N-CSR

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-09761

Direxion Insurance Trust

(Exact name of registrant as specified in charter)

33 Whitehall Street, 10^th Floor
New York, NY 10004

(Address of principal executive offices) (Zip code)

Daniel D. O’Neill

33 Whitehall Street, 10^th Floor

New York, NY 10004

(Name and address of agent for service)

646-572-3390

Registrant’s telephone number, including area code

Date of fiscal year end: December 31, 2008

Date of reporting period: December 31, 2008

 Item 1:  Report to Stockholders

ANNUAL REPORT DECEMBER 31, 2008

Evolution VP Managed Bond Fund

Evolution VP All-Cap Equity Fund

33 Whitehall Street, 10th Floor

New York, New York 10004

(800) 851-0511

Table of Contents

Letter to Shareholders	2
Performance Summary	3
Expense Example	5
Allocation of Portfolio Holdings	6
Schedule of Investments	7
Financial Statements	12
Financial Highlights	15
Notes to the Financial Statements	16
Report of Independent Registered Public Accounting Firm	23
Additional Information	24
Information on Board of Trustees and Officers	25

Letter to Shareholders

Dear Shareholders,

This Annual Report for the Evolution VP Funds covers the annual period of January 1, 2008 to December 31, 2008 (the “Annual Period”). The Evolution VP Managed Bond Fund (the “Managed Bond Fund”) and the Evolution VP All-Cap Equity Fund (the “All-Cap Equity Fund”) investment objectives are to seek high appreciation on an annual basis consistent with a high tolerance for risk. Flexible Plan Investments, Ltd. (the “Sub-Advisor”), serves as the sub-advisor to the Evolution Funds. During the Annual Period, the S&P 500 Index returned −37% on a total return basis. Increased volatility, erratic energy and commodity prices, decreased consumer confidence, problems in the financial system, and the potential failure of U.S. Auto Industry have all negatively affected U.S. Equities. During the Annual Period, U.S. equities declined in the first 3 months, rallied in April and May and then fell sharply in from June through December. Bonds fared better than stocks with the Barclays Aggregate Bond Index (formerly Lehman Aggregate Bond Index) rising 5.24% during the Annual Period. For the Annual Period, the Managed Bond Fund returned 3.15%, on a total return basis, compared with a return of 5.24% for the Barclays Aggregate Bond Index. For the Annual Period, the All-Cap Equity Fund returned −26.37%, on a total return basis, compared with the S&P 500 Index return of −37%.

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

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

Sincerely,

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

The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate and an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. To obtain performance data current to the most recent month-end, please call, toll-free, 1-800-851-0511 or visit www.direxionfunds.com.

The total annual fund operating expense ratio of the Evolution VP Managed Bond Fund and Evolution VP All-Cap Equity Fund is 2.00% and 2.00%, respectively, net of any fee, waivers or expense reimbursements.

An investment in any of the Direxion Funds is subject to a number of risks that could affect the value of its shares. It is important that investors closely review and understand these risks before making an investment. Investors considering an investment may obtain a prospectus by calling 1-800-851-0511. Investors should read the prospectus carefully for more complete information, including charges, expenses, objectives, and additional risks, before investing.

* Five-Star rating is out of 415 funds in the Mid-Cap Blend Category as of 11-30-2008.

Distributed by: Rafferty Capital Markets, LLC
Date of First Use: February 27, 2009

Evolution VP Managed Bond Fund

July 1, 2004¹ - December 31, 2008

	Average Annual Total Return3
							Since
	1 Year			3 Year			Inception1
Evolution VP Managed Bond Fund		3.15	%		2.17	%		1.31	%
Barclays Capital Aggregate Bond Index2		5.24	%		5.51	%		5.08	%
Lipper High Yield Bond Fund Index		(28.84)	%		(7.15)	%		(2.39)	%

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions of the redemption of fund shares. The performance of the Barclays Capital Aggregate Bond Index and the Lipper High Yield Bond Fund Index does not reflect the deduction of fees associated with a mutual fund, such as investment management fees. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, Rafferty Asset Management, LLC, reimbursed fees for various expenses. Had these reimbursements not been in effect, performance would have been lower.

The performance data quoted represents past performance; past performance does not guarantee future results.

Market Exposure

	%
Investment Type	of Net Assets
Investment Companies		100.4%
Total Exposure		100.4%

“Market Exposure” includes the value of total investments (including the notional value and any upfront payments of swaps) and excludes any short-term investments and cash equivalents divided by Net Assets.

1	Commencement of operations was July 1, 2004.
2	Formerly Lehman Aggregate Bond Index.
3	As of December 31, 2008.

DIREXION EVOLUTION VP FUNDS  3

Evolution VP All-Cap Equity Fund

July 1, 2004¹ - December 31, 2008

	Average Annual Total Return2
							Since
	1 Year			3 Year			Inception1
Evolution VP All-Cap Equity Fund		(26.37)	%		(5.06)	%		(0.24	)	%
S&P 500 Index		(37.00)	%		(8.36)	%		(2.93	)	%

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions of the redemption of fund shares. The performance of the S&P 500 Index does not reflect the deduction of fees associated with a mutual fund, such as investment management fees. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, Rafferty Asset Management, LLC, reimbursed fees for various expenses. Had these reimbursements not been in effect, performance would have been lower.

The performance data quoted represents past performance; past performance does not guarantee future results.

Market Exposure

	%
Investment Type	of Net Assets
Common Stock		71.6	%
Investment Companies		1.0	%
Futures Contracts		(46.0)	%
Total Exposure		26.6	%

“Market Exposure” includes the value of total investments (including the notional value and any upfront payments of swaps) and excludes any short-term investments and cash equivalents divided by Net Assets.

1	Commencement of operations was July 1, 2004.
2	As of December 31, 2008.

4  DIREXION EVOLUTION VP FUNDS

Expense Example

December 31, 2008 (Unaudited)

As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held the entire period (July 1, 2008 — December 31, 2008).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. Although the Fund charges no sales load or transactions fees, you will be assessed fees for outgoing wire transfers, returned checks or stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request a redemption be made by wire transfer, currently a $15.00 fee is charged by the Funds’ transfer agent. However, the example below does not include portfolio trading commissions and related expenses or other extraordinary expenses as determined under generally accepted accounting principles. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as wire transfers, returned checks or stop payment orders. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

DIREXION EVOLUTION VP FUNDS  5

Expense Example Tables

December 31, 2008 (Unaudited)

				Beginning		Ending		Expenses
	Expense			Account Value		Account Value		Paid During
	Ratio1			July 1, 2008		December 31, 2008		Period2
Evolution VP Managed Bond Fund
Based on actual fund return		2.00	%	$	1,000.00	$	1,031.00	$	10.21
Based on hypothetical 5% return		2.00	%		1,000.00		1,015.08		10.13
Evolution VP All-Cap Equity Fund
Based on actual fund return		2.00	%		1,000.00		775.77		8.93
Based on hypothetical 5% return		2.00	%		1,000.00		1,015.08		10.13

1	Annualized ratio of net expenses incurred in the most recent fiscal half-year.
2	Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/period, then divided by 366.

Allocation of Portfolio Holdings

December 31, 2008 (Unaudited)

							Investment
	Cash*			Common Stock			Companies			Futures**
Evolution VP Managed Bond Fund		0	%***		—			100	%		—
Evolution VP All-Cap Equity Fund		28	%		72	%		1	%		(1	)%

*	Cash, cash equivalents and other assets less liabilites.
**	Allocated by unrealized appreciation/depreciation.
***	Percentage is less than 0.5%.

6  DIREXION EVOLUTION VP FUNDS

Evolution VP Managed Bond Fund

Schedule of Investments

December 31, 2008

Shares			Value
INVESTMENT COMPANIES - 100.4%
	4,626	Alliance World Dollar Government Fund II	$	35,204
	5,839	BlackRock Corporate High Yield Fund VI		36,611
	3,834	BlackRock Floating Rate Income Strategy Fund		33,586
	5,353	BlackRock Preferred Income Strategies Fund		34,848
	3,332	Evergreen Multi-Sector Income Fund		33,986
	8,389	iShares Barclays 1-3 Year Treasury Bond Fund		710,196
	767	iShares Barclays 1-3 Yr Credit Bond Fund		77,344
	9,327	iShares Barclays 20+ Year Treasury Bond Fund		1,113,178
	3,850	iShares Barclays 3-7 Yr Treasury Bond Fund		444,944
	15,966	iShares Barclays 7-10 Year Treasury Bond Fund		1,573,130
	15,433	iShares Barclays Aggregate Bond Fund		1,603,180
	4,956	iShares Barclays MBS Bond Fund		519,934
	1,806	iShares Barclays Short Treasury Bond		199,364
	5,298	iShares GS $InvesTop Corporate Bond Fund		538,542
	3,323	iShares S&P National Municipal Bond Fund		330,639
	6,461	MFS Charter Income Trust		47,424
	5,746	MFS Government Markets Income Trust		45,393
	5,745	MFS Intermediate Income Trust		35,906
	9,090	Putnam Premier Income Trust		35,178
	2,172	SPDR Barclays Capital 1-3 Month T-Bill Fund		99,478
	7,923	SPDR Barclays Capital International Treasury Bond Fund		431,011
	4,053	Templeton Emerging Markets Income Fund		37,044
	34,570	Vanguard Total Bond Market ETF		2,737,944
	3,077	Western Asset Emerging Market Debt Fund		38,740
	7,207	Western Asset High Income Fund II		36,395
	3,406	Western Asset/Claymore Inflation-Linked Opportunities & Income Fund		35,729
		TOTAL INVESTMENT COMPANIES (Cost $10,076,809)	$	10,864,928
SHORT TERM INVESTMENTS - 4.6%
MONEY MARKET FUNDS - 4.6%
	132,379	AIM Liquid Assets Portfolio Fund(a)		132,379
	132,378	AIM STIT-STIC Prime Portfolio		132,378
	97,136	Federated Prime Obligations Fund		97,136
	132,378	Fidelity Institutional Money Market Portfolio		132,378
		TOTAL SHORT TERM INVESTMENTS (Cost $494,271)	$	494,271
		TOTAL INVESTMENTS (Cost $10,571,080) - 105.0%	$	11,359,199
		Liabilities in Excess of Other Assets - (5.0)%		(541,018	)
		TOTAL NET ASSETS - 100.0%	$	10,818,181

Percentages are stated as a percent of net assets.

^(a) Non Income Producing

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

7  DIREXION EVOLUTION VP FUNDS

Evolution VP All-Cap Equity Fund

Schedule of Investments

December 31, 2008

Shares			Value
COMMON STOCKS - 71.6%
Aerospace & Defense - 2.5%
	13,464	BE Aerospace, Inc.(a)	$	103,538
	1,103	Ceradyne, Inc.(a)		22,402
	621	General Dynamics Corp.		35,763
	844	Goodrich Corp.		31,245
	3,373	Kaman Corp.		61,152
	847	L-3 Communications Holdings, Inc.		62,492
	1,712	Teledyne Technologies, Inc.(a)		76,270
				392,862
Auto Components - 0.3%
	1,646	BorgWarner, Inc.		35,833
	400	Wabco Holdings, Inc.(a)		6,316
				42,149
Automobiles - 0.1%
	341	Honda Motor Co. Ltd. ADR		7,277
	112	Toyota Motor Corp. ADR		7,329
				14,606
Beverages - 0.2%
	860	Hansen Natural Corp.(a)		28,836
Biotechnology - 1.0%
	2,184	Gilead Sciences, Inc.(a)		111,690
	342	United Therapeutics Corp.(a)		21,392
	2,166	ViroPharma, Inc.(a)		28,201
				161,283
Capital Markets - 1.3%
	1,365	Ameriprise Financial		31,886
	1,346	The Charles Schwab Corp.		21,765
	1,261	Greenhill & Co., Inc.		87,980
	3,928	Knight Capital Group, Inc. - Class A(a)		63,437
				205,068
Chemicals - 2.5%
	3,555	Balchem Corp.		88,555
	2,533	Celanese Corp.		31,485
	573	CF Industries Holdings, Inc.		28,169
	216	Ecolab, Inc.(a)		7,592
	239	Methanex Corp.(a)		2,686
	1,588	Monsanto Co.		111,716
	190	Mosaic Co.(a)		6,574
	878	NewMarket Corp.		30,651
	397	Terra Industries, Inc.(a)		6,618
	748	Terra Nitrogen Co. L.P.		70,881
				384,927
Commercial Banks - 7.0%
	296	Associated Banc-Corp		6,195
	639	Banco Itau Holding Financeira S.A.		7,412
	2,274	Bank of Hawaii Corp.		102,717
	4,919	BB&T Corp.		135,076
	427	Cullen/Frost Bankers, Inc.		21,640
	388	First Financial Bankshares, Inc.		21,422
	8,052	Hudson City Bancorp, Inc.		128,510
	278	KB Financial Group, Inc. ADR(a)		7,284
	2,214	M&T Bank Corp.		127,106
	437	National Penn Bancshares, Inc.		6,341
Commercial Banks (continued)
	16,124	Regions Financial Corp.		128,347
	460	TCF Financial Corp.		6,284
	5,137	U.S. Bancorp		128,476
	4,376	Wells Fargo & Co.		129,004
	5,318	Zions Bancorporation		130,344
				1,086,158
Commercial Services & Supplies - 1.7%
	1,184	Huron Consulting Group, Inc.(a)		67,808
	332	Layne Christensen Co.(a)		7,971
	926	Manpower, Inc.		31,475
	1,437	Multi Color Corp.		22,733
	11,039	The Standard Register Co.		98,578
	99	Strayer Education, Inc.		21,227
	161	Watson Wyatt Worldwide, Inc. - Class A(a)		7,699
				257,491
Communications Equipment - 1.6%
	1,706	Cisco Systems, Inc.(a)		27,808
	2,074	Comtech Telecommunications Corp.(a)		95,030
	3,702	Corning, Inc.		35,280
	463	Nokia Corp. ADR		7,223
	1,672	Research In Motion Ltd.(a)		67,850
	951	Telefonaktiebolaget LM Ericsson ADR		7,427
				240,618
Computers & Peripherals - 1.5%
	323	Apple Computer, Inc.(a)		27,568
	3,041	Hewlett-Packard Co.		110,358
	8,349	Western Digital Corp.(a)		95,596
				233,522
Construction & Engineering - 0.4%
	278	EMCOR Group, Inc.(a)		6,236
	166	Fluor Corp.(a)		7,448
	1,326	Foster Wheeler Ltd.(a)		31,002
	438	Jacobs Engineering Group, Inc.(a)		21,068
				65,754
Diversified Consumer Services - 0.1%
	133	New Oriental Education & Technology Group, Inc. ADR(a)		7,303
Diversified Financial Services - 0.9%
	37	CME Group, Inc.(a)		7,700
	5,033	NYSE Euronext		137,804
				145,504
Electric Utilities - 1.1%
	1,086	Ameren Corp.		36,120
	533	Companhia Energetica de Minas Gerais		7,324
	3,409	The Southern Co.		126,133
				169,577
Electrical Equipment - 1.4%
	1,659	Arrow Electronics, Inc.(a)		31,256
	416	Avnet, Inc.(a)		7,575
	1,913	Dolby Laboratories, Inc.(a)		62,670

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

8  DIREXION EVOLUTION VP FUNDS

Evolution VP All-Cap Equity Fund

Schedule of Investments

December 31, 2008

Shares			Value
Electrical Equipment (continued)
	209	Emerson Electric Co.(a)	$	7,652
	686	Flir Systems, Inc.(a)		21,046
	1,133	II-VI, Inc.(a)		21,629
	955	Regal-Beloit Corp.		36,280
	1,303	Thomas & Betts Corp.(a)		31,298
				219,406
Energy Equipment & Services - 1.8%
	984	Baker Hughes, Inc.		31,557
	773	ENSCO International, Inc.		21,945
	1,987	Halliburton Co.		36,124
	1,946	Helmerich & Payne, Inc.		44,272
	1,181	National-Oilwell, Inc.(a)		28,864
	985	Noble Corp.		21,759
	732	Oceaneering International, Inc.(a)		21,330
	183	Schlumberger Ltd.(a)		7,746
	664	Transocean Ltd.(a)		31,374
	820	Unit Corp.(a)		21,910
	716	Weatherford International Ltd.(a)		7,747
				274,628
Food Products - 3.0%
	190	Cal-Maine Foods, Inc.(a)		5,453
	4,753	Corn Products International, Inc.		137,124
	3,919	General Mills, Inc.		238,079
	136	Nash Finch Co.		6,105
	1,174	Ralcorp Holdings, Inc.(a)		68,562
				455,323
Freight & Logistics - 1.4%
	527	C.H. Robinson Worldwide, Inc.		29,001
	127	Dryships, Inc.(a)		1,354
	5,417	Eagle Bulk Shipping, Inc.		36,944
	2,007	Expeditors International of Washington, Inc.		66,773
	2,820	Genco Shipping & Trading Ltd.		41,736
	657	TBS International Limited(a)		6,589
	2,680	Teekay Tankers Ltd.		34,036
				216,433
Health Care Equipment & Supplies - 2.9%
	2,083	Baxter International, Inc.		111,628
	1,741	Haemonetics Corp.(a)		98,367
	810	Immucor, Inc.(a)		21,530
	1,120	Kensey Nash Corp.(a)		21,739
	4,224	Mine Safety Appliances Co.		100,996
	2,194	Stryker Corp.		87,650
				441,910
Health Care Providers & Services - 1.4%
	483	Almost Family, Inc.(a)		21,725
	2,485	Bio-Reference Labs, Inc.(a)		65,181
	196	Chemed Corp.(a)		7,795
	2,746	Humana, Inc.(a)		102,371
	299	Landauer, Inc.		21,917
				218,989
Health Care Technology - 0.1%
	197	Cerner Corp.(a)		7,574
	519	HLTH Corporation(a)		5,429
				13,003
Hotels Restaurants & Leisure - 1.2%
	2,600	CEC Entertainment, Inc.(a)		63,050
	317	Ctrip.com International Ltd. ADR		7,545
	1,802	McDonald’s Corp.		112,066
				182,661
Household Durables - 0.6%
	4,842	Garmin Ltd.(a)		92,821
Household Products - 2.0%
	1,647	Colgate-Palmolive Co.		112,885
	894	Chattem, Inc.(a)		63,948
	2,404	Kimberly-Clark Corp.		126,787
				303,620
Industrial Conglomerates - 1.4%
	1,946	3M Co.		111,973
	1,526	Carlisle Cos., Inc.		31,588
	2,784	Raven Industries, Inc.		67,094
				210,655
Industrial & Construction Supplies - 0.9%
	1,859	Applied Industrial Technologies, Inc.		35,172
	957	Greif, Inc.		31,992
	225	MSC Industrial Direct Co., Inc. - Class A(a)		8,287
	1,997	NCI Building Systems, Inc.(a)		32,551
	1,676	WESCO International, Inc.(a)		32,229
				140,231
Insurance - 3.6%
	604	Ace Ltd.		31,964
	271	American Financial Group, Inc.		6,200
	122	Chubb Corp.		6,222
	2,508	Hanover Insurance Group, Inc.		107,769
	130	Infinity Property & Casualty Corp.		6,075
	1,065	IPC Holdings Ltd.		31,843
	1,774	Life Partners Holdings, Inc.		77,417
	1,666	Lincoln National Corp.		31,387
	5,273	Marsh & McLennan Companies, Inc.		127,976
	113	Navigators Group, Inc.(a)		6,205
	674	Presidential Life Corp.		6,666
	117	ProAssurance Corp.(a)		6,175
	2,253	Protective Life Corp.		32,331
	102	RLI Corp.		6,238
	160	Safety Insurance Group, Inc.		6,090
	278	Selective Insurance Group, Inc.		6,375
	807	Torchmark Corp.		36,073
	137	Travelers Companies, Inc.		6,192
	335	UnumProvident Corp.		6,231
	253	Validus Holdings Ltd.(a)		6,618
	196	Zenith National Insurance Corp.		6,188
				558,235

