FORM N-CSR

/s/ Daniel O’Neill

Daniel O’Neill

Chief Executive Officer

Letter to Shareholders

Dear Shareholders,

This Semi-Annual Report for the Direxion Funds covers the period from September 1, 2008 to February 28, 2008 (the “Semi-Annual Period”). During the Semi-Annual Period, the DJ Industrial Average Index returned −38.21%, the S&P 500 Index returned −42.70% and the Nasdaq-100 Index returned −40.35%. Emerging Markets did not outpace domestic returns, with the MSCI Emerging Markets Index declining −45.22% and the 10 Year Treasury Note increasing 8.53%, on a price performance basis, for the Semi-Annual Period.

The overall returns for the Semi-Annual Period were impacted by falling energy and commodity prices, continued problems in the mortgage markets which led to a credit squeeze, and fears of a U.S. recession. The Federal Reserve Board responded with four reductions in its target for the Federal Funds Rate, resulting in a target rate of 0.25% at the end of the Semi-Annual Period, its lowest level ever. Direxion Funds leveraged index funds seek to provide daily returns which are a multiple – positive or negative – of the return of a particular benchmark. The Direxion Funds maintain models which indicate the expected performance of each leveraged index fund in light of the path of the relevant benchmark, the Fund’s expense ratio and the impact of leveraging the Fund’s portfolio. The models, and a description of how they work, are available on the Direxion Funds website (www.direxionfunds.com). The models do not take into account transaction fees associated with creating a Fund’s portfolio, but do take into account a Fund’s expense ratio and financing implications. A brief comparison of the actual six month average total return versus expected returns for each of the Funds in this Semi-Annual Report follows.

The Small Cap Bull 2X Fund and the Small Cap Bear 2X Fund, which seek to provide 200% and −200% of the return of the Russell 2000 Index, provided returns of −86.70% and 103.08%, respectively. The model indicated an expected return of −86.53% for the Small Cap Bull 2X Fund and an expected return of 106.01% for the Small Cap Bear 2X Fund.

The Commodity Bull 2X Fund, which seeks to provide a daily return equal to 200% of the return of the Morgan Stanley Commodity Related Index, declined −80.19%, 6 basis points higher than its expected return of −80.25%. The Emerging Markets Bull 2X Fund and the Emerging Markets Bear 2X Fund, which seek to provide 200% and −200% of the return of the MSCI Emerging Markets Index, provided returns of −82.88% and −32.78%, respectively. The model indicated an expected return of −82.79% for the Emerging Markets Bull 2X Fund and an expected return of −35.21% for the Emerging Markets Bear 2X Fund.

The Developed Markets Bull 2X Fund and the Developed Markets Bear 2X Fund, which seek to provide 200% and −200% of the return of the MSCI EAFE Index, provided returns of −76.47% and 59.26%, respectively. The model indicated an expected return of −76.25% for the Developed Markets Bull 2X Fund and an expected return of 62.23% for the Developed Markets Bear 2X Fund.

The China Bull 2X Fund which seeks to provide 200% of the return of the FTSE/Xinhua China 25 Index, provided returns of −81.57%. The model indicated an expected return of −80.74% for the China Bull 2X Fund.

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.direxionfunds.com.

4 DIREXION SEMI-ANNUAL REPORT

The 10 Year Note Bull 2.5X Fund and 10 Year Note Bear 2.5X Fund, which seek to provide 250% and −250% of the return of the 10 Year Treasury Note, provided returns of 16.98% and −21.13% respectively. The model indicated an expected return of 19.55% for the 10 Year Note Bull 2.5X Fund and an expected return of −22.52% for the 10 Year Note Bear 2X Fund.

For the Semi-Annual Period, the Dynamic HY Bond Fund, which seeks to maximize total return by investing primarily in “lower quality” High Yield debt instruments, delivered −16.41% on a total return basis, while the HY Bear Fund, which seeks to profit from a decline in the value of “lower-quality” High Yield debt instruments delivered 9.54% on a total return basis.

As always, we thank you for using the Direxion Funds and we look forward to our mutual success.

Best Regards,




Daniel O’Neill Chief Investment Officer		Guy Talarico Principal Financial Officer

The total annual fund operating expense of the Small Cap Bull 2X Fund, Small Cap Bear 2X Fund, Dynamic HY Bond Fund, Commodity Bull 2X Fund, Emerging Markets Bull 2X Fund, Emerging Markets Bear 2x Fund, Developed Markets Bull 2X Fund, Developed Markets Bear 2X Fund and China Bull 2X Fund is 1.81%, 1.78%, 1.87%, 1.80%, 1.83%, 1.77%, 1.82%, 1.79% and 1.83%, respectively, net of any fee, waivers or expense reimbursements. The total annual fund operating expense ratio of the 10 Year Note Bull 2X Fund, 10 Year Note Bear 2X Fund and HY Bear Fund, net of any fee, waivers or expense reimbursements is 1.75%.

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. 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. The prospectus should be read carefully before investing.

Distributed by: Rafferty Capital Markets, LLC.
Date of First Use: April 29, 2009

DIREXION SEMI-ANNUAL REPORT 5

Expense Example

February 28, 2009 (Unaudited)

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 the 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, 2008 — February 28, 2009).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. Although the Fund charges no sales load or transactions fees, you will be assessed fees for outgoing wire transfers, returned checks or stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request a redemption be made by wire transfer, currently a $15.00 fee is charged by the Funds’ transfer agent. However, the example below does not include portfolio trading commissions and related expenses or other extraordinary expenses as determined under generally accepted accounting principles. 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 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 Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ 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 Funds 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.

6 DIREXION SEMI-ANNUAL REPORT

Expense Example Tables

February 28, 2009 (Unaudited)


				Beginning		Ending		Expenses
	Expense			Account Value		Account Value		Paid During
	Ratio¹			September 1, 2008		February 28, 2009		Period²

Small Cap Bull 2.5X Fund
Based on actual fund return		1.81	%	$	1,000.00	$	133.00	$	5.08
Based on hypothetical 5% return		1.81	%		1,000.00		1,015.82		9.05
Small Cap Bear 2.5X Fund
Based on actual fund return		1.78	%		1,000.00		2,030.80		13.38
Based on hypothetical 5% return		1.78	%		1,000.00		1,015.97		8.90
10 Year Note Bull 2.5X Fund
Based on actual fund return		1.75	%		1,000.00		1,169.80		9.41
Based on hypothetical 5% return		1.75	%		1,000.00		1,016.12		8.75
10 Year Note Bear 2.5X Fund³
Based on actual fund return		8.95	%		1,000.00		788.70		39.69
Based on hypothetical 5% return		8.95	%		1,000.00		980.41		43.95
Dynamic HY Bond Fund³
Based on actual fund return		1.89	%		1,000.00		835.90		8.60
Based on hypothetical 5% return		1.89	%		1,000.00		1,015.42		9.44
HY Bear Fund
Based on actual fund return		1.75	%		1,000.00		1,095.40		9.09
Based on hypothetical 5% return		1.75	%		1,000.00		1,016.12		8.75
Commodity Bull 2X Fund
Based on actual fund return		1.80	%		1,000.00		198.10		5.35
Based on hypothetical 5% return		1.80	%		1,000.00		1,015.87		9.00
Emerging Markets Bull 2X Fund
Based on actual fund return		1.83	%		1,000.00		171.20		5.31
Based on hypothetical 5% return		1.83	%		1,000.00		1,015.72		9.15
Emerging Markets Bear 2X Fund
Based on actual fund return		1.77	%		1,000.00		672.20		7.34
Based on hypothetical 5% return		1.77	%		1,000.00		1,016.02		8.85
Developed Markets Bull 2X Fund
Based on actual fund return		1.82	%		1,000.00		235.30		5.57
Based on hypothetical 5% return		1.82	%		1,000.00		1,015.77		9.10
Developed Markets Bear 2X Fund
Based on actual fund return		1.79	%		1,000.00		1,592.60		11.51
Based on hypothetical 5% return		1.79	%		1,000.00		1,015.92		8.95
China Bull 2X Fund
Based on actual fund return		1.83	%		1,000.00		184.30		5.37
Based on hypothetical 5% return		1.83	%		1,000.00		1,015.72		9.15
U.S. Government Money Market Fund
Based on actual fund return		0.94	%		1,000.00		1,001.60		4.67
Based on hypothetical 5% return		0.94	%		1,000.00		1,020.13		4.71


¹		Annualized
²		Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/period, then divided by 365.
³		Net expenses includes interest on securities sold short.

DIREXION SEMI-ANNUAL REPORT 7

Small Cap Bull 2.5X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 133.3%
MONEY MARKET FUNDS - 133.3%
	1,414,737	AIM STIT-Treasury Portfolio	$	1,414,737
	1,414,737	Fidelity Institutional Money Market Government Portfolio		1,414,737
	1,414,737	First American Government Obligations Fund		1,414,737
	6,441,463	Goldman Sachs Financial Square Government Fund		6,441,463
	1,414,737	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		1,414,737

		TOTAL SHORT TERM INVESTMENTS (Cost $12,100,411)	$	12,100,411

		TOTAL INVESTMENTS (Cost $12,100,411) - 133.3%	$	12,100,411
		Liabilities in Excess of Other Assets - (33.3)%		(3,023,807	)

		TOTAL NET ASSETS - 100.0%	$	9,076,604

Percentages are stated as a percent of net assets.

Small Cap Bull 2.5X Fund

Equity Swap Contracts

February 28, 2009 (Unaudited)

Number of

Notional

Termination

Unrealized

Counterparty

Reference Entity

Contracts

Amount

Date

Depreciation

Credit Suisse Capital, LLC

Russell 2000 Index

58,000

25,153,077

6/4/2010

(2,571,282

)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 9

10 Year Note Bull 2.5X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Principal
Amount			Value

U.S. TREASURY OBLIGATIONS - 82.3%
U.S. TREASURY NOTES - 82.3%
$	28,000,000	3.750%, 11/15/2018	$	29,710,625

		TOTAL U.S. TREASURY OBLIGATIONS (Cost $30,049,944)	$	29,710,625

Shares

SHORT TERM INVESTMENTS - 13.2%
MONEY MARKET FUNDS - 13.2%
	955,887	AIM STIT-Treasury Portfolio	$	955,887
	955,887	Fidelity Institutional Money Market Government Portfolio		955,887
	955,887	First American Government Obligations Fund		955,887
	955,887	Goldman Sachs Financial Square Government Fund		955,887
	955,887	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		955,887

		TOTAL SHORT TERM INVESTMENTS (Cost $4,779,435)	$	4,779,435

		TOTAL INVESTMENTS (Cost $34,829,379) - 95.5%	$	34,490,060
		Other Assets in Excess of Liabilities - 4.5%		1,636,852

		TOTAL NET ASSETS - 100.0%	$	36,126,912

Percentages are stated as a percent of net assets.

10 Year Note Bull 2.5X Fund

Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Appreciation

	503	U.S. Treasury 10-Year Note Futures
		Expiring June 2009 (Underlying Face Amount at Market Value $60,430,734)	$	73,139

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 11

10 Year Note Bear 2.5X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Principal
Amount			Value

SHORT TERM INVESTMENTS - 327.1%
REPURCHASE AGREEMENTS - 235.3%
$	525,938	Mizuho Repurchase Agreement, 0.050%, 3/2/2009 (Dated 2/27/2008, Collateralized by U.S. Treasury Note, 3.750%, due 11/15/2018, valued at $111,414,844. Repurchase proceeds are $525,938.)	$	525,938
	105,000,000	Mizuho Repurchase Agreement, 0.150%, 3/2/2009 (Dated 2/27/2009, Collateralized by U.S. Treasury Note, 3.750%, due 11/15/2018, valued at $111,414,844. Repurchase proceeds are $116,287,500.)		116,287,500

			$	116,813,438

Shares			Value

MONEY MARKET FUNDS - 91.8%
	9,115,932	AIM STIT-Treasury Portfolio	$	9,115,932
	9,115,932	Fidelity Institutional Government Portfolio		9,115,932
	9,115,932	First American Government Obligations Fund		9,115,932
	8,852,437	Goldman Sachs Financial Square Government Fund		8,852,437
	9,345,416	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		9,345,416

				45,545,649

		TOTAL SHORT TERM INVESTMENTS (Cost $162,359,087)	$	162,359,087

		TOTAL INVESTMENTS (Cost $162,359,087) - 327.1%	$	162,359,087
		Liabilities in Excess of Other Assets - (227.1)%		(112,719,128	)

		TOTAL NET ASSETS - 100.0%	$	49,639,959

Percentages are stated as a percent of net assets.

10 Year Note Bear 2.5X Fund

Securities Sold Short

February 28, 2009 (Unaudited)


Principal
Amount			Value

U.S. TREASURY NOTES - 224.5%
$	105,000,000	3.75%, 11/15/2018	$	111,414,844

		TOTAL SECURITIES SOLD SHORT (Proceeds $114,989,751)	$	111,414,844

10 Year Note Bear 2.5X Fund

Short Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Depreciation

	104	U.S. Treasury 10-Year Note Futures Contracts Expiring June 2009 (Underlying Face Amount at Market Value $12,494,625)	$	(17,065	)

The accompanying notes are an integral part of these financial statements.

12 DIREXION SEMI-ANNUAL REPORT

Dynamic HY Bond Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Principal
Amount			Value

CORPORATE BONDS - 5.8%
ENERGY EQUIPMENT & SERVICES - 1.9%
$	400,000	Key Energy Services, Inc. 8.375%, 12/1/2014 (a)	$	262,000
METALS & MINING 3.9%
	1,700,000	Novelis, Inc. 7.25%, 2/15/2015 (a)		539,750

		TOTAL CORPORATE BONDS (Cost $1,238,353)	$	801,750

SHORT TERM INVESTMENTS - 84.6%
REPURCHASE AGREEMENTS - 6.8%
	947,750	Mizuho Repurchase Agreement, 0.150%, 12/31/2010 (Dated 1/6/2009, Collateralized by U.S. Treasury Note, 3.750%, due 11/15/2018, valued at $901,930. Repurchase proceeds are $947,750.)	$	947,750

Shares			Value

MONEY MARKET FUNDS - 77.8%
	10,807,569	Goldman Sachs Financial Square Government Fund		10,807,569

		TOTAL SHORT TERM INVESTMENTS (Cost $11,755,319)	$	11,755,319

		TOTAL INVESTMENTS (Cost $12,993,672) - 90.4%	$	12,557,069
		Other Assets in Excess of Liabilities - 9.6%		1,335,569

		TOTAL NET ASSETS - 100.0%	$	13,892,638

Dynamic HY Bond Fund

Securities Sold Short

February 28, 2009 (Unaudited)


Principal
Amount			Value

U.S. TREASURY NOTES - 6.5%
$	850,000	3.75%, 11/15/2018	$	901,930

		TOTAL SECURITIES SOLD SHORT (Proceeds $941,467)	$	901,930

Percentages are stated as a percent of net assets.


(a)	Callable
(b)	Security deemed Illiquid (See Note 2)

Dynamic HY Bond Fund

Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Appreciation

	38	S&P 500 Index eMini Futures
		Expiring March 2009 (Underlying Face Amount at Market Value $1,395,550)	$	(208,173	)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 13

Dynamic HY Bond Fund

Credit Default Swap Contracts — Sell Protection¹

February 28, 2009 (Unaudited)


													Upfront
			Implied			Receive							Payments
			Credit			Fixed			Termination		Notional		Paid			Unrealized
Counterparty	Reference Entity		Spread²			Rate			Date		Amount³		(Received)			Depreciation

Bank of America		CDX North American High Yield Index		14.69	%		5.00	%		12/20/2013	$	2,425,000	$	(654,750	)	$	(10,077	)
Barclays Capital		CDX North American High Yield Index		14.69	%		5.00	%		12/20/2013		3,298,000		(902,827	)		(1,337	)
Goldman Sachs & Co.		CDX North American High Yield Index		14.69	%		5.00	%		12/20/2013		4,074,000		(1,033,778	)		(83,133	)

											$	9,797,000	$	(2,591,355	)	$	(94,547	)


¹		If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the reference obligations or underlying securities comprising the reference index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising the reference index.
²		Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk of the reference obligation and represent the likelihood or risk of default. The implied credit spread of a particular reference entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the reference entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the reference entity or reference obligation.
³		The maximum potential amount (if, after a credit event the value of the related reference obligation or obligations were determined to have a value of zero) the Fund could be required to make as seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

The accompanying notes are an integral part of these financial statements.

14 DIREXION SEMI-ANNUAL REPORT

HY Bear Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 78.7%
MONEY MARKET FUNDS - 78.7%
	24,122,146	Goldman Sachs Financial Square Government Fund	$	24,122,146

		TOTAL SHORT TERM INVESTMENTS (Cost $24,122,146)	$	24,122,146

		TOTAL INVESTMENTS (Cost $24,122,146) - 78.7%	$	24,122,146
		Other Assets in Excess of Liabilities - 21.3%		6,511,073

		TOTAL NET ASSETS - 100.0%	$	30,633,219

Percentages are stated as a percent of net assets.

HY Bear Fund

Credit Default Swap Contracts — Buy Protection¹

February 28, 2009 (Unaudited)


													Upfront
			Implied			Receive							Payments
			Credit			Fixed			Termination		Notional		Paid		Unrealized
Counterparty	Reference Entity		Spread²			Rate			Date		Amount³		(Received)		Appreciation

Barclays Capital		CDX North American High Yield Index		14.69	%		5.00	%		12/20/2013	$	2,619,000	$	713,678	$	4,829
Merrill Lynch		CDX North American High Yield Index		14.69	%		5.00	%		12/20/2013		17,120,500		4,625,808		107,471

											$	19,739,500	$	5,339,486	$	112,300


¹		If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the reference obligations or underlying securities comprising the reference index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising the reference index.
²		Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk of the reference obligation and represent the likelihood or risk of default. The implied credit spread of a particular reference entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the reference entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the reference entity or reference obligation.
³		The maximum potential amount (if, after a credit event the value of the related obligation or obligations were determined to have a value of zero) the Fund could be required to make as seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 15

Commodity Bull 2X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 79.1%
MONEY MARKET FUNDS - 79.1%
	1,058,723	AIM STIT-Treasury Portfolio	$	1,058,723
	1,058,722	Fidelity Institutional Money Market Government Portfolio		1,058,722
	1,058,722	First American Government Obligations Fund		1,058,722
	4,441,451	Goldman Sachs Financial Square Government Fund		4,441,451
	1,058,722	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		1,058,722

		TOTAL SHORT TERM INVESTMENTS (Cost $8,676,340)	$	8,676,340

		TOTAL INVESTMENTS (Cost $8,676,340) - 79.1%	$	8,676,340
		Other Assets in Excess of Liabilities - 20.9%		2,286,580

		TOTAL NET ASSETS - 100.0%	$	10,962,920

Percentages are stated as a percent of net assets.

Commodity Bull 2X Fund

Equity Swap Contracts

February 28, 2009 (Unaudited)


								Unrealized
		Number of		Notional		Termination		Appreciation/
Counterparty	Reference Entity	Contracts		Amount		Date		(Depreciation)

Merrill Lynch	Morgan Stanley Commodity Related Equity Index		15,595	$	15,846,235		6/22/2009	$	(9,217,272	)
Merrill Lynch	Morgan Stanley Commodity Related Equity Index		6,750		6,607,322		7/9/2009		(3,733,257	)
Merrill Lynch	Morgan Stanley Commodity Related Equity Index		11,400		5,070,210		3/24/2010		(76,104	)
Merrill Lynch	Morgan Stanley Commodity Related Equity Index		16,200		7,084,014		3/25/2010		3,930
Merrill Lynch	Morgan Stanley Commodity Related Equity Index		500		220,523		3/26/2010		(1,751	)

			50,445	$	34,828,304			$	(13,024,454	)

The accompanying notes are an integral part of these financial statements.

16 DIREXION SEMI-ANNUAL REPORT

Emerging Markets Bull 2X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 26.9%
MONEY MARKET FUNDS - 26.9%
	771,167	AIM STIT-Treasury Portfolio	$	771,167
	771,166	Fidelity Institutional Money Market Government Portfolio		771,166
	771,166	First American Government Obligations Fund		771,166
	764,880	Goldman Sachs Financial Square Government Fund		764,880
	771,166	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		771,166

		TOTAL SHORT TERM INVESTMENTS (Cost $3,849,545)	$	3,849,545

		TOTAL INVESTMENTS (Cost $3,849,545) - 26.9%	$	3,849,545
		Other Assets in Excess of Liabilities - 73.1%		10,431,956

		TOTAL NET ASSETS - 100.0%	$	14,281,501

Percentages are stated as a percent of net assets.

Emerging Markets Bull 2X Fund

Equity Swap Contracts

February 28, 2009 (Unaudited)


		Number of		Notional		Termination		Unrealized
Counterparty	Reference Entity	Contracts		Amount		Date		(Depreciation)

Merrill Lynch	iShare MSCI Emerging Market Index		32,400	$	798,346		12/30/2009	$	(110,758	)
Merrill Lynch	iShare MSCI Emerging Market Index		56,074		1,402,186		12/31/2009		(212,199	)
Merrill Lynch	iShare MSCI Emerging Market Index		58,500		1,500,601		1/7/2010		(259,142	)
Merrill Lynch	iShare MSCI Emerging Market Index		47,500		1,206,500		1/8/2010		(198,474	)
Merrill Lynch	iShare MSCI Emerging Market Index		81,000		1,938,735		1/13/2010		(219,747	)
Merrill Lynch	iShare MSCI Emerging Market Index		45,000		1,027,350		1/14/2010		(72,340	)
Merrill Lynch	iShare MSCI Emerging Market Index		60,000		1,399,650		1/16/2010		(126,313	)
Merrill Lynch	iShare MSCI Emerging Market Index		15,000		334,050		1/23/2010		(15,711	)
Merrill Lynch	iShare MSCI Emerging Market Index		17,000		382,160		1/26/2010		(21,376	)
Merrill Lynch	iShare MSCI Emerging Market Index		6,500		148,877		1/27/2010		(10,931	)
Merrill Lynch	iShare MSCI Emerging Market Index		81,000		1,950,740		1/28/2010		(231,756	)
Merrill Lynch	iShare MSCI Emerging Market Index		45,000		1,010,700		3/2/2010		(55,684	)
Merrill Lynch	iShare MSCI Emerging Market Index		1,000		23,076		3/3/2010		(1,854	)
Merrill Lynch	iShare MSCI Emerging Market Index		25,500		607,321		3/5/2010		(66,157	)
Merrill Lynch	iShare MSCI Emerging Market Index		117,000		2,918,890		3/6/2010		(435,945	)
Merrill Lynch	iShare MSCI Emerging Market Index		117,500		2,914,999		3/9/2010		(421,438	)
Merrill Lynch	iShare MSCI Emerging Market Index		167,500		4,003,887		3/12/2010		(449,187	)
Merrill Lynch	iShare MSCI Emerging Market Index		58,000		1,300,128		3/18/2010		(69,218	)
Merrill Lynch	iShare MSCI Emerging Market Index		60,000		1,295,580		3/20/2010		(22,113	)
Merrill Lynch	iShare MSCI Emerging Market Index		90,000		1,995,300		3/24/2010		(84,968	)
Merrill Lynch	iShare MSCI Emerging Market Index		160,000		3,485,632		3/25/2010		(89,093	)

			1,341,474	$	31,644,708			$	(3,174,404	)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 17

Emerging Markets Bear 2X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 85.3%
MONEY MARKET FUNDS - 85.3%
	171,601	AIM STIT-Treasury Portfolio	$	171,601
	171,601	Fidelity Institutional Money Market Government Portfolio		171,601
	171,601	First American Government Obligations Fund		171,601
	912,407	Goldman Sachs Financial Square Government Fund		912,407
	171,601	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		171,601

		TOTAL SHORT TERM INVESTMENTS (Cost $1,598,811)	$	1,598,811

		TOTAL INVESTMENTS (Cost $1,598,811) - 85.3%	$	1,598,811
		Other Assets in Excess of Liabilities - 14.7%		276,384

		TOTAL NET ASSETS - 100.0%	$	1,875,195

Percentages are stated as a percent of net assets.

Emerging Markets Bear 2X Fund

Short Equity Swap Contracts

February 28, 2009 (Unaudited)


								Unrealized
		Number of		Notional		Termination		Appreciation/
Counterparty	Reference Entity	Contracts		Amount		Date		(Depreciation)

Merrill Lynch	iShare MSCI Emerging Market Index		16,600	$	370,014		3/12/2010	$	17,614
Merrill Lynch	iShare MSCI Emerging Market Index		15,000		328,247		3/19/2010		9,810
Merrill Lynch	iShare MSCI Emerging Market Index		20,000		418,872		3/23/2010		(5,714	)
Merrill Lynch	iShare MSCI Emerging Market Index		103,000		2,281,560		3/24/2010		94,900
Merrill Lynch	iShare MSCI Emerging Market Index		22,200		475,148		3/26/2010		3,844

			176,800	$	3,873,841			$	120,454

The accompanying notes are an integral part of these financial statements.

18 DIREXION SEMI-ANNUAL REPORT

Developed Markets Bull 2X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 67.3%
MONEY MARKET FUNDS - 67.3%
	553,581	AIM STIT-Treasury Portfolio	$	553,581
	553,581	Fidelity Institutional Money Market Government Portfolio		553,581
	553,581	First American Government Obligations Fund		553,581
	546,747	Goldman Sachs Financial Square Government Fund		546,747
	553,581	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		553,581

		TOTAL SHORT TERM INVESTMENTS (Cost $2,761,071)	$	2,761,071

		TOTAL INVESTMENTS (Cost $2,761,071) - 67.3%	$	2,761,071
		Other Assets in Excess of Liabilities - 32.7%		1,339,931

		TOTAL NET ASSETS - 100.0%	$	4,101,002

Percentages are stated as a percent of net assets.

Developed Markets Bull 2X Fund

Equity Swap Contracts

February 28, 2009 (Unaudited)

Number of

Notional

Termination

Unrealized

Counterparty

Reference Entity

Contracts

Amount

Date

Depreciation

Credit Suisse Capital, LLC

iShares MSCI EAFE Index

236,600

9,329,372

6/4/2010

(1,125,316

)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 19

Developed Markets Bear 2X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 96.3%
MONEY MARKET FUNDS - 96.3%
	562,012	AIM STIT-Treasury Portfolio	$	562,012
	562,012	Fidelity Institutional Money Market Government Portfolio		562,012
	562,012	First American Government Obligations Fund		562,012
	2,092,013	Goldman Sachs Financial Square Government Fund		2,092,013
	562,012	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		562,012

		TOTAL SHORT TERM INVESTMENTS (Cost $4,340,061)	$	4,340,061

		TOTAL INVESTMENTS (Cost $4,340,061) - 96.3%	$	4,340,061
		Other Assets in Excess of Liabilities - 3.7%		167,209

		TOTAL NET ASSETS - 100.0%	$	4,507,270

Percentages are stated as a percent of net assets.

Developed Markets Bear 2X Fund

Short Equity Swap Contracts

February 28, 2009 (Unaudited)

Number of

Notional

Termination

Unrealized

Counterparty

Reference Entity

Contracts

Amount

Date

Depreciation

Credit Suisse Capital, LLC

iShares MSCI EAFE Index

260,150

9,012,859

6/4/2010

(10,535

)

The accompanying notes are an integral part of these financial statements.

20 DIREXION SEMI-ANNUAL REPORT

China Bull 2X Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

SHORT TERM INVESTMENTS - 81.4%
MONEY MARKET FUNDS - 81.4%
	1,156,879	AIM STIT-Treasury Portfolio	$	1,156,879
	1,156,878	Fidelity Institutional Government Portfolio		1,156,878
	1,156,878	First American Government Obligations Fund		1,156,878
	1,122,864	Goldman Sachs Financial Square Government Fund		1,122,864
	1,156,878	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		1,156,878

		TOTAL SHORT TERM INVESTMENTS (Cost $5,750,377)	$	5,750,377

		TOTAL INVESTMENTS (Cost $5,750,377) - 81.4%	$	5,750,377
		Other Assets in Excess of Liabilities - 18.6%		1,310,742

		TOTAL NET ASSETS - 100.0%	$	7,061,119

Percentages are stated as a percent of net assets.

China Bull 2X Fund

Equity Swap Contracts

February 28, 2009 (Unaudited)

Number of

Notional

Termination

Unrealized

Counterparty

Reference Entity

Contracts

Amount

Date

Depreciation

Credit Suisse Capital LLC

iShares FTSE/Xinhua China 25 Index

580,400

15,201,761

1/4/2010

(1,099,035

)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 21

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


	Small Cap Bull			Small Cap Bear			10 Year Note Bull			10 Year Note Bear
	2.5X Fund			2.5X Fund			2.5X Fund			2.5X Fund
Assets:
Investments, at market value (Note 2)	$	12,100,411		$	4,896,911		$	34,490,060		$	45,545,649
Repurchase agreements		—			—			—			116,813,438
Cash		—			210			—			—
Receivable for Fund shares sold		230,035			1,000,686			531,927			260,650
Deposit at broker for futures		—			—			1,113,200			213,400
Unrealized appreciation on swaps		—			198,005			—			—
Variation margin receivable		—			—			32,178			—
Dividends and interest receivable		3,018			1,089			309,726			277
Other assets		17,203			30,439			23,701			17,568

Total Assets		12,350,667			6,127,340			36,500,792			162,850,982

Liabilities:
Securities sold short, at market value (Proceeds of $-, $-, $- and $114,989,751, respectively)		—			—			—			111,414,844
Payable for Fund shares redeemed		358,247			270,750			300,971			74,000
Due to broker		322,531			18			—			494,242
Unrealized depreciation on swaps		2,571,282			—			—			—
Variation margin payable		—			—			—			6,087
Interest payable on securities sold short		—			—			—			1,122,493
Accrued investment advisory fees		5,543			428			14,317			30,648
Accrued distribution expenses		1,919			828			6,737			10,373
Accrued expenses and other liabilities		14,541			16,120			51,855			58,336

Total Liabilities		3,274,063			288,144			373,880			113,211,023

Net Assets	$	9,076,604		$	5,839,196		$	36,126,912		$	49,639,959

Net Assets Consist Of:
Capital stock	$	33,766,681		$	34,953,100		$	22,104,594		$	61,333,920
Accumulated undistributed net investment income (loss)		(32,446	)		(1,900,286	)		199,350			(1,273,061	)
Accumulated undistributed net realized gain (loss)		(22,086,349	)		(27,411,623	)		14,089,148			(13,978,742	)
Net unrealized appreciation (depreciation) :
Investments		—			—			(339,319	)		—
Securities sold short		—			—			—			3,574,907
Futures		—			—			73,139			(17,065	)
Swaps		(2,571,282	)		198,005			—			—

Total Net Assets	$	9,076,604		$	5,839,196		$	36,126,912		$	49,639,959

Calculation of Net Asset Value Per Share - Investor Class:
Net assets	$	9,076,604		$	5,839,196		$	36,126,912		$	49,639,959
Shares outstanding
(unlimited shares of beneficial interest authorized, no par value)		845,848			497,451			1,279,351			4,555,172
Net asset value, redemption price and offering price per share	$	10.73		$	11.74		$	28.24		$	10.90

Cost of Investments	$	12,100,411		$	4,896,611		$	34,829,379		$	162,359,087

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 23

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


	Dynamic HY			HY Bear			Commodity Bull
	Bond Fund			Fund			2X Fund
Assets:
Investments, at market value (Note 2)	$	12,557,069		$	24,122,146		$	8,676,340
Cash		—			—			1,000
Receivable for Fund shares sold		30,525			480,000			36,755
Receivable for investments sold		652,356			—			—
Deposit at broker for futures		188,100			—			—
Deposit at broker for swaps		5,265,598			—			16,144,442
Due from broker for swaps		—			4,477,345			—
Swap payments paid		—			5,339,486			—
Unrealized appreciation on swaps		—			112,300			—
Dividends and interest receivable		18,037			22,981			8,318
Other assets		19,934			30,438			37,355

Total Assets		18,731,619			34,584,696			24,904,210

Liabilities:
Securities sold short, at market value (Proceeds of $941,467, $- and $-, respectively)		901,930			—			—
Payable for Fund shares redeemed		893,496			35,359			65,000
Deposit from broker for swaps		—			3,842,941			—
Swap payments received		2,591,355			—			—
Due to broker for swaps		150,214			—			819,567
Unrealized depreciation on swaps		94,547			—			13,024,454
Variation margin payable		33,250			—			—
Accrued investment advisory fees		12,863			25,528			5,906
Accrued distribution expense		6,082			10,409			2,883
Accrued expenses and other liabilities		155,244			37,240			23,480

Total Liabilities		4,838,981			3,951,477			13,941,290

Net Assets	$	13,892,638		$	30,633,219		$	10,962,920

Net Assets Consist Of:
Capital stock	$	33,171,986		$	28,030,328		$	56,061,224
Accumulated undistributed net investment income (loss)		(730,509	)		(190,673	)		(27,392	)
Accumulated undistributed net realized gain (loss)		(17,849,053	)		2,681,264			(32,046,458	)
Net unrealized appreciation (depreciation) on:
Investments		(436,603	)		—			—
Securities sold short		39,537			—			—
Futures		(208,173	)		—			—
Swaps		(94,547	)		112,300			(13,024,454	)

Total Net Assets	$	13,892,638		$	30,633,219		$	10,962,920

Calculation of Net Asset Value Per Share - Investor Class:
Net assets		13,892,638			30,633,219		$	10,962,920
Shares outstanding
(unlimited shares of beneficial interest authorized, no par value)		1,074,311			1,510,136			613,383
Net asset value, redemption price and offering price per share	$	12.93		$	20.29		$	17.87

Cost of Investments	$	12,993,672		$	24,122,146		$	8,676,340

The accompanying notes are an integral part of these financial statements.

