UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨
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x | Definitive Proxy Statement | |
¨ | Definitive Additional Materials | |
¨ | Soliciting Material Pursuant to §240.14a-12 |
Direxion Funds
Direxion Insurance Trust
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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DIREXION FUNDS
DIREXION INSURANCE TRUST
1301 Avenue of the Americas, 35th Floor
New York, NY 10019
June 27, 2014
Dear Shareholders:
You are being asked to vote on a proposal related to the Direxion Funds and the Direxion Insurance Trust (the Trust, and collectively, the Trusts) at a Special Meeting of Shareholders (Meeting) of each fund organized as a series of the Trusts (each a Fund and collectively, the Funds). The Meeting is to be held at 241 N. Broadway, Suite 202, Milwaukee, WI 53202 on September 10, 2014, at 10 a.m. Central Time. The enclosed documents explain the proposal.
As discussed in more detail in the enclosed Proxy Statement, you are being asked to elect six trustees to the Board of Trustees of each Trust (the Board). The election of the six nominees includes four nominees who are not interested persons of the Trusts within the meaning of Section 2(a)(19) of the Investment Company Act of 1940 and two that are interested persons. If elected, the four non-interested persons would serve on each Board as Independent Trustees.
Each Trusts Board have unanimously approved the proposal and recommends that you vote FOR the proposal described in the Proxy Statement.
We encourage you to read the attached Proxy Statement in full. Following this letter are questions and answers regarding this proxy solicitation. The information is designed to help you cast your vote as a shareholder of the Funds, and is being provided as a supplement to, and not a substitute for, your proxy materials.
The Notice of Special Meeting of Shareholders, the accompanying Proxy Statement, and the proxy card for the Funds are enclosed. Please read them carefully. If you are unable to attend the Special Meeting in person, we urge you to sign, date, and return the proxy card (or vote by Internet or telephone) so that your shares may be voted in accordance with your instructions. Voting your shares in a timely manner helps the Funds avoid additional costs.
Your vote is important to us. Thank you for taking the time to consider this important proposal.
Sincerely yours, | ||
Angela Brickl | ||
Secretary |
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NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
OF
DIREXION FUNDS
Direxion Monthly S&P 500® Bull 2X Fund |
Direxion Monthly S&P 500® Bear 2X Fund | |
Direxion Monthly Small Cap Bull 2X Fund |
Direxion Monthly Small Cap Bear 2X Fund | |
Direxion Monthly NASDAQ 100 Bull 2X Fund |
Direxion Monthly Latin America Bull 2X Fund | |
Direxion Monthly China Bull 2X Fund |
Direxion Monthly Commodity Bull 2X Fund | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | |
Direxion Monthly Emerging Markets Bull 2X Fund |
Direxion Dynamic HY Bond Fund | |
Direxion Indexed CVT Strategy Fund |
Direxion Indexed CVT Strategy Bear Fund | |
Direxion Indexed Commodity Strategy Fund |
Direxion Indexed Managed Futures Strategy Fund | |
Direxion/Wilshire Dynamic Fund |
Direxion Long/Short Global Currency Fund |
Direxion U.S. Government Money Market Fund
DIREXION INSURANCE TRUST
Direxion Dynamic VP HY Bond Fund | Direxion VP Indexed Commodity Strategy Fund | |
Direxion VP Indexed Managed Futures Strategy Fund |
(each a Fund, and collectively, the Funds)
241 N. Broadway, Suite 202
Milwaukee, WI 53202
(800) 851-0511
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To the Shareholders:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the Special Meeting) of Direxion Funds and Direxion Insurance Trust (each a Trust, and collectively, the Trusts) and each Fund organized as a series of the Trusts, will be held at the offices of Rafferty Asset Management, LLC (Rafferty), 241 N. Broadway, Suite 202, Milwaukee, WI 53202 on September 10, 2014, at 10 a.m. Central Time. The Special Meeting is being held to elect six Trustees to each Trusts Board of Trustees.
You are entitled to vote at the Special Meeting and any adjournment thereof if you owned shares of the Funds at the close of business on June 23, 2014. If you attend the Special Meeting, you may vote your shares in person. Whether or not you intend to attend the Special Meeting in person, you may vote in any of the following ways:
(1) | Internet: Have your proxy card available. Vote on the Internet by accessing the website address on your proxy card. Enter your control number from your proxy card. Follow the instructions found on the website; |
(2) | Telephone: Have your proxy card available. You may vote by telephone by calling the toll-free number on your proxy card. Enter the control number on the proxy card and follow the instructions provided. (A confirmation of your telephone vote will be mailed to you.); or |
(3) | Mail: Vote, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope. |
Important Notice Regarding the Internet Availability of Proxy Materials for the Special Meeting of Shareholders to Be Held on September 10, 2014 or Any Adjournment Thereof. This Notice and the Proxy Statement are available on the Internet at www.proxyvote.com. On this website, you will be able to access the Notice, the Proxy Statement, any accompanying materials and any amendments or supplements to the foregoing material that are required to be furnished to shareholders.
We encourage you to access and review all of the important information contained in the proxy materials before voting.
By order of the Board of Trustees of the Direxion Funds and Direxion Insurance Trust, | ||
Angela Brickl | ||
Secretary | ||
Direxion Funds and Direxion Insurance Trust | ||
Dated: June 27, 2014 |
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YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. TO AVOID THE NEED FOR FOLLOW-UP MAIL AND TELEPHONE SOLICITATION, PLEASE RETURN YOUR PROXY CARD PROMPTLY.
It is important that you vote even if your account was closed after the June 23, 2014, Record Date.
Shareholders are invited to attend the Special Meeting in person. Any shareholder who does not expect to attend the Special Meeting is urged to indicate voting instructions on the enclosed proxy card, date and sign it, and return it in the envelope provided, which needs no postage if mailed in the United States. If you sign, date and return the proxy card but give no instructions, your shares will be voted FOR the Proposals described above and FOR or AGAINST any other matter acted upon at the Meeting in the discretion of the persons named as proxies.
Alternatively, you may vote your proxy on the Internet or by telephone in accordance with the instructions on the enclosed proxy card. Any shareholder proposal submitted to a vote at the Special Meeting may be voted only in person or by written proxy.
To avoid the additional expense of further solicitation, we ask your cooperation in mailing your proxy promptly, no matter how large or small your holdings may be.
Only one proxy statement will be sent to two or more shareholders who share an address, unless such a shareholder writes or calls Rafferty Asset Management, LLC, 1301 Avenue of the Americas, 35th Floor, New York, NY 10019; (800) 690-6903.
Notice to Corporations and Partnerships: Proxy cards submitted but not signed by the appropriate persons as set forth in the voting instructions on the proxy card(s) will not be voted.
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DIREXION FUNDS
DIREXION INSURANCE TRUST
Important Information to Help You Understand
and Vote on the Proposal
Please read the information in the proxy statement that follows the questions and answers below. We appreciate you placing your trust in the Direxion Funds and the Direxion Insurance Trust and look forward to helping you achieve your financial goals.
Why am I receiving this proxy statement?
This proxy statement seeks your approval as a shareholder of a Fund that is a series of the Direxion Funds or the Direxion Insurance Trust (each a Trust, and collectively, the Trusts) regarding the election of Trustees to each Trusts Board of Trustees (the Board, and collectively, the Boards). On June 23, 2014, you owned shares of a Fund or Funds and, as a result, have a right to vote on the proposal.
What proposal am I being asked to vote on?
You are being asked to vote on the proposal to elect six trustees, Gerald E. Shanley, III, John A. Weisser, David L. Driscoll, Jacob C. Gaffey, Daniel D. ONeill and Eric W. Falkeis (the Nominees) to each Trusts Board. Messrs. Shanley and Weisser are current members of each Trusts Board. Mr. Driscoll, Mr. Gaffey, Mr. ONeill and Mr. Falkeis are not current members of each Board. The proxy statement describes the proposal in more detail.
Why am I being asked to elect six Trustees?
Each Trust and each Fund are governed by their respective Board. Each Board is recommending that shareholders of each Fund elect Trustees, four of whom are not interested persons of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940 (1940 Act), and two who are considered to be interested persons to the Board. Therefore, if elected, the non-interested Nominees would serve on each Board as Independent Trustees under the 1940 Act, which is one of the federal securities laws governing the Funds. The Nominees that are interested persons would be considered Interested Trustees.
What role do the Boards play?
The Trustees serve as your representatives. They are fiduciaries and have an obligation to serve the best interests of shareholders. The Trustees review each Funds performance, oversee each Trust and the Funds activities and review contractual arrangements with companies that provide services to the Trusts and Funds.
Do Trustees receive compensation for their services?
Each Independent Trustee receives compensation for his service on the Boards. Trustees that are not Independent Trustees do not receive compensation for their service on the Boards. The proxy statement provides details about each Nominee and compensation to be paid to the Independent Trustees.
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Who is paying for my shareholder meeting and proxy statement?
The Funds will bear the costs, fees and expenses incurred in connection with the proxy statement. Rafferty has contractually agreed to pay the expenses of the Funds as part of its Operating Expense Agreement which effectively limits the Funds expenses.
What is the required vote?
The proposal to elect six Trustees to each Board requires the affirmative vote of a plurality of the shares voted at the Special Meeting in person or by proxy.
What happens if the shareholders do not elect the Trustees?
If shareholders do not elect the six Trustees to each Board, the current members of each Trusts Board, Messrs. Shanley and Weisser, will continue to serve on each Trusts Board.
How do the Boards suggest I vote in connection with the proposal?
After careful consideration, each Board unanimously recommends that you vote FOR the approval of the proposal.
How do I vote my shares?