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

9  DIREXION EVOLUTION VP FUNDS

Evolution VP All-Cap Equity Fund

Schedule of Investments

December 31, 2008

Shares			Value
Internet & Catalog Retail - 0.8%
	385	Liberty Media Corp.(a)	$	6,730
	1,464	NutriSystem Inc.		21,360
	5,010	PetMed Express, Inc.(a)		88,326
				116,416
Internet Software & Services - 1.1%
	55	Baidu.com, Inc. ADR(a)		7,181
	450	Google, Inc.(a)		138,443
	1,426	j2 Global Communications, Inc.(a)		28,577
				174,201
IT Services - 1.9%
	3,735	Cognizant Technology Solutions Corp.(a)		67,454
	231	Global Payments, Inc.(a)		7,575
	299	Infosys Technologies Ltd. ADR		7,346
	8,445	Tyler Technologies, Inc.(a)		101,171
	2,148	Visa, Inc.		112,663
				296,209
Leisure Equipment & Products - 0.4%
	3,853	Callaway Golf Co.		35,795
	695	Marvel Entertainment, Inc.(a)		21,371
				57,166
Machinery - 1.8%
	2,537	Barnes Group, Inc.		36,787
	698	Caterpillar, Inc.		31,180
	1,181	Cummins, Inc.		31,568
	1,086	Dover Corp.		35,751
	633	Eaton Corp.		31,466
	924	Gardner Denver, Inc.(a)		21,566
	306	L.B. Foster Co.(a)		9,572
	704	Lincoln Electric Holdings, Inc.		35,855
	1,775	Pentair, Inc.		42,014
	131	Valmont Industries, Inc.(a)		8,038
				283,797
Media - 0.7%
	495	Grupo Televisa S.A. ADR		7,395
	13,593	New York Times Co.		99,637
	335	The Walt Disney Co.(a)		7,601
				114,633
Metals & Mining - 1.6%
	435	Carpenter Technology Corp.(a)		8,935
	842	Cliffs Natural Resources Inc.		21,564
	577	Companhia Siderurgica Nacional S.A. ADR		7,391
	764	Gold Fields Ltd. ADR		7,586
	2,417	Nucor Corp.		111,665
	345	Olympic Steel, Inc.(a)		7,028
	4,036	PAN American Silver Corp.(a)		68,895
	172	Randgold Resources Ltd. ADR		7,554
	184	Schnitzer Steel Industries, Inc. - Class A(a)		6,928
	175	Teck Cominco Ltd.(a)		861
				248,407
Multi-Utilities & Unregulated Power - 0.5%
	991	Energen Corp.		29,066
	2,034	MDU Resources Group, Inc.		43,894
	166	SCANA Corp.		5,909
				78,869
Oil & Gas - 1.9%
	6,347	Arch Coal, Inc.		103,393
	272	Knightsbridge Tankers Ltd.(a)		3,985
	1,305	Petro-Canada		28,566
	3,523	Petroquest Energy, Inc.(a)		23,815
	2,004	Ultra Petroleum Corp.(a)		69,158
	4,746	W&T Offshore, Inc.		67,963
				296,880
Oil, Gas & Consumable Fuels - 2.9%
	911	Apache Corp.		67,897
	284	Arena Resources, Inc.(a)		7,978
	814	Cimarex Energy Co.		21,799
	713	Denbury Resources, Inc.(a)		7,786
	1,713	Devon Energy Corp.		112,561
	3,965	Dorchester Minerals L.P.		62,924
	1,525	Murphy Oil Corp.		67,634
	182	Overseas Shipholding Group, Inc.(a)		7,664
	309	Petroleo Brasileiro S.A. ADR		7,567
	1,368	Pioneer Natural Resources Co.		22,134
	747	Southwestern Energy Co.(a)		21,641
	3,683	Stone Energy Corp.(a)		40,587
				448,172
Pharmaceuticals - 1.8%
	243	Alcon, Inc.		21,673
	10,032	American Oriental Bioengineering, Inc.(a)		68,117
	891	Eli Lilly & Co.		35,881
	198	GlaxoSmithKline PLC ADR		7,379
	3,762	Merck & Co., Inc.		114,365
	147	Novartis AG ADR		7,315
	1,229	Questcor Pharmaceuticals, Inc.(a)		11,442
	173	Teva Pharmaceutical Industries Ltd. ADR		7,365
				273,537
Real Estate Investment Trusts - 0.9%
	366	Alexandria Real Estate Equities, Inc.		22,084
	523	Health Care REIT, Inc.		22,071
	1,087	LTC Properties, Inc.		22,044
	787	Nationwide Health Properties, Inc.		22,603
	279	Public Storage, Inc.		22,181
	1,390	Urstadt Biddle Properties, Inc.		22,143
				133,126
Road & Rail - 0.7%
	2,347	Union Pacific Corp.		112,187
Semiconductor & Semiconductor Equipment - 1.1%
	2,735	Applied Materials, Inc.		27,705
	1,288	Cymer, Inc.(a)		28,220
	4,699	Diodes, Inc.(a)		28,476
	1,306	Lam Research Corp.(a)		27,792

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

10  DIREXION EVOLUTION VP FUNDS

Evolution VP All-Cap Equity Fund

Schedule of Investments

December 31, 2008

Shares			Value
Semiconductor & Semiconductor Equipment (continued)
	2,473	Maxim Integrated Products, Inc.	$	28,242
	3,001	Sigma Designs, Inc.(a)		28,509
	920	Taiwan Semiconductor Manufacturing Co. Ltd. ADR		7,268
				176,212
Software - 3.3%
	1,322	Adobe Systems, Inc.(a)		28,145
	1,426	Autodesk, Inc.(a)		28,021
	2,076	Blackbaud, Inc.		28,026
	6,060	CA, Inc.		112,292
	2,762	Ebix, Inc.(a)		66,012
	2,041	Informatica Corp.(a)		28,023
	5,852	MICRO Systems, Inc.(a)		95,504
	2,875	Microsoft Corp.		55,890
	1,511	Quality Systems, Inc.		65,910
	203	SAP AG ADR		7,353
				515,176
Specialty Retail - 3.2%
	1,680	Abercrombie & Fitch Co. - Class A		38,758
	44	Autozone, Inc.(a)		6,137
	2,826	The Buckle, Inc.		61,663
	4,881	Family Dollar Stores, Inc.		127,248
	831	Gymboree Corp.(a)		21,681
	231	Jos. A. Bank Clothiers, Inc.(a)		6,041
	2,098	The Sherwin-Williams Co.		125,355
	1,507	Tiffany & Co.		35,610
	6,120	Volcom, Inc.(a)		66,708
				489,201
Textiles, Apparel & Luxury Goods - 0.3%
	315	Coach, Inc.(a)		6,543
	651	VF Corp.		35,655
				42,198
Tobacco - 2.6%
	1,801	Lorillard, Inc.		101,486
	2,550	Philip Morris International, Inc.		110,950
	883	Reynolds American, Inc.		35,594
	2,125	UST, Inc.		147,433
				395,463
Wireless Telecommunication Services - 0.2%
	239	America Movil S.A. de C.V. ADR		7,407
	144	China Mobile Hong Kong Ltd. ADR		7,323
	280	Mobile TeleSystems ADR(a)		7,470
	1,014	Vimpel-Communications ADR		7,260
				29,460
		TOTAL COMMON STOCKS (Cost $10,159,824)	$	11,044,883
INVESTMENT COMPANIES - 1.0%
	6,121	iShares MSCI Emerging Markets Index Fund		152,841
		TOTAL INVESTMENT COMPANIES (Cost $150,097)	$	152,841
SHORT TERM INVESTMENTS - 23.5%
MONEY MARKET FUNDS - 23.5%
	945,112	AIM Liquid Assets Portfolio Fund(a)		945,112
	945,113	AIM STIT-STIC Prime Portfolio		945,113
	783,876	Federated Prime Obligations Fund		783,876
	945,113	Fidelity Institutional Money Market Portfolio		945,113
		TOTAL SHORT TERM INVESTMENTS (Cost $3,619,214)	$	3,619,214
		TOTAL INVESTMENTS (Cost $13,929,135) - 96.1%	$	14,816,938
		Other Assets in Excess of Liabilities - 3.9%		597,981
		TOTAL NET ASSETS - 100.0%	$	15,414,919

Percentages are stated as a percent of net assets.

ADR American Depository Receipt

^(a) Non Income Producing

Evolution VP All-Cap Equity Fund

Short Futures Contracts

December 31, 2008

			Unrealized
Contracts			Depreciation
	293	NASDAQ-100 Index E-Mini Futures	$	(104,657	)
		Expiring March 2009 (Underlying Face Amount at Market Value $7,093,530)

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

11  DIREXION EVOLUTION VP FUNDS

Statements of Assets and Liabilities

December 31, 2008

	Evolution VP			Evolution VP
	Managed Bond Fund			All-Cap Equity Fund
Assets:
Investments, at market value (Note 2)	$	11,359,199		$	14,816,938
Cash		530			1,171
Receivable for investments sold		459,131			1,678,654
Deposit at broker for futures		—			894,079
Dividends and interest receivable		34,615			22,801
Other Assets		101			90
Total Assets		11,853,576			17,413,733
Liabilities:
Payable for Fund shares redeemed		32,262			628
Payable for investments purchased		945,341			1,811,712
Due to broker for futures		—			81,279
Variation margin payable		—			23,377
Accrued distribution expense		2,273			3,298
Accrued advisory expense		11,137			8,281
Accrued expenses and other liabilities		44,382			70,239
Total Liabilities		1,035,395			1,998,814
Net Assets	$	10,818,181		$	15,414,919
Net Assets Consist Of:
Capital stock	$	11,029,287		$	23,572,562
Accumulated undistributed net investment income (loss)		305,927			—
Accumulated undistributed net realized gain (loss)		(1,305,152	)		(8,940,789	)
Net unrealized appreciation/(depreciation) on:
Investments		788,119			887,803
Futures		—			(104,657	)
Total Net Assets	$	10,818,181		$	15,414,919
Calculation of Net Asset Value Per Share:
Net assets	$	10,818,181		$	15,414,919
Shares outstanding (unlimited shares of beneficial interest authorized, no par value)		557,352			1,011,681
Net asset value, redemption price and offering price per share	$	19.41		$	15.24
Cost of Investments	$	10,571,080		$	13,929,135

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

12  DIREXION EVOLUTION VP FUNDS

Statements of Operations

For The Year Ended December 31, 2008

	Evolution VP			Evolution VP
	Managed Bond Fund			All-Cap Equity Fund
Investment income:
Dividend income (net of foreign withholding tax of $— and $5,184, respectively)	$	526,482		$	257,441
Interest income		6,402			67,365
Total investment income		532,884			324,806
Expenses:
Investment advisory fees		113,478			219,773
Distribution expenses		28,369			54,943
Shareholder servicing fees		22,696			43,955
Administration fees		5,155			10,210
Fund accounting fees		11,617			37,331
Custody fees		3,067			3,233
Transfer agent fees		9,593			20,254
Professional fees		37,700			59,643
Reports to shareholders		5,599			15,864
Trustees’ fees and expenses		557			702
Other		9,172			17,155
Total expenses before reimbursement		247,003			483,063
Less: Reimbursement of expenses from Adviser		(20,047	)		(43,401	)
Total expenses		226,956			439,662
Net investment income (loss)		305,928			(114,856	)
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(549,154	)		(9,605,061	)
Futures		—			3,137,461
		(549,154	)		(6,467,600	)
Capital gain distributions from regulated investment companies		2,331			—
Change in unrealized appreciation (depreciation) on:
Investments		601,256			20,358
Futures		—			(104,657	)
		601,256			(84,299	)
Net realized and unrealized gain (loss) on investments		54,433			(6,551,899	)
Net increase (decrease) in net assets resulting from operations	$	360,361		$	(6,666,755	)

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

13  DIREXION EVOLUTION VP FUNDS

Statements of Changes in Net Assets

December 31, 2008

	Evolution VP Managed Bond Fund						Evolution VP All-Cap Equity Fund
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007
Operations:
Net investment income (loss)	$	305,928		$	449,961		$	(114,856	)	$	(78,939	)
Net realized gain (loss) on investments		(549,154	)		(394,686	)		(6,467,600	)		1,595,753
Capital gain distributions from regulated investment companies		2,331			3,333			—			—
Change in unrealized appreciation (depreciation) on investments		601,256			71,417			(84,299	)		(685,109	)
Net increase (decrease) in net assets resulting from operations		360,361			130,025			(6,666,755	)		831,705
Distributions to shareholders:
Net investment income		(469,818	)		(347,306	)		—			(78,978	)
Net realized gains		—			—			(2,691,024	)		(1,319,400	)
Total distributions		(469,818	)		(347,306	)		(2,691,024	)		(1,398,378	)
Capital share transactions:
Proceeds from shares sold		6,623,432			2,510,649			1,452,721			8,391,398
Proceeds from shares issued to holders in reinvestment of distributions		469,818			347,305			2,691,024			1,398,379
Cost of shares redeemed		(7,932,663	)		(4,113,820	)		(7,235,661	)		(8,562,377	)
Net increase in net assets resulting from capital share transactions		(839,413	)		(1,255,866	)		(3,091,916	)		1,227,400
Total increase (decrease) in net assets		(948,870	)		(1,473,147	)		(12,449,695	)		660,727
Net assets:
Beginning of year		11,767,051			13,240,198			27,864,614			27,203,887
End of year	$	10,818,181		$	11,767,051		$	15,414,919		$	27,864,614
Accumulated undistributed net investment income end of year	$	305,927		$	469,925		$	—		$	—

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

14  DIREXION EVOLUTION VP FUNDS

Financial Highlights

December 31, 2008

																												RATIOS TO AVERAGE NET ASSETS
																																								Net
						Net Realized			Net Increase																															Investment
	Net Asset		Net			and			(Decrease)			Dividends			Dividends						Net Asset							Including Short						Excluding Short						Income (Loss)
	Value,		Investment			Unrealized			in Net Asset			from Net			from						Value,					Net Assets,		Interest						Interest						After Expense			Portfolio
	Beginning		Income			Gain (Loss)			Value Resulting			Investment			Realized			Total			End		Total			End of		Total			Net			Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)4			on Investments4			from Operations			Income			Capital Gains			Distributions			of Year/Period		Return9			Year/Period (,000)		Expenses			Expenses			Expenses			Expenses			Recoupment			Rate5
Evolution VP Managed Bond Fund
Year ended December 31, 2008		19.64	$	0.52		$	0.08		$	0.60		$	(0.83	)		—			(0.83	)	$	19.41		3.15	%	$	10,818		—			—			2.18	%		2.00	%		2.70	%		323	%
Year ended December 31, 2007		20.00		0.73			(0.51	)		0.22			(0.58	)		—			(0.58	)		19.64		1.14	%		11,767		—			—			2.06	%		2.00	%		3.62	%		958	%
Year ended December 31, 2006		19.61		0.63			(0.19	)		0.44			(0.05	)		—			(0.05	)		20.00		2.23	%		13,240		—			—			2.55	%		2.00	%		3.19	%		954	%
Year ended December 31, 2005		20.76		0.67	6		(1.54	)		(0.87	)		(0.25	)		(0.03	)		(0.28	)		19.61		(4.19	%)		4,197		4.93	%		2.24	%		4.69	%		2.00	%		3.37	%7		978	%
July 1, 20041 to December 31, 2004		20.00		0.32			0.44			0.76			—			—			—			20.76		3.80	%2		754		—			—			23.17	%3		2.00	%3		3.19	%3		7	%2
Evolution VP All-Cap Equity Fund
Year ended December 31, 2008		25.19		(0.12	)		(6.60	)		(6.72	)		—			(3.23	)		(3.23	)		15.24		(26.37	%)		15,415		—			—			2.20	%		2.00	%		(0.52	%)		1,796	%
Year ended December 31, 2007		25.71		(0.07	)		0.88			0.81			(0.08	)		(1.25	)		(1.33	)		25.19		3.11	%		27,865		—			—			1.94	%		2.00	%		(0.27	%)		1,018	%
Year ended December 31, 2006		23.12		0.11			2.83			2.94			(0.00	)8		(0.35	)		(0.35	)		25.71		12.70	%		27,204		—			—			2.09	%		2.00	%		0.44	%		909	%
Year ended December 31, 2005		21.06		0.03			2.03			2.06			—			—			—			23.12		9.78	%		7,980		—			—			3.84	%		2.00	%		0.12	%		1,001	%
July 1, 20041 to December 31, 2004		20.00		(0.15	)		1.21			1.06			—			—			—			21.06		5.30	%2		1,044		—			—			20.13	%3		2.00	%3		(1.53	%)3		2	%2

1	Commencement of operations.
2	Not annualized.
3	Annualized.
4	Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period/year.
5	Portfolio turnover ratio is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, futures contracts and repurchase agreements are deemed short-term securities. Each Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
6	Net investment income (loss) before dividends on short positions for the year ended December 31, 2005 was $0.72 for the Evolution VP Managed Bond Fund.
7	The net investment income (loss) ratio included dividends on short positions. The ratio excluding dividends on short positions for the year ended December 31, 2005 was 3.60% for the Evolution VP Managed Bond Fund.
8	Amount less than $0.005 per share.
9	All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes or any fees and expenses imposed under the Contracts and Plans, which would increase overall fees and expenses. Please refer to your Contract or Plan prospectus for a description of those fees and expenses.