24 DIREXION SEMI-ANNUAL REPORT

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


	Emerging Markets			Emerging Markets			Developed Markets			Developed Markets
	Bull 2X Fund			Bear 2X Fund			Bull 2X Fund			Bear 2X Fund
Assets:
Investments, at market value (Note 2)	$	3,849,545		$	1,598,811		$	2,761,071		$	4,340,061
Receivable for Fund shares sold		4,089,346			45,882			310,500			246,772
Receivable from Adviser		—			11,375			—			2,827
Deposit at broker for swaps		11,361,176			110,000			2,390,000			—
Due from broker for swaps		—			50,000			—			—
Due from Administrator		183,530			—			—			—
Unrealized appreciation on swaps		—			120,454			—			—
Dividends and interest receivable		6,471			4,645			2,290			1,796
Other assets		85,632			33,010			36,025			85,212

Total Assets		19,575,700			1,974,177			5,499,886			4,676,668

Liabilities:
Payable for Fund shares redeemed		1,993,103			22,430			180,650			146,077
Payable to Custodian		—			47,500			—			—
Due to broker for swaps		93,068			—			77,382			1,284
Unrealized depreciation on swaps		3,174,404			—			1,125,316			10,535
Accrued investment advisory fees		10,366			—			2,202			—
Accrued distribution expense		3,260			346			1,218			657
Accrued expenses and other liabilities		19,998			28,706			12,116			10,845

Total Liabilities		5,294,199			98,982			1,398,884			169,398

Net Assets	$	14,281,501		$	1,875,195		$	4,101,002		$	4,507,270

Net Assets Consist Of:
Capital stock	$	63,489,444		$	13,300,985		$	14,283,340		$	3,119,493
Accumulated undistributed net investment income (loss)		(146,381	)		(1,423,630	)		(631,592	)		(636,747	)
Accumulated undistributed net realized gain (loss)		(45,887,158	)		(10,122,614	)		(8,425,430	)		2,035,059
Net unrealized appreciation (depreciation) on:
Swaps		(3,174,404	)		120,454			(1,125,316	)		(10,535	)

Total Net Assets	$	14,281,501		$	1,875,195		$	4,101,002		$	4,507,270

Calculation of Net Asset Value Per Share - Investor Class:
Net assets	$	14,281,501		$	1,875,195		$	4,101,002		$	4,507,270
Shares outstanding
(unlimited shares of beneficial interest authorized, no par value)		787,521			195,171			257,572			212,102
Net asset value, redemption price and offering price per share	$	18.13		$	9.61		$	15.92		$	21.25

Cost of Investments	$	3,849,545		$	1,598,811		$	2,761,071		$	4,340,061

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 25

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


	China Bull			U.S. Government
	2X Fund			Money Market Fund


Assets:
Investments, at market value (Note 2)	$	5,750,377		$	105,223,844
Receivable for Fund shares sold		396,322			4,173,822
Receivable from Adviser		—			62,347
Deposit at broker for swaps		2,250,000			—
Dividends and interest receivable		3,894			50,916
Other assets		8,964			42,196

Total Assets		8,409,557			109,553,125

Liabilities:
Payable for Fund shares redeemed		161,579			5,282,797
Unrealized depreciation on swaps		1,099,035			—
Due to broker		54,736			—
Accrued investment advisory fees		798			—
Accrued distribution expense		1,233			—
Accrued expenses and other liabilities		31,057			175,596

Total Liabilities		1,348,438			5,458,393

Net Assets	$	7,061,119		$	104,094,732

Net Assets Consist Of:
Capital stock	$	20,804,634		$	104,083,153
Accumulated undistributed net investment income (loss)		(38,601	)		14,981
Accumulated undistributed net realized gain (loss)		(12,605,879	)		(3,402	)
Net unrealized appreciation/(depreciation) on:
Swaps		(1,099,035	)		—

Total Net Assets	$	7,061,119		$	104,094,732

Calculation of Net Asset Value Per Share - Investor Class:
Net assets	$	7,061,119		$	104,094,732
Shares outstanding
(unlimited shares of beneficial interest authorized, no par value)		379,238			104,094,745
Net asset value, redemption price and offering price per share	$	18.62		$	1.00

Cost of Investments	$	5,750,377		$	105,223,844

The accompanying notes are an integral part of these financial statements.

26 DIREXION SEMI-ANNUAL REPORT

Statements of Operations

Six Months Ended February 28, 2009 (Unaudited)


	Small Cap Bull			Small Cap Bear			10 Year Note Bull			10 Year Note Bear
	2.5X Fund			2.5X Fund			2.5X Fund			2.5X Fund
Investment income:
Dividend income	$	—		$	—		$	—		$	—
Interest income		33,480			33,552			537,403			536,668

Total investment income		33,480			33,552			537,403			536,668

Expenses:
Investment advisory fees		27,344			26,186			144,477			151,303
Distribution expenses		9,115			8,729			48,159			50,435
Shareholder servicing fees		9,115			8,729			48,159			27,771
Administration fees		1,466			1,247			6,694			7,402
Fund accounting fees		3,230			4,497			15,206			17,084
Custody fees		919			787			4,430			3,882
Transfer agent fees		4,962			6,834			25,510			50,434
Federal and state registration		8,351			5,667			12,876			10,947
Professional fees		6,241			8,798			18,911			17,102
Reports to shareholders		1,857			2,533			11,339			10,693
Trustees’ fees and expenses		895			7			2,098			1,999
Other		996			—			5,373			5,505

Total expenses before reimbursement and dividends or interest on securities sold short		74,491			74,014			343,232			354,557
Dividends or interest on securities sold short		—			—			—			1,456,059
Interest on line of credit		—			—			305			—

Net expenses after dividends or interest on securities sold short		74,491			74,014			343,537			1,810,616
Less: Reimbursement of expenses from Adviser		(8,565	)		(11,690	)		(5,486	)		(887	)
Plus: Recoupment of previously waived expenses		—			—			—			0

Total expenses		65,926			62,324			338,051			1,809,729

Net investment income (loss)		(32,446	)		(28,772	)		199,350			(1,273,061	)

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		8,701			5,801			5,135,262			—
Options written		1,400			2,800			—			—
Securities sold short		—			—			—			(8,618,494	)
Futures		16,405			(62,238	)		8,931,848			(1,061,063	)
Swaps		(5,767,081	)		8,115,573			—			(138,630	)

		(5,740,575	)		8,061,936			14,067,110			(9,818,187	)

Change in unrealized appreciation (depreciation) on:
Investments		1,199			799			(527,583	)		—
Options written		(5,700	)		(11,400	)		—			—
Securities sold short		—			—			—			4,361,900
Futures		—			—			104,548			(22,695	)
Swaps		(2,600,988	)		469,181			—			117,502

		(2,605,489	)		458,580			(423,035	)		4,456,707

Net realized and unrealized gain (loss) on investments		(8,346,064	)		8,520,516			13,644,075			(5,361,480	)

Net increase (decrease) in net assets resulting from operations	$	(8,378,510	)	$	8,491,744		$	13,843,425		$	(6,634,541	)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 27

Statements of Operations

Six Months Ended February 28, 2009 (Unaudited)


	Dynamic HY			HY Bear			Commodity Bull
	Bond Fund			Fund			2X Fund
Investment income:
Dividend income (net of foreign withholding tax of $-, $- and $133, respectively)	$	—		$	—		$	28,878
Interest income		397,653			160,315			83,237

Total investment income		397,653			160,315			112,115

Expenses:
Investment advisory fees		220,208			120,497			58,201
Distribution expenses		73,403			40,166			19,400
Shareholder servicing fees		73,488			40,166			19,400
Administration fees		12,465			5,981			3,116
Fund accounting fees		20,079			15,144			5,385
Custody fees		9,514			2,289			1,606
Transfer agent fees		46,763			24,863			10,182
Federal and state registration		15,763			8,692			9,404
Professional fees		37,611			18,949			12,855
Reports to shareholders		41,913			7,408			8,653
Trustees’ fees and expenses		2,612			1,492			398
Other		11,145			5,659			2,902

Total expenses before reimbursement and dividends or interest on securities sold short		564,964			291,306			151,502
Dividends or interest on securities sold short		4,755			—			—

Net expenses after dividends or interest on securities sold short		569,719			291,306			151,502
Less: Reimbursement of expenses from Adviser		(13,560	)		(9,762	)		(11,995	)

Total expenses		556,159			281,544			139,507

Net investment income (loss)		(158,506	)		(121,229	)		(27,392	)

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(244,539	)		—			(6,598,782	)
Futures		(2,934,339	)		(53,904	)		—
Swaps		(10,117,093	)		3,070,812			(19,330,995	)

		(13,295,971	)		3,016,908			(25,929,777	)

Change in unrealized appreciation (depreciation) on:
Investments		(436,603	)		—			(1,818,269	)
Securities sold short		39,537			—			—
Futures		(208,173	)		—			—
Swaps		(152,000	)		218,279			(3,783,437	)

		(757,239	)		218,279			(5,601,706	)

Net realized and unrealized gain (loss) on investments		(14,053,210	)		3,235,187			(31,531,483	)

Net increase (decrease) in net assets resulting from operations	$	(14,211,716	)	$	3,113,958		$	(31,558,875	)

The accompanying notes are an integral part of these financial statements.

28 DIREXION SEMI-ANNUAL REPORT

Statements of Operations

Six Months Ended February 28, 2009 (Unaudited)


	Emerging Markets			Emerging Markets			Developed Markets			Developed Markets
	Bull 2X Fund			Bear 2X Fund			Bull 2X Fund			Bear 2X Fund
Investment income:
Dividend income	$	5,787		$	—		$	—		$	—
Interest income		77,759			22,206			33,831			34,473

Total investment income		83,546			22,206			33,831			34,473

Expenses:
Investment advisory fees		56,343			19,631			25,044			24,949
Distribution expenses		18,781			6,544			8,348			8,316
Shareholder servicing fees		18,781			6,544			8,348			8,316
Administration fees		2,920			963			1,180			1,135
Fund accounting fees		7,043			4,313			2,256			7,447
Custody fees		897			464			670			420
Transfer agent fees		9,965			9,842			3,908			8,939
Federal and state registration		11,664			14,651			8,145			17,650
Professional fees		4,853			6,660			6,696			5,922
Reports to shareholders		4,371			2,216			1,284			1,920
Trustees’ fees and expenses		957			829			840			927
Other		—			25,940			5,359			1,868

Total expenses before reimbursement		136,575			98,597			72,078			87,809
Less: Reimbursement of expenses from Adviser		—			(52,168	)		(11,028	)		(28,462	)
Plus: Recoupment of previously waived expenses		834			—			—			—

Total expenses		137,409			46,429			61,050			59,347

Net investment income (loss)		(53,863	)		(24,223	)		(27,219	)		(24,874	)

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(1,296,276	)		(39,280	)		(29,650	)		—
Options written		(26,652	)		(45,661	)		—			—
Futures		(14,794	)		62,010			—			(66,410	)
Swaps		(27,181,976	)		1,220,857			(5,678,790	)		3,740,976
Contribution by Administrator		183,530			—			—			—

		(28,336,168	)		1,197,926			(5,708,440	)		3,674,566

Change in unrealized appreciation (depreciation) on:
Investments		(4,386	)		—			—			—
Options written		(25,500	)		(12,751	)		—			—
Swaps		2,286,750			248,707			(1,201,029	)		350,147

		2,256,864			235,956			(1,201,029	)		350,147

Net realized and unrealized gain (loss) on investments		(26,079,304	)		1,433,882			(6,909,469	)		4,024,713

Net increase (decrease) in net assets resulting from operations	$	(26,133,167	)	$	1,409,659		$	(6,936,688	)	$	3,999,839

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 29

Statements of Operations

Six Months Ended February 28, 2009 (Unaudited)


	China Bull			U.S. Government
	2X Fund			Money Market Fund
Investment income:
Interest income	$	13,546		$	687,465

Total investment income		13,546			687,465

Expenses:
Investment advisory fees		20,442			271,229
Distribution expenses		6,814			—
Shareholder servicing fees		6,814			72,063
Administration fees		1,050			14,094
Fund accounting fees		2,573			43,396
Custody fees		299			12,541
Transfer agent fees		4,757			135,614
Federal and state registration		9,467			20,920
Professional fees		8,393			43,557
Reports to shareholders		1,208			26,178
Trustees’ fees and expenses		479			4,549
Other		8,254			32,307

Total expenses before reimbursement		70,550			676,448
Less: Reimbursement of expenses from Adviser		(20,657	)		(166,307	)

Total expenses		49,893			510,141

Net investment income (loss)		(36,347	)		177,324

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(591,896	)		—
Options written		(25,153	)		—
Swaps		(10,046,370	)		—

		(10,663,419	)		—

Change in unrealized appreciation (depreciation) on:
Investments		(578	)		—
Options written		(15,050	)		—
Swaps		(249,521	)		—

		(265,149	)		—

Net realized and unrealized gain (loss) on investments		(10,928,568	)		—

Net increase (decrease) in net assets resulting from operations	$	(10,964,915	)	$	177,324

The accompanying notes are an integral part of these financial statements.

30 DIREXION SEMI-ANNUAL REPORT

Statements of Changes in Net Assets


	Small Cap Bull 2.5X Fund						Small Cap Bear 2.5X Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008
Operations:
Net investment income (loss)	$	(32,446	)	$	55,943		$	(28,772	)	$	206,582
Net realized gain (loss) on investments		(5,740,575	)		(1,109,498	)		8,061,936			(4,899,977	)
Change in unrealized appreciation (depreciation) on investments		(2,605,489	)		(64,942	)		458,580			2,098,647

Net increase (decrease) in net assets resulting from operations		(8,378,510	)		(1,118,497	)		8,491,744			(2,594,748	)

Distributions to shareholders:
Net investment income		—			(523,740	)		(2,122,718	)		(562,369	)
Net realized gains		—			—			—			—

Total distributions		—			(523,740	)		(2,122,718	)		(562,369	)

Capital share transactions:
Proceeds from shares sold		55,819,313			89,897,867			49,906,122			183,249,882
Proceeds from shares issued to holders in reinvestment of distributions		—			489,445			2,040,036			514,768
Cost of shares redeemed		(44,017,011	)		(86,652,923	)		(65,841,251	)		(196,911,376	)

Net increase (decrease) in net assets resulting from capital share transactions		11,802,302			3,734,389			(13,895,093	)		(13,146,726	)

Total increase (decrease) in net assets		3,423,792			2,092,152			(7,526,067	)		(16,303,843	)

Net assets:
Beginning of year/period		5,652,812			3,560,660			13,365,263			29,669,106

End of year/period	$	9,076,604		$	5,652,812		$	5,839,196		$	13,365,263

(Accumulated) undistributed net investment income (loss), end of year/period	$	(32,446	)	$	—		$	(1,900,286	)	$	251,204

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 31

Statements of Changes in Net Assets


	10 Year Note Bull 2.5X Fund						10 Year Note Bear 2.5X Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008
Operations:
Net investment income (loss)	$	199,350		$	587,465		$	(1,273,061	)	$	(418,399	)
Net realized gain (loss) on investments		14,067,110			10,818,066			(9,818,187	)		(2,612,280	)
Change in unrealized appreciation (depreciation) on investments		(423,035	)		(102,624	)		4,456,707			(713,016	)

Net increase (decrease) in net assets resulting from operations		13,843,425			11,302,907			(6,634,541	)		(3,743,695	)

Distributions to shareholders:
Net investment income		—			(38,088	)		—			(23,079	)
Net realized gains		—			(217,579	)		—			—
Return of capital		—			—			—			(93,987	)

Total distributions		—			(255,667	)		—			(117,066	)

Capital share transactions:
Proceeds from shares sold		193,505,347			469,628,505			91,731,363			85,063,140
Proceeds from shares issued to holders in reinvestment of distributions		—			238,454			—			114,519
Cost of shares redeemed		(199,776,668	)		(460,574,534	)		(72,927,506	)		(49,639,801	)

Net increase (decrease) in net assets resulting from capital share transactions		(6,271,321	)		9,292,425			18,803,857			35,537,858

Total increase (decrease) in net assets		7,572,104			20,339,665			12,169,316			31,677,097

Net assets:
Beginning of year/period		28,554,808			8,215,143			37,470,643			5,793,546

End of year/period	$	36,126,912		$	28,554,808		$	49,639,959		$	37,470,643

(Accumulated) undistributed net investment income (loss), end of year/period	$	199,350		$	—		$	(1,273,061	)	$	—

The accompanying notes are an integral part of these financial statements.

32 DIREXION SEMI-ANNUAL REPORT

Statements of Changes in Net Assets


	Dynamic HY Bond Fund						HY Bear Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008
Operations:
Net investment income (loss)	$	(158,506	)	$	1,021,042		$	(121,229	)	$	446,495
Net realized gain (loss) on investments		(13,295,971	)		(1,664,097	)		3,016,908			560,250
Change in unrealized appreciation (depreciation) on investments		(757,239	)		(295,308	)		218,279			22,275

Net increase (decrease) in net assets resulting from operations		(14,211,716	)		(938,363	)		3,113,958			1,029,020

Distributions to shareholders:
Net investment income		(1,295,977	)		(2,488,092	)		(175,424	)		(294,072	)
Net realized gains		—			—			(80,765	)		(929,448	)

Total distributions		(1,295,977	)		(2,488,092	)		(256,189	)		(1,223,520	)

Capital share transactions:
Proceeds from shares sold		586,899,882			605,396,265			213,410,758			376,891,291
Proceeds from shares issued to holders in reinvestment of distributions		956,726			2,080,156			154,114			949,730
Cost of shares redeemed		(584,380,587	)		(654,661,601	)		(214,543,040	)		(375,471,546	)

Net increase (decrease) in net assets resulting from capital share transactions		3,476,021			(47,185,180	)		(978,168	)		2,369,475

Total increase (decrease) in net assets		(12,031,672	)		(50,611,635	)		1,879,601			2,174,975

Net assets:
Beginning of year/period		25,924,310			76,535,945			28,753,618			26,578,643

End of year/period	$	13,892,638		$	25,924,310		$	30,633,219		$	28,753,618

(Accumulated) undistributed net investment income (loss), end of year/period	$	(730,509	)	$	723,974		$	(190,673	)	$	105,980

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 33

Statements of Changes in Net Assets


	Commodity Bull 2X Fund						Emerging Markets Bull 2X Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008
Operations:
Net investment income (loss)	$	(27,392	)	$	230,199		$	(53,863	)	$	380,503
Net realized gain (loss) on investments		(25,929,777	)		10,173,742			(28,336,168	)		(8,434,231	)
Change in unrealized appreciation (depreciation) on investments		(5,601,706	)		(9,265,512	)		2,256,864			(7,746,567	)

Net increase (decrease) in net assets resulting from operations		(31,558,875	)		1,138,429			(26,133,167	)		(15,800,295	)

Distributions to shareholders:
Net investment income		—			(6,337,915	)		(92,518	)		(372,501	)
Net realized gains		—			(181,911	)		—			(5,113,687	)
Return of capital		—			—			—			(6,221,172	)

Total distributions		—			(6,519,826	)		(92,518	)		(11,707,360	)

Capital share transactions:
Proceeds from shares sold		31,450,037			187,986,507			119,989,500			273,700,606
Proceeds from shares issued to holders in reinvestment of distributions		—			6,045,827			89,671			10,637,278
Cost of shares redeemed		(32,009,088	)		(186,305,904	)		(101,861,843	)		(278,781,366	)

Net increase (decrease) in net assets resulting from capital share transactions		(559,051	)		7,726,430			18,217,328			5,556,518

Total increase (decrease) in net assets		(32,117,926	)		2,345,033			(8,008,357	)		(21,951,137	)

Net assets:
Beginning of year/period		43,080,846			40,735,813			22,289,858			44,240,995

End of year/period	$	10,962,920		$	43,080,846		$	14,281,501		$	22,289,858

(Accumulated) undistributed net investment income (loss), end of year/period	$	(27,392	)	$	—		$	(146,381	)	$	—

The accompanying notes are an integral part of these financial statements.

34 DIREXION SEMI-ANNUAL REPORT

Statements of Changes in Net Assets


	Emerging Markets Bear 2X Fund						Developed Markets Bull 2X Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008
Operations:
Net investment income (loss)	$	(24,223	)	$	218,095		$	(27,219	)	$	36,451
Net realized gain (loss) on investments		1,197,926			(8,859,339	)		(5,708,440	)		(2,748,376	)
Change in unrealized appreciation (depreciation) on investments		235,956			1,870,927			(1,201,029	)		(200,644	)

Net increase (decrease) in net assets resulting from operations		1,409,659			(6,770,317	)		(6,936,688	)		(2,912,569	)

Distributions to shareholders:
Net investment income		(1,399,407	)		—			(604,373	)		(560,910	)
Net realized gains		—			—			—			(70,966	)
Return of capital		—			—			—			(262,501	)

Total distributions		(1,399,407	)		—			(604,373	)		(894,377	)

Capital share transactions:
Proceeds from shares sold		84,206,653			162,822,542			56,790,551			62,380,365
Proceeds from shares issued to holders in reinvestment of distributions		1,297,334			—			586,987			877,299
Cost of shares redeemed		(92,808,963	)		(169,471,753	)		(48,439,236	)		(67,233,095	)

Net increase (decrease) in net assets resulting from capital share transactions		(7,304,976	)		(6,649,211	)		8,938,302			(3,975,431	)

Total increase (decrease) in net assets		(7,294,724	)		(13,419,528	)		1,397,241			(7,782,377	)

Net assets:
Beginning of year/period		9,169,919			22,589,447			2,703,761			10,486,138

End of year/period	$	1,875,195		$	9,169,919		$	4,101,002		$	2,703,761

(Accumulated) undistributed net investment income (loss), end of year/period	$	(1,423,630	)	$	—		$	(631,592	)	$	—

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 35

Statements of Changes in Net Assets


	Developed Markets Bear 2X Fund						China Bull 2X Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			December 3, 2007¹
	(Unaudited)			August 31, 2008			(Unaudited)			to August 31, 2008
Operations:
Net investment income (loss)	$	(24,874	)	$	182,900		$	(36,347	)	$	17,694
Net realized gain (loss) on investments		3,674,566			4,182,086			(10,663,419	)		(1,942,460	)
Change in unrealized appreciation (depreciation) on investments		350,147			152,816			(265,149	)		(833,886	)

Net increase (decrease) in net assets resulting from operations		3,999,839			4,517,802			(10,964,915	)		(2,758,652	)

Distributions to shareholders:
Net investment income		(2,165,581	)		—			(20,003	)		—
Net realized gains		—			—			—			—

Total distributions		(2,165,581	)		—			(20,003	)		—

Capital share transactions:
Proceeds from shares sold		120,909,477			148,780,387			85,152,890			72,953,135
Proceeds from shares issued to holders in reinvestment of distributions		2,128,242			—			19,232			—
Cost of shares redeemed		(131,497,803	)		(148,847,037	)		(73,421,394	)		(63,899,174	)

Net increase (decrease) in net assets resulting from capital share transactions		(8,460,084	)		(66,650	)		11,750,728			9,053,961

Total increase (decrease) in net assets		(6,625,826	)		4,451,152			765,810			6,295,309

Net assets:
Beginning of year/period		11,133,096			6,681,944			6,295,309			—

End of year/period	$	4,507,270		$	11,133,096		$	7,061,119		$	6,295,309

(Accumulated) undistributed net investment income (loss), end of year/period	$	(636,747	)	$	1,533,708		$	(38,601	)	$	17,749


¹		Commencement of operations.

The accompanying notes are an integral part of these financial statements.

36 DIREXION SEMI-ANNUAL REPORT

Statements of Changes in Net Assets


	U.S. Government Money Market Fund
	Six Months Ended
	February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008
Operations:
Net investment income (loss)	$	177,324		$	1,276,957
Net realized gain (loss) on investments		—			—
Change in unrealized appreciation (depreciation) on investments		—			—

Net increase (decrease) in net assets resulting from operations		177,324			1,276,957

Distributions to shareholders:
Net investment income		(177,324	)		(1,276,957	)
Net realized gains		—			—

Total distributions		(177,324	)		(1,276,957	)

Capital share transactions:
Proceeds from shares sold		684,412,197			810,278,680
Proceeds from shares issued to holders in reinvestment of distributions		160,775			1,065,340
Cost of shares redeemed		(671,748,651	)		(768,561,925	)

Net increase (decrease) in net assets resulting from capital share transactions		12,824,321			42,782,095

Total increase (decrease) in net assets		12,824,321			42,782,095

Net assets:
Beginning of year/period		91,270,411			48,488,316

End of year/period	$	104,094,732		$	91,270,411

(Accumulated) undistributed net investment income (loss), end of year/period	$	14,981		$	14,981

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 37

Financial Highlights

February 28, 2009


																															RATIOS TO AVERAGE NET ASSETS
																																											Net
						Net Realized			Net Increase																																		Investment
	Net Asset		Net			and			(Decrease)			Dividends			Distributions									Net Asset					Net Assets,														Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net			from			Return						Value,					End of		Including Short Interest						Excluding Short Interest						After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Realized			of Capital			Total			End of		Total			Year/Period		Total			Net			Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)³			on Investments⁴			from Operations			Income			Capital Gains			Distribution			Distributions			Year/Period		Return⁵			(,000)		Expenses¹			Expenses¹			Expenses¹			Expenses¹			Recoupment¹			Rate⁶


Small Cap Bull 2.5X Fund¹¹
Six months ended February 28, 2009 (Unaudited)	$	80.66	$	(0.09	)	$	(69.84	)	$	(69.93	)	$	—		$	—		$	—		$	—		$	10.73		(86.70	%)²	$	9,077		—			—			2.04	%		1.81	%		(0.89	%)		0	%²
Year ended August 31, 2008		120.08		1.10			(31.22	)		(30.12	)		(9.30	)		—			—			(9.30	)		80.66		(26.31	%)		5,653		—			—			2.50	%		1.75	%		1.24	%		723	%
Year ended August 31, 2007		106.88		3.60			9.60			13.20			—			—			—			—			120.08		12.33	%		3,561		—			—			3.19	%		1.75	%		2.76	%		535	%
Year ended August 31, 2006		113.20		2.96			(9.28	)		(6.32	)		—			—			—			—			106.88		(5.60	%)		4,418		—			—			2.07	%		1.75	%		2.50	%		762	%
Year ended August 31, 2005		90.90		0.46			21.84			22.30			—			—			—			—			113.20		24.53	%		15,573		—			—			1.75	%		1.75	%		0.43	%		407	%
Year ended August 31, 2004		83.50		(1.04	)		8.44			7.40			—			—			—			—			90.90		8.86	%		8,263		—			—			1.75	%		1.75	%		(1.10	%)		0	%
Small Cap Bear 2.5X Fund
Six months ended February 28, 2009 (Unaudited)		10.20		(0.05	)		8.51			8.46			(6.92	)		—			—			(6.92	)		11.74		103.08	%²		5,839		—			—			2.12	%		1.78	%		(0.82	%)		0	%²
Year ended August 31, 2008		11.61		0.17			(1.16	)		(0.99	)		(0.42	)		—			—			(0.42	)		10.20		(8.95	%)		13,365		—			—			2.27	%		1.75	%		1.39	%		0	%
Year ended August 31, 2007		15.12		0.39			(3.90	)		(3.51	)		—			—			—			—			11.61		(23.21	%)		29,669		—			—			2.15	%		1.75	%		3.25	%		0	%
Year ended August 31, 2006		19.88		0.41			(3.70	)		(3.29	)		(0.75	)		—			(0.72	)		(1.47	)		15.12		(17.09	%)		16,190		—			—			1.75	%		1.88	%		2.23	%		0	%
Year ended August 31, 2005		26.48		0.15			(6.75	)		(6.60	)		—			—			—			—			19.88		(24.92	%)		47,713		—			—			2.16	%		1.95	%		0.68	%		0	%
Year ended August 31, 2004		31.77		(0.34	)		(4.83	)		(5.17	)		(0.12	)		—			—			(0.12	)		26.48		(16.33	%)		7,729		—			—			2.00	%		1.95	%		(1.26	%)		0	%
10 Year Note Bull 2.5X Fund
Six months ended February 28, 2009 (Unaudited)		24.14		0.14			3.96			4.10			—			—			—			—			28.24		16.98	%²		36,127		—			—			1.78	%		1.75	%		1.03	%		498	%²
Year ended August 31, 2008		20.12		0.40			4.35			4.75			(0.11	)		(0.62	)		—			(0.73	)		24.14		24.07	%		28,555		—			—			1.77	%		1.75	%		1.70	%		2,086	%
Year ended August 31, 2007		18.73		0.62	⁷		0.77			1.39			—			—			—			—			20.12		7.42	%		8,215		8.80	%		7.48	%		3.07	%		1.75	%		3.20	%⁸		1,083	%
Year ended August 31, 2006		20.96		0.62	⁷		(2.39	)		(1.77	)		(0.33	)		—			(0.13	)		(0.46	)		18.73		(8.52	%)		14,776		8.84	%		5.84	%		4.75	%		1.75	%		3.53	%⁸		889	%
March 31, 2005¹² to August 31, 2005		20.00		0.22			0.74			0.96			—			—			—			—			20.96		4.80	%²		1,212		—			—			8.81	%		1.60	%		2.80	%		1,444	%²
10 Year Note Bear 2.5X Fund
Six months ended February 28, 2009 (Unaudited)		13.82		(0.36	)⁹		(2.56	)		(2.92	)		—			—			—			—			10.90		(21.13	%)²		49,640		8.96	%		8.95	%		1.76	%		1.75	%		(6.30	%)¹⁰		0	%²
Year ended August 31, 2008		17.57		(0.31	)⁹		(3.26	)		(3.57	)		(0.04	)		—			(0.14	)		(0.18	)		13.82		(20.46	%)		37,471		8.02	%		7.88	%		1.89	%		1.75	%		(2.09	%)¹⁰		0	%
Year ended August 31, 2007		18.87		0.44	⁹		(1.03	)		(0.59	)		(0.21	)		(0.50	)		—			(0.71	)		17.57		(3.27	%)		5,794		11.92	%		11.40	%		2.27	%		1.75	%		2.37	%¹⁰		0	%
Year ended August 31, 2006		17.02		—	⁹		1.85			1.85			—			—			—			—			18.87		10.87	%		8,201		10.45	%		10.45	%		1.75	%		1.75	%		0.02	%¹⁰		0	%
Year ended August 31, 2005		17.96		(0.20	)⁹		(0.74	)		(0.94	)		—			—			—			—			17.02		(5.23	%)		35,994		6.94	%		7.06	%		1.63	%		1.75	%		(1.13	%)¹⁰		0	%
May 17, 2004¹² to August 31, 2004		20.00		(0.03	)		(2.01	)		(2.04	)		—			—			—			—			17.96		(10.20	%)²		4,721		3.95	%		1.75	%		3.95	%		1.75	%		(0.60	%)		0	%²


¹		Annualized
²		Not annualized
³		Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period.
⁴		The amounts shown may not correlate with aggregate gains and losses of portfolio securities due to timing of subscriptions and redemptions of Fund shares.
⁵		All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes.
⁶		Portfolio turnover is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, and futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
⁷		Net investment income (loss) before interest on short positions for the year ended August 31, 2007 and the year ended August 31, 2006 was $1.73 and $1.33, respectively.
⁸		Net investment income (loss) ratio included interest on short positions. The ratio excluding interest on short positions for the year ended August 31, 2007 and 2006 was 8.93% and 7.63%, respectively.
⁹		Net investment income (loss) before interest on short positions for the six months ended February 28, 2009 and years ended August 31, 2008, 2007, 2006 and 2005 were $0.05, $0.59, $2.25, $1.64 and $0.74, respectively.
¹⁰		Net investment income (loss) ratio included interest on short positions. The ratio excluding interest on short positions for the period ended February 28, 2009 and years ended August 31, 2008, 2007, 2006 and 2005 were 0.91%, 4.04%, 12.02%, 8.73% and 4.31%, respectively.
¹¹		On December 15, 2008, the Small Cap Bull 2.5X Fund had a 2:1 reverse stock split. Per share data for all periods prior to December 15, 2008 has been adjusted to give effect to 2:1 reverse stock split.
¹²		Commencement of operations.