You can vote in any of the following ways:
Internet: | Have your proxy card available. Vote on the Internet by accessing the website address on your proxy card. Enter your control number from your proxy card. Follow the instructions found on the website; |
Telephone: | Have your proxy card available. You may vote by telephone by calling the number on your proxy card. Enter the control number on the proxy card and follow the instructions provided (A confirmation of your telephone vote will be mailed to you.); or |
Mail: | Vote, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope. |
How do I sign the proxy card?
The following general rules for signing proxy cards may be of assistance to you and avoid the time and expense involved in validating your vote if you fail to sign your proxy card properly.
Individual Accounts: Sign your name exactly as it appears in the registration on the proxy card.
Joint Accounts: Both parties should sign, and the name(s) of the party or parties signing should conform exactly to the name(s) shown in the registration on the proxy card.
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All Other Accounts: The capacity of the individual signing the proxy card should be indicated unless it is reflected in the form of registration.
When and where will the Special Meeting be held?
The Special Meeting will be held at 241 N. Broadway, Suite 202, Milwaukee, WI 53202 on September 10, 2014, at 10 a.m. Central Time, and any adjournment or postponement will be held at the same location. If you plan to attend the Special Meeting in person, please call toll-free 1-800-690-6903.
Whom should I call for more information about the proxy statement?
For more information regarding the proxy statement of the Special Meeting, please call toll-free 1-800-690-6903.
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DIREXION FUNDS
DIREXION INSURANCE TRUST
1301 Avenue of the Americas, 35th Floor, New York, NY 10019
(800) 851-0511
PROXY STATEMENT
Special Meeting of Shareholders
September 10, 2014
INTRODUCTION
This Proxy Statement is being furnished to the shareholders of the funds organized as series (each a Fund and collectively, the Funds) of the Direxion Funds and the Direxion Insurance Trust (each a Trust, and collectively, the Trusts) in connection with the solicitation of shareholder votes by proxy to be voted at the Special Meeting of Shareholders or any adjournments thereof (Special Meeting) to be held on September 10, 2014, at 10 a.m. Central Time at the offices of Rafferty Asset Management, LLC (Rafferty), 241 N. Broadway, Suite 202, Milwaukee, WI 53202. It is expected that the Notice of Special Meeting, Proxy Statement and proxy card will be first mailed to shareholders on or about July 8, 2014. As more fully described in this Proxy Statement, the purpose of the Meeting is to consider the election of six Trustees to the Funds Board of Trustees.
OVERVIEW
Proposal: You are being asked to elect six trustees, Gerald E. Shanley, III, John A. Weisser, David L. Driscoll, Jacob C. Gaffey, Daniel D. ONeill and Eric W. Falkeis (the Nominees). Mr. Shanley and Mr. Weisser are current members of the Board of Trustees (each a Board, and collectively, the Boards) of the Trusts. Mr. Driscoll, Mr. Gaffey, Mr. ONeill and Mr. Falkeis are not current members of the Boards. Each Nominee, with the exception of Mr. ONeill and Mr. Falkeis, is an independent or disinterested person of the Trusts, which means they are not interested persons of the Trusts or Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940 (1940 Act). Such persons are commonly referred to as Independent Trustees. Mr. ONeill and Mr. Falkeis if elected, would serve as Interested Trustees. The Board is unanimously recommending that you approve the election of the Nominees.
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VOTING INFORMATION
If the enclosed proxy card is executed properly and returned, shares represented by it will be voted at the Special Meeting in accordance with the instructions on the proxy. A proxy may nevertheless be revoked at any time prior to its use by written notification received by the Funds, by the execution of a subsequently dated proxy or by attending the Special Meeting and voting in person. However, if no instructions are specified on a proxy, shares will be voted FOR Proposals (1) and (2) (the Proposals) and FOR or AGAINST any other matters acted upon at the Meeting in the discretion of the persons named as proxies.
The close of business on June 23, 2014, has been established as the record date for the determination of shareholders entitled to notice of and to vote at the Special Meeting (Record Date). As of the Record Date, the Funds had 1,196,037 shares outstanding, entitled to the same number of votes. Each share will be entitled to one vote at the Special Meeting and fractional shares will be entitled to proportionate fractional votes. Exhibit A lists the control persons and principal shareholders of the Funds.
Quorum and Adjournment: The presence at the Special Meeting, in person or by proxy, of shareholders entitled to cast a majority of the Funds outstanding shares are required for a quorum for the Proposal. In the event that a quorum is present at the Special Meeting but sufficient votes to approve the Proposal are not received, the persons named as proxies may propose one or more adjournments of such Special Meeting to permit further solicitation of proxies. The affirmative vote of less than a majority of the votes entitled to be cast represented in person or by proxy is sufficient for adjournment. In such case, the persons named as proxies will vote those proxies, which they are entitled to vote in favor of such item FOR such an adjournment, and will vote those proxies required to be voted against such item AGAINST such an adjournment. A shareholder vote may be taken on the Proposal in this Proxy Statement prior to any such adjournment if sufficient votes have been received and it is otherwise appropriate. If a shareholder abstains from voting as to any matter, or if a broker returns a non-vote proxy, indicating a lack of authority to vote on a matter, then the shares represented by such abstention or non-vote will be treated as shares that are present at the Special Meeting for purposes of determining the existence of a quorum. However, abstentions and broker non-votes will be disregarded in determining the votes cast on an issue.
Required Vote: The election of six Trustees to the Boards requires a plurality of the shares voted in person or by proxy.
The most recent Annual and Semi-Annual Reports for the Funds, including financial statements, previously have been furnished to shareholders. If you would like to receive additional copies of these reports free of charge, please write to the Direxion Funds or Direxion Insurance Trust, 1301 Avenue of Americas, 35th Floor, New York, NY 10019 or call toll-free at 1-800-851-0511. The reports also are available on the Funds website at www.direxioninvestments.com and the website of the Securities and Exchange Commission (SEC) at www.sec.gov.
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PROPOSAL: ELECTION OF TRUSTEES FOR THE TRUSTS
The proposal relates to the election of six Trustees to the each Trusts Board. The Boards approved the nomination of six individuals (each a Nominee, and collectively, the Nominees) for election as Trustees of the Trusts. Shareholders are asked to elect the Nominees as Trustees, effective September 10, 2014 or upon shareholder approval, whichever is later (the Election Effective Date) each to hold office for life until his successor is elected, he is removed, resigns or retires.
The Nominees include Gerald E. Shanley, III and John A. Weisser, each of whom is a current member of each Trusts Board. In addition, each Trusts Board has nominated David L. Driscoll, Jacob C. Gaffey, Daniel D. ONeill and Eric W. Falkeis, each of whom is not currently a member of the Board. Mr. ONeill currently serves as a Trustee of the Direxion Shares ETF Trust, an affiliated investment company to the Trusts. Each Nominee, with the exception of Mr. ONeill and Mr. Falkeis, are independent or disinterested persons, which means they are not an interested person of the Trusts, as defined in the 1940 Act. Such individuals are commonly referred to as Independent Trustees. Mr. ONeill and Mr. Falkeis, if elected, would serve as Interested Trustees.
Each Trusts Nominating Committee, which consists solely of Independent Trustees, considered recommendations for Trustee nominees, and considered the qualifications, experience and background of each of the Nominees. Based upon this review, each Nominating Committee recommended each Nominee to the Trusts Boards as a candidate for nomination as an Independent Trustee or Interested Trustee. After discussion and consideration of the matter, the Boards voted to nominate the Nominees for election by shareholders. Each Nominee has consented to serve as a Trustee and to being named in this Proxy Statement.
INFORMATION CONCERNING THE NOMINEES
The information below provides pertinent information about each of the Nominees. This information includes their principal occupations and present positions, including any affiliation with Rafferty Asset Management, LLC (Rafferty), Rafferty Capital Markets, LLC (Distributor), the length of service to the Funds, and the position, if any, they hold on the board of trustees/directors of companies other than the Funds. Information concerning the Officers of the Trusts is included in Exhibit B. The principal address of each Trustee and Officer is 1301 Avenue of the Americas, 35th Floor, New York, NY 10019.
