# EDGAR Filing Document

**Accession Number:** 0001040587
**File Stem:** 0001193125-25-331098
**Filing Date:** 2025-12
**Character Count:** 2635426
**Document Hash:** 44d0b8a76477acd5c6965606621a77ee
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-25-331098.hdr.sgml**: 20251223

**ACCESSION NUMBER**: 0001193125-25-331098

**CONFORMED SUBMISSION TYPE**: 485BPOS

**PUBLIC DOCUMENT COUNT**: 124

**FILED AS OF DATE**: 20251223

**DATE AS OF CHANGE**: 20251223

**EFFECTIVENESS DATE**: 20251229

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** DIREXION FUNDS
- **CENTRAL INDEX KEY:** 0001040587

**ORGANIZATION NAME:**
- **EIN:** 000000000
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 0831

**FILING VALUES:**
- **FORM TYPE:** 485BPOS
- **SEC ACT:** 1940 Act
- **SEC FILE NUMBER:** 811-08243
- **FILM NUMBER:** 251601494

**BUSINESS ADDRESS:**
- **STREET 1:** 535 MADISON AVENUE
- **STREET 2:** 37TH FL.
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10022
- **BUSINESS PHONE:** 646-572-3390

**MAIL ADDRESS:**
- **STREET 1:** 535 MADISON AVENUE
- **STREET 2:** 37TH FL.
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10022

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** POTOMAC FUNDS
- **DATE OF NAME CHANGE:** 19970606
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** DIREXION FUNDS
- **CENTRAL INDEX KEY:** 0001040587

**ORGANIZATION NAME:**
- **EIN:** 000000000
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 0831

**FILING VALUES:**
- **FORM TYPE:** 485BPOS
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-28697
- **FILM NUMBER:** 251601493

**BUSINESS ADDRESS:**
- **STREET 1:** 535 MADISON AVENUE
- **STREET 2:** 37TH FL.
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10022
- **BUSINESS PHONE:** 646-572-3390

**MAIL ADDRESS:**
- **STREET 1:** 535 MADISON AVENUE
- **STREET 2:** 37TH FL.
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10022

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** POTOMAC FUNDS
- **DATE OF NAME CHANGE:** 19970606

## Series and Classes Contracts Data

### Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund (Series ID: S000007025)

| Class ID   | Class Name     | Ticker Symbol   |
|:---|:---|:---|
| C000019202 | Investor Class | DXKLX           |

### Direxion Monthly Small Cap Bull 1.75X Fund (Series ID: S000007044)

| Class ID   | Class Name     | Ticker Symbol   |
|:---|:---|:---|
| C000019221 | Investor Class | DXRLX           |

### Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund (Series ID: S000007050)

| Class ID   | Class Name     | Ticker Symbol   |
|:---|:---|:---|
| C000019229 | Investor Class | DXKSX           |

### Direxion Monthly S&P 500(R) Bull 1.75X Fund (Series ID: S000011950)

| Class ID   | Class Name     | Ticker Symbol   |
|:---|:---|:---|
| C000032626 | Investor Class | DXSLX           |

### Direxion Monthly NASDAQ-100(R) Bull 1.75X Fund (Series ID: S000011960)

| Class ID   | Class Name     | Ticker Symbol   |
|:---|:---|:---|
| C000032646 | Investor Class | DXQLX           |

### HILTON TACTICAL INCOME FUND (Series ID: S000046967)

| Class ID   | Class Name          | Ticker Symbol   |
|:---|:---|:---|
| C000146784 | Investor Class      | HCYAX           |
| C000146785 | Institutional Class | HCYIX           |

### DIREXION MONTHLY HIGH YIELD BULL 1.2X FUND (Series ID: S000052787)

| Class ID   | Class Name     | Ticker Symbol   |
|:---|:---|:---|
| C000165828 | Investor Class | DXHYX           |

### Direxion Monthly NASDAQ-100(R) Bull 1.25X Fund (Series ID: S000053315)

| Class ID   | Class Name     | Ticker Symbol   |
|:---|:---|:---|
| C000167765 | Investor Class | DXNLX           |

?xml version='1.0' encoding='ASCII'? 485BPOS

As filed with the Securities and Exchange Commission on December 23, 2025

1933 Act File No. 333-28697

1940 Act File No. 811-08243

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

**FORM N-1A** 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ] <br> Pre-Effective Amendment No. ___ [ ] <br> Post-Effective Amendment No. <u>208</u> [ X ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ] <br> Amendment No. <u>209</u> [ X ]

(Check appropriate box or boxes.)

**DIREXION FUNDS**

(Exact name of Registrant as Specified in Charter)

1301 Avenue of the Americas (6th Avenue), 28th Floor

New York, New York 10019

(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code: (646) 572-3390

Angela Brickl

1301 Avenue of the Americas (6th Avenue), 28th Floor

New York, New York 10019

(Name and Address of Agent for Service)

Copy to:

---

| |
|:---|
| Fatima S. Sulaiman |
| Frank H. Na |
| K&L Gates LLP |
| 1601 K Street, NW |
| Washington, DC 20006 |

---

It is proposed that this filing will become effective (check appropriate box)

---

| | |
|:---|:---|
| [ ] | immediately upon filing pursuant to paragraph (b) |
| [X ] | on December 29, 2025 pursuant to paragraph (b) |
| [ ] | 60 days after filing pursuant to paragraph (a)(1) |
| [ ] | on (date) pursuant to paragraph (a)(1) |
| [ ] | 75 days after filing pursuant to paragraph (a)(2) |
| [ ] | on (date) pursuant to paragraph (a)(2) of Rule 485. |

---

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

------

DIREXION FUNDS

CONTENTS OF REGISTRATION STATEMENT

This registration document is comprised of the following:

Cover Sheet;

Contents of Registration Statement:

Prospectuses and Statements of Additional Information for the Hilton Tactical Income Fund, Direxion Monthly High Yield Bull 1.2X Fund, Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund, Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund, Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund, Direxion Monthly Small Cap Bull 1.75X Fund, Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund and the Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund;

Part C of Form N-1A; and

Signature Page; and

Exhibits.

------

![](g58398img248cd5b52.gif)

Prospectus

Hilton Tactical Income Fund

December 29, 2025

Tickers: <br> Investor (HCYAX) Institutional Class (HCYIX)

*These securities have not been approved or disapproved by the U.S. Securities and Exchange Commission ("SEC") or the U.S. Commodity Futures Trading Commission ("CFTC"), nor have the SEC or CFTC passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.* 

---

| |
|:---|
| **535 Madison Avenue, 37**<sup>th</sup> **Floor \| New York, New York 10022 \| (800) 851-0511** |
| **www.direxion.com** |

---

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**Table of Contents**

---

| | |
|:---|:---|
| **[Summary Section](#xx_309b8d9c-0471-4d3b-8c6d-f2d21b72008d_1)** | **1** |
| [Hilton Tactical Income Fund](#xx_309b8d9c-0471-4d3b-8c6d-f2d21b72008d_1) | **1** |
| **[Overview of the Fund](#xx_b9c92d90-4972-459d-b539-93e5423d6427_1)** | **8** |
| **[PRINCIPAL Investment Strategy](#xx_b9c92d90-4972-459d-b539-93e5423d6427_1)** | **8** |
| &nbsp;&nbsp; **[ADDITIONAL INFORMATION REGARDING](#xx_0ea2895e-75e8-406e-97b0-0b39802d5b4c_1)**<br> **[PRINCIPAL Risks](#xx_0ea2895e-75e8-406e-97b0-0b39802d5b4c_1)**<br>| **10** |
| [Other Risks of the Fund](#xx_0ea2895e-75e8-406e-97b0-0b39802d5b4c_7) | **16** |
| **[About Your Investment](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_1)** | **18** |
| [Share Price of the Fund](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_1) | **18** |
| [Share Classes of the Fund](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_2) | **19** |
| [Rule 12b-1 Fees (Investor Class Shares)](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_2) | **19** |
| &nbsp;&nbsp; [Additional Payments to Financial](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_2)<br> [Intermediaries](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_2)<br>| **19** |
| [Shareholder Services Guide](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_2) | **19** |
| **[Account and Transaction Policies](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_5)** | **22** |
| **[Management of the Fund](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_8)** | **25** |
| **[Portfolio Holdings](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_10)** | **27** |
| **[other service providers](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_10)** | **27** |
| **[Distributions and Taxes](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_10)** | **27** |
| &nbsp;&nbsp; **[Additional Information ABOUT THE](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_11)**<br> **[TRUST](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_11)**<br>| **28** |
| **[Index Description](#xx_f4714ae3-cf58-4e9f-9a84-86341a773168_12)** | **29** |
| **[Financial Highlights](#xx_79c8e5c5-8349-4ceb-940f-6ae03ccbfb00_1)** | **30** |
| &nbsp;&nbsp; **[More Information On The Direxion](#xx_2e4ff3ad-dbc1-4afd-a602-94aec762f4f6_1)**<br> **[Funds](#xx_2e4ff3ad-dbc1-4afd-a602-94aec762f4f6_1)**<br>| **Back Cover** |

---

------

Summary Section

Hilton Tactical Income Fund

**Investment Objective**

The Hilton Tactical Income Fund (the "Fund") primarily seeks income with a secondary investment objective of capital appreciation consistent with the preservation of capital.

**Fees and Expenses of the Fund**

The tables below describe the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below.**

**Shareholder Fees** (fees paid directly from your investment)

---

| | |
|:---|:---|
|  | Institutional<br> Class<br>|
| &nbsp;&nbsp; Redemption Fee (as a percentage of amount <br> redeemed on shares redeemed within 30 <br> days of purchase, if applicable)<br>| 1.00% |

---

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

---

| | | |
|:---|:---|:---|
|  | Investor<br> Class<br>| Institutional<br> Class<br>|
| Management Fees | 0.79% | 0.79% |
| &nbsp;&nbsp; Distribution and/or Service (12b-1) <br> Fees<br>| 0.25% |  |
| Other Expenses of the Fund | 0.30% | 0.30% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.17% | 0.17% |
| &nbsp;&nbsp; Total Annual Fund Operating <br> Expenses<br>| 1.51% | 1.26% |
| Expense Cap/Reimbursement | -0.22% | -0.22% |
| &nbsp;&nbsp; Total Annual Fund Operating <br> Expenses After Expense <br> Cap/Reimbursement<br>| 1.29% | 1.04% |

---

<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $131 | $456 | $803 | $1783 |
| Institutional Class | $106 | $378 | $671 | $1503 |

---

**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 92% of the average value of its portfolio.

**Principal Investment Strategy**

The Fund utilizes a disciplined approach to balancing fixed income investments with historically higher income producing equity investments, with a focus on minimizing risk and volatility. The Fund's subadviser, Hilton Capital Management, LLC ("Hilton" or "Subadviser") generally seeks to mitigate portfolio risk and volatility by creating a diversified portfolio of income producing securities that offer the potential for capital appreciation but also may invest in options to attempt to hedge volatility and portfolio risks. The securities in which the Fund may invest include domestic and foreign, including emerging markets, common and preferred stocks of any market capitalization, closed-end funds and exchange-traded funds ("ETFs"), master limited partnerships ("MLPs"), real estate investment trusts ("REITs"), and a variety of debt instruments of any maturity, including corporate bonds, exchange-traded notes ("ETNs"), municipal bonds, and securities issued, backed or otherwise guaranteed by the U.S. government, or its agencies, including securities issued by U.S. government sponsored entities. The Fund will invest no more than 25% of its total assets in securities of MLPs.

The Subadviser's investment process begins by looking at various global macro-economic factors such as fiscal/monetary policy, interest rates, geo-political risks, inflation, commodity pricing, government policies and general business conditions. For the Fund's equity portfolio, the Subadviser reviews a broad array of possible income-producing investments and then analyzes company-specific fundamental research to understand a company's dividend policy, relative value and balance sheet. Investments are selected for the Fund's portfolio that demonstrate stable and consistent cash flow, strong underlying asset value, competitive advantages and management teams with demonstrable positive track records.

The Subadviser manages the Fund's fixed income portfolio by first considering a long-term strategic investment view and then buying and selling fixed income securities opportunistically in response to short-term market, economic, political, and other developments. The objective of the Subadviser's fixed income portfolio strategy is to generate higher income than would be expected from traditional intermediate-term fixed income investments, such as U.S. government bonds. As a result, the Fund may invest up to

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30% in high yield debt securities or "junk bonds" (higher-risk, lower-rated fixed income securities such as those rated lower than BBB- by Standard & Poor's Rating Service, Inc. ("S&P") or lower than Baa3 by Moody's Investors Service, Inc. or, if unrated, determined by the Subadviser to be of comparable quality). The Fund may invest in fixed income securities of any duration and may include foreign bonds that meet the Subadvisor's investment criteria.

The Subadviser's investment team has the flexibility to change the Fund's asset allocation to reflect its outlook on market conditions and may reallocate the Fund's investments between asset classes in an attempt to improve the Fund's total return and reduce volatility. Volatility in the markets provides the Subadviser with the opportunity to benefit the Fund from perceived pricing dislocations that may occur during periods of market distress. The Subadviser makes asset allocation adjustments based on a combination of bottom-up/top-down fundamental analysis and relative value analysis among capital market instruments within the target asset classes.

The Fund may invest in cash, cash equivalents, and high-quality, short-term debt securities and money market instruments for (i) temporary defensive purposes in response to adverse market, economic or political conditions and (ii) cash flow flexibility.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. It is important that investors closely review all of the risks listed below and understand them before making an investment in the Fund.

***Subadviser's Investment Strategy Risk —*** While the Subadviser seeks to take advantage of investment opportunities for the Fund that will maximize its investment returns, there is no guarantee that such opportunities will ultimately benefit the Fund or that the Subadviser will identify the opportunities correctly. There is no assurance that the Subadviser's investment strategy will enable the Fund to achieve its investment objective.

***Equity Securities Risk —*** Publicly issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests, and/or has exposure to, will cause the net asset value of the Fund to fluctuate.

***Preferred Stock Risk —*** A preferred stock has characteristics of a bond and a common stock. It may offer the higher yield of a bond and has priority over common stock in the receipt of dividends or in any residual assets after payment to creditors should the issuer be dissolved. However, it does not have the same seniority as a bond and, unlike common stock, its participation in the issuer's growth may be limited. Preferred stock is subject to many of the risks associated with debt instruments, including interest rate risk. If interest rates rise, the value of preferred stocks is likely to decline. In addition, preferred stocks may not pay a dividend; an issuer may suspend payment of dividends on preferred stocks,

may call or redeem its preferred stock, or convert it to common stock at any time.

***Real Estate Investment Risk —*** Real estate securities, including REITs, are subject to risks similar to those associated with direct ownership of real estate, including changes in local and general economic conditions, vacancy rates, interest rates, zoning laws, rental income, property taxes, operating expenses and losses from casualty or condemnation. An investment in a REIT is subject to additional risks, including poor performance by the manager of the REIT, adverse tax consequences, and non-diversification resulting from being invested in a limited group of properties. REITs receive favorable tax treatment only if they meet certain conditions, including the requirement that they distribute at least 90% of their taxable income. Many real estate companies, including REITs, utilize leverage (and some may be highly leveraged), which increases risk and could adversely affect a real estate company's operations and market value in periods of rising interest rates.

***Other Investment Companies (including ETFs) Risk***—

The Fund may invest in, or obtain exposure to, another investment company, including an ETF or a money market fund (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. If the underlying fund fails to achieve its investment objective the Fund's performance will likely be adversely affected.

In addition, to the extent that the Fund invests in, or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure. Shares of ETFs may trade at a discount or a premium to an ETF's net asset value which may result in an ETF's market price being more or less than the value of the Fund's investments especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend purchases or redemption of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the Fund. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

***Credit Risk —*** There is a risk that the issuer or guarantor of a debt security could go bankrupt or be unable or unwilling to make interest payments and/or repay principal. Changes in an issuer's financial strength or in an issuer's or debt security's credit rating also may affect a security's value and thus have an impact on Fund net asset value and performance. Generally, the longer the maturity and the lower the credit quality of a security, the more sensitive it is to credit risk.

***Interest Rate Risk —*** Interest rate risk is the chance that bond prices overall will decline because of rising interest rates. Securities with longer maturities generally are more sensitive to interest rate changes and subject to greater fluctuations in value. The risks associated with changing

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interest rates may have unpredictable effects on the markets and the Fund's investments. Fluctuations in interest rates may also affect the liquidity and volatility of fixed income securities and instruments held by the Fund.

***Debt Instrument Risk —*** The value of debt instruments may increase or decrease as a result of: market fluctuations; changes in interest rates; actual or perceived inability of issuers, guarantors, or liquidity providers to make scheduled principal or interest payments; or illiquidity in debt securities markets. The Fund's income may decline if interest rates fall. Debt instruments are also impacted by political, regulatory, market and economic developments that impact the market in general and specific economic sectors, industries or segments of the fixed income market. In general, rising interest rates lead to a decline in the value of debt securities and debt securities with longer durations tend to be more sensitive to interest rate changes usually making their prices more volatile than those of securities with shorter durations.

***Exchange-Traded Note Risk —*** The value of an exchange-traded note may be influenced by time to maturity, level of supply and demand for the exchange-traded note, volatility and lack of liquidity in the underlying securities' markets (if applicable), changes in the applicable interest rates, changes in the issuer's credit rating and economic, legal, political or geographic events that affect the referenced index. In addition, exchange traded notes are unsecured debt of the issuer and would lose value if the issuer goes bankrupt.

***High Yield Debt Securities Risk —*** Securities rated below investment grade, otherwise known as "junk bonds," generally involve greater risk of default or price changes than other types of fixed-income securities due to uncertainty regarding an issuer's continuing ability to make principal and interest payments. Junk bonds are considered primarily speculative and may be difficult to sell at the time and price the Fund desires. Junk bonds may have greater transaction costs and wider bid/ask spreads and their values can have significant volatility and may decline significantly over short periods of time as compared to higher-rated securities of similar maturities. Issuers of securities that are in default or have defaulted may fail to resume principal or interest payments, in which case the Fund may lose its entire investment.

***High-Yielding Dividend Stock Risk —*** High-yielding dividend stocks are often speculative, high risk investments. Companies offering high-yielding dividend stocks may be paying out more earnings than they can support and may reduce their dividends or stop paying dividends at any time, which could have a material adverse impact on the stock price of these companies and materially impact the Fund's performance.

***U.S. Government Securities Risk —*** A security backed by the U.S. Treasury or the full faith and credit of the United States is guaranteed only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. Furthermore, not all securities issued by the U.S. government and its agencies and instrumentalities are backed by the U.S. Treasury or the full faith and credit of the United States. In addition, because many types of U.S. government securities trade actively outside the United States, their prices may

rise and fall as changes in global economic conditions affect the demand for these securities. In addition, U.S. Treasury obligations may differ from other securities in their interest rates, maturities, times of issuance and other characteristics. Changes in the financial condition or credit rating of the U.S government may cause the value of U.S. Treasury obligations to decline.

***MLP Risk —*** Common units of MLPs involve risks that differ from common stock. Holders of MLP common units are subject to certain risks inherent in the structure of MLPs, including (i) tax risks, (ii) risk related to limited control of management or the general partner or managing member, (iii) limited rights to vote on matters affecting the MLP, except with respect to extraordinary transactions, (iv) conflicts of interest between the general partner or managing member and its affiliates, on the one hand, and the limited partners or members, on the other hand, including those arising from incentive distribution payments or corporate opportunities, and (v) cash flow risks. MLP common units can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or the energy sector, changes in a particular issuer's financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). Prices of common units of individual MLPs also can be affected by unique fundamentals, including cash flow growth, cash generating power and distribution coverage.

The Fund currently qualifies as, and intends to continue to qualify as, a registered investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "IRC") and as such, may not invest more than 25% of its net assets in the securities of MLPs. If the Fund exceeds this limitation, it may no longer qualify under the IRC as a registered investment company and may be subject to taxation as a corporation instead of a registered investment company.

***Convertible Bond Risk —*** Convertible bonds are fixed income securities that normally pay interest and are convertible into or exercisable for common stock of the issuer (or cash or securities of equivalent value) at either a stated price or a stated rate (the "conversion price"). To the extent the market price of the underlying stock approaches, or is greater than the conversion price, the convertible bond's market value tends to correlate with the market price of the underlying stock and will be subject to the market risk. To the extent the market price of the underlying stock declines below the conversion price, the value of the convertible bond tends to be influenced by the yield of the convertible bond. Convertible bonds are subject to risks associated with debt securities, such as interest rate risk and credit risk.

***Large-Capitalization Company Risk —*** Large-capitalization companies typically have significant financial resources, extensive product lines and broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to changes in business, product, financial, or market conditions and may not be able to

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maintain growth at rates that may be achieved by well-managed smaller and mid-size companies, which may affect the companies' returns.

***Small- and/or Mid-Capitalization Company Risk —***

Small- and mid-capitalization companies often have narrower markets for their goods and/or services, less stable earnings, and more limited managerial and financial resources and often have limited product lines, services, markets, financial resources or are dependent on a small management group. Because these stocks are not well-known to the investing public, do not have significant institutional ownership and are followed by relatively few security analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease the value and liquidity of such securities resulting in more volatile performance. These companies may face greater risk of business failure.

***Energy Sector Risk —*** If the Fund invests in MLPs, it will primarily invest in MLPs operating in the energy sector ("Energy MLPs"). These MLPs are subject to risks specific to the energy sector including, but not limited to the following:

● The energy sector is highly regulated. Energy MLPs are subject to significant regulation of virtually every aspect of their operations by federal, state and local governmental agencies, including how facilities are constructed, maintained and operated, environmental and safety controls, and the prices they may charge for the products and services they provide.

● Energy MLPs may be affected by fluctuations in the prices of energy commodities, including natural gas, natural gas liquids, crude oil and coal.

● Energy MLPs engaged in the exploration, development, management or production of energy commodities are at risk of the natural resources depleting over time, which may cause the market value of the MLP to decline over time.

● Energy MLPs may be adversely affected by reductions in the supply of or demand for energy commodities.

● Energy MLPs may be subject to various operational risks, such as disruption of operations, inability to timely and effectively integrate newly acquired assets, unanticipated operation and maintenance expenses, underestimated cost projections, and other risks arising from specific business strategies.

● Rising interest rates could adversely impact the financial performance of MLPs by increasing their costs of capital, which may reduce an MLP's ability to execute acquisitions or expansions in a cost-effective manner.

● Extreme weather or other natural disasters could adversely impact the value of the debt and equity securities of Energy MLPs.

● Threats of or actual attacks by terrorists on energy assets could impact the market for Energy MLPs.

● If a significant accident or event occurs and an MLP is not fully insured, it could adversely affect the MLP's

operations and financial condition and the securities issued by the MLP.

***Technology and Telecommunications Sectors Risk —***

The Fund invests in, and/or has exposure to, companies that serve the electronics, software, IT services, computer and telecommunications equipment and services industries or that manufacture products based on the latest applied science. These companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. The market prices of technology and/or telecommunications-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. Technology and telecommunications securities also may be affected adversely by changes in technology, consumer and business purchasing patterns, competition, government regulation and/or obsolete products or services. In addition, a rising interest rate environment tends to negatively affect technology and telecommunications companies.

***Emerging Markets Risk —*** Securities of issuers located in emerging markets face the potential for greater market volatility, lower trading volume, higher levels of inflation, political and economic instability, greater risk of market shutdown and more government limitations on foreign investments. Emerging market countries may include economies that concentrate in only a few industries, security issues that are held by only a few investors, limited trading capacity in local exchanges and the possibility that markets or issuances or securities offerings may be manipulated by foreign nationals who have inside information.

Some countries that are considered emerging markets may experience economic instability, including instability that results from substantial rates of inflation or significant devaluations of their currency, or economic recessions, which would have a negative effect on economies and securities markets of their economies. Some of these countries may also impose restrictions on the exchange or export of currency or adverse currency exchange rates and may be characterized by a lack of available currency hedging instruments. Additionally, emerging markets often have less uniformity in accounting and reporting requirements, auditor oversight, and reliable securities valuations and greater risks associated with custody of securities than developed markets and information about securities may be less reliable or complete. Shareholder claims and legal remedies that are common in the United States may be difficult or impossible to pursue in many emerging market countries.

Emerging markets often have greater risk of capital controls through such measures as taxes or interest rate control than developed markets. Certain emerging markets countries may also lack the infrastructure necessary to attract large amounts of foreign trade and investment. Local securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times.

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Settlement procedures in emerging market countries are frequently less developed and reliable than those in other developed countries, which may result in significant delays in registering the transfer of securities and may make it more difficult for the Fund to value its holdings.

Economic, business, political, or social instability may adversely affect the value of emerging market securities more than securities of developed markets. Disparities of wealth, the pace and success of democratization and ethnic, religious and racial disaffection, among other factors, may exacerbate social unrest, violence and labor unrest in addition to unanticipated or sudden political and social developments may result in sudden and significant reductions in the value of securities. Additionally, any of these developments may result in a decline in the value of a country's currency. Emerging markets may develop unevenly and may never fully develop. There is also a higher risk of loss due to expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and repatriation of capital invested in certain emerging market countries. These investments could be impacted by sustainability risks, in particular those caused by environmental changes related to climate change, social issues (including relating to labor rights) and governance risk (including but not limited to risks around board independence, ownership and control, or audit and tax management).

***Return of Capital Risk —*** A portion of the Fund's distributions are expected to be treated as a return of capital for tax purposes. Return of capital distributions are not taxable income to a shareholder, but reduce a shareholder's basis in their Shares. Such a reduction in tax basis will generally result in larger taxable gains and/or lower tax losses on a subsequent sale of Shares. A distribution in excess of a shareholder's basis will be taxable in the same manner as a sale of a shareholder's Shares. Shareholders who periodically receive the payments of dividends or other distributions consisting of a return of capital may be under the impression that they are receiving net profits from the Fund when, in fact, they are not.

***Depositary Receipt Risk —*** To the extent the Fund invests in foreign companies, the Fund's investment may be in the form of depositary receipts or other securities convertible into securities of foreign issuers including American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), and Global Depositary Receipts ("GDRs"). Such investments continue to be subject to most of the risks associated with investing directly in foreign securities, including political and exchange rate risks. The issuers of certain depository receipts are under no obligation to distribute shareholder communications to holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Investments in depository receipts may be less liquid than the underlying shares in their primary trading markets. The issuers of depository receipts may discontinue issuing new depository receipts and withdraw existing depository receipts at any time.

***Foreign Securities Risk —*** Investing in foreign instruments may involve greater risks than investing in domestic

instruments. As a result, the Fund's returns and net asset value 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. Additionally, the Fund may be impacted by a limitation on foreign ownership of securities, the imposition of withholding or other taxes, restrictions on the repatriation of cash or other assets, higher transaction and custody costs, delays in the settlement of securities, difficulties in enforcing contractual obligations and lower levels of regulation in the securities markets.

***Municipal Securities Risk —*** Municipal issuers are subject to unique factors affecting their ability to pay debt obligations, including the risk that litigation, legislation or other political events, local business and economic conditions, or bankruptcy could have a significant impact on an issuer's ability to make payments of principal and/or interest or otherwise affect the value of such securities. Moreover, an adverse interpretation of the tax status of municipal securities may make such securities decline in value. Because many municipal securities are issued to finance certain projects, such as those related to education, health care, housing, transportation, utilities, and water and sewer, conditions in these sectors can affect the overall municipal market.

***Options Risk —*** The Fund may not achieve its intended results with its use of options. There is no assurance that a liquid market will exist when the Fund seeks to close out an option position. The hours of trading for options may not conform to the hours during which the underlying assets are traded. To the extent the options markets close before the markets for the underlying assets, significant price and rate movements can take place in the underlying markets that cannot be reflected in the options markets. Additionally, the value of options can be affected by changes in the value and dividend rates of the underlying assets, an increase in interest rates, changes in the actual or perceived volatility of the stock market and the remaining time to an option's expiration. Additionally, the exercise price of an option may be adjusted before the option's expiration as a result of the occurrence of events affecting the underlying asset. A reduction in the exercise price of an option could reduce the Fund's capital appreciation potential on the underlying asset.

***Liquidity Risk —*** Some securities held by the Fund, including derivatives, may be difficult to sell or be illiquid, particularly during times of market turmoil. Illiquid securities also may be difficult to value. The Fund may be forced to sell a security at a loss, thus materially affecting Fund performance.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may result in the Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments, and/or may incur substantial trading losses.

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***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Valuation Time Risk —*** The Fund values its portfolio as of the close of regular trading on the New York Stock Exchange (generally 4:00 PM Eastern Time). In some cases, foreign markets may close before the New York Stock Exchange opens or may not be open for business on the same calendar days as the Fund. As a result, the Fund may have to price holdings at a fair value determined by the Adviser, under the oversight of the Board of Trustees.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year for the Fund's Investor Class Shares. The table shows how the Fund's average annual returns for the one-year, five-year, and ten-year periods compare with those of one or more broad-based market indexes for the same periods. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

The performance and average annual total returns shown below are those of the Fund's Investor Class Shares. However, during the calendar year ended December 31, 2017, the Investor Class Shares were Class A Shares. Effective at the close of business on June 30, 2018, the Fund's Class A Shares converted to Investor Class Shares.

Performance prior to June 1, 2015 reflects the performance of the Fund's Investor Class Shares. Effective June 1, 2015, the Investor Class Shares converted to Class A Shares, and the performance information from June 1, 2015 to December 31, 2017 reflects the performance of the Fund's Class A Shares. The average annual total returns table below reflects the sales charge attributable to the Class A Shares during the applicable periods.

The returns for the Fund's Institutional Class Shares would be different than the figures shown because each class of shares has different expenses.

**Hilton Tactical Income Fund –** 

**Investor Class Shares** 

**Calendar Year Total Return as of December 31**

![](g58398hiltontactical_36.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 6.83<br> %<br>| March 31, 2019 |
| Worst Quarter | &nbsp;&nbsp; -15.46<br> %<br>| March 31, 2020 |
| Year-to-Date | 6.52<br> %<br>| September 30, 2025 |

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 10.12% | &nbsp;&nbsp; 3.51% | &nbsp;&nbsp; 4.66% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; 8.88% | &nbsp;&nbsp; 2.76% | &nbsp;&nbsp; 3.81% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; 6.11% | &nbsp;&nbsp; 2.46% | &nbsp;&nbsp; 3.40% |
| **Institutional Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 10.38% | &nbsp;&nbsp; 3.77% | &nbsp;&nbsp; 4.91% |
| &nbsp;&nbsp; **Bloomberg U.S. Aggregate** <br> **Bond Index** (reflects no <br> deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 1.25% | &nbsp;&nbsp; -0.33% | &nbsp;&nbsp; 1.35% |
| &nbsp;&nbsp; **Bloomberg Intermediate US** <br> **Government/Credit Bond** <br> **Index** (reflects no deduction <br> for fees, expenses or taxes)<br>| &nbsp;&nbsp; 3.00% | &nbsp;&nbsp; 0.86% | &nbsp;&nbsp; 1.71% |
| &nbsp;&nbsp; **S&P 500 Index** (reflects no <br> deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 25.02% | &nbsp;&nbsp; 14.53% | &nbsp;&nbsp; 13.10% |

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After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement

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accounts.After-tax returns are shown only for the Investor Class. After-tax returns for the Institutional Class will vary.