38 DIREXION SEMI-ANNUAL REPORT

Financial Highlights

February 28, 2009


																															RATIOS TO AVERAGE NET ASSETS
																																											Net
						Net Realized			Net Increase																																		Investment
	Net Asset		Net			and			(Decrease)			Dividends			Distributions									Net Asset					Net Assets,														Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net			from			Return						Value,					End of		Including Short Interest						Excluding Short Interest						After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Realized			of Capital			Total			End of		Total			Year/Period		Total			Net			Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)³			on Investments⁴			from Operations			Income			Capital Gains			Distribution			Distributions			Year/Period		Return⁵			(,000)		Expenses¹			Expenses¹			Expenses¹			Expenses¹			Recoupment¹			Rate⁶


Dynamic HY Bond Fund
Six months ended February 28, 2009 (Unaudited)	$	16.38	$	(0.04	)⁸	$	(2.58	)	$	(2.62	)	$	(0.83	)	$	—		$	—		$	(0.83	)	$	12.93		(16.41	%)²	$	13,893		1.94	%		1.89	%		1.92	%		1.87	%		(0.54	%)⁹		661	%²
Year ended August 31, 2008		18.67		0.32			(1.38	)		(1.06	)		(1.23	)		—			—			(1.23	)		16.38		(5.85	%)⁷		25,924		—			—			1.74	%		1.74	%		1.80	%		241	%
Year ended August 31, 2007		18.16		0.79			0.51			1.30			(0.79	)		—			—			(0.79	)		18.67		7.24	%		76,536		—			—			1.52	%		1.52	%		4.16	%		426	%
Year ended August 31, 2006		19.00		0.77			0.23			1.00			(1.84	)		—			—			(1.84	)		18.16		5.58	%		101,987		—			—			1.46	%		1.46	%		4.18	%		805	%
Year ended August 31, 2005		20.35		0.84			(1.37	)		(0.53	)		(0.82	)		—			—			(0.82	)		19.00		(2.66	%)		206,548		—			—			1.39	%		1.39	%		4.14	%		622	%
July 1, 2004¹⁴ to August 31, 2004		20.00		0.17			0.18			0.35			—			—			—			—			20.35		1.75	%²		251,241		—			—			1.50	%		1.50	%		5.32	%		47	%²
HY Bear Fund
Six months ended February 28, 2009 (Unaudited)		18.74		(0.07	)		1.85			1.78			(0.16	)		(0.07	)		—			(0.23	)		20.29		9.54	%²		30,633		—			—			1.81	%		1.75	%		(0.75	%)		0	%²
Year ended August 31, 2008		19.23		0.25	¹⁰		0.06			0.31			(0.16	)		(0.64	)		—			(0.80	)		18.74		1.63	%		28,754		2.37	%		2.26	%		1.86	%		1.75	%		1.31	%¹¹		0	%
Year ended August 31, 2007		19.48		0.66	¹⁰		(0.79	)		(0.13	)		(0.12	)		—			—			(0.12	)		19.23		(0.66	%)		26,579		3.18	%		3.22	%		1.68	%		1.72	%		3.41	%¹¹		0	%
September 30, 2005¹⁴ to August 31, 2006		20.00		0.45	¹⁰		(0.97	)		(0.52	)		—			—			—			—			19.48		(2.60	%)²		9,021		3.72	%		2.02	%		3.45	%		1.75	%		2.51	%¹¹		1,150	%²
Commodity Bull 2X Fund¹²
Six months ended February 28, 2009 (Unaudited)		90.21		(0.05	)		(72.29	)		(72.34	)		—			—			—			—			17.87		(80.19	%)²		10,963		—			—			1.95	%		1.80	%		(0.35	%)		16	%²
Year ended August 31, 2008		96.06		0.39			10.68			11.07			(0.48	)		(16.44	)		—			(16.92	)		90.21		10.93	%		43,081		—			—			1.78	%		1.75	%		0.35	%		168	%
Year ended August 31, 2007		61.44		1.38			33.24			34.62			—			—			—			—			96.06		56.35	%		40,736		—			—			2.06	%		1.75	%		1.56	%		612	%
Year ended August 31, 2006		75.09		1.29			(8.28	)		(6.99	)		—			(6.66	)		—			(6.66	)		61.44		(9.35	%)		1,563		—			—			2.59	%		1.75	%		1.80	%		8,528	%
February 17, 2005¹⁴ to August 31, 2005		60.00		0.48			14.61			15.09			—			—			—			—			75.09		25.15	%²		35,090		—			—			2.00	%		1.75	%		1.37	%		0	%²
Emerging Markets Bull 2X Fund¹³
Six months ended February 28, 2009 (Unaudited)		106.45		(0.10	)		(88.15	)		(88.25	)		(0.07	)		—			—			(0.07	)		18.13		(82.88	%)²		14,282		—			—			1.82	%		1.83	%		(0.72	%)		1,473	%²
Year ended August 31, 2008		194.45		1.45			(38.75	)		(37.30	)		(1.80	)		(22.15	)		(26.75	)		(50.70	)		106.45		(27.82	%)		22,290		—			—			1.75	%		1.75	%		0.85	%		2,796	%
Year ended August 31, 2007		125.10		1.55			82.05			83.60			(2.40	)		(11.85	)		—			(14.25	)		194.45		69.47	%		44,241		—			—			2.02	%		1.75	%		0.93	%		2,617	%
November 1, 2005¹⁴ to August 31, 2006		100.00		1.00			25.95			26.95			(1.85	)		—			—			(1.85	)		125.10		27.06	%²		19,889		—			—			1.55	%		1.55	%		0.92	%		954	%²


¹		Annualized
²		Not annualized
³		Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period.
⁴		The amounts shown may not correlate with aggregate gains and losses of portfolio securities due to timing of subscriptions and redemptions of Fund shares.
⁵		All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes.
⁶		Portfolio turnover is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, and futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
⁷		The Adviser made a contribution due to trading error. If the contribution had not been made, the total return would have been lower by 0.41%.
⁸		Net investment income (loss) before interest on short positions for the six months ended February 28, 2009 was $(0.04).
⁹		Net investment income (loss) ratio included interest on short positions. The ratio excluding interest on short positions for the six months ended February 28, 2009 was (0.52%).
¹⁰		Net investment income (loss) before interest on short positions for the years ended August 31, 2008, 2007 and 2006 were $0.35, $0.94 and $0.41, respectively.
¹¹		Net investment income (loss) ratio included interest on short positions. The ratio excluding interest on short positions for the years ended August 31, 2008, 2007 and 2006 were 1.83%, 4.96% and 2.25%, respectively.
¹²		On December 15, 2008, the Commodity Bull 2X Fund had a 3:1 reverse stock split. Per share data for all periods prior to December 15, 2008 has been adjusted to give effect to 3:1 reverse stock split.
¹³		On December 15, 2008, the Emerging Markets Bull 2X Fund had a 5:1 reverse stock split. Per share data for all periods prior to December 15, 2008 has been adjusted to give effect to 5:1 reverse stock split.
¹⁴		Commencement of operations.

DIREXION SEMI-ANNUAL REPORT 39

Financial Highlights

February 28, 2009


																															RATIOS TO AVERAGE NET ASSETS
																																									Net
						Net Realized			Net Increase																																Investment
	Net Asset		Net			and			(Decrease)			Dividends			Distributions									Net Asset					Net Assets,												Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net			from			Return						Value,					End of		Including Short Interest				Excluding Short Interest						After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Realized			of Capital			Total			End of		Total			Year/Period		Total		Net		Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)³			on Investments⁴			from Operations			Income			Capital Gains			Distribution			Distributions			Year/Period		Return⁵			(,000)		Expenses¹		Expenses¹		Expenses¹			Expenses¹			Recoupment¹			Rate⁶


Emerging Markets Bear 2X Fund⁷
Six months ended February 28, 2009 (Unaudited)	$	26.43	$	(0.10	)	$	(10.84	)	$	(10.94	)	$	(5.88	)	$	—		$	—		$	(5.88	)	$	9.61		(32.78	%)²	$	1,875		—		—		3.77	%		1.77	%		(0.92	%)		2,726	%²
Year ended August 31, 2008		28.60		0.09			(2.26	)		(2.17	)		—			—			—			—			26.43		(7.59	%)		9,170		—		—		2.04	%		1.75	%		1.66	%		0	%
Year ended August 31, 2007		60.50		1.35			(32.00	)		(30.65	)		(1.25	)		—			—			(1.25	)		28.60		(51.25	%)		22,589		—		—		2.59	%		1.75	%		3.49	%		0	%
November 4, 2005¹² to August 31, 2006		100.00		1.70			(41.20	)		(39.50	)		—			—			—			—			60.50		(39.50	%)²		2,726		—		—		2.72	%		1.71	%		2.87	%		0	%²
Developed Markets Bull 2X Fund⁸
Six months ended February 28, 2009 (Unaudited)		73.85		(0.11	)		(55.43	)		(55.54	)		(2.39	)		—			—			(2.39	)		15.92		(76.47	%)²		4,101		—		—		2.15	%		1.82	%		(0.81	%)		700	%²
Year ended August 31, 2008		131.55		0.55			(39.50	)		(38.95	)		(11.80	)		(1.50	)		(5.45	)		(18.75	)		73.85		(34.75	%)		2,704		—		—		2.32	%		1.75	%		0.51	%		1,078	%
Year ended August 31, 2007		111.65		3.05			26.15			29.20			(7.70	)		(1.60	)		—			(9.30	)		131.55		26.61	%		10,486		—		—		2.03	%		1.75	%		2.35	%		496	%
January 25, 2006¹² to August 31, 2006		100.00		(0.35	)		12.00			11.65			—			—			—			—			111.65		11.65	%²		18,695		—		—		3.87	%		1.70	%		(0.51	%)		251	%²
Developed Markets Bear 2X Fund
Six months ended February 28, 2009 (Unaudited)		15.56		(0.07	)		8.59			8.52			(2.83	)		—			—			(2.83	)		21.25		59.26	%²		4,507		—		—		2.65	%		1.79	%		(0.75	%)		0	%²
Year ended August 31, 2008		11.99		0.20			3.37			3.57			—			—			—			—			15.56		29.77	%		11,133		—		—		1.88	%		1.75	%		1.60	%		0	%
Year ended August 31, 2007		15.90		0.43			(4.34	)		(3.91	)		—			—			—			—			11.99		(24.53	%)		6,682		—		—		6.12	%		1.75	%		3.20	%		0	%
February 6, 2006¹² to August 31, 2006		20.00		0.31			(4.41	)		(4.10	)		—			—			—			—			15.90		(20.50	%)²		2,787		—		—		2.83	%		1.74	%		3.10	%		0	%²
China Bull 2X Fund⁹
Six months ended February 28, 2009 (Unaudited)		100.92		(0.19	)		(82.11	)		(82.30	)		(0.01	)		—			—			(0.01	)		18.61		(81.57	%)²		7,061		—		—		2.58	%		1.83	%		(1.33	%)		1,942	%²
December 3, 2007¹² to August 31, 2008		240.00		0.48			(139.56	)		(139.08	)		—			—			—			—			100.92		(57.95	%)²		6,295		—		—		2.81	%		1.75	%		0.46	%		2,204	%²
U.S. Government Money Market Fund
Six months ended February 28, 2009 (Unaudited)		1.00		—	¹¹		—			—			—	¹¹		—			—			—			1.00		0.16	%²		104,095		—		—		1.25	%		0.94	%		0.33	%		0	%²
Year ended August 31, 2008		1.00		0.02			—			0.02			(0.02	)		—			—			(0.02	)		1.00		2.23	%		91,270		—		—		1.10	%		0.99	%		1.91	%		0	%
Year ended August 31, 2007		1.00		0.04			—			0.04			(0.04	)		—			—			(0.04	)		1.00		4.14	%		48,488		—		—		1.21	%¹⁰		1.18	%		4.06	%		0	%
Year ended August 31, 2006		1.00		0.03			—			0.03			(0.03	)		—			—			(0.03	)		1.00		3.49	%		27,309		—		—		1.00	%		1.09	%		3.37	%		0	%
Year ended August 31, 2005		1.00		0.02			—			0.02			(0.02	)		—			—			(0.02	)		1.00		1.54	%		18,718		—		—		1.07	%		1.00	%		1.61	%		0	%
Year ended August 31, 2004		1.00		—	¹¹		—			—			—	¹¹		—			—			—			1.00		0.10	%		20,628		—		—		1.30	%		0.99	%		0.12	%		0	%


¹		Annualized
²		Not annualized
³		Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period.
⁴		The amounts shown may not correlate with aggregate gains and losses of portfolio securities due to timing of subscriptions and redemptions of Fund shares.
⁵		All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes.
⁶		Portfolio turnover is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, and futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
⁷		On May 19, 2008, the Emerging Markets Bear 2X Fund had a 5:1 reverse stock split. Per share data for all periods prior to May 19, 2008 has been adjusted to give effect to 5:1 reverse stock split.
⁸		On December 15, 2008, the Developed Markets Bull 2X Fund had a 5:1 reverse stock split. Per share data for all periods prior to December 15, 2008 has been adjusted to give effect to 5:1 reverse stock split.
⁹		On December 15, 2008, the China Bull 2X Fund had a 12:1 reverse stock split. Per share data for all periods prior to December 15, 2008 has been adjusted to give effect to 12:1 reverse stock split.
¹⁰		The gross expense ratio reported includes additional expenses that were incurred by the Fund and waived under the terms of the Operating Expense Limitation Agreement.
¹¹		Amount is less than $0.01 per share.
¹²		Commencement of operations.

40 DIREXION SEMI-ANNUAL REPORT

Direxion Funds

NOTES TO THE FINANCIAL STATEMENTS

February 28, 2009 (Unaudited)


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 35 series of which 13 are included in this report: Small Cap Bull 2.5X, Small Cap Bear 2.5X, 10 Year Note Bear 2.5X Fund, 10 Year Note Bull 2.5X Fund, Dynamic HY Bond Fund, HY Bear Fund, Commodity Bull 2X Fund, Emerging Markets Bull 2X Fund, Emerging Markets Bear 2X Fund, Developed Markets Bull 2X Fund, Developed Markets Bear 2X Fund, China Bull 2X Fund, and the U.S. Government Money Market Fund (each a “Fund” and collectively, the “Funds”). Each Fund (other than the U.S. Government Money Market 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 of shares. During the six months ended February 28, 2009, the Board of Trustees of the Trust, based upon on the recommendation of management, closed four series: the NASDAQ-100 Bull 1.25X Fund, Dow 30 Bull 1.25X Fund, India Bull 2X Fund and China Bear 2X Fund.

The objective of the Small Cap Bull 2.5X Fund is to provide daily investment returns that correspond to 250% of the performance of the Russell 2000^® Index (“Russell 2000 Index”). The objective of the Small Cap Bear 2.5X Fund is to provide daily investment returns that inversely correspond (or opposite) to 250% of the performance of the Russell 2000 Index. The objective of the 10 Year Note Bear 2.5X Fund is to provide investment returns that inversely correspond (or opposite) to 250% of the daily price movement of the benchmark 10-year U.S. Treasury Note. The objective of the 10 Year Note Bull 2.5X Fund is to provide investment returns that correspond to 250% of the daily price movement of the benchmark 10 Year Note. The objective of the Dynamic HY Bond Fund is to maximize total return (income plus capital appreciation) by investing primarily in debt instruments, including convertible securities, and derivatives of such investments, with an emphasis on lower-quality debt instruments. The objective of the HY Bear Fund is to profit from a decline in the value of lower-quality debt instruments by creating short positions in such instruments and derivatives of such instruments. The objective of the Commodity Bull 2X Fund is to seek capital appreciation on an annual basis by investing in commodity-linked derivative instruments, including swap agreements, commodity options, futures, options on futures and commodity-linked notes, in an attempt to gain exposure to the investment returns of the commodities markets without investing directly in physical commodities. The objective of the Emerging Markets Bull 2X Fund is to provide investment returns that correspond to 200% of the performance of the MSCI Emerging Markets Index (“EM Index”). The objective of the Emerging Market Bear 2X Fund is to provide investment returns that inversely correspond (or opposite) to 200% of the performance of the EM Index. The objective of the Developed Markets Bull 2X Fund is to provide investment returns that correspond to 200% of the performance of the MSCI EAFE Index (“EAFE Index”). The objective of the Developed Markets Bear 2X Fund is to provide investment returns that inversely correspond (or opposite) to 200% of the performance of the EAFE Index. The objective of the China Bull 2X Fund is to provide investment returns that correspond to 200% of the performance of the FTSE/Xinhua China 25 Index. The objective of the U.S. Government Money Market Fund is to provide security of principal, current income and liquidity by investing primarily in obligations issued or guaranteed, as to principal and interest, by the U.S. government, its agencies or instrumentalities and repurchase agreements that are fully collateralized by such obligations.


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”).

DIREXION SEMI-ANNUAL REPORT 41

established by the exchange reflects trading after the Valuation Time, then the last sales price prior to Valuation Time will be used. Options are valued at the composite price, using the National Best Bid and Offer quotes (“NBBO”). NBBO consists of the highest bid price and lowest ask price across any of the exchanges on which an option is quoted. Specifically, composite pricing looks at the last trades on the exchanges where the options are traded. If there are no trades for the option on a given business day, the composite pricing calculates the mean of the highest bid and lowest ask price across the exchanges where the option is traded. Over-the-counter (“OTC”) securities are valued 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 (“NOCP”). Investments in open-end mutual funds are valued at their respective net asset values on the valuation dates. Swaps are valued based upon prices from third party vendor models or quotations from market makers to the extent available. Short-term debt securities with a maturity of 60 days or less and money market securities are valued using the amortized cost method. Other debt securities are valued by using the mean prices provided by the Fund’s pricing service or, if such services are unavailable, by a pricing matrix method. Securities for which reliable market quotations are not readily available, the Funds’ pricing service does not provide a valuation for such securities, the Fund’s pricing service provides valuation that in the judgment of Rafferty Asset Managements, LLC (the “Adviser”) does not represent fair value, or the Fund or Adviser believes the market price is stale, will be in each case fair valued as determined by the Adviser under the supervision of the Board of Trustees.

b) Repurchase Agreements – Each Fund may enter into repurchase agreements with institutions that are members of the Federal Reserve System or securities dealers who are members of a national securities exchange or are primary dealers in U.S. government securities. In connection with transactions in repurchase agreements, it is the Trust’s policy that the Fund receives, as collateral, cash and/or securities (primarily U.S. government securities) whose market value, including accrued interest, will at all times be at least equal to 100% of the amount invested by the Fund in each repurchase agreement. If the seller defaults, and the value of the collateral declines, recovery on the collateral by the Fund may be delayed or limited.

c) Swap Contracts – Each Fund, other than the U.S. Government Money Market 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). The Fund’s obligations are accrued daily (offset by any amounts owed to the funds.)

In a “long” equity swap agreement, the counterparty will generally agree to pay the Funds the amount, if any, by which the notional amount of swap contract would have increased in value if the Funds had been invested in the particular securities, plus dividends that would have been received on those securities. The Funds 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. 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 by the Fund’s custodian. 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 Funds on the notional amount are recorded as “unrealized gains or losses on swaps and futures” and when cash is exchanged, the gain or loss is recorded as “realized gains or losses on swaps and futures”. Swap contracts are collateralized by the securities and cash of each particular Fund.

Each Fund, other than the U.S. Government Money Market Fund, may enter into swap contracts that provide the opposite return of the particular 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 on the swap. Also, as with “long” swap agreements, in certain instances, the Fund will agree to pay to the counterparty commissions or trading spreads on the notional amount. These amounts are netted with any unrealized appreciation or depreciation to determine the value of the swap.

42 DIREXION SEMI-ANNUAL REPORT

The Dynamic HY Bond Fund and HY Bear Fund may enter into credit default swaps. Credit default swaps involve one party (referred to as the buyer of protection) making a stream of payments to another party (referred to as the seller of protection) in exchange for the right to receive a specified return in the event a credit event, typically a default by a corporate issuer on its debt obligation, occurs. As a seller of protection on credit default swaps, a Fund will generally receive from the buyer of protection a fixed rate of interest on the notional amount of the swap contract throughout the term of the swap provided that there is no credit event. As the seller of protection, a Fund would effectively add leverage to its portfolio because, in addition to its total assets, a Fund would be subject to investment exposure on the notional amount of the swap.

If a Fund is a seller of protection and a credit event occurs, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the reference obligation or underlying securities comprising the reference index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising the reference index. If a Fund is a buyer of protection and a credit event occurs, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the reference obligation or underlying securities comprising the reference index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising the reference index. Recovery values are assumed by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value.

Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. The stream of payments is recorded as an unrealized gain or loss and adjusted to include up-front payments paid or received by the Fund recorded as a component of unrealized gain or loss on swaps, and/or interest associated with the agreement until the swap is sold or expires, at which point the cumulative stream of payments is recognized as a component of realized gain or loss. A credit index consists of a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset based securities, emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index. A Fund may use credit default swaps on credit indices to hedge a portfolio of credit default swaps or bonds because entering into credit default swaps on indices is less expensive than buying many credit default swaps. Credit default swaps on indices are benchmarks for protecting investors owning bonds against defaults, and traders use them to speculate on changes in credit quality of bonds.

The maximum potential amount of future payments that the Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the swap. Notional amount of all credit default swaps outstanding as of February 28, 2009 are disclosed in the footnotes to the Schedule of Investments. These potential amounts would be partially offset by any recovery value of respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a Fund for the same referenced entity or entities.

The Dynamic HY Bond Fund has entered into swap agreements with three counterparties; Goldman Sachs, Barclays, and Bank of America in which the fund sold protection on a credit default swap index, the Dow Jones CDX North America High Yield Index (the “CDX”). The HY Bear Fund has entered into swap agreements with two counterparties; Barclays and Merrill Lynch in which the fund bought protection on the CDX. The CDX is a completely standardized credit security and is composed of 100 non-investment grade entities (“reference entities”), distributed among three sub-indices: B, BB, and HB. The composition of the CDX and each sub-index is determined by a consortium of 16 member banks. All entities are domiciled in North America. CDX indices roll every 6 months in March and September. The CDX is providing credit protection to the

DIREXION SEMI-ANNUAL REPORT 43

counterparties of the respective credit default swap agreements in exchange for a fixed interest rate payment received by the Fund from the counterparties. Therefore, there is credit risk with respect to the referenced entities of these credit default swap agreements. If a credit event occurs to a referenced entity, the Fund’s principal amount in the CDX will be reduced by its pro-rata interest in the respective credit default swap agreement. A credit event may include a failure to pay interest or principal, bankruptcy, or restructuring, by any of the 100 reference entities in the CDX. Any recoverable amounts of the liquidation of the referenced entity will be allocated pro rata to the holders of the CDX.

The Dynamic HY Bond Fund, by entering into the credit default swap agreements on the CDX, is providing credit protection to the counterparties of the respective credit default swap agreements in exchange for a fixed interest rate payment received by the Fund from the counterparties. Therefore, there is credit risk to the Fund with respect to the referenced entities of the CDX covered by these credit default swap agreements. If a credit event occurs to a referenced entity, the Fund will be required to make a payment to the counterparties under the respective credit default swap agreement. A credit event may include a failure to pay interest or principal, bankruptcy, or restructuring, by any of the 100 reference entities in the CDX.

The HY Bear Fund, by entering into the credit default swap agreements on the CDX, is provided credit protection from the counterparties of the respective credit default swap agreements in exchange for a fixed interest rate payment paid to the counterparties from the Fund. Therefore, there is no credit risk to the the Fund with respect to referenced entities of the CDX covered by these credit default swap agreements. The counterparties of the respective credit default swap agreements bear the credit risk. If a credit event occurs to a referenced entity, the counterparties will be required to make a payment to the Fund under the respective credit default swap agreement. A credit event may include a failure to pay interest or principal, bankruptcy, or restructuring, by any of the 100 reference entities in the CDX.

The Fund has adopted Financial Accounting Standards Board (“FASB”) Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45 (the “Position”). The Position amends FASB Statement No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and also amends FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The amendments to FAS 133 include required disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative, (ii) the maximum potential amount of future payments the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third parties. The amendments to FIN 45 require additional disclosures about the current status of the payment risk of a guarantee.

d) Short Positions – The Small Cap Bear 2.5X Fund, 10 Year Note Bear 2.5X Fund, HY Bear Fund, Emerging Markets Bear 2X Fund, Dynamic HY Bond Fund and Developed Markets Bear 2X Fund may engage in short sale transactions. The Small Cap Bull 2.5X Fund can only engage in short sales “against the box” In this instance a security can only be sold short if a long position is held on the same security. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. Subsequent fluctuations in the market prices of short securities may require purchasing the securities at prices which may differ from the market value reflected on the Statement of Assets and Liabilities. The Fund is liable to the buyer for any dividends payable on securities while those securities are in a short position. As collateral for its short positions, the Fund is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities equal to the market value of the securities sold short. This collateral is required to be adjusted daily.

e) Stock Index Futures Contracts and Options on Futures Contracts – Each Fund, other than the U.S. Government Money Market Fund, may purchase and sell stock index futures contracts and options on such futures contracts. 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

44 DIREXION SEMI-ANNUAL REPORT

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.

f) Risks of Options, Futures Contracts, Options on Futures Contracts and Short Positions – The risks inherent in the use of options, futures contracts, options on futures contracts and short positions include 1) adverse changes in the value of such instruments; 2) imperfect correlation between the price of options and 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 written options, futures contracts, options on futures contracts and short positions.

Transactions in options written during the six months ended February 28, 2009 were as follows:


	Small Cap						Small Cap						Emerging Markets
	Bull 2.5X Fund						Bear 2.5X Fund						Bull 2X Fund
	Number			Premiums			Number			Premiums			Number			Premiums
	of Contracts			Received			of Contracts			Received			of Contracts			Received

Options outstanding at August 31, 2008		50		$	6,450			100		$	12,900			2,000		$	43,000
Options written		100			11,200			200			22,400			3,400			79,900
Options terminated in closing purchase transactions		(150	)		(17,650	)		(300	)		(35,300	)		(5,400	)		(122,900	)
Options expired		—			—			—			—			—			—
Option exercised		—			—			—			—			—			—

Options outstanding at February 28, 2009		—		$	—			—		$	—			—		$	—


	Emerging Markets						China
	Bear 2X Fund						Bull 2X Fund
	Number			Premiums			Number			Premiums
	of Contracts			Received			of Contracts			Received

Options outstanding at August 31, 2008		1,000		$	21,501			450		$	24,300
Options written		2,500			79,000			160			10,240
Options terminated in closing purchase transactions		(3,500	)		(100,501	)		(360	)		(20,040	)
Options expired		—			—			(250	)		(14,500	)
Option exercised		—			—			—			—

Options outstanding at February 28, 2009		—		$	—			—		$	—

g) Risks of Investing in Foreign Securities – Investments in foreign securities involve greater risks than investing in domestic securities. As a result, the 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 not be as strict as they are in the U.S., and there may be less public information available about foreign companies.

h) Security 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.

i) Illiquid Securities – According to the Fund’s Statement of Additional Information, each Fund may purchase and hold illiquid securities. No Fund may purchase any security if, as a result, more than 15% of the current value of net assets would be invested in investments deemed illiquid. Investments currently considered to be illiquid include: (1) repurchase agreements not terminable within seven days; (2) securities for which market quotations are not readily available;

DIREXION SEMI-ANNUAL REPORT 45

(3) over-the-counter (“OTC”) options and their underlying collateral; (4) bank deposits, unless they are payable at principal amount plus accrued interest on demand or within seven days after demand; and (5) restricted securities not determined to be liquid pursuant to guidelines established by the Board; and (6) in certain circumstances, securities involved in swap, cap, floor or collar transactions. As of February 28, 2009, the Dynamic HY Bond Fund was invested in a repurchase agreement terminable beyond seven days. The value of this illiquid investment as of February 28, 2009 was 6.82%.

j) Federal Income Taxes – Each Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code 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.

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. The Funds are charged for those expenses that are directly attributable to each series, such as advisory fees and registration costs. Expenses that are not directly attributable to a series are generally allocated among the Trust’s series in proportion to their respective net assets.

l) Distributions to Shareholders – Each Fund, other than the U.S. Government Money Market Fund, generally pays dividends from net investment income and distributes net realized capital gains, if any, at least annually. The U.S. Government Money Market Fund ordinarily will declare dividends from net investment income on a daily basis and distribute those dividends monthly. 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.

The tax character of distributions for the Investor Class during the six months ended February 28, 2009 and the year ended August 31, 2008, were as follows:


	Small Cap Bull 2.5X Fund				Small Cap Bear 2.5X Fund				10 Year Note Bull 2.5X Fund
	Six Months Ended				Six Months Ended				Six Months Ended
	February 28,		Year Ended		February 28,		Year Ended		February 28,		Year Ended
	2009		August 31,		2009		August 31,		2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	—	$	523,740	$	2,122,718	$	562,369	$	—	$	210,366
Long-Term Capital Gains		—		—		—		—		—		45,301
Return of Capital		—		—		—		—		—		—

Total Distributions paid	$	—	$	523,740	$	2,122,718	$	562,369	$	—	$	255,667


	10 Year Note Bear 2.5X Fund				Dynamic HY Bond Fund				HY Bear Fund
	Six Months Ended				Six Months Ended				Six Months Ended
	February 28,		Year Ended		February 28,		Year Ended		February 28,		Year Ended
	2009		August 31,		2009		August 31,		2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	—	$	23,079	$	1,295,977	$	2,488,092	$	175,424	$	1,223,520
Long-Term Capital Gains		—		—		—		—		80,765		—
Return of Capital		—		93,987		—		—		—		—

Total Distributions paid	$	—	$	117,066	$	1,295,977	$	2,488,092	$	256,189	$	1,223,520

46 DIREXION SEMI-ANNUAL REPORT


	Commodity Bull 2X Fund				Emerging Markets Bull 2X Fund				Emerging Markets Bear 2X Fund
	Six Months Ended				Six Months Ended				Six Months Ended
	February 28,		Year Ended		February 28,		Year Ended		February 28,		Year Ended
	2009		August 31,		2009		August 31,		2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	—	$	6,519,826	$	92,518	$	5,193,968	$	1,399,407	$	—
Long-Term Capital Gains		—		—		—		292,220		—		—
Return of Capital		—		—		—		6,221,172		—		—

Total Distributions paid	$	—	$	6,519,826	$	92,518	$	11,707,360	$	1,399,407	$	—


	Developed Markets Bull 2X Fund				Developed Markets Bear 2X Fund
	Six Months Ended				Six Months Ended
	February 28,		Year Ended		February 28,		Year Ended
	2009		August 31,		2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	604,373	$	618,675	$	2,165,581	$	—
Long-Term Capital Gains		—		13,201		—		—
Return of Capital		—		262,501		—		—

Total Distributions paid	$	604,373	$	894,377	$	2,165,581	$	—


					U.S. Government
	China Bull 2X Fund				Money Market Fund
	Six Months Ended				Six Months Ended
	February 28,		Period Ended		February 28,		Year Ended
	2009		August 31,		2009		August 31,
	(Unaudited)		2008¹		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	20,003	$	—	$	177,324	$	1,276,957
Long-Term Capital Gains		—		—		—		—
Return of Capital		—		—		—		—

Total Distributions paid	$	20,003	$	—	$	177,324	$	1,276,957


¹		Commenced operations on December 3, 2007.