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Non-Interested Trustees
Name, Address |
Position(s) Held |
Term of Office |
Principal |
# of Portfolios in Direxion Family of Investment Companies that will be Overseen by Trustee(2) |
Other | |||||
Gerald E. Shanley III
Age: 70 |
Trustee | Lifetime of Trust until removal or resignation; Since 1997 | Retired, Since 2002; Business Consultant, 1985-present; Trustee of Trust Under Will of Charles S. Payson, 1987-present; C.P.A., 1979-present. | 125 | None. |
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Name, Address |
Position(s) Held |
Term of Office |
Principal |
# of Portfolios in Direxion Family of Investment Companies that will be Overseen by Trustee(2) |
Other Trusteeships/ Directorships Held by Trustee During Past Five Years | |||||
John A. Weisser
Age: 72 |
Trustee | Lifetime of Trust until removal or resignation; Since 2007 | Retired, Since 1995; Salomon Brothers, Inc, 1971-1995, most recently as Managing Director. | 125 | Director, The MainStay Funds Trust (35 Funds), The MainStay Funds (12 Funds), MainStay VP Fund Series (29 Funds); Mainstay Defined Term Municipal Opportunities Fund (1 Fund); Private Advisors Alternative Strategy Fund (1 Fund); Private Advisors Alternative Strategies Master Fund (1 Fund). |
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Name, Address |
Position(s) Held |
Term of Office |
Principal |
# of Portfolios in Direxion Family of Investment Companies that will be Overseen by Trustee(2) |
Other | |||||
David L. Driscoll
Age: 44 |
N/A | N/A | Partner, King Associates, LLP, since 2004, real estate manager; Board Advisor, University Common Real Estate, since 2012; Principal, Grey Oaks LLP since 2003, real estate partnership; Member, Kendrick LLC, since 2006, real estate management and services | 125 | None. |
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Name, Address |
Position(s) Held |
Term of Office |
Principal |
# of Portfolios in Direxion Family of Investment Companies that will be Overseen by Trustee(2) |
Other Trusteeships/ Directorships Held by Trustee During Past Five Years | |||||
Jacob C. Gaffey
Age: 66 |
N/A | N/A | Managing Director of Loomis & Co. since 2013, providing bank advisory & valuation services; Partner, Bay Capital Advisors, LLC 2008 2012, providing investment banking for small & mid-sized companies | 125 | Director, Costa, Inc. (name changed from A.T. Cross, Inc. in 2013) |
Interested Trustees
Name, Address |
Position(s) Held |
Term of Office |
Principal |
# of Portfolios in Direxion Family of Investment Companies Overseen by Trustee(3) |
Other | |||||
Daniel D. ONeill(1)
Age: 46 |
Chief Executive Officer and Chief Investment Officer |
One Year; Since 2006 | Managing Director of Rafferty, 1999-present. | 125 | None. |
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Name, Address |
Position(s) Held |
Term of Office |
Principal |
# of Portfolios in Direxion Family of Investment Companies Overseen by Trustee(3) |
Other | |||||
Eric Falkeis(2)
Age: 40 |
Principal Executive Officer | One Year; Since 2014 | Chief Operating Office, Since March 2013 and President from March 2013- March 2014, Rafferty; formerly, Senior Vice President, USBancorp Fund Services, LLC (USBFS), September 2007 March 2013; Chief Financial Officer, USBFS, April 2006 March 2013; Vice President, USBFS, 1997-2007; formerly, Chief Financial Officer, Quasar Distributors, LLC (2000-2003). | 125 | Trustee, Professionally Managed Portfolios (45 Funds) |
(1) | Mr. ONeill is the Managing Director of Rafferty and owns a beneficial interest in Rafferty. |
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(2) | Mr. Falkeis is an employee of Rafferty. |
(3) | The Direxion Family of Investment Companies consists of the Direxion Funds which, as of the date of this Proxy Statement, offers for sale to the public 19 portfolios, the Direxion Insurance Trust which, as of the date of this Proxy Statement, offers for sale 3 of the 8 funds registered with the SEC and the Direxion Shares ETF Trust which, as of the date of this Proxy Statement, offers for sale to the public 56 of the 98 funds registered with the SEC. |
In addition to the information set forth in the tables above and other relevant qualifications, experience, attributes or skills applicable to a particular Trustee, the following provides further information about the qualifications and experience of each Trustee.
Mr. Shanley has audit experience and spent ten years in the tax practice of an international public accounting firm. He is a certified public accountant and has a JD degree. He has extensive business experience as the president of a closely held manufacturing company, a director of several closely held companies, a business and tax consultant and a trustee of a private investment trust. He has served on the boards of several charitable and not for profit organizations. He also has multiple years of service as a Trustee.
Mr. Weisser has extensive experience in the investment business, including as managing director of an investment bank and a director of other registered investment companies. He also has multiple years of service as a Trustee.
Mr. Driscoll has significant experience with risk assessment and strategic planning as a partner and manager of various real estate partnerships and companies.
Mr. Gaffey has significant experience with providing investment banking and valuation services to various companies. Mr. Gaffey has been a director and a member of an audit committee of a public company since 2011.
Mr. ONeill has extensive experience in the investment management business, including as managing director of Rafferty since 1999. Mr. ONeill serves as an interested trustee of the Direxion Shares ETF Trust, an affiliated investment company to the Trusts.
Mr. Falkeis has extensive experience in the financial services business. He is a certified public accountant. Prior to joining Rafferty in 2013, Mr. Falkeis was Chief Financial Officer and Senior Vice President of USBFS. USBFS provides fund administration, fund accounting and transfer agency services to registered investment companies and non-registered investment companies. Mr. Falkeis is currently the Chief Operating Officer of Rafferty.
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Board Duties and Board Structure
The Funds are governed by a Board of Trustees. The Boards are responsible for and oversee the overall management and operations of the Trusts and the Funds. The current Trustees who serve on the Trusts Boards also serve on the boards of the Direxion Shares ETF Trust and its respective funds. Each Boards responsibilities include the general oversight and review of the Funds investment activities, in accordance with federal law and the laws of the Commonwealth of Massachusetts, as well as the stated policies of each Fund. Each Board oversees the respective Trusts officers and service providers, including Rafferty, which is responsible for the management of the day-to-day operations of the Funds based on policies and agreements reviewed and approved by the Boards. In carrying out these responsibilities, the Boards regularly interact with, and receive reports from, senior personnel of service providers, including Rafferty personnel, and each Trusts Chief Compliance Officer (CCO), who reports directly to the Boards. Each Board is also assisted by each Trusts independent auditor (who reports directly to each Trusts Audit Committee), independent counsel and other professionals as appropriate, all of whom are selected by the Boards.
Risk Oversight
Consistent with its responsibility for oversight of the Trusts and the Funds, the Boards oversee the management of risks relating to the administration and operation of the Trusts and the Funds. Rafferty, as part of its responsibilities for the day-to-day operations of the Funds, is responsible for day-to-day risk management for the Funds. The Boards, in the exercise of its reasonable business judgment, also separately considers potential risks that may impact the Funds. The Boards perform this risk management oversight directly and, as to certain matters, through its committees (described below) and through the Independent Trustees. The following provides an overview of the principal, but not all, aspects of each Boards oversight of risk management for the Funds.
Each Board has adopted, and periodically reviews, policies and procedures designed to address risks to the Trusts and the Funds. In addition, under the general oversight of the Boards, Rafferty and other service providers to the Funds have themselves adopted a variety of policies, procedures and controls designed to address particular risks to the Funds. Different processes, procedures and controls are employed with respect to different types of risks.
Each Board also oversees risk management for the Trusts and the Funds through review of regular reports, presentations and other information from officers of the Trusts and other persons. Each Trusts CCO and senior officers of Rafferty and USBFS regularly report to the Boards on a range of matters, including those relating to risk management. The Boards also regularly receive reports from Rafferty and USBFS with respect to the Funds investments. In addition to regular reports from these parties, the Boards also receive reports regarding other service providers to the Trusts, either
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directly or through Rafferty, USBFS or the CCO, on a periodic or regular basis. At least annually, the Boards receive a report from the CCO regarding the effectiveness of the Funds compliance program. Also, on an annual basis, the Boards receive reports, presentations and other information from Rafferty in connection with the Boards consideration of the renewal of each of the Trusts agreements with Rafferty and the Trusts distribution plan under Rule 12b-1 under the 1940 Act.
The CCO also reports regularly to the Boards on Fund valuation matters. In addition, each Audit Committee receives regular reports from each Trusts independent registered public accounting firm on internal control and financial reporting matters. On at least a quarterly basis, the Independent Trustees meet with each Trusts CCO to discuss matters relating to the Trusts compliance program.
Board Structure and Related Matters
Currently, Board members who are not interested persons of the Funds as defined in Section 2(a)(19) of the 1940 Act (Independent Trustees) constitute two-thirds of each Board. The Trustees discharge their responsibilities to each Trust collectively as a Board, as well as through Board committees, each of which operates pursuant to a charter approved by each Board that delineates the specific responsibilities of that committee. Each Board has established three standing committees: the Audit Committee, the Nominating Committee and the Qualified Legal Compliance Committee. For example, the Audit Committee is responsible for specific matters related to oversight of the Funds independent auditors, subject to approval of the Audit Committees recommendations by each Board. The members and responsibilities of each Board committee are summarized below.
Each Board periodically evaluates its structure and composition as well as various aspects of its operations. Each Board has chosen not to have a lead Independent Trustee. However, the Boards believe that its leadership structure, including its Independent Trustees and Board committees, is appropriate for the Trusts in light of, among other factors, the asset size and nature of the Funds, the number of Funds overseen by the Boards, the arrangements for the conduct of the Funds operations, the number of Trustees, and the Boards responsibilities. On an annual basis, each Board conducts a self-evaluation that considers, among other matters, whether the Board and its committees are functioning effectively and whether, given the size and composition of the Board and each of its committees, the Trustees are able to oversee effectively the number of Funds in the Fund Complex.
The Trusts are part of the Direxion Family of Investment Companies, which is comprised of the 8 portfolios within the Direxion Insurance Trust, 19 portfolios within the Direxion Funds and 98 portfolios within Direxion Shares ETF Trust. The same persons who constitute the Boards will also constitute the Board of Trustees of the Direxion Shares ETF Trust.
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Each Board holds four regularly scheduled in-person meetings each year. The Independent Trustees also have an additional meeting each year to discuss the annual contract renewal process. The Boards may hold special meetings, as needed, either in person or by telephone, to address matters arising between regular meetings. During a portion of each in-person meeting, the Independent Trustees meet outside of managements presence. The Independent Trustees may hold special meetings, as needed, either in person or by telephone.
Shareholders may communicate with the Trustees as a group or individually. Any such communications should be sent to the Funds Board or an individual Trustee in writing, c/o the Rafferty Asset Management, LLC, 1301 Avenue of the Americas, 35th Floor, New York, NY 10019. The Secretary may determine not to forward any letter to the appropriate Board or a Trustee that does not relate to the business of the Funds.
Board Committees
Each Trust has an Audit Committee, consisting of Messrs. Weisser and Shanley. Mr. Shanley serves as Chairperson of each Trusts Audit Committee and has been determined by each Board to be a financial expert. The members of each Audit Committee are not interested persons of the Trust (as defined in the 1940 Act). The primary responsibilities of a Trusts Audit Committee are, as set forth in its charter, to make recommendations to the Trustees as to: the engagement or discharge of each Trusts independent registered public accounting firm (including the audit fees charged by the auditors); the supervision of investigations into matters relating to audit matters; the review with the independent registered public accounting firm of the results of audits; and addressing any other matters regarding audits. The Audit Committee met four times during each Trusts most recent fiscal year. The Audit Committee has a charter, which is attached to this proxy statement as Exhibit C.