DIREXION EVOLUTION VP FUNDS  15

Evolution VP Managed Bond Fund
Evolution VP All-Cap Equity Fund

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2008

1.   ORGANIZATION

Direxion Insurance Trust (the “Trust”) was organized as a Massachusetts business trust on December 28, 1999 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company issuing its shares in series, each series representing a distinct portfolio with its own investment objective and policies. The Trust currently has three series in operation of which two are included in this report, the Evolution VP Managed Bond Fund and the Evolution VP All-Cap Equity Fund (each a “Fund” and collectively, the “Funds”). Each Fund is a “non-diversified” series of the Trust pursuant to the 1940 Act. The Trust offers shares to unaffiliated life insurance separate accounts (registered as unit investment trusts under the 1940 Act) to fund the benefits under variable annuity and variable life contracts. The Evolution VP Managed Bond Fund and Evolution VP All-Cap Equity Fund commenced operations on July 1, 2004.

The objective of the Evolution VP Managed Bond Fund is to seek the highest appreciation on an annual basis consistent with a high tolerance for risk by investing at least 80% of its assets (plus any borrowing for investment purposes) in fixed-income securities indirectly through securities that invest in or are a derivative of fixed-income securities, including exchange traded funds (“ETFs”) and closed-end investment companies (collectively, fixed-income securities). The objective of the Evolution VP All-Cap Equity Fund is to seek the highest appreciation on an annual basis consistent with a high tolerance for risk by investing at least 80% of its assets (plus any borrowing for investment purposes) in equity securities either directly through individual stocks and American Depository Receipts (“ADRs”) or indirectly through securities that invest in or are a derivative of equity securities.

2.   SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with U.S. generally accepted accounting principles (“GAAP”).

a) Investment Valuation – Equity securities, ETFs, closed-end investment companies, options, futures, and options on futures are valued at their last sales price, or if not available, the average of the last bid and asked prices. Over-the-counter (“OTC”) securities are valued at the average of the last bid and ask prices. Securities primarily traded on the NASDAQ National Market are valued using the NASDAQ Official Closing Price (“NOCP”). Investments in open-end mutual funds are valued at their respective net asset values on valuation date. Short- term debt securities with a maturity of 60 days or less and money market securities are valued using the amortized cost method. Other debt securities are valued by using the closing bid and asked prices provided by the Funds’ pricing service or, if such services are unavailable, by a pricing matrix method. Securities for which reliable market quotations are not readily available, the Funds’ pricing service does not provide a valuation for such securities, the Funds’ pricing service provides valuation that in the judgment of Rafferty Asset Managements, LLC (the “Adviser”) does not represent fair value, or the Fund or Adviser believes the market price is stale will be fair valued as determined by the Adviser under the supervision of the Board of Trustees.

b) Repurchase Agreements – Each Fund may enter into repurchase agreements with institutions that are members of the Federal Reserve System or securities dealers who are members of a national securities exchange or are primary dealers in U.S. government securities. In connection with transactions in repurchase agreements, it is the Trust’s policy that the Fund receives, as collateral, cash and/or securities (primarily U.S. government securities) whose market value, including accrued interest, at all times will be at least equal to 100% of the amount invested by the Fund in each repurchase agreement. If the seller defaults, and the value of the collateral declines, realization of the collateral by the Fund may be delayed or limited. The Funds were not invested in repurchase agreements at December 31, 2008.

c) Swap Contracts – Each Fund may enter into equity swap contacts. Standard swap contracts are between two parties that agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross amount to be exchanged is calculated with respect to a “notional amount” (i.e. the

16  DIREXION EVOLUTION VP FUNDS

return on or increase in value of a particular dollar amount invested in a “basket” of securities representing a particular index or industry sector). The Fund’s obligations are accrued daily (offset by any amounts owed to the funds.)

In a “long” swap agreement, the counterparty will generally agree to pay the Funds the amount, if any, by which the notional amount of swap contract would have increased in value if the Funds had been invested in the particular securities, plus dividends that would have been received on those securities. The Funds will agree to pay the counterparty a floating rate of interest on the notional amount of the swap contract plus the amount, if any, by which the notional amount would have decreased in value had it been invested in such securities plus, in certain instances, commissions or trading spreads on the notional amounts. Thus, the return on the swap contract should be the gain or loss on the notional amount plus dividends on the securities less the interest paid by the Fund on the notional amount. Payments may be made at the conclusion of the contract or periodically during its term. Swap contracts do not include the delivery of securities or other underlying securities. The net amount of the excess, if any, of the Fund’s obligations over its entitlement with respect to each swap is accrued on a daily basis and an amount of cash or liquid assets, having an aggregate net asset value at least equal to such accrued excess is maintained in a segregated account by the Fund’s custodian. Until a swap contract is settled in cash, the gain or loss on the notional amount plus dividends on the securities less the interest paid by the Funds on the notional amount are recorded as “unrealized gains or losses on swaps and futures” and when cash is exchanged, the gain or loss is recorded as “realized gains or losses on swaps and futures.” Swap contracts are collateralized by cash, cash equivalents and securities of the Fund held as deposits at broker.

Each Fund may enter into swap contracts that provide the opposite return of the particular benchmark or security (“short” the index or security). The operations are similar to that of the swaps disclosed above except that the counterparty pays interest to the Fund on the notional amount outstanding and the dividends on the underlying securities reduce the value of the swap, plus, in certain instances, the Fund will agree to pay to the counterparty commissions or trading spreads on the notional amount. These amounts are netted with any unrealized appreciation or depreciation to determine the value of the swap.

Swap contracts involve, to varying degrees, elements of market risk and exposure to loss in excess of the amount reflected in the Statements of Assets and Liabilities. The notional amounts reflect the extent of the total investment exposure that each Fund has under the swap contract. The primary risks associated with the use of swap agreements are imperfect correlation between movements in the notional amount and the price of the underlying securities and the inability of counterparties to perform. A Fund bears the risk of loss of the amount expected to be received under a swap contract in the event of default or bankruptcy of a swap contract counterparty. In order to minimize credit risk, the Funds will attempt to enter into swap contracts with multiple counterparties. The Funds will not enter into swap agreements unless the Adviser believes that the other party to the transaction is creditworthy, the Funds do bear the risk of loss of the amount in the event of the default or bankruptcy of the agreement counterparty. The Funds have established counterparty credit guidelines and entered into transactions only with financial institutions of investment grade or better. The Funds were not invested in swap contracts at December 31, 2008.

d) Short Positions – Each Fund may engage in short sale transactions. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. Subsequent fluctuations in the market prices of short positions may require purchasing the securities at prices which may differ from the market value reflected on the Statement of Assets and Liabilities. The Fund is liable to the buyer for any dividends payable on securities while those securities are in a short position. As collateral for its short positions, the Fund is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities equal to the market value of the securities sold short. This collateral is required to be adjusted daily. The Funds were not invested in short positions at December 31, 2008.

e) Stock Index Futures Contracts and Options on Futures Contracts – Each Fund may purchase and sell stock index futures contracts and options on such futures contracts. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as “variation margin” and are recorded by the Fund as unrealized gains and losses. When

DIREXION EVOLUTION VP FUNDS  17

the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. As collateral for futures contracts, the Fund is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities. This collateral is required to be adjusted daily to reflect the market value of the purchase obligation for long futures contracts or the market value of the instrument underlying the contract, but not less than the market price at which the futures contract was established, for short futures contracts.

f) Risks of Options, Futures Contracts, Options on Futures Contracts and Short Positions – The risks inherent in the use of options, futures contracts, options on futures contracts and short positions include 1) adverse changes in the value of such instruments; 2) imperfect correlation between the price of options and futures contracts and options thereon and movements in the price of the underlying securities, index or futures contracts; 3) the possible absence of a liquid secondary market for any particular instrument at any time; 4) the possible need to defer closing out certain positions to avoid adverse tax consequences; and 5) the possible nonperformance by the counterparty under the terms of the contract. The Funds designate cash, cash equivalents and liquid securities as collateral for written options, futures contracts, options on futures contracts and short positions.

g) Risks of Investing in Foreign Securities – Investments in foreign securities involve greater risks than investing in domestic securities. As a result, the Fund’s returns and net asset values may be affected to a large degree by fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory requirements in other countries. The laws and accounting, auditing, and financial reporting standards in foreign countries typically are not as strict as they are in the U.S., and there may be less public information available about foreign companies.

h) Security Transactions – Investment transactions are recorded on trade date. The Funds determine the gain or loss realized from investment transactions by comparing the identified cost, which is the same basis used for federal income tax purposes, with the net sales proceeds.

i) Federal Income Taxes – Each Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all or substantially all federal income and excise taxes.

j) Income and Expenses – Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and discount, is recognized on an accrual basis. The Funds are charged for those expenses that are directly attributable to each series, such as Advisory fees and registration costs. Expenses that are not directly attributable to a series are generally allocated among the Trust’s series in proportion to their respective net assets.

k) Distributions to Shareholders – Each Fund generally pays dividends from net investment income and distributes net realized capital gains, if any, at least annually. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Distributions to shareholders are recorded on the ex-dividend date. Each Fund may utilize earnings and profits distributed to shareholders on redemption of shares as part of the dividend paid deduction.

The tax character of distributions for the Funds during the years ended December 31, 2008 and December 31, 2007, were as follows:

	Evolution VP Managed Bond Fund				Evolution VP All-Cap Equity Fund
	Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,
	2008		2007		2008		2007
Distributions paid from:
Ordinary income	$	469,818	$	347,306	$	2,691,024	$	1,326,536
Long-term capital gain		—		—		—		71,842
Total distributions paid	$	469,818	$	347,306	$	2,691,024	$	1,398,378

18  DIREXION EVOLUTION VP FUNDS

The Funds designate as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits of the Funds related to net capital gain to zero for the tax year ended December 31, 2008. The Funds may utilize earnings and profits distributed to shareholders on redemption of shares as part of the dividend paid deduction.

As of December 31, 2008, the components of distributable earnings of the Funds on a tax basis were as follows:

	Evolution VP			Evolution VP
	Managed Bond Fund			All-Cap Equity Fund
Tax cost of investments	$	10,994,820		$	15,935,078
Gross unrealized appreciation		830,032			1,025,481
Gross unrealized depreciation		(465,653	)		(2,143,621	)
Net unrealized appreciation/(depreciation)		364,379			(1,118,140	)
Undistributed ordinary income/(loss)		305,927			—
Undistributed long-term capital gain/(loss)		—			—
Total distributable earnings		305,927			—
Other accumulated gain/(loss)		(881,412	)		(7,144,160	)
Other Temporary Difference		—			104,657
Total accumulated earnings /(losses)	$	(211,106	)	$	(8,157,643	)

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

On the Statements of Assets and Liabilities, the following adjustments were made for permanent tax differences between accounting for net investment income and realized gains and losses under GAAP and tax reporting:

	Accumulated		Accumulated
	Realized		Net Investment			Capital
	Gain/(Loss)		Income/(Loss)			Stock
Evolution VP Managed Bond Fund	$	108	$	(108	)	$	—
Evolution VP All-Cap Equity Fund		5,448		114,856			(120,304	)

Net investment income and realized gains and losses for federal income tax purposes may differ from that reported on the financial statements because of permanent book-to-tax differences. GAAP requires that permanent differences in net investment income and realized gains and losses due to differences between financial reporting and tax reporting be reclassified between various components of net assets. The permanent differences primarily relate to net operating losses, and dividends on redemption adjustments with differing book and tax methods.

In order to meet certain excise tax distribution requirements, the Funds are required to measure and distribute annually, net capital gains realized during a twelve-month period ending October 31st. In connection with this, the Funds are permitted for tax purposes to defer into their next fiscal year any net capital losses incurred between November 1st and the end of their fiscal year, December 31, 2008.

At December 31, 2008 the Evolution VP All-Cap Equity Fund deferred, on a tax basis, post-October losses of $1,877,201.

As of December 31, 2008, the Funds had capital loss carryforwards on a tax basis of:

	Expires
	12/31/2013		12/31/2014		12/31/2015		12/31/2016		Total
Evolution VP Managed Bond Fund	$	143,203	$	38,577	$	280,466	$	419,166	$	881,412
Evolution VP All-Cap Equity Fund		—		—		—		5,162,302		5,162,302

DIREXION EVOLUTION VP FUNDS  19

To the extent that the Fund realizes future net capital gains, those gains will be offset by any unused capital loss carryforward.

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

The Funds have reviewed all open tax years and major jurisdictions and concluded that the adoption of FIN 48 resulted in no effect to the Funds’ financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax returns for the fiscal year-end December 31, 2005 through December 31, 2008. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

l) Guarantees and Indemnifications – In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnification provisions pursuant to which the Fund agrees to indemnify third parties upon occurrence of specified events. The Fund’s maximum exposure relating to these indemnification agreements is unknown. However, the Fund has not had prior claims or losses in connection with these provisions and believes the risk of loss is remote.

m) Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3.   CAPITAL SHARE TRANSACTIONS

Capital share transactions for the Funds during the years ended December 31, 2008 and December 31, 2007 were as follows:

	Evolution VP Managed Bond Fund						Evolution VP All-Cap Equity Fund
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2008			2007			2008			2007
Shares sold		343,607			126,197			63,755			316,075
Shares issued to holders in reinvestment of distributions		24,292			17,875			180,727			55,098
Shares redeemed		(409,572	)		(207,080	)		(338,874	)		(323,161	)
Total increase (decrease) from capital share transactions		(41,673	)		(63,008	)		(94,392	)		48,012

4.   INVESTMENT TRANSACTIONS

During the year ended December 31, 2008, the aggregate purchases and sales of investments (excluding short-term investments) for each Fund were as follows:

	Purchases		Sales
Evolution VP Managed Bond Fund	$	36,270,169	$	36,992,225
Evolution VP All-Cap Equity Fund		344,226,609		345,149,495

There were no purchases or sales of long-term U.S. Government securities during the period ended December 31, 2008.

5.   INVESTMENT ADVISORY AND OTHER AGREEMENTS

Investment Advisory Fees: The Funds have entered into an investment advisory agreement with the Adviser. The Adviser receives a fee, computed daily and payable monthly, at the annual rates presented below as applied to each Fund’s average daily net assets. In addition, the Adviser has entered into a sub-advisory agreement relating to the Funds whereby the sub-adviser, Flexible Plan Investments, Ltd., will direct investment activities of the Funds. The Adviser pays, out of the management fees it receives from the Funds, a fee for these sub-advisory services. For the year ended December 31, 2008, the Adviser has contractually agreed to pay all operating expenses (excluding dividends on short positions), in excess of the

20  DIREXION EVOLUTION VP FUNDS

annual cap on expenses presented below as applied to each Fund’s average daily net assets. On November 6, 2008, the Board of Trustees approved charges to the annual expense cap of the Funds. Effective January 1, 2009 extending through December 31, 2009, the annual expense caps of the Funds increased from 2.00% to 2.35%. Additionally, the Adviser may waive fees it may otherwise normally charge the Fund. For the year ended December 31, 2008, the Fund did not voluntarily waive any additional fees. The Adviser may change, or end, any voluntary waiver at any time. The Adviser may recover from the Funds the expenses paid in excess of the annual cap on expenses (either due to the contractual or any voluntary waiver) for the three previous years, as long as the recovery does not cause the Fund to exceed such annual cap on expenses. For the year ended December 31, 2008, the Adviser paid or recouped the following expenses:

	Evolution VP			Evolution VP
	Managed			All-Cap
	Bond Fund			Equity Fund
Annual Advisory rate		1.00	%		1.00	%
Annual cap on expenses		2.00	%		2.00	%
Reimbursement of expenses from Adviser - 2008	$	20,047		$	43,401

Expenses subject to potential recovery expiring in:

	Evolution VP		Evolution VP
	Managed		All-Cap
	Bond Fund		Equity Fund
2009	$	49,690	$	16,813
2010	$	8,065	$	—
2011	$	20,047	$	43,401
Total	$	77,802	$	60,214

Rafferty Capital Markets, LLC (the “Distributor”) serves as principal underwriter of the Funds and acts as the Funds’ distributor in a continuous public offering of the Fund’s shares. There were no Rule 12b-1 fees retained by the Distributor for the year ended December 31, 2008. The Distributor is an affiliate of the Advisor.

Distribution Expenses: Shares of the Evolution VP Managed Bond and the Evolution VP All-Cap Equity Funds are subject to an annual Rule 12b-1 fee of up to .25% of Fund’s average daily net assets. During the year ended December 31, 2008, the Evolution VP Managed Bond Fund and the Evolution VP All-Cap Equity Fund incurred expenses of $28,369 and $54,943, respectively, under Rule 12b-1. The fee is paid to the insurance company of the plan sponsor (i.e. various enrolled employers) for distribution-related activities on behalf of the funds.