As of February 28, 2009, the components of distributable earnings of the Funds on a tax basis were as follows:


	Small Cap			Small Cap			10 Year Note		10 Year Note			Dynamic HY			HY Bear
	Bull 2.5X Fund			Bear 2.5X Fund			Bull 2.5X Fund		Bear 2.5X Fund			Bond Fund			Fund

Net unrealized appreciation/(depreciation)	$	(1,199	)	$	(799	)	$	178,893	$	—		$	—		$	—

Undistributed ordinary income		—			251,204			—		—			805,553			—
Undistributed long-term capital gain		—			—			—		—			—			—

Total distributable earnings		—			251,204			—		—			805,553			—

Other accumulated gain/(loss)		(16,310,368	)		(35,733,335	)		—		(5,059,420	)		(4,577,208	)		(254,878	)

Total accumulated earnings/(loss)	$	(16,311,567	)	$	(35,482,930	)	$	178,893	$	(5,059,420	)	$	(3,771,655	)	$	(254,878	)

DIREXION SEMI-ANNUAL REPORT 47


				Emerging			Emerging			Developed			Developed
	Commodity			Markets			Markets			Markets			Markets			China
	Bull 2X Fund			Bull 2X Fund			Bear 2X Fund			Bull 2X Fund			Bear 2X Fund			Bull 2X Fund

Net unrealized appreciation/(depreciation)	$	(2,306,556	)	$	(2,907,611	)	$	—		$	(436,702	)	$	—		$	(1,040,349	)

Undistributed ordinary income		—			—			—			—			1,553,708			17,749
Undistributed long-term capital gain		—			—			—			—			—			—

Total distributable earnings		—			—			—			—			1,553,708			17,749

Other accumulated gain/(loss)		(11,232,873	)		(20,074,647	)		(11,436,042	)		(2,204,575	)		(2,000,189	)		(1,735,997	)

Total accumulated earnings/(loss)	$	(13,539,429	)	$	(22,982,258	)	$	(11,436,042	)	$	(2,641,277	)	$	(446,481	)	$	(2,758,597	)


	U.S. Government
	Money
	Market Fund

Net unrealized appreciation/(depreciation)	$	—

Undistributed ordinary income		14,981
Undistributed long-term capital gain		—

Total distributable earnings		14,981

Other accumulated gain/(loss)		(3,402	)

Total accumulated earnings/(loss)	$	11,579

The difference between book cost of investments and tax cost of investments is attributable primarily to the tax deferral of losses on wash sales.

The cost basis of investments for federal tax purposes as of February 28, 2009 was as follows:


	Small Cap		Small Cap			10 Year Note			10 Year Note			Dynamic HY			HY Bear
	Bull 2.5X Fund		Bear 2.5X Fund			Bull 2.5X Fund			Bear 2.5X Fund			Bond Fund			Fund

Tax cost of investments	$	12,100,411	$	4,896,911		$	34,838,751		$	162,359,087		$	12,993,672		$	24,122,146
Gross unrealized appreciation		—		203,995			117,801			3,581,185			39,537			258,637
Gross unrealized depreciation		—		(203,995	)		(466,492	)		(3,581,185	)		(476,140	)		(258,637	)

Net unrealized appreciation/(depreciation)	$	—	$	—		$	(348,691	)	$	—		$	(436,603	)	$	—


				Emerging			Emerging			Developed			Developed
	Commodity			Markets			Markets			Markets			Markets			China
	Bull 2X Fund			Bull 2X Fund			Bear 2X Fund			Bull 2X Fund			Bear 2X Fund			Bull 2X Fund

Tax cost of investments	$	12,801,165		$	6,761,542		$	1,598,811		$	3,197,773		$	4,340,061		$	6,791,604
Gross unrealized appreciation		4,458			—			126,191			1,312			26,897			6,282
Gross unrealized depreciation		(4,129,283	)		(2,911,997	)		(126,191	)		(438,014	)		(26,897	)		(1,047,509	)

Net unrealized appreciation/(depreciation)	$	(4,124,825	)	$	(2,911,997	)	$	—		$	(436,702	)	$	—		$	(1,041,227	)

48 DIREXION SEMI-ANNUAL REPORT


	U.S. Government
	Money
	Market Fund

Tax cost of investments	$	105,223,844
Gross unrealized appreciation		—
Gross unrealized depreciation		—

Net unrealized appreciation/(depreciation)	$	—

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^st. In connection with this, the Funds are permitted for tax purposes to defer into their next fiscal year any net capital losses incurred between November 1^st and the end of their fiscal year, August 31, 2008. At August 31, 2008, the following funds deferred, on a tax basis, post-October losses of:


	Post October		Post October
	Loss Deferred		Currency Loss

Small Cap Bull 2.5X Fund	$	894,166	$	—
Small Cap Bear 2.5X Fund		1,734,610		—
10 Year Note Bull 2.5X Fund		—		—
10 Year Note Bear 2.5X Fund		2,125,366		—
Dynamic HY Bond Fund		3,747,529		24,126
HY Bear Fund		254,878		—
Commodity Bull 2X Fund		24,095		—
Emerging Markets Bull 2X Fund		13,966,370		—
Emerging Markets Bear 2X Fund		198,722		—
Developed Markets Bull 2X Fund		2,280,288		—
Developed Markets Bear 2X Fund		85,799		—
China Bull 2X Fund		658,066		—
U.S. Government Money Market Fund		—		—

At August 31, 2008 the following funds had capital loss carryforwards on a tax basis of:


	Expires
	8/31/2009		8/31/2010		8/31/2011		8/31/2012		8/31/2013		8/31/2014		8/31/2015		8/31/2016		Total

Small Cap Bull 2.5X Fund		—		2,461,728		12,679,111		—		—		—		—		310,769		15,451,608
Small Cap Bear 2.5X Fund		—		—		—		16,306,020		4,667,388		883,969		5,310,686		6,570,886		33,738,949
10 Year Note Bull 2.5X Fund		—		—		—		—		—		—		—		—		—
10 Year Note Bear 2.5X Fund		—		—		—		—		—		—		88,219		1,941,340		2,029,559
Dynamic HY Bond Fund		—		—		—		—		—		805,553		—				805,553
HY Bear Fund		—		—		—		—		—		—		—		—		—
Commodity Bull 2X Fund		—		—		—		—		—		—		—		—		—
Emerging Markets Bull 2X Fund		—		—		—		—		—		—		—		—		—
Emerging Markets Bear 2X Fund		—		—		—		—		—		—		589		11,121,229		11,121,818
Developed Markets Bull 2X Fund		—		—		—		—		—		—		—		—		—
Developed Markets Bear 2X Fund		—		—		—		—		—		—		602,706		951,002		1,553,708
China Bull 2X Fund		—		—		—		—		—		—		—		—		—
U.S. Government Money Market Fund		779		1,619		377		—		189		356		82		—		3,402
Capital Loss Utilized:
Dynamic HY Bond Fund		455,263
Commodity Bull 2X Fund		2,503,215

To the extent that the Funds realize future net capital gains, those gains will be offset by any unused capital loss carryover.

DIREXION SEMI-ANNUAL REPORT 49

FIN 48 requires the Funds to analyze all open tax years. Open tax years are those years that are open for examination by the relevant income taxing authority. As of February 28, 2009, open Federal and state income tax years include the tax years ended August 31, 2005, August 31, 2006, August 31, 2007 and August 31, 2008. The Funds have no examination in progress.

The Funds have reviewed all open tax years and concluded that the adoption of FIN 48 resulted in no effect to the Fund’s financial positions or results of operations. There is no tax liability resulting from uncertain income tax positions taken or expected to be taken on the tax returns for the fiscal year-end August 31, 2005, August 31, 2006, August 31, 2007 and August 31, 2008. 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 twelve months.

m) Credit Facility – U.S. Bank, N.A. has made available to the Funds, with the exception of the China Bull 2X Fund, a credit facility pursuant to a Line of Credit Agreement (“Line of Credit”) for meeting redemption requests. Borrowings under the Line of Credit are charged at prime rate less 1/2%. The Small Cap Bull 2.5X Fund, Small Cap Bear 2.5X Fund, 10 Year Note Bear 2.5X Fund, Dynamic HY Bond Fund, HY Bear Fund, Commodity Bull 2X Fund, Emerging Markets Bull 2X Fund, Emerging Markets Bear 2X Fund, Developed Markets Bull 2X Fund, Developed Markets Bear 2X Fund and U.S. Government Money Market Fund did not utilize the credit facility for the six months ended February 28, 2009. The following Fund did use the credit facility:

Maximum Amount

Outstanding

Outstanding during the

Average

Balance as of

Six Months Ended

Daily

Interest

February 28, 2009

Balance

Expense

10 Year Note Bull 2.5X Fund

—

4,050,000

22,376

305

n) 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 Fund’s 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.

o) 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. REVERSE STOCK SPLITS

During the six months ended February 28, 2009, shares of the Small Cap Bull 2.5X Fund, Commodity Bull 2X Fund, Emerging Markets Bull 2X Fund, Developed Markets Bull 2X Fund and the China Bull 2X Fund were adjusted to reflect a reverse stock split. In addition, during the year ended August 31, 2008, the Emerging Markets Bear 2X Fund’s shares were adjusted to reflect a reverse stock split. The effect of the reverse stock split was to reduce the number of shares outstanding while maintaining the Fund’s and each shareholders aggregate net asset value. A summary of the reverse stock splits is as follows:


					Net Asset Value		Net Asset Value		Shares Outstanding		Shares Outstanding
	Date		Rate		Before Split		After Split		Before Split		After Split
Small Cap Bull 2.5X Fund		12/15/2008		2:1	$	9.23	$	18.46		958,217		479,109
Commodity Bull 2X Fund		12/15/2008		3:1		7.32		21.96		1,411,527		470,509
Emerging Markets Bull 2X Fund		12/15/2008		5:1		5.18		25.90		3,763,051		752,610
Emerging Markets Bear 2X Fund		5/19/2008		5:1		3.45		17.25		1,967,335		393,467
Developed Markets Bull 2X Fund		12/15/2008		5:1		5.02		25.10		1,845,712		369,142
China Bull 2X Fund		12/15/2008		12:1		2.53		30.36		2,511,174		209,265

50 DIREXION SEMI-ANNUAL REPORT


4.	CAPITAL SHARE TRANSACTIONS

Capital share transactions for the Funds during the six months ended February 28, 2009 and year ended August 31, 2008 were as follows:


	Small Cap Bull 2.5X Fund¹						Small Cap Bear 2.5X Fund
	Six Months Ended						Six Months Ended
	February 28,			Year Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		3,798,633			1,969,382			4,209,381			15,295,101
Shares issued in reinvestment of distributions		—			10,293			189,011			44,776
Shares redeemed		(3,092,941	)		(1,898,820	)		(5,211,893	)		(16,585,034	)

Total net increase (decrease) from capital share transactions		705,692			80,855			(813,501	)		(1,245,157	)


	10 Year Note Bull 2.5X Fund						10 Year Note Bear 2.5X Fund
	Six Months Ended						Six Months Ended
	February 28,			Year Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		7,599,078			20,344,100			8,313,834			5,696,090
Shares issued in reinvestment of distributions		—			11,190			—			7,131
Shares redeemed		(7,502,413	)		(19,580,923	)		(6,470,030	)		(3,321,576	)

Total net increase (decrease) from capital share transactions		96,665			774,367			1,843,804			2,381,645


	Dynamic HY Bond Fund						HY Bear Fund
	Six Months Ended						Six Months Ended
	February 28,			Year Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		39,405,659			35,035,332			10,884,000			19,851,220
Shares issued in reinvestment of distributions		66,971			121,426			7,969			50,605
Shares redeemed		(39,981,373	)		(37,672,888	)		(10,915,793	)		(19,749,866	)

Total net increase (decrease) from capital share transactions		(508,743	)		(2,516,130	)		(23,824	)		151,959


	Commodity Bull 2X Fund²
	Six Months Ended
	February 28,			Year Ended
	2009			August 31,
	(Unaudited)			2008

Shares sold		1,980,433			5,185,203
Shares issued in reinvestment of distributions		—			194,462
Shares redeemed		(2,799,571	)		(5,219,186	)

Total net increase (decrease) from capital share transactions		(819,138	)		160,479


	Emerging Markets Bull 2X Fund³						Emerging Markets Bear 2X Fund⁴
	Six Months Ended						Six Months Ended
	February 28,			Year Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		11,735,643			7,601,820			4,919,024			7,227,984
Shares issued in reinvestment of distributions		16,855			334,190			109,296			—
Shares redeemed		(12,012,170	)		(8,026,543	)		(5,180,114	)		(7,670,785	)

Total net increase (decrease) from capital share transactions		(259,672	)		(90,533	)		(151,794	)		(442,801	)

DIREXION SEMI-ANNUAL REPORT 51


	Developed Markets Bull 2X Fund⁵						Developed Markets Bear 2X Fund
	Six Months Ended						Six Months Ended
	February 28,			Year Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		6,330,911			3,108,992			6,464,580			11,868,775
Shares issued in reinvestment of distributions		111,469			36,566			124,897			—
Shares redeemed		(6,367,806	)		(3,361,184	)		(7,092,756	)		(11,710,476	)

Total net increase (decrease) from capital share transactions		74,574			(215,626	)		(503,279	)		158,299


	China Bull 2X Fund⁶						U.S. Government Money Market Fund
	Six Months Ended						Six Months Ended
	February 28,			Period Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008⁷			(Unaudited)			2008

Shares sold		21,131,793			6,573,389			684,412,197			810,278,681
Shares issued in reinvestment of distributions		6,994			—			160,775			1,065,340
Shares redeemed		(21,508,517	)		(5,824,421	)		(671,748,646	)		(768,562,877	)

Total net increase (decrease) from capital share transactions		(369,730	)		748,968			12,824,326			42,781,144


¹		Capital share transactions prior to December 15, 2008 have been restated to reflect the effect of the 2:1 reverse stock split.

²		Capital share transactions prior to December 15, 2008 have been restated to reflect the effect of the 3:1 reverse stock split.

³		Capital share transactions prior to December 15, 2008 have been restated to reflect the effect of the 5:1 reverse stock split.

⁴		Capital share transactions prior to May 19, 2008 have been restated to reflect the effect of the 5:1 reverse stock split.

⁵		Capital share transactions prior to December 15, 2008 have been restated to reflect the effect of the 5:1 reverse stock split.

⁶		Capital share transactions prior to December 15, 2008 have been restated to reflect the effect of the 12:1 reverse stock split.

⁷		Commenced operations on December 3, 2007.

5. INVESTMENT TRANSACTIONS

During the six months ended February 28, 2009, the aggregate purchases and sales of investments (excluding short-term investments, options, swaps and futures contracts) were:

Small Cap

10 Year Note

Bull 2.5X

Bear 2X

Bull 2.5X

Bear 2.5X

Fund

Purchases

—

Sales

—


	Dynamic		HY		Commodity		Emerging Markets		Emerging Markets
	HY Bond		Bear		Bull 2X		Bull 2X		Bear 2X
	Fund		Fund		Fund		Fund		Fund

Purchases	$	6,431,000	$	—	$	862,001	$	8,308,877	$	1,047,681
Sales		5,017,775		—		15,848,110		10,071,600		1,008,401


	Developed Markets		Developed Markets		China		U.S. Government
	Bull 2X		Bear 2X		Bull 2X		Money Market
	Fund		Fund		Fund		Fund

Purchases	$	8,951,800	$	—	$	3,957,281	$	—
Sales		8,992,150		—		3,741,102		—

52 DIREXION SEMI-ANNUAL REPORT

The following fund had purchases and sales of long-term U.S. Government Securities during the six months ended February 28, 2009.


	10 Year Note
	Bull 2.5X
	Fund

Purchases	$	148,366,282
Sales		145,655,546

6. INVESTMENT ADVISORY AND OTHER AGREEMENTS

Investment Advisory Fees: The Funds have entered into an investment advisory agreement with the Adviser. The Adviser receives a fee, computed daily and payable monthly, at the annual rates presented below as applied to each Fund’s average daily net assets. For the six months ended February 28, 2009, the Adviser has contractually agreed to pay all operating expenses (excluding dividends on short positions), in excess of the annual cap on expenses presented below as applied to each Fund’s average daily net assets. On November 6, 2008, the Board of Trustees approved changes to the annual expense caps of the Small Cap Bull 2.5X Fund, Small Cap Bear 2.5X Fund, 10 Year Note Bull 2.5X Fund, 10 Year Note Bear 2.5X Fund, Dynamic HY Bond Fund, HY Bear Fund, Commodity Bull 2X Fund, Emerging Markets Bull 2X Fund, Emerging Markets Bear 2X Fund, Developed Markets Bull 2X Fund, Developed Markets Bear 2X Fund and China Bull 2X Fund. Effective January 1, 2009 and extending through December 31, 2009, the annual expenses caps of these Funds increased from 1.75% to 1.95%. The Adviser may recover from the Funds the expenses paid in excess of the annual cap on expenses for the three previous years, as long as the recovery does not cause the Fund to exceed the annual cap on expenses from the period in which those expenses were originally waived. For the six months ended February 28, 2009, the Adviser paid or recouped the following expenses:


	Small Cap			Small Cap			10 Year Note			10 Year Note
	Bull 2.5X Fund			Bear 2.5X Fund			Bull 2.5X Fund			Bear 2.5X Fund

Annual Advisory rate		0.75	%		0.75	%		0.75	%		0.75	%
Annual cap on expenses		1.95	%		1.95	%		1.95	%		1.95	%
Expenses paid in excess of annual cap on expenses — 2009	$	8,565		$	11,690		$	9,460		$	5,693
Advisory expense waiver recovery — 2009	$	—		$	—		$	3,974		$	4,806


	Dynamic HY						Commodity
	Bond Fund			HY Bear Fund			Bull 2X Fund

Annual Advisory rate		0.75	%		0.75	%		0.75	%
Annual cap on expenses		1.95	%		1.95	%		1.95	%
Expenses paid in excess of annual cap on expenses — 2009	$	13,560		$	10,904		$	11,995
Advisory expense waiver recovery — 2009	$	—		$	1,142		$	—


	Emerging Markets			Emerging Markets			Developed Markets			Developed Markets
	Bull 2X Fund			Bear 2X Fund			Bull 2X Fund			Bear 2X Fund

Annual Advisory rate		0.75	%		0.75	%		0.75	%		0.75	%
Annual cap on expenses		1.95	%		1.95	%		1.95	%		1.95	%
Expenses paid in excess of annual cap on expenses — 2009	$	4,208		$	52,168		$	11,028		$	28,462
Advisory expense waiver recovery — 2009	$	5,042		$	—		$	—		$	—


	China Bull			U.S. Government Money
	2X Fund			Market Fund

Annual Advisory rate		0.75	%		0.50	%
Annual cap on expenses		1.95	%		1.25	%
Expenses paid in excess of annual cap on expenses — 2009	$	20,657		$	166,307
Advisory expense waiver recovery — 2009	$	—		$	—

DIREXION SEMI-ANNUAL REPORT 53

Expenses subject to potential recovery expiring in:


							10 Year
	Small Cap Bull		Small Cap Bear		10 Year Note Bull		Note Bear
	2.5X Fund		2.5X Fund		2.5X Fund		2.5X Fund

2009	$	28,771	$	—	$	71,104	$	—
2010	$	76,236	$	66,020	$	73,130	$	52,340
2011	$	33,337	$	56,276	$	7,448	$	29,296
2012	$	8,565	$	11,690	$	9,460	$	5,693

Total	$	146,909	$	133,986	$	161,142	$	86,442


							Emerging		Emerging		Developed
	Dynamic HY		HY Bear		Commodity Bull		Markets Bull		Markets Bear		Markets Bull
	Bond Fund		Fund		2X Fund		2X Fund		2X Fund		2X Fund

2009	$	—	$	51,315	$	72,524	$	—	$	49,468	$	51,779
2010	$	—	$	—	$	47,805	$	8,886	$	66,942	$	47,688
2011	$	—	$	35,424	$	17,505	$	—	$	38,221	$	40,328
2012	$	13,560	$	10,904	$	11,995	$	4,208	$	52,168	$	11,028

Total	$	13,560	$	97,643	$	149,829	$	13,094	$	206,799	$	150,823


	Developed				U.S. Government
	Markets Bear		China Bull		Money
	2X Fund		2X Fund		Market Fund

2009	$	36,493	$	—	$	—
2010	$	96,879	$	—	$	15,624
2011	$	14,677	$	40,713	$	119,570
2012	$	28,462	$	20,657	$	166,307

Total	$	176,511	$	61,370	$	301,501

Distribution Expenses: Shares of the Funds, except for shares of the Dynamic HY Bond Fund, HY Bear Fund and U.S. Government Money Market Fund, are subject to an annual 12b-1 fee of up to 1.00% of a Fund’s average daily net assets. The Dynamic HY Bond Fund and HY Bear Fund are subject to an annual Rule 12b-1 fee of up to 0.40% of the Fund’s average daily net assets. The U.S. Government Money Market Fund is not authorized to pay 12b-1 fees. The Funds, expect the U.S. Government Money Market Fund, currently pay a 12b-1 fee of 0.25% of the Fund’s average daily net assets.

Shareholder Servicing Fees: The Board of Trustees has also authorized each Fund’s shares to pay a shareholder servicing fee of 0.25% of each Fund’s average daily net assets. The Trust, on behalf of each Fund, pays the fee to financial institutions and other persons who provide services and maintain shareholder accounts.

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.

An accounting error of $183,530 occurred on an equity swap contract which was held in the Emerging Markets Bull 2X Fund. This amount is reflected in the Statement of Assets and Liabilities as Due from Administrator and in the Statement of Operations as Contribution by Administrator.

7. SUMMARY OF FAIR VALUE DISCLOSURE

In September 2006, FASB issued Standard No. 157, Fair Value Measurement (“FAS 157”) effective for fiscal years beginning after November 15, 2007. FAS 157 clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosure about the use of fair value measurements in an effort to make measurements of fair value more consistent and comparable. The Funds have adopted FAS 157 effective September 1, 2008. A summary of the fair value hierarchy under FAS 157 is described below.

54 DIREXION SEMI-ANNUAL REPORT

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels listed below:


	Level 1 — Quoted prices in active markets for identical securities

	Level 2 — Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, etc.)

	Level 3 — Significant unobservable inputs (including Fund’s own assumptions in determining fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the credit risk associated with investing in those securities.

The following is a summary of the inputs used to value each Fund’s net assets as of February 28, 2009:


	Small Cap Bull 2X Fund					Small Cap Bear 2X Fund
	Investments in		Other Financial			Investments in		Other Financial
	Securities		Instruments*			Securities		Instruments*

Description
Level 1 — Quoted prices	$	12,100,411	$	—		$	4,896,911	$	—
Level 2 — Other significant observable inputs		—		(2,571,282	)		—		198,005
Level 3 — Significant unobservable inputs		—		—			—		—

Total	$	12,100,411	$	(2,571,282	)	$	4,896,911	$	198,005


	10 Year Note Bull 2.5X Fund				10 Year Note Bear 2.5X Fund
	Investments in		Other Financial		Investments in		Other Financial
	Securities		Instruments*		Securities		Instruments*

Description
Level 1 — Quoted prices	$	4,779,435	$	73,139	$	45,545,649	$	(17,065	)
Level 2 — Other significant observable inputs		29,710,625		—		5,398,594		—
Level 3 — Significant unobservable inputs		—		—		—		—

Total	$	34,490,060	$	73,139	$	50,944,243	$	(17,065	)


	Dynamic HY Bond Fund					HY Bear Fund
	Investments in		Other Financial			Investments in		Other Financial
	Securities		Instruments*			Securities		Instruments*

Description
Level 1 — Quoted prices	$	10,807,569	$	(208,173	)	$	24,122,146	$	—
Level 2 — Other significant observable inputs		847,570		(94,547	)		—		112,300
Level 3 — Significant unobservable inputs		—		—			—		—

Total	$	11,655,139	$	(302,720	)	$	24,122,146	$	112,300


	Commodity Bull 2X Fund					Emerging Markets Bull 2X Fund
	Investments in		Other Financial			Investments in		Other Financial
	Securities		Instruments*			Securities		Instruments*

Description
Level 1 — Quoted prices	$	8,676,340	$	—		$	3,849,545	$	—
Level 2 — Other significant observable inputs		—		(13,024,454	)		—		(3,174,404	)
Level 3 — Significant unobservable inputs		—		—			—		—

Total	$	8,676,340	$	(13,024,454	)	$	3,849,545	$	(3,174,404	)

DIREXION SEMI-ANNUAL REPORT 55


	Emerging Markets Bear 2X Fund				Developed Markets Bull 2X Fund
	Investments in		Other Financial		Investments in		Other Financial
	Securities		Instruments*		Securities		Instruments*

Description
Level 1 — Quoted prices	$	1,598,811	$	—	$	2,761,071	$	—
Level 2 — Other significant observable inputs		—		120,454		—		(1,125,316	)
Level 3 — Significant unobservable inputs		—		—		—		—

Total	$	1,598,811	$	120,454	$	2,761,071	$	(1,125,316	)


	Developed Markets Bear 2X Fund					China Bull 2X Fund
	Investments in		Other Financial			Investments in		Other Financial
	Securities		Instruments*			Securities		Instruments*

Description
Level 1 — Quoted prices	$	4,340,061	$	—		$	5,750,377	$	—
Level 2 — Other significant observable inputs		—		(10,535	)		—		(1,099,035	)
Level 3 — Significant unobservable inputs		—		—			—		—

Total	$	4,340,061	$	(10,535	)	$	5,750,377	$	(1,099,035	)


	U.S. Government Money
	Market Fund
	Investments in		Other Financial
	Securities		Instruments*

Description
Level 1 — Quoted prices	$	105,223,844	$	—
Level 2 — Other significant observable inputs		—		—
Level 3 — Significant unobservable inputs		—		—

Total	$	105,223,844	$	—


^*		Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as written options, futures and swap contracts. Futures and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument.


8.	NEW ACCOUNTING PRONOUNCEMENT

In March 2008, FASB issued its Statement on Financial Accounting Standards No. 161, Disclosures about Derivatives Instruments and Hedging Activities (“FAS 161”). This standard is intended to enhance financial statement disclosure for derivative instruments and hedging activities and enable investors to understand: a) how and why a fund uses derivatives instruments, b) how derivatives instruments and related hedge items are accounted for, and c) how derivative instruments and related hedge items affect a fund’s financial position, results of operations and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As of February 28, 2009, management does not believe the adoption of SFAS No. 161 will impact the financial statement amounts; however, additional footnote disclosures will be required about the use of derivative instruments and hedge items.

56 DIREXION SEMI-ANNUAL REPORT

SEMI-ANNUAL REPORT FEBRUARY 28, 2009

33 Whitehall Street, 10th Floor New York, New York 10004 (800) 851-0511

Investment Adviser

Rafferty Asset Management, LLC

33 Whitehall St. 10th Floor

New York, NY 10004

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

233 S. Wacker Dr.

Chicago, IL 60606

Distributor

Rafferty Capital Markets, LLC

59 Hilton Avenue

Garden City, NY 11530

The Fund’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 (starting with the year ended June 30, 2005) is available without charge by calling 1-800-851-0511 or by accessing the SEC’s website at www.sec.gov.

The Fund files complete schedules of portfolio holdings with the SEC on Form N-Q. The Form N-Q is available without change, upon request, by calling 1-800-851-0511, or by accessing 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.

Letter to Shareholders

Dear Shareholders,

This Semi-Annual Report for the Evolution Funds covers the period from September 1, 2008 to February 28, 2009 (the “Semi-Annual Period”). This Report covers the Evolution Managed Bond Fund (“Managed Bond Fund”), Evolution All-Cap Equity Fund (“All-Cap Equity Fund”), the Evolution Market Leaders Fund (formerly the Evolution Small Cap Fund), (“Market Leaders Fund”) and the Evolution Alternative Investment Fund (formerly the Evolution Total Return Fund), (“Alternative Investment Fund”). Flexible Plan Investments, Ltd. (“Sub-Advisor”), serves as the sub-advisor to the Evolution Funds. During the Semi-Annual Period, the DJ Industrial Average Index returned −38.21%, the S&P 500 Index returned −42.70% and the Nasdaq-100 Index returned −40.35%. International Markets did not outpace domestic returns, with the MSCI EAFE Index declining −45.40% and the 10 Year Treasury Note increasing 8.53%, on a price performance basis, for the Semi-Annual Period.

The overall returns for the Semi-Annual Period were impacted by extreme price volatility in the equity markets, falling energy and commodity prices, continued problems in the mortgage markets which led to a credit squeeze, collapsing corporate earnings and fears of a U.S. recession. The Federal Reserve Board responded with four reductions in its target for the Federal Funds Rate, resulting in a target rate of 0.25% at the end of the Semi-Annual Period, its lowest level ever.

The Managed Bond Fund seeks the highest appreciation on an annual basis consistent with a high tolerance for risk. The Managed Bond Fund returned −1.70% on a total return basis during the Semi-Annual Period, compared to 1.88% for the Barclay Capital Aggregate Bond Index (formerly known as Lehman U.S. Aggregate Bond Index).

The All-Cap Equity Fund seeks the highest appreciation on an annual basis consistent with a high tolerance for risk. The All-Cap Equity Fund returned −23.40% on a total return basis during the Semi-Annual Period, compared to −42.70% for the S&P 500 Index.

The Market Leaders Fund seeks the highest appreciation on an annual basis consistent with a high tolerance for risk. The Market Leaders Fund returned −44.66% on a total return basis during the Semi-Annual Period, compared to −47.39% for the Russell 2000 Index.

The Alternative Investment Fund seeks high total return on an annual basis consistent with a high tolerance for risk. The Alternative Investment Fund returned −12.21% on a total return basis during the Semi-Annual Period, compared to −42.70% for the S&P Index and 1.88% for the Barclays Capital Aggregate Bond Index (formerly known as the Lehman U.S. Aggregate Bond Index).

Additionally, the Alternative Investment Fund was awarded a 5-star rating by independent data and research firm Morningstar*.

As always, we thank you for using the Direxion Funds and we look forward to our mutual success.

Best Regards,




Daniel O’Neill		Jerry Wagner
Direxion Funds		Flexible Plan Investments, Ltd.

The total annual fund operating expense ratio of the Managed Bond Fund, All-Cap Equity Fund, Market Leaders Fund and the Alternative Investment Fund is 1.87%, 1.83%, 1.90% and 1.90% respectively, net of any fee, waivers or expense reimbursements.

* Five-Star rating is out of 384 funds in the Mid-Cap Value Category as of 03-31-2008.

Distributed by: Rafferty Capital Markets, LLC

Date of First Use: April 29, 2009

Expense Example

February 28, 2009 (Unaudited)

The Example is based on an investment of $1,000 invested at the beginning of the period and held the entire period (September 1, 2008 — February 28, 2009).