Each Trust also has a Nominating Committee, consisting of Messrs. Weisser and Shanley, each of whom is a not an interested person of each Board. Mr. Weisser serves as Chairperson of each Trusts Nominating Committee. The primary responsibilities of each Nominating Committee are to make recommendations to the Board on issues related to the composition and operation of the Boards, and communicate with management on those issues. Each Nominating Committee also evaluates and nominates Board member candidates. Each Nominating Committee will consider nominees recommended by shareholders. Such recommendations should be in writing and addressed to a Fund with attention to the Nominating Committee Chair. The recommendations must include the following Preliminary Information regarding the nominee: (1) name; (2) date of birth; (3) education; (4) business professional or other relevant experience and areas of expertise; (5) current business and home addresses and contact information; (6) other board positions or prior experience; and (7) any knowledge and experience relating to investment companies and investment company governance. Each Nominating Committee has a charter, which is attached to this Proxy Statement as Exhibit D.
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Each Trust has a Qualified Legal Compliance Committee, consisting of Messrs. Weisser and Shanley. The members of the Qualified Legal Compliance Committee are not interested persons of the Trust (as defined in the 1940 Act). The primary responsibility of each Trusts Qualified Legal Compliance Committee is to receive, review and take appropriate action with respect to any report (Report) made or referred to the Committee by an attorney of evidence of a material violation of applicable U.S. federal or state securities law, material breach of a fiduciary duty under U.S. federal or state law or a similar material violation by the Trust or by any officer, director, employee or agent of the Trust. Each Trusts Committee has a charter, which is attached to this Proxy Statement as Exhibit E.
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Nominee and Trustee Ownership of Shares of each Fund
The following table shows the amount of equity securities owned in each Fund and the Direxion Family of Investment Companies by the Nominees as of the calendar year ended December 31, 2013.
Dollar Range of Equity Securities Owned: |
Interested Trustees: | Disinterested Trustees: | ||||||||||
Daniel ONeill |
Eric W. Falkeis |
Gerald E. Shanley III |
John A. Weisser |
David L. Driscoll |
Jacob C. Gaffey | |||||||
Direxion Monthly S&P 500® Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly S&P 500® Bear 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly NASDAQ-100® Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly Small Cap Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly Small Cap Bear 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly China Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly Latin America Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly Emerging Markets Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly Commodity Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly 7-10 Year Treasury Bull 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Monthly 7-10 Year Treasury Bear 2X Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Dynamic HY Bond Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Indexed CVT Strategy Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Indexed CVT Strategy Bear Fund |
$0 | $0 | $0 | $0 | $0 | $0 |
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Dollar Range of Equity Securities Owned: |
Interested Trustees: | Disinterested Trustees: | ||||||||||
Daniel ONeill |
Eric W. Falkeis |
Gerald E. Shanley III |
John A. Weisser |
David L. Driscoll |
Jacob C. Gaffey | |||||||
Direxion Indexed Commodity Strategy Fund |
$10,000- $50,000 |
$0 | $0 | $0 | $0 | $0 | ||||||
Direxion Indexed Managed Futures Strategy Fund |
More than $100,000 |
$0 | $0 | $0 | $0 | $0 | ||||||
Direxion Wilshire Dynamic Fund |
More than $100,000 |
$0 | $0 | $0 | $0 | $0 | ||||||
Direxion Long/Short Global Currency Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion U.S. Government Money Market Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion Dynamic VP HY Bond Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion VP Indexed Commodity Strategy Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Direxion VP Indexed Managed Futures Strategy Fund |
$0 | $0 | $0 | $0 | $0 | $0 | ||||||
Aggregate Dollar Range of Equity Securities in the Direxion Family of Investment Companies(1) |
More than $100,000 |
$0 | $0 | $1 - $10,000 | $0 | $0 |
(1) | The Direxion Family of Investment Companies consists of the Direxion Funds which, as of the date of this Proxy Statement, offers for sale to the public 19 portfolios, the Direxion Insurance Trust which, as of the date of this Proxy Statement, offers for sale to the public 3 of the 8 funds registered with the SEC and the Direxion Shares ETF Trust which, as of the date of this Proxy Statement, offers for sale to the public 56 of the 98 funds registered with the SEC. |
No Trustee or the Nominee, with exception of Mr. ONeill has any beneficial ownership in the Trusts investment adviser, Rafferty, its principal underwriter or any entity directly or indirectly controlling, controlled by, or under common control with the investment advisor or principal underwriter of the Trusts. Mr. ONeill has a beneficial ownership interest in the Trusts investment adviser, Rafferty.
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Compensation
As of June 1, 2014, each Trustee of the Direxion Family of Investment Companies who is not an employee of Rafferty or its affiliates receives an annual fee of $80,000 for their services as a Trustee for the Direxion Family of Investment Companies. Mr. Shanley and Mr. Weisser receive an additional annual fee of $20,000 from the Direxion Family of Investment Companies for their services related to their respective services as the Chairperson of each Trusts Audit Committee and Nominating Committee, respectively. If Mr. Driscoll and Mr. Gaffey are elected to the Trusts Boards, they will receive the same annual compensation as the other Independent Trustees.
Because Rafferty and other unaffiliated service providers perform substantially all of the services necessary for the operation of the Trusts and the Funds, the Funds do not require employees. No officer, director or employee of Rafferty receives any compensation from the Trusts or Funds for acting as a director or officer.
The following tables show the compensation earned by each Trustee for each Fund in the Trusts for the Funds fiscal year end:
Name of Person, Position |
Aggregate Compensation From the Direxion Monthly S&P 500® Bull 2X Fund for the fiscal year end August 31, 2013 |
Aggregate Compensation From the Direxion Monthly S&P 500® Bear 2X Fund for the fiscal year end August 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
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Name of Person, Position |
Aggregate Compensation From the Direxion Monthly Small Cap Bull 2X Fund for the fiscal year end August 31, 2013 |
Aggregate Compensation From the Direxion Monthly Small Cap Bear 2X Fund for the fiscal year end August 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
Name of Person, Position |
Aggregate Compensation From the Direxion Monthly NASDAQ-100 Bull 2X Fund for the fiscal year end August 31, 2013 |
Aggregate Compensation From the Direxion Monthly Latin America Bull 2X Fund for the fiscal year end August 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
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Name of Person, Position |
Aggregate Compensation From the Direxion Monthly China Bull 2X Fund for the fiscal year end August 31, 2013 |
Aggregate Compensation From the Direxion Monthly Commodity Bull 2X Fund for the fiscal year end August 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
Name of Person, Position |
Aggregate Compensation From the Direxion Monthly 7-10 Year Treasury Bull 2X Fund for the fiscal year end August 31, 2013 |
Aggregate Compensation From the Direxion Monthly 7-10 Year Treasury Bear 2X Fund for the fiscal year end August 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
- 25 -
Name of Person, Position |
Aggregate Compensation From the Direxion Monthly Emerging Markets Bull 2X Fund for the fiscal year end August 31, 2013 |
Aggregate Compensation From the Direxion Dynamic HY Bond Fund for the fiscal year end August 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $1,090 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
Name of Person, Position |
Aggregate Compensation From the Direxion U.S. Government Money Market Fund for the fiscal year end August 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | ||||
Interested Trustees |
||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | ||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | ||||
Disinterested Trustees |
||||||||
Gerald E. Shanley III |
$1,090 | $0 | $0 | $100,000 | ||||
John A. Weisser |
$1,090 | $0 | $0 | $100,000 | ||||
David L. Driscoll |
N/A | N/A | N/A | N/A | ||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A |
- 26 -
Name of Person, Position |
Aggregate Compensation From the Direxion Indexed CVT Strategy Fund(2) |
Aggregate Compensation From the Direxion Indexed CVT Strategy Bear Fund(2) |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,136 | $1,136 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,136 | $1,136 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
Name of Person, Position |
Aggregate Compensation From the Direxion Indexed Commodity Strategy Fund for the fiscal year end October 31, 2013 |
Aggregate Compensation From the Direxion Indexed Managed Futures Fund for the fiscal year end October 31, 2013 |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $973 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $973 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/ A |
N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/ A |
N/A | N/A | N/A |
- 27 -
Name of Person, Position |
Aggregate Compensation From the Direxion/ Wilshire Dynamic Fund for the fiscal year end October 31, 2013 |
Aggregate Compensation From the Direxion Long/Short Global Currency Fund (2) |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,090 | $1,136 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,090 | $1,136 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
Name of Person, Position |
Aggregate Compensation From the Direxion Dynamic VP HY Bond Fund for the fiscal year end December 31, 2013 |
Aggregate Compensation From the Direxion VP Indexed Commodity Strategy Fund (3) |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | |||||
Interested Trustees |
||||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | $0 | |||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | $0 | |||||
Disinterested Trustees |
||||||||||
Gerald E. Shanley III |
$1,187 | $1,136 | $0 | $0 | $100,000 | |||||
John A. Weisser |
$1,187 | $1,136 | $0 | $0 | $100,000 | |||||
David L. Driscoll |
N/A | N/A | N/A | N/A | N/A | |||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A | N/A |
- 28 -
Name of Person, Position |
Aggregate Compensation From the Direxion VP Indexed Commodity Strategy Fund (3) |
Pension or Retirement Benefits Accrued As Part of the Trusts Expenses |
Estimated Annual Benefits Upon Retirement |
Aggregate Compensation From the Direxion Family of Investment Companies Paid to the Trustees(1) | ||||
Interested Trustees |
||||||||
Daniel D. ONeill |
$0 | $0 | $0 | $0 | ||||
Eric W. Falkeis |
$0 | $0 | $0 | $0 | ||||
Disinterested Trustees |
||||||||
Gerald E. Shanley III |
$1,136 | $0 | $0 | $100,000 | ||||
John A. Weisser |
$1,136 | $0 | $0 | $100,000 | ||||
David L. Driscoll |
N/A | N/A | N/A | N/A | ||||
Jacob C. Gaffey |
N/A | N/A | N/A | N/A |
(1) | The Direxion Family of Investment Companies consists of the Direxion Funds which, as of the date of this Proxy Statement, offers for sale to the public 19 portfolios, the Direxion Insurance Trust which, as of the date of this Proxy Statement, offers for sale to the public 3 of the 8 funds registered with the SEC and the Direxion Shares ETF Trust which, as of the date of this Proxy Statement, offers for sale to the public 56 of the 98 funds registered with the SEC. |
(2) | This Fund has not been operational for a full fiscal year. The information presented is estimated for the October 31, 2014 fiscal year end. |
(3) | This fund has not been operational for a full fiscal year. This information is for the fiscal year end December 31, 2014. |
REQUIRED VOTE
The proposal to elect a new Trustee to the Board requires the affirmative vote of a plurality of the shares voted at the Special Meeting in person or by proxy.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE PROPOSAL
INFORMATION ABOUT THE TRUSTS INDEPENDENT ACCOUNTANTS
The Trusts financial statements for the fiscal years ended August 31, 2013, October 31, 2013 and December 31, 2013 (the 2013 Fiscal Year Ends), were audited by Ernest & Young (E&Y) of New York, NY, which serves as the Trusts independent public accountants. E&Y has informed the Trusts and the Funds that it has no material direct or indirect financial interest in the Trusts or Funds. In the opinion of the Board, the
- 29 -
services provided by E&Y are compatible with maintaining the independence of the auditors. The Board appointed E&Y as the independent accountants for the Trusts and Funds for the fiscal years ending August, 31, 2014, October 31, 2014 and December 31, 2014. Representatives of E&Y are not expected to be present at the Meeting
Audit Fees
The aggregate fees billed by the Trusts independent public accountants, E&Y, for professional services rendered in connection with the audit of the Trusts annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $481,100 for the fiscal periods ended August, 31, 2012, October 31, 2012 and December 31, 2012 (the 2012 Fiscal Year Ends), and $416,200 for the 2012 Fiscal Year Ends.