**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Investment Subadviser.** Hilton Capital Management, LLC is the Fund's investment subadviser.

**Portfolio Manager.** The Subadviser's portfolio management team has the day-to-day responsibility for managing the Fund's investment strategy and asset allocation.

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| | | |
|:---|:---|:---|
| Portfolio Manager | Years of Service <br> with the Fund<br>| Primary Title |
| C. Craig O'Neill | Since Inception in <br> September 2013<br>| Chief Executive <br> Officer and <br> President<br>|
| &nbsp;&nbsp; Alexander D. <br> Oxenham<br>| Since Inception in <br> September 2013<br>| Co-Chief <br> Investment Officer<br>|
| Timothy Reilly | Since November <br> 2017<br>| Portfolio Manager |

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**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Hilton Tactical Income Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121), overnight mail (Direxion Funds - Hilton Tactical Income Fund, c/o U.S. Bank Global Fund Services, 801 Pennsylvania Ave, Suite 219252, Kansas City, MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: Investor <br> Class Shares<br>| $2,500 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $100 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (401(k) plans; <br> Traditional, ROTH <br> and Spousal <br> individual retirement <br> accounts)<br>| $2,500 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $100 |
| &nbsp;&nbsp; Minimum Investment <br> Institutional Class <br> Shares<br>| $50000 | $100 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

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Overview of the Fund

The Hilton Tactical Income Fund (the "Fund") is a series of the Direxion Funds (the "Trust"). The Trust is a registered investment company offering a number of separate series. This Prospectus relates to the Investor Class Shares and Institutional Class Shares of the Fund. Rafferty Asset Management, LLC serves as the investment adviser to the Fund ("Rafferty" or "Adviser") and Hilton Capital Management, LLC serves as subadviser to the Fund ("Hilton" or "Subadviser").

**Changes in Investment Objective.** The Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval upon 60 days' notice to shareholders.

**Defensive Policy**. At the Subadviser's discretion, the Fund may invest in high-quality, short-term debt securities and money market instruments for (i) temporary defensive purposes in response to adverse market, economic or political conditions and (ii) to retain flexibility in meeting redemptions, paying expenses and identifying and assessing investment opportunities. These short-term debt securities and money market instruments include cash, shares of other mutual funds, commercial paper, certificates of deposit, bankers' acceptances, U.S. government securities, discount notes and repurchase agreements. To the extent that the Fund invests in money market mutual funds for its cash position, there will be some duplication of expenses because the Fund will bear its pro rata portion of such money market fund's management fees and operational expenses. When investing for temporary defense purposes, the Subadviser may invest up to 100% of the Fund's total assets in such instruments. Taking a temporary defensive position may result in the Fund not achieving its investment objective. To find out more information about the Fund, you may call (800) 851-0511.

PRINCIPAL Investment Strategy

The Fund utilizes a disciplined approach to balancing fixed income investments with historically higher income producing equity securities, with a focus on minimizing absolute risk and volatility. The Subadviser attempts to mitigate portfolio risk and volatility by creating a diversified portfolio of income producing securities that also offer the potential for capital appreciation. These securities may include common and preferred stocks of any capitalization, closed-end funds, exchange-traded funds ("ETFs"), master limited partnerships ("MLPs"), real estate investment trusts ("REITs"), and a variety of debt instruments of any maturity, including corporate bonds, exchange-traded notes ("ETNs"), municipal bonds, and securities issued, backed or otherwise guaranteed by the U.S. government, or its agencies, including securities issued by U.S. government sponsored entities. The Fund may also invest in foreign equity securities, including emerging market securities that are income producing. The Fund may invest in other investment companies, including ETFs, to the extent permitted by the Investment Company Act of 1940, as amended (the "1940 Act") and the rules thereunder. In addition, the Fund may use options to attempt to hedge volatility and other portfolio risks.

The Subadviser's investment process begins by looking at various global macro-economic factors such as fiscal/monetary policy, interest rates, geo-political risks, inflation, commodity pricing, government policies and general business conditions. The Subadviser reviews a broad array of possible income-producing investments and then analyzes company-specific fundamental research to understand a company's dividend policy, relative value and balance sheet. Investments are selected for the Fund's portfolio that demonstrate stable and consistent cash flow, strong underlying asset value, competitive advantages and management teams with demonstrable positive track records. The Subadviser has a rigorous sell discipline that generates sell signals, not only based on adverse fundamental and/or relative value triggers, but also through the use of a proprietary risk management quantitative matrix that assists with identifying potential security sale candidates. Portfolio securities may be sold at any time, including when the Subadviser believes portfolio securities no longer represent relatively attractive investment opportunities, when the Subadviser identifies what it believes to be is a superior investment opportunity, or if a security has reached, or is close to reaching, its valuation target.

The Subadviser managed the Fund's fixed income portfolio by first considering a long-term strategic investment view and then buying and selling fixed income securities opportunistically in response to short-term market, economic, political, and other developments. The objective of the Subadviser's fixed income portfolio strategy is to generate higher income than would be expected from traditional intermediate-term fixed income investments, such as U.S. government bonds. As a result, the Fund may invest up to 30% in high yield debt securities or "junk bonds" (higher-risk, lower-rated fixed income securities such as those rated lower than BBB- by Standard & Poor's Rating Service, Inc. ("S&P") or lower than Baa3 by Moody's Investors Service, Inc.) or, if unrated, determined by the Subadviser to be of comparable quality. The Fund invests in fixed income securities of any duration. Duration measures the sensitivity of the price of a fixed income investment to a 1% change in interest rates. For example, a five-year duration means the investment will decrease in value by 5% if interest rates rise 1%.

The Subadviser's approach to investing in the fixed income markets includes consideration of the following factors:

● Security selection within a given debt security market sector;

● Relative valuation and performance of the various market sectors;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

● Yield curve shape;

● Fluctuations in the overall level of interest rates;

● Duration; and

● Coupon rate.

The Subadviser may reallocate between asset classes in an attempt to improve the Fund's total return to dampen volatility of the Fund and/or to reflect its outlook on market conditions. The Subadviser will make asset allocation adjustments based on a combination of bottom-up/top-down fundamental analysis and relative value analysis among capital market instruments within the target asset classes. Volatility in the markets may offer the Subadviser the opportunity to take advantage of perceived pricing dislocations that can occur during periods of market distress.

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ADDITIONAL INFORMATION REGARDING PRINCIPAL Risks

An investment in the Fund entails risks. The Fund may not achieve its investment objective and may decline in value. It is important that investors closely review and understand all of the Fund's risks before making an investment. The Fund is not a complete investment program. Risks of investing in the Fund are described below.

**Subadviser's Investment Strategy Risk** 

While the Subadviser seeks to take advantage of investment opportunities for the Fund that will maximize its investment returns, there is no guarantee that such opportunities will ultimately benefit the Fund or that the Subadviser will identify the opportunities correctly. The Subadviser may aggressively change the Fund's portfolio in response to market conditions that are unpredictable and may expose the Fund to greater market risk than other mutual funds. The value of your investment in the Fund may vary with the effectiveness of the Subadviser's research, analysis and asset allocation among portfolio securities. There is no assurance that the Subadviser's investment strategy will enable the Fund to achieve its investment objective.

**Equity Securities Risk** 

Investments in publicly issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time and to volatile increases and decreases in value, as market confidence in, and perceptions of, their issuer change. These investors' perceptions are based on various and unpredictable factors including: expectations regarding government, economic, monetary and fiscal policies; inflation and interest rates; economic expansion or contraction; global and/or regional political, economic and banking crises; and factors affecting specific industries, sectors or companies in which the Fund invests. The Fund's NAV and investment return will fluctuate based upon changes in the value of its portfolio securities.

**Preferred Stock Risk**

A preferred stock has characteristics of a bond and a common stock. It may offer the higher yield of a bond and has priority over common stock in the receipt of dividends or in any residual assets after payment to creditors should the issuer be dissolved. However, it does not have the same seniority as a bond and, unlike common stock, its participation in the issuer's growth may be limited. Although the dividend on a preferred stock may be set at a fixed annual rate, in some circumstances it may be changed or passed by the issuer. Unlike interest payments on debt securities, dividend payments on preferred stock must be declared by the issuer's board of directors. An issuer's board of directors is generally not under any obligation to pay a dividend (even if such dividend has been accrued) and may suspend payment of dividends on preferred stock at any time. In the event an issuer of preferred stock experiences economic difficulties, the issuer's preferred stock may lose substantial value due to the reduced likelihood that the issuer's board of directors will declare a dividend and the fact that preferred stock may be subordinated to other securities of the same issuer.

Additionally, because many preferred stocks pay dividends at a fixed rate, their market price can be sensitive to changes in interest rates in a manner similar to bonds – that is, as interest rates rise, the value of the preferred stocks is likely to decline. Also because many preferred stocks allow holders to convert the preferred stock into common stock of the issuer, their market price can be sensitive to changes in the value of the issuer's common stock. Preferred stocks are subject to market volatility and the prices of preferred stocks will fluctuate based on market demand.

**Real Estate Investment Risk**

Real estate securities, including REITs, are subject to risks similar to those associated with direct ownership of real estate, including changes in local and general economic conditions, vacancy rates, interest rates, zoning laws, rental income, property taxes, operating expenses and losses from casualty or condemnation. An investment in a REIT is subject to additional risks, including poor performance by the manager of the REIT, adverse tax consequences, and non-diversification resulting from being invested in a limited group of properties. Factors such as these may adversely affect companies that own and operate real estate directly, companies that lend to them, and companies that service the real estate industry. REITs receive favorable tax treatment only if they meet certain conditions, including the requirement that they distribute at least 90% of their taxable income.

**Other Investment Companies (including ETFs) Risk** 

The Fund may invest in, or obtain exposure to, another investment company, including an ETF (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, including an ETF, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. The Fund must rely on the underlying fund to achieve its investment objective. Accordingly, if the underlying fund fails to achieve its investment objective, the Fund's performance will likely be adversely affected. To the extent the Fund obtains exposure to an underlying fund, including an ETF, by entering into a derivatives contract whose reference asset is the underlying fund, the Fund will not be a shareholder of the underlying fund but will still be exposed to the risk that it may fail to achieve its investment objective and adversely impact the Fund.

In addition, to the extent that the Fund invests in an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure, including any risks associated with representative sampling . For example, shares of ETFs may trade at a discount or a premium to an ETF's net asset value, which may result in an ETF's market price being more or less than the value of the Fund's investments especially during periods of market volatility or disruption. There may also be additional trading costs

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due to an ETF's bid-ask spread, and/or the underlying fund may suspend sales or redemptions of its shares due to market circumstances that make it impracticable to conduct such transactions, any of which may adversely impact the Fund's performance. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

**Credit Risk** 

There is a risk that the issuer or guarantor of a debt security could go bankrupt or be unable or unwilling to make interest payments and/or repay principal. Changes in an issuer's financial strength or in an issuer's or debt security's credit rating also may affect a security's value and thus have an impact on Fund performance. The degree of credit risk for a particular security may be reflected in its credit rating. Lower rated debt securities involve greater credit risk, including the possibility of default or bankruptcy. Generally, the longer the maturity and the lower the credit quality of a security, the more sensitive it is to credit risk.

**Interest Rate Risk** 

Debt securities, and securities that provide exposure to debt securities, have varying levels of sensitivity to changes in interest rates. In addition, the Fund is subject to the risk that interest rates may change and exhibit increased volatility, thus affecting the performance of the Fund. Securities with longer maturities can be more sensitive to interest rate changes, and rising rates normally cause the value of fixed income securities with longer durations to decline; while falling rates normally cause the value of fixed income securities with longer durations to increase. An increase in interest rates may lead to heightened volatility in the fixed-income markets and adversely affect the liquidity of certain fixed-income investments. A decrease in fixed-income market maker capacity may act to decrease liquidity in the fixed-income markets and act to further increase volatility, affecting the Fund's return.

In addition, short-term and long-term interest rates do not necessarily move in the same amount or the same direction. Short-term securities tend to react to changes in short-term interest rates, and long-term securities tend to react to changes in long-term interest rates. The impact of an interest rate change may be significant for other asset classes as well, whether because of the impact of interest rates on economic activity or because of changes in the relative attractiveness of asset classes due to changes in interest rates. For instance, higher interest rates may make investments in debt securities more attractive, thus reducing investments in equities. The link between interest rates and debt security prices tends to be weaker with lower-rated debt securities than with investment-grade debt securities.

**Debt Instrument Risk** 

The value of debt instruments may increase or decrease as a result of the following: market fluctuations; changes in interest rates; actual or perceived inability of issuers, guarantors, or liquidity providers to make scheduled principal or interest payments; or illiquidity in debt securities markets.

The Fund's income may decline if interest rates fall. Debt instruments are also impacted by political, regulatory, market and economic developments that impact the market in general and specific economic sectors, industries or segments of the fixed income market. In general, rising interest rates lead to a decline in the value of debt securities and debt securities with longer durations tend to be more sensitive to interest rate changes usually making their prices more volatile than those of securities with shorter durations. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall. Declining interest rates may lead to prepayment of obligations and cause reduced rates of return due to reinvestment of interest and principal payments at lower interest rates.

**Exchange-Traded Note Risk**

Exchange-traded notes ("ETNs") are subject to the credit risk of the issuer. The value of an ETN will vary and will be influenced by its time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in underlying securities, currency and commodities markets as well as changes in the applicable interest rates, changes in the issuer's credit rating, and economic, legal, political, or geographic events that affect the referenced index. ETNs are unsecured debt of the issuer and would lose value if the issuer goes bankrupt. In addition, there may be restrictions on the Fund's right to redeem its investment in an ETN, which is meant to be held until maturity. The Fund's ability to sell its ETN holdings may be limited by the availability of a secondary market.

**High-Yield Debt Securities Risk**

Securities rated below investment grade (commonly known as "junk bonds") and unrated debt securities determined to be of comparable quality involve greater risks than investment grade debt securities. Such securities may fluctuate more widely in price and yield and may fall in price during times when the economy is weak or is expected to become weak. These securities may be less liquid and also may require a greater degree of judgment to establish a price, may be difficult to sell at the time and price the Fund desires, and may carry higher transaction costs. In particular, these securities may be issued by smaller companies or by highly indebted companies, which are generally less able than more financially stable companies to make scheduled payments of interest and principal. Lower-rated debt securities are considered by the major rating agencies to be predominantly speculative with respect to the issuer's continuing ability to pay principal and interest and carry a greater risk that the issuer of such securities will default in the timely payment of principal and interest. Such securities are susceptible to such a default or decline in market value due to real or perceived adverse economic and business developments relating to the issuer, the industry in general, market interest rates and market liquidity. Issuers of securities that are in default or have defaulted may fail to resume principal or interest payments, in which case the Fund may lose its entire investment. Where it deems it appropriate and in the best interests of Fund

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shareholders, the Fund may incur additional expenses to seek recovery on a defaulted security and/or to pursue litigation to protect the Fund's investment.

The credit rating of a security may not accurately reflect the actual credit risk associated with such a security. The creditworthiness of issuers of these securities may be more complex to analyze than that of issuers of investment grade debt securities, and the overreliance on credit ratings may present additional risks. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of such securities, especially in a thinly traded or illiquid market. To the extent the Fund owns or may acquire illiquid or restricted lower-rated debt securities or unrated debt securities of comparable quality, these securities may involve special registration responsibilities, liabilities, costs, and liquidity and valuation difficulties.

**High-Yielding Dividend Stock Risk**

High-yielding dividend stocks are often speculative, high risk investments. These companies may be paying out more earnings than they can support and may reduce their dividends or stop paying dividends at any time, which could have a material adverse impact on the stock price of these companies and materially impact the Fund's performance.

**U.S. Government Securities Risk** 

A security backed by the U.S. Treasury or the full faith and credit of the United States is guaranteed only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. In addition, because many types of U.S. government securities trade actively outside the United States, their prices may rise and fall as changes in global economic conditions affect the demand for these securities.

U.S. government sponsored enterprise ("GSE") securities are issued or guaranteed by the U.S. government or its agencies or instrumentalities. Some obligations issued by GSEs and instrumentalities are supported by the full faith and credit of the U.S. Treasury; others by the right of the issuer to borrow from the U.S. Treasury; others by discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality; and others only by the credit of the agency or instrumentality. Those securities bear fixed, floating or variable rates of interest. Interest may fluctuate based on generally recognized reference rates or the relationship of rates. While the U.S. government currently provides financial support to such GSEs or instrumentalities, no assurance can be given that it will always do so, because it is not so obligated by law.

Certain U.S. government debt securities, such as securities of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury. Others, such as securities issued by the Fannie Mae<sup>©</sup> and Freddie Mac<sup>©</sup>, are supported only by the credit of the related corporation. In the case of securities not backed by the full faith and credit of the United States, the Fund must look principally to the agency issuing or guaranteeing the obligation in the event the agency or instrumentality does not meet its commitments. The U.S. government may choose not to provide financial support to GSEs or instrumentalities if it

is not legally obligated to do so. The Fund will invest in securities of such instrumentalities only when the Subadviser is satisfied that the credit risk with respect to any such instrumentality is comparatively minimal.

**MLP Risk**

Common units of MLPs involve risks that differ from common stock. Holders of MLP common units are subject to certain risks inherent in the structure of MLPs, including (i) tax risks, (ii) risk related to limited control of management or the general partner or managing member, (iii) limited rights to vote on matters affecting the MLP, except with respect to extraordinary transactions, (iv) conflicts of interest between the general partner or managing member and its affiliates, on the one hand, and the limited partners or members, on the other hand, including those arising from incentive distribution payments or corporate opportunities, and (v) cash flow risks. MLP common units can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or the energy sector, changes in a particular issuer's financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). Prices of common units of individual MLPs also can be affected by unique fundamentals, including cash flow growth, cash generating power and distribution coverage.

In addition, the value of the Fund's investment in an MLP will depend largely on the MLP's treatment as a partnership for U.S. federal income tax purposes. If an MLP does not meet current legal requirements to maintain partnership status, or if it is unable to do so because of tax law changes, it would be treated as a corporation for U.S. federal income tax purposes. In that case, the MLP would be obligated to pay income tax at the entity level and distributions received by the Fund would generally be taxed as dividend income. As a result, there could be a material reduction in the Fund's cash flow and there could be a material decrease in its NAV. Furthermore, MLP interests may not be as liquid as other more commonly traded equity securities. The value of MLPs that are regulated by the Federal Energy Regulatory Commission ("FERC") may also be negatively impacted by regulatory action taken by and regulatory requirements of FERC.

Finally, the Fund currently qualifies as, and intends to continue to qualify as, a registered investment company under Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended (the "IRC") and as such may not invest more than 25% of its net assets in the securities of MLPs. If the Fund exceeds this limitation, it may no longer qualify under the IRC as a registered investment company and may be subject to taxation as a corporation instead of a registered investment company.

**Convertible Bond Risk**

Convertible bonds are fixed-income securities that normally pay interest and are convertible into or exercisable for common stock of the issuer (or cash or securities of equivalent value) at either a stated price or a stated rate (the "conversion price"). To the extent the market price of the underlying stock approaches, or is greater than the conversion price,

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the convertible bond's market value tends to correlate with the market price of the underlying stock and will be subject to the market risk. To the extent the market price of the underlying stock declines below the conversion price, the value of the convertible bond tends to be influenced by the yield of the convertible bond. Convertible bonds are subject to risks associated with debt securities, such as interest rate risk and credit risk.

**Large-Capitalization Company Risk** 

Large-capitalization companies typically have significant financial resources, extensive product lines and broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at rates that may be achieved by well-managed smaller and mid-size companies, which may affect the companies' returns.

**Small- and/or Mid-Capitalization Company Risk** 

Small- and/or mid-capitalization companies often have narrower markets for their goods and/or services, less stable earnings, and more limited managerial and financial resources. Furthermore, those companies often have limited product lines, services, markets, financial resources or are dependent on a small management group. Because these stocks are not well-known to the investing public, there will normally be less publicly available information concerning these securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease the value and liquidity of such securities, resulting in more volatile performance. They also face greater risk of business failure.

**Energy Sector Risk**

To the extent the Fund invests in MLPs, it will primarily invest in MLPs operating in the energy sector ("Energy MLPs"). These MLPs are subject to risks specific to the energy industry including, but not limited to the following:

● The energy sector is highly regulated. Energy MLPs are subject to significant regulation of virtually every aspect of their operations by federal, state and local governmental agencies, including how facilities are constructed, maintained and operated, environmental and safety controls, and the prices they may charge for the products and services they provide.

● Energy MLPs may be affected by fluctuations in the prices of energy commodities, including natural gas, natural gas liquids, crude oil and coal.

● Energy MLPs engaged in the exploration, development, management or production of energy commodities are at risk of the natural resources depleting over time, which may cause the market value of the MLP to decline over time.

● Energy MLPs may be adversely affected by reductions in the supply of or demand for energy commodities.

● Energy MLPs may be subject to various operational risks, such as disruption of operations, inability to timely and effectively integrate newly acquired assets, unanticipated operation and maintenance expenses, underestimated

cost projections, and other risks arising from specific business strategies.

● Rising interest rates could adversely impact the financial performance of MLPs by increasing their costs of capital, which may reduce an MLP's ability to execute acquisitions or expansions in a cost-effective manner.

● Extreme weather or other natural disasters could adversely impact the value of the debt and equity securities of Energy MLPs.

● Threats of or actual attacks by terrorists on energy assets could impact the market for Energy MLPs.

● If a significant accident or event occurs and an MLP is not fully insured, it could adversely affect the MLP's operations and financial condition and the securities issued by the MLP.

**Technology and Telecommunications Sectors Risk**

The technology and telecommunications sectors include companies that serve the electronics, software, IT services, computer and telecommunications equipment and services industries or that manufacture products based on the latest applied science. These companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. The market prices of technology and/or telecommunications-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. Technology and telecommunications securities also may be affected adversely by changes in technology, consumer and business purchasing patterns, competition, government regulation and/or obsolete products or services. In addition, a rising interest rate environment tends to negatively affect technology and telecommunications companies.

**Emerging Markets Risk** 

Securities of issuers located in emerging markets face the potential for greater market volatility, lower trading volume, higher levels of inflation, political and economic instability, greater risk of market shutdown and more government limitations on foreign investments. Emerging market countries may include economies that concentrate in only a few industries, security issues that are held by only a few investors, limited trading capacity in local exchanges and the possibility that markets or issuances or securities offerings may be manipulated by foreign nationals who have inside information.

Some countries that are considered emerging markets may experience economic instability, including instability that results from substantial rates of inflation or significant devaluations of their currency, or economic recessions, which would have a negative effect on economies and securities markets of their economies. Some of these countries may also impose restrictions on the exchange or export of currency or adverse currency exchange rates and may be characterized by a lack of available currency hedging instruments. Additionally, emerging markets often have less uniformity

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in accounting and reporting requirements, auditor oversight, and reliable securities valuations and greater risks associated with custody of securities than developed markets and information about securities may be less reliable or complete. Shareholder claims and legal remedies that are common in the United States may be difficult or impossible to pursue in many emerging market countries.

Emerging markets often have greater risk of capital controls through such measures as taxes or interest rate control than developed markets. Certain emerging markets countries may also lack the infrastructure necessary to attract large amounts of foreign trade and investment. Local securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times. Settlement procedures in emerging market countries are frequently less developed and reliable than those in other developed countries, which may result in significant delays in registering the transfer of securities and may make it more difficult for the Fund to value its holdings.

Economic, business, political, or social instability may adversely affect the value of emerging market securities more than securities of developed markets. Disparities of wealth, the pace and success of democratization and ethnic, religious and racial disaffection, among other factors, may exacerbate social unrest, violence and labor unrest in addition to unanticipated or sudden political and social developments may result in sudden and significant reductions in the value of securities. Additionally, any of these developments may result in a decline in the value of a country's currency. Emerging markets may develop unevenly and may never fully develop. There is also a higher risk of loss due to expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and repatriation of capital invested in certain emerging market countries. These investments could be impacted by sustainability risks, in particular those caused by environmental changes related to climate change, social issues (including relating to labor rights) and governance risk (including but not limited to risks around board independence, ownership and control, or audit and tax management).

**Return of Capital Risk**

A portion of the Fund's distributions are expected to be treated as a return of capital for tax purposes. Return of capital distributions are not taxable income to a shareholder, but reduce a shareholder's basis in their shares of the Fund. Such a reduction in tax basis will generally result in larger taxable gains and/or smaller tax losses on a subsequent sale of Fund shares. A distribution in excess of a shareholder's basis will be taxable in the same manner as a sale of a shareholder's shares of the Fund. Shareholders who periodically receive the payments of dividends or other distributions consisting of a return of capital may be under the impression that they are receiving net profits from the Fund when, in fact, they are not. Shareholders should not assume that the source of distributions is from the net profits of the Fund.

**Depositary Receipt Risk** 

To the extent the Fund invests in, or has exposure to, foreign companies, investment may be in the form of depositary receipts or other securities convertible into securities of foreign issuers. American Depositary Receipts ("ADRs") are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. European Depositary Receipts ("EDRs") are receipts issued in Europe that evidence a similar ownership arrangement. Global Depositary Receipts ("GDRs") are receipts issued throughout the world that evidence a similar arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world. Depositary receipts will not necessarily be denominated in the same currency as their underlying securities. The issuers of certain depository receipts are under no obligation to distribute shareholder communications to holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Investments in depository receipts may be less liquid than the underlying shares in their primary trading markets. The issuers of depository receipts may discontinue issuing new depository receipts and withdraw existing depository receipts at any time.

Depositary receipts may be purchased through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may establish an unsponsored facility without participation by the issuer of the depositary security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts of the deposited securities. Fund investments in depositary receipts, which include ADRs, GDRs and EDRs, are deemed to be investments in foreign securities for purposes of the Fund's investment strategy.

**Foreign Securities Risk** 

Foreign instruments may involve greater risks than domestic instruments. As a result, the Fund's returns and NAV may be affected to a large degree by fluctuations in currency exchange rates, interest 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 United States, and there may be less public information available about foreign companies. Pursuant to regulatory changes effective in May 2024, many U.S., Canadian, and Mexican securities transitioned to a "T+1" (trade date plus one day) settlement cycle, while securities trading in most other foreign securities markets have longer settlement cycles. As a result, there are potential operational, settlement and other risks for the Funds associated with differences in the timing of settlement cycles between markets.

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Foreign securities may involve additional risk, including, greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, organizations, entities and/or individuals, changes in international trade patterns, trade barriers, and other protectionists or retaliatory measures. Additionally, the Fund may be impacted by a limitation on foreign ownership of securities, the imposition of withholding or other taxes, restrictions on the repatriation of cash or other assets, higher transaction and custody costs, delays in the settlement of securities, difficulties in enforcing contractual obligations and lower levels of regulation in the securities markets.

**Municipal Securities Risk**

Municipal securities are fixed-income securities issued by states, counties, cities and other political subdivisions and authorities. Municipalities issue such securities to fund their current operations before collecting taxes or other municipal revenues or to fund capital projects prior to issuing long-term bonds. Municipal securities also may be issued by industrial or economic development authorities, school and college authorities, housing authorities, healthcare facility authorities, municipal utilities, transportation authorities, and other public agencies.

Municipal issuers are subject to unique factors affecting their ability to pay debt obligations, including the risk that litigation, legislation or other political events, local business and economic conditions, or bankruptcy could have a significant impact on an issuer's ability to make payments of principal and/or interest or otherwise affect the value of such securities. Moreover, an adverse interpretation of the tax status of municipal securities may make such securities decline in value. Municipal securities can be significantly affected by political changes as well as uncertainties in the municipal market related to government regulation, taxation, legislative changes or the rights of municipal security holders, including in connection with an issuer insolvency. Because many municipal securities are issued to finance certain projects, such as those related to education, health care, housing, transportation, utilities, and water and sewer, conditions in these sectors can affect the overall municipal market.

Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the tax benefits supporting the project or assets or the inability to collect revenues for the project or from the assets. Municipal securities may be less liquid than taxable bonds and there may be less publicly available information on the financial condition of municipal security issuers than for issuers of other securities.

**Options Risk**

The Fund may not achieve its intended investment objective with the use of options contracts as part of a hedging strategy. There is no assurance that a liquid market will exist when the Fund seeks to close out an option position. To the extent the options markets close before the markets for the

underlying assets, significant price and rate movements can take place in the underlying markets that cannot be reflected in the options markets. Additionally, the value of options can be affected by changes in the value and dividend rates of the underlying assets, an increase in interest rates, changes in the actual or perceived volatility of the stock market and the underlying assets and the remaining time to an option's expiration. Additionally, the exercise price of an option may be adjusted before the option's expiration. A reduction in the exercise price of an option would reduce the Fund's capital appreciation potential on the underlying asset.

**Liquidity Risk** 

Some securities held by the Fund, including derivatives, may be difficult to sell or illiquid, particularly during times of market turmoil. Illiquid securities also may be difficult to value. Illiquid securities may also be difficult to value. If the Fund is forced to sell an illiquid security at an unfavorable time or at a price that is lower than the Subadviser's judgment of the security's true market value, the Fund may be forced to sell the security at a loss. Such a situation may prevent the Fund from limiting losses or realizing gains, thus adversely affecting Fund performance.

**Early Close/Trading Halt Risk** 

An exchange or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may result in the Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments, and/or may incur substantial trading losses.

**Market Risk** 

The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, inflation rates and/or investor expectations concerning such rates, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, and public health risks. Interest rates and inflation rates may change frequently and drastically as a result of various factors and the Fund's investments may not keep pace with these changes.

Securities markets also may experience long periods of decline in value. During a general downturn in the securities markets, multiple asset classes may decline in value simultaneously and changes in the financial condition of a single issuer can impact a market the markets broadly. The Fund is subject to the risk that geopolitical events will disrupt markets and adversely affect global economies, markets, and exchanges. Local, regional or global events such as war, tariffs and trade wars, acts of terrorism, natural disasters, the spread of infectious illness or other public health issues, conflicts and social unrest or other events could have a significant impact on the Fund, its investments and the Fund's ability to achieve its investment objective. The economic, fiscal, monetary and

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foreign policies of the U.S. government, including the imposition of tariffs, changes to the federal agencies and regulatory policies will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities, including the various counterparties utilized by the Fund.