Actual Expenses

Hypothetical Example for Comparison Purposes

4 DIREXION SEMI-ANNUAL REPORT

Evolution Managed Bond Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

INVESTMENT COMPANIES - 102.1%
	12,643	AllianceBernstein Global High Income Fund	$	99,500
	18,465	BlackRock Preferred Income Strategies Fund		99,711
	16,345	BlackRock Corporate High Yield Fund VI		102,974
	11,975	BlackRock Floating Rate Income Strategies Fund		104,662
	10,254	Evergreen Multi-Sector Income Fund		104,078
	2,200	iShares Barclays TIPS Bond Fund		213,444
	68,289	iShares Barclays Aggregate Bond Fund		6,884,214
	2,279	iShares iBoxx $Investment Grade Corporate Bond Fund		214,591
	24,100	iShares Barclays 20+ Year Treasury Bond Fund		2,455,308
	40,440	iShares Barclays 7-10 Year Treasury Bond Fund		3,790,846
	24,502	iShares Barclays 1-3 Year Treasury Bond Fund		2,058,903
	10,950	iShares S&P National Municipal Bond Fund		1,093,358
	24,142	iShares Barclays MBS Bond Fund		2,531,530
	7,550	iShares Barclays 1-3 Year Credit Bond Fund		749,564
	11,562	iShares Barclays 3-7 Year Treasury Bond Fund		1,307,662
	2,050	iShares Barclays Short Treasury Bond Fund		225,971
	18,384	MFS Charter Income Trust		135,122
	16,502	MFS Intermediate Income Trust		103,138
	18,438	MFS Government Markets Income Trust		132,016
	24,675	Putnam Premier Income Trust		104,622
	5,100	SPDR Barclays Capital 1-3 Month T-Bill ETF		233,937
	11,865	Templeton Emerging Markets Income Fund		99,310
	106,315	Vanguard Total Bond Market ETF		8,144,792
	9,240	Western Asset Emerging Markets Debt Fund		100,623
	18,956	Western Asset High Income Fund II		96,865
	9,929	Western Asset/Claymore Inflation- Linked Opportunities & Income Fund		104,354

		TOTAL INVESTMENT COMPANIES (Cost $30,528,254)	$	31,291,095

SHORT TERM INVESTMENTS - 0.8%
MONEY MARKET FUNDS - 0.8%
	51,957	AIM STIT-Treasury Portfolio		51,957
	51,957	Fidelity Institutional Money Market Government Portfolio		51,957
	51,956	First American Government Obligations Fund		51,956
	51,956	Goldman Sachs Financial Square Government Fund		51,956
	51,956	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		51,956

		TOTAL SHORT TERM INVESTMENTS (Cost $259,782)	$	259,782

		TOTAL INVESTMENTS (Cost $30,788,036) - 102.9%	$	31,550,877
		Liabilities in Excess of Other Assets - (2.9)%		(896,168	)

		TOTAL NET ASSETS - 100.0%	$	30,654,709

Percentages are stated as a percent of net assets.

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 7

Evolution All-Cap Equity Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

COMMON STOCKS - 46.9%
Aerospace & Defense - 1.3%
	6,901	Aerovironment, Inc.(a)	$	215,449
	1,565	Ceradyne, Inc.(a)		27,422
	1,096	Goodrich Corp.		36,322
	1,027	Stanley, Inc.(a)		31,333
	11,474	Teledyne Technologies, Inc.(a)		262,869

				573,395

Air Freight & Logistics - 1.5%
	9,200	C.H. Robinson Worldwide, Inc.		380,696
	9,446	Expeditors International of Washington, Inc.		260,237

				640,933

Beverages - 0.5%
	6,224	Hansen Natural Corp.(a)		207,135

Biotechnology - 1.9%
	2,755	Amgen, Inc.(a)		134,802
	2,087	Cephalon, Inc.(a)		136,886
	11,293	Gilead Sciences, Inc.(a)		505,927
	887	Myriad Genetics, Inc.(a)		69,940

				847,555

Building Products - 0.1%
	6,239	NCI Building Systems, Inc.(a)		31,569

Chemicals - 1.6%
	3,785	Arch Chemicals, Inc.		68,054
	1,468	Balchem Corp.(a)		30,880
	4,390	Celanese Corp Del		37,491
	5,520	Ecolab, Inc.		175,426
	5,076	Monsanto Co.		387,146

				698,997

Commercial Services & Supplies - 1.1%
	1,850	Apollo Group, Inc.(a)		134,125
	2,712	Career Education Corp.(a)		66,905
	4,600	Cbiz, Inc.(a)		31,556
	1,158	Waste Management, Inc.(a)		31,319
	4,297	Watson Wyatt Worldwide, Inc. - Class A		211,026

				474,931

Communications Equipment - 0.8%
	3,483	Black Box Corp.		69,103
	5,295	Cisco Systems, Inc.(a)(c)		76,716
	10,914	Corning, Inc.		115,143
	1,830	Research In Motion Ltd.(a)		73,090

				334,052

Computers & Peripherals - 1.5%
	1,969	Apple Computer, Inc.(a)(c)		175,851
	13,081	Hewlett-Packard Co.		379,742
	7,690	Western Digital Corp.(a)		105,045

				660,638

Construction & Engineering - 0.9%
	5,130	Fluor Corp.		170,572
	2,538	Foster Wheeler Ag(a)		38,172
	6,211	Jacobs Engineering Group, Inc.(a)		209,559

				418,303

Containers & Packaging - 0.2%
	2,382	Owens-Illinois, Inc.(a)		36,731
	651	Silgan Holdings, Inc.(a)		32,236

				68,967

Distributors - 0.1%
	2,201	WESCO International, Inc.(a)		36,537

Diversified Financial Services - 0.3%
	2,363	IntercontinentalExchange, Inc.(a)		134,148

Diversified Telecommunication Services - 0.8%
	10,704	Shenandoah Telecom Co.		226,390
	4,882	Verizon Communications, Inc.		139,283

				365,673

Electric Utilities - 0.8%
	1,615	CH Energy Group, Inc.		67,281
	1,860	Consolidated Edison, Inc.		67,351
	915	NSTAR(a)		29,838
	3,706	PG&E Corp.		141,643
	2,578	Pinnacle West Capital Corp.		67,698

				373,811

Electrical Equipment - 0.6%
	1,237	Anixter International, Inc.(a)		36,380
	2,188	Arrow Electronics, Inc.(a)		36,387
	2,089	Avnet, Inc.(a)		36,077
	3,694	Encore Wire Corp.		66,492
	1,782	II-VI, Inc.(a)		31,981
	1,610	Thomas & Betts Corp.(a)		36,885

				244,202

Electronic Equipment & Instruments - 1.3%
	9,973	Amphenol Corp. - Class A		253,514
	10,619	Daktronics, Inc.		72,846
	8,794	Mellanox Technologies Ltd.(a)		73,077
	10,054	National Instruments Corp.		173,231

				572,668

Electronic Equipment, Instruments & Components - 0.1%
	3,805	Tyco Electronics Ltd		36,071

Energy Equipment & Services - 2.5%
	11,989	Atwood Oceanics, Inc.(a)		183,192
	8,618	Dril-Quip, Inc.(a)		181,150
	1,452	ENSCO International, Inc.		35,690
	1,363	Helmerich & Payne, Inc.(a)		33,782
	6,372	Lufkin Industries, Inc.		209,320
	8,014	National-Oilwell, Inc.(a)		214,214
	1,471	Noble Corp.		36,172
	1,023	Oceaneering International, Inc.(a)		33,398
	3,750	T-3 Energy Services, Inc.(a)		41,288
	620	Transocean Ltd(a)		37,058
	4,690	Unit Corp.(a)		100,225

				1,105,489

Food & Staples Retailing - 0.6%
	9,618	Village Super Mkt, Inc.		251,607
	639	Wal-Mart Stores, Inc.(a)		31,764

				283,371

The accompanying notes are an integral part of these financial statements.

8 DIREXION SEMI-ANNUAL REPORT

Evolution All-Cap Equity Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

Food Products - 1.6%
	5,131	Archer-Daniels-Midland Co.	$	136,793
	1,395	Flowers Foods, Inc.(a)		31,609
	3,700	Fresh Del Monte Produce, Inc.(a)		69,486
	7,386	General Mills, Inc.		387,617
	2,047	Sanderson Farms, Inc.		70,683

				696,188

Gas Utilities - 0.6%
	658	The Laclede Group, Inc.(a)		26,428
	7,593	WGL Holdings, Inc.		230,523

				256,951

Health Care Equipment & Supplies - 2.6%
	11,935	Baxter International, Inc.		607,611
	9,213	Immucor, Inc.(a)		206,740
	8,121	Matrixx Initiatives, Inc.(a)		143,173
	3,076	Stryker Corp.		103,569
	4,915	Zoll Medical Corp.(a)		67,581

				1,128,674

Health Care Providers & Services - 1.7%
	1,505	Almost Family, Inc.(a)		29,965
	4,427	Chemed Corp.		176,239
	12,434	Gentiva Health Services, Inc.(a)		215,481
	3,174	LifePoint Hospitals, Inc.(a)		66,717
	2,813	Pharmaceutical Product Development, Inc.		67,484
	2,131	PSS World Medical, Inc.(a)		30,733
	8,359	VCA Antech, Inc.(a)		173,784

				760,403

Hotels Restaurants & Leisure - 1.0%
	1,254	Buffalo Wild Wings, Inc.(a)		39,120
	1,609	Jack in the Box, Inc.(a)		31,375
	7,413	McDonald’s Corp.		387,329

				457,824

Household Durables - 0.2%
	5,925	Garmin Ltd.		101,436

Household Products - 0.9%
	6,572	Colgate-Palmolive Co.		395,503

Industrial Conglomerates - 1.0%
	8,485	3M Co.		385,728
	3,908	Raven Industries, Inc.		71,048

				456,776

Insurance - 0.3%
	4,317	Life Partners Holdings, Inc.		73,860
	3,866	Lincoln National Corp.		33,209
	770	Odyssey Re Holdings Corp.		35,774

				142,843

Internet & Catalog Retail - 0.7%
	2,723	Nutri/System, Inc.(a)		34,978
	21,387	PetMed Express, Inc.(a)		294,713

				329,691

Internet Software & Services - 1.2%
	1,141	Google, Inc.(a)(c)		385,647
	3,844	j2 Global Communications, Inc.(a)		71,998
	1,481	Sohu.com, Inc.(a)		73,161

				530,806

IT Services - 1.5%
	1,277	AECOM Technology Corp		32,220
	1,597	CACI International, Inc. - Class A(a)		68,304
	3,873	Cognizant Technology Solutions Corp.(a)		71,263
	2,320	CSG Systems International, Inc.(a)		31,835
	5,133	SRA International, Inc. - Class A(a)		69,706
	6,878	Visa, Inc.		390,052

				663,380

Leisure Equipment & Products - 0.1%
	1,375	Hasbro, Inc.(a)		32,172

Machinery - 1.0%
	1,610	Cascade Corp.(a)		27,120
	1,665	CIRCOR International, Inc.		37,013
	1,785	Cummins, Inc.		37,128
	1,568	Gardner Denver, Inc.(a)		29,993
	1,264	K-Tron International, Inc.(a)		70,127
	1,076	Parker Hannifin Corp.		35,906
	13,201	Sun Hydraulics, Inc.		175,045
	1,352	Titan Machy, Inc.(a)		12,592
	1,158	Westinghouse Air Brake Technologies Corp.(a)		31,647

				456,571

Metals & Mining - 0.8%
	10,984	Nucor Corp.		369,612

Multiline Retail - 0.7%
	4,515	Dollar Tree, Inc.(a)		175,272
	5,110	Family Dollar Stores, Inc.		140,219

				315,491

Multi-Utilities & Unregulated Power - 0.2%
	1,214	Energen Corp.(a)		33,558
	2,240	SCANA Corp.		67,491

				101,049

Oil & Gas - 0.5%
	14,231	Denbury Resources, Inc.(a)		183,295
	1,683	Petro-Canada		36,858

				220,153

Oil, Gas & Consumable Fuels - 2.0%
	1,240	Apache Corp.		73,272
	8,403	Arena Resources, Inc.(a)		179,992
	3,534	Cimarex Energy Co.		69,443
	8,752	Devon Energy Corp.		382,200
	1,450	EOG Resources, Inc.		72,558
	1,755	Murphy Oil Corp.		73,376
	9,183	Stone Energy Corp.(a)		36,365

				887,206

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 9

Evolution All-Cap Equity Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

Personal Products - 0.2%
	2,553	Herbalife Ltd.	$	34,823
	2,412	NBTY, Inc.(a)		35,866

				70,689

Pharmaceutical Preparations - 0.3%
	7,029	Endo Pharmaceuticals Holdings, Inc.(a)		133,410

Pharmaceuticals - 1.8%
	1,718	Allergan, Inc.		66,555
	7,348	Bristol-Myers Squibb Co.		135,277
	5,338	Medicines Co.(a)		65,497
	15,450	Merck & Co., Inc.		373,890
	5,137	Par Pharmaceutical Cos, Inc.(a)		68,425
	2,386	Watson Pharmaceuticals, Inc.(a)		67,452

				777,096

Road & Rail - 0.9%
	872	J.B. Hunt Transport Services, Inc.(a)		18,009
	10,597	Union Pacific Corp.		397,600

				415,609

Semiconductor & Semiconductor Equipment - 0.5%
	3,900	Lam Research Corp.(a)		78,515
	5,695	Monolithic Power Systems, Inc.(a)		73,191
	5,755	Sigma Designs, Inc.(a)		80,188

				231,894

Software - 2.5%
	4,652	Adobe Systems, Inc.(a)		78,796
	11,335	Autodesk, Inc.(a)		143,841
	23,386	Ca, Inc.		396,393
	10,541	Double-take Software, Inc.(a)		73,999
	3,328	Intuit, Inc.(a)		74,680
	4,624	Manhattan Associates, Inc.(a)		68,481
	12,557	Net 1 UEPS Technologies, Inc.(a)		181,700
	1,817	Quality Systems, Inc.		70,336

				1,088,226

Specialty Retail - 1.1%
	1,660	Abercrombie & Fitch Co. - Class A		36,503
	1,204	Autozone, Inc.(a)		171,245
	1,351	The Buckle, Inc.(a)		32,184
	1,222	Gymboree Corp.(a)		31,983
	1,314	JOS A Bank Clothiers, Inc.(a)		30,296
	3,194	Tractor Supply Co.(a)		99,780
	8,834	Volcom, Inc.(a)		70,319

				472,310

Textiles, Apparel & Luxury Goods - 0.3%
	5,251	Coach, Inc.(a)		73,409
	2,244	Phillips-Van Heusen Corp.		37,183

				110,592

Tobacco - 0.9%
	11,443	Philip Morris Intl, Inc.		382,997

Trading Companies & Distributors - 0.8%
	5,899	Fastenal Co.		177,678
	5,739	MSC Industrial Direct Co., Inc. - Class A		175,556

				353,234

Water Utilities - 0.5%
	5,914	California Water Service Group		232,184

		TOTAL COMMON STOCKS (Cost $21,345,546)	$	20,679,415

SHORT TERM INVESTMENTS - 49.3%
MONEY MARKET FUNDS - 49.3%
	4,395,120	AIM STIT-Treasury Portfolio		4,395,120
	4,395,121	Fidelity Institutional Money Market Government Portfolio		4,395,121
	4,395,120	First American Government Obligations Fund		4,395,120
	4,166,341	Goldman Sachs Financial Square Government Fund		4,166,341
	4,395,120	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		4,395,120

		TOTAL SHORT TERM INVESTMENTS (Cost $21,746,822)	$	21,746,822

		TOTAL INVESTMENTS (Cost $43,092,278) - 96.2%	$	42,426,237
		Other Assets in Excess of Liabilities - 3.8%		1,674,218

		TOTAL NET ASSETS - 100.0%	$	44,100,455

Percentages are stated as a percent of net assets.

Footnotes


(a)	Non income producing

The accompanying notes are an integral part of these financial statements.

10 DIREXION SEMI-ANNUAL REPORT

Evolution Market Leaders Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

COMMON STOCK - 0.0%
Commercial Banks - 0.0%
	1	Southside Bancshares, Inc.	$	17

Personal Products - 0.0%
	1	Inter Parfums, Inc.		3

		TOTAL COMMON STOCK (Cost $16)	$	20

INVESTMENT COMPANIES - 93.2%
	19,639	DIAMONDS Trust, Series 1		1,388,674
	16,279	First Trust Value Line 100 Exchange Traded Fund		130,883
	151,213	First Trust Value Line Dividend Index Fund		1,386,623
	12,189	iShares KLD 400 Social Index Fund		335,197
	2,147	iShares Morningstar Mid Core Index Fund		89,487
	4,553	iShares MSCI Chile Investable Market Index Fund		152,525
	3,065	iShares MSCI Israel Capped Investable Market Index Fund		93,544
	22,670	iShares MSCI Japan Index Fund		167,078
	21,414	iShares MSCI Malaysia Index Fund		149,470
	31,318	iShares Russell 1000 Growth Index Fund		1,017,522
	7,736	iShares Russell 3000 Growth Index Fund		203,921
	16,043	iShares Russell Midcap Growth Index Fund		444,552
	4,733	iShares S&P 100 Index Fund		165,892
	26,078	iShares S&P 500 Growth Index Fund		1,017,042
	11,934	iShares S&P MidCap 400 Growth Index Fund		575,457
	11,087	iShares S&P Midcap 400 Index Fund		499,691
	5,242	iShares S&P/TOPIX 150 Index Fund		167,010
	6,091	Midcap SPDR Trust Series 1		500,132
	118,230	PowerShares Dynamic Large Cap Value Portfolio		1,383,291
	30,167	PowerShares Dynamic Market Portfolio		835,626
	47,397	PowerShares Dynamic Mid Cap Growth Portfolio		574,926
	65,013	PowerShares Value Line Timeliness Select Portfolio		576,665
	14,262	Rydex Russell Top 50 Exchange Traded Fund		831,760
	25,693	SPDR DJ Wilshire Large Cap Growth Exchange Traded Fund		816,524
	5,951	SPDR Russell/Nomura Small Cap Japan Exchange Traded Fund		168,532
	1,417	SPDR S&P China Exchange Traded Fund		54,640
	45,579	SPDR S&P Dividend Exchange Traded Fund		1,387,425
	4,096	SPDR S&P Emerging Middle East & Africa Exchange Traded Fund		149,299
	25,047	Vanguard Dividend Appreciation Index Fund		831,560
	36,688	Vanguard Mega Cap 300 Growth Exchange Traded Fund		1,018,459
	13,749	Vanguard Mid-Cap Exchange Traded Fund		500,464
	12,994	WisdomTree Earnings 500 Fund		334,985
	5,578	WisdomTree Japan SmallCap Dividend Fund		167,786
	16,490	WisdomTree MidCap Dividend Fund		418,846

		TOTAL INVESTMENT COMPANIES (COST $20,277,203)	$	18,535,488

WARRANTS - 0.0%
		Pegasus Wireless Warrants
	3,847	Expiration: March, 2009, Exercise Price: $8.000		0

		TOTAL WARRANTS (Cost $0)	$	0

		TOTAL INVESTMENTS (Cost $20,277,219) - 93.2%	$	18,535,508
		Other Assets in Excess of Liabilities - 6.8%		1,342,291

		TOTAL NET ASSETS - 100.0%	$	19,877,799

Percentages are stated as a percent of net assets.

Evolution Market Leaders Fund

Short Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Appreciation

	6	E-Mini MCSI EAFE Index Futures
		Expiring March 2009 (Underlying Face Amount at Market Value $292,290)	$	9,133
	163	E-Mini S&P 500 Futures
		Expiring March 2009 (Underlying Face Amount at Market Value $5,986,175)		825,850
	5,400	E-Mini S&P MidCap 400 Futures
		Expiring March 2009 (Underlying Face Amount at Market Value $1,978,680)		158,397

			$	993,380

The accompanying notes are an integral part of these financial statements.

12 DIREXION SEMI-ANNUAL REPORT

Evolution Alternative Investment Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

INVESTMENT COMPANIES - 46.2%
	30,069	Arbitrage I Fund	$	368,344
	200	Biotech HOLDRs ETF		32,796
	7,419	Diamond Hill Long-Short Fund		87,247
	744	First Trust AMEX Biotechnology Index Fund		13,541
	161,009	Gabelli ABC		1,458,738
	2,530	Gateway Fund		54,568
	3,382	iShares Barclays 20+ Year Treasury Bond Fund		344,558
	3,891	iShares Barclays 7-10 Year Treasury Bond Fund		364,742
	639	iShares Barclays MBS Bond Fund		67,006
	633	iShares Barclays Inter Government/Credit Bond Fund		65,610
	1,722	iShares Barclays 10-20 Yr Treasury Bond Fund		192,985
	1,067	iShares Barclays 3-7 Year Treasury Bond Fund		120,678
	29,726	James Market Neutral Fund		334,716
	2,884	Market Vectors Gold Miners Fund		96,210
	129	Market Vectors Agribusiness Fund		3,424
	27,790	Merger Fund		397,670
	27,496	Permanent Portfolio Fund		837,521
	616	PowerShares Dynamic Healthcare Fund		10,244
	1,301	PowerShares Dynamic Biotech & Genome Fund		16,210
	20,663	PowerShares DB US Dollar Index Bullish Fund		547,156
	2,120	PowerShares VRDO Tax-Free Weekly Fund		53,021
	14,519	PowerShares 1-30 Laddered Treasury Fund		409,145
	416	PowerShares Emerging Markets Sovereign Debt Fund		8,590
	5,682	ProFunds Short Precious Metals Fund		85,624
	950	ProShares UltraShort Emerging Markets MSCI Fund		59,242
	46	ProShares UltraShort Real Estate Fund		3,699
	3,127	ProShares UltraShort Oil & Gas Fund		95,374
	223	ProShares UltraShort Industrials Fund		19,896
	435	Rydex S&P Equal Weight Health Care Fund		16,200
	12,090	SPDR Barclays Capital 1-3 Month T-Bill Fund		554,568
	129,229	TFS Market Neutral Fund		1,676,094
	7,300	WisdomTree Dreyfus Chinese Yuan Fund		184,106
	1,300	WisdomTree Pacific ex-Japan Total Dividend Fund		42,354

		TOTAL INVESTMENT COMPANIES (Cost $8,761,614)	$	8,621,877

SHORT TERM INVESTMENTS - 55.3%
MONEY MARKET FUNDS - 55.3%
	2,064,414	AIM STIT-Treasury Portfolio		2,064,414
	2,064,414	Fidelity Institutional Money Market Government Portfolio		2,064,414
	2,064,414	First American Government Obligations Fund		2,064,414
	2,064,414	Goldman Sachs Financial Square Government Fund		2,064,414
	2,064,414	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		2,064,414

		TOTAL SHORT TERM INVESTMENTS (Cost $10,322,070)	$	10,322,070

		TOTAL INVESTMENTS (Cost $19,083,684) - 101.5%	$	18,943,947
		Liabilities in Excess of Other Assets - (1.5)%		(289,227	)

		TOTAL NET ASSETS - 100.0%	$	18,654,720

Percentages are stated as a percent of net assets.

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 13

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


	Evolution Managed			Evolution All-Cap
	Bond Fund			Equity Fund

Assets:
Investments, at market value (Note 2)	$	31,550,877		$	42,426,237
Receivable for Fund shares sold		5,007			33,457
Receivable for investments sold		2,288,110			10,707,432
Deposit at broker for futures		—			2,094,100
Variation margin receivable		—			240,815
Dividends and interest receivable		2,146			31,016
Other assets		9,095			26,100

Total Assets		33,855,235			55,559,157

Liabilities:
Payable for investments purchased		2,363,419			10,506,801
Payable for Fund shares redeemed		747,749			840,433
Accrued advisory expense		27,187			35,637
Accrued distribution expense		14,572			24,757
Accrued expenses and other liabilities		47,599			51,074

Total Liabilities		3,200,526			11,458,702

Net Assets	$	30,654,709		$	44,100,455

Net Assets Consist Of:
Capital stock	$	35,367,061		$	63,537,292
Accumulated undistributed net investment income (loss)		62,479			(76,048	)
Accumulated undistributed net realized gain (loss)		(5,537,672	)		(20,055,679	)
Net unrealized appreciation (depreciation) on:
Investments		762,841			(666,041	)
Futures		—			1,360,931

Total Net Assets	$	30,654,709		$	44,100,455

Calculation of Net Asset Value Per Share:
Net assets	$	30,654,709		$	44,100,455
Shares outstanding (unlimited shares of beneficial interest authorized, no par value)		1,930,514			3,103,458
Net asset value, redemption price and offering price per share	$	15.88		$	14.21

Cost of Investments	$	30,788,036		$	43,092,278

The accompanying notes are an integral part of these financial statements.

14 DIREXION SEMI-ANNUAL REPORT

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


				Evolution
	Evolution Market			Alternative
	Leaders Fund			Investment Fund

Assets:
Investments, at market value (Note 2)	$	18,535,508		$	18,943,947
Cash		—			109
Receivable for Fund shares sold		11,297			893
Receivable for investments sold		3,209,360			379,100
Deposits at broker for futures		1,128,000			—
Variation margin receivable		158,338			—
Dividends and interest receivable		7,344			5,315
Other assets		12,174			10,866

Total Assets		23,062,021			19,340,230

Liabilities:
Payable for investments purchased		2,802,905			217,539
Payable for Fund shares redeemed		6,893			408,589
Payable to Custodian		321,044			—
Accrued advisory expense		17,769			19,508
Accrued distribution expenses		5,161			6,564
Accrued expenses and other liabilities		30,450			33,310

Total Liabilities		3,184,222			685,510

Net Assets	$	19,877,799		$	18,654,720

Net Assets Consist Of:
Capital stock	$	33,693,853		$	27,285,318
Accumulated undistributed net investment income (loss)		65,256			95,989
Accumulated undistributed net realized gain (loss)		(13,132,979	)		(8,586,850	)
Net unrealized appreciation (depreciation) on:
Investments		(1,741,711	)		(139,737	)
Futures		993,380			—

Total Net Assets	$	19,877,799		$	18,654,720

Calculation of Net Asset Value Per Share:
Net assets	$	19,877,799		$	18,654,720
Shares outstanding (unlimited shares of beneficial interest authorized, no par value)		2,154,468			1,252,456
Net asset value, redemption price and offering price per share	$	9.23		$	14.89

Cost of Investments	$	20,277,219		$	19,083,684

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 15

Statements of Operations

For the Six Months Ended February 28, 2009 (Unaudited)


	Evolution Managed			Evolution All-Cap
	Bond Fund			Equity Fund

Investment income:
Dividend income (net of foreign withholding tax of $- and $2,422, respectively)	$	703,901		$	254,391
Interest income		4,270			90,647

Total investment income		708,171			345,038

Expenses:
Investment advisory fees		155,093			230,400
Distribution expenses		38,773			57,600
Shareholder servicing fees		23,264			34,560
Administration fees		5,532			8,033
Fund accounting fees		13,783			23,217
Custody fees		3,869			5,434
Transfer agent fees		16,369			25,286
Federal and state registration		8,601			8,755
Professional fees		18,269			19,678
Reports to shareholders		152			—
Trustees’ fees and expenses		1,507			2,013
Other		5,161			6,110

Total expenses before reimbursement		290,373			421,086
Less: Reimbursement of expenses from Adviser		(85	)		—

Total expenses		290,288			421,086

Net investment income (loss)		417,883			(76,048	)

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(969,288	)		(17,189,034	)
Futures		—			7,173,061

		(969,288	)		(10,015,973	)

Capital gain distributions from regulated investment companies		7,553			—

Change in unrealized appreciation (depreciation) on:
Investments		453,260			(1,524,847	)
Futures		—			1,233,632

		453,260			(291,215	)

Net realized and unrealized gain (loss) on investments		(508,475	)		(10,307,188	)

Net increase (decrease) in net assets resulting from operations	$	(90,592	)	$	(10,383,236	)

The accompanying notes are an integral part of these financial statements.

16 DIREXION SEMI-ANNUAL REPORT

Statements of Operations

For the Six Months Ended February 28, 2009 (Unaudited)


				Evolution
	Evolution Market			Alternative
	Leaders Fund			Investment Fund

Investment income:
Dividend income (net of foreign withholding tax of $- and $2,799, respectively)	$	210,217		$	215,750
Interest income		6,827			79,358

Total investment income		217,044			295,108

Expenses:
Investment advisory fees		80,288			104,677
Distribution expenses		20,072			26,169
Shareholder servicing fees		12,043			15,701
Administration fees		3,070			3,775
Fund accounting fees		9,571			10,516
Custody fees		2,383			4,927
Transfer agent fees		8,597			12,979
Federal and state registration		9,932			8,292
Professional fees		17,855			18,343
Reports to shareholders		34			—
Trustees’ fees and expenses		1,003			1,337
Other		2,406			2,981

Total expenses before reimbursement/recoupment		167,254			209,697
Less: Reimbursement of expenses from Adviser		(14,682	)		(10,579	)

Total expenses		152,572			199,118

Net investment income (loss)		64,472			95,990

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(8,849,196	)		(2,560,274	)
Securities sold short		(96	)		—
Futures		2,829,258			—

		(6,020,034	)		(2,560,274	)
Capital gain distributions from regulated investment companies		562			57,978

Change in unrealized appreciation (depreciation) on:
Investments		(3,077,908	)		(474,567	)
Futures		1,031,317			—

		(2,046,591	)		(474,567	)

Net realized and unrealized gain (loss) on investments		(8,066,063	)		(2,976,863	)

Net increase (decrease) in net assets resulting from operations	$	(8,001,591	)	$	(2,880,873	)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 17

Statements of Changes in Net Assets


	Evolution Managed Bond Fund						Evolution All-Cap Equity Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008

Operations:
Net investment income (loss)	$	417,883		$	1,159,615		$	(76,048	)	$	(130,224	)
Net realized gain (loss) on investments		(969,288	)		(418,510	)		(10,015,973	)		(4,372,549	)
Capital gain distributions from regulated investment companies		7,553			5,575			—			—
Change in net unrealized appreciation (depreciation) on investments		453,260			(22,289	)		(291,215	)		(214,624	)

Net increase (decrease) in net assets resulting from operations		(90,592	)		724,391			(10,383,236	)		(4,717,397	)

Distributions to shareholders:
Net investment income		(480,904	)		(1,479,225	)		—			—
Net realized gains		—			—			—			(8,731,487	)

Total distributions		(480,904	)		(1,479,225	)		—			(8,731,487	)

Capital share transactions:
Proceeds from shares sold		16,512,108			12,095,784			33,038,251			15,791,146
Proceeds from shares issued to holders in reinvestment of distributions		480,904			1,479,225			—			8,731,487
Cost of shares redeemed		(12,009,031	)		(26,313,490	)		(13,691,767	)		(40,183,923	)

Net increase (decrease) in net assets resulting from capital share transactions		4,983,981			(12,738,481	)		19,346,484			(15,661,290	)

Total increase (decrease) in net assets		4,412,485			(13,493,315	)		8,963,248			(29,110,174	)

Net assets:
Beginning of year/period		26,242,224			39,735,539			35,137,207			64,247,381

End of year/period	$	30,654,709		$	26,242,224		$	44,100,455		$	35,137,207

Undistributed (Accumulated) net investment income (loss), end of year/period	$	62,479		$	125,500		$	(76,048	)	$	—

The accompanying notes are an integral part of these financial statements.