Shareholder Servicing Fees: The Board has authorized each Fund to pay a shareholder servicing fee of 0.20% of the Fund’s average daily net assets. During the year ended December 31, 2008, the Evolution VP Managed Bond Fund and the Evolution VP All-Cap Equity Fund incurred expenses of $22,696 and $43,955, respectively, for shareholder servicing fees. The Trust, on behalf of each Fund, pays the fee to the insurance company of the plan sponsor for the servicing of shareholder accounts.

DIREXION EVOLUTION VP FUNDS  21

6.   FINANCIAL ACCOUNTING STANDARDS BOARD STANDARD NO. 157

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

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

Level 1 — Quoted prices in active markets for identical securities,

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

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

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

The following is a summary of the inputs used to value the Fund’s net assets as of December 31, 2008:

	Evolution VP Managed Bond Fund				Evolution VP All-Cap Equity Fund
	Investments in				Investments in		Other Financial
	Securities		Other Financial		Securities		Instruments*
Description	(Asset)		Instruments*		(Asset)		(Liability)
Level 1 — Quoted prices	$	11,359,199	$	—	$	14,816,938	$	(104,657	)
Level 2 — Other significant observable inputs		—		—		—		—
Level 3 — Significant unobservable inputs		—		—		—		—
Total	$	11,359,199	$	—	$	14,816,938	$	(104,657	)

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

7.   NEW ACCOUNTING PRONOUNCEMENT

In March 2008, FASB issued its Statement on Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”). This standard is intended to enhance financial statement disclosure for derivative instruments and hedging activities and enable investors to understand: a) how and why a fund uses derivatives instruments, b) how derivatives instruments and related hedge items are accounted for, and c) how derivative instruments and related hedge items affect a fund’s financial position, results of operations and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As of December 31, 2008, management does not believe the adoption of FAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedge items.

22  DIREXION EVOLUTION VP FUNDS

Direxion Funds

Report of Independent Registered Public Accounting Firm

To the Shareholders and

Board of Trustees of Direxion Insurance Trust:

We have audited the accompanying statements of assets and liabilities of the Evolution VP Managed Bond Fund and Evolution VP All-Cap Equity Fund (two of the series constituting Direxion Insurance Trust) (the “Funds”), including the schedules of investments, as of December 31, 2008, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended and for the period from July 1, 2004 (commencement of operations) to December 31, 2004. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Evolution VP Managed Bond Fund and Evolution VP All-Cap Equity Fund at December 31, 2008, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended and for the period from July 1, 2004 (commencement of operations) to December 31, 2004 in conformity with U.S. generally accepted accounting principles.

February 25, 2009

Milwaukee, Wisconsin

DIREXION EVOLUTION VP FUNDS  23

Additional Information

(Unaudited)

QUALIFIED DIVIDEND INCOME/DIVIDENDS RECEIVED DEDUCTION

For the fiscal year ended December 31, 2008, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified income was as follows:

Evolution VP Managed Bond Fund	58.78	%
Evolution VP All Cap Equity Fund	12.60	%

For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended December 31, 2008 was as follows:

Evolution VP Managed Bond Fund	59.40	%
Evolution VP All Cap Equity Fund	4.20	%

24  DIREXION EVOLUTION VP FUNDS

Direxion Funds

TRUSTEES AND OFFICERS

The business affairs of each Fund are managed by or under the direction of the Board of Trustees. Information pertaining to the Trustees and Officers of the Funds is set forth below. The SAI includes additional information about the Funds’ Trustee and Officers and is available without charge, upon request by calling 1-800-851-0511.

Interested Trustees

				# of Portfolios
	Position(s)	Term of Office		in Direxion Complex		Other Trusteeships/
	Held with	and Length of	Principal Occupation(s)	Overseen by		Directorships Held
Name, Address and Age	Fund	Time Served	During Past Five Years	Trustee(2)		by Trustee
Lawrence C. Rafferty(1) Age: 66	Chairman of the Board of Trustees	Lifetime of Trust until removal or resignation; Since 1997	Chairman and Chief Executive Officer of Rafferty, 1997-present; Chief Executive Officer of Rafferty Companies, LLC, 1996-present; Chief Executive Officer of Rafferty Capital Markets, Inc., 1995-present.		109	Board of Trustees, Fairfield University; Board of Directors, St. Vincent’s Services; Executive Committee, Metropolitan Golf Association

Non-Interested Trustees

				# of Portfolios
		Term of Office		in Direxion Complex		Other Trusteeships/
	Position(s) Held with	and Length of	Principal Occupation(s)	Overseen by		Directorships Held
Name, Address and Age	Fund	Time Served	During Past Five Years	Trustee(2)		by Trustee
Daniel J. Byrne Age: 64	Trustee	Lifetime of Trust until removal or resignation; Since 1997	President and Chief Executive Officer of Byrne Securities Inc., 1992-present.		109	Trustee, The Opening Word Program, Wyandanch, New York
Gerald E. Shanley III Age: 65	Trustee	Lifetime of Trust until removal or resignation; Since 1997	Business Consultant, 1985-present; Trustee of Trust Under Will of Charles S. Payson, 1987-present; C.P.A. 1979-present.		109	None
John Weisser Age: 67	Trustee	Lifetime of Trust until removal or resignation; Since 2007	Retired, Since 1995; Salomon Brothers, Inc, 1971-1995, most recently as Managing Director.		109	MainStay VP Series Fund, Inc.

DIREXION EVOLUTION VP FUNDS  25

Direxion Funds

TRUSTEES AND OFFICERS

Officers

				# of Portfolios
		Term of Office		in Direxion Complex		Other Trusteeships/
	Position(s) Held with	and Length of	Principal Occupation(s)	Overseen by		Directorships Held
Name, Address and Age	Fund	Time Served	During Past Five Years	Trustee(2)		by Trustee
Daniel D. O’Neill Age: 40	President;	One Year; Since 1999	Managing Director of Rafferty, 1999-present.		N/A	N/A
	Chief Operating Officer and Chief Investment Officer	One Year; Since 2006
William Franca Age: 52	Executive Vice President – Head of Distribution	One Year; Since 2006	Senior Vice President – National Sales, Massachusetts Financial Services/SunLife Financial Distributors, 2002-2004; Executive Vice President, Distribution, SunLife, 2001-2002.		N/A	N/A
Peter Wilson Age: 31	Chief Compliance Officer	One Year; Since 2008	Director, Alaric Compliance Services, LLC, 2004 – present; Attorney, US Army JAG Corps, 2003-2007.		N/A	N/A
Guy F. Talarico Age: 53	Principal Financial Officer	One Year; Since 2008	CEO, Alaric Compliance Services LLC, 2006-present; Co-CEO EOS Compliance Services, LLC, 2004-2006; Senior Director, Investors Bank and Trust Co, 2001-2004; Division Executive, JP Morgan-Chase Bank, 1986-2001; Group Product Manager, Lever Brothers Company, 1977-1986.		N/A	N/A
Eric W. Falkeis 615 East Michigan Street Milwaukee, WI 53202 Age: 36	Secretary	One Year; Since 2004	Senior Vice President USBFS since September 2007; Chief Financial Officer, U.S. Bancorp Fund Services, LLC, since April 2006; Vice President, U.S. Bancorp Fund Services LLC, 1997 – present; formerly, Chief Financial Officer, Quasar Distributors, LLC, 2000-2003.		N/A	N/A

(1)	Mr. Rafferty is affiliated with Rafferty. Mr. Rafferty is the Chairman and Chief Executive Officer of Rafferty and owns a beneficial interest in Rafferty.
(2)	The Direxion Complex consists of the Direxion Funds which currently offers for sale to the public 32 portfolios of the 32 currently registered with the SEC and the Direxion Insurance Trust which currently offers for sale 3 portfolios of the 45 currently registered with the SEC and the Direxion ETF Trust which currently offers for sale to the public 8 of the 32 funds currently registered with the SEC.
	The address for all trustees and officers except Eric W. Falkeis is 33 Whitehall St., New York, NY 10004.

26  DIREXION EVOLUTION VP FUNDS

Investment Advisory and Subadvisory Agreements Approvals (Unaudited)

Provided below is a summary of certain of the factors the Board considered at its August 13, 2008 Board meeting in renewing, as applicable: (1) the Advisory Agreement between Rafferty Asset Management (“Rafferty”) and the Direxion Insurance Trust (the “Trust”) on behalf of the Evolution VP Managed Bond Fund and Evolution VP All-Cap Equity Fund (each, a “Fund” and collectively, the “Funds”); and (2) the Subadvisory Agreement between Rafferty and Flexible Plan Investments, Inc. (“Flexible”) on behalf of the Funds. The Board did not identify any particular information that was most relevant to its consideration to approve the Advisory Agreement or Subadvisory Agreement and each Trustee may have afforded different weight to the various factors.

In determining whether to approve the continuance of the Advisory Agreement and Subadvisory Agreement (collectively, the “Agreements”), the Board considered the best interests of each Fund separately. In addition, the Board noted that the Trustees have considered various reports and information provided throughout the year at their regular Board meetings and otherwise. While the Agreements for both Funds were considered at the same Board meeting, the Board considered each Fund’s investment advisory and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund to the extent applicable; (3) the cost to Rafferty or Flexible for providing services and the profitability of the advisory business to Rafferty or Flexible, if such information was provided; (4) the extent to which economies of scale have been taken into account in setting fee schedules; (5) whether fee levels reflect these economies of scale, if any, for the benefit of Fund shareholders; (6) comparisons of services and fees with contracts entered into by Rafferty and, in certain cases, Flexible, with other clients (such as pension funds and other institutional investors), if any; and (7) other benefits derived or anticipated to be derived by Rafferty or Flexible from its relationship with the Funds.

Nature, Extent and Quality of Services Provided.  The Board reviewed the nature, extent and quality of the services provided or to be provided under the Advisory Agreement by Rafferty. The Board noted that Rafferty has provided services to the Trust since its inception and has developed an expertise in managing the Funds. The Board also noted that Rafferty trades efficiently with low commission schedules, which helps improve performance results. The Board considered Rafferty’s representation that it has the financial resources and appropriate staffing to manage the Funds and meet its expense reimbursement obligations, if any. The Board also considered that Rafferty had enhanced the compliance programs of the Trust by utilizing the services of an independent compliance consulting firm and that a report from the chief compliance officer is provided to the Board at its regularly scheduled quarterly Board meetings. The Board noted Rafferty’s marketing and distribution efforts, including offering additional investment options to shareholders through the creation of new funds and promoting the Funds through new broker and platform relationships. The Board considered that Rafferty oversees all aspects of the operation of the Funds, including oversight of the Funds’ service providers and Flexible.

Regarding the Subadvisory Agreement with Flexible, the Board noted that Flexible utilizes those Funds it subadvises as the primary investments for its separate account clients. The Board also noted that there would be no change in the services provided by Flexible.

Based on these and other considerations, the Board determined that, in the exercise of its business judgment, the nature, extent and quality of the services provided by Rafferty to the Funds under the Advisory Agreement and Flexible under the Subadvisory Agreement were fair and reasonable.

Performance of the Funds.  Unless otherwise noted, the Board evaluated the performance of each Fund compared to its benchmark index for monthly periods and the year-to-date period ended July 31, 2008, and the average performance of the relevant Lipper fund universe for various monthly periods and the year-to-date period ended July 31, 2008. Although the Board received monthly performance reports for its consideration, the Board generally assigned more weight to the longer-term performance of the Funds.

With respect to the Evolution VP Managed Bond Fund, the Board considered that, as of June 30, 2008: (1) the Fund outperformed its benchmark index for the one-month, six-month and one-year periods, but underperformed for the three-month period; and (2) the Fund outperformed the average of the relevant Lipper fund universe for the one-month and six-month periods, but underperformed for the three-month and one-year periods. With respect to the Evolution VP All-Cap Equity Fund, the Board considered that: (1) the Fund outperformed its benchmark index for the year-to-date period; and (2) the Fund underperformed the average of the relevant Lipper fund universe for the one-month and one-year periods, but

DIREXION EVOLUTION VP FUNDS  27

outperformed for the three-month, six-month and three-year periods. Based on these and other considerations, the Board determined that, in the exercise of its business judgment, each Fund’s performance was reasonable.

Costs of Services Provided to the Funds and Profits Realized.  The Board considered the overall fees paid to Rafferty on an annual basis since each Fund’s commencement of operations, including any fee waivers and recoupment of fees previously waived. With respect to the Funds, the Board also considered advisory fees charged by, and total expense ratios of, comparable fund groups. In this regard, management advised the Board that the advisory fees for each of the Funds is similar to and, in some cases lower than, the advisory fees for the comparable fund groups. The Board also considered that the total expense ratio for each Fund is generally higher than comparable funds. However, Rafferty indicated that the comparable fund groups generally have higher asset levels, which account in part for their lower total expense ratios. The Board also noted that Rafferty does not have any non-mutual fund clients, except for one hedge fund client. In this connection, the Board considered that Rafferty charges higher fees for that hedge fund compared to the advisory fees of the Funds. The Board also considered that Rafferty contractually agreed to limit the total expenses for the most recent and upcoming fiscal years for each Fund via fee waivers and/or expense limitations. The Board also considered the overall profitability of Rafferty’s investment business and its representation that it does not allocate internal costs and assess profitability with respect to its services to individual Funds. Based on these considerations, the Board determined that, in the exercise of its business judgment, the costs of the services provided and the profits realized under the Advisory Agreement were fair and reasonable.

In considering the fees paid by Rafferty to Flexible, the Board considered Rafferty’s representation that the fees and expenses generally are higher than industry averages. However, Rafferty explained that, in certain cases, the Funds help to lower the overall fees paid by Flexible’s clients. The Board also noted that, in some cases, Flexible uses the fees it receives from the Funds to reduce the asset-based fees it charges clients for providing investment advisory services. The Board also noted that Rafferty negotiated the lowest fee that Flexible charges for comparable client accounts. With respect to each Fund, the Board considered Flexible’s profits for its services to the extent such information was provided. In this regard, the Board noted Flexible’s representation that it did not earn any pre- or post-tax profits with respect to its services to the Funds.

Based on these considerations, the Board determined that, in the exercise of its business judgment, the costs of the services provided and the profits realized under the Agreements were fair and reasonable.

Economies of Scale.  The Board considered Rafferty’s representation that it believes that asset levels at this time are not sufficient to achieve economies of scale or warrant a reduction in fee rates or the addition of breakpoints. Rafferty noted that it was continuing its sales and marketing efforts in order to raise additional assets. Based on these and other considerations, the Board determined that, in the exercise of its business judgment, the reduction in fee rates or additions of breakpoints was not necessary at this time.

Other Benefits.  The Board considered Rafferty’s representation that its relationship with the Funds has permitted Rafferty to attract business to its non-mutual fund account. The Board also considered that Rafferty’s overall business with brokerage firms helps to lower commission rates and provide better execution for Fund portfolio transactions. The Board also considered that Flexible has greater access to certain trust platforms due to its subadvisory services to the Funds. Based on these and other considerations, the Board determined that, in the exercise of its business judgment, the benefits were fair and reasonable.

Conclusion.  Based on, but not limited to, the above considerations and determinations, the Board determined that the Agreements for the Funds were fair and reasonable in light of the services to be performed, fees, expenses and such other matters as the Board considered relevant in the exercise of its business judgment. On this basis, the Board unanimously voted in favor of the continuance of the Agreements.

28  DIREXION EVOLUTION VP FUNDS

ANNUAL REPORT DECEMBER 31, 2008

Adviser

Rafferty Asset Management, LLC

33 Whitehall St. 10th Floor

New York, NY 10004

Sub-Advisor

Flexible Plan Investments, Ltd.

3883 Telegraph Road

Bloomfield Hills, MI 48302

Administrator, Transfer Agent, Dividend Paying

Agent & Shareholding Servicing Agent

U.S. Bancorp Fund Services, LLC

P.O. Box 1993

Milwaukee, WI 53201-1993

Custodian

U.S. Bank, N.A.

1555 RiverCenter Dr., Suite 302

Milwaukee, WI 53212

Independent Registered Public Accounting Firm

Ernst & Young LLP

875 E. Wisconsin Ave.
Milwaukee, WI 53202

Distributor

Rafferty Capital Markets, LLC

59 Hilton Avenue

Garden City, NY 11530

The Fund’s Proxy Voting Policies are available without charge by calling 1-800-851-0511, or by accessing the SEC’s website, at www.sec.gov.

The actual voting records relating to portfolio securities during the most recent period ended June 30 (starting with the year ended June 30, 2005) is available without charge by calling 1-800-851-0511 or by accessing the SEC’s website at www.sec.gov.

The Fund files complete schedules of portfolio holdings with the SEC on Form N-Q. The Form N-Q is available without charge, upon request, by calling 1-800-851-0511, by accessing the SEC’s website, at www.sec.gov., or by calling the SEC at 1-800-SEC-0330

This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

Direxion Insurance Trust

ANNUAL REPORT DECEMBER 31, 2008

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

Dynamic VP HY Bond Fund

Table of Contents

Letter to Shareholders	2
Performance Summary	3
Expense Example	4
Allocation of Portfolio Holdings	5
Schedule of Investments	6
Financial Statements	7
Financial Highlights	10
Notes to the Financial Statements	11
Report of Independent Registered Public Accounting Firm	18
Information on Board of Trustees and Officers	19

Letter to Shareholders

Dear Shareholders,

This Annual Report for the Direxion Funds covers the period of January 1, 2008 to December 31, 2008 (the “Annual Period”). The Dynamic VP HY Bond Fund (the “Fund”) investment objective is to seek to maximize total return (income plus capital appreciation) by investing primarily in debt instruments, including convertible securities, and derivatives of such instruments, with an emphasis on lower quality debt instruments. For the Annual Period, the Fund returned −9.98% on a total return basis compared with a return of −28.84% for the Lipper High Yield Bond Fund Index. During the Annual Period, the Fund was generally exposed to the credit markets using a credit derivative index. Volatility in the financial markets and a developing credit crunch negatively affected the performance of the Fund outright. A relatively conservative weighting in the credit derivative index, however, benefited the fund on a relative basis versus its peers. Additionally, out-performance was generally attributable to a lack of interest rate exposure and strong relative performance of the credit derivative index. Positive performance of the Fund was driven by rallies in the credit derivative index. Income in the Fund was generally achieved by investing cash in a combination of high quality overnight repurchase agreements and coupon payments from the credit derivative index.