Audit-Related Fees
There were no aggregate fees E&Y billed to the Trusts for assurance and other services which are reasonably related to the performance of the Trusts audit and are not reported under Item 4(a) for the 2012 Fiscal Year Ends and the 2013 Fiscal Year Ends. The aggregate fees E&Y billed to the Trusts investment adviser and any entity controlling, controlled by, or under common control with the Trusts investment adviser for assurance and other services directly related to the operations and financial reporting of the Trusts were $0.00 for the 2012 Fiscal Year Ends, and $0.00 for the 2013 Fiscal Year Ends.
Tax Fees
The aggregate tax fees E&Y billed to the Trusts for tax compliance, tax advice, and tax planning services were $147,000 for the fiscal period ended 2012 Fiscal Year Ends, and $102,200 for the 2013 Fiscal Year Ends. There were no aggregate tax fees E&Y billed to the Trusts investment adviser and any entity controlling, controlled by, or under common control with the Trusts investment adviser for services directly related to the operations and financial reporting of the Trusts for the 2012 Fiscal Year Ends and the 2013 Fiscal Year Ends.
All Other Fees
For the 2012 Fiscal Year Ends and the 2013 Fiscal Year Ends the Trusts did not pay E&Y any other fees (including non-audit fees). E&Y did not bill the Trusts investment advisory or any entity controlling, controlled by, or under common control with the Trusts investment advisor any fees for any other services directly related to the operations and financial reporting of the Trusts for the 2012 Fiscal Year Ends and the 2013 Fiscal Year Ends.
- 30 -
Pre-Approval Policies and Procedures
The Trusts Audit Committee Charter provides that each Audit Committee (comprised of the Independent Trustees of the Fund) is responsible for pre-approval of all auditing services performed for the Trusts. Each Audit Committee reports to its respective Board regarding its approval of the engagement of the auditor and the proposed fees for the engagement, and the majority of the Board (including the members of the Board who are Independent Trustees) must approve the auditor at an in-person meeting. Each Audit Committee also is responsible for pre-approval (subject to the de minimis exception for non-audit services described in the Securities Exchange Act of 1934, as amended, and applicable rule thereunder and not expecting to exceed $5,000) of all non-auditing services performed for the Trusts or for any service affiliate of the Trusts. The Trusts Audit Committees pre-approved all fees described above which E&Y billed to each Fund within the Trusts.
OTHER MATTERS
No business, other than as set forth above, is expected to come before the Meeting. Should any other matters requiring a vote of shareholders properly come before the Meeting, the persons named in the enclosed proxy will vote thereon in accordance with their best judgment in the interests of the Trusts.
SOLICITATION OF PROXIES
The solicitation of proxies will be made primarily by mail but may also be made by telephone by Rafferty and Broadridge Investor Communication Solutions, Inc./Broadridge Financial Solutions, Inc. (Broadridge), professional proxy solicitors, who will be paid fees and expenses of approximately $68,400 for soliciting services. All expenses in connection with preparing this Proxy Statement and its enclosures and solicitation expenses that relate to the Proposal will be borne by the Funds. Rafferty has contractually agreed to pay the expenses of the Funds as part of its Operating Expense Agreement which effectively limits the Funds expenses.
If votes are recorded by telephone, Rafferty and/or Broadridge will use procedures designed to authenticate shareholders identities, to allow shareholders to authorize the voting of their shares in accordance with their instructions and to confirm that shareholder instructions have been properly recorded. Shareholders also may vote through a secure Internet site or by mail. Proxies by Internet or telephone may be revoked at any time before they are voted in the same manner that proxies voted by mail may be revoked.
- 31 -
INFORMATION ABOUT RAFFERTY
Rafferty, 1301 Avenue of the Americas, 35th Floor, New York, NY 10019, serves as the investment adviser for each Funds in the Trusts. As of May 31, 2014, Rafferty had approximately $8 billion of assets under management. Rafferty Capital Markets, LLC, 1010 Franklin Avenue, Suite 300A, Garden City, NY 11530, serves as the Funds distributor.
PAYMENTS OF COMMISSIONS TO AFFILIATED BROKERS
During the 2013 Fiscal Year Ends, the Funds made no payments of commissions to brokers affiliated with the Funds to execute portfolio transactions.
SHAREHOLDER PROPOSAL
As a general matter, the Trusts and the Funds do not hold regular annual or other meetings of shareholders. Any shareholder who wishes to submit proposals to be considered at a special meeting of the Funds shareholders should send such proposals to the Direxion Funds or Direxion Insurance Trust at 1301 Avenue of the Americas, 35th Floor, New York, NY 10019, so as to be received a reasonable time before the proxy solicitation for that meeting is made. Shareholder proposals that are submitted in a timely manner will be provided to Board members for their consideration but not necessarily be included in the Funds proxy materials. Inclusion of such proposals is subject to limitations under the federal securities laws.
By order of the Board of Trustees,
Angela Brickl
Secretary
Direxion Funds and
Direxion Insurance Trust
Dated: June 27, 2014
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Exhibit A
Control Persons and Principal Holders of Securities
Control Persons are those beneficial owners who may have the power to exercise a controlling influence over the management or policies of a company as a result of their ownership of more than 25% of the voting securities of the company. Listed below are shareholders who owned of record or were known by the funds to own beneficially five percent or more of the outstanding shares of a class of the Fund as of May 30, 2014.
Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
Direxion Monthly S&P 500® Bull Fund |
Investor | TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
45.48 | % | ||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
28.65 | % | ||||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
10.82 | % | ||||||
Direxion Monthly S&P 500® Bear Fund |
Investor | Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
32.66 | % | ||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
30.29 | % | ||||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
23.01 | % | ||||||
Direxion Monthly Small Cap Bull 2X Fund |
Investor | National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
39.68 | % |
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Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
25.09 | % | ||||||
TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
12.92 | % | ||||||
Direxion Monthly Small Cap Bear 2X Fund | Investor | National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
52.50 | % | ||||
TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
39.48 | % | ||||||
Direxion Monthly NASDAQ-100 Bull 2X Fund | Investor | Trust Company of America PO Box 6503 Engelwood, CO 80155-6503 |
70.98 | % | ||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
12.10 | % | ||||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
10.10 | % | ||||||
Direxion Monthly Latin America Bull 2X Fund | Investor | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
39.95 | % | ||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
27.72 | % |
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Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
7.19 | % | ||||||
E*Trade Clearing LLC P.O. Box 484 Jersey City, NJ 07303-0484 |
5.48 | % | ||||||
Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
5.07 | % | ||||||
Direxion Monthly China Bull 2X Fund | Investor | National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
27.72 | % | ||||
Patrick J. Cullinane 950 North Kings Road Unit 348 West Hollywood, CA 90069-6220 |
16.37 | % | ||||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
11.29 | % | ||||||
John B. Cullinane 8900 2nd Ave NE Seattle, WA 98115-2912 |
8.79 | % | ||||||
Jae W. Kim 2901 Windmill Rd Torrance, CA 90505-7138 |
6.86 | % | ||||||
Myong W. Kim 2901 Windmill Rd Torrance, CA 90505-7138 |
6.86 | % | ||||||
E*Trade Clearing LLC P.O. Box 484 Jersey City, NJ 07303-0484 |
6.22 | % |
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Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
Direxion Monthly Commodity Bull 2X Fund | Investor | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
46.63 | % | ||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
32.04 | % | ||||||
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | Investor | National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
70.56 | % | ||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
11.12 | % | ||||||
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | Investor | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
39.25 | % | ||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
25.35 | % | ||||||
TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
22.69 | % | ||||||
Direxion Monthly Emerging Markets Bull 2X Fund | Investor | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
38.78 | % |
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Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
30.25 | % | ||||||
TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
14.82 | % | ||||||
Direxion Dynamic HY Bond Fund | Investor | Trust Company of America PO Box 6503 Engelwood, CO 80155-6503 |
63.84 | % | ||||
TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
17.95 | % | ||||||
Millennium Trust Company, LLC 2001 Spring Road, Suite 700 Oak Brook, IL 60523-1890 |
7.23 | % | ||||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
5.93 | % | ||||||
Direxion Indexed CVT Strategy Fund | Investor | Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
76.52 | % | ||||
Trust Company of America PO Box 6503 Engelwood, CO 80155-6503 |
21.55 | % | ||||||
Direxion Indexed CVT Strategy Bear Fund | Investor | Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
77.29 | % | ||||
Trust Company of America PO Box 6503 Engelwood, CO 80155-6503 |
20.26 | % | ||||||
Direxion Indexed Commodity Strategy Fund | Class A | First Clearing, LLC 2801 Market Street Saint Louis, MO 63103-2523 |
11.98 | % |
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Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
9.98 | % | ||||||
LPL Financial 9785 Towne Centre Dr. San Diego, CA 92121-1968 |
5.54 | % | ||||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
5.44 | % | ||||||
Institutional Class | National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
55.90 | % | |||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
23.50 | % | ||||||
Merrill Lynch, Pierce, Fenner & Smith 4804 Deer Lake Drive E Jacksonville, FL 32246 |
12.08 | % | ||||||
Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
8.36 | % | ||||||
Class C | Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
10.97 | % | |||||
Direxion Indexed Managed Futures Strategy Fund | Class A | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
52.28 | % |
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Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
14.40 | % | ||||||
Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
5.03 | % | ||||||
Institutional Class | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
25.59 | % | |||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
20.66 | % | ||||||
TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103-2226 |
8.41 | % | ||||||
Class C | Pershing LLC P.O. Box 2052 Jersey City, NJ 07303-2052 |
18.64 | % | |||||
Direxion/Wilshire Dynamic Fund | Class A | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
53.39 | % | ||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
5.99 | % | ||||||
Class C | Mary M. Tillema 4111 W. Grange Ave. Greenfield, WI 53221-3031 |
8.18 | % |
- 39 -
Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
Daniel L. Niesen 4820 Bay Vista Road Egg Harbor, WI 54209-8919 |
5.41 | % | ||||||
National Financial Services Corp. One World Financial Center 200 Liberty Street, Floor 5 New York, NY 10281-1003 |
5.27 | % | ||||||
Direxion Long/Short Global Currency Funds | Class A | Rafferty Asset Management, LLC 1301 Avenue of Americas, 35th Street New York, NY 10019 |
89.26 | % | ||||
Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
10.73 | % | ||||||
Institutional Class | Charles Schwab & Co. Inc. 4500 Cherry Creek Drive South Suite 700 Denver, CO 80246 |
23.13 | % | |||||
Morgan Stanley 1585 Broadway New York, NY 10036-8200 |
17.15 | % | ||||||
Citigroup Global Markets, Inc. 390 Greenwich St. New York, NY 10013-2375 |
17.11 | % | ||||||
Brown Brothers Harriman & Co 140 Broadway New York, NY 10036-8200 |
17.11 | % | ||||||
Stifel Nicolaus & Co 501 North Broadway St. Louis, MO 63102-2188 |
16.77 | % |
- 40 -
Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
Class C | Rafferty Asset Management, LLC 1301 Avenue of Americas, 35th Street New York, NY 10019 |
100.00 | % | |||||
Direxion U.S. Government Money Market Fund |
Investor | Charles A. Hanson 4040 Appaloosa Dr. Santa Teresa, NM 88008-9153 |
17.01 | % | ||||
Neubieser Family Revocable Trust 4040 Moorpark Ave, 220 San Jose, CA 95117-1852 |
16.57 | % | ||||||
Four Sigma Capital Limited 1 Cranberry Hill Lexington, MA 02421-7397 |
11.19 | % | ||||||
Robert A. Garvey 200 Esplanada Way Palm Beach, FL 3348-3018 |
10.35 | % | ||||||
Ralph W. Sirek 6380 Royal Grove Dr. Huntington Beach, CA 92648-6605 |
6.72 | % | ||||||
Direxion Dynamic VP HY Bond Fund |
Jefferson National Life Insurance Company 10350 Ormsby Park Place Louisville, KY 40223-4051 |
53.96 | % | |||||
First Security Benefit Life FBO Security Benefit Life Insurance One SW Security Benefit Place Topeka, KS 66636-0001 |
36.85 | % | ||||||
Nationwide Life Insurance Company 1 Nationwide Plaza Columbus, OH 43215 |
8.31 | % |
- 41 -
Fund |
Class |
Name of 5% Shareholder |
Percent Ownership |
|||||
Direxion VP Indexed Commodity Strategy Fund | Rafferty Asset Management, LLC 1301 Avenue of Americas, 35th Street New York, NY 10019 |
100.00 | % | |||||
Direxion VP Indexed Managed Futures Strategy Fund | Rafferty Asset Management, LLC 1301 Avenue of Americas, 35th Street New York, NY 10019 |
100.00 | % |
- 42 -
Exhibit B
Officers of the Fund
Name, Address |
Position(s) |
Term of Office |
Principal Occupation(s) |
Other | ||||
Daniel D. ONeill Age: 46 |
Chief Executive Officer and Chief Investment Officer |
One Year; Since 2006 | Managing Director of Rafferty, 1999-present. | N/A | ||||
Eric Falkeis: Age: 40 |
President | One Year; Since 2014 | Chief Operating Officer, since March 2013, President, Rafferty, from March 2013-March 2014; formerly, Senior Vice President, USBancorp Fund Services, LLC (USBFS), September 2007 March 2013; Chief Financial Officer, USBFS, April 2006 March 2013; Vice President, USBFS, 1997-2007; formerly, Chief Financial Officer, Quasar Distributors, LLC (2000-2003). | Trustee, Professionally Managed Portfolios (45 Funds) | ||||
Patrick J. Rudnick Age: 40 |
Principal Financial Officer and Assistant Secretary | One Year; Since 2010 | Senior Vice President and Principal Financial Officer, Rafferty Asset Management, LLC, since March 2013; formerly, Vice President, USBFS, (2006 2013); formerly, Manager, PricewaterhouseCoopers LLP (1999-2006). | N/A |
- 43 -
Name, Address and |
Position(s) Held |
Term of Office |
Principal |
Other | ||||
Angela Brickl Age: 38 |
Chief Compliance Officer
Secretary |
One Year; Since 2012
One Year; Since 2011 |
General Counsel and Chief Compliance Officer, Rafferty, since October 2010; Summer Associate at Skadden, Arps, Slate, Meagher & Flom, LLP, May August 2009; Summer Associate at Foley & Lardner, LLP May - August 2008; Vice President USBFS November 2003 August 2007. | N/A |
(1) | The address for each officer of the Trusts is 1301 Avenue of the Americas, 35th Floor, New York, NY 10019 |
(2) | Each officer of the Trusts holds office until his or her successor is elected and qualified or until his or her earlier death, inability to serve, removal or resignation. |
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Exhibit C
Audit Committee Charter
I. | Membership and Qualifications |
The Audit Committee of the Board of Trustees (Board) of Direxion Funds, Direxion Insurance Trust and Direxion Shares ETF Trust (each a Trust and collectively, the Trusts), each consisting of multiple series (each a Fund and collectively, the Funds), shall be composed entirely of independent trustees. A trustee shall be deemed to be independent if he or she (1) is not an interested person of any Fund, as that term is defined in the Investment Company Act of 1940, (2) has not accepted, directly or indirectly, any consulting, advisory or other compensatory fee from the Trusts, except for services as a member of the Board or a committee of the Board, and (3) meets the independence requirements any applicable rule of any exchange on which shares of each Trust are listed, if shares of that Trust are listed on an exchange. The Board shall determine annually whether any member of the Audit Committee qualifies as an audit committee financial expert as that term is defined in Item 3 of Form N-CSR.
II. | Purposes of the Audit Committee |
The purposes of the Audit Committee shall be:
(a) | to oversee generally each Funds accounting and financial reporting policies and practices, their internal controls and, as appropriate, the internal controls of certain service providers; |
(b) | to oversee generally the quality and objectivity of each Funds financial statements and the independent audit thereof; |
(c) | to oversee the quality and integrity of each Funds financial statements and the independent audit thereof; |
(d) | to assist the Board with its oversight of each Trusts compliance with legal and regulatory requirements that relate to each Funds accounting and financial reporting, internal controls and independent audits; |
(e) | to approve, prior to appointment, the engagement of each Trusts independent auditors and, in connection therewith, to review and evaluate the qualifications, independence and performance of the Trusts independent auditors; and |
(f) | to act as a liaison between each Trusts independent auditors and the Board. |
The independent auditors shall report directly to the Audit Committee.