Markets and market participants are increasingly reliant on information data systems. Inaccurate data, software or other technology malfunctions, programming inaccuracies, unauthorized use or access and similar circumstances may impair the performance of these systems and may have an adverse impact upon a single issuer, a group of issuers, or securities markets more broadly.

**Money Market Instrument Risk** 

Money market instruments, including money market funds, depositary accounts and repurchase agreements may be used for cash management purposes. Money market funds may be subject to credit risk with respect to the short-term debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Repurchase agreements are contracts in which a seller of securities agrees to buy the securities back at a specified time and price. Repurchase agreements may be subject to market and credit risk related to the collateral securing the repurchase agreement. Money market instruments may also be subject to credit risks associated with the instruments in which they invest. There is no guarantee that money market instruments will maintain a stable value, and they may lose money.

Other Risks of the Fund

**Cybersecurity Risk** 

The increased use of technologies, such as the internet, to conduct business increases the operational, information security and related "cyber" risks both directly to the Fund and through its service providers. Similar types of cyber security risks are also present for issuers of securities in which the Fund may invest, which could result in material adverse consequences for such issuers. Unlike many other types of risks faced by the Fund, these risks typically are not covered by insurance. Cyber incidents can result from deliberate attacks or unintentional events. Cyber incidents may include, but are not limited to, gaining unauthorized access to digital systems (*e.g.*, through "hacking" or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, causing physical damage to computer or network systems, or causing operational disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (*i.e*., efforts to make network services unavailable to intended users).

Failures or breaches of the electronic systems of the Fund, the Fund's adviser, subadviser, distributor, other service providers, counterparties, securities trading venues, or the issuers of securities in which the Fund invests have the ability to cause disruptions and negatively impact the Fund's business operations, potentially resulting in financial losses to the Fund and its shareholders. Cyber attacks may also interfere

with the Fund's calculation of its NAV, result in the submission of erroneous trades , and could lead to violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs and/or additional compliance costs. While the Fund has established business continuity plans, there are inherent limitations in such plans, including the possibility that certain risks have not been identified and that prevention and remediation efforts will not be successful. Furthermore, the Fund cannot control the cyber security plans and systems of the Fund's service providers or issuers of securities in which the Fund invests.

**Investment Risk** 

An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. When you sell your Shares, they could be worth less than what you paid for them.

**Risk of Global Economic Shock** 

Widespread disease, including public health disruptions, pandemics and epidemics (for example, COVID-19 including its variants), have been and may continue to be highly disruptive to economies and markets. Health crises could exacerbate political, social, and economic risks, and result in breakdowns, delays, shutdowns, social isolation, civil unrest, periods of high unemployment, shortages in and disruptions to the medical care and consumer goods and services industries, and other disruptions to important global, local and regional supply chains, with potential corresponding results on the performance of the Fund and its investments.

Additionally, wars, military conflicts, sanctions, acts of terrorism, sustained elevated inflation, supply chain issues or other events could have a significant negative impact on global financial markets and economies. Russia's military incursions in Ukraine have led to, and may lead to additional sanctions being levied by the United States, European Union and other countries against Russia. The ongoing hostilities between the two countries could result in additional widespread conflict and could have a severe adverse effect on the region and certain markets. Sanctions on Russian exports could have a significant adverse impact on the Russian economy and related markets and could affect the value of the Fund's investments, even beyond any direct exposure the Fund may have to the region or to adjoining geographic regions. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could have a severe adverse effect on the region, including significant negative impacts on the economy and the markets for certain securities and commodities, such as oil and natural gas. Furthermore, the possibility of a prolonged conflict between Hamas and Israel, and the potential expansion of the conflict in the surrounding areas and the involvement of other nations in such conflict, such as the Houthi movement's attacks on marine vessels in the Red Sea, could further destabilize the Middle East region and introduce new uncertainties in global markets, including the oil and natural gas markets. How long such tensions and related events will last cannot be predicted. These tensions and any related events could have significant impact on

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the Fund performance and the value of an investment in the Fund.

**Natural Disaster/Epidemic Risk** 

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics (for example, COVID-19), have been and can be highly disruptive to economies and markets and have recently led, and may continue to lead, to increased market volatility and significant market losses. Such natural disaster and health crises could exacerbate political, social, and economic risks, and result in significant breakdowns, delays, shutdowns, social isolation, and other disruptions to important global, local and regional supply chains affected, with potential corresponding results on the operating performance of the Fund and its investments. A climate of uncertainty and panic, including the contagion of infectious viruses or diseases, may adversely affect global, regional, and local economies and reduce the availability of potential investment opportunities, and increases the difficulty of performing due diligence and modeling market conditions, potentially reducing the accuracy of financial projections. Under these circumstances, the Fund may have difficulty achieving its investment objective, which may adversely impact Fund performance. Further, such events can be highly disruptive to economies and markets, significantly disrupt the operations of individual companies (including, but not limited to, the Fund's investment advisor, third party service providers, and counterparties), sectors, industries, markets, securities and commodity exchanges, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund's investments. These factors can cause substantial market volatility, exchange trading suspensions and closures, changes in the availability of and the margin requirements for certain instruments, and can impact the ability of the Fund to complete redemptions and otherwise affect Fund

performance. A widespread crisis would also affect the global economy in ways that cannot necessarily be foreseen. How long such events will last and whether they will continue or recur cannot be predicted. Impacts from these events could have a significant impact on the Fund's performance, resulting in losses to your investment.

**Operational Risk** 

The Fund and its service providers are subject to operational risks arising from, among other things, human error, systems and technology errors and disruptions, including related to the use of artificial intelligence, failed or inadequate controls, and fraud. These errors may adversely affect the Fund's operations, including its ability to execute its investment process or calculate or disseminate its net asset value in a timely manner. While the Fund seeks to minimize such events through controls and oversight, there may still be failures and the Fund may be unable to recover any damages associated with such failures. These failures may have a material adverse effect on the Fund's returns.

**Regulatory Risk** 

The Fund is subject to the risk that a change in U.S. law and related regulations will impact the way the Fund operates, increase the particular costs of the Fund's operations and/or change the competitive landscape. Additional legislative or regulatory changes could occur that may materially and adversely affect the Fund.

**Valuation Time Risk**

The Fund values its portfolio as of the close of regular trading on the New York Stock Exchange ("NYSE") (generally 4:00 PM Eastern Time). In some cases, foreign markets may close before the NYSE opens or may not be open for business on the same calendar days as the Fund. As a result, the Fund may have to price any holdings that are not traded on the NYSE at a fair value determined by the Adviser, under the oversight of the Board of Trustees.

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About Your Investment

**Share Price of the Fund**

A fund's share price is known as its NAV. The Fund's share price is calculated as of the close of regular trading on the NYSE, usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The NYSE may close early on the Business Day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

The value of the Fund's assets that trade in markets outside the United States or in currencies other than the U.S. Dollar may fluctuate when foreign markets are open but the Fund is not open for business.

All shareholder transaction orders received in good form by the Fund's transfer agent or an authorized financial intermediary by the time that the Fund calculates its NAV (as described above) will be processed at that day's NAV, plus any applicable sales charges. Transaction orders received after the time that the Fund calculates its NAV will receive the next calculated NAV, plus any applicable sales charges.

Share price is calculated by dividing the Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." The Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations:

● Equity securities listed and traded principally on any domestic or foreign national securities exchange are valued at the last sales price. Exchange-traded funds are valued at the last sales price prior to Valuation Time. Securities primarily traded in the NASDAQ Global Market<sup>®</sup> are valued using the NASDAQ<sup>®</sup> Official Closing Price. Over-the counter securities are valued at the last sales price in the over-the-counter market;

● Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time;

● Options are valued at the composite price, using National Best Bid and Offer quotes; and

● Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that the Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as the Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

Direxion Funds Prospectus

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**Share Classes of the Fund** 

The Fund offers Institutional and Investor Class Shares. Neither Institutional nor Investor Class Shares are subject to a sales load or deferred sales charge. The minimum investment in Institutional Class Shares is $50,000. The minimum investment in Investor Class Shares is $2,500, subject to various waivers and exceptions as discussed in the Shareholder Services Guide below. Institutional Class Shares do not pay Rule 12b-1 Fees, whereas Investor Class Shares do pay Rule 12b-1 Fees as discussed immediately below.

**Rule 12b-1 Fees (Investor Class Shares)** 

The Fund has adopted an Investor Class Shares distribution plan under Rule 12b-1 (the "Investor Class Plan") pursuant to which the Fund pays for distribution and services provided to Fund shareholders. Because these fees are paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

Pursuant to the Investor Class Plan, the Investor Class Shares of the Fund may pay an annual Rule 12b-1 fee of up to 1.00% of the average daily net assets. The Board of Trustees has currently authorized the Investor Class Shares of the Fund covered by the Investor Class Plan to pay a maximum annual Rule 12b-1 fee of 0.25% of the average daily net assets of the Fund's Investor Class Shares.

Under an agreement with the Fund, your registered investment adviser, financial planner, broker-dealer or other financial intermediary ("Financial Adviser") may receive Rule 12b-1 fees from the Fund. In exchange, your Financial Adviser may provide a number of services, such as: placing your orders and issuing confirmations; providing investment advice, research and other advisory services; handling correspondence for individual accounts; acting as the sole shareholder of record for individual shareholders; issuing shareholder statements and reports; executing daily investment "sweep" functions; and other shareholder services as described in the Fund's Statement of Additional Information ("SAI"). For more information on these and other services, you should speak directly to your Financial Adviser. Your Financial Adviser may charge additional account fees for services beyond those specified above.

**Additional Payments to Financial Intermediaries**

The Adviser (and its affiliates) may make substantial payments to financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Adviser receives from the Fund. These payments may be made to financial intermediaries for marketing, promotional or related expenses. These payments, sometimes referred to as "revenue sharing," do not change the price paid by investors to purchase shares of the Fund or the amount investors in the Fund would receive as proceeds from the redemption of such shares and will not increase the expenses of investing in the Fund.

Examples of "revenue sharing" payments include, but are not limited to, payment to financial institutions for "shelf space" or access to a third party platform or portfolio offering list or other marketing programs, including, but not limited to, inclusion of the Fund on preferred or recommended sales lists, mutual fund "supermarket" platforms and other formal sales programs; granting the Adviser access to the financial institution's sales force; granting the Adviser access to the financial institution's conferences and meetings; assistance in training and educating the financial institution's personnel; and obtaining other forms of marketing support. Revenue sharing payments also may be made to financial intermediaries that provide various services to the Fund, including but not limited to, record keeping, shareholder servicing, transaction processing, sub-accounting services and other administrative services. The Adviser may make other payments or allow other promotional incentives to financial intermediaries to the extent permitted by the SEC, by the Financial Industry Regulatory Authority, Inc. ("FINRA") and by other applicable laws and regulations.

The level of revenue sharing payments made to financial intermediaries may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of the Fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of the Fund available to its customers and may allow the Fund greater access to the financial institution's customers.

**Shareholder Services Guide**

You may invest in the Fund through traditional investment accounts, including Automatic Investment Plans, individual retirement accounts ("IRAs") (including Roth IRAs), self-directed retirement plans or company sponsored retirement plans. Applications and descriptions of any service fees for retirement or other accounts are available directly from the Fund. You may invest directly with the Fund or through certain financial intermediaries. Any transaction effected through a financial intermediary may be subject to a processing fee. The minimum initial investment is set forth below. Rafferty may waive these minimum requirements at its discretion. Contact Rafferty if you need additional information or assistance.

Direxion Funds Prospectus

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Shares of the Fund have not been registered for sale outside of the United States. The Fund generally does not sell shares to investors residing outside of the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.

The Fund offers the option to submit purchase orders through your financial intermediary or to send purchase orders to the Fund as described in the table below.

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| Minimum Investment: Investor <br> Class Shares<br>| &nbsp;&nbsp; $2,500 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $100 |
| Minimum Investment: <br> Retirement Accounts <br> (Traditional, Roth and Spousal <br> IRAs)<br>| &nbsp;&nbsp; $2,500 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $100 |
| Minimum Investment <br> Institutional Class Shares<br>| $50000 | $100 |
| By Mail | &nbsp;&nbsp; ●Complete and sign your application. <br> Remember to include all required <br> documents (if any).<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase.<br> ●Send the signed application and check to <br> (regular mail):<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307 <br> (The Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Fund.)<br>| ●Complete an Investment Slip or provide <br> written instructions with your name, <br> account number and the Fund in which you <br> would like to invest.<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase and your account number.<br> ●Send the Investment Slip and check to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307 <br> (The Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Fund.) <br>|

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Direxion Funds Prospectus

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| By Wire | &nbsp;&nbsp; ●Contact Direxion at (800) 851-0511 to make <br> arrangements to send in your application <br> via facsimile or mail.<br> ●Fax the application according to <br> instructions the representative will give <br> you.<br> ●Mail the original application to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> ●Call (800) 851-0511 to: (a) confirm receipt of <br> the application; (b) receive an account <br> number; and (c) receive a confirmation <br> number.<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Fund and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions.<br>| ●Contact Direxion at (800) 851-0511 with <br> your account number, the amount wired <br> and the Fund(s) in which you want to <br> invest.<br> ●You will receive a confirmation number; <br> retain your confirmation number.<br> ●Instruct your bank to wire the money to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US Bank NA, Milwaukee, WI 53202<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABA 075000022<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit: US Bancorp Fund Services, LLC<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACCT # 112-952-137<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FFC: Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Your name and Direxion Account<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number)<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Fund and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions.<br>|
| By Telephone | &nbsp;&nbsp; You may not make initial investments by <br> telephone<br>| ●If you did not decline telephone options on <br> your account application, your account has <br> been open for at least 7 business days and <br> you have banking information established <br> on your account, you may purchase shares <br> by telephone.<br> ●There is no minimum for subsequent <br> purchases by telephone.<br> ●Contact Direxion at (800) 851-0511 to <br> purchase additional shares of the Fund. <br> Orders will be accepted via the electronic <br> funds transfer through the Automated <br> Clearing House ("ACH") network.<br> ●Shares will be purchased at the NAV <br> calculated on the day your order is placed <br> provided that your order is received prior to <br> market close.<br>|
| Through Financial <br> Intermediaries<br>| Contact your financial intermediary. | Contact your financial intermediary. |

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\*

The Adviser may set different investment minimums for certain securities dealers, banks, and other financial institutions that provide certain shareholder services or omnibus processing for the Fund in fee-based mutual fund programs.

**Contact Information** 

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| | |
|:---|:---|
| By Telephone | (800) 851-0511 |
| Fax | (Faxes may be accepted, but must be pre-authorized by a representative. Please call (800) 851-0511 to <br> receive authorization and the fax number.)<br>|
| Internet | www.direxion.com |
| Regular Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252<br> Kansas City, MO 64121-9252<br>|
| Overnight Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> 801 Pennsylvania Ave, Suite 219252<br> Kansas City, MO 64105-1307<br>|

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Direxion Funds Prospectus

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If you opened your shareholder account through a financial intermediary, you will ordinarily submit your exchange or redemption order through that financial intermediary. You may also exchange or redeem Fund shares as described in the following table. Instructions for Exchanging or Redeeming Shares

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| | |
|:---|:---|
| By Mail | Send written instructions sufficient to process your request to:<br> Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252<br> Kansas City, MO 64121-9252<br>|
| By Telephone | (800) 851-0511 for Individual Investors<br> (877) 437-9363 for Financial Professionals<br>|
| By Internet | ●Log on to www.direxion.com. Establish an account ID and password by following the instructions <br> on the site.<br> ●Follow the instructions on the site.<br>|
| &nbsp;&nbsp; Through Financial <br> Intermediaries<br>| Contact your financial intermediary. |

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Account and Transaction Policies

**Payment for Shares.** All purchases must be made in U.S. Dollars through a U.S. bank. The Fund will not accept payment in cash or money orders. In addition, to prevent check fraud, the Fund does not accept third party checks, U.S. Treasury checks, credit card checks, traveler's checks, or starter checks for the purchase of shares. We are unable to accept post-dated checks or any conditional order or payment. If your payment does not clear, you will be charged a $25.00 fee. In addition, you may be responsible for losses sustained by the Fund for any returned payment.

You will receive written confirmation by mail, but we do not issue share certificates.

**Anti-Money Laundering Program.** The Fund's transfer agent will verify certain information from investors as part of the Fund's anti-money laundering program.

The USA PATRIOT Act of 2001 requires financial institutions, including the Fund, to adopt certain policies and programs to prevent money laundering activities, including procedures to verify the identity of customers opening new accounts. When completing a new account application, you will be required to supply your full name, date of birth, social security number and permanent street address to assist in verifying your identity. If you are opening the account in the name of a legal entity (*e.g.*, partnership, limited liability company, business trust, corporation, etc.), you must also supply the identity of the beneficial owners. Mailing addresses containing only a P.O. Box will not be accepted. Until such verification is made, the Fund may temporarily limit additional share purchases. In addition, the Fund may limit additional share purchases or close an account if they are unable to verify a shareholder's identity. As required by law, the Fund may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct.

If the Fund does not have a reasonable belief of the identity of a shareholder, the account will be rejected or the shareholder will not be allowed to perform a transaction on the account until such information is received. In the rare event that the Transfer Agent is unable to verify your identity, the Fund reserves the right to redeem your account at the current day's net asset value.

**Good Form.** Good form means that your purchase (whether direct or through a financial intermediary) is complete and contains all necessary information, has all supporting documentation (such as trust documents, beneficiary designations, proper signature guarantees, IRA rollover forms, etc.) and is accompanied by sufficient purchase proceeds. For a purchase request to be in good form, it must include: (1) the name of the Fund; (2) the dollar amount or share amount to be purchased; and (3) your purchase application or investment stub. An application that is sent to the transfer agent does not constitute a purchase order until the transfer agent processes the application and receives correct payment by check or wire transfer. The Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC's post office box, of purchase applications or redemption requests does not constitute receipt by the transfer agent of the Fund. Receipt of purchase orders or redemption requests is based on when the order is received at the Transfer Agent's offices.

Certain transactions through a financial intermediary may not be deemed in good form if such financial intermediary failed to properly notify the Fund of such trade or trades. In particular, financial intermediaries that transact in shares of the Fund through the Fundserv system must, in many cases, notify the Fund of trades before placing them in the Fundserv system. In the event that a financial intermediary transacts in shares of the Fund through the Fundserv system without notifying the Fund of such trades in advance, such transaction may be deemed not to have been received in good form. In practice, this means that a confirmation from a financial intermediary is not binding on the Fund. In the event that a trade is deemed

Direxion Funds Prospectus

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not to have been received in good form, for whatever reason, a purchase, redemption or exchange request may be rejected or canceled and, in the event of a redemption which is canceled, the Fund shall have the right to a return of proceeds. Cancellation of a trade is processed at the NAV at which the trade was originally received and is ordinarily completed the next business day. Please contact your financial intermediary to determine how it processes transactions in shares of the Fund.

**Financial Intermediaries.** If you opened your shareholder account through a financial intermediary, you will ordinarily submit your transaction orders through that financial intermediary. Financial intermediaries are responsible for placing orders promptly with the Fund and forwarding payment promptly, as well as ensuring that you receive copies of the Fund's Prospectus. Financial intermediaries may charge fees for the services they provide to you in connection with processing your transaction order or maintaining your account with them. Each intermediary also may have its own rules about share transactions, limits on the number of share transactions you are permitted to make in a given time period, and may have earlier cut-off times for processing your transaction. For more information about your financial intermediary's rules and procedures, you should contact your financial intermediary directly. In addition, Rafferty may, from time to time, at its own expense, compensate financial intermediaries for distribution or marketing services.

**Order Policies.** There are certain times when you may be unable to sell shares of the Fund or proceeds may be delayed. This may occur during emergencies, unusual market conditions or when the Fund cannot determine the value of its assets or sell its holdings. The Fund reserves the right to reject any purchase order or suspend offering of its shares. Generally, the Fund may reject a purchase if it is disruptive to the efficient management of the Fund.

**Telephone Transactions.** For your protection, the Fund may require some form of personal identification prior to accepting your telephone request such as verification of your social security number, account number or other information. If an account has more than one owner or authorized person, the Fund will accept telephone instructions from any one owner or authorized person. We also may record the conversation for accuracy. During times of unusually high market activity or extreme market changes, you should be aware that it may be difficult to place your request in a timely manner. Telephone trades must be received by, or prior to, market close. Please allow sufficient time to place your telephone transaction. Telephone redemption and exchange transaction privileges are automatically granted, unless you declined such privileges on your account application. If you previously declined telephone privileges and would like to add this option to your account, please contact the Fund at (800) 851-0511 for instructions. The maximum amount that may be redeemed by telephone is $100,000. Once a telephone transaction has been placed, it cannot be canceled or modified after the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern Time).

**Automatic Investment Plan.** For your convenience, the Fund offers an Automatic Investment Plan ("AIP"). Under the AIP, after you make your initial minimum investment of $2,500 for Investor Class Shares, and $50,000 for Institutional Class Shares, you authorize the Fund to withdraw the amount you wish to invest from your personal bank account on a monthly basis. The AIP requires a minimum monthly investment of $100. If you wish to participate in the AIP, please complete the "Automatic Investment Plan" section on the account application or call the Fund at (800) 851-0511 if you have any questions. In order to participate in the AIP, your bank or financial institution must be a member of the ACH network. The Fund may terminate or modify this privilege at any time. You may change your investment amount or terminate your participation in the AIP at any time by notifying the Fund's transfer agent by telephone or in writing, five days prior to the effective date of the next transaction. A fee, currently $25, will be imposed if your AIP transaction is returned.

**Signature Guarantees.** In certain instances when you sell shares of the Fund, we will need your signature guaranteed. Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program ("STAMP"). A notary public cannot guarantee signatures. Your signature must be guaranteed, by either a Medallion program member or a non-Medallion program member, if:

● You are changing your account ownership;

● When a redemption request is received by the transfer agent and the account address has changed within the last 30 calendar days;

● The redemption proceeds are payable or sent to any person, address or bank account other than the one listed on record with the Fund;

● The sale is greater than $100,000; or

● There are other unusual situations as determined by the Fund's transfer agent.

Non-financial transactions including establishing or modifying certain services on an account may require a signature guarantee, signature verification or other acceptable signature authentication from a financial institution source. The Fund may waive any signature guarantee requirement at its discretion.

**Exchange Policies.** You may exchange Institutional Class Shares of your current Fund(s) for Institutional Class shares of any other fund advised by Rafferty whether or not offered in this Prospectus that offers Institutional Class Shares. You may exchange Investor Class Shares of your current Fund(s) for the Investor Class Shares of any other fund advised by Rafferty

Direxion Funds Prospectus

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whether or not offered in this Prospectus. Exchanges will be processed at the next determined NAV after receipt of your order in good form without any charges. The Fund can only honor exchanges between accounts registered in the same name and having the same address and taxpayer identification number. If your exchange establishes a new position in the Fund, you must exchange at least $1,000 or, if your account value is less than that, your entire account balance will be exchanged. You may exchange by telephone unless you declined telephone exchange options on your account application. Your exchange of shares of the Fund ("original shares") for shares of any other fund will be treated for federal income tax purposes as a sale of the original shares, with the result that you will recognize a taxable gain or loss on the exchange.

**Redemption Proceeds.** Redemption proceeds from any sale of shares will normally be sent within one business day, but at least within seven days, from the time the Fund receives your request in good order. A redemption request will be considered good order if: 1) the number or amount of shares and the class of shares to be redeemed and shareholder account number have been indicated; and 2) any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account. For investments that have been made by check or ACH, payment on sales requests may be delayed until the Fund's transfer agent is reasonably satisfied that the purchase payment has been collected by the Fund, which may require up to 10 calendar days. Your proceeds will be sent via check, wire or electronic funds transfer through the ACH network using the address or bank account listed on the transfer agent's records. You will be charged a wire transfer fee of $15.00, which will be deducted from your account balance on dollar specific redemption requests or from the proceeds on share specific requests. This fee is in addition to any fees that may be imposed by your bank. Your proceeds will be wired only to the bank listed on the transfer agent's records. There is no charge for payment sent through the ACH network and proceeds are generally available within 2 to 3 days. Shareholders who have an IRA or other retirement plan must indicate on their written redemption request whether to withhold federal income tax. Redemption requests failing to indicate an election not to have tax withheld will generally be subject to 10% withholding. The Fund also offers a Systematic Withdrawal Plan for shareholders who require periodic payments, such as those from IRAs. For more information on this option, please contact the Fund at (800) 851-0511.

The Fund typically expects to meet redemption requests by paying out available cash or proceeds from selling portfolio holdings, which may include cash equivalent portfolio holdings. In stressed market conditions and other appropriate circumstances, redemption methods may include borrowing funds or redeeming in kind. The Fund may stop selling its shares at any time and postpone redemption payments at times when the NYSE is closed or has restricted trading or the SEC has determined that an emergency condition exists.

**Redemption In-Kind.** The Fund reserves the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Fund's portfolio. It is not expected that the Fund would do so except in unusual circumstances. If the Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash and will bear any market risks associated with such securities until they are converted to cash.

**Redemption Fees.** The Fund is not suitable for purchase by active investors. The Fund is intended for long-term investment purposes only and discourages shareholders from engaging in "market-timing" or other types of excessive short-term trading that could adversely affect shareholder returns. Consequently, the Board of Trustees has adopted policies to prevent frequent purchases and redemptions of shares of the Fund. In an effort to discourage short-term trading and defray costs related to such trading, the Board of Trustees has approved a redemption fee of 1.00% on sales and exchanges (collectively, "redemptions") of the Fund's Investor and Institutional Class Shares made within thirty (30) days of the date of purchase (including shares acquired through an exchange), subject to the limitations described below.

The redemption fee is deducted from the redemption proceeds and cannot be paid separately. The redemption fee is credited to the assets of the Fund. The redemption fee does not apply to shares purchased with reinvested dividends or other distributions. To calculate the redemption fee, the Fund will use the first-in, first-out method to determine how long a shareholder has held shares of the Fund. This means that the Fund will assume that shares held by a shareholder for the longest period of time will be sold first.

The redemption fee applies to Fund shares purchased directly through the Fund or through a financial intermediary, such as a broker-dealer. Transactions through financial intermediaries typically are placed with the Fund on an omnibus basis and include purchase and sale transactions placed on behalf of multiple investors. The Fund requests that financial intermediaries assess the redemption fee on customer accounts and collect and remit the proceeds to the Fund. However, the Fund recognizes that due to operational and system limitations, financial intermediaries' methods for tracing and calculating the fee may be inadequate or differ in some respects from those of the Fund. To the extent that a financial intermediary is unable to collect the redemption fee, the Fund may not be able to defray the expenses associated with short-term trades made by that financial intermediary's customers.

The Fund reserves the right to waive the redemption fee, in its discretion, where the Fund believes that such waiver is in the best interests of the Fund. The Fund also may waive the redemption fee in circumstances where a financial intermediary's systems are unable to properly assess the fee and for redemptions that the Fund reasonably believes may not raise frequent trading or market timing concerns, including:

● Redemptions by participants in certain qualified retirement and deferred compensation plans and group annuity contracts;

● Redemptions resulting from certain transfers upon the death of a shareholder;

Direxion Funds Prospectus

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

● Redemptions by certain pension plans as required by law or regulatory authorities;

● Redemptions pursuant to a systematic withdrawal plan;

● Retirement loans and withdrawals; and

● Redemptions in accounts participating in certain approved asset allocation programs.

**Low Balance Accounts.** 

● **Investor Class Shares.** If your total account balance falls below $1,000 due to withdrawals, then we may sell your shares of the Fund. We will inform you in writing 30 days prior to selling your shares. If you do not bring your total account balance up to $1,000 within 30 days, we may sell your shares and send you the proceeds. We will not sell your shares if your account value falls due to market fluctuations.

● **Institutional Class.** If your total account balance falls below $50,000 due to withdrawals, your shares automatically may be converted to Investor Class Shares of the Fund. We will inform you in writing 30 days prior to such conversion. The Fund will not convert your shares if your account value falls due to market fluctuations.

**Excessive Trading.** The Fund is intended for long-term investors. Short-term "market-timers" who engage in frequent purchases and redemptions may disrupt the Fund's investment program and create additional transaction costs that are borne by all shareholders. The Board of Trustees has adopted a policy regarding excessive trading.

The Fund discourages excessive, short-term trading and other abusive trading practices and the Fund may use a variety of techniques to monitor trading activity and detect abusive trading practices. In an effort to minimize harm to the Fund and its shareholders, the Fund reserves the right, in its sole discretion, to reject purchase orders from individuals or groups who, in the Fund's view, are likely to engage in market timing or excessive trading and suspend the offering of Fund shares. The Fund reserves the right, in its sole discretion, to identify trading practices as abusive. In making such judgments, the Fund seeks to act in a manner that it believes is consistent with the best interests of shareholders.

Due to the complexity and subjectivity involved in identifying abusive trading activity and the volume of shareholder transactions the Fund handles, there can be no assurance that the Fund's efforts will identify all trades or trading practices that may be considered abusive. In particular, since the Fund receives purchase and sale orders through financial intermediaries that use group or omnibus accounts, the Fund cannot always detect frequent trading. As a consequence, the Fund's ability to monitor and discourage abusive trading practices in omnibus accounts may be limited.

**Electronic Delivery of Reports.** Fund shareholders can save paper by electing to receive their account documents by e-mail in place of paper copies. You may choose electronic delivery ("E-Delivery") for Prospectuses, supplements, Annual and Semi-Annual Reports. To enroll in E-Delivery you can opt-in when completing a direct account application with Direxion Funds. You can also register, cancel, change your e-mail address or change your consent options by logging onto www.direxioninvestments.com/edelivery.

**Householding.** In an effort to decrease costs, the Fund intends to reduce the number of duplicate prospectuses and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders we reasonably believe are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call toll-free at (800) 851-0511 to request individual copies of these documents. Once the Fund receives notice to stop householding, we will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.

**Shareholder Inactivity.** Under certain circumstances, if no activity occurs in an account within a time period specified by state law, your shares in the Fund may be transferred to that state.

**Lost Shareholder.** It is important that the Fund maintain a correct address for each investor. An incorrect address may cause an investor's account statements and other mailings to be returned to the Fund. Based upon statutory requirements for returned mail, the Fund will attempt to locate the investor or rightful owner of the account. If the Fund is unable to locate the investor, then it will determine whether the investor's account can legally be considered abandoned. The Fund is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction. Investors with a state of residence in Texas have the ability to designate a representative to receive legislatively required unclaimed property due diligence notifications. Please contact the Texas Comptroller of Public Accounts for further information.

Management of the Fund

Rafferty provides investment management services to the Fund. Rafferty has been managing investment companies since 1997. Rafferty is located at 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of August 31, 2025, the Adviser had approximately $52.3 billion in assets under management.

Under an investment advisory agreement between the Trust and Rafferty, the Fund pays Rafferty a fee at an annualized rate based on a percentage of its average daily net assets of 0.79%.