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

Sincerely,

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

The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate and an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. To obtain performance data current to the most recent month-end, please call, toll-free, 1-800-851-0511 or visit www.direxionfunds.com.

The total annual fund operating expense ratio of the Dynamic VP HY Bond Fund is 1.75%, net of any fee, waivers or expense reimbursements.

An investment in any of the Direxion Funds is subject to a number of risks that could affect the value of its shares. It is important that investors closely review and understand these risks before making an investment. Investors considering an investment may obtain a prospectus by calling 1-800-851-0511. Investors should read the prospectus carefully for more complete information, including charges, expenses, objectives, and additional risks, before investing.

Distributed by: Rafferty Capital Markets
Date of First Use: February 27, 2009

Dynamic VP HY Bond Fund

February 1, 2005¹ - December 31, 2008

	Average Annual Total Return3
								Since
	1 Year			3 Year				Inception1
Dynamic VP HY Bond Fund		(9.98)	%		(2.07	)	%		(1.21)	%
Barclays Capital Aggregate Bond Index2		5.24	%		5.51		%		4.67	%
Lipper High Yield Bond Funds Index		(28.84)	%		(7.15	)	%		(4.74)	%

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions of the redemption of fund shares. The performance of the Barclays Capital Aggregate Bond Index and the Lipper High Yield Bond Fund Index does not reflect the deduction of fees associated with a mutual fund, such as investment management fees. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, Rafferty Asset Management, LLC, waived and/or recouped fees for various expenses. Had these waivers and/or recoupments not been in effect, performance during the current period would have been lower.

The performance data quoted represents past performance; past performance does not guarantee future results.

Market Exposure

	% of
Investment Type	Net Assets
Swap Contracts		27.8	%
Total Exposure		27.8	%

“Market Exposure” includes the value of total investments (including the notional amount, upfront payments, and any unrealized appreciation of swaps) and excludes any short-term investments and cash equivalents divided by Net Assets.

1	Commencement of operations was February 1, 2005.
2	Formerly Lehman Aggregate Bond Index.
3	As of December 31, 2008.

DIREXION DYNAMIC VP HY BOND FUND  3

Expense Example

December 31, 2008 (Unaudited)

As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held the entire period (July 1, 2008 — December 31, 2008).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. Although the Fund charges no sales load or transactions fees, you will be assessed fees for outgoing wire transfers, returned checks or stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request a redemption be made by wire transfer, currently a $15.00 fee is charged by the Funds’ transfer agent. However, the example below does not include portfolio trading commissions and related expenses or other extraordinary expenses as determined under generally accepted accounting principles. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as wire transfers, returned checks or stop payment orders. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

4  DIREXION DYNAMIC VP HY BOND FUND

Expense Example Tables

December 31, 2008 (Unaudited)

				Beginning		Ending		Expenses
	Expense			Account Value		Account Value		Paid During
	Ratio1			July 1, 2008		December 31, 2008		Period2
Dynamic VP HY Bond Fund
Based on actual fund return		2.02	%	$	1,000.00	$	949.70	$	9.90
Based on hypothetical 5% return		2.02	%		1,000.00		1,014.98		10.23

1	Annualized ratio of net expenses incurred in the most recent fiscal half-year.
2	Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/period, then divided by 366.

Allocation of Portfolio Holdings

December 31, 2008 (Unaudited)

	Cash*			Swaps**			Total
Dynamic VP HY Bond Fund		100	%		0	%***		100	%

*	Cash, cash equivalents and other assets less liabilities.
**	Allocated by unrealized appreciation/depreciation.
***	Percentage is less than 0.5%.

DIREXION DYNAMIC VP HY BOND FUND  5

Dynamic VP HY Bond Fund

Schedule of Investments

December 31, 2008

Shares			Value
SHORT TERM INVESTMENTS - 96.1%
MONEY MARKET FUNDS - 96.1%
	11,338,549	Dreyfus Government Cash Management	$	11,338,549
	11,338,549	Evergreen Institutional U.S. Government Money Market Fund		11,338,549
	11,338,549	Federated Prime Obligations Fund		11,338,549
	1,134,314	Fidelity Institutional Money Market Portfolio		1,134,314
	11,378,622	Goldman Sachs Financial Square Government Fund		11,378,622
	11,338,549	SEI Daily Income Trust Government Fund		11,338,549
		TOTAL SHORT TERM INVESTMENTS (Cost $57,867,132)	$	57,867,132
		TOTAL INVESTMENTS (Cost $57,867,132) — 96.1%	$	57,867,132
		Other Assets in Excess of Liabilities - 3.9%		2,320,195
		TOTAL NET ASSETS - 100.0%	$	60,187,327

Percentages are stated as a percent of net assets.

Dynamic VP HY Bond Fund

Credit Default Swap Contracts — Sell Protection¹

December 31, 2008

												Upfront
		Implied										Payments
		Credit			Receive			Termination		Notional		Paid			Unrealized
Counterparty	Reference Entity	Spread2			Fixed Rate			Date		Amount3		(Received)			Appreciation
Bank of America	CDX North America High Yield Index		11.46	%		5.00	%		12/20/2013	$	7,150,000	$	(1,556,781	)	$	122,513
Barclays Capital	CDX North America High Yield Index		11.46	%		5.00	%		12/20/2013		5,000,000		(1,150,938	)		151,188
Goldman Sachs & Co.	CDX North America High Yield Index		11.46	%		5.00	%		12/20/2013		8,800,000		(1,760,000	)		440
										$	20,950,000	$	(4,467,719	)	$	274,141

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

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

6  DIREXION DYNAMIC VP HY BOND FUND

Statement of Assets and Liabilities

December 31, 2008

	Dynamic
	VP HY Bond Fund
Assets:
Investments, at market value (Note 2)	$	57,867,132
Cash		200,655
Receivable for Fund shares sold		476,006
Deposit at broker for swaps		3,560,000
Swap payments receivable		2,500,000
Unrealized appreciation on swaps		274,141
Interest receivable		18,724
Total Assets		64,896,658
Liabilities:
Payable for Fund shares redeemed		157,084
Swap payments received		4,467,719
Accrued distribution expense		4,222
Accrued advisory expense		6,932
Accrued expenses and other liabilities		73,374
Total Liabilities		4,709,331
Net Assets	$	60,187,327
Net Assets Consist Of:
Capital stock	$	62,214,410
Accumulated undistributed net investment income		703,018
Accumulated undistributed net realized gain (loss)		(3,004,242	)
Net unrealized appreciation/(depreciation) on:
Investments		—
Swaps		274,141
Total Net Assets	$	60,187,327
Calculation of Net Asset Value Per Share:
Net assets	$	60,187,327
Shares outstanding (unlimited shares of beneficial interest authorized, no par value)		3,677,629
Net asset value, redemption price and offering price per share	$	16.37
Cost of Investments	$	57,867,132

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

7  DIREXION DYNAMIC VP HY BOND FUND

Statement of Operations

For the Year Ended December 31, 2008

	Dynamic
	VP HY Bond Fund
Investment income:
Dividend income	$	110
Interest income		365,915
Total investment income		366,025
Expenses:
Investment advisory fees		109,408
Distribution expenses		36,469
Shareholder servicing fees		29,175
Administration fees		7,297
Fund accounting fees		17,281
Custody fees		2,634
Transfer agent fees		11,925
Professional fees		41,156
Reports to shareholders		20,276
Trustees’ fees and expenses		585
Other		5,108
Total expenses before reimbursement		281,314
Less: Reimbursement of expenses from Adviser		(26,098	)
Total expenses		255,216
Net investment income		110,809
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on:
Investments		(43,891	)
Futures		(51,947	)
Swaps		(1,216,746	)
Contributions by affiliates (Note 5)		31,151
		(1,281,433	)
Change in unrealized appreciation (depreciation) on:
Investments		4,914
Swaps		566,121
		571,035
Net realized and unrealized gain on investments		(710,398	)
Net decrease in net assets resulting from operations	$	(599,589	)

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

8  DIREXION DYNAMIC VP HY BOND FUND

Statements of Changes in Net Assets

December 31, 2008

	Dynamic VP HY Bond Fund
	Year Ended			Year Ended
	December 31, 2008			December 31, 2007
Operations:
Net investment income	$	110,809		$	1,246,592
Net realized gain (loss) on investments		(1,281,433	)		511,232
Change in unrealized appreciation (depreciation) on investments		571,035			(1,737,756	)
Net increase (decrease) in net assets resulting from operations		(599,589	)		20,068
Distributions to shareholders:
Net investment income		(846,466	)		(1,258,795	)
Total distributions		(846,466	)		(1,258,795	)
Capital share transactions:
Proceeds from shares sold		160,032,560			97,181,701
Proceeds from shares issued to holders in reinvestment of distributions		846,466			1,258,795
Cost of shares redeemed		(121,404,201	)		(119,748,425	)
Net increase (decrease) in net assets resulting from beneficial interest transactions		39,474,825			(21,307,929	)
Total increase (decrease) in net assets		38,028,770			(22,546,656	)
Net assets:
Beginning of year		22,158,557			44,705,213
End of year	$	60,187,327		$	22,158,557
Accumulated undistributed net investment income, end of year/period	$	703,018		$	1,064,614

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

9  DIREXION DYNAMIC VP HY BOND FUND

Financial Highlights

December 31, 2008

																								RATIOS TO AVERAGE NET ASSETS
																														Net
					Net Realized			Net Increase																						Investment
	Net Asset		Net		and			(Decrease)			Dividends						Net Asset													Income (Loss)
	Value,		Investment		Unrealized			in Net Asset			from Net						Value,					Net Assets,								After Expense			Portfolio
	Beginning		Income		Gain (Loss)			Value Resulting			Investment			Total			End		Total			End of		Total			Net			Reimbursement/			Turnover
Year/Period	of Year/Period		(Loss)4		on Investments4			from Operations			Income			Distributions			of Year/Period		Return6			Year/Period (,000)		Expenses			Expenses			Recoupment			Rate5
Dynamic VP HY Bond Fund
Year ended December 31, 2008	$	19.52	$	0.13	$	(2.05	)	$	(1.92	)	$	(1.23	)	$	(1.23	)	$	16.37		(9.98	%)7	$	60,187		1.93	%		1.75	%		0.76	%		50	%
Year ended December 31, 2007		20.43		0.81		(1.16	)		(0.35	)		(0.56	)		(0.56	)		19.52		(1.77	%)		22,159		1.63	%		1.63	%		3.95	%		145	%
Year ended December 31, 2006		20.05		0.96		0.27			1.23			(0.85	)		(0.85	)		20.43		6.21	%		44,705		1.68	%		1.67	%		4.75	%		538	%
February 1, 20051 to December 31, 2005		20.00		0.90		(0.60	)		0.30			(0.25	)		(0.25	)		20.05		1.50	%2		35,144		1.94	%3		1.74	%3		4.98	%3		654	%2

1	Commencement of operations.
2	Not annualized.
3	Annualized.
4	Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each period/year.
5	Portfolio turnover ratio is calculated without regard to short-term securities having a maturity of less than one year. Investments in options, swaps, futures contracts and repurchase agreements are deemed short-term securities. The Fund’s aggressive investment strategy may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.
6	All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes or any fees and expenses imposed under the Contracts and Plans, which would increase overall fees and expenses. Please refer to your Contract or Plan prospectus for a description of those fees and expenses.
7	The Adviser made a contribution due to trading error. If the contribution had not been made, the total return would have been lower by 0.07%.

10  DIREXION DYNAMIC VP HY BOND FUND

Dynamic VP HY Bond Fund

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2008

1.   ORGANIZATION

Direxion Insurance Trust (the “Trust”) was organized as a Massachusetts business trust on December 28, 1999 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company issuing its shares in series, each series representing a distinct portfolio with its own investment objective and policies. The Trust currently has three series in operation of which the Dynamic VP HY Bond Fund (the “Fund”) is included in this report. The Fund is a “non-diversified” series of the Trust pursuant to the 1940 Act. The Trust offers shares to unaffiliated life insurance separate accounts (registered as unit investment trusts under the 1940 Act) to fund the benefits under variable annuity and variable life contracts. The Dynamic VP HY Bond Fund commenced operations on February 1, 2005.

The objective of the Dynamic VP HY Bond Fund is to maximize total return (income plus capital appreciation) by investing primarily in debt instruments, including convertible securities, and derivatives of such instruments, with an emphasis on lower-quality debt instruments.

2.   SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of their financial statements. These policies are in conformity with U.S. generally accepted accounting principles.

a) Investment Valuation – Equity securities, exchange-traded funds, options, futures, and options on futures are valued at their last sales price, or if not available, the average of the last bid and asked prices. Over-the-counter (“OTC”) securities are valued at the average of the last bid and ask prices. Securities primarily traded on the NASDAQ National Market are valued using the NASDAQ Official Closing Price (“NOCP”). Investments in open-end mutual funds are valued at their respective net asset values on the valuation dates. Swaps are valued based upon prices from third party vendor models or quotations from market makers to the extent available. Short-term debt securities with a maturity of 60 days or less and money market securities are valued using the amortized cost method. Other debt securities are valued by using the mean prices provided by the Fund’s pricing service or, if such services are unavailable, by a pricing matrix method. Securities for which reliable market quotations are not readily available, the Funds’ pricing service does not provide a valuation for such securities, the Fund’s pricing service provides valuation that in the judgment of Rafferty Asset Managements, LLC (the “Adviser”) does not represent fair value, or the Fund or Adviser believes the market price is stale will be fair valued as determined by the Adviser under the supervision of the Board of Trustees.

b) Repurchase Agreements – The Fund may enter into repurchase agreements with institutions that are members of the Federal Reserve System or securities dealers who are members of a national securities exchange or are primary dealers in U.S. government securities. In connection with transactions in repurchase agreements, it is the Trust’s policy that the Fund receives, as collateral, cash and/or securities (primarily U.S. government securities) whose market value, including accrued interest, at all times will be at least equal to 100% of the amount invested by the Fund in each repurchase agreement. If the seller defaults, and the value of the collateral declines, realization of the collateral by the Fund may be delayed or limited. The Fund was not invested in repurchase agreements at December 31, 2008.

c) Swap Contracts – The Fund may enter into equity swap contacts. Standard equity swap contracts are between two parties that agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross amount to be exchanged is calculated with respect to a “notional amount” (i.e. the return on or increase in value of a particular dollar amount invested in a “basket” of securities representing a particular index or industry sector). The Fund’s obligations are accrued daily (offset by any amounts owed to the Fund).

In a “long” equity swap agreement, the counterparty will generally agree to pay the Fund the amount, if any, by which the notional amount of swap contract would have increased in value if the Fund had been invested in the particular securities, plus dividends that would have been received on those securities. The Fund will agree to pay the counterparty a floating rate of

DIREXION DYNAMIC VP HY BOND FUND  11

interest on the notional amount of the swap contract plus the amount, if any, by which the notional amount would have decreased in value had it been invested in such securities plus, in certain instances, commissions or trading spreads on the notional amounts. Thus, the return on the swap contract should be the gain or loss on the notional amount plus dividends on the securities less the interest paid by the Fund on the notional amount. Payments may be made at the conclusion of the contract or periodically during its term. Swap contracts do not include the delivery of securities or other underlying securities. The net amount of the excess, if any, of the Fund’s obligations over its entitlement with respect to each swap is accrued on a daily basis and an amount of cash or liquid assets, having an aggregate net asset value at least equal to such accrued excess is maintained in a segregated account by the Fund’s custodian. Until a swap contract is settled in cash, the gain or loss on the notional amount plus dividends on the securities less the interest paid by the Fund on the notional amount are recorded as “unrealized gains or losses on swaps and futures” and when cash is exchanged, the gain or loss is recorded as “realized gains or losses on swaps and futures.” Swap contracts are collateralized by the securities and cash of each particular Fund.

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

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

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

The maximum potential amount of future payments that the Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the swap. Notional amount of all credit default swaps outstanding as of December 31, 2008 are disclosed in the footnotes to the Schedule of Investments. These

12  DIREXION DYNAMIC VP HY BOND FUND

potential amounts would be partially offset by any recovery value of respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a Fund for the same referenced entity or entities.

Dynamic VP HY Bond Fund has entered into swap agreements with three counterparties: Goldman Sachs, Barclays, and Bank of America in which the fund sold protection on a credit default swap index, the Dow Jones CDX North America High Yield Index (the “CDX”). The CDX is a completely standardized credit security and is composed of 100 non-investment grade entities (“reference entities”), distributed among three sub-indices: B, BB, and HB. The composition of the CDX and each sub-index is determined by a consortium of 16 member banks. All entities are domiciled in North America. CDX indices roll every 6 months in March and September. The CDX is providing credit protection to the counterparties of the respective credit default swap agreements in exchange for a fixed interest rate payment received by the Fund from the counterparties. Therefore, there is credit risk with respect to the referenced entities of these credit default swap agreements. If a credit event occurs to a referenced entity, the Fund’s principal amount in the CDX will be reduced by its pro-rata interest in the respective credit default swap agreement. A credit event may include a failure to pay interest or principal, bankruptcy, or restructuring, by any of the 100 reference entities in the CDX. Any recoverable amounts of the liquidation of the referenced entity will be allocated pro rata to the holders of the CDX.