18 DIREXION SEMI-ANNUAL REPORT

Statements of Changes in Net Assets


	Evolution Market Leaders Fund						Evolution Alternative Investment Fund
	Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008

Operations:
Net investment income (loss)	$	64,472		$	91,438		$	95,990		$	800,941
Net realized gain (loss) on investments		(6,020,034	)		(4,161,529	)		(2,560,274	)		(2,990,481	)
Capital gain distributions from regulated investment companies		562			—			57,978			—
Net unrealized appreciation (depreciation) on investments		(2,046,591	)		1,210,982			(474,567	)		(1,299,026	)

Net increase (decrease) in net assets resulting from operations		(8,001,591	)		(2,859,109	)		(2,880,873	)		(3,488,566	)

Distributions to shareholders:
Net investment income		—			(83,227	)		(800,714	)		(121,868	)
Net realized gains		—			—			—			(1,223,072	)
Return of capital		—			(46,292	)		—			—

Total distributions		—			(129,519	)		(800,714	)		(1,344,940	)

Capital share transactions:
Proceeds from shares sold		33,721,146			9,133,559			6,586,245			10,594,573
Proceeds from shares issued to holders in reinvestment of distributions		—			129,520			800,714			1,344,939
Cost of shares redeemed		(23,139,629	)		(20,613,485	)		(10,087,736	)		(28,183,896	)

Net increase (decrease) in net assets resulting from capital share transactions		10,581,517			(11,350,406	)		(2,700,777	)		(16,244,384	)

Total increase (decrease) in net assets		2,579,926			(14,339,034	)		(6,382,364	)		(21,077,890	)

Net assets:
Beginning of year/period		17,297,873			31,636,907			25,037,084			46,114,974

End of year/period	$	19,877,799		$	17,297,873		$	18,654,720		$	25,037,084

Undistributed (Accumulated) net investment income (loss), end of year/period	$	65,256		$	—		$	153,967		$	800,713

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 19

Financial Highlights

February 28, 2009


																															RATIOS TO AVERAGE NET ASSETS
																																											Net
						Net Realized			Net Increase																																		Investment
	Net Asset		Net			and			(Decrease)			Dividends			Distributions									Net Asset					Net Assets,		Including Short						Excluding Short						Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net			from			Return						Value,					End of		Dividends						Dividends						After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Realized			of Capital			Total			End of		Total			Year/Period		Total			Net			Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)³			on Investments⁴			from Operations			Income			Capital Gains			Distribution			Distributions			Year/Period		Return⁵			(,000)		Expenses			Expenses			Expenses			Expenses			Recoupment			Rate⁶


Evolution Managed Bond Fund
Six months ended February 28, 2009 (Unaudited)	$	16.41	$	0.21		$	(0.48	)	$	(0.27	)	$	(0.26	)	$	—		$	—		$	(0.26	)	$	15.88		(1.70	%)²		30,655		—			—			1.87	%		1.87	%		2.69	%		225	%²
Year ended August 31, 2008		16.83		0.59			(0.30	)		0.29			(0.71	)		—			—			(0.71	)		16.41		1.78	%		26,242		—			—			1.90	%		1.75	%¹⁰		3.51	%		439	%
Year ended August 31, 2007		17.45		0.64			(0.51	)		0.13			(0.75	)		—			—			(0.75	)		16.83		0.76	%		39,736		—			—			1.75	%		1.75	%¹⁰		3.70	%		914	%
Year ended August 31, 2006		18.20		0.46	⁷		(0.70	)		(0.24	)		(0.51	)		—			—			(0.51	)		17.45		(1.26	%)		46,932		1.86	%		1.84	%		1.81	%		1.79	%^9,10		2.70	%⁸		1,156	%
Year ended August 31, 2005		18.73		0.86	⁷		(0.41	)		0.45			(0.98	)		—			—			(0.98	)		18.20		2.41	%		14,642		2.12	%		2.03	%		2.09	%		2.00	%		4.63	%⁸		941	%
April 1, 2004¹¹ to August 31, 2004		20.00		0.21	⁷		(1.48	)		(1.27	)		—			—			—			—			18.73		(6.35	%)²		15,965		2.46	%¹		2.27	%¹		2.19	%¹		2.00	%¹		2.68	%^1,8		536	%²
Evolution All-Cap Equity Fund
Six months ended February 28, 2009 (Unaudited)		18.55		(0.03	)		(4.31	)		(4.34	)		—			—			—			—			14.21		(23.40	%)²		44,100		—			—			1.83	%		1.83	%		(0.33	%)		1,246	%²
Year ended August 31, 2008		24.31		(0.06	)		(1.96	)		(2.02	)		—			(3.74	)		—			(3.74	)		18.55		(10.07	%)		35,137		—			—			1.84	%		1.75	%¹⁰		(0.27	%)		1,374	%
Year ended August 31, 2007		22.75		0.03			2.67			2.70			(0.19	)		(0.95	)		—			(1.14	)		24.31		12.03	%		64,247		—			—			1.69	%		1.69	%¹⁰		0.10	%		885	%
Year ended August 31, 2006		21.24		0.20			2.03			2.23			—			(0.72	)		—			(0.72	)		22.75		10.61	%		112,721		—			—			1.67	%		1.69	%^9,10		0.88	%		1,119	%
Year ended August 31, 2005		17.55		(0.23	)		3.92			3.69			—			—			—			—			21.24		21.03	%		20,184		—			—			1.97	%		2.00	%		(1.14	%)		1,374	%
April 1, 2004¹¹ to August 31, 2004		20.00		(0.09	)		(2.36	)		(2.45	)		—			—			—			—			17.55		(12.25	%)²		12,808		—			—			2.34	%¹		2.00	%¹		(1.21	%)¹		558	%²
Evolution Market Leaders Fund
Six months ended February 28, 2009 (Unaudited)		16.68		0.04			(7.49	)		(7.45	)		—			—			—			—			9.23		(44.66	%)²		19,878		—			—			2.08	%		1.90	%		0.80	%		828	%²
Year ended August 31, 2008		18.80		0.07			(2.10	)		(2.03	)		(0.06	)		—			(0.03	)		(0.09	)		16.68		(10.86	%)		17,298		—			—			1.96	%		1.75	%¹⁰		0.38	%		1,191	%
Year ended August 31, 2007		18.12		(0.03	)		0.78			0.75			(0.07	)		—			—			(0.07	)		18.80		4.06	%		31,637		—			—			1.85	%		1.75	%¹⁰		(0.17	%)		886	%
January 27, 2006¹¹ to August 31, 2006		20.00		0.06			(1.94	)		(1.88	)		—			—			—			—			18.12		(9.40	%)²		53,795		—			—			1.84	%¹		1.75	%¹		0.50	%¹		864	%²
Evolution Alternative Investment Fund
Six months ended February 28, 2009 (Unaudited)		17.63		0.07			(2.19	)		(2.12	)		(0.62	)		—			—			(0.62	)		14.89		(12.21	%)²		18,655		—			—			2.00	%		1.90	%		0.92	%		373	%²
Year ended August 31, 2008		20.48		0.45			(2.60	)		(2.15	)		(0.06	)		(0.64	)		—			(0.70	)		17.63		(10.77	%)		25,037		—			—			1.89	%		1.75	%¹⁰		2.32	%		777	%
Year ended August 31, 2007		20.65		0.32			(0.03	)		0.29			(0.32	)		(0.14	)		—			(0.46	)		20.48		1.35	%		46,115		—			—			1.72	%		1.75	%¹⁰		1.46	%		824	%
January 26, 2006¹¹ to August 31, 2006		20.00		0.22			0.49			0.71			(0.06	)		—			—			(0.06	)		20.65		3.57	%²		58,519		—			—			1.82	%¹		1.75	%¹		1.88	%¹		642	%²


¹		Annualized
²		Not annualized
³		Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period.
⁴		The amounts shown may not correlate with aggregate gains and losses of portfolio securities due to timing of subscriptions and redemptions of Fund shares.
⁵		All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes.
⁶		Portfolio turnover is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, and futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
⁷		Net investment income (loss) before dividends on short positions for the year ended August 31, 2006 and 2005 and the period ended August 31, 2004 was $0.47, $0.86 and $0.23, respectively.
⁸		Net investment income (loss) ratio included dividends on short positions. The ratio excluding dividends on short positions for the year ended August 31, 2006, 2005 and the period ended August 31, 2004 was 2.75%, 4.66% and 2.95%, respectively.
⁹		For the period September 1, 2005 to December 29, 2005 the annual cap on expenses excluding short dividends was 2.00%.
¹⁰		For the period December 30, 2005 to August 31, 2008 the annual cap on expenses excluding short dividends was 1.75%.
¹¹		Commencement of operations.

20 DIREXION SEMI-ANNUAL REPORT

Direxion Funds

NOTES TO THE FINANCIAL STATEMENTS

February 28, 2009


1.	ORGANIZATION

The objective of the Evolution Managed Bond Fund is to seek the highest appreciation on an annual basis consistent with a high tolerance for risk by investing at least 80% of its assets (plus any borrowing for investment purposes) in fixed-income securities indirectly through securities that invest in or are a derivative of fixed-income securities, including exchange traded funds (ETFs) and closed end investment companies (collectively, fixed-income securities). The objective of the Evolution All-Cap Equity Fund is to seek the highest appreciation on an annual basis consistent with a high tolerance for risk by investing at least 80% of its net assets (plus any borrowing for investment purposes) in equity securities either directly through individual stocks and American Depository Receipts (ADRs) or indirectly through securities that invest in or are a derivative of equity securities. The objective of the Evolution Market Leaders Fund is to seek the highest appreciation on an annual basis consistent with a high tolerance for risk by investing primarily in equity securities either directly or indirectly through individual stocks and ADRs or indirectly through securities that invest in or are a derivative of equity securities. The objective of the Evolution Alternative Investment Fund is to seek high total return on an annual basis consistent with a high tolerance for risk by investing primarily in securities, including dividend-paying equities or interest bearing fixed income securities, having a low or negative correlation with the S&P 500^® Index (collectively, “alternative securities”) or indirectly through securities that invest in or are a derivative of alternative securities.


2.	SIGNIFICANT ACCOUNTING POLICIES

a) 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”). Equity securities and exchange-traded funds are valued at their last sales price, or if not available, at the average of the last bid and ask prices. Futures 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. Options are valued at the composite price, using the National Best Bid and Offer quotes (“NBBO”). NBBO consists of the highest bid price and lowest ask price across any of the exchanges on which an option is quoted. Specifically, composite pricing looks at the last trades on the exchanges where the options are traded. If there are no trades for the option on a given business day, the composite pricing calculates the mean of the highest bid and lowest ask price across the exchanges where the option is traded. Over-the-counter (“OTC”) securities are valued 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 (“NOCP”). Investments in open-end mutual funds are valued at their respective net asset values on the valuation dates. Swaps are valued based upon prices from third party vendor models or quotations from market makers to the extent available. Short-term debt securities with a maturity of 60 days or less and money market securities are valued using the amortized cost method. Other debt securities are valued by using the mean prices provided by the Fund’s pricing service or, if such services are unavailable, by a pricing matrix method. Securities for which reliable market quotations are not readily available, the Funds’ pricing service does not provide a valuation for such securities, the Fund’s pricing service provides valuation that in the judgment of Rafferty Asset Managements, LLC (the “Adviser”) does not represent fair value, or the Fund or Adviser

DIREXION SEMI-ANNUAL REPORT 21

believes the market price is stale, will in each case be fair valued as determined by the Adviser under the supervision of the Board of Trustees.

b) Repurchase Agreements – Each Fund may enter into repurchase agreements with institutions that are members of the Federal Reserve System or securities dealers who are members of a national securities exchange or are primary dealers in U.S. government securities. In connection with transactions in repurchase agreements, it is the Trust’s policy that the Fund receives, as collateral, cash and/or securities (primarily U.S. Government securities) whose market value, including accrued interest, will at all times be at least equal to 100% of the amount invested by the Fund in each repurchase agreement. If the seller defaults, and the value of the collateral declines, recovery on the collateral by the Fund may be delayed or limited.

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 returns) 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). The Fund’s obligations are accrued daily (offset by any amounts owed to the Funds.)

In a “long” swap agreement, the counterparty will generally agree to pay the Fund the amount, if any, by which the notional amount 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. 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 by the Fund’s custodian. 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 gains or losses on swaps and futures” and when cash is exchanged, the gain or loss is recorded as “realized gains or losses on swaps and futures”. Swap contracts are collateralized by the securities and cash of each particular Fund.

Each Fund may enter into swap contracts that provide the opposite return of the particular 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 on the swap. Also, as with “long” swap agreements, in certain instances, the Fund will agree to pay to the counterparty commissions or trading spreads on the notional amount. These amounts are netted with any unrealized appreciation or depreciation to determine the value of the swap.

Swap contracts involve, to varying degrees, elements of market risk and exposure to loss in excess of the amount reflected in the Statement of Assets and Liabilities. The notional amounts reflect the extent of the total investment exposure that each Fund has under the swap contract. The primary risks associated with the use of swap agreements are imperfect correlation between movements in the notional amount and the price of the underlying securities and the inability of counterparties to perform. A Fund bears the risk of loss of the amount expected to be received under a swap contract in the event of default or bankruptcy of a swap contract counterparty. The Funds were not invested in swap contracts at February 28, 2009.

d) Short Positions – Each Fund may engage in short sale transactions. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. Subsequent fluctuations in the market prices of short positions may require purchasing the securities at prices which may differ from the market value reflected on the Statement of Assets and Liabilities. The Fund is liable to the buyer for any dividends payable on securities while those securities are in a short position. As collateral for its short positions, the Fund is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities equal to the market value of the

22 DIREXION SEMI-ANNUAL REPORT

securities sold short. This collateral is required to be adjusted daily. The Funds were not invested in short positions at February 28, 2009.

e) Stock Index Futures Contracts and Options on Futures Contracts – Each Fund may purchase and sell stock index futures contracts and options on such futures contracts. 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.

f) Risks of Options, Futures Contracts, Options on Futures Contracts and Short Positions – The risks inherent in the use of options, futures contracts, options on futures contracts and short positions include 1) adverse changes in the value of such instruments; 2) imperfect correlation between the price of options and 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 all cash, cash equivalents and liquid securities as collateral for written options, futures contracts and short positions.

g) Risks of Investing in Foreign Securities – Investments in foreign securities involve greater risks than investing in domestic securities. As a result, the 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 not be as strict as they are in the U.S., and there may be less public information available about foreign companies.

i) Federal Income Taxes – Each Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code 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.

j) 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. The Funds are charged for those expenses that are directly attributable to each series, such as advisory fees and registration costs. Expenses that are not directly attributable to a series are generally allocated among the Trust’s series in proportion to their respective net assets.

k) Distributions to Shareholders – Each Fund generally 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 U.S. generally accepted accounting principles. Distributions to shareholders are recorded on the ex-dividend date.

DIREXION SEMI-ANNUAL REPORT 23

The tax character of distributions for the Investor Class during the six months ended February 28, 2009, and the year ended August 31, 2008 were as follows:


	Evolution Managed Bond Fund				Evolution All-Cap Equity Fund
	Six Months				Six Months
	Ended				Ended
	February 28,		Year Ended		February 28,		Year Ended
	2009		August 31,		2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	480,904	$	1,479,225	$	—	$	8,730,319
Long-Term Capital Gains		—		—		—		1,168
Return of Capital		—		—		—		—

Total Distributions paid	$	480,904	$	1,479,225	$	—	$	8,731,487


					Evolution Alternative
	Evolution Market Leaders Fund				Investment Fund
	Six Months				Six Months
	Ended				Ended
	February 28,		Year Ended		February 28,		Year Ended
	2009		August 31,		2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	—	$	83,227	$	800,714	$	1,337,597
Long-Term Capital Gains		—		—		—		7,342
Return of Capital		—		46,292		—		—

Total Distributions paid	$	—	$	129,519	$	800,714	$	1,344,939

As of February 28, 2009, the components of distributable earnings of the Funds were as follows:


	Evolution			Evolution			Evolution			Evolution
	Managed			All-Cap			Market			Alternative
	Bond Fund			Equity Fund			Leaders Fund			Investment Fund

Net unrealized appreciation/depreciation	$	(79,019	)	$	(1,297,287	)	$	(209,334	)	$	(257,690	)

Undistributed ordinary income		125,500			—			—			800,713
Undistributed long-term capital gain/(loss)		—			—			—			—

Total distributable earnings		125,500			—			—			800,713
Other accumulated loss		(4,187,337	)		(7,756,314	)		(5,605,129	)		(5,492,034	)

Total accumulated losses	$	(4,140,856	)	$	(9,053,601	)	$	(5,814,463	)	$	(4,949,011	)

The difference between book cost of investments and tax cost of investments is attributable primarily to the tax deferral of losses on wash sales.

The cost basis of investments for federal tax purposes as of February 28, 2009 was as follows:


	Evolution			Evolution			Evolution			Evolution
	Managed			All-Cap			Market			Alternative
	Bond Fund			Equity Fund			Leaders Fund			Investment Fund

Tax cost of investments	$	31,176,636		$	45,248,370		$	21,822,750		$	20,268,724
Gross unrealized appreciation		968,511			377,560			2,312			49,013
Gross unrealized depreciation		(594,270	)		(3,199,693	)		(3,289,554	)		(1,373,790	)

Net unrealized appreciation/depreciation	$	374,241		$	(2,822,133	)	$	(3,287,242	)	$	(1,324,777	)

24 DIREXION SEMI-ANNUAL REPORT


	Post October		Post October
	Loss Deferred		Currency Loss

Evolution Managed Bond Fund	$	510,421	$	—
Evolution All-Cap Equity Fund		4,306,728		—
Evolution Market Leaders Fund		3,824,064		—
Evolution Alternative Investment Fund		4,134,461		—

At August 31, 2008, the following Funds had capital loss carryovers on a tax basis of:


	Expires
	8/31/2013		8/31/2014		8/31/2015		8/31/2016		Total

Evolution Managed Bond Fund	$	1,238,379	$	596,309	$	586,831	$	1,226,623	$	3,648,142
Evolution All-Cap Equity Fund		—		—		—		3,893,085		3,893,085
Evolution Market Leaders Fund		—		—		1,584,209		94,888		1,679,097
Evolution Alternative Investment Fund		—		—		—		1,400,927		1,400,927

To the extent that the Funds realize future net capital gains, those gains will be offset by any unused capital loss carryover.

The Funds have reviewed all open tax years and concluded that the adoption of FIN 48 resulted in no effect to the Fund’s financial positions or results of operations. There is no tax liability resulting uncertain income tax positions taken or expected to be taken on the tax returns for the fiscal year-end August 31, 2005, August 31, 2006, August 31, 2007 and August 31, 2008. 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 twelve months.

l) Credit Facility – U.S. Bank, N.A. has made available to the Funds a credit facility pursuant to a Line of Credit Agreement (“Line of Credit”) for meeting redemption requests. Borrowings under the Line of Credit are charged at prime rate less 1/2%. The Funds did not utilize the credit facility for the six months ended February 28, 2009.

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 Fund’s 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.

DIREXION SEMI-ANNUAL REPORT 25


3.	CAPITAL SHARE TRANSACTIONS

The capital share transactions for the Funds during the six months ended February 28, 2009 and year ended August 31, 2008 were as follows:


	Evolution Managed Bond Fund						Evolution All-Cap Equity Fund
	Six Months						Six Months
	Ended						Ended
	February 28,			Year Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		1,054,563			722,420			2,102,880			736,314
Shares issued in reinvestment of distributions		29,074			89,486			—			417,176
Shares redeemed		(752,164	)		(1,573,682	)		(893,449	)		(1,901,770	)

Total net increase (decrease) from capital share transactions		331,473			(761,776	)		1,209,431			(748,280	)


							Evolution Alternative
	Evolution Market Leaders Fund						Investment Fund
	Six Months						Six Months
	Ended						Ended
	February 28,			Year Ended			February 28,			Year Ended
	2009			August 31,			2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		2,983,845			514,267			411,939			546,642
Shares issued in reinvestment of distributions		—			7,085			52,783			69,541
Shares redeemed		(1,866,169	)		(1,167,267	)		(632,757	)		(1,447,150	)

Total net increase (decrease) from capital share transactions		1,117,676			(645,915	)		(168,035	)		(830,967	)


4.	INVESTMENT TRANSACTIONS

During the six months ended February 28, 2009, the aggregate purchases and sales of investments (excluding short-term investments) were:


	Purchases		Sales

Evolution Managed Bond Fund	$	74,954,358	$	69,292,612
Evolution All-Cap Equity Fund		410,913,124		405,316,595
Evolution Market Leaders Fund		136,070,890		122,175,144
Evolution Alternative Investment Fund		41,785,452		54,991,858

There were no purchases or sales of long-term U.S. Government securities during the six months ended February 28, 2009.


5.	INVESTMENT ADVISORY AND OTHER AGREEMENTS

Investment Advisory Fees: The Funds have entered into an investment advisory agreement with the Adviser. The Adviser receives a fee, computed daily and payable monthly, at the annual rates presented below as applied to each Fund’s average daily net assets. In addition, the Adviser has entered into sub-advisory agreements relating to the Funds whereby the sub-advisor, Flexible Plan Investments, Ltd., will direct investment activities of the Funds. The Adviser pays, out of the management fees it receives from the Funds, a fee for these sub-advisory services. For the six months ended February 28, 2009, the Adviser has voluntarily agreed to pay all operating expenses (excluding dividends on short positions), in excess of the annual cap on expenses presented below as applied to each Fund’s average daily net assets. Because this is a voluntary waiver, the Adviser may change or end the waiver at any time. Effective September 1, 2008 this expense cap was raised to 1.90% for each of the Funds. The Adviser may recover from the Funds the expenses paid in excess of the annual cap on

26 DIREXION SEMI-ANNUAL REPORT

expenses for the three previous years, as long as the recovery does not cause the Fund to exceed such annual cap on expenses from the period in which those expenses were originally waived. For the six months ended February 28, 2009, the Adviser paid or recouped the following expenses:


	Evolution			Evolution			Evolution			Evolution
	Managed			All-Cap			Market			Alternative
	Bond Fund			Equity Fund			Leaders Fund			Investment Fund

Annual Adviser rate		1.00	%		1.00	%		1.00	%		1.00	%
Annual cap on expenses:		1.90	%		1.90	%		1.90	%		1.90	%
Expenses paid in excess of annual cap on expenses — 2009	$	85		$	—		$	14,682		$	10,579
Voluntary waiver — 2009	$	—		$	—		$	—		$	—
Adviser expense waiver recovery — 2009	$	—		$	—		$	—		$	—

Expenses subject to potential recovery expiring in:


	Evolution		Evolution		Evolution		Evolution
	Managed		All-Cap		Market		Alternative
	Bond Fund		Equity Fund		Leaders Fund		Investment Fund

2009	$	7,084	$	—	$	21,360	$	31
2010	$	1,093	$	—	$	36,463	$	—
2011	$	48,316	$	41,552	$	50,055	$	45,509
2012	$	85	$	—	$	14,682	$	10,579

Total	$	56,578	$	41,552	$	122,560	$	56,119

Distribution Expenses: Shares of the Funds are subject to an annual Rule 12b-1 fee equal to 0.25% of the average daily net assets.

Shareholder Servicing Fees: The Board has also authorized each Fund’s shares to pay a shareholder servicing fee of 0.15% of each Fund’s average daily net assets. The Trust, on behalf of each Fund, pays the fee to financial institutions and other persons who provide services for and maintain shareholder accounts.

Rafferty Capital Markets, LLC (the “Distributor”) serves as principle underwriter of the Funds, and acts as the Funds’ distributor in a continuous public offering of the Funds’ shares. There were no Rule 12b-1 fees retained by the Distributor for the six months ended February 28, 2009. The Distributor is an affiliate of the Adviser.


6.	SUMMARY OF FAIR VALUE DISCLOSURE

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels listed below:


	Level 1 – Quoted prices in active markets for identical securities

	Level 2 – Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, etc.)

	Level 3 – Significant unobservable inputs (including Fund’s own assumptions in determining fair value of investments)

DIREXION SEMI-ANNUAL REPORT 27

The inputs or methodology used for valuing securities are not necessarily an indication of the credit risk associated with investing in those securities.

The following is a summary of the inputs used to value each Fund’s net assets as of February 28, 2009:


	Evolution Managed Bond Fund				Evolution All-Cap Equity Fund
	Investments in		Other Financial		Investments in		Other Financial
Description	Securities		Instruments*		Securities		Instruments*

Level 1 – Quoted prices	$	31,550,877	$	—	$	42,426,237	$	1,360,931
Level 2 – Other significant observable inputs		—		—		—		—
Level 3 – Significant unobservable inputs		—		—		—		—

Total	$	31,550,877	$	—	$	42,426,237	$	1,360,931


					Evolution Alternative
	Evolution Market Leaders Fund				Investment Fund
	Investments in		Other Financial		Investments in		Other Financial
Description	Securities		Instruments*		Securities		Instruments*

Level 1 – Quoted prices	$	18,535,508	$	993,380	$	18,943,947	$	—
Level 2 – Other significant observable inputs		—		—		—		—
Level 3 – Significant unobservable inputs		—		—		—		—

Total	$	18,535,508	$	993,380	$	18,943,947	$	—


*		Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as written options, futures and swap contracts. Futures and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument.


7.	NEW ACCOUNTING PRONOUNCEMENT

Adviser

Rafferty Asset Management, LLC

33 Whitehall St. 10th Floor

New York, NY 10004

Sub-Advisor

Flexible Plan Investments, Ltd.

3883 Telegraph Road

Bloomfield Hills, MI 48302

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

875 E. Wisconsin Ave.

Milwaukee, WI 53202

Distributor

Rafferty Capital Markets, LLC

59 Hilton Avenue

Garden City, NY 11530

The Fund’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 Fund files complete schedules of portfolio holdings with the SEC on Form N-Q. The Form N-Q is available without charge, upon request, by calling 1-800-851-0511, or by accessing 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.

Dear Shareholders,

This Semi-Annual Report for the HCM Freedom Fund (the “Fund”) covers the period from September 1, 2008 to February 28, 2009 (the “Semi-Annual Period”). Horizon Capital Management, Inc. (“HCM”) serves as the sub-advisor to the Fund. For the Semi-Annual Period, the Fund, which seeks long term capital appreciation with lower volatility than the overall market, returned −2.72% on a total return basis.

During the Semi-Annual Period, the DJ Industrial Average Index returned −38.21%, the S&P 500 Index returned −42.70% and the Nasdaq-100 Index returned −40.35%. Emerging Markets did not outpace domestic returns, with the MSCI Emerging Markets Index declining −45.22% and the 10 Year Treasury Note increasing 8.53%, on a price performance basis, for the Semi-Annual Period.

As always, we thank you for using the Direxion Funds and we look forward to our mutual success.

Best Regards,




Daniel O’Neill	Dexter Lyons	Mark Thomas
Direxion Funds	Horizon Capital Management, Inc.	Horizon Capital Management, Inc.

The total annual fund operating expense ratio of the HCM Freedom Fund, net of any fee, waivers or expense reimbursements is 2.45%.

Distributed by: Rafferty Capital Markets, LLC
Date of First Use: April 29, 2009

Dear Shareholders,

This Semi-Annual Report for the PSI Funds covers the period September 1, 2008 to February, 28 2009, (the “Semi-Annual Period”). This Report covers the PSI Macro Trends Fund (the “Macro Trends Fund”), the PSI Core Strength Fund (the “Core Strength Fund”) and the PSI Total Return Fund (the “Total Return Fund”). Portfolio Strategies Investment Managers, (the “Sub-Advisor”), serves as the sub-advisor to the PSI Funds. During the Semi-Annual Period, the DJ Industrial Average Index returned −38.21%, the S&P 500 Index returned −42.70% and the Nasdaq-100 Index returned −40.35%. Emerging Markets did not outpace domestic returns, with the MSCI Emerging Markets Index declining −45.22% and the 10 Year Treasury Note increasing 8.53%, on a price performance basis, for the Semi-Annual Period.

The Core Strength Fund seeks to achieve returns equal to or better than the return of the broad U.S. stock market as measured by the S&P 500 Index over a full market cycle. The Core Strength Fund returned −15.90%, on a total return basis, during the Semi-Annual Period.

The Macro Trends Fund seeks to implement short or long strategies to achieve capital appreciation. The Macro Trends Fund returned −39.04%, on a total return basis, during the Semi-Annual Period.

The Total Return Fund seeks to exceed the total return of the Barclays Capital Aggregate Bond Index (formerly known as the Lehman U.S. Aggregate Bond Index) over a complete market cycle. The Total Return Fund returned −13.22%, on a total return basis, during the Semi-Annual Period, compared to 1.88% for the Barclays Capital Aggregate Bond Index.

As always, we thank you for using the Direxion Funds and we look forward to our mutual success.

Best Regards,




Daniel O’Neill		David Jajewski
Direxion Funds		Portfolio Strategies, Inc.

The total annual fund operating expense ratio of the Macro Trend Fund, the Core Strength Fund and the Total Return Fund is, 2.00%, 2.00%, 2.00%, respectively, net of any fee, waivers or expense reimbursements.

Distributed by: Rafferty Capital Markets, LLC
Date of First Use: April 29, 2009

Dear Shareholders,

This Semi-Annual Report for the Spectrum Funds covers the period from September 1, 2008 to February 28, 2009 (the “Semi- Annual Period”). This Report covers the Spectrum Global Perspective Fund (the “Global Fund”), the Spectrum Equity Opportunity Fund (the “Equity Fund”) and the Spectrum Select Alternative Fund, (the “Select Alternative Fund”). Hundredfold Advisors, LLC (the “Sub-Advisor”), serves as the sub-advisor to the Spectrum Funds.

The Global Fund seeks a high total rate of return (income from short-term trading plus capital appreciation) on an annual basis. The Global Fund returned −22.72%, on a total return basis, during the Semi-Annual Period, compared to −42.70% for the S&P 500 Index.

The Equity Fund seeks a high total rate of return (income from short-term trading plus capital appreciation) on an annual basis. The Equity Fund returned −20.38%, on a total return basis, during the Semi-Annual Period, compared to −42.70% for the S&P 500 Index.

The Select Alternative Fund seeks a moderate total rate of return, including income and capital appreciation on an annual basis. The Select Alternative Fund returned −8.15%, on a total return basis, during the Semi-Annual Period, compared to −42.70% for the S&P 500 Index and 1.88% for the Barclays Capital Aggregate Bond Index (formerly known as the Lehman U.S. Aggregate Bond Index).

As always, we thank you for using the Direxion Funds and we look forward to our mutual success.

Best Regards,




Daniel O’Neill		Ralph Doudera
Direxion Funds		Hundredfold Advisors, LLC

The total annual fund operating expense ratio of the Spectrum Global Perspective Fund, Spectrum Equity Opportunity Fund and the Spectrum Select Alternative Fund is 2.48%, 2.75%, 2.60%, respectively, net of any fee, waivers or expense reimbursements.

Distributed by: Rafferty Capital Markets, LLC
Date of First Use: April 29, 2009

Expense Example

February 28, 2009 (Unaudited)

The Example is based on an investment of $1,000 invested at the beginning of the period and held the entire period (September 1, 2008 — February 28, 2009).

Actual Expenses

Hypothetical Example for Comparison Purposes

2 DIREXION SEMI-ANNUAL REPORT

Statements of Changes in Net Assets


	HCM Freedom Fund
	Six Months Ended
	February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008

Operations:
Net investment income (loss)	$	(140,532	)	$	99,787
Net realized loss on investments		(542,677	)		(1,234,015	)
Change in net unrealized appreciation (depreciation) on investments		—			(34,623	)

Net decrease in net assets resulting from operations		(683,209	)		(1,168,851	)

Distributions to shareholders:
Net investment income		—			(3,487,566	)

Total distributions		—			(3,487,566	)

Capital share transactions:
Proceeds from shares sold		151,048			1,414,324
Proceeds from shares issued to holders in reinvestment of dividends		—			3,479,021
Cost of shares redeemed		(1,622,928	)		(3,362,586	)

Net increase (decrease) in net assets resulting from capital share transactions		(1,471,880	)		1,530,759

Total decrease in net assets		(2,155,089	)		(3,125,658	)

Net assets:
Beginning of year/period		25,516,553			28,642,211

End of year/period	$	23,361,464		$	25,516,553

Undistributed (Accumulated) net investment income (loss), end of year/period	$	898,850		$	1,039,382

The accompanying notes are an integral part of these financial statements.