Direxion Funds Prospectus

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Rafferty has entered into an Operating Expense Limitation Agreement with the Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses) through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.12% for the Investor Class Shares and 0.87% for the Institutional Class Shares of the Fund's daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any expense waiver or reimbursement is subject to recoupment by the Adviser within three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. Rafferty may pay, reimburse or otherwise assume one or more of the excluded expenses, in which case such expense will be subject to the Operating Expense Limitation Agreement and recoupment by Rafferty in accordance with the Agreement. This Agreement may be terminated or revised at any time with the consent of the Board of Trustees.

Rafferty has retained Hilton to serve as Subadviser to the Fund under an investment subadvisory agreement. Hilton is located at 1010 Franklin Avenue, Garden City, New York 11530. Established in 2001, Hilton is an SEC-registered investment adviser that provides investment advisory services to private clients and institutions and has approximately $3.1 billion in assets under management as of August 31, 2025.

Under an investment subadvisory agreement between Rafferty and Hilton, Rafferty, not the Fund, pays Hilton a subadvisory fee at an annualized rate of 0.59% of the Fund's average daily net assets. For the fiscal year ended August 31, 2025, the Adviser received net management fees in the amount of 0.00% of the Fund's average daily net assets after reflecting the expenses reimbursed under the Operating Expense Limitation Agreement.

A discussion regarding the basis on which the Board of Trustees approved the investment advisory and investment subadvisory agreements for the Fund is included in the Fund's Annual Financial Statements and Additional Information for the period ended August 31, 2025.

As investment adviser, Rafferty oversees Hilton's management of the Fund's portfolio. Under the investment subadvisory agreement, Hilton is responsible for the day-to-day operations, trading and asset allocation of the Fund. C. Craig O'Neill, Alexander D. Oxenham, and Timothy Reilly of Hilton serve as the portfolio managers of the Fund.

C. Craig O'Neill – President and Chief Executive Officer. Mr. O'Neill is the President and CEO of Hilton Capital Management, LLC, serving in this capacity since 2010. Prior to joining Hilton Capital, from 2005 to 2010, Mr. O'Neill was a Managing Director at Rafferty Capital Markets, overseeing their Institutional Equity Sales and Trading as well as the Prime Brokerage group. Prior to Rafferty Capital, Mr. O'Neill was a partner at CDM LLC, an option specialist firm on the American Stock Exchange, where he served as a Senior Market Maker and Risk Manager. Mr. O'Neill is a graduate of Hobart College with a B.S. in Economics.

Alexander D. Oxenham – Co-Chief Investment Officer. Mr. Oxenham joined Hilton Capital Management, LLC in 2011 from HSBC Private Bank in New York. At HSBC, Mr. Oxenham was a Senior Portfolio Manager and Voting Member on the HSBC Private Bank Investment Policy committee for the Americas' region from 2007-2011. Prior to HSBC, from 2003-2007, Mr. Oxenham worked in portfolio management for Mercantile Bankshares, Bankers Trust, Alex Brown/Brown Advisory and Bank of America. Mr. Oxenham holds a B.S. in International Business from the University of Maryland, College Park and an M.B.A. in Finance from American University, and is a CFA charter holder. Mr. Oxenham is also a member of the CFA Institute and the New York Society of Security Analysts.

Timothy Reilly – Portfolio Manager. Mr. Reilly joined Hilton in 2017 and manages Hilton's Efficient Tactical Income Strategy. In addition to his work on the Investment Committee, Mr. Reilly focuses on a range of strategic business development initiatives and expanding the firm's risk management capabilities. Prior to joining Hilton, Mr. Reilly was a Managing Director at Bank of America, where he oversaw their Global Convertible Sales and Trading business. He was responsible for risk management, trading and distribution of the convertible product. Prior to Bank of America, Mr. Reilly was a Managing Director at Goldman Sachs, where he managed their U.S. Convertible Trading business. Mr. Reilly graduated from Harvard University with a B.S. in Economics.

The Fund's SAI provides additional information about the portfolio managers' compensation, other accounts they manage and their ownership of securities in the Fund.

Direxion Funds Prospectus

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Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI. Currently, disclosure of the Fund's holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the quarterly holdings report on Form N-PORT. The Annual and Semi-Annual Reports will be available by contacting the Direxion Funds, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121-9252 or calling (800) 851-0511.

other service providers

ALPS Distributors, Inc. ("Distributor") serves as the Fund's distributor. U.S. Bancorp Fund Services, LLC ("USBFS") serves as the Fund's administrator, fund accountant and transfer agent. U.S. Bank, N.A., an affiliate of USBFS, serves as the Fund's custodian.

Distributions and Taxes

**Distributions.** The Fund distributes dividends from its net investment income at least annually. Net investment income generally consists of interest income and dividends received on investments, less expenses.

The Fund also distributes any realized net capital gains and net gains from foreign currency transactions, if any, at least annually. The Fund realizes capital gains mainly from sales of its portfolio assets for a profit. A portion of the Fund's distributions may also be characterized as a return of capital. The Fund may invest up to 25% of its total assets in MLPs and a portion of the cash distributions received by the Fund from the MLPs in which it invests may be characterized as return of capital. If, for any calendar year, the Fund's total distributions exceed both current and accumulated earnings and profits, the excess will generally be treated as a return of capital for U.S. federal income tax purposes up to the amount of a shareholder's tax basis in the Shares, reducing that basis accordingly, which will generally increase the shareholder's potential gain, or reduce the shareholder's potential loss, on any subsequent sale or other disposition of Fund shares. The Fund cannot assure you as to what percentage, if any, of the distributions paid on Fund shares will consist of net capital gain, which is taxed at reduced rates for non-corporate shareholders, or return of capital.

Dividends and other distributions (collectively, "distributions") will be reinvested in additional Fund shares of the distributing class automatically at that class's NAV per share unless you request otherwise in writing or via telephone at least five days prior to the record date of the distribution. The Fund reserves the right, if you elect to receive distributions from the Fund by check and the U.S. Postal Service cannot deliver the check, or the amount of the check remains uncashed for six months, to reinvest in your account, without interest, in additional Fund shares of the distributing class at the distributing class's then-current NAV per share and to reinvest all subsequent distributions in shares of that class until an updated address is received. The check will not be held separate from the shares in your account.

Due to the pattern of purchases and redemptions of the Fund, the Fund's total net assets may fluctuate significantly over the course of a year. Because the Fund may declare and pay distributions at any time, an investor may receive a distribution, which may be taxable, shortly after making an investment in the Fund.

**Taxes.** Federal income tax consequences of a distribution will vary depending on whether the distribution is from net investment income, net foreign currency gains, or net capital gains and, in the latter case, how long the Fund has held the assets the sale of which generated the gains, not how long you held your Fund shares. Distributions of net gains on sales of assets held for one year or less, and distributions of certain foreign currency gains, are taxed as dividends (that is, ordinary income). Distributions of gains on sales of assets held longer than one year (long-term capital gains), and distributions of other foreign currency gains are taxed at lower capital gains rates.

The following table illustrates the potential tax consequences for taxable accounts (of individual shareholders):

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| | |
|:---|:---|
| Type of Transaction | Federal Tax Rate/Treatment\* |
| &nbsp;&nbsp; Dividend (other than "qualified dividend <br> income" ("QDI") (see below)) distribution<br>| Ordinary income rate |
| Distribution of QDI | Long-term capital gains rate |
| Distribution of net short-term capital gains | Ordinary income rate |
| Distribution of net long-term capital gains | Long-term capital gains rate |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for more than one year<br>| Long-term capital gain or loss |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for one year or less<br>| &nbsp;&nbsp; Gain is taxed at the same rate as ordinary <br> income; loss is subject to special rules<br>|

---

Direxion Funds Prospectus

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\*

Tax consequences for tax-deferred retirement accounts (such as 401(k) plan accounts and IRAs) or non-taxable shareholders will be different. You should consult your tax specialist for more information about your personal situation.

QDI consists of dividends the Fund receives from most U.S. corporations and "qualified foreign corporations," provided that the Fund satisfies certain holding periods and other restrictions regarding the stock on which the dividends were paid. (Dividends received from other investment companies, including ETFs that are taxed as RICs will only qualify for QDI treatment to the extent that the other investment company reports the qualifying portion to its shareholders in writing.) The Fund's dividends attributable to its QDI are taxed to individual shareholders at the long-term capital gains rates (see the next paragraph) for shareholders who satisfy those restrictions regarding their Fund shares. A portion of the Fund's dividends (excluding dividends from foreign corporations) also may be eligible for the dividends-received deduction allowed to corporations, subject to similar restrictions.

Net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) an individual or certain other non-corporate shareholder realizes on a redemption or exchange of Fund shares, is subject to federal income tax at a maximum rate of 15% or 20% for those non-corporate shareholders with taxable income exceeding certain thresholds.

If you are a non-retirement account shareholder of the Fund, then each year we will send you a Form 1099 that tells you the amount of Fund distributions you received for the prior calendar year, the tax status of those distributions and a list of reportable redemption transactions, including, for redeemed shares that were acquired after December 31, 2011 ("Covered Shares"), basis information and whether they had a short-term (one year or less) or long-term (more than one year) holding period. Normally, distributions are taxable in the year you receive them. However, any distributions declared in the last three months of a calendar year and paid in January of the following year generally are taxable as if received on December 31 of the year they are declared.

If you are a taxable non-corporate shareholder of the Fund and do not provide the Fund with your correct taxpayer identification number (normally your social security number), the Fund is required to withhold and remit to the Internal Revenue Service ("IRS") 24% of all dividends and other distributions and redemption proceeds (regardless of whether you realize a gain or loss) otherwise payable to you. If you are such a shareholder and are otherwise subject to backup withholding, we also are required to withhold and remit to the IRS the same percentage of all dividends and other distributions otherwise payable to you. Any tax withheld may be applied against your tax liability when you file your tax return.

A shareholder's basis in Covered Shares will be determined in accordance with the Fund's default method, which currently is average basis, unless the shareholder affirmatively elects in writing (which may be electronic) to use a different acceptable basis determination method, such as a specific identification method. The basis determination method a Fund shareholder elects may not be changed with respect to a redemption of Covered Shares after the settlement date of the redemption. Fund shareholders should consult with their tax advisors to determine the best IRS-accepted basis method for their tax situation and to obtain more information about how the basis reporting law applies to them.

An individual must pay a 3.8% federal tax on the lesser of (1) the individual's "net investment income," which generally includes dividends, interest, and net gains from the disposition of investment property (including dividends and capital gain distributions the Fund pays), or (2) the excess of the individual's "modified adjusted gross income" over a threshold amount ($250,000 for married persons filing jointly and $200,000 for single taxpayers). This tax is in addition to any other taxes due on that income. A similar tax will apply for those years to estates and trusts. Shareholders should consult their own tax advisers regarding the effect, if any, this provision may have on their investment in Fund shares.

Additional Information ABOUT THE TRUST

The Trust enters into contractual arrangements with various parties, which may include, among others, the Fund's investment adviser, custodian, and transfer agent, who provide services to the Fund. Shareholders are not parties to any such contractual arrangements and are not intended beneficiaries of those contractual arrangements, and those contractual arrangements are not intended to create in any shareholder any right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the Trust.

This Prospectus provides information concerning the Fund that you should consider in determining whether to purchase Fund shares. Neither this Prospectus nor the SAI is intended, or should be read, to be or give rise to an agreement or contract between the Trust or the Fund and any investor, or to give rise to any rights in any shareholder or other person other than any rights under federal or state law that may not be waived.

Many states have unclaimed property rules that provide for transfer to the state (also known as "escheatment") of unclaimed property under various circumstances. These circumstances include inactivity (e.g., no owner-initiated contact for a certain period), returned mail (e.g., when mail sent to a shareholder is returned by the post office as undeliverable), or a combination of both inactivity and returned mail. Unclaimed or inactive accounts may be subject to escheatment laws, and the Fund and the Fund's transfer agent will not be liable to shareholders and their representatives for good faith compliance with those laws.

Direxion Funds Prospectus

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Index Description

Please note that you cannot invest directly in an index, although you may invest in the underlying securities represented in the index. Index returns are adjusted to reflect the reinvestment of dividends on securities in the index but do not reflect the expenses of the Fund.

The Bloomberg Intermediate US Government/Credit Bond Index is a broad-based flagship benchmark that measures the non-securitized component of the Bloomberg US Aggregate Bond Index with less than 10 years to maturity. The index includes investment grade, US dollar-denominated, fixed-rate treasuries, government-related and corporate securities.

The Bloomberg US Aggregate Bond Index measures the performance of the investment grade, U.S. Dollar denominated, fixed-rate taxable bond market, and is composed of U.S. Treasury bonds, government-related bonds, investment-grade corporate bonds, mortgage pass-through securities, commercial mortgage-backed securities and asset-backed securities.

The S&P 500<sup>®</sup> Index is one of the most commonly used benchmarks for the overall U.S. Stock Market. It is a market value weighted index and each stock's weight is proportionate to its market value.

Direxion Funds Prospectus

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Financial Highlights

The financial highlights table is intended to help you understand the financial performance of the shares of the Fund for the periods indicated. The information set forth below has been derived from the financial statements which were audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, whose report, along with the Fund's financial statements, are included in the Annual shareholder report, which is available upon request and incorporated by reference into the Fund's SAI. Certain information reflects financial results for a single share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and other distributions).

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| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  |  |  |  |  |  |  | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** |  |
|  | **Net Asset**<br> **Value,**<br> **Beginning of**<br> **Year/Period**<br>| **Net**<br> **Investment**<br> **Income**<sup>1</sup><br>| **Net Realized**<br> **and Unrealized**<br> **Gain (Loss) on**<br> **Investments**<br>| **Net Increase**<br> **(Decrease) in**<br> **Net Asset**<br> **Value Resulting**<br> **from Operations**<br>| **Dividends**<br> **from Net**<br> **Investment**<br> **Income**<br>| **Return of**<br> **Capital**<br> **Distribution**<br>| **Total**<br> **Distributions**<br>| **Net Asset**<br> **Value, End**<br> **of Year/Period**<br>| **Total**<br> **Return**<sup>2</sup><br>| **Net Assets,**<br> **End of**<br> **Year/Period**<br> **(,000)**<br>| **Total**<br> **Expenses**<br>| **Net**<br> **Expenses**<sup>3</sup><br>| **Net Investment**<br> **Income (Loss)**<br> **after Expense**<br> **Reimbursement/**<br> **Recoupment**<br>| **Portfolio**<br> **Turnover**<br> **Rate**<sup>4</sup><br>|
| **Hilton Tactical Income Fund - Institutional Class Shares** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $18.17 | 0.62 | 0.40 | 1.02 | (0.71)<br>| – | (0.71)<br>–<br> <sup>5</sup><br>| $18.48 | 5.78<br> %<br>| $120736 | 1.09<br> %<br>| 0.87<br> %<br>| 3.43<br> %<br>| 92<br> %<br>|
| Year ended August 31, 2024 | $16.44 | 0.55 | 1.76 | 2.31 | (0.55)<br>| (0.03)<br>| (0.58)<br>–<br> <sup>5</sup><br>| $18.17 | 14.38<br> %<br>| $105245 | 1.10<br> %<br>| 0.87<br> %<br>| 3.22<br> %<br>| 83<br> %<br>|
| Year ended August 31, 2023 | $16.72 | 0.43 | (0.21)<br>| 0.22 | (0.43)<br>| (0.07)<br>| (0.50)<br>–<br> <sup>5</sup><br>| $16.44 | 1.37<br> %<br>| $100711 | 1.15<br> %<br>| 0.87<br> %<br>| 2.65<br> %<br>| 93<br> %<br>|
| Year ended August 31, 2022 | $18.51 | 0.21 | (1.51)<br>| (1.30)<br>| (0.49)<br>| – | (0.49)<br>–<br> <sup>5</sup><br>| $16.72 | -7.13<br> %<br>| $102016 | 1.09<br> %<br>| 0.87<br> %<br>| 1.17<br> %<br>| 103<br> %<br>|
| Year ended August 31, 2021 | $16.27 | 0.25 | 2.49 | 2.74 | (0.27)<br>| (0.23)<br>| (0.50)<br>–<br> <sup>5</sup><br>| $18.51 | 17.19<br> %<br>| $104044 | 1.10<br> %<br>| 0.87<br> %<br>| 1.45<br> %<br>| 112<br> %<br>|
| **Investor Class Shares** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $18.13 | 0.57 | 0.42 | 0.99 | (0.66)<br>| – | (0.66)<br>–<br> <sup>5</sup><br>| $18.46 | 5.63<br> %<br>| $4307 | 1.34<br> %<br>| 1.12<br> %<br>| 3.14<br> %<br>| 92<br> %<br>|
| Year ended August 31, 2024 | $16.40 | 0.51 | 1.76 | 2.27 | (0.51)<br>| (0.03)<br>| (0.54)<br>–<br> <sup>5</sup><br>| $18.13 | 14.12<br> %<br>| $18224 | 1.35<br> %<br>| 1.12<br> %<br>| 2.98<br> %<br>| 83<br> %<br>|
| Year ended August 31, 2023 | $16.68 | 0.39 | (0.21)<br>| 0.18 | (0.40)<br>| (0.06)<br>| (0.46)<br>–<br> <sup>5</sup><br>| $16.40 | 1.12<br> %<br>| $14311 | 1.40<br> %<br>| 1.12<br> %<br>| 2.38<br> %<br>| 93<br> %<br>|
| Year ended August 31, 2022 | $18.48 | 0.16 | (1.51)<br>| (1.35)<br>| (0.45)<br>| – | (0.45)<br>–<br> <sup>5</sup><br>| $16.68 | -7.41<br> %<br>| $18035 | 1.34<br> %<br>| 1.12<br> %<br>| 0.92<br> %<br>| 103<br> %<br>|
| Year ended August 31, 2021 | $16.24 | 0.20 | 2.50 | 2.70 | (0.25)<br>| (0.21)<br>| (0.46)<br>–<br> <sup>5</sup><br>| $18.48 | 16.94<br> %<br>| $20160 | 1.34<br> %<br>| 1.12<br> %<br>| 1.18<br> %<br>| 112<br> %<br>|

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Net investment income per share represents net investment income divided by the daily average shares of beneficial interest outstanding throughout each year.

Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at the net asset value during the period and redemption on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain expenses had not been reimbursed by the investment adviser.

Net expenses include effects of any reimbursement or recoupment.

Portfolio turnover rate is not annualized and is calculated without regard to short-term securities having a maturity of less than one year.

Amount is less than $0.005. Redemption Fees Paid to Fund are included in the Statement of Changes in Net Assets "Shares redeemed" for each share class.

Direxion Funds Prospectus

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![](g58398img7aebb72e3.gif)

Hilton Tactical Income Fund

Investor Class

Institutional Class

More Information On The Direxion Funds

***Statement of Additional Information ("SAI"):*** 

The Fund's SAI contains more information on the Fund and its applicable investment policies. The SAI is incorporated in this Prospectus by reference (meaning it is legally part of this Prospectus). A current SAI is on file with the Securities and Exchange Commission ("SEC").

***Annual and Semi-Annual Reports to Shareholders:*** 

The Fund's reports provide additional information on the Fund's investment holdings, performance data and information discussing the market conditions and investment strategies that significantly affected the Fund's performance during that period. The Fund's Form N-CSR will contain additional information about the Fund's investments and the Fund's annual and semi-annual financial statements. **To Obtain the SAI or Fund Reports Free of Charge or for Other Information, such as Fund Financial Statements, or Shareholder Inquiries:** 

Write to: Direxion Funds c/o U.S. Bank Global Fund Services PO Box 219252 Kansas City, MO 64121-9252 <br> Call: (800) 851-0511 <br> By Internet: www.direxion.com

Reports and other information about the Fund may be viewed on screen or downloaded from the EDGAR Database on the SEC's website at http://www.sec.gov. Copies of these documents may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.

SEC File Number: 811-08243

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| |
|:---|
| **535 Madison Avenue, 37**<sup>th</sup> **Floor \| New York, New York 10022 \| (800) 851-0511** |
| **www.direxion.com** |

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![](g58398img1c8232ce1.gif)

Direxion Funds

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

www.direxion.com

**Direxion Monthly High Yield Bull 1.2X Fund** 

**Investor Class (DXHYX)**

**The fund offered in this Prospectus (the "Fund") seeks *calendar month leveraged* investment results and is riskier than most mutual funds because the Fund seeks 1.2 times the calendar month performance of a respective underlying index.** 

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Investors in the Fund should:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**

**understand the risks associated with the use of leverage;** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**

**understand the consequences of seeking calendar month leveraged investment results; and** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**

**intend to actively monitor and manage their investments.** 

**Investors who do not understand the Fund or do not intend to actively manage and monitor their investments should not buy the Fund.** 

**There is no assurance that the Fund will achieve its investment objective and an investment in the Fund could lose money. No single Fund is a complete investment program.** 

**An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 120% exposure to the underlying index from that point until the end of the month. The actual exposure is a function of the performance of the underlying index from the end of the prior calendar month to an investor's purchase date. If a Fund's shares are held for a period other than a calendar month, the Fund's performance is likely to deviate from 120% of the underlying index's performance for the period the Fund is held. This deviation will increase with higher underlying index volatility and longer holding periods.**

*These securities have not been approved or disapproved by the U.S. Securities and Exchange Commission ("SEC") or the U.S. Commodity Futures Trading Commission ("CFTC"), nor have the SEC or CFTC passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.*

December 29, 2025

------

**Table of Contents**

---

| | |
|:---|:---|
| **[Summary Section](#xx_e50da51f-3460-48e2-a41d-e05c64ee145b_1)** | **1** |
| [Direxion Monthly High Yield Bull 1.2X Fund](#xx_e50da51f-3460-48e2-a41d-e05c64ee145b_1) | **1** |
| **[Overview of the Fund](#xx_660425f3-984d-4e11-8d9d-8d8ac0c66d40_1)** | **9** |
| &nbsp;&nbsp; **[Additional Information Regarding](#xx_660425f3-984d-4e11-8d9d-8d8ac0c66d40_1)**<br> **[Investment Techniques and Policies](#xx_660425f3-984d-4e11-8d9d-8d8ac0c66d40_1)**<br>| **9** |
| &nbsp;&nbsp; **[ADDITIONAL INFORMATION REGARDING](#xx_14f7a410-5a66-4881-97ec-aea72bd68ee9_1)**<br> **[PRINCIPAL Risks](#xx_14f7a410-5a66-4881-97ec-aea72bd68ee9_1)**<br>| **15** |
| [Other Risks of the Fund](#xx_14f7a410-5a66-4881-97ec-aea72bd68ee9_7) | **21** |
| **[About Your Investment](#xx_97aa388b-68fe-4606-b169-806f3512c115_1)** | **24** |
| [Share Price of the Fund](#xx_97aa388b-68fe-4606-b169-806f3512c115_1) | **24** |
| [Rule 12b-1 Fees](#xx_97aa388b-68fe-4606-b169-806f3512c115_2) | **25** |
| &nbsp;&nbsp; [Additional Payments to Financial](#xx_97aa388b-68fe-4606-b169-806f3512c115_2)<br> [Intermediaries](#xx_97aa388b-68fe-4606-b169-806f3512c115_2)<br>| **25** |
| [Shareholder Services Guide](#xx_97aa388b-68fe-4606-b169-806f3512c115_2) | **25** |
| **[Account and Transaction Policies](#xx_97aa388b-68fe-4606-b169-806f3512c115_5)** | **28** |
| **[Management of the Fund](#xx_97aa388b-68fe-4606-b169-806f3512c115_7)** | **30** |
| **[Portfolio Holdings](#xx_97aa388b-68fe-4606-b169-806f3512c115_8)** | **31** |
| **[other service providers](#xx_97aa388b-68fe-4606-b169-806f3512c115_8)** | **31** |
| **[Distributions and Taxes](#xx_97aa388b-68fe-4606-b169-806f3512c115_8)** | **31** |
| &nbsp;&nbsp; **[Additional Information ABOUT THE](#xx_97aa388b-68fe-4606-b169-806f3512c115_10)**<br> **[TRUST](#xx_97aa388b-68fe-4606-b169-806f3512c115_10)**<br>| **33** |
| **[Index Licensors](#xx_97aa388b-68fe-4606-b169-806f3512c115_10)** | **33** |
| **[Financial Highlights](#xx_5a067ae7-d0b9-4126-b77e-cb0d989560d9_1)** | **34** |
| &nbsp;&nbsp; **[More Information On The Direxion](#xx_bc3f18c1-cc76-4efb-9aad-1863ae7d999d_1)**<br> **[Funds](#xx_bc3f18c1-cc76-4efb-9aad-1863ae7d999d_1)**<br>| **Back Cover** |

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Summary Section

Direxion Monthly High Yield Bull 1.2X Fund

**Important Information Regarding the Fund**

The Direxion Monthly High Yield Bull 1.2X Fund (the "Fund") seeks ***calendar month leveraged 1.2X*** investment results and is very different from most other mutual funds. As a result, the Fund may be riskier than alternatives that do not use leverage because the Fund's objective is to magnify the monthly performance of the Solactive High Yield Beta Index (the "Index"). The return for investors that invest for periods longer or shorter than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, should not be expected to be 120% of the performance of the Index for the period. The return of the Fund for a period longer than a full calendar month will be the result of each full calendar month's compounded return over the period, which will very likely differ from 120% of the return of the Index for that period. Longer holding periods, higher volatility of the Index and leverage increase the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as, or more than, the return of the Index.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking calendar month leveraged 1.2X investment results, understand the risks associated with the use of leverage and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a calendar month, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the Index's performance increases. An investor could lose the full principal value of his/her investment within a calendar month if the Index loses more than 83% in one month.**

**Investment Objective**

The Fund seeks monthly investment results, before fees and expenses, of 120% of the calendar month performance of the Index. **The Fund does not seek to achieve its stated investment objective for a period of time different than a full calendar month**.

**Fees and Expenses of the Fund**

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

---

| | |
|:---|:---|
| Management Fees | 0.75% |
| Distribution and/or Service (12b-1) Fees | 0.25% |
| Other Expenses of the Fund | 0.69% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.35% |
| Total Annual Fund Operating Expenses<sup>(2)</sup> | 2.04% |
| Expense Cap/Reimbursement<sup>(3)</sup> | -0.34% |
| &nbsp;&nbsp; Total Annual Fund Operating Expenses After <br> Expense Cap/Reimbursement<br>| 1.70% |

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<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

<sup>(2)</sup>

Rafferty Asset Management, LLC ("Rafferty" or the "Adviser"), has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if overall Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.

<sup>(3)</sup>

For the fiscal year ended August 31, 2025, as a result of a portion of the Adviser's management fee and/or a previous reimbursement of Other Expenses, the Adviser recouped fees in the amount of 0.04%.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $173 | $607 | $1067 | $2342 |

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**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are

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held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 913% of the average value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the Fund's extensive use of derivatives was reflected, the Fund's portfolio turnover rate would be significantly higher.

**Principal Investment Strategy**

The Index is a rules-based systematic strategy index calculated in U.S. Dollars that provides exposure to an equal weighted portfolio of three high yield ETFs: the State Street<sup>®</sup> SPDR<sup>®</sup> Bloomberg High Yield Bond ETF ("JNK"), the iShares iBoxx $ High Yield Corporate Bond ETF ("HYG") and the PIMCO 0-5 Year High Yield Corporate Bond Index Exchange-Traded Fund ("HYS") (collectively, the "Underlying ETFs").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● JNK seeks to track the performance of the Bloomberg High Yield Very Liquid Index (the "Bloomberg Index"). The Bloomberg Index attempts to measure the performance of publicly issued U.S. dollar-denominated high yield corporate bonds with above average liquidity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● HYG seeks to track the performance of the Markit IBoxx<sup>®</sup> USD Liquid High Yield Index (the "Markit Index"). The Markit Index is a rules-based index consisting of U.S. dollar-denominated, high yield corporate bonds for sale in the United States. iShares<sup>®</sup> is a registered trademark of BlackRock, Inc. or its subsidiaries ("BlackRock"). Neither BlackRock nor the iShares<sup>®</sup> Funds make any representations regarding the advisability of investing in iShares iBoxx $ High Yield Corporate Bond ETF.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● HYS seeks to track the performance of the ICE BofAML 0-5 Year US High Yield Constrained Index (the "BofAML Index"). The BofAML Index is an unmanaged index comprised of U.S. dollar-denominated below-investment grade corporate debt securities publicly issued in the U.S. domestic market with remaining maturities of less than 5 years. None of Pacific Investment Management Company LLC, PIMCO Investments LLC, PIMCO ETF Trust, or the PIMCO 0-5 Year High Yield Corporate Bond Index Exchange-Traded Fund make any representations regarding the advisability of investing in the Fund.

The Index is adjusted on a monthly basis, on the last trading day of each month ("Adjustment Day"), to an equal weight allocation of each of the Underlying ETFs. However, the Index may be adjusted between two Adjustment Days as the result of an extraordinary event, such as the removal and replacement of an Index member.

High yield debt instruments and below investment grade debt instruments, or "junk bonds," are generally rated lower than Baa by Moody's Investors Service<sup>®</sup>, Inc. or lower than BBB by Standard & Poor's Rating Service, Inc.

The components of the Index and the percentages represented by various sectors in the Index may change over time. The Fund will concentrate its investment in a particular industry or group of industries (*i.e.*, hold 25% or more of its total assets in the stocks of a particular industry or group of industries) to approximately the same extent as the Index is so concentrated.

The Fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, securities of the Index, and exchange-traded funds ("ETFs") that track the Index, that, in combination, provide 1.2X monthly leveraged exposure to the Index, consistent with the Fund's investment objective. The financial instruments in which the Fund most commonly invests are swap agreements which are intended to produce economically leveraged investment results.

The Fund may invest in the Underlying ETFs or other ETFs that track the same index or a substantially similar index as an Underlying ETF, utilize derivatives such as swaps on the Index, swaps on the Underlying ETFs or other ETFs that track the same or substantially similar indexes as the Underlying ETFs to obtain leveraged exposure to the securities or a representative sample of the securities in the Index that have aggregate characteristics similar to those of the Index. On a day-to-day basis, the Fund is expected to hold money market funds, deposit accounts with institutions with high quality credit ratings, and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles, including U.S. government securities and repurchase agreements. The Fund seeks to remain fully invested at all times consistent with its stated investment objective.

Because a significant portion of the assets of the Fund may come from investors using "asset allocation" and "market timing" investment strategies, the Fund may engage in frequent trading.

The Fund is "non-diversified," meaning that a relatively high percentage of its assets may be invested in a limited number of issuers of securities. Additionally, the Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its leveraged investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review all of the risks listed below and understand them before making an investment in the Fund.