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

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

d) Short Positions – The Fund may engage in short sale transactions. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. Subsequent fluctuations in the market prices of short positions may require purchasing the securities at prices which may differ from the market value reflected on the Statement of Assets and Liabilities. The Fund is liable to the buyer for any dividends payable on securities while those securities are in a short position. As collateral for its short positions, the Fund is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities equal to the market value of the securities sold short. This collateral is required to be adjusted daily. There was no short position held by the Funds at December 31, 2008.

e) Risks of Options, Futures Contracts, Options on Futures Contracts and Short Positions – The risks inherent in the use of options, futures contracts, options on futures contracts and short positions include 1) adverse changes in the value of such instruments; 2) imperfect correlation between the price of options and futures contracts and options thereon and movements in the price of the underlying securities, index or futures contracts; 3) the possible absence of a liquid secondary market for any particular instrument at any time; 4) the possible need to defer closing out certain positions to avoid adverse tax consequences; and 5) the possible nonperformance by the counterparty under the terms of the contract.

DIREXION DYNAMIC VP HY BOND FUND  13

The Funds designate cash, cash equivalents and liquid securities as collateral for written options, futures contracts, options on futures contracts, and short positions.

f) Risks of Investing in Foreign Securities – Investments in foreign securities involve greater risks than investing in domestic securities. As a result, the Fund’s returns and net asset values may be affected to a large degree by fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory requirements in other countries. The laws and accounting, auditing, and financial reporting standards in foreign countries typically are not as strict as they are in the U.S., and there may be less public information available about foreign companies.

g) Security Transactions – Investment transactions are recorded on trade date. The Fund determines the gain or loss realized from investment transactions by comparing the identified cost, which is the same basis used for federal income tax purposes, with the net sales proceeds.

h) Federal Income Taxes – The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all or substantially all federal income and excise taxes.

i) Income and Expenses – Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and discount, and dividends received from money market mutual funds is recognized on an accrual basis. The Fund is charged for those expenses that are directly attributable to each series, such as Advisory fees and registration costs. Expenses that are not directly attributable to a series are generally allocated among the Trust’s series in proportion to their respective net assets.

j) Distributions to Shareholders – The Fund generally pays dividends from net investment income and distributes net realized capital gains, if any, at least annually. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Distributions to shareholders are recorded on the ex-dividend date.

The tax character of distributions for the Dynamic VP HY Bond Fund during the years ended December 31, 2008 and December 31, 2007, were as follows:

	Dynamic VP HY Bond Fund
	Year Ended		Year Ended
	December 31,		December 31,
	2008		2007
Distributions paid from:
Ordinary income	$	846,466	$	1,258,795
Long-term capital gain		—		—
Total distributions paid	$	846,466	$	1,258,795

As of December 31, 2008, the components of distributable earnings of the Fund on a tax basis were as follows:

	Dynamic
	VP HY Bond Fund
Tax cost of investments	$	57,867,132
Gross unrealized appreciation		—
Gross unrealized depreciation		—
Net unrealized appreciation/(depreciation)		—
Undistributed ordinary income/(loss)		977,159
Undistributed long-term capital gain		—
Total distributable earnings		977,159
Other accumulated gain/(loss)		(3,004,242	)
Total accumulated earnings/(loss)	$	(2,027,083	)

14  DIREXION DYNAMIC VP HY BOND FUND

On the Statement of Assets and Liabilities, the following adjustments were made for permanent tax differences between accounting for net investment income and realized gains and losses under GAAP and tax reporting:

Accumulated Realized			Accumulated Net
Gain/(Loss)			Investment Income/(Loss)		Capital Stock
$	(374,062	)	$	374,061	$	1

Net investment income and realized gains and losses for federal income tax purposes may differ from that reported on the financial statements because of permanent book-to-tax differences. GAAP requires that permanent differences in net investment income and realized gains and losses due to differences in financial reporting and tax reporting be reclassified between various components of net assets. The permanent differences primarily relate to swap contracts, foreign exchange, and advisor contributions.

In order to meet certain excise tax distribution requirements, the Fund is required to measure and distribute annually, net capital gains realized during a twelve-month period ending October 31st. In connection with this, the Fund is permitted for tax purposes to defer into their next fiscal year any net capital losses incurred between November 1st and the end of their fiscal year, December 31, 2008. At December 31, 2008 the Fund deferred, on a tax basis, post-October losses of $100,448.

As of December 31, 2008, the Dynamic VP HY Bond Fund had capital loss carryforwards on a tax basis of:

Expires
12/31/2013		12/31/2014		12/31/2015		12/31/2016		Total
$	203,531	$	304,289	$	—	$	2,395,974	$	2,903,794

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

FIN 48 requires the Fund to analyze all open tax years. Open tax years are those years that are open for examination by the relevant taxing authority. As of December 31, 2008, open Federal and state income taxes include the tax years ended December 31, 2005, December 31, 2006, December 31, 2007 and December 31, 2008. The Fund has no examination in progress.

The Fund has reviewed all open tax years and major jurisdictions and concluded that the adoption of FIN 48 resulted in no effect to the Fund’s financial position or results of operations. There is no tax liability resulting from uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year-ends December 31, 2005, December 31, 2006, December 31, 2007 and December 31, 2008. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will significantly change in the next twelve months.

k) Guarantees and Indemnifications – In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnification provisions pursuant to which the Fund agrees to indemnify third parties upon occurrence of specified events. The Fund’s maximum exposure relating to these indemnification agreements is unknown. However, the Fund has not had prior claims or losses in connection with these provisions and believes the risk of loss is remote.

l) Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting. Actual results could differ from those estimates.

DIREXION DYNAMIC VP HY BOND FUND  15

3.   CAPITAL SHARE TRANSACTIONS

Capital share transactions for the Dynamic VP HY Bond Fund during the years ended December 31, 2008 and December 31, 2007 were as follows:

	Year Ended			Year Ended
	December 31,			December 31,
	2008			2007
Shares sold		9,260,284			4,848,453
Shares issued to holders in reinvestment of distributions		47,943			61,965
Shares redeemed		(6,765,587	)		(5,963,395	)
Total increase (decrease) from capital share transactions		2,542,640			(1,052,977	)

4.   INVESTMENT TRANSACTIONS

During the year ended December 31, 2008, the aggregate purchases and sales of investments (excluding short-term investments) for the Fund were as follows:

	Purchases		Sales
Dynamic VP HY Bond Fund	$	83,085	$	623,635

There were no purchases or sales of long-term U.S. Government securities during the year ended December 31, 2008.

5.   INVESTMENT ADVISORY AND OTHER AGREEMENTS

Investment Advisory Fees: The Fund has entered into an investment advisory agreement with the Adviser. The Adviser receives a fee, computed daily and payable monthly, at the annual rates presented below as applied to the Fund’s average daily net assets. For the year ended December 31, 2008, the Adviser contractually has agreed to pay all operating expenses (excluding dividends on short positions), in excess of the annual cap on expenses presented below as applied to the Fund’s average daily net assets. On November 6, 2008, the Board of Trustees approved a change to the annual expense cap of the Fund. Effective January 1, 2009 and extending through December 31, 2009, the annual expense cap of the Fund increased from 1.75% to 1.95%. Additionally, the Adviser may waive fees it may otherwise normally charge the Fund. For the year ended December 31, 2008, the Fund did not voluntarily waive any additional fees. The Adviser may change, or end, any voluntary waiver at any time. The Adviser may recover from the Fund the expenses paid in excess of the annual cap on expenses (either due to the contractual or any voluntary waiver) for the three previous years, as long as the recovery does not cause the Fund to exceed such annual cap on expenses. For the year ended December 31, 2008, the Adviser paid or recouped the following expenses:

	Dynamic
	VP HY Bond Fund
Annual Advisory rate		0.75%
Annual cap on expenses		1.75%
Reimbursement of expenses from Adviser - 2008	$	26,098
Adviser expense waiver recovery - 2008	$	—

Remaining expenses subject to potential recovery expiring in:

	Dynamic
	VP HY Bond Fund
2009	$	—
2010	$	—
2011	$	26,098
Total	$	26,098

Rafferty Capital Markets, LLC (the “Distributor”) serves as principal underwriter of the Fund and acts as the Fund’s distributor in a continuous public offering of the Fund’s shares. The Distributor is an affiliate of the Adviser.

16  DIREXION DYNAMIC VP HY BOND FUND

Distribution Expenses: The shares of the Dynamic VP HY Bond Fund are subject to an annual Rule 12b-1 fee of up to 0.25% of Fund’s average daily net assets. The fee is paid to the insurance company of the plan sponsor (i.e. various enrolled employers) for expenses incurred for distribution-related activities, on behalf of the Funds.

Shareholder Servicing Fees: The Board has also authorized the Fund to pay a shareholder servicing fee of 0.20% of the Fund’s average daily net assets. The Trust, on behalf of the Fund, pays the fee to the insurance company of the plan sponsor who provides services for and maintain shareholder accounts.

A trading error of $31,151 occurred on a variance swap contract which was held in the Dynamic VP HY Bond Fund. The Adviser reimbursed the Fund for this loss. This amount is reflected on the Statement of Operations as contribution by affiliates, and in the Financial Highlights.

6.   FINANCIAL ACCOUNTING STANDARDS BOARD STANDARD NO. 157

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

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

Level 1 — Quoted prices in active markets for identical securities,

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

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

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

The following is a summary of the inputs used to value the Fund’s net assets as of December 31, 2008:

	Dynamic VP HY Bond Fund
	Investments		Other Financial
	in Securities		Instruments*
Description	(Asset)		(Asset)
Level 1 — Quoted prices	$	57,867,132	$	—
Level 2 — Other significant observable inputs		—		274,141
Level 3 — Significant unobservable inputs		—		—
Total	$	57,867,132	$	274,141

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

7.   NEW ACCOUNTING PRONOUNCEMENT

In March 2008, FASB issued its Statement on Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”). This standard is intended to enhance financial statement disclosure for derivative instruments and hedging activities and enable investors to understand: a) how and why a fund uses derivatives instruments, b) how derivatives instruments and related hedge items are accounted for, and c) how derivative instruments and related hedge items affect a fund’s financial position, results of operations and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As of December 31, 2008, management does not believe the adoption of FAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedge items.

DIREXION DYNAMIC VP HY BOND FUND  17

Direxion Funds

Report of Independent Registered Public Accounting Firm

To the Shareholders and

Board of Trustees of Direxion Insurance Trust:

We have audited the accompanying statement of assets and liabilities of Dynamic VP HY Bond Fund (one of the series constituting Direxion Insurance Trust) (the “Fund”), including the schedule of investments, as of December 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and for the period from February 1, 2005 (commencement of operations) to December 31, 2005. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Dynamic VP HY Bond Fund at December 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and for the period from February 1, 2005 (commencement of operations) to December 31, 2005 in conformity with U.S. generally accepted accounting principles.

February 25, 2009

Milwaukee, Wisconsin

18  DIREXION DYNAMIC VP HY BOND FUND

Direxion Funds

TRUSTEES AND OFFICERS

The business affairs of each Fund are managed by or under the direction of the Board of Trustees. Information pertaining to the Trustees and Officers of the Funds is set forth below. The SAI includes additional information about the Funds’ Trustee and Officers and is available without charge, upon request by calling 1-800-851-0511.

Interested Trustees

				# of Portfolios
				in Direxion
		Term of Office		Complex
	Position(s) Held with	and Length of	Principal Occupation(s)	Overseen by		Other Trusteeships/
Name, Address and Age	Fund	Time Served	During Past Five Years	Trustee(2)		Directorships Held by Trustee
Lawrence C. Rafferty(1)
Age: 66	Chairman of the Board of Trustees	Lifetime of Trust until removal or resignation; Since 1997	Chairman and Chief Executive Officer of Rafferty, 1997-present; Chief Executive Officer of Rafferty Companies, LLC, 1996-present; Chief Executive Officer of Rafferty Capital Markets, Inc., 1995-present.		109	Board of Trustees, Fairfield University; Board of Directors, St. Vincent’s Services; Executive Committee, Metropolitan Golf Association

Non-Interested Trustees

				# of Portfolios
				in Direxion
		Term of Office		Complex		Other Trusteeships/
		and Length of	Principal Occupation(s)	Overseen by		Directorships Held
Name, Address and Age	Position(s) Held with Fund	Time Served	During Past Five Years	Trustee(2)		by Trustee
Daniel J. Byrne
Age: 64	Trustee	Lifetime of Trust until removal or resignation; Since 1997	President and Chief Executive Officer of Byrne Securities Inc., 1992-present.		109	Trustee, The Opening Word Program, Wyandanch, New York
Gerald E. Shanley III Age: 65	Trustee	Lifetime of Trust until removal or resignation; Since 1997	Business Consultant, 1985-present; Trustee of Trust Under Will of Charles S. Payson, 1987-present; C.P.A. 1979-present.		109	None
John Weisser
Age: 67	Trustee	Lifetime of Trust until removal or resignation; Since 2007	Retired, Since 1995; Salomon Brothers, Inc, 1971-1995, most recently as Managing Director.		109	MainStay VP Series Fund, Inc.

DIREXION DYNAMIC VP HY BOND FUND  19

Direxion Funds

TRUSTEES AND OFFICERS

Officers

				# of Portfolios
		Term of Office		in Direxion Complex		Other Trusteeships/
		and Length of	Principal Occupation(s)	Overseen by		Directorships Held
Name, Address and Age	Position(s) Held with Fund	Time Served	During Past Five Years	Trustee(2)		by Trustee
Daniel D. O’Neill
Age: 40	President;	One Year; Since 1999	Managing Director of Rafferty, 1999-present.		N/A	N/A
	Chief Operating Officer and Chief Investment Officer	One Year; Since 2006
William Franca
Age: 52	Executive Vice President – Head of Distribution	One Year; Since 2006	Senior Vice President – National Sales, Massachusetts Financial Services/SunLife Financial Distributors, 2002-2004; Executive Vice President, Distribution, SunLife, 2001-2002.		N/A	N/A
Peter Wilson
Age: 31	Chief Compliance Officer	One Year; Since 2008	Director, Alaric Compliance Services, LLC, 2004 – present; Attorney, US Army JAG Corps, 2003-2007.		N/A	N/A
Guy F. Talarico
Age: 53	Principal Financial Officer	One Year; Since 2008	CEO, Alaric Compliance Services LLC, 2006-present; Co-CEO EOS Compliance Services, LLC, 2004-2006; Senior Director, Investors Bank and Trust Co, 2001-2004; Division Executive, JP Morgan-Chase Bank, 1986-2001; Group Product Manager, Lever Brothers Company, 1977-1986.		N/A	N/A
Eric W. Falkeis 615 East Michigan Street
Milwaukee, WI 53202 Age: 36	Secretary	One Year; Since 2004	Senior Vice President USBFS since September 2007; Chief Financial Officer, U.S. Bancorp Fund Services, LLC, since April 2006; Vice President, U.S. Bancorp Fund Services LLC, 1997-present; formerly, Chief Financial Officer, Quasar Distributors, LLC, 2000-2003.		N/A	N/A
­ ­

(1)	Mr. Rafferty is affiliated with Rafferty. Mr. Rafferty is the Chairman and Chief Executive Officer of Rafferty and owns a beneficial interest in Rafferty.
(2)	The Direxion Complex consists of the Direxion Funds which currently offers for sale to the public 32 portfolios of the 32 currently registered with the SEC and the Direxion Insurance Trust which currently offers for sale 3 portfolios of the 45 currently registered with the SEC and the Direxion ETF Trust which currently offers for sale to the public 8 of the 32 funds currently registered with the SEC.
	The address for all trustees and officers except Eric W. Falkeis is 33 Whitehall St., New York, NY 10004.

20  DIREXION DYNAMIC VP HY BOND FUND

Investment Advisory Agreement Approval (Unaudited)

Provided below is a summary of certain of the factors the Board considered at its August 13, 2008 Board meeting in renewing the Advisory Agreement (“Agreement”) between Rafferty Asset Management (“Rafferty”) and the Direxion Insurance Trust (the “Trust”) on behalf of the Dynamic VP HY Bond Fund (“Fund”). The Board did not identify any particular information that was most relevant to its consideration to approve the Agreement and each Trustee may have afforded different weight to the various factors.

In determining whether to approve the continuance of the Agreement, the Board considered the best interests of the Fund. In addition, the Board noted that the Trustees have considered various reports and information provided throughout the year at their regular Board meetings and otherwise. The Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund to the extent applicable; (3) the cost to Rafferty for providing services and the profitability of the advisory business to Rafferty, if such information was provided; (4) the extent to which economies of scale have been taken into account in setting fee schedules; (5) whether fee levels reflect these economies of scale, if any, for the benefit of Fund shareholders; (6) comparisons of services and fees with contracts entered into by Rafferty with other clients (such as pension funds and other institutional investors), if any; and (7) other benefits derived or anticipated to be derived by Rafferty from its relationship with the Fund.

Nature, Extent and Quality of Services Provided.  The Board reviewed the nature, extent and quality of the services provided or to be provided under the Agreement by Rafferty. The Board noted that Rafferty has provided services to the Trust since its inception and has developed an expertise in managing the Fund. The Board also noted that Rafferty trades efficiently with low commission schedules, which helps improve performance results. The Board considered Rafferty’s representation that it has the financial resources and appropriate staffing to manage the Fund and meet its expense reimbursement obligations, if any. The Board also considered that Rafferty had enhanced the compliance programs of the Trust by utilizing the services of an independent compliance consulting firm and that a report from the chief compliance officer is provided to the Board at its regularly scheduled quarterly Board meetings. The Board noted Rafferty’s marketing and distribution efforts, including offering additional investment options to shareholders through the creation of new funds and promoting the Fund through new broker and platform relationships. The Board considered that Rafferty oversees all aspects of the operation of the Fund, including oversight of the Fund’s service providers. Based on these and other considerations, the Board determined that, in the exercise of its business judgment, the nature, extent and quality of the services provided by Rafferty to the Fund under the Agreement were fair and reasonable.