- 45 -
III. | Duties and Powers |
To carry out its purposes, the Audit Committee shall have the following duties and powers:
(a) | to approve, prior to appointment, the engagement of auditors to perform an annual audit and provide their opinion on each Trusts financial statements, and the auditors compensation; to recommend to the Board the selection, retention or termination of each Trusts auditors and, in connection therewith, to evaluate the independence of such auditors, including the nature and extent of any consulting services the independent auditors or their affiliates may provide to Rafferty Asset Management, LLC (RAM) or its affiliates; and to receive annually the auditors specific representations as to their independence; |
(b) | to oversee the work of the independent auditors (including resolution of disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for each Fund; |
(c) | to approve, prior to appointment, the engagement of each auditor to provide other audit services to the Trusts or to provide non-audit services to the Trusts, RAM or any entity controlling, controlled by, or under common control with RAM (adviser affiliate) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts; |
(d) | to develop, to the extent deemed appropriate by the Audit Committee, policies and procedures for pre-approval of the engagement of each Trusts auditors to provide any of the services described in (b) above; |
(e) | to consider the controls applied by the auditors and management to assure that all items requiring pre-approval by the Audit Committee are identified and referred to the Audit Committee in a timely fashion; |
(f) | to consider whether the non-audit services provided by the Trusts auditors to RAM or any adviser affiliate that provides ongoing services to the Trusts, which were not pre-approved by the Audit Committee, are compatible with maintaining the auditors independence; |
(g) | to meet with each Trusts independent auditors, including private meetings, as necessary (i) to review the arrangements for and scope of the annual audit and any special audits; (ii) to discuss any matters of concern relating to each Funds financial statements, including any adjustments to such statements recommended by the independent auditors, or other results of said audit; (iii) to consider the independent auditors comments with respect to each Funds accounting and financial reporting policies, procedures and internal accounting controls and RAMs responses thereto; and (iv) to review the form of opinion the auditors propose to render to the Board and shareholders; |
- 46 -
(h) | to consider the effect upon each Fund of any changes in accounting principles or practices proposed by RAM or the auditors; |
(i) | to review and approve the fees proposed to be charged by the auditors for audit and non-audit services; |
(j) | to review with each Trusts President and Treasurer in connection with their certifications on Form N-CSR any significant deficiencies in the design or operation of disclosure controls and procedures or material weaknesses therein and any reported evidence of fraud involving management or other employees who have a significant role in each Trusts disclosure controls and procedures; |
(k) | to engage independent counsel, and other advisers, as the Audit Committee determines necessary to carry out its duties; |
(l) | to establish procedures for the receipt, retention and treatment of complaints received by the Trusts regarding accounting, internal accounting controls or audit matters, and for the confidential, anonymous submission by any employee of the Funds, RAM or its affiliates, or any other provider of accounting related services for the Trusts of concerns regarding questionable accounting or auditing matters, as set forth in Appendix A; |
(m) | to investigate improprieties or suspected improprieties in Fund operations; and |
(n) | to report its activities to the Board on a regular basis and to make such recommendations with respect to the above and other matters as the Audit Committee may deem necessary or appropriate. |
IV. | Operations and Responsibilities |
The Committee shall meet on a regular basis and be empowered to hold special meetings as circumstances require. The Committee shall meet with the Treasurer of each Trust at such times as the Committee deems appropriate.
The Trusts will provide the Audit Committee with appropriate funding, as determined by the Audit Committee, for the payment of (a) compensation to the Trusts independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Trust, (b) compensation to any adviser employed by the Audit Committee, and (c) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
Nothing in this Charter shall be construed to reduce the responsibilities or liabilities of RAM, U.S. Bancorp Fund Services, LLC (USBFS), the Trusts administrator and the Direxion Funds and Direxion Insurance Trusts fund accountant, and The Bank of New York Mellon (BNYM), the Direxion Shares ETF Trusts fund accountant, or the Trusts independent auditors. The function of the Audit Committee is oversight; it is the responsibility of RAM, USBFS and BNYM to maintain appropriate
- 47 -
systems for accounting and internal controls, and the auditors responsibility to plan and carry out a proper audit. Specifically, RAM, USBFS and BNYM are responsible for: (1) the preparation, presentation and integrity of each Trusts financial statements; (2) the maintenance of appropriate accounting and financial reporting principles and policies; and (3) the maintenance of internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for planning and carrying out an audit consistent with applicable legal and professional standards and the terms of their engagement letter.
Although the Audit Committee is expected to take a detached and questioning approach to the matters that come before it, the Audit Committees oversight activities with respect to each Funds financial statements is not an audit, nor do the Audit Committees activities substitute for the responsibilities of the Trusts management for preparing, or the independent auditors for auditing, the financial statements. Members of the Audit Committee are not full-time employees of the Trusts and, in serving on the Audit Committee, are not, and do not hold themselves out to be, acting as accountants or auditors. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct field work or other types of auditing or accounting reviews or procedures.
In discharging their duties, the members of the Audit Committee are entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: (1) one or more officers of the Trusts whom Committee members reasonably believe to be reliable and competent in the matters presented; (2) legal counsel, public accountants, or other persons as to matters the trustees reasonably believe are within the persons professional or expert competence; or (3) another Board committee of which the Committee member is a non-member.
The Committee shall review this Charter periodically and recommend any changes to the Board.
Last Revised: May 8, 2014
- 48 -
Appendix A
Audit Committee of the Board of Trustees
WHISTLEBLOWER POLICIES AND PROCEDURES
The Audit Committee of the Board of Trustees (the Board) of Direxion Funds, Direxion Insurance Trust, and Direxion Shares ETF Trust (each a Trust and collectively, the Trusts) has established these procedures for (a) the receipt, retention, and treatment of complaints received by the Trusts regarding accounting, internal accounting controls or auditing matters for the Trusts, and (b) the submission by employees of the Trusts, their investment adviser, administrator and any other provider of accounting-related services to the Trusts, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters relating to the Trusts or violations of the Code of Ethics for Principal Executive and Principal Financial Officers for the Trusts (collectively, Concerns).
Submission and Receipt of Reports
Any persons having Concerns may report such Concerns to the Chief Compliance Officer or the Chairman of the Audit Committee. Reports of Concerns may be submitted in writing or by e-mail, telephone or in-person, at the option of the reporting person. Reports may be anonymous at the option of the reporting person. Reporting persons who are willing to provide their names should indicate if they want their names kept confidential.
Handling and Investigation of Reports
The Chief Compliance Officer or the Chairman of the Audit Committee shall report to the Audit Committee all substantive reported Concerns in a timely manner. The Audit Committee shall investigate each Concern to the extent that the Committee deems necessary, and appropriate corrective action will be recommended to the Board of Trustees, if warranted by the investigation. The Audit Committee shall have the authority to retain outside legal counsel, accountants, private investigators, or any other resource deemed necessary to conduct a full and complete investigation of any reported Concern. The Audit Committee may, in its discretion, consult with any member of management or of the staff providing services to the Trusts who is not the subject of the allegation. With respect to any or all responsibilities contained in these procedures, the Audit Committee may act between meetings by authority delegated to one or more members and recommend appropriate corrective action to the Board.
No Retaliation
These Policies and Procedures are intended to enable individuals to raise Concerns for investigation and appropriate action. With this goal in mind, consistent with the policies of the Trusts, the Audit Committee shall not retaliate or tolerate any retaliation by
- 49 -
management of the Trusts directly or indirectly, including encouraging retaliation by others, against anyone who, in good faith, makes a report of a Concern or provides assistance to the Audit Committee, management or any other duly authorized person or group, including any governmental, regulatory or law enforcement body, investigating a report of a Concern. If the Chief Compliance Officer or Chairman of the Audit Committee becomes aware of a retaliatory action against a reporting person, the Chief Compliance Officer or Chairman of the Audit Committee shall inform the Audit Committee of such action.
Nothing in these Policies and Procedures shall limit the authority of the Trusts to discipline, penalize, suspend or terminate any employee for good and sufficient reasons, which shall not include having in good faith made a report of a Concern or provided assistance to the Audit Committee, management or any other duly authorized person or group, including any governmental, regulatory or law enforcement body investigating such report. A persons right to protection from retaliation does not extend immunity for any complicity in the matters that are the subject of the Concerns or any ensuing investigation.
Confidentiality
Reports of Concerns, and investigations pertaining thereto, shall be kept confidential to the extent possible, consistent with the need to conduct an adequate investigation. The Chief Compliance Officer or Chairman of the Audit Committee shall take reasonable steps necessary to protect the identity of any person making a report of a Concern so as to prevent any officer, employee, contractor, sub-contractor or agent from being in a position to take any retaliatory action against such person making such report, including encouraging others to take retaliatory action.
Recordkeeping
The Audit Committee shall retain as a part of its records any reports of Concerns received pursuant to these Policies and Procedures, and any related documentation regarding investigations or remedial action with respect to any reported Concerns, for a period of no less than seven (7) years. Any report of a Concern received by the Trusts Chief Compliance Officer, but not delivered by him or her to the Committee, shall be retained by the Chief Compliance Officer for a period of no less than seven (7) years.
Last Revised: May 8, 2014
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Exhibit D
NOMINATING COMMITTEE CHARTER
I. | Membership and Qualifications |
The Nominating Committee (Committee) of the Boards of Trustees (Boards) of the Direxion Fund, Direxion Insurance Trust and Direxion ETF Shares Trust (each a Trust and collectively the Trusts), each consisting of multiple series (each a Fund and collectively the Funds) shall be composed entirely of Board members who are not interested persons of each Trust (Independent Trustees), as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (1940 Act) and the rules thereunder.