7 DIREXION SEMI-ANNUAL REPORT

Financial Highlights


																									RATIOS TO AVERAGE NET ASSETS
																																					Net
						Net Realized			Net Increase																												Investment
	Net Asset		Net			and			(Decrease)			Dividends						Net Asset					Net Assets,														Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net						Value,					End of		Including Short Dividends						Excluding Short Dividends						After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Total			End of		Total			Year/Period		Total			Net			Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)³			on Investments⁴			from Operations			Income			Distributions			Year/Period		Return⁵			(,000)		Expenses¹			Expenses¹			Expenses¹			Expenses¹			Recoupment¹			Rate⁶

HCM Freedom Fund
Six months ended February 28, 2009 (Unaudited)	$	14.68	$	(0.08	)	$	(0.32	)	$	(0.40	)	$	—		$	—		$	14.28		(2.72	%)²	$	23,361		—			—			2.44	%		2.45	%		(1.16	%)		22,336	%²
Year ended August 31, 2008		17.46		0.06			(0.70	)		(0.64	)		(2.14	)		(2.14	)		14.68		(4.43	%)		25,517		—			—			2.50	%		2.45	%		0.35	%		2,886	%
Year ended August 31, 2007		18.11		0.34			(0.11	)		0.23			(0.88	)		(0.88	)		17.46		1.32	%		28,642		—			—			2.18	%		2.18	%		1.98	%		4,042	%
Year ended August 31, 2006		18.91		0.40			(1.08	)		(0.68	)		(0.12	)		(0.12	)		18.11		(3.61	%)		53,753		—			—			2.22	%		2.12	%		2.14	%		3,065	%
December 7, 2004⁸ to August 31, 2005		20.00		0.11			(1.20	)		(1.09	)		—			—			18.91		(5.45	%)²		140,786		2.31	%		2.11	%		2.30	%		2.10	%		0.82	%⁷		2,215	%²


¹		Annualized
²		Not annualized
³		Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period.
⁴		The amounts shown may not correlate with aggregate gains and losses of portfolio securities due to timing of subscriptions and redemptions of Fund shares.
⁵		All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes.
⁶		Portfolio turnover is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, and futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
⁷		Net investment income (loss) ratio included dividends on short positions. The ratio excluding dividends on short positions for the period ended August 31, 2005 was 0.83%.
⁸		Commencement of operations.

DIREXION SEMI-ANNUAL REPORT 8

Expense Example

February 28, 2009 (Unaudited)

The Example is based on an investment of $1,000 invested at the beginning of the period and held the entire period (September 1, 2008 — February 28, 2009).

Actual Expenses

Hypothetical Example for Comparison Purposes

9 DIREXION SEMI-ANNUAL REPORT

Expense Example Tables

February 28, 2009 (Unaudited)


				Beginning		Ending		Expenses
	Expense			Account Value		Account Value		Paid During
	Ratio¹			September 1, 2008		February 28, 2009		Period²

PSI Core Strength Fund
Based on actual fund return		2.00	%	$	1,000.00	$	841.00	$	9.13
Based on hypothetical 5% return		2.00	%		1,000.00		1,014.88		9.99
PSI Macro Trends Fund
Based on actual fund return		2.00	%		1,000.00		609.60		7.98
Based on hypothetical 5% return		2.00	%		1,000.00		1,014.88		9.99
PSI Total Return Fund
Based on actual fund return		2.00	%		1,000.00		867.80		9.26
Based on hypothetical 5% return		2.00	%		1,000.00		1,014.88		9.99


¹		Annualized
²		Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/period, then divided by 365.

Allocation of Portfolio Holdings

February 28, 2009 (Unaudited)


				Investment
	Cash*			Companies		Futures			Swaps			Total

PSI Core Strength Fund		62	%		38%		—			—			100	%
PSI Macro Trends Fund		38	%		67%		(5	%)		0	%**		100	%
PSI Total Return Fund		37	%		63%		0	%**		0	%**		100	%


*		Cash, cash equivalents and other assets less liabilities.
**		Percentage is less than 0.5%.

DIREXION SEMI-ANNUAL REPORT 10

PSI Core Strength Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

INVESTMENT COMPANIES - 37.5%
	19,200	DIAMONDS Trust Series 1	$	1,357,632
	23,100	Energy Select Sector SPDR		951,027
	5,600	iShares Dow Jones U.S. Basic Materials Sector Index Fund		207,760
	11,300	iShares Dow Jones U.S. Telecommunications Sector Index Fund		182,382
	23,100	iShares MSCI Japan Index Fund		178,332
	7,200	iShares S&P Europe 350 Index Fund		179,568
	10,800	Market Vectors Gold Miners		360,288
	7,400	PowerShares DB US Dollar Index Bearish Fund		180,634
	10,800	ProShares Short Russell 2000		871,884
	10,000	ProShares Short S&P500		859,500
	10,300	Semiconductor HOLDRS Trust		176,542
	14,400	SPDR S&P Metals and Mining		338,400
	25,000	Utilities Select Sector SPDR Fund		635,500

		TOTAL INVESTMENT COMPANIES (Cost $6,543,521)	$	6,479,449

SHORT TERM INVESTMENTS - 57.4%
MONEY MARKET FUNDS - 57.4%
	2,484,269	AIM STIT-Treasury Portfolio		2,484,269
	2,484,269	Fidelity Institutional Government Portfolio		2,484,269
	2,484,269	Goldman Sachs Financial Square Government Fund		2,484,269
	2,484,269	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		2,484,269

		TOTAL SHORT TERM INVESTMENTS (Cost $9,937,076)	$	9,937,076

		TOTAL INVESTMENTS (Cost $16,480,597) - 94.9%	$	16,416,525
		Other Assets in Excess of Liabilities - 5.1%		878,511

		TOTAL NET ASSETS - 100.00%	$	17,295,036

Percentages are stated as a percent of net assets.

The accompanying notes are an integral part of these financial statements.

11 DIREXION SEMI-ANNUAL REPORT

PSI Macro Trends Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

INVESTMENT COMPANIES - 66.8%
	15,700	iShares iBoxx $ High Yield Corporate Bond Fund	$	1,055,825
	11,300	iShares Lehman Treasury Inflation Protected Securities Fund		1,096,326
	71,900	iShares MSCI EAFE Index Fund		2,493,492
	75,700	iShares MSCI Emerging Markets Index Fund		1,607,111
	16,300	iShares Russell 1000 Growth Index Fund		529,587
	13,900	iShares Russell 1000 Value Index Fund		528,478
	20,800	iShares Russell 2000 Index Fund		813,072
	15,800	iShares Russell Midcap Growth Index		437,818
	17,800	iShares Russell Midcap Value Index Fund		396,228
	8,700	Midcap SPDR Trust		714,357
	102,300	PowerShares DB Commodity Index Tracking Fund		1,954,953

		TOTAL INVESTMENT COMPANIES (Cost $13,963,558)	$	11,627,247

SHORT TERM INVESTMENTS - 29.9%
MONEY MARKET FUNDS - 29.9%
	1,302,554	AIM STIT-Treasury Portfolio		1,302,554
	1,302,554	Fidelity Institutional Government Portfolio		1,302,554
	1,302,554	First American Government Obligations Fund		1,302,554
	1,302,553	Goldman Sachs Financial Square Government Fund		1,302,553

		TOTAL SHORT TERM INVESTMENTS (Cost $5,210,215)	$	5,210,215

		TOTAL INVESTMENTS (Cost $19,173,773) - 96.7%	$	16,837,462
		Other Assets in Excess of Liabilities - 3.3%		578,160

		TOTAL NET ASSETS - 100.00%	$	17,415,622

Percentages are stated as a percent of net assets.

PSI Macro Trends Fund

Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Depreciation

	7,400	S&P 500 Index eMini Futures Expiring March 2009 (Underlying Face Amount at Market Value $5,435,300)	$	(916,962	)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 12

PSI Total Return Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

INVESTMENT COMPANIES - 63.7%
	68,150	iShares Barclays 1-3 Year Treasury Bond	$	5,726,645
	56,750	iShares Barclays Aggregate Bond Fund		5,720,967
	12,350	iShares Barclays TIPS Bond Fund		1,198,197
	15,200	ProShares UltraShort 20+ Year Treasury		732,184
	15,100	SPDR S&P 500		1,116,343

		TOTAL INVESTMENT COMPANIES (Cost $14,625,261)	$	14,494,336

SHORT TERM INVESTMENTS - 35.2%
MONEY MARKET FUNDS - 35.2%
	1,572,606	AIM STIT-Treasury Portfolio		1,572,606
	1,572,606	Fidelity Institutional Government Portfolio		1,572,606
	1,572,606	First American Government Obligations Fund		1,572,606
	1,572,607	Goldman Sachs Financial Square Government Fund		1,572,607
	1,714,497	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		1,714,497

		TOTAL SHORT TERM INVESTMENTS (Cost $8,004,922)	$	8,004,922

		TOTAL INVESTMENTS (Cost $22,630,183) - 98.9%	$	22,499,258
		Other Assets in Excess of Liabilities - 1.1%		245,799

		TOTAL NET ASSETS - 100.00%	$	22,745,057

Percentages are stated as a percent of net assets.

PSI Total Return Fund

Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
			Appreciation
Contracts			(Depreciation)

	1	FTSE 100 9 Month Variance Futures Expiring March 2009 (Underlying Face Amount at Market Value $63,890)	$	(2,773	)
	3	Dollar Index Futures Expiring March 2009 (Underlying Face Amount at Market Value $264,780)		440
	13	S&P 500 Index eMini Futures Expiring March 2009 (Underlying Face Amount at Market Value $477,425)		(81,092	)
	1	US 5 Year Note Future Expiring June 2009 (Underlying Face Amount at Market Value $116,680)		91
	1	New Zealand Dollar Future Expiring March 2009 (Underlying Face Amount at Market Value $50,100)		(4,358	)
	1	US 10 Year Note Future Expiring June 2009 (Underlying Face Amount at Market Value $120,141)		90

			$	(87,602	)

PSI Total Return Fund

Short Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
			Appreciation
Contracts			(Depreciation)

	1	Japanese Yen Future Expiring March 2009 (Underlying Face Amount at Market Value $128,100)	$	8,409
	1	Swiss Franc Future Expiring March 2009 (Underlying Face Amount at Market Value $106,850)		(1,516	)

			$	6,893

The accompanying notes are an integral part of these financial statements.

13 DIREXION SEMI-ANNUAL REPORT

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


	PSI Core			PSI Macro			PSI Total
	Strength Fund			Trends Fund			Return Fund

Assets:
Investments, at market value (Note 2)	$	16,416,525		$	16,837,462		$	22,499,258
Cash		138			—			—
Receivable for Fund shares sold		45,729			27,630			12,147
Receivable for investments sold		3,106,441			—			1,115,589
Deposit at broker for swaps		—			—			102,625
Deposit at broker for futures		—			732,600			—
Dividends and interest receivable		5,381			7,740			4,159
Other assets		10,723			11,162			17,546

Total Assets		19,584,937			17,616,594			23,751,324

Liabilities:
Payable for Fund shares redeemed		899			839			7
Payable for investments purchased		2,233,716			—			877,883
Unrealized depreciation on swaps		—			—			21,384
Variation margin payable		—			129,499			6,496
Accrued advisory expense		18,877			18,984			28,138
Accrued distribution expense		—			10,484			25,385
Accrued expenses and other liabilities		36,409			41,166			46,974

Total Liabilities		2,289,901			200,972			1,006,267

Net Assets	$	17,295,036		$	17,415,622		$	22,745,057

Net Assets Consist Of:
Capital stock	$	22,228,725		$	38,398,402		$	28,297,904
Accumulated undistributed net investment income (loss)		(27,957	)		(39,276	)		(150,594	)
Accumulated undistributed net realized gain (loss)		(4,841,660	)		(17,690,231	)		(5,169,235	)
Net unrealized appreciation (depreciation) on:
Investments		(64,072	)		(2,336,311	)		(130,925	)
Futures		—			(916,962	)		(80,709	)
Swaps		—			—			(21,384	)

Total Net Assets	$	17,295,036		$	17,415,622		$	22,745,057

Calculation of Net Asset Value Per Share - Investor Class:
Net assets	$	17,295,036		$	17,415,622		$	22,745,057
Shares outstanding (unlimited shares of beneficial interest authorized, no par value)		1,179,657			1,777,832			1,322,625
Net asset value, redemption price and offering price per share	$	14.66		$	9.80		$	17.20

Cost of Investments	$	16,480,597		$	19,173,773		$	22,630,183

The accompanying notes are an integral part of these financial statements.

15 DIREXION SEMI-ANNUAL REPORT

Statements of Operations

Six Month Ended February 28, 2009 (Unaudited)


	PSI Core			PSI Macro			PSI Total
	Strength Fund			Trends Fund			Return Fund

Investment income:
Dividend income (net of foreign withholding tax of $79, $- and $38, respectively)	$	117,507		$	284,653		$	316,924
Interest income		66,744			70,687			87,458

Total investment income		184,251			355,340			404,382

Expenses:
Investment advisory fees		99,063			148,358			154,909
Distribution expenses		21,535			32,252			33,676
Shareholder servicing fees		12,922			19,351			20,205
Administration fees		3,117			4,611			4,831
Fund accounting fees		8,291			12,638			11,820
Custody fees		1,623			1,810			2,415
Transfer agent fees		9,852			16,894			16,465
Federal and state registration		7,120			7,472			8,871
Professional fees		13,083			20,107			18,864
Reports to shareholders		—			254			—
Trustees’ fees and expenses		1,215			1,487			1,506
Other		2,086			4,668			3,997

Total expenses before reimbursement		179,907			269,902			277,559
Less: Waiver of expenses and reimbursement from Adviser		(7,593	)		(11,839	)		(7,603	)

Total expenses		172,314			258,063			269,956

Net investment income (loss)		11,937			97,277			134,426

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(3,104,931	)		(9,032,378	)		(1,431,717	)
Futures		—			(3,807,286	)		(1,234,470	)
Swaps		—			(228,498	)		(1,631,789	)

		(3,104,931	)		(13,068,162	)		(4,297,976	)

Capital gain distributions from regulated investment companies		200			—			—

Change in unrealized appreciation (depreciation) on:
Investments		(61,094	)		551,077			(199,705	)
Futures		—			(775,264	)		(101,689	)
Swaps		—			60,084			191,687

		(61,094	)		(164,103	)		(109,707	)

Net realized and unrealized gain (loss) on investments		(3,165,825	)		(13,232,265	)		(4,407,683	)

Net increase (decrease) in net assets resulting from operations	$	(3,153,888	)	$	(13,134,988	)	$	(4,273,257	)

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 16

Statements of Changes in Net Assets


	PSI Core Strength Fund						PSI Macro Trends Fund						PSI Total Return Fund
	Six Months Ended						Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008

Operations:
Net investment income (loss)	$	11,937		$	92,300		$	97,277		$	463,477		$	134,426		$	658,149
Net realized gain (loss) on investments		(3,104,931	)		(286,338	)		(13,068,162	)		(4,027,853	)		(4,297,976	)		30,561
Capital gain distributions from regulated investment companies		200			—			—			—			—			—
Change in unrealized appreciation (depreciation) on investments		(61,094	)		(421,716	)		(164,103	)		(1,414,174	)		(109,707	)		(200,433	)

Net increase (decrease) in net assets resulting from operations		(3,153,888	)		(615,754	)		(13,134,988	)		(4,978,550	)		(4,273,257	)		488,277

Distributions to shareholders:
Net investment income		(39,894	)		—			(357,346	)		(252,097	)		(285,020	)		(1,140,512	)
Net realized gains		—			(858,895	)		(24,533	)		(913,194	)		—			(607,914	)
Return of capital		—			(199,791	)		—			—			—			—

Total distributions		(39,894	)		(1,058,686	)		(381,879	)		(1,165,291	)		(285,020	)		(1,748,426	)

Capital share transactions:
Proceeds from shares sold		6,766,166			16,717,844			7,178,680			17,591,767			4,142,761			30,315,204
Proceeds from shares issued to holders in reinvestment of dividends		39,856			1,058,686			381,880			1,165,291			280,919			1,735,674
Cost of shares redeemed		(6,539,292	)		(20,508,466	)		(10,610,174	)		(19,700,616	)		(10,454,752	)		(27,909,038	)

Net increase (decrease) in net assets resulting from capital share transactions		266,730			(2,731,936	)		(3,049,614	)		(943,558	)		(6,031,072	)		4,141,840

Total increase (decrease) in net assets		(2,927,052	)		(4,406,376	)		(16,566,481	)		(7,087,399	)		(10,589,349	)		2,881,691

Net assets:
Beginning of year/period		20,222,088			24,628,464			33,982,103			41,069,502			33,334,406			30,452,715

End of year/period	$	17,295,036		$	20,222,088		$	17,415,622		$	33,982,103		$	22,745,057		$	33,334,406

Undistributed (Accumulated) net investment income (loss), end of year/period	$	(27,957	)	$	—		$	(39,276	)	$	220,793		$	(150,594	)	$	—


¹		Commencement of Operations.

The accompanying notes are an integral part of these financial statements.

17 DIREXION SEMI-ANNUAL REPORT

Financial Highlights


																										RATIOS TO AVERAGE NET ASSETS
																																		Net
						Net Realized			Net Increase																									Investment
	Net Asset		Net			and			(Decrease)			Dividends			Distributions						Net Asset					Net Assets,								Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net			from						Value,					End of								After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Realized			Total			End of		Total			Year/Period		Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)³			on Investments⁴			from Operations			Income			Capital Gains			Distributions			Year/Period		Return⁵			(,000)		Expenses¹			Expenses¹			Recoupment¹			Rate⁶
PSI Core Strength Fund
Six months ended February 28, 2009 (Unaudited)	$	17.48	$	0.01		$	(2.79	)	$	(2.78	)	$	(0.04	)	$	—		$	(0.04	)	$	14.66		(15.90	%)²	$	17,295		2.09	%		2.00	%		0.14	%		1,896	%²
Year ended August 31, 2008		20.11		0.08			(1.67	)		(1.59	)		(0.84	)		(0.20	)		(1.04	)		17.48		(8.44	%)		20,222		2.09	%		2.00	%		0.43	%		2,509	%
January 8, 2007⁷ to August 31, 2007		20.00		0.22			(0.11	)		0.11			—			—			—			20.11		0.55	%²		24,628		2.18	%		2.00	%		1.70	%		935	%²
PSI Macro Trends Fund
Six months ended February 28, 2009 (Unaudited)		16.33		0.05			(6.40	)		(6.35	)		(0.17	)		(0.01	)		(0.18	)		9.80		(39.04	%)²		17,416		2.09	%		2.00	%		0.75	%		339	%²
Year ended August 31, 2008		19.42		0.22			(2.72	)		(2.50	)		(0.13	)		(0.46	)		(0.59	)		16.33		(13.28	%)		33,982		2.03	%		2.00	%		1.20	%		304	%
January 8, 2007⁷ to August 31, 2007		20.00		(0.03	)		(0.55	)		(0.58	)		—			—			—			19.42		(2.90	%)²		41,070		2.03	%		2.00	%		(0.26	%)		926	%²
PSI Total Return Fund
Six months ended February 28, 2009 (Unaudited)		20.00		0.08			(2.69	)		(2.61	)		(0.19	)		—			(0.19	)		17.20		(13.22	%)²		22,745		2.06	%		2.00	%		1.00	%		196	%²
Year ended August 31, 2008		20.53		0.38			0.17			0.55			(0.67	)		(0.41	)		(1.08	)		20.00		2.66	%		33,334		2.01	%		2.00	%		1.84	%		90	%
January 8, 2007⁷ to August 31, 2007		20.00		0.33			0.20			0.53			—			—			—			20.53		2.65	%²		30,453		2.11	%		2.00	%		2.57	%		191	%²


¹		Annualized

²		Not annualized

³		Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period.

⁴		The amounts shown may not correlate with aggregate gains and losses of portfolio securities due to timing of subscriptions and redemptions of Fund shares.

⁵		All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes.

⁶		Portfolio turnover is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, and futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.

⁷		Commencement of operations.

DIREXION SEMI-ANNUAL REPORT 18

Expense Example

February 28, 2009 (Unaudited)

The Example is based on an investment of $1,000 invested at the beginning of the period and held the entire period September 1, 2008 — February 28, 2009).

Actual Expenses

Hypothetical Example for Comparison Purposes

19 DIREXION SEMI-ANNUAL REPORT

Expense Example Tables

February 28, 2009 (Unaudited)


				Beginning		Ending		Expenses
	Expense			Account Value		Account Value		Paid During
	Ratio¹			September 1, 2008		February 28, 2009		Period²

Spectrum Select Alternative Fund
Based on actual fund return		2.60	%	$	1,000.00	$	918.50	$	12.37
Based on hypothetical 5% return		2.60	%		1,000.00		1,011.90		12.97
Spectrum Global Perspective Fund
Based on actual fund return		2.48	%		1,000.00		772.80		10.90
Based on hypothetical 5% return		2.48	%		1,000.00		1,012.50		12.37
Spectrum Equity Opportunity Fund
Based on actual fund return		2.75	%		1,000.00		796.20		12.25
Based on hypothetical 5% return		2.75	%		1,000.00		1,011.16		13.71


¹		Annualized
²		Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/period, then divided by 365.

Allocation of Portfolio Holdings

February 28, 2009 (Unaudited)


							Investment
	Cash*			Common Stock			Companies			Futures			Total

Spectrum Select Alternative Fund		57	%		—			43	%		0	%**		100	%
Spectrum Global Perspective Fund		83	%		—			17	%		0	%**		100	%
Spectrum Equity Opportunity Fund		76	%		0	%**		23	%		1	%		100	%


*		Cash, cash equivalents and other assets less liabilities.
**		Percentage is less than 0.5%.

DIREXION SEMI-ANNUAL REPORT 20

Spectrum Select Alternative Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

INVESTMENT COMPANIES - 43.4%
	395,387	American High-Income Trust	$	3,064,251
	48,115	Caldwell & Orkin Market Opportunity Fund		987,797
	106,943	DWS Disciplined Market Neutral Fund		1,007,404
	93,695	Highbridge Statistical Market Neutral Fund		1,524,422
	28,762	Northeast Investors Trust		106,420
	76,923	TFS Market Neutral Fund		997,688

		TOTAL INVESTMENT COMPANIES (Cost $7,721,088)	$	7,687,982

SHORT TERM INVESTMENTS - 55.7%
MONEY MARKET FUNDS - 55.7%
	1,972,745	AIM STIT-Treasury Portfolio		1,972,745
	1,972,745	Fidelity Institutional Government Portfolio		1,972,745
	1,972,745	First American Government Obligations Fund		1,972,745
	1,967,424	Goldman Sachs Financial Square Government Fund		1,967,424
	1,972,745	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		1,972,745

		TOTAL SHORT TERM INVESTMENTS (Cost $9,858,404)	$	9,858,404

		TOTAL INVESTMENTS (Cost $17,579,492) - 99.1%	$	17,546,386
		Other Assets in Excess of Liabilities - 0.9%		155,901

		TOTAL NET ASSETS - 100.0%	$	17,702,287

Percentages are stated as a percent of net assets.

Spectrum Select Alternative Fund

Short Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Appreciation

	47	S&P 500 E-mini Futures Contracts
		Expiring March 2009 (Underlying Face Amount at Market Value $1,726,075)	$	51,735

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 21

Spectrum Global Perspective Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

INVESTMENT COMPANIES - 17.2%
	971,357	American High-Income Trust	$	7,528,020
	47,733	Northeast Investors Trust		176,611
	25,599	TFS Market Neutral Fund		332,025

		TOTAL INVESTMENT COMPANIES (Cost $8,353,707)	$	8,036,656

SHORT TERM INVESTMENTS - 82.3%
MONEY MARKET FUNDS - 82.3%
	7,695,258	AIM STIT-Treasury Portfolio		7,695,258
	7,695,258	Fidelity Institutional Government Portfolio		7,695,258
	7,695,258	First American Government Obligations Fund		7,695,258
	7,695,259	Goldman Sachs Financial Square Government Fund		7,695,259
	7,695,258	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		7,695,258

		TOTAL SHORT TERM INVESTMENTS (Cost $38,476,291)	$	38,476,291

		TOTAL INVESTMENTS (Cost $46,829,998) - 99.5%	$	46,512,947
		Other Assets in Excess of Liabilities - 0.5%		256,676

		TOTAL NET ASSETS - 100.0%	$	46,769,623

Percentages are stated as a percent of net assets.

Spectrum Global Perspective Fund

Short Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Appreciation

	99	S&P 500 E-mini Futures
		Expiring March 2009 (Underlying Face Amount at Market Value $2,240,225)	$	160,310

The accompanying notes are an integral part of these financial statements.

22 DIREXION SEMI-ANNUAL REPORT

Spectrum Equity Opportunity Fund

Schedule of Investments

February 28, 2009 (Unaudited)


Shares			Value

COMMON STOCKS - 0.0%
METALS & MINING - 0.0%
	1	Goldcorp Inc.	$	29

OIL & GAS - 0.0%
	1	Kinder Morgan Management LLC		44

		TOTAL COMMON STOCKS (Cost $74)	$	73

INVESTMENT COMPANIES — 23.5%
	327,376	American High-Income Trust		2,537,162
	4,666	Janus Advisor Long/Short Fund		42,461
	6,120	Northeast Investors Trust		22,642

		TOTAL INVESTMENT COMPANIES (Cost $2,556,810)	$	2,602,265

SHORT TERM INVESTMENTS — 75.3%
MONEY MARKET FUNDS — 75.3%
	1,669,670	AIM STIT-Treasury Portfolio		1,669,670
	1,669,670	Fidelity Institutional Government Portfolio		1,669,670
	1,669,670	First American Government Obligations Fund		1,669,670
	1,669,669	Goldman Sachs Financial Square Government Fund		1,669,669
	1,669,669	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		1,669,669

		TOTAL SHORT TERM INVESTMENTS (Cost $8,348,348)	$	8,348,348

		TOTAL INVESTMENTS (Cost $10,905,232) - 98.8%	$	10,950,686
		Other Assets in Excess of Liabilities - 1.2%		129,597

		TOTAL NET ASSETS - 100.0%	$	11,080,283

Percentages are stated as a percent of net assets.

Spectrum Equity Opportunity Fund

Short Futures Contracts

February 28, 2009 (Unaudited)


			Unrealized
Contracts			Appreciation

	28	S&P 500 E-mini Futures
		Expiring March 2009 (Underlying Face Amount at Market Value $514,150)	$	56,595

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 23

Statements of Assets and Liabilities

February 28, 2009 (Unaudited)


	Spectrum Select			Spectrum Global			Spectrum Equity
	Alternative Fund			Perspective Fund			Opportunity Fund

Assets:
Investments, at market value (Note 2)	$	17,546,386		$	46,512,947		$	10,950,686
Deposit at broker for futures		232,650			490,050			138,600
Variation margin receivable		41,125			88,432			25,011
Dividends and interest receivable		25,303			59,786			21,967
Other assets		7,380			10,711			10,363

Total Assets		17,852,844			47,161,926			11,146,627

Liabilities:
Payable for Fund shares purchased		78,117			238,326			—
Accrued advisory expense		14,018			37,686			10,861
Accrued distribution expense		11,024			33,691			11,093
Accrued expenses and other liabilities		47,398			82,600			44,390

Total Liabilities		150,557			392,303			66,344

Net Assets	$	17,702,287		$	46,769,623		$	11,080,283

Net Assets Consist Of:
Capital stock	$	23,243,732		$	81,866,537		$	17,401,452
Accumulated undistributed net investment income (loss)		112,774			(96,912	)		(26,296	)
Accumulated undistributed net realized gain (loss)		(5,672,848	)		(34,843,261	)		(6,396,922	)
Net unrealized appreciation (depreciation) on:
Investments		(33,106	)		(317,051	)		45,454
Futures		51,735			160,310			56,595

Total Net Assets	$	17,702,287		$	46,769,623		$	11,080,283

Calculation of Net Asset Value Per Share:
Net assets	$	17,702,287		$	46,769,623		$	11,080,283
Shares outstanding (unlimited shares of beneficial interest authorized, no par value)		1,059,414			3,239,977			777,563
Net asset value, redemption price and offering price per share	$	16.71		$	14.44		$	14.25

Cost of Investments	$	17,579,492		$	46,829,998		$	10,905,232

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 24

Statements of Operations

Six Months Ended February 28, 2009 (Unaudited)


	Spectrum Select			Spectrum Global			Spectrum Equity
	Alternative Fund			Perspective Fund			Opportunity Fund

Investment income:
Dividend income (net of foreign withholding tax of $—, $—, $111, respectively)	$	421,270		$	338,713		$	92,126
Interest income		65,489			298,355			64,268

Total investment income		486,759			637,068			156,394

Expenses:
Investment advisory fees		101,638			296,444			65,670
Distribution expenses		101,638			296,444			65,670
Administration fees		3,636			10,622			2,349
Fund accounting fees		9,592			26,669			6,482
Custody fees		34			9,336			776
Transfer agent fees		12,989			37,989			8,438
Federal and state registration		6,203			6,567			4,757
Professional fees		27,417			42,162			26,058
Reports to shareholders		—			—			453
Trustees’ fees and expenses		1,338			2,650			1,113
Other		78			5,074			2,141

Total expenses before reimbursement		264,563			733,957			183,907
Less: Reimbursement of expenses from Adviser		—			—			(3,098	)

Total expenses		264,563			733,957			180,809

Net investment income (loss)		222,196			(96,889	)		(24,415	)

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(1,718,063	)		(12,614,352	)		(1,935,261	)
Futures		(59,936	)		(1,133,926	)		(1,278,858	)
Swaps		(343,871	)		(2,199,824	)		(62,564	)

		(2,121,870	)		(15,948,102	)		(3,276,683	)

Capital gain distributions from regulated investment companies		9,658			—			—

Change in unrealized appreciation (depreciation) on:
Investments		(5,049	)		(389,387	)		161,128
Futures		51,735			160,310			34,964

		46,686			(229,077	)		196,092

Net realized and unrealized gain (loss) on investments		(2,065,526	)		(16,177,179	)		(3,080,591	)

Net increase (decrease) in net assets resulting from operations	$	(1,843,330	)	$	(16,274,068	)	$	(3,105,006	)

The accompanying notes are an integral part of these financial statements.

25 DIREXION SEMI-ANNUAL REPORT

Statements of Changes in Net Assets


	Spectrum Select						Spectrum Global						Spectrum Equity
	Alternative Fund						Perspective Fund						Opportunity Fund
	Six Months Ended						Six Months Ended						Six Months Ended
	February 28, 2009			Year Ended			February 28, 2009			Year Ended			February 28, 2009			Year Ended
	(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008			(Unaudited)			August 31, 2008

Operations:
Net investment income (loss)	$	222,196		$	596,028		$	(96,889	)	$	(762,345	)	$	(24,415	)	$	(65,320	)
Net realized gain (loss) on investments		(2,121,870	)		(3,138,786	)		(15,948,102	)		(5,319,917	)		(3,276,683	)		(1,201,572	)
Capital gain distributions from regulated investment companies		9,658			120,927			—			4,110			—			4,266
Change in unrealized appreciation (depreciation) on investments		46,686			115,783			(229,077	)		(2,055,423	)		196,092			(447,824	)

Net increase (decrease) in net assets resulting from operations		(1,843,330	)		(2,306,048	)		(16,274,068	)		(8,133,575	)		(3,105,006	)		(1,710,450	)

Distributions to shareholders:
Net investment income		(153,512	)		(798,522	)		(7,177	)		(3,592,655	)		(1,881	)		(755,550	)
Net realized gains		—			(14,167	)		(5,694	)		(15,267,529	)		—			(1,483,186	)

Total distributions		(153,512	)		(812,689	)		(12,871	)		(18,860,184	)		(1,881	)		(2,238,736	)

Capital share transactions:
Proceeds from shares sold		385,731			7,989,068			736,191			8,266,915			450,992			1,142,108
Proceeds from shares issued to holders in reinvestment of dividends		152,838			805,878			12,841			18,836,313			1,864			2,238,737
Cost of shares redeemed		(5,829,215	)		(21,443,226	)		(17,541,342	)		(31,024,292	)		(2,647,152	)		(15,908,109	)

Net increase (decrease) in net assets resulting from capital share transactions		(5,290,646	)		(12,648,280	)		(16,792,310	)		(3,921,064	)		(2,194,296	)		(12,527,264	)

Total increase (decrease) in net assets		(7,287,488	)		(15,767,017	)		(33,079,249	)		(30,914,823	)		(5,301,183	)		(16,476,450	)

Net assets:
Beginning of year/period		24,989,775			40,756,792			79,848,872			110,763,695			16,381,466			32,857,916

End of year/period	$	17,702,287		$	24,989,775		$	46,769,623		$	79,848,872		$	11,080,283		$	16,381,466

Undistributed (Accumulated) net investment income (loss), end of year/period	$	112,774		$	44,090		$	(96,912	)	$	7,154			(26,296	)	$	—

The accompanying notes are an integral part of these financial statements.