Performance of the Fund.  The Board also evaluated the performance of the Fund to the average performance of the relevant Lipper funds universe for the one-, three- and six-month periods ended July 31, 2008. The Board considered management’s description of the performance of the Fund in monthly performance reports, which reflected recent out-performance of its benchmark index. Although the Board received monthly performance reports for its consideration, the Board generally assigned more weight to the longer-term performance of the Fund. Based on these and other considerations, the Board determined that, in the exercise of its business judgment, the Fund’s performance was reasonable.

Costs of Services Provided to the Fund and Profits Realized.  The Board considered the overall fees paid to Rafferty on an annual basis since the Fund’s commencement of operations, including any fee waivers and recoupment of fees previously waived. The Board also considered advisory fees charged by, and total expense ratios of, comparable fund groups. In this regard, management advised the Board that the advisory fees for the Fund is similar to and, in some cases lower than, the advisory fees for the comparable fund groups. The Board also considered that the total expense ratio for the Fund is generally higher than comparable funds. However, Rafferty indicated that the comparable fund groups generally have higher asset levels, which account in part for their lower total expense ratios. The Board also noted that Rafferty does not have any non-mutual fund clients, except for one hedge fund client. In this connection, the Board considered that Rafferty charges higher fees for that hedge fund compared to the advisory fees of the Fund. The Board also considered that Rafferty contractually agreed to limit the total expenses for the most recent and upcoming fiscal years for the Fund via fee waivers and/or expense limitations. The Board also considered the overall profitability of Rafferty’s investment business and its representation that it does not allocate internal costs and assess profitability with respect to its services to individual Funds. Based on these considerations, the Board determined that, in the exercise of its business judgment, the costs of the services provided and the profits realized under the Agreement were fair and reasonable.

DIREXION DYNAMIC VP HY BOND FUND  21

Economies of Scale.  The Board considered Rafferty’s representation that it believes that asset levels at this time are not sufficient to achieve economies of scale or warrant a reduction in fee rates or the addition of breakpoints. Rafferty noted that it was continuing its sales and marketing efforts in order to raise additional assets. Based on these and other considerations, the Board determined that, in the exercise of its business judgment, the reduction in fee rates or additions of breakpoints was not necessary at this time.

Other Benefits.  The Board considered Rafferty’s representation that its relationship with the Fund has permitted Rafferty to attract business to its non-mutual fund account. The Board also considered that Rafferty’s overall business with brokerage firms helps to lower commission rates and provide better execution for Fund portfolio transactions. Based on these and other considerations, the Board determined that, in the exercise of its business judgment, the benefits were fair and reasonable.

Conclusion.  Based on, but not limited to, the above considerations and determinations, the Board determined that the Agreement for the Fund was fair and reasonable in light of the services to be performed, fees, expenses and such other matters as the Board considered relevant in the exercise of its business judgment. On this basis, the Board unanimously voted in favor of the continuance of the Agreement.

22  DIREXION DYNAMIC VP HY BOND FUND

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Direxion Insurance Trust

ANNUAL REPORT DECEMBER 31, 2008

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

Investment Adviser

Rafferty Asset Management, LLC

33 Whitehall St. 10th Floor

New York, NY 10004

Administrator, Transfer Agent, Dividend

Paying Agent & Shareholding Servicing
Agent

U.S. Bancorp Fund Services, LLC

P.O. Box 1993

Milwaukee, WI 53201-1993

Custodian

U.S. Bank, N.A.

1555 RiverCenter Dr., Suite 302

Milwaukee, WI 53212

Independent Registered Public Accounting Firm

Ernst & Young LLP

857 E. Wisconsin Ave.

Milwaukee, WI 53202

Distributor

Rafferty Capital Markets, LLC

59 Hilton Avenue

Garden City, NY 11530

The Fund’s Proxy Voting Policies are available without charge by calling 1-800-851-0511, or by accessing the SEC’s website, at www.sec.gov.

The actual voting records relating to portfolio securities during the most recent period ended June 30 (starting with the year ended June 30, 2005) is available without charge by calling 1-800-851-0511 or by accessing the SEC’s website at www.sec.gov.

The Fund files complete schedules of portfolio holdings with the SEC on Form N-Q. The Form N-Q is available without change, upon request, by calling 1-800-851-0511, by accessing the SEC’s website, at www.sec.gov., or by calling the SEC at 1-800-SEC-0330

This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

TABLE OF CONTENTS

	Item 2. Code of Ethics
	Item 3. Audit Committee Financial Expert
	Item 4. Principal Accountant Fees and Services
	Item 5. Audit Committee of Listed Registrants
	Item 6. Schedule of Investments
	Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
	Item 8. Portfolio Managers of Closed-End Management Investment Companies
	Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
	Item 10. Submission of Matters to a Vote of Security Holders
	Item 11. Controls and Procedures
	Item 12. Exhibits.
SIGNATURES
EX-99.CODE
EX-99.CERT
EX-99.906CERT

Item 2. Code of Ethics.

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.

A copy of the registrant’s Code of Ethics is filed herewith.

Item 3. Audit Committee Financial Expert.

The registrant’s board of trustees has determined that there is at least one audit committee financial expert serving on its audit committee. Gerald E. Shanley III is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no “Other services” provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.

	FYE 12/31/2008		FYE 12/31/2007
Audit Fees	$	92,400	$	60,000
Audit-Related Fees		—		—
Tax Fees		12,600		12,600
All Other Fees		—		—

The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.

The percentages of fees billed by Ernst & Young LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:

	FYE 12/31/2008			FYE 12/31/2007
Audit-Related Fees		0	%		0	%
Tax Fees		0	%		0	%
All Other Fees		0	%		0	%

All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant. (If more than 50 percent of the accountant’s hours were spent to audit the registrant’s financial statements for the most recent fiscal year, state how many hours were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.)

The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the last two years. The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser is compatible with maintaining the principal accountant’s independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.

Non-Audit Related Fees	FYE 12/31/2008		FYE 12/31/2007
Registrant		—		—
Registrant’s Investment Adviser		—		—

Item 5. Audit Committee of Listed Registrants.

Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).

Item 6. Schedule of Investments.

Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to open-end investment companies.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable to open-end investment companies.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to open-end investment companies.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors/trustees.

Item 11. Controls and Procedures.

(a)

The Registrant’s Chief Executive Officer and Principal Financial Officer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.

(b)

There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)	(1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith.
	(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
	(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.

(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)	Direxion Insurance Trust
By (Signature and Title)*	/s/ Daniel D. O’Neill
	Daniel D. O’Neill, Chief Executive Officer
Date March 6, 2009

      Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*	/s/ Daniel D. O’Neill
	Daniel D. O’Neill, Chief Executive Officer
Date March 6, 2009
By (Signature and Title)*	/s/ Guy Talarico
	Guy Talarico, Principal Financial Officer
Date March 4, 2009

* Print the name and title of each signing officer under his or her signature.

EX-99.CODE

EX. 99. CODE ETH

CODE OF ETHICS

DIREXION FUNDS
DIREXION INSURANCE TRUST
and
RAFFERTY ASSET MANAGEMENT, LLC

I. INTRODUCTION

     A. Fiduciary Duty. This Code of Ethics has been adopted by the above named trusts (“Trusts”) and Rafferty Asset Management, LLC in compliance with Rule 17j-1 under the Investment Company Act of 1940, as amended. Capitalized terms used in this Code are defined in Appendix 1 to this Code. All Appendices referred to herein are attached to and are a part of this Code.

     This Code is based on the principle that the trustees, officers, and employees of Rafferty and the Trusts have a fiduciary duty to place the interests of the Funds ahead of their own interests. The Code applies to all Access Persons and focuses principally on preclearance and reporting of personal transactions in securities. Access Persons must avoid activities, interests and relationships that might interfere with making decisions in the best interests of the Funds.

     As fiduciaries, Access Persons must at all times:

     1. Place the interests of the Funds first. Access Persons must scrupulously avoid serving their own personal interests ahead of the interests of the Funds. An Access Person may not induce or cause a Fund to take action, or not to take action, for personal benefit, rather than for the benefit of the Fund. For example, an Access Person would violate this Code by causing a Fund to purchase a Security he or she owned for the purpose of increasing the price of that Security.

     2. Avoid taking inappropriate advantage of their positions. Access Persons may not, for example, use their knowledge of portfolio transactions to profit by the market effect of such transactions. Receipt of investment opportunities, prerequisites, or gifts from persons seeking business with the Trusts or Rafferty could call into question the exercise of an Access Person’s independent judgment.

     3. Conduct all Personal Securities Transactions in full compliance with this Code including the reporting requirements. Doubtful situations should be resolved in favor of the Funds. Technical compliance with the Code’s procedures will not automatically insulate from scrutiny any trades that indicate an abuse of fiduciary duties.

     B. Appendices to the Code. The appendices to this Code are attached to and are a part of the Code. The appendices include the following:

1.	Definitions (Appendix 1),
2.	Contact Persons (Appendix 2),
3.	Certification of Compliance with Code of Ethics (Appendix 3 and 3-I),

a) Personal Securities Holdings and Accounts Disclosure Form (Appendix 3-A)

4.	Form Letter to Broker, Dealer or Bank (Appendix 4).
5.	Report of Securities Transactions (Appendix 5)
6.	Initial Public Offering / Private Placement Clearance Form (Appendix 6)

     C. Application of the Code to Independent Fund Trustees. Notwithstanding the definition of Access Persons, the following provisions do not apply to Independent Fund Trustees and their Immediate Families.

1.	Personal Securities Transactions (Section II)
2.	Initial, Quaterly and Annual Holdings Reporting Requirements (Section III.A.)
3.	Receipt and Giving of Gifts (Section IV.B.)
4.	Restrictions on Service as a Director of a Publicly-Traded Company (Section IV.E.)

II. PERSONAL SECURITIES TRANSACTIONS

     A. Prohibited Transactions.

     1. Prohibited Securities Transactions. The following Securities Transactions are prohibited and will not be authorized by the Compliance Officer (or a designee) absent exceptional circumstances. The prohibitions apply only to the categories of Access Persons specified.

     a. Initial Public Offerings (Investment Personnel only). Any purchase of Securities by Investment Personnel in an initial public offering (other than a new offering of a registered open-end investment company). However, if authorized, the Compliance Officer will maintain a record of the reasons for such authorization (see Appendix 6).

     b. Pending Buy or Sell Orders (Investment Personnel Only). Any purchase or sale of Securities by Investment Personnel on any day during which any Fund has a pending “buy” or “sell” order in the same Security (or Equivalent Security) until that order is executed or withdrawn.

     c. Intention to Buy or Sell for a Fund (all Investment Personnel). Purchases or sales of Securities by an Investment Person at a time when that Investment Person intends, or knows of another’s intention, to purchase or sell that Security (or an Equivalent Security) on behalf of a Fund. This prohibition applies whether the Securities Transaction is in the same direction (e.g., two purchases) or the opposite direction (a purchase and sale) as the transaction of the Fund.

     2. Always Prohibited Securities Transactions. The following Securities Transactions are prohibited and will not be authorized under any circumstances.

     a. Inside Information. Any transaction in a Security while in possession of material nonpublic information regarding the Security or the issuer of the Security.

     b. Market Manipulation. Transactions intended to raise, lower, or maintain the price of any Security or to create a false appearance of active trading.

     c. Others. Any other transactions deemed by the Compliance Officer (or a designee) to involve a conflict of interest, possible diversions of a corporate opportunity, or an appearance of impropriety.

     3. Private Placements (Investment Personnel only). Acquisition of Beneficial Interests in Securities in a private placement by Investment Personnel is strongly discouraged. The Compliance Officer (or a designee) will give permission only after considering, among other facts, whether the investment opportunity should be reserved for a Fund and whether the opportunity is being offered to the person by virtue of the person’s position as an Investment Person. If a private placement transaction is permitted, the Compliance Officer will maintain a record of the reasons for such approval (see Appendix 6). Investment Personnel who have acquired securities in a private placement are required to disclose that investment to the Compliance Officer when they play a part in any subsequent consideration of an investment in the issuer by a Fund, and the decision to purchase securities of the issuer by a Fund must be independently authorized by a Portfolio Manager with no personal interest in the issuer.

     B. Exemptions.

     1. The following Securities Transactions are exempt from the restrictions set forth in Section II.A.

     a. Mutual Funds. Securities issued by any registered open-end investment companies (including the Funds);

     b. No Knowledge. Securities Transactions where neither the Access Person nor an Immediate Family member knows of the transaction before it is completed (for example, Securities Transactions effected for an Access Person by a trustee of a blind trust or discretionary trades involving an investment partnership or investment club in which the Access Person is neither consulted nor advised of the trade before it is executed);

     c. Certain Corporate Actions. Any acquisition of Securities through stock dividends, dividend reinvestments, stock splits, reverse stock splits, mergers, consolidations, spin-offs, or other similar corporate reorganizations or distributions generally applicable to all holders of the same class of Securities;

     d. Rights. Any acquisition of Securities through the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent the rights were acquired in the issue; and

     e. Miscellaneous. Any transaction in the following: (1) bankers’ acceptances, (2) bank certificates of deposit, (3) commercial paper, (4) high quality short-term debt, including repurchase agreements, (5) Securities that are direct obligations of the U.S. Government, and (6) other Securities as may from time to time be designated in writing by the Compliance Officer on the grounds that the risk of abuse is minimal or non-existent.

     2. Personal Transactions in Securities that also are being purchased, sold or held by a Fund are exempt from the prohibitions of Sections II.A.1.b, and c, if the Access Person does not, in connection with his or her regular functions or duties, make, participate in, or obtain information regarding the purchase or sale of Securities by that Fund.

     The Securities Transactions listed in Section II in this subsection are not exempt from the reporting requirements of the Code.

     3. Application to Commodities, Futures, Options on Futures and Options on Broad-Based Indices. Commodities, futures (including currency futures and futures on securities comprising part of a broad-based, publicly traded market based index of stocks) and options on futures are not subject to the seven-day blackout and prohibited transaction provisions of Section II.A., but are subject to transaction reporting.

III. REPORTING REQUIREMENTS

     A. Reporting Requirements for all Access Persons Except Independent Fund Trustees

     1. Initial Holdings and Accounts Report. Any person who becomes an Access Person of Rafferty or the Funds must submit within 10 days of becoming an Access Person an Initial Holdings and Accounts Report (see Appendix 3-A) to the Compliance Officer listing all Securities accounts and securities that he or she holds in such accounts in which that Access Person (or Immediate Family member) has Beneficial Interest..

     2. Quarterly Reporting Requirements. Every Access Person and members of his or her Immediate Family must arrange for the Compliance Officer to receive directly from any broker, dealer, or bank that effects any Securities Transaction, duplicate copies of each confirmation for each such transaction and periodic statements for each brokerage account in which such Access Person has a Beneficial Interest. Attached hereto as Appendix 4 is a form of letter that may be used to request such documents from such entities. All copies must be received no later than 10 days after the end of the calendar quarter. Each confirmation or statement must disclose the following information:

a)	the date of the transaction;
b)	the title (and interest rate and maturity date, if applicable)
c)	the number of shares and principal amount
d)	the nature of the transaction (e.g., purchase, sale);
e)	the price of the Security; and
f)	the name of the broker, dealer or bank through which the trade was effected.

          If an Access Person is not able to arrange for duplicate confirmations and periodic statements to be sent that contain the information required above, the Access Person must submit a Quarterly Transaction Report (see Appendix 5) within 10 days after the completion of each calendar quarter to the Compliance Officer.

     3. Every Access Person who establishes a Securities account during the quarter in which that Access Person (or Immediate Family member) has Beneficial Interest must submit an Account Report (see Appendix 5) to the Compliance Officer. This report must be submitted to the Compliance Officer within 10 days after the completion of each calendar quarter.

     4. Annual Holdings and Accounts Report. Every Access Person must submit an Annual Holdings and Accounts Report (see Appendix 3-A) listing all Securities accounts and securities in which that Access Person (or Immediate Family member) has Beneficial Interest. The information in the Annual Holdings Report must be current as of a date no more than 30 days before the report is submitted. The completed report should be submitted to the Compliance Officer by December 31 following the end of the calendar year.

     B. Reporting Requirements for Independent Fund Trustees

     Each Independent Fund Trustee (and their Immediate Families) must report to the Compliance Officer any trade in a Security by any account in which the Independent Fund Trustee has any Beneficial Interest if the Independent Fund Trustee knew or, in the ordinary course of fulfilling his or her duty as a Trustee of the Trusts, should have known that during the 15-day period immediately preceding or after the date of the transaction in a Security by the Trustee such Security (or an Equivalent Security) was or would be purchased or sold by the Fund or such purchase or sale by the Fund was or would be considered by the Fund or by Rafferty for the Fund. Independent Fund Trustees who need to report such transactions should refer to the procedures outlined in Section III.A.2.

     C. Reporting Requirements for Investment Personnel

     Each investment person must notify the Chief Compliance officer in writing of each securities transaction, except those exempt transaction listed in Section II B, on the trade date of the transaction. Notification must consist of securities name and number of shares or bonds traded.

     D. Exemptions, Disclaimers and Availability of Reports

     1. A Securities Transaction involving the following circumstances or Securities are exempt from the Reporting Requirements discussed above: (1) neither the Access Person nor an Immediate Family Member had any direct or indirect influence or control over the transaction; (2) Securities directly issued by the U.S. Government; (3) bankers’ acceptances; (4) bank certificates of deposit; (5) commercial paper; (6) high quality short-term debt instruments, including repurchase agreements; (7) shares issued by open-end mutual funds; and (7) other Securities as may from time to time be designated in writing by the Compliance Officer on the grounds that the risk of abuse is minimal or non-existent.

     In addition, no Access Person of Rafferty shall be required to make a Quarterly Transaction Report where such report would duplicate information recorded by Heritage pursuant to Rule 204-2(a) of the Investment Advisers Act of 1940.

     2. Disclaimers. Any report of a Securities Transaction for the benefit of a person other than the individual in whose account the transaction is placed may contain a statement that the report should not be construed as an admission by the person making the report that he or she has any direct or indirect beneficial ownership in the Security to which the report relates.