II. | Purposes of the Nominating Committee |
The purposes of the Nominating Committee shall be to:
(1) | Identify and recommend for nomination candidates to serve as Board members who are not interested persons of the Trusts as that term is defined in the Investment in the 1940 Act |
(2) | Evaluate and make recommendations to the full Boards regarding potential Board candidates who are interested persons of the Trusts (Interested Persons) as that term is defined by the 1940 Act; |
(3) | Review periodically the workload and capabilities of Trustees and, as the Committee deems appropriate, to make recommendations to a Board if such a review suggests that changes to the size or composition of the Board are warranted; and |
III. | Duties and Powers |
To carry out its purpose, the Nominating Committee shall have the following powers:
(1) | Consider recommendations for candidates from any source it deems appropriate, including shareholders. The names of potential candidates may be accepted from Board members, Fund shareholders, legal counsel to the Independent Trustees or other such sources as the Committee deems appropriate. |
(2) | Evaluate candidates qualifications for Board membership and their independence from each Funds investment adviser and other principal service providers. The Committee shall consider the effect of any relationships delineated in the 1940 Act or other types of relationships, e.g., business, financial or family relationships with the investment adviser(s) or other principal service providers, which might impair independence. In determining candidates qualifications for Board membership, the Committee may consider all factors it may determine to be relevant to fulfilling the role of being a member of the Boards. |
- 51 -
(3) | Recommend to the Board of each Trust the selection and nomination of candidates for Trustee, whether proposed to be appointed by the Board or to be elected by shareholders. |
(4) | Periodically review the composition of each Board and the backgrounds of the Board members to determine whether it may be appropriate to recommend adding or removing Trustees, and propose to the Board and the Independent Trustees changes to the number of positions on the Board and the addition or removal of Trustees. |
IV. | Criteria for Selecting Nominees |
The Committee shall nominate candidates for new or vacant Board positions based on its evaluation of which applicants or potential candidates are most qualified to serve and protect the interests of each Funds shareholders and to promote the effective operations of each Board. In order for the Committee to consider an applicant or potential candidate, the Committee initially must receive at least the following information regarding such person: (1) name; (2) date of birth; (3) education; (4) business, professional or other relevant experience and areas of expertise; (5) current business, professional or other relevant experience and areas of expertise; (6) current business and home addresses and contact information; (7) other board positions or prior experience; and (8) any knowledge and experience relating to investment companies and investment company governance (collectively, Preliminary Information).
A successful candidate should have certain uniform characteristics, such as a very high level of integrity, appropriate experience, and a commitment to fulfill the fiduciary duties inherent in Board membership. The Committee also shall consider the extent to which potential candidates possess sufficiently diverse skill sets and diversity characteristics that would contribute to the Boards overall effectiveness.
V. | Submissions by Shareholders of Potential Nominees |
The Committee shall consider potential candidates for nomination identified by one or more shareholders of a Fund. Shareholders can submit recommendations in writing to the attention of the chair of the Committee at an address to be maintained by Fund management for this purpose. In order to be considered by the Committee, any shareholder recommendation must include the Preliminary Information set forth in Section IV above.
Following an initial evaluation by the Committee based on the Preliminary Information, a successful candidate proposed by a shareholder must:
(1) | Demonstrate the integrity, experience, sound business judgment, talents and commitment necessary to fulfill the fiduciary duties inherent in Board membership and to add value to the Boards performance of its duties; |
- 52 -
(2) | Be prepared to submit written answers to a questionnaire seeking professional and personal information that will assist the Committee to evaluate the candidate and to determine, among other matters, whether the candidate would be an Independent Board Member under the 1940 Act or otherwise have material relationships with key service providers to the Funds; |
(3) | Submit character references and agree to appropriate background checks; |
(4) | Demonstrate the disposition to act independently from management, but effectively within a Board composed of numerous members; |
(5) | Be willing to meet with one or more members of the Committee at a time and location convenient to those Committee members in order to discuss the candidates qualifications; and |
(6) | If nominated and elected, be able to prepare for and attend in person Board and committee meetings at various locations in the United States. |
VI. | Interested Trustees |
The Committee shall evaluate those Interested Persons who are proposed by management of the Trusts to serve as Board members and then make appropriate recommendations to the Boards regarding such proposed nominees. The Committee shall review such information as it deems appropriate in order to make this evaluation. At its option, the Committee also can seek to interview any such potential nominee.
VII. | Operations of the Committee |
(1) | The Committee shall meet on an as-needed basis. Meetings may be in person or by telephone, and may be called by the chair or a majority of the members with reasonable notice thereof. |
(2) | The Committee shall ordinarily meet in person; however, members may attend telephonically, and the Committee may act by written consent, to the extent permitted by law and the Trusts bylaws. |
(3) | The Committee shall have the authority to meet privately, to admit non-members individually by invitation and to retain special counsel and other experts or consultants at the reasonable expense of the appropriate Fund(s). |
(4) | The Committee may select one of its members to be chair. A majority of the members of the Committee shall constitute a quorum for the transaction of business at any meeting of the Committee. The action of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the action of the Committee. |
(5) | The Committee shall review this Charter at least annually and recommend any necessary changes to the Boards. |
Dated: November 26, 2013
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Exhibit E
QUALIFIED LEGAL COMPLIANCE COMMITTEE
POLICIES AND PROCEEDURES
The Audit Committee of Direxion Funds, Direxion Insurance Trust, and Direxion Shares ETF Trust (each a Trust and collectively the Trusts) shall serve as the Qualified Legal Compliance Committee (QLCC) for the Trusts for the purpose of compliance with Rules 205.2(k) and 205.3(c) of the Code of Federal Regulations, regarding alternative reporting procedures for attorneys retained or employed by an issuer who appear and practice before the Securities and Exchange Commission on behalf of the issuer (the issuer attorneys). An issuer attorney who becomes aware of evidence of a material violation of applicable U.S. federal or state securities law, material breach of a fiduciary duty under U.S. federal or state law or similar material violation by a Trust, or by any officer, director, employee, or agent of a Trust, may report evidence of such material violation to the QLCC as an alternative to the reporting requirements of Rule 205.3(b) (which requires reporting to the chief legal officer and potentially up the ladder to other entities).
Upon receipt of such a report, the QLCC shall have the duty and responsibility:
| to inform the Trusts chief legal officer and chief executive officer (or equivalents thereof) of such report, unless the reporting attorney reasonably believes that it would be futile to report evidence of a material violation to the Trusts chief legal officer and chief executive officer; |
| to determine whether an investigation is necessary regarding such report and, if it determines an investigation is necessary or appropriate, to notify a Trusts Board; initiate an investigation, which may be conducted either by the chief legal officer or by outside attorneys; and retain such additional expert personnel as the QLCC deems necessary; and |
| at the conclusion of any such investigation, to recommend, by majority vote, that a Trust implement an appropriate response to evidence of a material violation, and inform the chief legal officer and the chief executive officer and the Trusts Board of the results of any such investigation and the appropriate remedial measures to be adopted. |
The QLCC shall have the authority and responsibility, acting by majority vote, to take all other appropriate action, including the authority to notify the SEC in the event that the Trust fails in any material respect to implement an appropriate response that the QLCC has recommended.
Any reports received by the QLCC shall be retained by the Trusts for a period of two years, unless otherwise required by law.
Adopted: February 10, 2010
Last Revised: November 26, 2013
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Exhibit F
THREE EASY WAYS TO VOTE YOUR PROXY | ||
PROXY TABULATOR | To vote by Internet | |
P.O. BOX 9112 | 1) Read the Proxy Statement and have the proxy card below at hand. | |
FARMINGDALE, NY 11735 | 2) Go to website www.proxyvote.com. | |
3) Follow the instructions provided on the website. | ||
To vote by Telephone | ||
1) Read the Proxy Statement and have the proxy card below at hand. | ||
2) Call 1-800-690-6903 | ||
3) Follow the instructions. | ||
To vote by Mail | ||
1) Read the Proxy Statement. | ||
2) Check the appropriate boxes on the proxy card below. | ||
3) Sign and date the proxy card. | ||
4) Return the proxy card in the envelope provided. | ||
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
M54722-S03174 KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DIREXION FUNDS AND DIREXION INSURANCE TRUST | ||||||||||||||||
The Board of Trustees recommends that you vote FOR the following proposals: | ||||||||||||||||
1. | Election of Trustees | |||||||||||||||
Nominee for Election: | ||||||||||||||||
For | Withhold | |||||||||||||||
Gerald E. Shanley, III | ¨ | ¨ | ||||||||||||||
John A. Weisser | ¨ | ¨ | ||||||||||||||
David L. Driscoll | ¨ | ¨ | ||||||||||||||
Jacob C. Gaffey | ¨ | ¨ | ||||||||||||||
Daniel D. ONeill | ¨ | ¨ | ||||||||||||||
Eric W. Falkeis | ¨ | ¨ | ||||||||||||||
Signature(s) should be exactly as name or names appearing on this proxy. If shares are held jointly, each shareholder is requested to sign, but only one Signature is required. If signing is by attorney, executor, administrator, trustee or guardian, please give full title. By signing this proxy card, receipt of the accompanying Notice of Special Meeting of Shareholders and Proxy Statement is acknowledged. | ||||||||||||||||
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Signature [PLEASE SIGN Date WITHIN BOX]
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Signature [Joint Owners] Date |
The Notice and Proxy Statement for this Meeting is available at www.proxyvote.com.
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M54723-S03174
DIREXION FUNDS AND DIREXION INSURANCE TRUST The undersigned shareholder of Direxion Funds or Direxion Insurance Trust (the Trusts) hereby appoints Angela M. Brickl and Patrick Rudnick, and each of them, the proxies of the undersigned, with full power of substitution, to vote, as indicated herein, all of the shares of the fund standing in the name of the undersigned at the close of business on June 23, 2014 at a Special Meeting of Shareholders to be held at the office of Rafferty Asset Management, LLC. (Rafferty), 241 N. Broadway, Suite 202, Milwaukee, WI 53202, and at any and all adjournments thereof, with all of the powers the undersigned would possess if then and there personally present and especially (but without limiting the general authorization and power hereby given) to vote as indicated on the proposals, as more fully described in the Proxy Statement for the meeting. PLEASE SIGN AND DATE ON THE REVERSE SIDE
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