***Effects of Compounding and Market Volatility Risk* —** 

The Fund's performance for periods greater than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, will be the result of each month's returns compounded over the period, which is likely to differ from

Direxion Funds Prospectus

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120% of the Index's performance, before fees and expenses. Compounding has a significant impact on funds that are leveraged and that rebalance monthly. The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an investment in the Fund is held and the volatility of the Index during the shareholder's holding period.

Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities of the Index. The chart below provides examples of how Index volatility and its return could affect the Fund's performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Actual Fund returns are expected to vary from these estimates. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates (to obtain leveraged exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from 120% of the performance of the Index.

As shown in the chart below, the Fund would be expected to lose 3.6% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant loss of value in the Fund, even if the Index's return is flat. **For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose 30.8% of its value, even if the cumulative Index return for the year was 0%.** Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than 120% of the performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than 120% of the performance of the Index. The table below is not a representation of the Fund's actual returns, which may be significantly better or worse than the returns shown below as a result of any of the factors discussed above or in "Monthly Index Correlation Risk" below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ from the volatility of the Index.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **120%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-72%** | -68.8% | -70.2% | -74.3% | -78.8% | -83.3% |
| **-50%** | **-60%** | -58.1% | -59.8% | -64.7% | -70.0% | -74.9% |
| **-40%** | **-48%** | -47.1% | -49.1% | -54.5% | -61.0% | -66.4% |
| **-30%** | **-36%** | -35.8% | -38.0% | -44.0% | -51.1% | -58.3% |
| **-20%** | **-24%** | -24.2% | -26.7% | -33.4% | -41.2% | -47.9% |
| **-10%** | **-12%** | -12.5% | -15.2% | -22.6% | -30.8% | -38.7% |
| **0%** | **0%** | -0.6% | -3.6% | -11.7% | -20.5% | -30.8% |
| **10%** | **12%** | 11.4% | 8.1% | -0.5% | -10.2% | -18.0% |
| **20%** | **24%** | 23.5% | 19.8% | 10.5% | 0.2% | -7.8% |
| **30%** | **36%** | 35.6% | 31.7% | 21.7% | 11.2% | 1.7% |
| **40%** | **48%** | 47.8% | 43.5% | 32.8% | 21.4% | 9.0% |
| **50%** | **60%** | 60.1% | 55.3% | 43.6% | 31.5% | 22.4% |
| **60%** | **72%** | 72.4% | 67.1% | 54.2% | 42.7% | 33.6% |

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The Index's annualized historical volatility rate for the five year period ended September 30, 2025 was 7.08%. The Index's highest volatility rate for any twelve-month period (October 1 to September 30) during the five year period was 11.76% and volatility for a shorter period of time may have been substantially higher. The Index's annualized performance for the five-year period ended September 30, 2025 was 5.30%. Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

***Derivatives Risk —*** Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.

The Fund's investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the performance of its reference asset for various reasons, including due to fees and other costs associated with it.

Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index due to costs associated with trading ETFs, such as an ETF's premium or discount which is the difference between its market price and its net asset value.If the Index has a dramatic intramonth increase or decrease that causes a material change in the Fund's performance and/or net assets, the terms of a swap agreement between the Fund and its counterparty may permit the

Direxion Funds Prospectus

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counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter into another swap agreement or invest in other derivatives to achieve its investment objective. This may occur even if the Index reverses all or a portion of its intramonth movement by the end of the month.

Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service providers such as the Fund's custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased credit risk with respect to the custodian bank holding the assets.

***Leverage Risk —*** The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. An investment in the Fund is exposed to the risk that a decline in the monthly performance of the Index will be magnified. This means that your investment in the Fund will be reduced by an amount equal to 1.2% for every 1% monthly decline in the Index, not including the cost of financing the leverage utilized and the impact of operating expenses, which would further lower your investment.

***Counterparty Risk —*** If a counterparty is unwilling or unable to make timely payments to meet its contractual obligations or fails to return holdings that are subject to the agreement with the counterparty, the Fund will lose money and/or not be able to meet its monthly leveraged investment objective.

Because the Fund may enter into swap agreements with a limited number of counterparties, this increases the Fund's exposure to counterparty credit risk. Further, there is a risk that no suitable counterparties will be willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its leveraged investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. The risk that no suitable counterparties will enter into or continue to provide swap exposure to the Fund may be heightened when there is significant volatility in the overall market or the reference asset.

***Rebalancing Risk —*** If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

***Intra-Calendar Month Investment Risk —*** The intra-month performance will be different from the performance of the Fund when measured from the close of the market at the

end of one calendar month until the close of the market on the last day of the subsequent calendar month. An investor that purchases shares on a day other than the last business day of a calendar month may experience performance that is greater than, or less than, the Fund's stated investment objective. If there is a significant intra-month market event and/or the securities of the Index experience a significant change in value, the Fund may not meet its investment objective or be unable to rebalance its portfolio appropriately.

***Monthly Index Correlation Risk —*** A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index and therefore achieve its monthly leveraged investment objective. The Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each calendar month. The possibility of the Fund being materially over- or under-exposed to the Index increases during months when the Index is volatile.

Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly, the Fund's valuation methodology differing from the Index's valuation methodology, accounting standards and their application to income items, disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also adversely affect the Fund's ability to adjust exposure to meet its monthly leveraged investment objective.

The derivatives or investments the Fund utilizes to obtain exposure may not provide the expected correlation to the Index resulting in the Fund not performing as expected. Additionally, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the securities may be different from that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index and impacting the Fund's correlation to the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index reconstitutions and other Index rebalancing events may also hinder the Fund's ability to meet its monthly leveraged investment objective.

***High Yield Debt Securities Risk —*** Securities rated below investment grade, otherwise known as "junk bonds," generally involve greater risk of default or price changes than other types of fixed-income securities due to uncertainty regarding an issuer's continuing ability to make principal and interest payments. Junk bonds are considered primarily speculative and may be difficult to sell at the time and price the Fund desires. Junk bonds may have greater transaction costs and wider bid/ask spreads and their values can have significant volatility and may decline significantly over short periods of time as compared to higher-rated securities of similar maturities. Issuers of securities that are in default or have defaulted may fail to resume principal or interest payments, in which case the Fund may lose its entire investment.

Direxion Funds Prospectus

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***Other Investment Companies (including ETFs) Risk***—

The Fund may invest in, or obtain exposure to, another investment company, including an ETF or a money market fund (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. If the underlying fund fails to achieve its investment objective the Fund's performance will likely be adversely affected.

In addition, to the extent that the Fund invests in, or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure. Shares of ETFs may trade at a discount or a premium to an ETF's net asset value which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend purchases or redemption of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the Fund. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

***Passive Investment and Index Performance Risk —***

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry concentrations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the Index's methodology or calculation will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations

and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Liquidity Risk —***Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index. To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties.

***Credit Risk —*** There is a risk that the issuer or guarantor of a debt security could go bankrupt or be unable or unwilling to make interest payments and/or repay principal. Changes in an issuer's financial strength or in an issuer's or debt security's credit rating also may affect a security's value and thus have an impact on Fund net asset value and performance. Generally, the longer the maturity and the lower the credit quality of a security, the more sensitive it is to credit risk.

***Debt Instrument Risk —*** The value of debt instruments may increase or decrease as a result of: market fluctuations; changes in interest rates; actual or perceived inability of issuers, guarantors, or liquidity providers to make scheduled principal or interest payments; or illiquidity in debt securities markets. The Fund's income may decline if interest rates fall. Debt instruments are also impacted by political, regulatory, market and economic developments that impact the market in general and specific economic sectors, industries or segments of the fixed income market. In general, rising interest rates lead to a decline in the value of debt securities

Direxion Funds Prospectus

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and debt securities with longer durations tend to be more sensitive to interest rate changes usually making their prices more volatile than those of securities with shorter durations.

***Asset-Backed Securities Risk*** - Payment of interest and repayment of principal may be impacted by the cash flows generated by the assets backing these securities. The value of the Fund's asset-backed securities also may be affected by changes in interest rates, the availability of information concerning the interest in, and structure of, the pools of purchase contracts, financing leases or sales agreements that are represented by these securities, the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the entities that provide any supporting letters of credit, surety bonds, or other credit enhancements.

***Prepayment Risk —*** Many types of debt securities are subject to prepayment risk, which is the risk that the issuer of the security will repay principal prior to the maturity date. As a result, the Fund may have to reinvest its assets in other debt securities that have lower yields. Securities subject to prepayment can offer less potential for gains during a declining interest rate environment and potential for loss in a rising interest rate environment. In addition, the potential impact of prepayment features on the price of a debt security can be difficult to predict and result in greater volatility.

***Call Risk —*** An issuer may exercise its right to redeem a fixed income security earlier than expected (a call). Issuers may call outstanding securities prior to their maturity for a number of reasons (e.g., declining interest rates, changes in credit spreads and improvements in the issuer's credit quality). If an issuer calls a security the holder of the security may not recoup the full amount of its initial investment and may be forced to reinvest in lower-yielding securities, securities with greater credit risk or securities with other, less favorable features.

***Extension Risk —*** During periods of rising interest rates, certain debt obligations may be paid off substantially more slowly than originally anticipated and the value of those securities may fall sharply, which may adversely impact the value of the Fund's investments.

***Interest Rate Risk —*** Interest rate risk is the chance that bond prices overall will decline because of rising interest rates. Securities with longer maturities generally are more sensitive to interest rate changes and subject to greater fluctuations in value. The risks associated with changing interest rates may have unpredictable effects on the markets and the Fund's investments. Fluctuations in interest rates may also affect the liquidity and volatility of fixed income securities and instruments held by the Fund.

***Communication Services Sector Risk —*** The communication services sector may be dominated by a small number of companies which may lead to additional volatility in the sector. Communication services companies are particularly vulnerable to the potential obsolescence of products and services due to technological advances and the innovation of competitors. Communication services companies may also be affected by other competitive pressures, such as pricing competition, as well as research and development costs, substantial capital requirements, and government regulation.

Fluctuating domestic and international demand, shifting demographics, and often unpredictable changes in consumer demand can drastically affect a communication services company's profitability. Compliance with governmental regulations, delays or failure to receive regulatory approvals, or the enactment of new regulatory requirements may negatively affect the business of telecommunication services companies. Certain companies in the communication services sector may be particular targets of network security breaches, hacking and potential theft of proprietary or consumer information, or disruptions in services, which would have a material adverse effect on their businesses.

***Consumer Cyclical Sector Risk*** - Companies engaged in the consumer cyclical sector are affected by fluctuations in supply and demand and changes in consumer preferences. Changes in discretionary consumer spending as a result of domestic or world events, political and economic conditions, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources and labor relations also may adversely affect these companies.

***Consumer Services Industry Risk*** *—* The success of consumer product manufacturers and retailers (including food and drug retailers, general retailers, media, and travel and leisure) is tied closely to the performance of the domestic and international economy, interest rates, exchange rates, competition and consumer confidence. The consumer services industry depends heavily on disposable household income and consumer spending. Companies in the consumer services industry may be subject to severe competition, which may also have an adverse impact on their profitability. Changes in demographics and consumer preferences may affect the success of consumer service providers.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, and may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

***High Portfolio Turnover Risk***— Monthly rebalancing of the Fund's holdings pursuant to its monthly investment objective causes a much greater number of portfolio transactions when compared to most funds. In addition, there is the possibility of significantly increased short-term capital gains (which will be taxable to shareholders as ordinary income when distributed to them). The Fund calculates portfolio turnover without including the short-term cash instruments or derivative transactions that comprise the majority of the Fund's trading. As such, if the Fund's extensive use of derivative instruments were reflected, the calculated portfolio turnover rate would be significantly higher.

***Market Timing Activity Risk —*** Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading, which may lead to large shareholder transactions into and out of the Fund. These large movements of assets may lead

Direxion Funds Prospectus

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to increased portfolio turnover, higher transaction costs and the possibility of increased net realized capital gains, including net short-term capital gains. Additionally, these large movement of assets may have a negative impact on the Fund's ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, the Fund's expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus.

***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Non-Diversification Risk —*** The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year. The table shows how the Fund's average annual returns for the one-year, five-year, and since inception periods compare with those of at least one broad-based market index for the same periods. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

**Total Return for the Calendar Years Ended December 31**

![](g58398highyieldbull12x_25.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 8.82<br> %<br>| June 30, 2020 |
| Worst Quarter | &nbsp;&nbsp; -15.55<br> %<br>| March 31, 2020 |
| Year-to-Date | 6.37<br> %<br>| September 30, 2025 |

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | Since <br> Inception<br>|
|  | 1 Year | 5 Years | 2/17/2016 |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 6.47% | &nbsp;&nbsp; 1.35% | &nbsp;&nbsp; 4.57% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; 4.40% | &nbsp;&nbsp; -1.16% | &nbsp;&nbsp; 2.05% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; 3.78% | &nbsp;&nbsp; -0.09% | &nbsp;&nbsp; 2.41% |
| &nbsp;&nbsp; **S&P 500 Index** (reflects no <br> deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 25.02% | &nbsp;&nbsp; 14.53% | &nbsp;&nbsp; 15.43% |
| &nbsp;&nbsp; **Solactive High Yield Beta** <br> **Index** (reflects no <br> deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 8.04% | &nbsp;&nbsp; 3.47% | &nbsp;&nbsp; 5.85% |

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After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

In addition, the "Return After Taxes on Distributions and Sale of Fund Shares" is higher than "Return After Taxes on Distributions" for the five year and since inception period because the calculation recognizes a capital loss upon the redemption of Fund shares.

Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of time.

**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Portfolio Managers.** The following members of Rafferty's investment team are jointly and primarily responsible for the day-to-day management of the Fund:

<u> Portfolio Managers</u> <u> Years of Service with the Fund</u> <u> Primary Title</u> <br> Paul Brigandi Since Inception in February 2016 Portfolio Manager <br> Tony Ng Since Inception in February 2016 Portfolio Manager

**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Direxion Monthly High Yield Bull 1.2X Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121), overnight mail (Direxion Funds - Direxion Monthly High Yield Bull 1.2X Fund, c/o U.S. Bank Global Fund Services, 801 Pennsylvania Ave, Suite 219252, Kansas City, MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established

Direxion Funds Prospectus

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these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: <br> Traditional <br> Investment Accounts<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (Traditional, Roth <br> and Spousal <br> individual retirement <br> accounts)<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

**Index Information**

Solactive AG is not a sponsor of, or in any way affiliated with, the Direxion Monthly High Yield Bull 1.2X Fund.

Direxion Funds Prospectus

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Overview of the Fund

The Direxion Funds (the "Trust") is a registered investment company offering a number of separate series. This Prospectus describes shares of the Direxion Monthly High Yield Bull 1.2X Fund (the "Fund"). Rafferty Asset Management, LLC serves as the investment adviser to the Fund ("Rafferty" or "Adviser").

The Fund seeks to provide calendar month leveraged investment results, before fees and expenses, that correspond to 120% the performance of the Solactive High Yield Beta Index (the "Index"). Additional information regarding the exchange-traded funds ("ETFs") that are included in the Index may be obtained from the EDGAR database on the SEC's website at http://www.sec.gov.

The Fund does not attempt to provide returns which are a multiple of the return of the underlying index for periods other than a calendar month. The Fund rebalances its portfolio on a monthly basis, increasing exposure in response to that month's gains or reducing exposure in response to that month's losses.

Also, the exposure to the Index received by an investor who purchases the Fund intra-month will differ from the Fund's stated monthly leveraged investment objective by an amount determined by the movement of the Index from its value at the end of the prior calendar month. If the Index moves in a direction favorable to the Fund between the close of the market at the end of one month through the time in the next calendar month when the investor purchases the Fund, the investor will receive less exposure to the Index than the stated fund monthly leveraged investment objective. Conversely, if the Index moves in a direction adverse to the Fund, the investor will receive more exposure to the Index than the stated fund monthly leveraged investment objective.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Such investors are expected to monitor and manage their portfolios frequently. Investors in the Fund should: (a) understand the risks associated with the use of leverage; (b) understand the consequences of seeking monthly leveraged investment results; and (c) intend to actively monitor and manage their investments. Investors who do not understand the Fund or do not intend to actively manage their funds and monitor their investments should not buy the Fund.** 

**There is no assurance that the Fund will achieve its investment objective and an investment in the Fund could lose money. The Fund is not a complete investment program.** 

**Changes in Investment Objective.** The Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Defensive Policy.** Generally, the Fund pursues its investment objective regardless of market conditions and does not generally take defensive positions.

Additional Information Regarding Investment Techniques and Policies

Rafferty uses statistical and quantitative analysis to determine the investments the Fund makes and the techniques it employs. Rafferty relies upon a pre-determined model to generate orders that result in repositioning the Fund's investments in accordance with its monthly leveraged investment objective. Using this approach, Rafferty determines the type, quantity and mix of investment positions that it believes in combination should produce monthly returns consistent with the Fund's investment objective. In general, if the Fund is performing as designed, the return of the Index will dictate the return for the Fund. Rafferty does not invest the assets of the Fund in securities, derivatives or other investments based on Rafferty's view of the investment merit of a particular security, instrument or company, nor does it conduct conventional investment research or analysis or forecast market movements or trends. The Fund pursues its investment objective regardless of the market conditions and does not generally take defensive positions. If the Fund takes a temporary defensive position, it may not meet its investment objective during such periods.

Rafferty attempts to provide 120%, before fees and expenses, of the return of the Index for a calendar month. To do this, Rafferty creates net "long" positions for the Fund. (Rafferty may create short positions in the Fund even though the net exposure in the Fund will be long.) Long positions move in the same direction as the Index, advancing when the Index advances and declining when the Index declines. Short positions move in the opposite direction of the Index, advancing when the Index declines and declining when the Index advances.

At the close of the markets at the end of each calendar month, the Fund will position its portfolio to ensure that the Fund's exposure to the Index is consistent with the Fund's stated investment objective. The impact of market movements during the month determines whether a portfolio needs to be repositioned. If the Index has risen in a given month, the Fund's net assets should rise, meaning its exposure will typically need to be increased. Conversely, if the Index has fallen in a given month, the Fund's net assets should fall, meaning its exposure will typically need to be reduced. The Fund's portfolio may also need to be changed to reflect changes in the composition of the Index.

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The Fund has a clearly articulated monthly leveraged investment objective which requires the Fund to seek economic exposure in excess of its net assets (*i.e*., economic leverage). To meet its objectives, the Fund invests in some combination of financial instruments so that it generates economic exposure consistent with the Fund's investment objective.

The Fund generally may hold a representative sample of the securities in the Index. The sampling of securities that is held by the Fund is intended to maintain high correlation with, and similar aggregate characteristics (*e.g*., market capitalization and industry weightings) to, the Index. The Fund also may invest in securities that are not included in the Index or may overweight or underweight certain components of the Index. The Fund offered in this Prospectus is non-diversified, which means that it may invest in the securities of a limited number of issuers.

**The Effects of Fees and Expenses on the Return of the Fund for a Single Calendar Month**. To create the necessary exposure, the Fund uses leveraged investment techniques, which necessarily incur brokerage and financing charges. In light of these charges and the Fund's operating expenses, the expected return of the Fund over one calendar month is equal to the gross expected return, which is the monthly Index return multiplied by the Fund's monthly leveraged investment objective, minus (i) financing charges incurred by the portfolio and (ii) daily operating expenses. For instance, if the Index returns 2% on a given day, the gross expected return of the Fund would be 2.4%, but the net expected return, which factors in the cost of financing the portfolio and the impact of operating expenses, would be lower. The Fund will reposition its portfolio at the end of every calendar month. Therefore, if an investor purchases Fund shares at the close of the markets at the end of a given calendar month, the investor's exposure to the Index would reflect 120% of the performance of the Index during the following calendar month, subject to the charges and expenses noted above.

The Fund may have difficulty in achieving its monthly leveraged investment objective due to fees, expenses, transaction costs, income items, accounting standards, significant purchase and redemption activity by Fund shareholders and/or disruptions or a temporary lack of liquidity in the markets for the securities held by the Fund.

An exchange or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may result in the Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and/or may incur substantial trading losses.

If the Fund is unable to obtain leveraged exposure to the Index consistent with its investment objective, such as situations in which the instruments utilized by the Fund are thinly traded or have a limited market, the Fund could, among other things, fail to meet its monthly investment objective.

**Examples of the Impact of Monthly Leverage and Compounding.** For a period longer than one calendar month, the pursuit of calendar month goals may result in calendar month leveraged compounding, which means that the return of the Index over a period of time greater than one calendar month multiplied by the Fund's calendar month target (e.g., 120%) generally will not equal the Fund's performance over that same period. As such, although federal regulations require that this prospectus include annualized performance and multi-year expense information for the Fund, investors should bear in mind that the Fund seeks calendar month, and not annual, investment results. A one-year period is used for illustrative purposes only. Deviations from the returns of the Index times the Fund's multiplier (120%) can occur over short periods.

Consider the following examples:

Mary is considering investments in two funds, Fund A and Fund B. Fund A is a traditional index fund which seeks (before fees and expenses) to match the performance of the XYZ index. Fund B is a leveraged Fund and seeks calendar month leveraged investment results (before fees and expenses) that correspond to 120% of the calendar month performance of the XYZ index.

In January, the XYZ index increases in value from $100 to $105, a gain of 5%. In February, the XYZ index declines from $105 back to $100, a loss of 4.76%. In the aggregate, the XYZ index has not moved.

An investment in Fund A would be expected to gain 5% in January and lose 4.76% in February to return to its original value. The following example assumes a $100 investment in Fund A when the index is also valued at $100:

**FUND A – A Traditional Index Fund** 

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| | | | | |
|:---|:---|:---|:---|:---|
| Month | &nbsp;&nbsp;&nbsp;&nbsp; Index <br> Value<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index Monthly <br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index <br> Cumulative <br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Value of <br> Investment<br>|
|  | $100.00 |  |  | $100.00 |
| January | $105.00 | 5.00% | 5.00% | $105.00 |
| February | $100.00 | -4.76% | 0.00% | $100.00 |

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The same $100 investment in Fund B, however, would be expected to gain 6% in January (120% of 5%) but decline 5.71% in February.

Direxion Funds Prospectus

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**FUND B – 1.2X Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Month | &nbsp;&nbsp;&nbsp;&nbsp; Index <br> Value<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index <br> Monthly <br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; 120% of <br> Monthly Index <br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Value of <br> Investment<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index <br> Cumulative <br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Investment <br> Cumulative <br> Performance<br>|
|  | $100.00 |  |  | $100.00 |  |  |
| January | $105.00 | 5.00% | 6.00% | $106.00 | 5.00% | 6.00% |
| February | $100.00 | -4.76% | -5.71% | $99.95 | 0.00% | -0.05% |

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Although the percentage decline is smaller in February than the percentage gain in January, the loss is applied to a higher principal amount so the investment in Fund B has a loss even when the aggregate index value for the two-month period has not declined. (These calculations do not include the charges for expense ratio and the financing charges.)

An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 120% exposure to the Index from the time of their investment through the end of the month. The actual exposure is a function of the performance of the Index from the end of the prior calendar month to the date of investment in the Fund. If the Fund's shares are held through the end of a calendar month or months, the Fund's performance is likely to deviate from the multiple of the Index's performance for the longer period.

**<u>Examples of the Impact of Index Volatility</u>**. The Fund rebalances its portfolio on a monthly basis, increasing exposure in response to that calendar month's gains or reducing exposure in response to that calendar's losses. Monthly rebalancing will typically cause the Fund to lose money if the Index experiences volatility. An index's volatility rate is a statistical measure of the magnitude of fluctuations in the index's returns over a defined period. For periods longer than a calendar month, volatility in the performance of the Index from month to month is the primary cause of any disparity between the Fund's actual returns and the returns of the Index for such period. Volatility causes such disparity because it exacerbates the effects of compounding on the Fund's returns. In addition, the effects of volatility are magnified in the Funds due to leverage. Consider the following three examples that demonstrate the effect of volatility on a hypothetical

fund:

**<u>Example 1</u> <u>– Underlying Index Experiences Low Volatility</u>** 

Mary invests $10.00 in a hypothetical Fund on the last day of Calendar Month 1. During Calendar Month 2, the Fund's underlying index rises from 100 to 102, a 2% gain. Mary's investment rises 2.4% to $10.24. Mary holds her investment through the end of Calendar Month 3, during which the Fund's underlying index rises from 102 to 104, a gain of 1.96%. Mary's investment rises to $10.48, a gain during Calendar Month 3 of 2.35%. For the two calendar month period since Mary invested in the Fund, the underlying index gained 4% although Mary's investment increased by 4.8%. Because the underlying index continued to trend upwards with low volatility, Mary's return closely correlates to the 120% return of the return of the index for the period.

**<u>Example 2</u> <u>– Underlying Index Experiences High Volatility</u>** 

Mary invests $10.00 in a hypothetical Fund on the last day of Calendar Month 1. During Calendar Month 2, the Fund's underlying index rises from 100 to 110, a 10% gain, and Mary's investment rises 12% to $11.20. Mary continues to hold her investment through the end of Calendar Month 3, during which the Fund's underlying index declines from 110 to 90, a loss of 18.18%. Mary's investment declines by 21.82%, from $11.20 to $8.76. For the two calendar month period since Mary invested in the Fund, the Fund's underlying index lost 10% while Mary's investment decreased from $10 to $8.76, a 12.4% loss. The volatility of the underlying index affected the correlation between the underlying index's return for the two calendar month period and Mary's return. In this situation, Mary lost more than 1.2 times the return of the underlying index.

**<u>Example 3</u> <u>– Intra Month Investment with Volatility</u>** 

The examples above assumed that Mary purchased the hypothetical Fund on the last day of the relevant calendar month and received exposure equal to 120% of her investment. If she made an investment on a subsequent day, she would have received a beta determined by the performance of the underlying index from the end of the prior calendar month until the date of the purchase.

Mary invests $10.00 in a hypothetical Fund on the 5th day of Calendar Month 1. From the end of the prior calendar month until the day on which Mary invests, the index moves from 100 to 102, a 2% gain. In light of that gain, the Fund beta at the point at which Mary invests is 119.5%. During the remainder of Calendar Month 1, the Fund's underlying index rises from 102 to 110, a gain of 7.84%, and Mary's investment rises 9.37% (which is the underlying index gain of 7.84% multiplied by the 119.5% beta that she received) to $10.94. Mary continues to hold her investment through the end of Calendar Month 2, during which the Fund's underlying index declines from 110 to 90, a loss of 18.18%. Mary's investment declines by 21.8%, from $10.94 to $8.56. For the period of Mary's investment, the Fund's underlying index declined from 102 to 90, a loss of 11.76%, while Mary's investment decreased from $10.00 to $8.56, a 14.4% loss. The volatility of the underlying index affected the correlation between the underlying index's return for the two calendar

Direxion Funds Prospectus

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month period and Mary's return. In this situation, Mary lost more than 1.2 times the return of the underlying index. Mary's loss was also less because she missed the first 2% move of the underlying index and had a beta of 119.5% for the remainder of Calendar Month 1.

**Market Volatility**. The Fund seeks to provide a return which is a multiple of the calendar month performance of the Index. The Fund does not attempt to, and should not be expected to, provide returns which are a multiple of the return of the Index for periods other than one calendar month. The Fund rebalances its portfolio on a calendar month basis, increasing exposure in response to that month's gains or reducing exposure in response to that month's losses.

Monthly rebalancing will impair the Fund's performance if the Index experiences volatility. For instance, the Fund would be expected to lose 3.6% (as shown in Table 1 below) if the Index provided no return over a one year period and experienced annualized volatility of 25%. If the Index's annualized volatility were to rise to 50%, the hypothetical loss for a one year period for the Fund would widen to 11.7%.

**Table 1 – Impact of Hypothetical Volatility Levels on Returns** 

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| | |
|:---|:---|
| Volatility Range | 1.2X Fund Loss |
| 10% | &nbsp;&nbsp;&nbsp;&nbsp; 0.6% |
| 25% | &nbsp;&nbsp;&nbsp;&nbsp; 3.6% |
| 50% | &nbsp;&nbsp;&nbsp;&nbsp; 11.7% |
| 75% | &nbsp;&nbsp;&nbsp;&nbsp; 20.5% |
| 100% | &nbsp;&nbsp;&nbsp;&nbsp; 30.8% |

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Annualized volatility for the Index for the five year period ended September 30, 2025 was 7.08%. Since market volatility has negative implications for the Fund which rebalances on a calendar month basis, investors should be sure to monitor and manage their investments in the Fund, particularly in volatile markets. The negative implications of volatility noted in Table 1 can be combined with the recent volatility ranges of the Index to give investors some sense of the risks of holding the Fund for longer periods over the past five years. Historical index volatility and performance are not likely indicative of future volatility and performance. These tables are intended to simply underscore the fact that the Fund is designed as a short-term trading vehicle. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios.

Direxion Funds Prospectus

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**The Projected Returns of the Fund for Shares Held Longer than a Calendar Month**. The Fund seeks calendar month investment results which should not be equated with seeking a goal for longer than a calendar month. For instance, if the Index gains 10% during a year, the Fund should not be expected to provide a return of 12% for the year. This is true because the pursuit of calendar month goals may result in calendar month compounding, which means that the return of the Index over a period of time greater than one calendar month multiplied by 120% will not generally equal the Fund's performance over that same period.

The following tables set out a range of hypothetical calendar month performances during a given calendar year for a hypothetical underlying index and demonstrate how changes in the underlying index impact the hypothetical Fund's performance for each calendar month and cumulatively up to, and including, the entire calendar year. The tables are based on a hypothetical $100 investment in the hypothetical Fund over a 12-month calendar period and do not reflect expenses of any kind.

**Table 2 – The Market Lacks a Clear Trend for a Period Longer Than One Month** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Index | Index | Index | Index | Fund | Fund | Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  |
| January | 105 | 5.00% | 5.00% | $106.00 | 6.00% | 6.00% |
| February | 110 | 4.76% | 10.00% | $112.06 | 5.71% | 12.06% |
| March | 100 | -9.09% | 0.00% | $99.83 | -10.91% | -0.17% |
| April | 90 | -10.00% | -10.00% | $87.85 | -12.00% | -12.15% |
| May | 85 | -5.56% | -15.00% | $82.00 | -6.67% | -18.00% |
| June | 100 | 17.65% | 0.00% | $99.36 | 21.18% | -0.64% |
| July | 95 | -5.00% | -5.00% | $93.40 | -6.00% | -6.60% |
| August | 100 | 5.26% | 0.00% | $99.30 | 6.32% | -0.70% |
| September | 105 | 5.00% | 5.00% | $105.25 | 6.00% | 5.25% |
| October | 100 | -4.76% | 0.00% | $99.24 | -5.71% | -0.76% |
| November | 95 | -5.00% | -5.00% | $93.29 | -6.00% | -6.71% |
| December | 105 | 10.53% | 5.00% | $105.07 | 12.63% | 5.07% |

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The cumulative annual performance of the hypothetical underlying index in Table 2 is 5.00%. The return of the hypothetical Fund for the calendar year is 5.07%. The volatility of the hypothetical underlying index performance and the lack of a clear trend results in performance for the hypothetical Fund which bears little relationship to the performance of the hypothetical underlying index for the year.