     3. Availability of Reports. All information supplied pursuant to this Code may be made available for inspection to the Board of Trustees of the Trusts, the Board of Directors of Rafferty, the Compliance Officer, any party to which any investigation is referred by any of the

foregoing, the SEC, any self-regulatory organization of which Rafferty is a member, any state securities commission, and any attorney or agent of the foregoing or of the Trusts.

IV. FIDUCIARY DUTIES

     A. Confidentiality. Access Persons are prohibited from revealing information relating to the investment intentions, activities or portfolios of the Funds except to persons whose responsibilities require knowledge of the information.

     B. Gifts. The following provisions on gifts apply to all Investment Personnel.

     1. Accepting Gifts. On occasion, because of their position with the Trusts, Investment Personnel may be offered, or may receive without notice, gifts from clients, brokers, vendors, or other persons not affiliated with such entities. Acceptance of extraordinary or extravagant gifts is not permissible. Any such gifts must be declined or returned in order to protect the reputation and integrity of the Trusts and Rafferty. Gifts of a nominal value (i.e., gifts whose reasonable value is no more than $100 a year), and customary business meals, entertainment (e.g., sporting events), and promotional items (e.g., pens, mugs, T-shirts) may be accepted.

     If an Investment Person receives any gift that might be prohibited under this Code, the Investment Person must inform the Compliance Officer.

     2. Solicitation of Gifts. Investment Personnel may not solicit gifts or gratuities.

     3. Giving Gifts. Investment Personnel may not personally give any gift with a value in excess of $100 per year to persons associated with securities or financial organizations, including exchanges, other member organizations, commodity firms, news media, or clients of Rafferty.

     C. Corporate Opportunities. Access Persons may not take personal advantage of any opportunity properly belonging to the Trusts or Rafferty. This includes, but is not limited to, acquiring Securities for one’s own account that would otherwise be acquired for a Fund.

     D. Undue Influence. Access Persons may not cause or attempt to cause any Fund to purchase, sell or hold any Security in a manner calculated to create any personal benefit to the Access Person. If an Access Person or Immediate Family member stands to benefit materially from an investment decision for a Fund which the Access Person is recommending or participating in, the Access Person must disclose to those persons with authority to make investment decisions for the Fund (or, if the Access Person in question is a person with authority to make investment decisions for the Fund, to the Compliance Officer) any Beneficial Interest that the Access Person (or Immediate Family member) has in that Security or an Equivalent Security, or in the issuer thereof, where the decision could create a material benefit to the Access Person (or Immediate Family member) or the appearance of impropriety. The person to whom the Access Person reports the interest, in consultation with the Compliance Officer, must determine whether or not the Access Person will be restricted in making investment decisions.

     E. Service as a Director. No Investment Person may serve on the board of directors of a publicly-held company (other than the Trusts) absent prior written authorization by the Compliance Officer. This authorization will rarely, if ever, be granted and, if granted, normally will require that the affected Investment Person be isolated, through a “Chinese Wall” or other procedures, from those making investment decisions related to the issuer on whose board the person sits.

V. COMPLIANCE WITH THIS CODE OF ETHICS

     A. Compliance Officer Review

     1. Investigating Violations of the Code. The Compliance Officer is responsible for investigating any suspected violation of the Code and shall report the results of each investigation to the President of Rafferty. The President of Rafferty together with the Compliance Officer are responsible for reviewing the results of any investigation of any reported or suspected violation of the Code. Any violation of the Code by an Access Person will be reported to the Boards of Trustees of the Trusts no less frequently than each regular quarterly meeting.

     2. Annual Reports. The Compliance Officer will review the Code at least once a year, in light of legal and business developments and experience in implementing the Code, and will report to the Boards of Trustees of the Trusts:

     a. Summarizing existing procedures concerning personal investing and any changes in the procedures made during the past year;

     b. Identifying any violation requiring significant remedial action during the past year; and

     c. Identifying any recommended changes in existing restrictions or procedures based on its experience under the Code, evolving industry practices, or developments in applicable laws or regulations.

     B. Remedies

     1. Sanctions. If the Compliance Officer and the President of Rafferty determine that an Access Person has committed a violation of the Code following a report of the Compliance Officer, the Compliance Officer and the President of Rafferty may impose sanctions and take other actions as they deem appropriate, including a letter of caution or warning, suspension of personal trading rights, suspension of employment (with or without compensation), fine, civil referral to the SEC, criminal referral, and termination of the employment of the violator for cause. The Compliance Officer and the President of Rafferty also may require the Access Person to reverse the trade(s) in question and forfeit any profit or absorb any loss derived therefrom. The amount of profit shall be calculated by the Compliance Officer and the President of Rafferty and shall be forwarded to a charitable organization selected by the Compliance Officer and the President of Rafferty. The Compliance Officer and the President of Rafferty may not review his or her own transaction.

     2. Sole Authority. The Compliance Officer and the President of Rafferty have sole authority, subject to the review set forth in Section V.B.3 below, to determine the remedy for any violation of the Code, including appropriate disposition of any monies forfeited pursuant to this provision. Failure to promptly abide by a directive to reverse a trade or forfeit profits may result in the imposition of additional sanctions.

     3. Review. Whenever the Compliance Officer and the President of Rafferty determine that an Access Person has committed a violation of this Code that merits remedial action, they will report no less frequently than quarterly to the Boards of Trustees of the Trusts, information relating to the investigation of the violation, including any sanctions imposed. The

Boards of Trustees of the Trusts may modify such sanctions as it deems appropriate. The Boards of Trustees of the Trusts and the Compliance Officer and the President of Rafferty shall have access to all information considered by the Compliance Officer in relation to the case. The Compliance Officer may determine whether or not to delay the imposition of any sanctions pending review by the applicable Board.

     C. Exceptions to the Code. Although exceptions to the Code will rarely, if ever, be granted, the Compliance Officer may grant exceptions to the requirements of the Code on a case by case basis if the Compliance Officer finds that the proposed conduct involves negligible opportunity for abuse. All such exceptions must be in writing and must be reported as soon as practicable to the Boards of Trustees of the Trusts at its next regularly scheduled meeting after the exception is granted.

     D. Compliance Certification. Each current Access Person and each newly-hired Access Person shall certify that he or she has received, read and understands the Code by executing the Certification of Compliance with the Code of Ethics form (see Appendix 3). In addition, by December 31 following the end of the prior calendar year, all Access Persons will be required to re-certify on such form (see Appendix 3) that they have read and understand the Code, that they have complied with the requirements of the Code, and that they have reported all Securities Transactions required to be disclosed or reported pursuant to the requirements of this Code. Independent Fund Trustees should complete Appendix 3-I only.

     E. Inquiries Regarding the Code. The Compliance Officer will answer any questions about the Code or any other compliance-related matters.

August 26, 1997, as amended February 24, 2000 and November 9, 2004

Appendix 1

DEFINITIONS

     “Access Person” means any trustee, director, officer or Advisory Person of Rafferty or the Trusts.

     “Advisory Person” means (1) any employee of Rafferty and the Trusts (or of any company in a control relationship with such companies) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by the Funds, or whose functions relate to the making of any recommendation with respect to such purchases or sales, and (2) any natural person in a control relationship to such companies who obtains information concerning the recommendations made to the Funds with respect to the purchase and sale of securities by the Funds.

     “Beneficial Interest” means the opportunity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, to profit, or share in any profit derived from, a transaction in the subject Securities. An Access Person is deemed to have a Beneficial Interest in Securities owned by members of his or her Immediate Family. Common examples of Beneficial Interest include joint accounts, spousal accounts, UTMA accounts, partnerships, trusts and controlling interests in corporations. Any uncertainty as to whether an Access Person has a Beneficial Interest in a Security should be brought to the attention of the Compliance Officer. Such questions will be resolved in accordance with, and this

definition shall be subject to, the definition of “beneficial owner” found in Rules 16a-1(a)(2) and (5) promulgated under the Securities Exchange Act of 1934.

     “Code” means this Code of Ethics, as it may be amended from time to time.

     “Compliance Officer” means the Compliance Officer of Rafferty and the persons designated in Appendix 2, as such Appendix shall be amended from time to time.

     “Equivalent Security” means any Security issued by the same entity as the issuer of a subject Security, including options, rights, stock appreciation rights, warrants, preferred stock, restricted stock, phantom stock, bonds, and other obligations of that company or security otherwise convertible into that security. Options on securities are included even if, technically, they are issued by the Options Clearing Corporation or a similar entity.

     “Fund” and “Funds” mean one or more of the portfolios of the Direxion Funds, an investment company registered under the 1940 Act for which Rafferty serves as investment adviser.

     “Immediate Family” of an Access Person means any of the following persons who reside in the same household as the Access Person:

child	grandparent	son-in-law
stepchild	spouse	daughter-in-law
grandchild	sibling	brother-in-law
parent	mother-in-law	sister-in-law
stepparent	father-in-law

Immediate Family includes adoptive relationships and any other relationship (whether or not recognized by law) which the Compliance Officer determines could lead to the possible conflicts of interest, diversions of corporate opportunity, or appearances of impropriety which this Code is intended to prevent.

     “Independent Fund Trustee” means a trustee of a Trust who is not an “interested person” as that term is defined in Section 2(a)(19) of the 1940 Act.

     “Initial Public Offering” is an offering of securities registered under the Securities Act of 1933 by an issuer who immediately before the registration of such securities was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934.

     “Investment Personnel” and “Investment Person” mean (1) employees of Rafferty or the Trusts (or of any company in a control relationship to such companies) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of a security, or (2) any natural person who controls Rafferty or the Trusts and who obtains information concerning recommendations made to the Funds regarding the purchase and sale of securities by the Funds. References to Investment Personnel include Portfolio Managers.

     “1940 Act” means the Investment Company Act of 1940, as amended.

     “Private Placement” means a limited offering exempt from registration pursuant to Rules 504, 505 or 506 or under Section 4(2) or 4(6) of the Securities Act of 1933.

     “Portfolio Manager” means a person who has or shares principal day-to-day responsibility for managing the portfolio of a Fund.

     “Rafferty” means Rafferty Asset Management, LLC.

     “SEC” means the Securities and Exchange Commission.

     “Security” includes stock, notes, bonds, debentures, and other evidences of indebtedness (including loan participations and assignments), limited partnership interests, investment contracts, and all derivative instruments of the foregoing, such as options and warrants. “Security” does not include futures and options on futures, but the purchase and sale of such instruments are nevertheless subject to the reporting requirements of the Code.

     “Securities Transaction” means a purchase or sale of Securities in which an Access Person or a member of his or her Immediate Family has or acquires a Beneficial Interest.

     “Trusts” means the Direxion Funds and the Direxion Insurance Trust, each an investment company registered under the 1940 Act.

Appendix 2

CONTACT PERSONS

COMPLIANCE OFFICER

     1. Tim Hagan

Appendix 3

CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS

     I acknowledge that I have received the Code of Ethics dated August 26, 1997, as amended on February 24, 2000, and certify that:

     1. I have read the Code of Ethics and I understand that it applies to me and to all accounts in which I or a member of my Immediate Family has any Beneficial Interest.

     2. In accordance with Section III.A. of the Code of Ethics, I will report or have reported all Securities Transactions in which I have, or a member of my Immediate Family has, a Beneficial Interest, except for transactions exempt from reporting under Section III.C.

     3. I have listed on Appendix 3-A of this form all accounts and securities in which I have, or any member of my Immediate Family has, any Beneficial Interest.

     4. I will comply or have complied with the Code of Ethics in all other respects.

     5. I agree to disgorge and forfeit any profits on prohibited transactions in accordance with the requirements of the Code of Ethics.

Access Person’s Signature

Print Name

Date:

SEE NEXT PAGE

Appendix 3-A

PERSONAL SECURITIES HOLDINGS and ACCOUNTS DISCLOSURE FORM
(for use as an Initial or Annual Holdings and Accounts Report)

     Pursuant to Section III.A.1 or III.A.3 of the Code of Ethics, please list all Securities accounts and Securities holdings for each Securities account in which you or your Immediate Family member has beneficial interest. You do not need to list those Securities that are exempt pursuant to Section III.C.

Is this an Initial or Annual Report?

Name of Access Person:

Name of Account Holder:

Relationship to Access Person:

SECURITIES HOLDINGS:

Attach to this Report your most recent account statement and/or list Securities held below:

Name of Security	Quantity	Principal Amount	Name of Broker/Dealer/Bank
1.
2.
3.

(Attach separate sheets as necessary)

SECURITIES ACCOUNTS:

Account Name	Account Number	Date Account Opened	Name of Broker/Dealer/Bank
1.
2.
3.
4.

(Attach separate sheets as necessary)

     I certify that this Report and the attached statements (if any) constitute all the Securities accounts and Securities that must be reported pursuant to this Code.

Access Person Signature
Print Name	Date

Appendix 3-I

CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS
(Independent Fund Trustees)

     I acknowledge that I have received the Code of Ethics dated August 26, 1997, as amended on February 24, 2000, and certify that:

     1. I have read the Code of Ethics and I understand that it applies to me and to all accounts in which I or a member of my Immediate Family has any Beneficial Interest.

     2. I will report or have reported all Securities Transactions required to be reported under Section III.B. of the Code in which I have, or a member of my Immediate Family has, a Beneficial Interest.

     3. I will comply or have complied with applicable provisions of the Code of Ethics in all other respects.

Trustee’s Signature

Print Name

Date:                                        

13

Appendix 4

Form of Letter to Broker, Dealer or Bank

<Date>

<Broker Name and Address>

     Subject:                     Account #                                         

Dear                                         :

     Rafferty Asset Management, LLC (“Rafferty”), my employer, is a registered investment adviser. In connection with the Code of Ethics adopted by Rafferty, I am required to request that you send duplicate confirmations of individual transactions as well as duplicate periodic statements for the referenced account to my employer. Please note that the confirmations and/or periodic statements must disclose the following information:

1) date of the transaction;
2) the title of the security (including interest rate and maturity date) and price;
3) the number of shares and principal amount;
4) the nature of the transaction (e.g., purchase or sale); and
5) the name of the firm effecting the trade.

If you are unable to provide this information, please let me know immediately. Otherwise, please address the confirmations and statements directly to:

Mr. Tim Hagan
Rafferty Asset Management, LLC
3719 N. Randolph St.
Arlington, VA 22207

     Your cooperation is most appreciated. If you have any questions regarding these requests, please contact me at <phone number> .

Sincerely,

<Name of Access Person>

Appendix 5

REPORT OF SECURITY TRANSACTIONS

FOR QUARTER ENDED                                        

Access Persons other than Independent Fund Trustees: You do not need to report transactions in 1) direct obligations of the U.S. Government, 2) bankers’ acceptances, bank CDs, commercial paper, high quality short-term debt instruments, 3) shares of an open-end investment company, and 4) transactions which you had no direct or indirect influence or control.

Independent Fund Trustees: If you are an Independent Fund Trustee, then you only need to report a transaction if you, at the time of that transaction, knew or, in the ordinary course of fulfilling your official duties as a Trustee to the Direxion Funds, should have known that, during the 15-day period immediately before or after your transaction in a security,

1) the Funds purchased or sold such security or
2) the Funds or their investment adviser considered purchasing or selling such security.

Disclose all securities transactions for the period covered by this Report:

			Price at
Name/Description of	Number	Date of	Which		Principal	Bought	Name of
Security*	Shares	Transaction	Effected	Amount		or Sold	Broker/Dealer/Bank

* Please disclose the interest rate or maturity date, if applicable.

Did you establish any securities accounts during the period covered by this Report? ___Yes ___ No

If Yes, please complete the following:

	Date of
Name of Broker	Account Opening	Account Number

___The above is a record of every transaction in a security or account opened which I had, or in which I acquired, any direct or indirect beneficial ownership during the period indicated above.

___I certify that the Compliance Officer has received confirmations or account statements pertaining to all transactions executed and that disclose the information required above, and notice of any accounts opened, during the period covered by this Report.

___I have nothing to report for the period covered by this Report.

Date: Signature:

2

Appendix 6

INITIAL PUBLIC OFFERING / PRIVATE PLACEMENT
CLEARANCE FORM
(for the use of the Compliance Officer only)

     The Code of Ethics for Rafferty and the Direxion Funds prohibits any acquisition of securities in an initial public offering (other than shares of open-end investment companies) and private placement by any Investment Person. In cases of exceptional circumstances, however, investments in such securities may be permitted. In these instances, a record of the rationale supporting the approval of such transactions must be completed and retained for a period of 5 years after the end of the fiscal year in which approval is granted. This form should be used for such record keeping purposes.

Name of Investment Person:

Date of Request:

Name of IPO / Private Placement:

Date of Offering:

Number of Shares/Interests

Price:

Name of Broker/Dealer/Bank

          I have cleared the IPO / Private Placement transaction described above.

          Reasons supporting the decision to approve the above transaction:

Name of Compliance Officer

Signature of Compliance Officer

Date

EX-99.CERT

EX.99.CERT

CERTIFICATIONS

I, Daniel D.O’Neill, certify that:

1.	I have reviewed this report on Form N-CSR of Direxion Insurance Trust;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 6, 2009	/s/ Daniel D. O’Neill
	Daniel D. O’Neill, Chief Executive Officer

EX.99.CERT

CERTIFICATIONS

I, Guy Talarico, certify that:

1.	I have reviewed this report on Form N-CSR of Direxion Insurance Trust;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 4, 2009	/s/ Guy Talarico
	Guy Talarico, Principal Financial Officer

EX-99.906CERT

EX.99.906CERT

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of the Direxion Insurance Trust, does hereby certify, to such officer’s knowledge, that the report on Form N-CSR of the Direxion Insurance Trust for the year ended December 31, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Direxion Insurance Trust for the stated period.

/s/ Daniel D. O’Neill	/s/ Guy Talarico
Daniel D. O’Neill	Guy Talarico
Chief Executive Officer, Direxion Insurance Trust	Principal Financial Officer, Direxion Insurance Trust
Dated: March 6, 2009	Dated: March 4, 2009

This statement accompanies this report on Form N-CSR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by Direxion Insurance Trust for purposes of Section 18 of the Securities Exchange Act of 1934.