DIREXION SEMI-ANNUAL REPORT 26

Financial Highlights


																												RATIOS TO AVERAGE NET ASSETS
																																								Net
						Net Realized			Net Increase																															Investment
	Net Asset		Net			and			(Decrease)			Dividends			Distributions						Net Asset					Net Assets,														Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net			from						Value,					End of		Including Short Dividends						Excluding Short Dividends						After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Realized			Total			End of		Total			Year/Period		Total			Net			Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)³			on Investments⁴			from Operations			Income			Capital Gains			Distributions			Year/Period		Return⁵			(,000)		Expenses¹			Expenses¹			Expenses¹			Expenses¹			Recoupment¹			Rate⁶
Spectrum Select Alternative Fund
Six months ended February 28, 2009 (Unaudited)	$	18.33	$	0.19		$	(1.68	)	$	(1.49	)	$	(0.13	)	$	—		$	(0.13	)	$	16.71		(8.15	%)²	$	17,702		—			—			2.60	%		2.60	%		2.18	%		212	%²
Year ended August 31, 2008		20.02		0.33			(1.58	)		(1.25	)		(0.43	)		(0.01	)		(0.44	)		18.33		(6.38	%)		24,990		—			—			2.57	%		2.57	%		1.68	%		127	%
Year ended August 31, 2007		19.54		0.57			0.76			1.33			(0.85	)		—			(0.85	)		20.02		6.93	%		40,757		—			—			2.44	%		2.44	%		2.82	%		260	%
Year ended August 31, 2006		19.96		0.50			0.34			0.84			(1.26	)		—			(1.26	)		19.54		4.53	%		22,725		—			—			2.54	%		2.54	%		2.57	%		898	%
September 1, 2004¹⁰ to August 31, 2005		20.00		0.48			(0.26	)		0.22			(0.26	)		—			(0.26	)		19.96		1.09	%²		33,414		—			—			2.38	%		2.38	%		2.44	%		759	%²
Spectrum Global Perspective Fund
Six months ended February 28, 2009 (Unaudited)		18.69		(0.03	)		(4.22	)		(4.25	)		—⁹			—⁹			—			14.44		(22.72	%)²		46,770		—			—			2.48	%		2.48	%		(0.33	%)		1,412	%²
Year ended August 31, 2008		24.73		(0.16	)		(1.48	)		(1.64	)		(0.84	)		(3.56	)		(4.40	)		18.69		(8.96	%)		79,849		—			—			2.38	%		2.38	%		(0.75	%)		2,073	%
Year ended August 31, 2007		25.93		(0.03	)		2.86			2.83			(0.34	)		(3.69	)		(4.03	)		24.73		11.32	%		110,764		—			—			2.24	%		2.24	%		(0.12	%)		1,259	%
Year ended August 31, 2006		23.46		0.06			4.49			4.55			—			(2.08	)		(2.08	)		25.93		20.43	%		115,420		—			—			2.23	%		2.23	%		0.25	%		1,693	%
September 27, 2004¹⁰ to August 31, 2005		20.00		(0.03	)⁷		3.80			3.77			(0.26	)		(0.05	)		(0.31	)		23.46		18.88	%²		71,085		2.39	%		2.39	%		2.38	%		2.38	%		(0.16	%)⁸		1,152	%²
Spectrum Equity Opportunity Fund
Six months ended February 28, 2009 (Unaudited)		17.90		(0.03	)		(3.62	)		(3.65	)		—⁹			—			—			14.25		(20.38	%)²		11,080		—			—			2.80	%		2.75	%		(0.37	%)		982	%²
Year ended August 31, 2008		21.24		(0.05	)		(1.51	)		(1.56	)		(0.60	)		(1.18	)		(1.78	)		17.90		(8.28	%)		16,381		—			—			2.63	%		2.63	%		(0.27	%)		1,617	%
Year ended August 31, 2007		21.43		(0.03	)		1.48			1.45			(0.31	)		(1.33	)		(1.64	)		21.24		6.91	%		32,858		—			—			2.40	%		2.40	%		(0.14	%)		1,347	%
Year ended August 31, 2006		21.85		0.03			0.77			0.80			—			(1.22	)		(1.22	)		21.43		3.85	%		48,875		—			—			2.31	%		2.31	%		0.15	%		2,310	%
October 11, 2004¹⁰ to August 31, 2005		20.00		(0.16	)		2.01			1.85			—			—			—			21.85		9.25	%²		45,689		—			—			2.50	%		2.50	%		(0.88	%)		1,334	%²


¹		Annualized
²		Not annualized
³		Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period.
⁴		The amounts shown may not correlate with aggregate gains and losses of portfolio securities due to timing of subscriptions and redemptions of Fund shares.
⁵		All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes.
⁶		Portfolio turnover is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, and futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
⁷		Net investment income (loss) before dividends on short positions for the period ended August 31, 2005 was $(0.04).
⁸		Net investment income (loss) ratio included dividends on short positions. The ratio excluding dividends on short positions for the period ended August 31, 2005 was (0.15%).
⁹		Amount is less than $0.01 per share.
¹⁰		Commencement of operations.

27 DIREXION SEMI-ANNUAL REPORT

Direxion Funds

NOTES TO THE FINANCIAL STATEMENTS

February 28, 2009


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 40 series of which 7 are included in this report, HCM Freedom Fund, PSI Core Strength Fund, PSI Macro Trends Fund, PSI Total Return Fund, Spectrum Select Alternative Fund (formerly Spectrum High Yield Plus Fund), Spectrum Global Perspective Fund and Spectrum Equity Opportunity Fund (each a “Fund” and collectively, the “Funds”). Each Fund is a “non-diversified” series of the Trust pursuant to the 1940 Act. The PSI Core Strength Fund, the PSI Macro Trends Fund and the PSI Total Return Fund commenced operations on January 8, 2007.

The objective of the HCM Freedom Fund is to seek long-term capital appreciation with lower volatility than the overall market by investing in equity securities of domestic issuers, equity securities of foreign issuers, whether directly of indirectly through sponsored or unsponsored American Depository Receipts (ADRs), exchange traded funds (ETFs), other investment companies and foreign currencies. The objective of the PSI Core Strength Fund is to seek returns equal to or better than the return of the broad U.S. stock market as measured by the S&P 500^® Fund over a full market cycle. The PSI Macro Trends Fund seeks to implement short or long strategies to achieve capital appreciation. The PSI Total Return Fund seeks income plus capital appreciation. The objective of the Spectrum Select Alternative Fund is to seek income and capital appreciation on a total return basis by investing primarily in high yield fixed-income securities, either directly or indirectly through exchange-traded funds (ETFs), other investment companies and derivative instruments. The Spectrum Global Perspective Fund seeks income and capital appreciation by investing in equity securities of foreign issuers either directly or indirectly through American Depository Receipts (ADRs), ETFs, foreign currencies, other investment companies and derivative instruments. The Spectrum Equity Opportunity Fund seeks income and capital appreciation by investing either directly in securities of domestic and foreign issuers or indirectly through ADRs, ETFs, other investment companies and derivative instruments.


2.	SIGNIFICANT ACCOUNTING POLICIES

DIREXION SEMI-ANNUAL REPORT 28

the judgment of Rafferty Asset Managements, LLC (the “Adviser”) does not represent fair value, or the Fund or Adviser believes the market price is stale, will in each case be fair valued as determined by the Adviser under the supervision of the Board of Trustees.

The Spectrum Select Alternative Fund may enter into credit default swaps. Credit default swaps involve one party (referred to as the buyer of protection) making a stream of payments to another party (referred to as the seller of protection) in exchange for the right to receive a specified return in the event a credit event, typically a default by a corporate issuer on its debt obligation, occurs. As a seller of protection on credit default swaps, a Fund will generally receive from the buyer of protection a fixed rate of interest on the notional amount of the swap contract throughout the term of the swap provided that there is no credit event. As the seller of protection, a Fund would effectively add leverage to its portfolio because, in addition to its total assets, a Fund would be subject to investment exposure on the notional amount of the swap.

29 DIREXION SEMI-ANNUAL REPORT

equal to the notional amount of the swap and deliver the reference obligation or underlying securities comprising the reference index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising the reference index. Recovery values are assumed by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value.

DIREXION SEMI-ANNUAL REPORT 30

The Funds designate all cash, cash equivalents and liquid securities as collateral for written options, futures contracts and short positions.

g) Risks of Investing in Foreign Securities – The Spectrum Global Perspective and the Spectrum Equity Opportunity Funds may invest in foreign securities. Investments in foreign securities involve greater risks than investing in domestic securities. As a result, the 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 not be as strict as they are 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 potential buyers for such securities and delays and disruption in securities settlement procedures.

h) Forward Currency Contracts – The Spectrum Global Perspective and Spectrum Equity Opportunity Funds may enter into forward currency exchange contracts obligating the Funds to deliver and receive currency at a specified future date. Forward contracts are valued daily, and unrealized appreciation and depreciation is recorded daily as the difference between the contract exchange rate and the closing forward rate applied to the face amount of the contract. A realized gain or loss is recorded at the time the forward contract is closed.

i) Foreign Currency Translations – The books and records of the Funds are maintained in U.S. dollars. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Funds do not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in market prices of securities. However, for federal income tax purposes, the Fund does isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gain or loss from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences.

j) Security Transactions – Investment transactions are recorded on the trade date. The Funds determine the gain or loss realized from the investment transactions by comparing the identified cost, which is the same basis used for federal income tax purposes, with the net sales proceeds.

k) Federal Income Taxes – Each Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code 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.

l) 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. The Funds are charged for those expenses that are directly attributable to each series, such as Advisory fees and registration costs. Expenses that are not directly attributable to a series are generally allocated among the Trust’s series in proportion to their respective net assets.

m) Distributions to Shareholders – Each Fund generally 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 U.S. generally accepted accounting principals. Distributions to shareholders are recorded on the ex-dividend date.

31 DIREXION SEMI-ANNUAL REPORT

The tax character of distributions for the Funds during the six months ended February 28, 2009 and the year ended August 31, 2008 were as follows:


	HCM Freedom Fund
	Six Months Ended		Year Ended
	February 28, 2009		August 31,
	(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	—	$	3,487,566
Long-Term Capital Gains		—		—
Return of Capital		—		—

Total Distributions paid	$	—	$	3,487,566


	PSI Core Strength Fund				PSI Macro Trends Fund
	Six Months Ended		Year Ended		Six Months Ended		Year Ended
	February 28, 2009		August 31,		February 28, 2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	39,894	$	858,895	$	380,790	$	1,125,328
Long-Term Capital Gains		—		—		1,089		39,963
Return of Capital		—		199,791		—		—

Total Distributions paid	$	39,894	$	1,058,686	$	381,879	$	1,165,291


					Spectrum Select
	PSI Total Return Fund				Alternative Fund
	Six Months Ended		Year Ended		Six Months Ended		Year Ended
	February 28, 2009		August 31,		February 28, 2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	285,020	$	1,517,114	$	153,512	$	812,689
Long-Term Capital Gains		—		231,312		—		—
Return of Capital		—		—		—		—

Total Distributions paid	$	285,020	$	1,748,426	$	153,512	$	812,689


	Spectrum Global				Spectrum Equity
	Perspective Fund				Opportunity Fund
	Six Months Ended		Year Ended		Six Months Ended		Year Ended
	February 28, 2009		August 31,		February 28, 2009		August 31,
	(Unaudited)		2008		(Unaudited)		2008

Distributions paid from:
Ordinary Income	$	7,177	$	18,598,688	$	1,881	$	2,236,452
Long-Term Capital Gains		5,694		261,496		—		2,284
Return of Capital		—		—		—		—

Total Distributions paid	$	12,871	$	18,860,184	$	1,881	$	2,238,736

DIREXION SEMI-ANNUAL REPORT 32

As of February 28, 2009, the components of distributable earnings on a tax basis were as follows:


	HCM Freedom			PSI Core			PSI Macro			PSI Total
	Fund			Strength Fund			Trend Fund			Return Fund

Net unrealized appreciation/depreciation	$	—		$	(45,220	)	$	(3,393,431	)	$	(193,204	)

Undistributed ordinary income		1,039,382			—			243,980			—
Undistributed long-term capital gain		—			—			1,068			—

Total distributable earnings		1,039,382			—			245,048			—
Other acculumated losses		(21,027,986	)		(1,694,687	)		(4,317,530	)		(801,366	)

Total acculumated losses	$	(19,988,604	)	$	(1,739,907	)	$	(7,465,913	)	$	(994,570	)


	Spectrum			Spectrum Global			Spectrum Equity
	Alternative Fund			Perspective Fund			Opportunity Fund

Net unrealized appreciation/depreciation	$	(65,249	)	$	(12,462,004	)	$	(232,563	)

Undistributed ordinary income		44,090			12,567			—
Undistributed long-term capital gain		—			264			—

Total distributable earnings		44,090			12,831			—

Other acculumated losses		(3,523,444	)		(6,360,802	)		(2,981,719	)

Total acculumated losses	$	(3,544,603	)	$	(18,809,975	)	$	(3,214,282	)

The difference between book cost of investments and tax cost of investments is attributable primarily to the tax deferral of losses on wash sales.

The cost basis of investments for federal tax purposes as of February 28, 2009 was as follows:


	HCM Freedom		PSI Core			PSI Macro			PSI Total
	Fund		Strength Fund			Trend Fund			Return Fund

Tax cost of investments	$	23,426,742	$	16,522,839		$	19,679,816		$	22,892,167
Gross unrealized appreciation		—		237,230			—			64,142
Gross unrealized depreciation		—		(343,544	)		(2,842,354	)		(457,051	)

Net unrealized appreciation/(depreciation)	$	—	$	(106,314	)	$	(2,842,354	)	$	(392,909	)


	Spectrum Select			Spectrum Global			Spectrum Equity
	Alternative Fund			Perspective Fund			Opportunity Fund

Tax cost of investments	$	17,616,684		$	59,364,338		$	11,022,121
Gross unrealized appreciation		147,607			211			62,916
Gross unrealized depreciation		(217,905	)		(12,851,602	)		(134,351	)

Net unrealized appreciation/(depreciation)	$	(70,298	)	$	(12,851,391	)	$	(71,435	)

33 DIREXION SEMI-ANNUAL REPORT

tax purposes to defer into their next fiscal year any net capital losses incurred between November 1st and the end of their fiscal year, August 31, 2008. At August 31, 2008, the following funds deferred, on a tax basis, post October losses of:


	Post October		Post October
	Loss Deferred		Currency Loss

HCM Freedom Fund	$	4,868,578	$	—
PSI Core Strength Fund		1,694,687		—
PSI Macro Trends Fund		4,257,446		—
PSI Total Return Fund		588,298		—
Spectrum Select Alternative Fund		3,523,444		—
Spectrum Global Perspective Fund		6,360,802		—
Spectrum Equity Opportunity Fund		2,981,719		—

At August 31, 2008, the following funds had capital loss carryforwards on a tax basis of:


	Expires
	8/31/2014		8/31/2015		8/31/2016		Total

HCM Freedom Fund	$	8,842,217	$	5,679,579	$	1,637,612	$	16,159,408
PSI Core Strength Fund		—		—		—		—
PSI Macro Trends Fund		—		—		—		—
PSI Total Return Fund		—		—		—		—
Spectrum Select Alternative Fund		—		—				—
Spectrum Global Perspective Fund		—		—		—		—
Spectrum Equity Opportunity Fund		—		—		—		—

To the extent the Funds realize future net capital gains; those gains will be offset by any unused capital loss carryover.

The Funds have reviewed all open tax years and concluded that the adoption of FIN 48 resulted in no effect to the Fund’s financial positions or results of operations. There is no tax liability resulting from uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year-end August 31, 2005, August 31, 2006, August 31, 2007 and August 31, 2008. 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 twelve months.

n) Credit Facility – U.S. Bank, N.A. has made available to the Funds a credit facility pursuant to a Line of Credit Agreement (“Line of Credit”) for meeting redemption requests. Borrowings under the Line of Credit are charged at prime rate less 1/2%. The Funds did not utilize the credit facility for the six months ended February 28, 2009.

o) 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 Fund’s 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.

p) 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.

DIREXION SEMI-ANNUAL REPORT 34


3.	CAPITAL SHARE TRANSACTIONS

Capital share transactions for the Funds during the six months ended February 28, 2009 and the year ended August 31, 2008 were as follows:


	HCM Freedom Fund
	Six Months Ended			Year Ended
	February 28, 2009			August 31,
	(Unaudited)			2008

Shares sold		10,410			85,182
Shares issued in reinvestment of distributions		—			217,097
Shares redeemed		(113,060	)		(204,007	)

Total net increase (decrease) from capital share transactions		(102,650	)		98,272


	PSI Core Strength Fund						PSI Macro Trends Fund
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	February 28, 2009			August 31,			February 28, 2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		440,089			920,127			563,334			968,409
Shares issued in reinvestment of distributions		2,617			54,403			33,646			61,688
Shares redeemed		(420,002	)		(1,042,322	)		(899,987	)		(1,064,083	)

Total net increase (decrease) from capital share transactions		22,704			(67,792	)		(303,007	)		(33,986	)


							Spectrum Select
	PSI Total Return Fund						Alternative Fund
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	February 28, 2009			August 31,			February 28, 2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		228,320			1,458,486			22,600			400,108
Shares issued in reinvestment of distributions		14,661			85,716			8,807			40,903
Shares redeemed		(586,829	)		(1,360,789	)		(335,687	)		(1,112,997	)

Total net increase (decrease) from capital share transactions		(343,848	)		183,413			(304,280	)		(671,986	)


	Spectrum Global Perspective Fund						Spectrum Equity Opportunity Fund
	Six Months Ended			Period Ended			Six Months Ended			Year Ended
	February 28, 2009			August 31,			February 28, 2009			August 31,
	(Unaudited)			2008			(Unaudited)			2008

Shares sold		45,453			371,454			27,659			54,847
Shares issued in reinvestment of distributions		794			877,332			120			110,884
Shares redeemed		(1,079,044	)		(1,454,964	)		(165,342	)		(797,504	)

Total net increase (decrease) from capital share transactions		(1,032,797	)		(206,178	)		(137,353	)		(631,773	)


4.	INVESTMENT TRANSACTIONS

During the six months ended February 28, 2009, the aggregate purchases and sales of investments (excluding short-term investments, swaps and futures contracts) were:


									Spectrum		Spectrum		Spectrum
	HCM		PSI Core		PSI Macro		PSI Total		Select		Global		Equity
	Freedom		Strength		Trends		Return		Alternative		Perspective		Opportunity
	Fund		Fund		Fund		Fund		Fund		Fund		Fund

Purchases	$	16,541,050	$	146,641,679	$	54,800,286	$	28,359,389	$	23,320,293	$	281,936,429	$	45,267,605
Sales	$	16,022,027	$	150,257,015	$	61,848,107	$	28,655,881	$	26,391,229	$	311,301,054	$	47,052,978

DIREXION SEMI-ANNUAL REPORT 35

There were no purchases or sales of long-term U.S. government securities during the period ended February 28, 2009 for any of the Funds.


5.	INVESTMENT ADVISORY AND OTHER AGREEMENTS

Investment Advisory Fees: The Funds have entered into an investment advisory agreement with the Adviser. The Adviser receives a fee, computed daily and payable monthly, at the annual rates presented below as applied to each Fund’s average daily net assets. In addition, the Adviser has entered into sub-advisory agreements with Horizon Capital Management, Inc. for the HCM Freedom Fund, with Portfolio Strategies, Inc. for the PSI Core Strength Fund, the PSI Macro Trends Fund and the PSI Total Return Fund, and with Hundredfold Advisors, LLC for the Spectrum Select Alternative Fund, the Spectrum Global Perspective Fund and the Spectrum Equity Opportunity Fund (the “Sub-Advised Funds”) whereby the sub-advisor will direct investment activities of the Sub-Advised Funds. The Adviser pays, out of the management fees it receives from the Sub-Advised Funds, a fee for these sub-advisory services. For the six months ended February 28, 2009, the Adviser voluntarily agreed to pay all operating expenses (excluding dividends on short positions), in excess of the annual cap on expenses presented below as applied to each Fund’s average daily net assets. The Adviser may change, or end, this voluntary waiver at any time. The Adviser may recover from the Sub-Advised Funds the expenses paid in excess of the annual cap on expenses for the three previous years, as long as the recovery does not cause the Fund to exceed such annual cap on expenses. For the six months ended February 28, 2009, the Adviser paid or recouped the following expenses:


	HCM			PSI Core			PSI Macro			PSI Total
	Freedom Fund			Strength Fund			Trends Fund			Return Fund

Annual Adviser rate		1.00	%		1.15	%		1.15	%		1.15	%
Annual cap on expenses		2.45	%		2.00	%		2.00	%		2.00	%
Expenses paid in excess of annual cap on expenses — 2009	$	—		$	7,593		$	11,839		$	7,603
Adviser expense recoupment — 2009	$	1,580		$	—		$	—		$	—


	Spectrum Select			Spectrum Global			Spectrum Equity
	Alternative Fund			Perspective Fund			Opportunity Fund

Annual Adviser rate		1.00	%		1.00	%		1.00	%
Annual cap on expenses:		2.75	%		2.75	%		2.75	%
Expenses paid in excess of annual cap on expenses — 2009	$	—		$	—		$	3,098
Adviser expense recoupment — 2009	$	—		$	—		$	—

Expenses subject to potential recovery expiring in:


	HCM		PSI Core		PSI Macro		PSI Total
	Freedom Fund		Strength Fund		Trends Fund		Return Fund

2009	$	—	$	—	$	—	$	—
2010	$	—	$	26,572	$	6,008	$	18,272
2011	$	12,745	$	19,619	$	11,970	$	4,670
2012	$	—	$	7,593	$	11,839	$	7,603

Total	$	12,745	$	53,784	$	29,817	$	30,545


	Spectrum Select		Spectrum Global		Spectrum Equity
	Alternative Fund		Perspective Fund		Opportunity Fund

2009	$	—	$	—	$	—
2010	$	—	$	—	$	—
2011	$	—	$	—	$	—
2012	$	—	$	—	$	3,098

Total	$	—	$	—	$	3,098

Distribution Expenses: Shares are subject to an annual Rule 12b-1 fee of 0.80% for the HCM Freedom Fund, of 0.25% for the PSI Core Strength Fund, the PSI Macro Trends Fund, and the PSI Total Return Fund, and up to 1.00% of the average daily net

DIREXION SEMI-ANNUAL REPORT 36

assets for the Spectrum Select Alternative Fund, the Spectrum Global Perspective Fund and the Spectrum Equity Opportunity Fund.

Shareholder Servicing Fees: The Board has also authorized the PSI Core Strength Fund, the PSI Macro Trends Fund and the PSI Total Return Fund to pay a shareholder servicing fee of 0.15% of each Fund’s average daily net assets. The Trust, on behalf of each Fund, pays the fee to financial institutions and other persons who provide services for and maintain shareholder accounts.


8.	SUMMARY OF FAIR VALUE DISCLOSURE

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels listed below:

Level 1 – Quoted prices in active markets for identical securities

Level 2 – Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, etc.)

Level 3 – Significant unobservable inputs (including Fund’s own assumptions in determining fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the credit risk associated with investing in those securities.

The following is a summary of the inputs used to value each Fund’s net assets as of February 28, 2009:


	HCM Freedom Fund
	Investments in		Other Financial
Description	Securities		Instruments*

Level 1 – Quoted prices	$	23,426,742	$	—
Level 2 – Other significant observable inputs		—		—
Level 3 – Significant unobservable inputs		—		—

Total	$	23,426,742	$	—


	PSI Core Strength Fund				PSI Macro Trends Fund
	Investments in		Other Financial		Investments in		Other Financial
Description	Securities		Instruments*		Securities		Instruments*

Level 1 – Quoted prices	$	16,416,525	$	—	$	16,837,462	$	(916,962	)
Level 2 – Other significant observable inputs		—		—		—		—
Level 3 – Significant unobservable inputs		—		—		—		—

Total	$	16,416,525	$	—	$	16,837,462	$	(916,962	)

37 DIREXION SEMI-ANNUAL REPORT


						Spectrum Select
	PSI Total Return Fund					Alternative Fund
	Investments in		Other Financial			Investments in		Other Financial
Description	Securities		Instruments*			Securities		Instruments*

Level 1 – Quoted prices	$	22,499,258	$	(80,709	)	$	17,546,386	$	51,735
Level 2 – Other significant observable inputs		—		(21,384	)		—		—
Level 3 – Significant unobservable inputs		—		—			—		—

Total	$	22,499,258	$	(102,093	)	$	17,546,386	$	51,735


	Spectrum Global				Spectrum Equity
	Perspective Fund				Opportunity Fund
	Investments in		Other Financial		Investments in		Other Financial
Description	Securities		Instruments*		Securities		Instruments*

Level 1 – Quoted prices	$	46,512,947	$	160,310	$	10,950,686	$	56,595
Level 2 – Other significant observable inputs		—		—		—		—
Level 3 – Significant unobservable inputs		—		—		—		—

Total	$	46,512,947	$	160,310	$	10,950,686	$	56,595


*		Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as written options, futures and swap contracts. Futures and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument.


9.	NEW ACCOUNTING PRONOUNCEMENT

In March 2008, FASB issued its Statement on Financial Accounting Standards No. 161, “Disclosures about Derivatives Instruments and Hedging Activities” (“FAS 161”). This standard is intended to enhance financial statement disclosure for derivative instruments and hedging activities and enable investors to understand: a) how and why a fund uses derivatives instruments, b) how derivatives instruments and related hedge items are accounted for, and c) how derivative instruments and related hedge items affect a fund’s financial position, results of operations and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As of February 28, 2009, management does not believe the adoption of FAS No. 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedge items.

SEMI-ANNUAL REPORT FEBRUARY 28, 2009

Adviser

Rafferty Asset Management, LLC

33 Whitehall St. 10th Floor

New York, NY 10004

Sub-Advisor

HCM Sub-Advisor

Horizon Capital Management, Inc.

141 Ridgeway Drive

Lafayette, LA 70503

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

875 E. Wisconsin Ave.

Milwaukee, WI 53202

Distributor

Rafferty Capital Markets, LLC

59 Hilton Avenue

Garden City, NY 11530

The Fund’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.

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 FEBRUARY 28, 2009

Adviser

Rafferty Asset Management, LLC

33 Whitehall St. 10th Floor

New York, NY 10004

Sub-Advisor

PSI Funds Sub-Advisor

Portfolio Strategies, Inc.

1102 Broadway Plaza

Tacoma, WA 98402

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

875 E. Wisconsin Ave.

Milwaukee, WI 53202

Distributor

Rafferty Capital Markets, LLC

59 Hilton Avenue

Garden City, NY 11530

The Fund’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.

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 FEBRUARY 28, 2009

Adviser

Rafferty Asset Management, LLC

33 Whitehall St. 10th Floor

New York, NY 10004

Sub-Advisor

Spectrum Funds Sub-Advisor

Hundredfold Advisors, LLC

2940 N. Lynnhaven Road

Virginia Beach, VA 23452

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

875 E. Wisconsin Ave.

Milwaukee, WI 53202

Distributor

Rafferty Capital Markets, LLC

59 Hilton Avenue

Garden City, NY 11530

The Fund’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.

This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

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 directors/trustees.

Item 11. Controls and Procedures.

(a)

The Registrant’s President/Chief Executive Officer and Treasurer/Chief 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. Exhibits.

(a)		Not Applicable.

		(2) Certifications 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.

(b)		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.


Bull Funds		Bear Funds

Domestic Index Equity Funds

Small Cap Bull 2.5X Fund		Small Cap Bear 2.5X Fund

International Funds

Emerging Markets Bull 2X Fund Developed Markets Bull 2X Fund China Bull 2X Fund		Emerging Markets Bear 2X Fund Developed Markets Bear 2X Fund

Specialty Funds

Commodity Bull 2X Fund (formerly Commodity Bull Fund)

Fixed Income Funds

10 Year Note Bull 2.5X Fund Dynamic HY Bond Fund		10 Year Note Bear 2.5X Fund HY Bear Fund


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Shares			Value

SHORT TERM INVESTMENTS - 83.9%
MONEY MARKET FUNDS - 83.9%
	699,382	AIM STIT-Treasury Portfolio	$	699,382
	699,382	Fidelity Institutional Money Market Government Portfolio		699,382
	699,382	First American Government Obligations Fund		699,382
	2,099,383	Goldman Sachs Financial Square Government Fund		2,099,383
	699,382	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		699,382

		TOTAL SHORT TERM INVESTMENTS (Cost $4,896,911)	$	4,896,911

		TOTAL INVESTMENTS (Cost $4,896,911) - 83.9%	$	4,896,911
		Other Assets in Excess of Liabilities - 16.1%		942,285

		TOTAL NET ASSETS - 100.0%	$	5,839,196


Shares			Value

SHORT TERM INVESTMENTS - 101.1%
MONEY MARKET FUNDS - 101.1%
	21,059,769	AIM STIT-Treasury Portfolio	$	21,059,769
	21,059,769	Fidelity Institutional Government Portfolio		21,059,769
	21,059,769	First American Government Obligations Fund		21,059,769
	20,984,769	Goldman Sachs Financial Square Government Fund		20,984,769
	21,059,768	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		21,059,768

		TOTAL SHORT TERM INVESTMENTS (Cost $105,223,844)	$	105,223,844

		TOTAL INVESTMENTS (Cost $105,223,844) - 101.1%	$	105,223,844
		Liabilities in Excess of Other Assets - (1.1)%		(1,129,112	)

		TOTAL NET ASSETS - 100.0%	$	104,094,732



Letter to Shareholders			4

Expense Example			6

Allocation of Portfolio Holdings			8

Schedule of Investments			9

Financial Statements			23

Financial Highlights			38

Notes to the Financial Statements			41


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				Repurchase			Corporate			U.S. Treasury
	Cash*			Agreements			Bonds			Obligations			Futures			Swaps			Total

Small Cap Bull 2.5X Fund		128	%		—			—			—			—			(28	%)		100%
Small Cap Bear 2.5X Fund		97	%		—			—			—			—			3	%		100%
10 Year Note Bull 2.5X Fund		18	%		—			—			82	%		0	%**		—			100%
10 Year Note Bear 2.5X Fund		89	%		235	%		—			(224	%)		0	%**		—			100%
Dynamic HY Bond Fund		96	%		7	%		6	%		(6	%)		(2	%)		(1	%)		100%
HY Bear Fund		100	%		—			—			—			—			0	%**		100%
Commodity Bull 2X Fund		219	%		—			—			—			—			(119	%)		100%
Emerging Markets Bull 2X Fund		122	%		—			—			—			—			(22	%)		100%
Emerging Markets Bear 2X Fund		94	%		—			—			—			—			6	%		100%
Developed Markets Bull 2X Fund		127	%		—			—			—			—			(27	%)		100%
Developed Markets Bear 2X Fund		100	%		—			—			—			—			0	%**		100%
China Bull 2X Fund		116	%		—			—			—			—			(16	%)		100%
U.S. Government Agency Obligations		100	%		—			—			—			—			—			100%


Shares			Value

SHORT TERM INVESTMENTS - 100.3%
MONEY MARKET FUNDS - 100.3%
	4,687,441	AIM STIT-Treasury Portfolio	$	4,687,441
	4,687,440	Fidelity Institutional Money Market Government Portfolio		4,687,440
	4,687,441	First American Government Obligations Fund		4,687,441
	4,676,979	Goldman Sachs Financial Square Government Fund		4,676,979
	4,687,441	Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio		4,687,441

		TOTAL SHORT TERM INVESTMENTS (Cost $23,426,742)	$	23,426,742

		TOTAL INVESTMENTS (Cost $23,426,742) - 100.3%	$	23,426,742
		Liabilities in Excess of Other Assets - (0.3)%		(65,278	)

		TOTAL NET ASSETS - 100.0%	$	23,361,464


By (Signature and Title)*		/s/ Daniel O’Neill

		Daniel O’Neill, Chief Executive Officer

Date	5/7/2009


*		Print the name and title of each signing officer under his or her signature.

1.		I have reviewed this report on Form N-CSR of The Direxion Funds;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting 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; and

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.