**Table 3 – The Market Rises in a Clear Trend** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Index | Index | Index | Index | Fund | Fund | Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  |
| January | 102 | 2.00% | 2.00% | $102.40 | 2.40% | 2.40% |
| February | 104 | 1.96% | 4.00% | $104.81 | 2.35% | 4.81% |
| March | 106 | 1.92% | 6.00% | $107.23 | 2.31% | 7.23% |
| April | 108 | 1.89% | 8.00% | $109.66 | 2.26% | 9.66% |
| May | 110 | 1.85% | 10.00% | $112.09 | 2.22% | 12.09% |
| June | 112 | 1.82% | 12.00% | $114.54 | 2.18% | 14.54% |
| July | 114 | 1.79% | 14.00% | $116.99 | 2.14% | 16.99% |
| August | 116 | 1.75% | 16.00% | $119.46 | 2.11% | 19.46% |
| September | 118 | 1.72% | 18.00% | $121.93 | 2.07% | 21.93% |
| October | 120 | 1.69% | 20.00% | $124.41 | 2.03% | 24.41% |
| November | 122 | 1.67% | 22.00% | $126.90 | 2.00% | 26.90% |
| December | 124 | 1.64% | 24.00% | $129.39 | 1.97% | 29.39% |

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The cumulative annual performance of the hypothetical underlying index in Table 3 is 24.00%. The return of the hypothetical Fund for the calendar year is 29.39%. In this case, because of the positive hypothetical underlying index trend, the hypothetical Fund's gain is greater than 120% of the hypothetical underlying index gain for the year.

Direxion Funds Prospectus

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**Table 4 – The Market Declines in a Clear Trend** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Index | Index | Index | Index | Fund | Fund | Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  |
| January | 98 | -2.00% | -2.00% | $97.60 | -2.40% | -2.40% |
| February | 96 | -2.04% | -4.00% | $95.21 | -2.45% | -4.79% |
| March | 94 | -2.08% | -6.00% | $92.83 | -2.50% | -7.17% |
| April | 92 | -2.13% | -8.00% | $90.46 | -2.55% | -9.54% |
| May | 90 | -2.17% | -10.00% | $88.10 | -2.61% | -11.90% |
| June | 88 | -2.22% | -12.00% | $85.75 | -2.67% | -14.25% |
| July | 86 | -2.27% | -14.00% | $83.41 | -2.73% | -16.59% |
| August | 84 | -2.33% | -16.00% | $81.08 | -2.79% | -18.92% |
| September | 82 | -2.38% | -18.00% | $78.77 | -2.86% | -21.23% |
| October | 80 | -2.44% | -20.00% | $76.46 | -2.93% | -23.54% |
| November | 78 | -2.50% | -22.00% | $74.17 | -3.00% | -25.83% |
| December | 76 | -2.56% | -24.00% | $71.89 | -3.08% | -28.11% |

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The cumulative annual performance of the hypothetical underlying index in Table 4 is -24.00%. The return of the hypothetical Fund for the calendar year is -28.11%. In this case, because of the negative underlying index trend, the hypothetical Fund's decline is less than 120% of the hypothetical underlying index decline for the year.

Direxion Funds Prospectus

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ADDITIONAL INFORMATION REGARDING PRINCIPAL Risks

An investment in the Fund entails risks. The Fund may not achieve its investment objective and may decline in value. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review and understand all of the Fund's risks before making an investment. The Fund is not a complete investment program. These and other risks are described below.

**Effects of Compounding and Market Volatility Risk**

The Fund's performance for periods greater than a full calendar month which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month will be the result of each month's returns compounded over the period, which is likely to differ from an Index's performance times the stated multiple in the Fund's investment objective, before fees and expenses. Compounding has a significant impact on leveraged funds and funds that rebalance monthly.

Over time, the cumulative percentage increase or decrease in the value of the Fund's portfolio may diverge significantly from the cumulative percentage increase or decrease in 120% of the return of the Index due to the compounding effect of losses and gains on the returns of the Fund. It also is expected that the Fund's use of leverage will cause the Fund to underperform the return of 120% of the Index in a trendless or flat market.

The chart below provides examples of how index volatility could affect the Fund's performance. The Index's volatility rate is a statistical measure of the magnitude of fluctuations in the returns of the Index. Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) index volatility; b) index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities in the Index. The chart below illustrates the impact of two principal factors – index volatility and index performance – on Fund performance. The chart shows estimated Fund returns for a number of combinations of index volatility and index performance over a one-year period. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates (to obtain leveraged exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher index volatility, compounding will cause results for periods longer than a full calendar month to vary from 120% of the performance of the Index.

As shown below, the Fund would be expected to lose 3.6% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. If the Index's annualized volatility were to rise to 75%, the hypothetical loss for a one-year period for the Fund widens to approximately 20.5%.

At higher ranges of volatility, there is a chance of a significant loss of value in the Fund. For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose approximately 30.8% of its value, even if the cumulative return of the Index for the year was 0%. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **120%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-72%** | -68.8% | -70.2% | -74.3% | -78.8% | -83.3% |
| **-50%** | **-60%** | -58.1% | -59.8% | -64.7% | -70.0% | -74.9% |
| **-40%** | **-48%** | -47.1% | -49.1% | -54.5% | -61.0% | -66.4% |
| **-30%** | **-36%** | -35.8% | -38.0% | -44.0% | -51.1% | -58.3% |
| **-20%** | **-24%** | -24.2% | -26.7% | -33.4% | -41.2% | -47.9% |
| **-10%** | **-12%** | -12.5% | -15.2% | -22.6% | -30.8% | -38.7% |
| **0%** | **0%** | -0.6% | -3.6% | -11.7% | -20.5% | -30.8% |
| **10%** | **12%** | 11.4% | 8.1% | -0.5% | -10.2% | -18.0% |
| **20%** | **24%** | 23.5% | 19.8% | 10.5% | 0.2% | -7.8% |
| **30%** | **36%** | 35.6% | 31.7% | 21.7% | 11.2% | 1.7% |
| **40%** | **48%** | 47.8% | 43.5% | 32.8% | 21.4% | 9.0% |
| **50%** | **60%** | 60.1% | 55.3% | 43.6% | 31.5% | 22.4% |
| **60%** | **72%** | 72.4% | 67.1% | 54.2% | 42.7% | 33.6% |

---

The chart is intended to underscore the fact that the Fund is designed as a short-term trading vehicle for investors who intend to actively monitor and manage their portfolios.

For additional information and examples demonstrating the effects of volatility and index performance on the long-term performance of the Fund, see the "Additional Information Regarding Investment Techniques and Policies" section, and "Special Note Regarding the Correlation Risks of the Fund" in the Fund's Statement of Additional Information ("SAI").

Holding an unmanaged position opens the investor to the risk of market volatility adversely affecting the performance of the investment. The Fund is not appropriate for investors who do not intend to actively monitor and manage their portfolios.

**Derivatives Risk** 

The Fund may obtain exposure through derivatives by investing in swap agreements, futures contracts, forward contracts, options, and options on futures contracts. Investing in derivatives may be considered aggressive and may expose the Fund to risks different from, and possibly greater than, risks associated with investing directly in the reference asset(s) underlying the derivative. The use of derivatives may result in larger losses or smaller gains than investing in the underlying securities directly. The use of derivatives may expose the Fund to additional risks such as counterparty risk, liquidity risk and increased monthly correlation risk. When the Fund uses derivatives, there may be imperfect correlation between the value of the underlying reference assets and the derivative, which may prevent the Fund from achieving its investment objective.

Direxion Funds Prospectus

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The Fund expects to use a combination of swaps on the Index and swaps on an ETF that is designed to track the performance of that index. The performance of an ETF may not track the performance of the Index due to embedded costs and other factors. Thus, to the extent the Fund invests in swaps that use an ETF as the reference asset, the Fund may be subject to greater correlation risk and may not achieve as high a degree of correlation with the Index as it would if the Fund only used swaps on the Index. If the Index has a dramatic intraday move in value that causes a material decline in the Fund's NAV, the terms of the swap agreement between the Fund and its counterparty may allow the counterparty to immediately close out of the transaction with the Fund. In such circumstances, the Fund may be unable to enter into another swap agreement or invest in other derivatives to achieve the desired exposure consistent with the Fund's monthly leveraged investment objective. This may prevent the Fund from achieving its monthly leveraged investment objective particularly if the Index reverses all or a portion of its intraday move by the end of the day. The value of an investment in the Fund may change quickly and without warning. Any financing, borrowing or other costs associated with using derivatives may also have the effect of lowering the Fund's return. Such costs may increase as interest rates rise.

In addition, the Fund's investments in derivatives are subject to the following risks:

● *Swap Agreements*. Swap agreements are entered into primarily with major global financial institutions for a specified period which may range from one day to more than one year. In a standard swap transaction, two parties agree to exchange the return (or differentials in rates of return) earned or realized on particular predetermined reference or underlying securities or instruments. The gross return to be exchanged or swapped between the parties is calculated based on a notional amount or the return on or change in value of a particular dollar amount invested in a reference asset. Swap agreements are generally traded over-the-counter, and therefore, may not receive regulatory protection, which may exposure investors to significant losses.

● *Futures Contracts*. A futures contact is a contract to purchase or sell a particular security, or the cash value of an index, at a specified future date at a price agreed upon when the contract is made. Under such contracts, no delivery of the actual securities is required. Rather, upon the expiration of the contract, settlement is made by exchanging cash in an amount equal to the difference between the contract price and the closing price of a security or index at expiration, net of the variation margin that was previously paid.

● *Forward Contracts*. Forward contracts are two-party contracts pursuant to which one party agrees to pay the counterparty a fixed price for an agreed upon amount of commodities, securities, or the cash value of the commodities, securities or the securities index, at an agreed upon date. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the date of the

contract agreed upon by the parties, at a price set at the time of the contract.

● *Options*. An option is a contract that gives the purchaser (holder) of the option, in return for a premium, the right to buy from (call) or sell to (put) the seller (writer) of the option the security or currency underlying the option at a specified exercise price at any time during the term of the option (normally not exceeding nine months). The writer of an option has the obligation upon exercise of the option to deliver the underlying security or currency upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security or currency.

● *Options on Futures Contracts*. An option on a futures contract provides the holder with the right to enter into a "long" position in the underlying futures contract, in the case of a call option, or a "short" position in the underlying futures contract in the case of a put option, at a fixed exercise price to a stated expiration date. Upon exercise of the option by the holder, the contract market clearing house establishes a corresponding short position for the writer of the option, in the case of a call option, or a corresponding long position, in the case of a put option.

**Leverage Risk** 

To achieve its monthly investment objective, the Fund employs leverage and is exposed to the risk that adverse calendar month performance of the Index will be leveraged. This means that, if the Index experiences adverse calendar month performance, your investment in the Fund will be reduced by an amount equal to 1.2% for every 1% of adverse performance, not including the cost of financing the portfolio and the impact of operating expenses, which would further lower your investment. Leverage will also have the effect of magnifying any difference in the Fund's correlation with the Index.

**Counterparty Risk** 

Counterparty risk is the risk that a counterparty is unwilling or unable to make timely payments to meet its contractual obligations with respect to the amount the Fund expects to receive from a counterparty to a financial instrument entered into by the Fund. The Fund generally enters into derivatives transactions, such as the swap agreements, with counterparties such that either party can terminate the contract without penalty prior to the termination date. If a counterparty terminates a contract, the Fund may not be able to invest in other derivatives to achieve the desired exposure, or achieving such exposure may be more expensive. The Fund may be negatively impacted if a counterparty becomes bankrupt or otherwise fails to perform its obligations under such a contract, or if any collateral posted by the counterparty for the benefit of the Fund is insufficient or there are delays in the Fund's ability to access such collateral. If the counterparty becomes bankrupt or defaults on its payment obligations to the Fund, it may experience significant delays in obtaining any recovery, may obtain only a limited recovery or obtain no recovery and the value of an investment held by the Fund may decline. The Fund may also not be able to exercise remedies, such as the termination of

Direxion Funds Prospectus

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transactions, netting of obligations and realization on collateral, if such remedies are stayed or eliminated under special resolutions adopted in the United States, the European Union and various other jurisdictions. European Union rules and regulations intervene when a financial institution is experiencing financial difficulties and could reduce, eliminate, or convert to equity a counterparty's obligations to the Fund (sometimes referred to as a "bail in").

The Fund typically enters into transactions with counterparties that present minimal risks based on the Adviser's assessment of the counterparty's creditworthiness, or its capacity to meet its financial obligations during the term of the derivative agreement or contract. The Adviser considers factors such as counterparty credit rating among other factors when determining whether a counterparty is creditworthy. The Adviser regularly monitors the creditworthiness of each counterparty with which the Fund transacts. The Fund generally enters into swap agreements or other financial instruments with major, global financial institutions and seeks to mitigate risks by generally requiring that the counterparties for the Fund to post collateral, marked to market daily, in an amount approximately equal to what the counterparty owes the Fund, subject to certain minimum thresholds. To the extent any such collateral is insufficient or there are delays in accessing the collateral, the Fund will be exposed to the risks described above. If a counterparty's credit ratings decline, the Fund may be subject to a bail-in, as described above.

Because the Fund may enter into swap agreements with a limited number of counterparties, which may increase the Fund's exposure to counterparty credit risk. The Fund does not specifically limit its counterparty risk with respect to any single counterparty. There is a risk that no suitable counterparties are willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. Additionally, although a counterparty to a centrally cleared swap agreement and/or an exchange-traded futures contract is often backed by a futures commission merchant ("FCM") or a clearing organization that is further backed by a group of financial institutions, there may be instances in which a FCM or a clearing organization would fail to perform its obligations, causing significant losses to the Fund.

**Rebalancing Risk** 

If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and

may not achieve its investment objective, leading to significantly greater losses or reduced gains.

**Intra-Calendar Month Investment Risk** 

The Fund seeks calendar month leveraged investment results. Thus, an investor who purchases shares on a day other than the last business day of a calendar month will likely obtain more, or less, than 120% investment exposure to the Index, depending upon the movement of the Index from the end of the prior calendar month until the time of investment by an investor. If, since the beginning of the month, the Index has moved in a direction favorable to the Fund at the time of an investor's investment in it, the investor will receive exposure to the Index less than 120%. Conversely, if the Index has moved in a direction adverse to the Fund at the time of an investor's investment in it, the investor will receive exposure to the Index greater than 120%.

**Monthly Index Correlation Risk** 

There can be no guarantee that the Fund will achieve a high degree of correlation with its investment objective relative to the Index. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. A number of factors may adversely affect the Fund's correlation with the Index, including fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly as a reference asset for derivative instruments, income items, valuation methodology, accounting standards and disruptions or illiquidity in the markets for the securities or derivatives held by the Fund. Market disruptions, regulatory restrictions or extreme volatility will also adversely affect the Fund's ability to adjust exposure to the required levels. Activities surrounding index reconstitutions and other index repositioning events may hinder the Fund's ability to meet its calendar month leveraged investment objective.

The Fund may not have investment exposure to all securities in the Index, or its weighting of investment exposure to such stocks or industries may be different from that of the Index. In addition, the Fund may invest in securities or financial instruments not included in the Index. The Fund may take or refrain from taking positions in order to improve tax efficiency or comply with regulatory restrictions, either of which may negatively affect the Fund's correlation with the Index. The Fund may be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Additionally, securities in the Index may trade on markets that may not be open on the same day as the Fund, which may cause a difference between the performance of the Fund and the Index.

Any of these factors individually or in combination with other factors could decrease the correlation between the monthly performance of the Fund and the Index and may hinder the Fund's ability to meet its leveraged investment objective.

Direxion Funds Prospectus

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**Other Investment Companies (including ETFs) Risk** 

The Fund may invest in, or obtain exposure to, another investment company, including an ETF (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, including an ETF, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. The Fund must rely on the underlying fund to achieve its investment objective. Accordingly, if the underlying fund fails to achieve its investment objective, the Fund's performance will likely be adversely affected. To the extent the Fund obtains exposure to an underlying fund, including an ETF, by entering into a derivatives contract whose reference asset is the underlying fund, the Fund will not be a shareholder of the underlying fund but will still be exposed to the risk that it may fail to achieve its investment objective and adversely impact the Fund.

In addition, to the extent that the Fund invests in an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure, including any risks associated with representative sampling . For example, shares of ETFs may trade at a discount or a premium to an ETF's net asset value, which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend sales or redemptions of its shares due to market circumstances that make it impracticable to conduct such transactions, any of which may adversely impact the Fund's performance. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

**Passive Investment and Index Performance Risk** 

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry calculations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the methodology underlying the Index or the calculation of the Index will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell a constituent due to a decline in its performance or based on changes to the prospects of a constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

**Market Risk** 

The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, inflation rates and/or investor expectations concerning such rates, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, and public health risks. Interest rates and inflation rates may change frequently and drastically as a result of various factors and the Fund's investments may not keep pace with these changes.

Securities markets also may experience long periods of decline in value. During a general downturn in the securities markets, multiple asset classes may decline in value simultaneously and changes in the financial condition of a single issuer can impact a market the markets broadly. The Fund is subject to the risk that geopolitical events will disrupt markets and adversely affect global economies, markets, and exchanges. Local, regional or global events such as war, tariffs and trade wars, acts of terrorism, natural disasters, the spread of infectious illness or other public health issues, conflicts and social unrest or other events could have a significant impact on the Fund, its investments and the Fund's ability to achieve its investment objective. The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to the federal agencies and regulatory policies will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities, including the various counterparties utilized by the Fund.

Markets and market participants are increasingly reliant on information data systems. Inaccurate data, software or other technology malfunctions, programming inaccuracies, unauthorized use or access and similar circumstances may impair the performance of these systems and may have an adverse impact upon a single issuer, a group of issuers, or securities markets more broadly.

**High-Yield Debt Securities Risk**

Securities rated below investment grade (commonly known as "junk bonds") and unrated debt securities determined to be of comparable quality involve greater risks than investment grade debt securities. Such securities may fluctuate more widely in price and yield and may fall in price during times when the economy is weak or is expected to become weak. These securities may be less liquid and also may require a greater degree of judgment to establish a price, may be difficult to sell at the time and price the Fund desires, and may carry higher transaction costs. In particular, these securities may be issued by smaller companies or by highly indebted

Direxion Funds Prospectus

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companies, which are generally less able than more financially stable companies to make scheduled payments of interest and principal. Lower-rated debt securities are considered by the major rating agencies to be predominantly speculative with respect to the issuer's continuing ability to pay principal and interest and carry a greater risk that the issuer of such securities will default in the timely payment of principal and interest. Such securities are susceptible to such a default or decline in market value due to real or perceived adverse economic and business developments relating to the issuer, the industry in general, market interest rates and market liquidity. Issuers of securities that are in default or have defaulted may fail to resume principal or interest payments, in which case the Fund may lose its entire investment. Where it deems it appropriate and in the best interests of Fund shareholders, the Fund may incur additional expenses to seek recovery on a defaulted security and/or to pursue litigation to protect the Fund's investment.

The credit rating of a security may not accurately reflect the actual credit risk associated with such a security. The creditworthiness of issuers of these securities may be more complex to analyze than that of issuers of investment grade debt securities, and the overreliance on credit ratings may present additional risks. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of such securities, especially in a thinly traded or illiquid market. To the extent the Fund owns or may acquire illiquid or restricted lower-rated debt securities or unrated debt securities of comparable quality, these securities may involve special registration responsibilities, liabilities, costs, and liquidity and valuation difficulties.

**Liquidity Risk** 

Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that are attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index.

To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties. Under such circumstances, the Fund may be unable to rebalance its exposure properly which may result in significantly more

or less exposure and losses to the Fund. In such an instance, the Fund may increase its transaction fee, utilize derivatives instruments that are less correlated to the Index, change its investment objective, reduce its exposure or close.

**Asset-Backed Securities Risk** 

Payment of interest and repayment of principal may be impacted by the cash flows generated by the assets backing these securities. The value of the Fund's asset-backed securities also may be affected by changes in interest rates, the availability of information concerning the interests in, and structure of, the pools of purchase contracts, financing leases or sales agreements that are represented by these securities, the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the entities that provide any supporting letters of credit, surety bonds, or other credit enhancements.

**Call Risk**

An issuer may exercise its right to redeem a fixed-income security earlier than expected (a call). Issuers may call outstanding securities prior to their maturity for a number of reasons (*e.g.*, declining interest rates, changes in credit spreads and improvements in the issuer's credit quality). If an issuer calls a security, the holder of the security may not recoup the full amount of its initial investment and may be forced to reinvest in lower-yielding securities, securities with greater credit risk or securities with other, less favorable features.

**Credit Risk** 

There is a risk that the issuer or guarantor of a debt security could go bankrupt or be unable or unwilling to make interest payments and/or repay principal. Changes in an issuer's financial strength or in an issuer's or debt security's credit rating also may affect a security's value and thus have an impact on Fund performance. The degree of credit risk for a particular security may be reflected in its credit rating. Lower rated debt securities involve greater credit risk, including the possibility of default or bankruptcy. Generally, the longer the maturity and the lower the credit quality of a security, the more sensitive it is to credit risk.

**Debt Instrument Risk** 

The value of debt instruments may increase or decrease as a result of the following: market fluctuations; changes in interest rates; actual or perceived inability of issuers, guarantors, or liquidity providers to make scheduled principal or interest payments; or illiquidity in debt securities markets. The Fund's income may decline if interest rates fall. Debt instruments are also impacted by political, regulatory, market and economic developments that impact the market in general and specific economic sectors, industries or segments of the fixed income market. In general, rising interest rates lead to a decline in the value of debt securities and debt securities with longer durations tend to be more sensitive to interest rate changes usually making their prices more volatile than those of securities with shorter durations. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall. Declining

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interest rates may lead to prepayment of obligations and cause reduced rates of return due to reinvestment of interest and principal payments at lower interest rates.

**Extension Risk** 

During periods of rising interest rates, certain debt obligations may be paid off substantially more slowly than originally anticipated and the value of those securities may fall sharply, which may adversely impact the value of the Fund's investments.

**Interest Rate Risk** 

Debt securities, and securities that provide exposure to debt securities, have varying levels of sensitivity to changes in interest rates. In addition, the Fund is subject to the risk that interest rates may change and exhibit increased volatility, thus affecting the performance of the Fund. Securities with longer maturities can be more sensitive to interest rate changes, and rising rates normally cause the value of fixed income securities with longer durations to decline; while falling rates normally cause the value of fixed income securities with longer durations to increase. An increase in interest rates may lead to heightened volatility in the fixed-income markets and adversely affect the liquidity of certain fixed-income investments. A decrease in fixed-income market maker capacity may act to decrease liquidity in the fixed-income markets and act to further increase volatility, affecting the Fund's return.

In addition, short-term and long-term interest rates do not necessarily move in the same amount or the same direction. Short-term securities tend to react to changes in short-term interest rates, and long-term securities tend to react to changes in long-term interest rates. The impact of an interest rate change may be significant for other asset classes as well, whether because of the impact of interest rates on economic activity or because of changes in the relative attractiveness of asset classes due to changes in interest rates. For instance, higher interest rates may make investments in debt securities more attractive, thus reducing investments in equities. The link between interest rates and debt security prices tends to be weaker with lower-rated debt securities than with investment-grade debt securities.

**Prepayment Risk** 

Many types of debt securities are subject to prepayment risk, which is the risk that the issuer of the security will repay principal prior to the maturity date. As a result, the Fund may have to reinvest its assets in other debt securities that have lower yields. Securities subject to prepayment can offer less potential for gains during a declining interest rate environment and potential for loss in a rising interest rate environment. In addition, the potential impact of prepayment features on the price of a debt security can be difficult to predict and result in greater volatility.

**Communication Services Sector Risk** 

The communication services sector may be dominated by a small number of companies which may lead to additional volatility in the sector. Communication services companies are particularly vulnerable to the potential obsolescence of products and services due to technological advances and

the innovation of competitors. Communication services companies may also be affected by other competitive pressures, such as pricing competition, as well as research and development costs, substantial capital requirements and government regulation. Fluctuating domestic and international demand, shifting demographics and often unpredictable changes in consumer demand can drastically affect a communication services company's profitability. Telecommunication service providers are often required to obtain licenses or franchises in order to provide services in a given location. Licensing or franchise rights are limited, which may result in an advantage to certain participants. Compliance with governmental regulations, delays or failure to receive regulatory approvals, or the enactment of new regulatory requirements may negatively affect the business of telecommunication services companies. Companies in media and entertainment industries can be significantly affected by competition, particularly in formulating new products and services using new technologies, and the cyclicality of revenues and earnings. Certain companies in the communication services sector may be particular targets of network security breaches, hacking and potential theft of proprietary or consumer information or disruptions in services, which would have a material adverse effect on their businesses.

**Consumer Cyclical Sector Risk** 

Companies engaged in the consumer cyclical sector are affected by fluctuations in supply and demand and changes in consumer preferences. Changes in discretionary consumer spending as a result of domestic or world events, political and economic conditions, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources and labor relations also may adversely affect these companies.

**Consumer Services Industry Risk** 

The success of consumer product manufacturers and retailers (including food and drug retailers, general retailers, media, and travel and leisure) is tied closely to the performance of the domestic and international economy, interest rates, exchange rates, competition and consumer confidence. The consumer services industry depends heavily on disposable household income and consumer spending. Companies in the consumer services industry may be subject to severe competition, which may also have an adverse impact on their profitability. Changes in demographics and consumer preferences may affect the success of consumer service providers.

**Early Close/Trading Halt Risk** 

An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

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**High Portfolio Turnover Risk** 

Monthly rebalancing of the Fund's holdings pursuant to its monthly investment objective causes a much greater number of portfolio transactions when compared to most Funds. In addition, there is the possibility of significantly increased short-term capital gains (which will be taxable to shareholders as ordinary income when distributed to them). The Fund calculates portfolio turnover without including the short-term cash instruments or derivative transactions that comprise the majority of the Fund's trading. As such, if the Fund's extensive use of derivative instruments were reflected, the calculated portfolio turnover rate would be significantly higher.

**Market Timing Activity Risk** 

Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading to take advantage of anticipated changes in market conditions. Frequent trading could increase the rate of the Fund's portfolio turnover, which involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups/mark-downs and other transaction costs on the sale of securities and reinvestments in other securities. Such sales also may result in adverse tax consequences to the Fund's shareholders from distributions to them of net gains realized on the sales. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund's performance. In addition, large movements of assets into and out of the Fund may have a negative impact on its ability to achieve its investment objective or its desired level of operating expenses. The risks associated with market timing activity and high portfolio turnover will have a negative impact on longer-term investments. Please see the "Financial Highlights" section of this Prospectus for the Fund's historic portfolio turnover rates.

**Money Market Instrument Risk** 

Money market instruments, including money market funds, depositary accounts and repurchase agreements may be used for cash management purposes. Money market funds may be subject to credit risk with respect to the short-term debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Repurchase agreements are contracts in which a seller of securities agrees to buy the securities back at a specified time and price. Repurchase agreements may be subject to market and credit risk related to the collateral securing the repurchase agreement. Money market instruments may also be subject to credit risks associated with the instruments in which they invest. There is no guarantee that money market instruments will maintain a stable value, and they may lose money.

**Non-Diversification Risk** 

The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. This means it has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few

counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer or the credit of a single counterparty and make the Fund more susceptible to risks associated with a single economic, political or regulatory occurrence than a diversified fund.

**Tax Risk** 

To qualify as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended, the Fund must meet certain requirements concerning the source of its income for each taxable year, meet certain asset diversification tests at the end of each taxable quarter, and meet annual distribution requirements. If in any year, the Fund were to fail to qualify as a RIC, and it was ineligible to, or was not able to, cure such failure, the Fund would be taxed in the same manner as an ordinary corporation subject to U.S. federal income tax on all of its income at the fund level as well as a tax to shareholders on such income when distributed by the Fund as an ordinary dividend. The resulting taxes could substantially reduce the Fund's net assets and the amount of income available for distribution. In addition, to requalify as a RIC, the Fund would be required to recognize unrealized gains, pay substantial taxes and interest and make certain distributions.

Other Risks of the Fund

**Investment Strategy Implementation Risk** 

The Adviser utilizes a quantitative methodology to select investments for the Fund. Although this methodology is designed to correlate the Fund's monthly performance with 120% of the monthly performance of the Index, there is no assurance that the implementation of such methodology will be successful and will enable the Fund to achieve its investment objective.

**Cybersecurity Risk** 

The increased use of technologies, such as the internet, to conduct business increases the operational, information security and related "cyber" risks both directly to the Fund and through its service providers. Similar types of cyber security risks are also present for issuers of securities in which the Fund may invest, which could result in material adverse consequences for such issuers. Unlike many other types of risks faced by the Fund, these risks typically are not covered by insurance. Cyber incidents can result from deliberate attacks or unintentional events. Cyber incidents may include, but are not limited to, gaining unauthorized access to digital systems (*e.g.*, through "hacking" or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, causing physical damage to computer or network systems, or causing operational disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (*i.e*., efforts to make network services unavailable to intended users).

Failures or breaches of the electronic systems of the Fund, the Fund's adviser, distributor, other service providers, counterparties, securities trading venues, or the issuers of

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securities in which the Fund invests have the ability to cause disruptions and negatively impact the Fund's business operations, potentially resulting in financial losses to the Fund and its shareholders. Cyber attacks may also interfere with the Fund's calculation of its NAV, result in the submission of erroneous trades , and could lead to violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs and/or additional compliance costs. While the Fund has established business continuity plans, there are inherent limitations in such plans, including the possibility that certain risks have not been identified and that prevention and remediation efforts will not be successful. Furthermore, the Fund cannot control the cyber security plans and systems of the Fund's service providers or issuers of securities in which the Fund invests.

**Commodity Pool Registration Risk** 

The Fund is considered a commodity pool, and therefore subject to regulation under the Commodity Exchange Act and CFTC rules. Registration as a commodity pool requires compliance with such additional laws, regulations and enforcement policies which may potentially increase compliance costs and may affect the operations and financial performance of the Fund.

**Risk of Global Economic Shock** 

Widespread disease, including public health disruptions, pandemics and epidemics (for example, COVID-19 including its variants), have been and may continue to be highly disruptive to economies and markets. Health crises could exacerbate political, social, and economic risks, and result in breakdowns, delays, shutdowns, social isolation, civil unrest, periods of high unemployment, shortages in and disruptions to the medical care and consumer goods and services industries, and other disruptions to important global, local and regional supply chains, with potential corresponding results on the performance of the Fund and its investments.

Additionally, wars, military conflicts, sanctions, acts of terrorism, sustained elevated inflation, supply chain issues or other events could have a significant negative impact on global financial markets and economies. Russia's military incursions in Ukraine have led to, and may lead to additional sanctions being levied by the United States, European Union and other countries against Russia. The ongoing hostilities between the two countries could result in additional widespread conflict and could have a severe adverse effect on the region and certain markets. Sanctions on Russian exports could have a significant adverse impact on the Russian economy and related markets and could affect the value of the Fund's investments, even beyond any direct exposure the Fund may have to the region or to adjoining geographic regions. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could have a severe adverse effect on the region, including significant negative impacts on the economy and the markets for certain securities and commodities, such as oil and natural gas. Furthermore, the possibility of a prolonged conflict between Hamas and Israel, and the potential expansion of the conflict in the surrounding areas and the involvement of other nations in such conflict, such

as the Houthi movement's attacks on marine vessels in the Red Sea, could further destabilize the Middle East region and introduce new uncertainties in global markets, including the oil and natural gas markets. How long such tensions and related events will last cannot be predicted. These tensions and any related events could have significant impact on the Fund performance and the value of an investment in the Fund.

**Natural Disaster/Epidemic Risk** 

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics (for example, COVID-19), have been and can be highly disruptive to economies and markets and have recently led, and may continue to lead, to increased market volatility and significant market losses. Such natural disaster and health crises could exacerbate political, social, and economic risks, and result in significant breakdowns, delays, shutdowns, social isolation, and other disruptions to important global, local and regional supply chains affected, with potential corresponding results on the operating performance of the Fund and its investments. A climate of uncertainty and panic, including the contagion of infectious viruses or diseases, may adversely affect global, regional, and local economies and reduce the availability of potential investment opportunities, and increases the difficulty of performing due diligence and modeling market conditions, potentially reducing the accuracy of financial projections. Under these circumstances, the Fund may have difficulty achieving its investment objective, which may adversely impact Fund performance. Further, such events can be highly disruptive to economies and markets, significantly disrupt the operations of individual companies (including, but not limited to, the Fund's investment advisor, third party service providers, and counterparties), sectors, industries, markets, securities and commodity exchanges, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund's investments. These factors can cause substantial market volatility, exchange trading suspensions and closures, changes in the availability of and the margin requirements for certain instruments, and can impact the ability of the Fund to complete redemptions and otherwise affect Fund performance. A widespread crisis would also affect the global economy in ways that cannot necessarily be foreseen. How long such events will last and whether they will continue or recur cannot be predicted. Impacts from these events could have a significant impact on the Fund's performance, resulting in losses to your investment.

**Investment Risk** 

An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. When you sell your Shares, they could be worth less than what you paid for them.

**Operational Risk** 

The Fund and its service providers are subject to operational risks arising from, among other things, human error, systems and technology errors and disruptions, including related

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to the use of artificial intelligence, failed or inadequate controls, and fraud. These errors may adversely affect the Fund's operations, including its ability to execute its investment process or calculate or disseminate its net asset value in a timely manner. While the Fund seeks to minimize such events through controls and oversight, there may still be failures and the Fund may be unable to recover any damages associated with such failures. These failures may have a material adverse effect on the Fund's returns.

**Regulatory Risk** 

The Fund is subject to the risk that a change in U.S. law and related regulations will impact the way the Fund operates, increase the particular costs of the Fund's operations and/or change the competitive landscape. Additional legislative or regulatory changes could occur that may materially and adversely affect the Fund.

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About Your Investment

**Share Price of the Fund**

A fund's share price is known as its NAV. The Fund's share price is calculated as of the close of regular trading on the New York Stock Exchange ("NYSE"), usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The NYSE may close early on the Business Day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

The value of the Fund's assets that trade in markets outside the United States or in currencies other than the U.S. Dollar may fluctuate when foreign markets are open but the Fund is not open for business.

All shareholder transaction orders received in good form by the Fund's transfer agent or an authorized financial intermediary by the time that the Fund calculates its NAV (as described above) will be processed at that day's NAV, plus any applicable sales charges. Transaction orders received after the time that the Fund calculates its NAV will receive the next calculated NAV, plus any applicable sales charges.

Share price is calculated by dividing the Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." The Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations:

● Equity securities listed and traded principally on any domestic or foreign national securities exchange are valued at the last sales price. Exchange-traded funds are valued at the last sales price prior to Valuation Time. Securities primarily traded in the NASDAQ Global Market<sup>®</sup> are valued using the NASDAQ<sup>®</sup> Official Closing Price. Over-the counter securities are valued at the last sales price in the over-the-counter market;

● Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time;

● Options are valued at the composite price, using National Best Bid and Offer quotes; and

● Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that the Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as the Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

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**Rule 12b-1 Fees**

The Fund has adopted an Investor Class distribution plan under Rule 12b-1 (the "Investor Class Plan") pursuant to which the Fund pays for distribution and services provided to Fund shareholders. Because these fees are paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

Pursuant to its Investor Class Plan, the Fund may pay an annual Rule 12b-1 fee of up to 1.00% of its average daily net assets. The Board of Trustees has currently authorized the Fund to pay a maximum annual Rule 12b-1 fee of 0.25% of its average daily net assets.

Under an agreement with the Fund, your registered investment adviser, financial planner, broker-dealer or other financial intermediary ("Financial Adviser"), may receive Rule 12b-1 fees from the Fund. In exchange, your Financial Adviser may provide a number of services, such as: placing your orders and issuing confirmations; providing investment advice, research and other advisory services; handling correspondence for individual accounts; acting as the sole shareholder of record for individual shareholders; issuing shareholder statements and reports; executing daily investment "sweep" functions; and other shareholder services as described in the Fund's Statement of Additional Information ("SAI"). For more information on these and other services, you should speak directly to your Financial Adviser. Your Financial Adviser may charge additional account fees for services beyond those specified above.

**Additional Payments to Financial Intermediaries**

The Adviser (and its affiliates) may make substantial payments to financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Adviser receives from the Fund. These payments may be made to financial intermediaries for marketing, promotional or related expenses. These payments, sometimes referred to as "revenue sharing," do not change the price paid by investors to purchase shares of the Fund or the amount investors in the Fund would receive as proceeds from the redemption of such shares and will not increase the expenses of investing in the Fund.

Examples of "revenue sharing" payments include, but are not limited to, payment to financial institutions for "shelf space" or access to a third party platform or portfolio offering list or other marketing programs, including, but not limited to, inclusion of the Fund on preferred or recommended sales lists, mutual fund "supermarket" platforms and other formal sales programs; granting the Adviser access to the financial institution's sales force; granting the Adviser access to the financial institution's conferences and meetings; assistance in training and educating the financial institution's personnel; and obtaining other forms of marketing support. Revenue sharing payments also may be made to financial intermediaries that provide various services to the Fund, including but not limited to, record keeping, shareholder servicing, transaction processing, sub-accounting services and other administrative services. The Adviser may make other payments or allow other promotional incentives to financial intermediaries to the extent permitted by the SEC, by the Financial Industry Regulatory Authority, Inc. ("FINRA") and by other applicable laws and regulations.

The level of revenue sharing payments made to financial intermediaries may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of the Fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of the Fund available to its customers and may allow the Fund greater access to the financial institution's customers.

**Shareholder Services Guide**

You may invest in the Fund through traditional investment accounts, including Automatic Investment Plans, individual retirement accounts ("IRAs") (including Roth IRAs), self-directed retirement plans or company-sponsored retirement plans. Applications and descriptions of any service fees for retirement or other accounts are available directly from the Fund. You may invest directly with the Fund or through certain financial intermediaries. Any transaction effected through a financial intermediary may be subject to a processing fee. The minimum initial investment is set forth below. Rafferty may waive these minimum requirements at its discretion. Contact Rafferty if you need additional information or assistance.

Shares of the Fund have not been registered for sale outside of the United States. The Fund generally does not sell shares to investors residing outside of the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.

The Fund offers the option to submit purchase orders through your financial intermediary or to send purchase orders to the Fund as described in the table below.

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| Minimum Investment: <br> Traditional Investment <br> Accounts<br>| &nbsp;&nbsp; $25,000 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $500 |
| Minimum Investment: <br> Retirement Accounts <br> (Traditional, Roth and Spousal <br> IRAs)<br>| &nbsp;&nbsp; $25,000 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $500 |
| By Mail | &nbsp;&nbsp; ●Complete and sign your application. <br> Remember to include all required <br> documents (if any).<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase.<br> ●Send the signed application and check to <br> (regular mail):<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (The Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Fund.)<br>| ●Complete an Investment Slip or provide <br> written instructions with your name, <br> account number and the Fund in which you <br> would like to invest.<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase and your account number.<br> ●Send the Investment Slip and check to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (The Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Fund.)<br>|
| By Wire | &nbsp;&nbsp; ●Contact Direxion at (800) 851-0511 to make <br> arrangements to send in your application <br> via facsimile or mail.<br> ●Fax the application according to <br> instructions the representative will give <br> you.<br> ●Mail the original application to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> ●Call (800) 851-0511 to: (a) confirm receipt of <br> the application; (b) receive an account <br> number; and (c) receive a confirmation <br> number.<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Fund and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions.<br>| ●Contact Direxion at (800) 851-0511 with <br> your account number, the amount wired <br> and the Fund(s) in which you want to <br> invest.<br> ●You will receive a confirmation number; <br> retain your confirmation number.<br> ●Instruct your bank to wire the money to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US Bank NA, Milwaukee, WI 53202<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABA 075000022<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit: US Bancorp Fund Services, LLC<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACCT # 112-952-137<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FFC: Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Your name and Direxion Account<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number)<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Fund and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions. <br>|

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| By Telephone | &nbsp;&nbsp; You may not make initial investments by <br> telephone.<br>| ●If you did not decline telephone options on <br> your account application, your account has <br> been open for at least 7 business days, and <br> you have banking information established <br> on your account, you may purchase shares <br> by telephone.<br> ●The minimum telephone purchase is equal <br> to the subsequent investment purchase <br> amount for your account type.<br> ●Contact Direxion at (800) 851-0511 to <br> purchase additional shares of the Fund. <br> Orders will be accepted via the electronic <br> funds transfer through the Automated <br> Clearing House ("ACH") network.<br> ●Shares will be purchased at the NAV <br> calculated on the day your order is placed <br> provided that your order is received prior to <br> market close.<br>|
| Through Financial <br> Intermediaries<br>| Contact your financial intermediary. | Contact your financial intermediary. |

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\*

The Adviser may set different investment minimums for certain securities dealers, banks and other financial institutions that provide certain shareholder services or omnibus processing for the Fund in fee-based mutual fund programs.

**Contact Information** 

---

| | |
|:---|:---|
| By Telephone | (800) 851-0511 |
| Fax | (Faxes may be accepted, but must be pre-authorized by a representative. Please call (800) 851-0511 <br> to receive authorization and the fax number.)<br>|
| Internet | www.direxion.com |
| Regular Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252Kansas City, MO 64121-9252<br>|
| Overnight Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> 801 Pennsylvania Ave, Suite 219252<br> Kansas City, MO 64105-1307<br>|

---

Shares of the Fund are redeemable. If you opened your shareholder account through a financial intermediary, you will ordinarily submit your exchange or redemption order through that financial intermediary. You may exchange or redeem Fund shares as described in the following table.

**Instructions for Exchanging or Redeeming Shares** 

---

| | |
|:---|:---|
| By Mail | Send written instructions sufficient to process your request to:<br> Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252<br> Kansas City, MO 64121-9252<br>|
| By Telephone | (800) 851-0511 for Individual Investors<br> (877) 437-9363 for Financial Professionals<br>|
| By Internet | ●Log on to www.direxion.com. Establish an account ID and password by following the instructions <br> on the site.<br> ●Follow the instructions on the site.<br>|
| &nbsp;&nbsp; Through Financial <br> Intermediaries<br>| Contact your financial intermediary. |

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Direxion Funds Prospectus

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Account and Transaction Policies

**Payment for Shares.** All purchases must be made in U.S. Dollars through a U.S. bank. The Fund will not accept payment in cash or money orders. In addition, to prevent check fraud, the Fund does not accept third party checks, U.S. Treasury checks, credit card checks, traveler's checks, or starter checks for the purchase of shares. We are unable to accept post-dated checks or any conditional order or payment. If your check does not clear, you will be charged a $25.00 fee. In addition, you may be responsible for losses sustained by the Fund for any returned payment.

You will receive written confirmation by mail, but we do not issue share certificates.

**Anti-Money Laundering Program.** The Fund's transfer agent will verify certain information from investors as part of the Fund's anti-money laundering program.

The USA PATRIOT Act of 2001 requires financial institutions, including the Fund, to adopt certain policies and programs to prevent money laundering activities, including procedures to verify the identity of customers opening new accounts. When completing a new account application, you will be required to supply your full name, date of birth, social security number and permanent street address to assist in verifying your identity. If you are opening the account in the name of a legal entity (*e.g.*, partnership, limited liability company, business trust, corporation, etc.), you must also supply the identity of the beneficial owners. Mailing addresses containing only a P.O. Box will not be accepted. Until such verification is made, the Fund may temporarily limit additional share purchases. In addition, the Fund may limit additional share purchases or close an account if they are unable to verify a shareholder's identity. As required by law, the Fund may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct.

If the Fund does not have a reasonable belief of the identity of a shareholder, the account will be rejected or the shareholder will not be allowed to perform a transaction on the account until such information is received. The Fund may also reserve the right to close the account within five business days if clarifying information and/or documentation is not received.

**Good Form.** Good form means that your purchase (whether direct or through a financial intermediary) is complete and contains all necessary information, has all supporting documentation (such as trust documents, beneficiary designations, proper signature guarantees, IRA rollover forms, etc.) and is accompanied by sufficient purchase proceeds. For a purchase request to be in good form, it must include: (1) the name of the Fund; (2) the dollar amount or share amount to be purchased; and (3) your purchase application or investment stub. An application that is sent to the transfer agent does not constitute a purchase order until the transfer agent processes the application and receives correct payment by check or wire transfer. The Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC's post office box, of purchase applications or redemption requests does not constitute receipt by the transfer agent of the Fund. Receipt of purchase orders or redemption requests is based on when the order is received at the Transfer Agent's offices.

Certain transactions through a financial intermediary may not be deemed in good form if such financial intermediary failed to properly notify the Fund of such trade or trades. In particular, financial intermediaries that transact in shares of the Fund through the Fundserv system must, in many cases, notify the Fund of trades before placing them in the Fundserv system. In the event that a financial intermediary transacts in shares of the Fund through the Fundserv system without notifying the Fund of such trades in advance, such transaction may be deemed not to have been received in good form. In practice, this means that a confirmation from a financial intermediary is not binding on the Fund. In the event that a trade is deemed not to have been received in good form, for whatever reason, a purchase, redemption or exchange request may be rejected or canceled and, in the event of a redemption which is canceled, the Fund shall have the right to a return of proceeds. Cancellation of a trade is processed at the NAV at which the trade was originally received and is ordinarily completed the next business day. Please contact your financial intermediary to determine how it processes transactions in shares of the Fund.

**Financial Intermediaries.** If you opened your shareholder account through a financial intermediary, you will ordinarily submit your transaction orders through that financial intermediary. Financial intermediaries are responsible for placing orders promptly with the Fund and forwarding payment promptly, as well as ensuring that you receive copies of the Fund's Prospectus. Financial intermediaries may charge fees for the services they provide to you in connection with processing your transaction order or maintaining your account with them. Each intermediary also may have its own rules about share transactions, limits on the number of share transactions you are permitted to make in a given time period, and may have earlier cut-off times for processing your transaction. For more information about your financial intermediary's rules and procedures, you should contact your financial intermediary directly. In addition, Rafferty may, from time to time, at its own expense, compensate financial intermediaries for distribution or marketing services.

**Order Policies.** There are certain times when you may be unable to sell shares of the Fund or proceeds may be delayed. This may occur during emergencies, unusual market conditions or when the Fund cannot determine the value of its assets or sell its holdings. The Fund reserves the right to reject any purchase order or suspend offering of its shares. Generally, the Fund may reject a purchase if it is disruptive to the efficient management of the Fund.

Direxion Funds Prospectus

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**Telephone Transactions.** For your protection, the Fund may require some form of personal identification prior to accepting your telephone request such as verification of your social security number, account number or other information. If an account has more than one owner or authorized person, the Fund will accept telephone instructions from any one owner or authorized person. We also may record the conversation for accuracy. During times of unusually high market activity or extreme market changes, you should be aware that it may be difficult to place your request in a timely manner. Telephone trades must be received by or prior to market close. Please allow sufficient time to place your telephone transaction. Telephone redemption and exchange transaction privileges are automatically granted, unless you declined such privileges on your account application. If you previously declined telephone privileges and would like to add this option to your account, please contact the Fund at (800) 851-0511 for instructions. The maximum amount that may be redeemed by telephone is $100,000. Once a telephone transaction has been placed, it cannot be canceled or modified after the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern Time).

**Automatic Investment Plan.** For your convenience, the Fund offers an Automatic Investment Plan ("AIP"). Under the AIP, after you make your initial minimum investment of $25,000, you authorize the Fund to withdraw the amount you wish to invest from your personal bank account on a monthly basis. The AIP requires a minimum monthly investment of $500. If you wish to participate in the AIP, please complete the "Automatic Investment Plan" section on the account application or call the Fund at (800) 851-0511 if you have any questions. In order to participate in the AIP, your bank or financial institution must be a member of the ACH network. The Fund may terminate or modify this privilege at any time. You may change your investment amount or terminate your participation in the AIP at any time by notifying the Fund's transfer agent by telephone or in writing, five days prior to the effective date of the next transaction. A fee, currently $25, will be imposed if your AIP transaction is returned.

**Signature Guarantees.** In certain instances when you sell shares of the Fund, we will need your signature guaranteed. Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program ("STAMP"). A notary public cannot guarantee signatures. Your signature must be guaranteed, by either a Medallion program member or a non-Medallion program member, if:

● You are changing your account ownership;

● When a redemption request is received by the transfer agent and the account address has changed within the last 30 calendar days;

● The redemption proceeds are payable or sent to any person, address or bank account other than the one listed on record with the Fund;

● The sale is greater than $100,000; or

● There are other unusual situations as determined by the Fund's transfer agent.

Non-financial transactions including establishing or modifying certain services on an account may require a signature guarantee, signature verification or other acceptable signature authentication from a financial institution source. The Fund may waive any signature guarantee requirement at its discretion.

**Exchange Policies.** You may exchange Investor Class shares of your current Fund(s) for Investor Class shares of any other Fund (as well as other Funds advised by Rafferty not offered in this Prospectus) at the next determined NAV after receipt of your order in good form without any charges. The Fund can only honor exchanges between accounts registered in the same name and having the same address and taxpayer identification number. If your exchange establishes a new position in the Fund, you must exchange at least $1,000 or, if your account value is less than that, your entire account balance will be exchanged. You may exchange by telephone unless you declined telephone exchange privileges on your account application.

**Redemption Proceeds.** Redemption proceeds from any sale of shares will normally be sent within one business day, but at least within seven days, from the time the Fund receives your request in good order. A redemption request will be considered in good order if: 1) the number or amount of shares and the class of shares to be redeemed and shareholder account number have been indicated; and 2) any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account. For investments that have been made by check or ACH, payment on sales requests may be delayed until the Fund's transfer agent is reasonably satisfied that the purchase payment has been collected by the Fund, which may require up to 10 calendar days. Your proceeds will be sent via check, wire or electronic funds transfer through the ACH network using the address or bank account listed on the transfer agent's records. You will be charged a wire transfer fee of $15.00, which will be deducted from your account balance on dollar specific redemption requests or from the proceeds on share specific requests. This fee is in addition to any fees that may be imposed by your bank. Your proceeds will be wired only to the bank listed on the transfer agent's records. There is no charge for payment sent through the ACH network and proceeds are generally available within 2 to 3 days. Shareholders who have an IRA or other retirement plan must indicate on their written redemption request whether to withhold federal income tax. Redemption requests failing to indicate an election not to have tax withheld will generally be subject to 10% withholding. The Fund also offers a Systematic Withdrawal Plan for shareholders who require periodic payments, such as those from IRAs. For more information on this option, please contact the Fund at (800) 851-0511.

Direxion Funds Prospectus

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The Fund typically expects to meet redemption requests by paying out available cash or proceeds from selling portfolio holdings, which may include cash equivalent portfolio holdings. In stressed market conditions and other appropriate circumstances, redemption methods may include borrowing funds or redeeming in kind. The Fund may stop selling its shares and postpone redemption payments at times when the NYSE is closed or has restricted trading or the SEC has determined that an emergency condition exists.

**Redemption In-Kind.** The Fund reserves the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Fund's portfolio. It is not expected that the Fund would do so except in unusual circumstances. If the Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash and will bear any market risks associated with such securities until they are converted into cash.

**Short-Term Trading**. The Fund anticipates that a significant portion of its assets will come from professional money managers and investors who use the Fund as part of their "asset allocation" and/or "market timing" investment strategies. These strategies often call for frequent trading to take advantage of anticipated changes in market conditions.

Frequent trading increases the rate of the Fund's portfolio turnover, which increases the overall expenses of managing the Fund, due to increased brokerage commissions or dealer mark-ups/mark-downs and other transaction costs on the sale of securities and reinvestments in other securities. In addition, frequent trading may dilute the value of Fund shares held by long-term shareholders and may interfere with the efficient management of the Fund's portfolios. Although the Fund reserves the right to reject any purchase orders or suspend the offering of Fund shares, the Fund does not currently impose any trading restrictions on Fund shareholders nor actively monitor for trading abuses. The Fund's Board of Trustees has approved the short-term trading policy of the Fund. The costs associated with the Fund's portfolio turnover will have a negative impact on longer-term investors as noted previously in the Prospectus.

**Low Balance Accounts.** If your total account balance falls below $10,000 due to withdrawals, then we may sell your shares of the Fund. We will inform you in writing 30 days prior to selling your shares. If you do not bring your total account balance up to $10,000 within 30 days, we may sell your shares and send you the proceeds. We will not sell your shares if your account value falls due to market fluctuations.

**Electronic Delivery of Reports.** Fund shareholders can save paper by electing to receive their account documents by e-mail in place of paper copies. You may choose electronic delivery ("E-Delivery") for Prospectuses, supplements, Annual and Semi-Annual Reports. To enroll in E-Delivery you can opt-in when completing a direct account application with Direxion Funds. You can also register, cancel, change your e-mail address or change your consent options by logging onto www.direxion.com/edelivery.

**Householding.** In an effort to decrease costs, the Fund intends to reduce the number of duplicate prospectuses and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders we reasonably believe are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call toll-free at (800) 851-0511 to request individual copies of these documents. Once the Fund receives notice to stop householding, we will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.

**Shareholder Inactivity.** Under certain circumstances, if no activity occurs in an account within a time period specified by state law, your shares in the Fund may be transferred to that state.

**Lost Shareholder.** It is important that the Fund maintain a correct address for each investor. An incorrect address may cause an investor's account statements and other mailings to be returned to the Fund. Based upon statutory requirements for returned mail, the Fund will attempt to locate the investor or rightful owner of the account. If the Fund is unable to locate the investor, then it will determine whether the investor's account can legally be considered abandoned. The Fund is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction. Investors with a state of residence in Texas have the ability to designate a representative to receive legislatively required unclaimed property due diligence notifications. Please contact the Texas Comptroller of Public Accounts for further information.

Management of the Fund

Rafferty provides investment management services to the Fund. Rafferty has been managing investment companies since 1997. Rafferty is located at 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of August 31, 2025, the Adviser had approximately $52.3 billion in assets under management.

Under an investment advisory agreement between the Trust and Rafferty, the Fund pays Rafferty a fee at an annualized rate based on a percentage of its average daily net assets of 0.75%.

As a result of the Operating Expense Limitation Agreement, for the fiscal year ended August 31, 2025, the Adviser received a management fee of 0.45% as a percentage of average daily net assets from the Fund.

A discussion regarding the basis on which the Board of Trustees approved the investment advisory agreement for the Fund is included in the Fund's Annual Financial Statements and Additional Information for the fiscal year ended August 31, 2025.

Direxion Funds Prospectus

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Rafferty has entered into an Operating Expense Limitation Agreement with the Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any contractual expense waiver or reimbursement is subject to recoupment by the Adviser within three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. Rafferty may pay, reimburse or otherwise assume one or more of the excluded expenses, in which case such expense will be subject to the Operating Expense Limitation Agreement and recoupment by Rafferty in accordance with the Agreement. This Agreement may be terminated or revised at any time with the consent of the Board of Trustees.

Paul Brigandi and Tony Ng are jointly and primarily responsible for the day-to-day management of the Fund (the "Portfolio Managers"). An investment trading team of Rafferty employees assists the Portfolio Managers in the day-to-day management of the Fund subject to their primary responsibility and oversight. The Portfolio Managers work with the investment trading team to decide the target allocation of the Fund's investments and on a day-to-day basis, an individual portfolio trader executes transactions for the Fund consistent with the target allocation. The members of the investment trading team rotate periodically among the various series of the Trust, including the Fund, so that no single individual is assigned to a specific Fund for extended periods of time.

Mr. Brigandi has been a Portfolio Manager at Rafferty since June 2004. Mr. Brigandi was previously involved in the equity trading training program for Fleet Boston Financial Corporation from August 2002 to April 2004. Mr. Brigandi is a 2002 graduate of Fordham University.

Mr. Ng has been a Portfolio Manager at Rafferty since April 2006. Mr. Ng was previously a Team Leader in the Trading Assistant Group with Goldman Sachs from 2004 to 2006. He was employed with Deutsche Asset Management from 1998 to 2004. Mr. Ng graduated from State University of New York at Buffalo in 1998.

The Fund's SAI provides additional information about the investment team members' compensation, other accounts they manage and their ownership of shares of the Fund.

Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI. Currently, disclosure of the Fund's holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the quarterly holdings report on Form N-PORT. The Annual and Semi-Annual Reports will be available by contacting the Direxion Funds, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121-9252 or calling (800) 851-0511.

other service providers

ALPS Distributors, Inc. ("Distributor") serves as the Fund's distributor. U.S. Bancorp Fund Services, LLC ("USBFS") serves as the Fund's administrator, fund accountant and transfer agent. U.S. Bank, N.A., an affiliate of USBFS, serves as the Fund's custodian.

Distributions and Taxes

**Distributions.** The Fund distributes dividends from its net investment income at least annually. Net investment income generally consists of interest income and dividends received on investments, less expenses.

The Fund also distributes any realized net capital gains and net gains from foreign currency transactions, if any, at least annually. The Fund realizes capital gains mainly from sales of its portfolio assets for a profit.

Dividends and other distributions (collectively, "distributions") will be reinvested in additional distributing Fund shares automatically at the Fund's NAV per share unless you request otherwise in writing or via telephone at least five days prior to the record date of the distribution. The Fund reserves the right, if you elect to receive distributions from the Fund by check and the U.S. Postal Service cannot deliver the check or the check remains uncashed for six months, to reinvest the amount of the check in your account, without interest, in additional Fund shares at the Fund's then-current NAV per share

Direxion Funds Prospectus

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and to reinvest all subsequent distributions in shares of the Fund until an updated address is received. The check will not be held separate from the shares in your account.

Due to the pattern of purchases and redemptions of the Fund, the Fund's total net assets may fluctuate significantly over the course of a year. Because the Fund may declare and pay distributions at any time, an investor may receive a distribution, which may be taxable, shortly after making an investment in the Fund.

**Taxes.** Federal income tax consequences of a distribution will vary depending on whether the distribution is from net investment income, net foreign currency gains, or net capital gains and, in the latter case, how long the Fund has held the assets the sale of which generated the gains, not how long you held your Fund shares. Distributions of net gains on sales of assets held for one year or less, and distributions of certain foreign currency gains, are taxed as dividends (that is, ordinary income). Distributions of gains on sales of assets held longer than one year (long-term capital gains), and distributions of other foreign currency gains are taxed at lower capital gains rates.

The following table illustrates the potential tax consequences for taxable accounts (of individual shareholders):

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| | |
|:---|:---|
| Type of Transaction | Federal Tax Rate/Treatment\* |
| &nbsp;&nbsp; Dividend (other than "qualified dividend <br> income" ("QDI") (see below)) distribution<br>| Ordinary income rate |
| Distribution of QDI | Long-term capital gains rate |
| Distribution of net short-term capital gains | Ordinary income rate |
| Distribution of net long-term capital gains | Long-term capital gains rate |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for more than one year<br>| Long-term capital gain or loss |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for one year or less<br>| &nbsp;&nbsp; Gain is taxed at the same rate as ordinary <br> income; loss is subject to special rules<br>|

---

\*

Tax consequences for tax-deferred retirement accounts (such as 401(k) plan accounts and IRAs) or non-taxable shareholders will be different. You should consult your tax specialist for more information about your personal situation.

QDI consists of dividends the Fund receives from most U.S. corporations and "qualified foreign corporations," provided that the Fund satisfies certain holding periods and other restrictions regarding the stock on which the dividends were paid. (Dividends received from other investment companies, including ETFs that are taxed as RICs will only qualify for QDI treatment to the extent that the other investment company reports the qualifying portion to its shareholders in writing.) The Fund's dividends attributable to its QDI are taxed to individual shareholders at the long-term capital gains rates (see the next paragraph) for shareholders who satisfy those restrictions regarding their Fund shares. A portion of the Fund's dividends (excluding dividends from foreign corporations) also may be eligible for the dividends-received deduction allowed to corporations, subject to similar restrictions.

Net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) an individual or certain other non-corporate shareholder realizes on a redemption or exchange of Fund shares, is subject to federal income tax at a maximum rate of 15% or 20% for those non-corporate shareholders with taxable income exceeding certain thresholds.

If you are a non-retirement account shareholder of the Fund, then each year we will send you a Form 1099 that tells you the amount of Fund distributions you received for the prior calendar year, the tax status of those distributions and a list of reportable redemption transactions, including, for redeemed shares that were acquired after December 31, 2011 ("Covered Shares"), basis information and whether they had a short-term (one year or less) or long-term (more than one year) holding period. Normally, distributions are taxable in the year you receive them. However, any distributions declared in the last three months of a calendar year and paid in January of the following year generally are taxable as if received on December 31 of the year they are declared.

If you are a taxable non-corporate shareholder of the Fund and do not provide the Fund with your correct taxpayer identification number (normally your social security number), the Fund is required to withhold and remit to the Internal Revenue Service ("IRS") 24% of all dividends and other distributions and redemption proceeds (regardless of whether you realize a gain or loss) otherwise payable to you. If you are such a shareholder and are otherwise subject to backup withholding, we also are required to withhold and remit to the IRS the same percentage of all dividends and other distributions otherwise payable to you. Any tax withheld may be applied against your tax liability when you file your tax return.

A shareholder's basis in Covered Shares will be determined in accordance with the Fund's default method, which currently is average basis, unless the shareholder affirmatively elects in writing (which may be electronic) to use a different acceptable basis determination method, such as a specific identification method. The basis determination method a Fund shareholder elects may not be changed with respect to a redemption of Covered Shares after the settlement date of the redemption. Fund shareholders should consult with their tax advisors to determine the best IRS-accepted basis method for their tax situation and to obtain more information about how the basis reporting law applies to them.

An individual must pay a 3.8% federal tax on the lesser of (1) the individual's "net investment income," which generally includes dividends, interest, and net gains from the disposition of investment property (including dividends and capital gain distributions the Fund pays), or (2) the excess of the individual's "modified adjusted gross income" over a threshold

Direxion Funds Prospectus

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amount ($250,000 for married persons filing jointly and $200,000 for single taxpayers). This tax is in addition to any other taxes due on that income. A similar tax will apply for those years to estates and trusts. Shareholders should consult their own tax advisers regarding the effect, if any, this provision may have on their investment in Fund shares.

Additional Information ABOUT THE TRUST

The Trust enters into contractual arrangements with various parties, which may include, among others, the Fund's investment adviser, custodian, and transfer agent, who provide services to the Fund. Shareholders are not parties to any such contractual arrangements and are not intended beneficiaries of those contractual arrangements, and those contractual arrangements are not intended to create in any shareholder any right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the Trust.

This Prospectus provides information concerning the Fund that you should consider in determining whether to purchase Fund shares. Neither this Prospectus nor the SAI is intended, or should be read, to be or give rise to an agreement or contract between the Trust or the Fund and any investor, or to give rise to any rights in any shareholder or other person other than any rights under federal or state law that may not be waived.

Many states have unclaimed property rules that provide for transfer to the state (also known as "escheatment") of unclaimed property under various circumstances. These circumstances include inactivity (e.g., no owner-initiated contact for a certain period), returned mail (e.g., when mail sent to a shareholder is returned by the post office as undeliverable), or a combination of both inactivity and returned mail. Unclaimed or inactive accounts may be subject to escheatment laws, and the Fund and the Fund's transfer agent will not be liable to shareholders and their representatives for good faith compliance with those laws.

Index Licensors

**Solactive High Yield Beta Index.** The Direxion Monthly High Yield Bull 1.2X Fund is not a sponsor of, or in any way affiliated with Solactive AG ("Licensor"). Licensor makes no representation or warranty, express or implied, to the owners of the Direxion Monthly High Yield Bull 1.2X Fund or any member of the public regarding the advisability of investing in securities generally or in the Direxion Monthly High Yield Bull 1.2X Fund particularly or the ability of the Solactive High Yield Beta Index to track the performance of the Solactive High Yield Beta Index. Licensor's only relationship to Rafferty Asset Management, LLC ("Licensee") is the licensing of certain service marks and trade names of Licensor and of the Solactive High Yield Beta Index that is determined, composed and calculated by Licensor without regard to the Licensee or the Direxion Monthly High Yield Bull 1.2X Fund. Licensor has no obligation to take the needs of the Licensee or the owners of the Direxion Monthly High Yield Bull 1.2X Fund into consideration in determining, composing or calculating the Solactive High Yield Beta Index. Licensor is not responsible for and has not participated in the determination of the timing of prices at, or quantities of the Direxion Monthly High Yield Bull 1.2X Fund to be issued or in the determination or calculation of the equation by which the Direxion Monthly High Yield Bull 1.2X Fund is to be converted into cash. Licensor has no obligation or liability in connection with the administration, marketing or trading of the Direxion Monthly High Yield Bull 1.2X Fund.

LICENSOR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE SOLACTIVE HIGH YIELD BETA INDEX OR ANY DATA INCLUDED THEREIN AND LICENSOR SHALL HAVE NO LABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. LICENSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED AS TO RESULTS TO BE OBTAINED BY LICENSEE OWNERS OF THE DIREXION MONTHLY HIGH YIELD BULL 1.2X FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SOLACTIVE HIGH YIELD BETA INDEX OR ANY DATA INCLUDED THEREIN. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE SOLACTIVE HIGH YIELD BETA INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Direxion Funds Prospectus

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Financial Highlights

The financial highlights table is intended to help you understand the financial performance of the Fund for the periods indicated. The information set forth below has been derived from the financial statements which were audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, whose report, along with the Fund's financial statements, are included in the Annual shareholder report, which is available upon request and incorporated by reference into the Fund's SAI. Certain information reflects financial results for a single share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and other distributions).

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Net Asset**<br> **Value,**<br> **Beginning of**<br> **Year**<br>| **Net**<br> **Investment**<br> **Income**<br> **(Loss)**<sup>1</sup><br>| **Net Realized**<br> **and**<br> **Unrealized**<br> **Gain (Loss)**<br> **on Investments**<sup>2</sup><br>| **Net Increase**<br> **(Decrease)**<br> **in Net**<br> **Asset Value**<br> **Resulting**<br> **from** <br> **Operations**<br>| **Dividends**<br> **from Net**<br> **Investment**<br> **Income**<br>| **Distributions**<br> **from Realized**<br> **Capital Gains**<br>| **Return of**<br> **Capital**<br> **Distributions**<br>| **Total**<br> **Distributions**<br>| **Net Asset**<br> **Value,**<br> **End of**<br> **Year**<br>| **Total**<br> **Return**<sup>3</sup><br>|
| **Direxion Monthly High Yield Bull 1.2X Fund** |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $17.51 | 0.79 | 0.30 | 1.09 | (0.94)<br>| – | (0.00)<sup>7</sup><br>| (0.94)<br>| $17.66 | 6.46<br> %<br>|
| Year ended August 31, 2024 | $16.50 | 0.75 | 1.00 | 1.75 | (0.74)<br>| – | (0.00)<sup>7</sup><br>| (0.74)<br>| $17.51 | 10.90<br> %<br>|
| Year ended August 31, 2023 | $16.76 | 0.94 | 0.01 | 0.95 | (1.21)<br>| – | – | (1.21)<br>| $16.50 | 5.94<br> %<br>|
| Year ended August 31, 2022 | $21.57 | 0.50 | (3.49)<br>| (2.99)<br>| (1.78)<br>| – | (0.04)<br>| (1.82)<br>| $16.76 | -14.45<br> %<br>|
| Year ended August 31, 2021 | $20.34 | 0.42 | 1.28 | 1.70 | (0.46)<br>| – | (0.01)<br>| (0.47)<br>| $21.57 | 8.46<br> %<br>|

---

Direxion Funds Prospectus

------

Financial Highlights (continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **Portfolio**<br> **Turnover**<br> **Rate**<sup>6</sup> |
|  | **Net Assets,**<br> **End of**<br> **Year**<br> **(000's)**<br>| **Total**<br> **Expenses**<sup>4</sup><br>| **Net**<br> **Expenses**<sup>4,5</sup><br>| **Net**<br> **Investment**<br> **Income (Loss)**<br> **after**<br> **Expense**<br> **Reimbursement**<br> **/Recoupment**<sup>4</sup><br>| **Total**<br> **Expenses**<br>| **Net**<br> **Expenses**<sup>5</sup><br>| **Net**<br> **Investment**<br> **Income (Loss)**<br> **after**<br> **Expense**<br> **Reimbursement**<br> **/Recoupment**<br>| **Portfolio**<br> **Turnover**<br> **Rate**<sup>6</sup> |
| **Direxion Monthly High Yield Bull 1.2X Fund** |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $7204 | 1.65<br> %<br>| 1.35<br> %<br>| 4.51<br> %<br>| 1.65<br> %<br>| 1.35<br> %<br>| 4.51<br> %<br>| 913<br> %<br>|
| Year ended August 31, 2024 | $59328 | 1.47<br> %<br>| 1.35<br> %<br>| 4.40<br> %<br>| 1.47<br> %<br>| 1.35<br> %<br>| 4.40<br> %<br>| 869<br> %<br>|
| Year ended August 31, 2023 | $23057 | 1.49<br> %<br>| 1.35<br> %<br>| 5.65<br> %<br>| 1.49<br> %<br>| 1.35<br> %<br>| 5.65<br> %<br>| 2720<br> %<br>|
| Year ended August 31, 2022 | $19002 | 1.37<br> %<br>| 1.35<br> %<br>| 2.53<br> %<br>| 1.37<br> %<br>| 1.35<br> %<br>| 2.53<br> %<br>| 2768<br> %<br>|
| Year ended August 31, 2021 | $91324 | –<br> %<br>| 1.35<br> %<br>| 2.00<br> %<br>| –<br> %<br>| 1.35<br> %<br>| 2.00<br> %<br>| 1181<br> %<br>|

---

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

Due to the timing of sales and redemptions of capital shares, the net realized and unrealized gain (loss) per share will not equal the Fund's changes in net realized and unrealized gain (loss) on investments and swaps for the period.

Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at the net asset value during the period and redemption on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain expenses had not been reimbursed by the investment adviser.

Includes interest expense and extraordinary expense which is comprised of excise tax expense.

Net expenses include effects of any reimbursement or recoupment.

Portfolio turnover is not annualized and is calculated without regard to short-term securities that have a maturity of less than one year and does not include effects of turnover of the swap contracts portfolio.

Amount represents less than $0.005 per share.

Direxion Funds Prospectus

------

![](g58398img1c8232ce1.gif)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

Investor Class

More Information On The Direxion Funds

***Statement of Additional Information ("SAI"):*** 

The Fund's SAI contains more information on the Fund and its applicable investment policies. The SAI is incorporated in this Prospectus by reference (meaning it is legally part of this Prospectus). A current SAI is on file with the Securities and Exchange Commission ("SEC").

***Annual and Semi-Annual Reports to Shareholders:*** 

The Fund's reports provide additional information on the Fund's investment holdings, performance data and information discussing the market conditions and investment strategies that significantly affected the Fund's performance during that period. The Fund's Form N-CSR will contain additional information about the Fund's investments and the Fund's annual and semi-annual financial statements. **To Obtain the SAI or Fund Reports Free of Charge or for Other Information, such as Fund Financial Statements, or Shareholder Inquiries:** 

Write to: Direxion Funds c/o U.S. Bank Global Fund Services PO Box 219252 Kansas City, MO 64121-9252 <br> Call: (800) 851-0511 <br> By Internet: www.direxion.com

Reports and other information about the Fund may be viewed on screen or downloaded from the EDGAR Database on the SEC's website at http://www.sec.gov. Copies of these documents may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.

SEC File Number: 811-08243

------

![](g58398img293431651.gif)

Direxion Funds

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

www.direxion.com

**Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund (DXNLX)** 

Investor Class

**The fund offered in this Prospectus (the "Fund") seeks *calendar month leveraged* investment results and is riskier than most mutual funds because the Fund seeks 1.25 times the calendar month performance of a respective underlying index.** 

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Investors in the Fund should:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**

**understand the risks associated with the use of leverage;** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**

**understand the consequences of seeking calendar month leveraged investment results; and** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**

**intend to actively monitor and manage their investments.** 

**Investors who do not understand the Fund or do not intend to actively manage and monitor their investments should not buy the Fund.** 

**There is no assurance that the Fund will achieve its investment objective and an investment in the Fund could lose money. No single Fund is a complete investment program.** 

**An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 125% exposure to the underlying index from that point until the end of the month. The actual exposure is a function of the performance of the underlying index from the end of the prior calendar month to an investor's purchase date. If a Fund's shares are held for a period other than a calendar month, the Fund's performance is likely to deviate from 125% of the underlying index's performance for the period the Fund is held. This deviation will increase with higher underlying index volatility and longer holding periods.**

*These securities have not been approved or disapproved by the U.S. Securities and Exchange Commission ("SEC") or the U.S. Commodity Futures Trading Commission ("CFTC"), nor have the SEC or CFTC passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.*

December 29, 2025

------

**Table of Contents**

---

| | |
|:---|:---|
| **[Summary Section](#xx_52e6a312-a24b-4f46-9f20-a1b6dfd18ab6_1)** | **1** |
| &nbsp;&nbsp; [Direxion Monthly NASDAQ-100](#xx_52e6a312-a24b-4f46-9f20-a1b6dfd18ab6_1)<sup>®</sup>[Bull 1.25X](#xx_52e6a312-a24b-4f46-9f20-a1b6dfd18ab6_1)<br> [Fund](#xx_52e6a312-a24b-4f46-9f20-a1b6dfd18ab6_1)<br>| **1** |
| **[Overview of the Fund](#xx_03edb9ed-ce51-44ef-9280-7176bff780fb_1)** | **8** |
| &nbsp;&nbsp; **[Additional Information Regarding](#xx_03edb9ed-ce51-44ef-9280-7176bff780fb_1)**<br> **[Investment Techniques and Policies](#xx_03edb9ed-ce51-44ef-9280-7176bff780fb_1)**<br>| **8** |
| &nbsp;&nbsp; **[ADDITIONAL INFORMATION REGARDING](#xx_4eea27be-3f34-4882-b185-2f28f31a1bff_1)**<br> **[PRINCIPAL Risks](#xx_4eea27be-3f34-4882-b185-2f28f31a1bff_1)**<br>| **13** |
| [Other Risks of the Fund](#xx_4eea27be-3f34-4882-b185-2f28f31a1bff_7) | **19** |
| **[About Your Investment](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_1)** | **21** |
| [Share Price of the Fund](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_1) | **21** |
| [Rule 12b-1 Fees](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_2) | **22** |
| &nbsp;&nbsp; [Additional Payments to Financial](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_2)<br> [Intermediaries](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_2)<br>| **22** |
| [Shareholder Services Guide](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_2) | **22** |
| **[Account and Transaction Policies](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_5)** | **25** |
| **[Management of the Fund](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_7)** | **27** |
| **[Portfolio Holdings](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_8)** | **28** |
| **[other service providers](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_8)** | **28** |
| **[Distributions and Taxes](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_8)** | **28** |
| &nbsp;&nbsp; **[Additional Information ABOUT THE](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_10)**<br> **[TRUST](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_10)**<br>| **30** |
| **[Index Licensors](#xx_811da7bf-a2f7-4ce1-9a50-18572b0f3f40_10)** | **30** |
| **[Financial Highlights](#xx_f18dfd22-4d27-4f38-aa84-a5b8d0c30d5f_1)** | **31** |
| &nbsp;&nbsp; **[More Information On The Direxion](#xx_63f4fa13-323e-4fad-a928-0e3ede81f88e_1)**<br> **[Funds](#xx_63f4fa13-323e-4fad-a928-0e3ede81f88e_1)**<br>| **Back Cover** |

---

------

Summary Section

Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund

**Important Information Regarding the Fund**

The Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund (the "Fund") seeks ***calendar month leveraged 1.25X*** investment results and is very different from most other mutual funds. As a result, the Fund may be riskier than alternatives that do not use leverage because the Fund's objective is to magnify the monthly performance of the NASDAQ 100<sup>®</sup> Index (the "Index"). The return for investors that invest for periods longer or shorter than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, should not be expected to be 125% of the performance of the Index for the period. The return of the Fund for a period longer than a full calendar month will be the result of each full calendar month's compounded return over the period, which will very likely differ from 125% of the return of the Index for that period. Longer holding periods, higher volatility of the Index and leverage increase the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as, or more than, the return of the Index.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking calendar month leveraged 1.25X investment results, understand the risks associated with the use of leverage and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a calendar month, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the Index's performance increases. An investor could lose the full principal value of his/her investment within a calendar month if the Index loses more than 80% in one month.**

**Investment Objective**

The Fund seeks monthly investment results, before fees and expenses, of 125% of the calendar month performance of the Index. **The Fund does not seek to achieve its stated investment objective for a period of time different than a full calendar month**.

**Fees and Expenses of the Fund**

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

---

| | |
|:---|:---|
| Management Fees | 0.75% |
| Distribution and/or Service (12b-1) Fees | 0.25% |
| Other Expenses of the Fund | 1.45% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.12% |
| Total Annual Fund Operating Expenses<sup>(2)</sup> | 2.57% |
| Expense Cap/Reimbursement | -1.23% |
| &nbsp;&nbsp; Total Annual Fund Operating Expenses After <br> Expense Cap/Reimbursement<br>| 1.34% |

---

<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

<sup>(2)</sup>

Rafferty Asset Management, LLC ("Rafferty" or the "Adviser"), has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.15% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if overall Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $136 | $682 | $1255 | $2813 |

---

**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 820% of the average

Direxion Funds Prospectus

------

value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the Fund's extensive use of derivatives was reflected, the Fund's portfolio turnover rate would be significantly higher.

**Principal Investment Strategy**

The Index is a modified market capitalization-weighted index and includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market<sup>®</sup> based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, communication services, retail/wholesale trade and biotechnology. It does not contain securities of financial companies or investment companies. Each security must have been traded for at least three full months and have a minimum three-month average daily trading volume of 200,000 shares. The Index is reviewed on an annual basis in December.

As of October 31, 2025, the Index consisted of 101 securities which were concentrated in the information technology and consumer discretionary sectors.

The components of the Index and the percentages represented by various sectors in the Index may change over time. The Fund will concentrate its investment in a particular industry or group of industries (*i.e.*, hold 25% or more of its total assets in the stocks of a particular industry or group of industries) to approximately the same extent as the Index is so concentrated.

The Fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, securities of the Index, and exchange-traded funds ("ETFs") that track the Index, that, in combination, provide 1.25X monthly leveraged exposure to the Index, consistent with the Fund's investment objective. The financial instruments in which the Fund most commonly invests are swap agreements which are intended to produce economically leveraged investment results.

The Fund may invest in the securities of the Index, a representative sample of the securities in the Index that has aggregate characteristics similar to those of the Index, an ETF that tracks the Index or a substantially similar index, and derivatives, such as swaps on the Index or an ETF that tracks the same Index or a substantially similar index, that provide leveraged exposure to the above.

The Fund will attempt to achieve its investment objective without regard to overall market movement or the increase or decrease of the value of the securities in the Index. On a day-to-day basis, the Fund is expected to hold ETFs, money market funds, deposit accounts with institutions with high quality credit ratings, and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles *(i.e., investment grade or higher)*, including U.S. government securities and repurchase agreements. The Fund seeks to remain fully invested at all times consistent with its stated investment objective.

Because a significant portion of the assets of the Fund may come from investors using "asset allocation" and "market

timing" investment strategies, the Fund may engage in frequent trading.

The Fund is "non-diversified," meaning that a relatively high percentage of its assets may be invested in a limited number of issuers of securities. Additionally, the Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its leveraged investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review all of the risks listed below and understand them before making an investment in the Fund.

***Effects of Compounding and Market Volatility Risk* —** 

The Fund's performance for periods greater than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, will be the result of each month's returns compounded over the period, which is likely to differ from 125% of the Index's performance, before fees and expenses. Compounding has a significant impact on funds that are leveraged and that rebalance monthly. The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an investment in the Fund is held and the volatility of the Index during the shareholder's holding period.

Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities of the Index. The chart below provides examples of how Index volatility and its return could affect the Fund's performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Actual Fund returns are expected to vary from these estimates. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates (to obtain leveraged exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from 125% of the performance of the Index.

As shown in the chart below, the Fund would be expected to lose 3.9% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant loss of value in the Fund, even if the Index's return is flat. **For instance, if the Index's annualized** 

Direxion Funds Prospectus

------

**volatility is 100%, the Fund would be expected to lose 30.9% of its value, even if the cumulative Index return for the year was 0%.** Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than 125% of the performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than 125% of the performance of the Index. The table below is not a representation of the Fund's actual returns, which may be significantly better or worse than the returns shown below as a result of any of the factors discussed above or in "Monthly Index Correlation Risk" below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ from the volatility of the Index.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One Year**<br> **Index**<br>| **125%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-75%** | -70.4% | -71.9% | -76.2% | -80.7% | -84.9% |
| **-50%** | **-63%** | -59.7% | -61.5% | -66.5% | -72.5% | -77.6% |
| **-40%** | **-50%** | -48.6% | -50.7% | -56.5% | -63.3% | -69.8% |
| **-30%** | **-38%** | -37.0% | -39.4% | -45.7% | -53.0% | -60.5% |
| **-20%** | **-25%** | -25.1% | -27.7% | -35.1% | -42.7% | -50.6% |
| **-10%** | **-13%** | -13.0% | -16.0% | -24.0% | -32.4% | -40.7% |
| **0%** | **0%** | -0.7% | -3.9% | -12.6% | -21.9% | -30.9% |
| **10%** | **13%** | 11.9% | 8.3% | -1.1% | -11.87% | -20.6% |
| **20%** | **25%** | 24.5% | 20.6% | 10.3% | -0.7% | -9.3% |
| **30%** | **38%** | 37.3% | 33.0% | 21.9% | 10.4% | 1.9% |
| **40%** | **50%** | 50.2% | 45.4% | 33.3% | 21.7% | 11.2% |
| **50%** | **63%** | 63.2% | 57.9% | 44.8% | 33.1% | 22.0% |
| **60%** | **75%** | 76.2% | 70.3% | 56.2% | 42.60% | 33.4% |

---

The Index's annualized historical volatility rate for the five year period ended September 30, 2025 was 23.11%. The Index's highest volatility rate for any twelve-month period (October 1 to September 30) during the five year period was 32.52% and volatility for a shorter period of time may have been substantially higher. The Index's annualized performance for the five-year period ended September 30, 2025 was 17.58%. Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

***Derivatives Risk —*** Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.

The Fund's investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the performance of its reference

asset for various reasons, including due to fees and other costs associated with it.

Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index due to costs associated with trading ETFs, such as an ETF's premium or discount which is the difference between its market price and its net asset value.If the Index has a dramatic intramonth increase or decrease that causes a material change in the Fund's performance and/or net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter into another swap agreement or invest in other derivatives to achieve its investment objective. This may occur even if the Index reverses all or a portion of its intramonth movement by the end of the month.

Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service providers such as the Fund's custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased credit risk with respect to the custodian bank holding the assets.

***Leverage Risk —*** The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. An investment in the Fund is exposed to the risk that a decline in the monthly performance of the Index will be magnified. This means that your investment in the Fund will be reduced by an amount equal to 1.25% for every 1% monthly decline in the Index, not including the cost of financing the leverage utilized and the impact of operating expenses, which would further lower your investment.

***Counterparty Risk —*** If a counterparty is unwilling or unable to make timely payments to meet its contractual obligations or fails to return holdings that are subject to the agreement with the counterparty, the Fund will lose money and/or not be able to meet its monthly leveraged investment objective.

Because the Fund may enter into swap agreements with a limited number of counterparties, this increases the Fund's exposure to counterparty credit risk. Further, there is a risk that no suitable counterparties will be willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its leveraged investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. The risk that no suitable counterparties will enter into or continue to provide swap exposure to the Fund may be heightened when there is significant volatility in the overall market or the reference asset.

Direxion Funds Prospectus

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***Rebalancing Risk —*** If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

***Intra-Calendar Month Investment Risk —*** The intra-month performance will be different from the performance of the Fund when measured from the close of the market at the end of one calendar month until the close of the market on the last day of the subsequent calendar month. An investor that purchases shares on a day other than the last business day of a calendar month may experience performance that is greater than, or less than, the Fund's stated investment objective. If there is a significant intra-month market event and/or the securities of the Index experience a significant change in value, the Fund may not meet its investment objective or be unable to rebalance its portfolio appropriately.

***Monthly Index Correlation Risk —*** A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index and therefore achieve its monthly leveraged investment objective. The Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each calendar month. The possibility of the Fund being materially over- or under-exposed to the Index increases during months when the Index is volatile.

Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly, the Fund's valuation methodology differing from the Index's valuation methodology, accounting standards and their application to income items, disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also adversely affect the Fund's ability to adjust exposure to meet its monthly leveraged investment objective.

The derivatives or investments the Fund utilizes to obtain exposure may not provide the expected correlation to the Index resulting in the Fund not performing as expected. Additionally, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the securities may be different from that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index and impacting the Fund's correlation to the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index reconstitutions and other Index rebalancing events may also hinder the Fund's ability to meet its monthly leveraged investment objective.

***Other Investment Companies (including ETFs) Risk***—

The Fund may invest in, or obtain exposure to, another investment company, including an ETF or a money market fund (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. If the underlying fund fails to achieve its investment objective the Fund's performance will likely be adversely affected.

In addition, to the extent that the Fund invests in, or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure. Shares of ETFs may trade at a discount or a premium to an ETF's net asset value which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend purchases or redemption of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the Fund. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

***Passive Investment and Index Performance Risk —***

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry concentrations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the Index's methodology or calculation will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations

Direxion Funds Prospectus

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and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Liquidity Risk —***Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index. To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties.

***Consumer Discretionary Sector Risk —***Because companies in the consumer discretionary sector manufacture products and provide discretionary services directly to the consumer, the success of these companies is tied closely to the performance of the overall domestic and international economy, including the functioning of the global supply chain, interest rates, and inflation competition and consumer confidence. Success depends heavily on disposable household income and consumer spending, and may be strongly affected by social trends and marketing campaigns. Also, companies in the consumer discretionary sector may be subject to intense competition, which may have an adverse impact on a company's profitability. Changes in demographics and consumer tastes also can affect the demand for, and success of, consumer discretionary products in the marketplace.

***Information Technology Sector Risk —*** The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product

obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs. In addition, many information technology companies have limited product lines, markets, financial resources or personnel. The prices of information technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile and less liquid than the overall market. Information technology companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the information technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel. Companies in the application software industry, in particular, may also be negatively affected by the risk that subscription renewal rates for their products and services decline or fluctuate, leading to declining revenues. Companies in the systems software industry may be adversely affected by, among other things, actual or perceived security vulnerabilities in their products and services, which may result in individual or class action lawsuits, state or federal enforcement actions and other remediation costs. Companies in the computer software industry may also be affected by the availability and price of computer software technology components.

***Large-Capitalization Company Risk —*** Large-capitalization companies typically have significant financial resources, extensive product lines and broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to changes in business, product, financial, or market conditions and may not be able to maintain growth at rates that may be achieved by well-managed smaller and mid-size companies, which may affect the companies' returns.

***Mid-Capitalization Company Risk*** - Mid-capitalization companies often have narrower markets for their goods and/or services, more limited product lines, services, markets, managerial and financial resources, less stable earnings, or are dependent on a small management group. In addition, because these stocks are not well known to the investing public, do not have significant institutional ownership and are followed by relatively few security analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. As a result, the price of mid-capitalization companies can be more volatile and they may be less liquid than large-capitalization companies, which could increase the volatility of the Fund's portfolio.

***Depositary Receipt Risk —*** To the extent the Fund invests in, and/or has exposure to, foreign companies, the Fund's investment may be in the form of depositary receipts or other securities convertible into securities of foreign issuers including American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), and Global Depositary Receipts ("GDRs"). Such investments continue to be subject to most of the risks associated with investing directly in foreign securities, including political and exchange rate risks. The issuers of certain depository receipts are under no obligation

Direxion Funds Prospectus

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to distribute shareholder communications to holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Investments in depository receipts may be less liquid than the underlying shares in their primary trading markets. The issuers of depository receipts may discontinue issuing new depository receipts and withdraw existing depository receipts at any time.

***Foreign Securities Risk —*** Investing in, and/or having exposure to, foreign instruments may involve greater risks than investing in domestic instruments. As a result, the Fund's returns and net asset value 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. Additionally, the Fund may be impacted by a limitation on foreign ownership of securities, the imposition of withholding or other taxes, restrictions on the repatriation of cash or other assets, higher transaction and custody costs, delays in the settlement of securities, difficulties in enforcing contractual obligations and lower levels of regulation in the securities markets.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, and may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

***Equity Securities Risk —*** Publicly issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests, and/or has exposure to, will cause the net asset value of the Fund to fluctuate.

***High Portfolio Turnover Risk***— Monthly rebalancing of the Fund's holdings pursuant to its monthly investment objective causes a much greater number of portfolio transactions when compared to most funds. In addition, there is the possibility of significantly increased short-term capital gains (which will be taxable to shareholders as ordinary income when distributed to them). The Fund calculates portfolio turnover without including the short-term cash instruments or derivative transactions that comprise the majority of the Fund's trading. As such, if the Fund's extensive use of derivative instruments were reflected, the calculated portfolio turnover rate would be significantly higher.

***Market Timing Activity Risk —*** Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading, which may lead to large shareholder transactions into and out of the Fund. These large movements of assets may lead to increased portfolio turnover, higher transaction costs and the possibility of increased net realized capital gains, including

net short-term capital gains. Additionally, these large movement of assets may have a negative impact on the Fund's ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, the Fund's expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus.

***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Non-Diversification Risk —*** The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year. The table shows how the Fund's average annual returns for the one-year, five-year, and since inception periods compare with those of at least one broad-based market index for the same periods. The Nasdaq Composite Index is included in the table as the Fund's primary benchmark for regulatory reasons. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

![](g58398nasdaqbull125x_19.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 37.74<br> %<br>| June 30, 2020 |
| Worst Quarter | &nbsp;&nbsp; -27.66<br> %<br>| June 30, 2022 |
| Year-to-Date | 19.47<br> %<br>| September 30, 2025 |

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Direxion Funds Prospectus

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | Since <br> Inception<br>|
|  | 1 Year | 5 Years | 3/31/2016 |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 28.58% | &nbsp;&nbsp; 21.62% | &nbsp;&nbsp; 22.24% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; 28.48% | &nbsp;&nbsp; 19.56% | &nbsp;&nbsp; 20.24% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; 16.92% | &nbsp;&nbsp; 16.48% | &nbsp;&nbsp; 17.77% |
| &nbsp;&nbsp; **Nasdaq Composite Index** <br> (reflects no deduction for <br> fees, expenses or taxes)<br>| &nbsp;&nbsp; 29.57% | &nbsp;&nbsp; 17.49% | &nbsp;&nbsp; 18.13% |
| &nbsp;&nbsp; **NASDAQ-100 Index** (reflects <br> no deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 25.88% | &nbsp;&nbsp; 20.18% | &nbsp;&nbsp; 20.44% |

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After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of time.

**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Portfolio Managers.** The following members of Rafferty's investment team are jointly and primarily responsible for the day-to-day management of the Fund:

<u> Portfolio Managers</u> <u> Years of Service with the Fund</u> <u> Primary Title</u> <br> Paul Brigandi Since Inception in March 2016 Portfolio Manager <br> Tony Ng Since Inception in March 2016 Portfolio Manager

**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121), overnight mail (Direxion Funds - Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund, c/o U.S. Bank Global Fund

Services, 801 Pennsylvania Ave, Suite 219252, Kansas City, MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: <br> Traditional <br> Investment Accounts<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (Traditional, Roth <br> and Spousal <br> individual retirement <br> accounts)<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

**Index Information**

Nasdaq<sup>®</sup>, Nasdaq-100<sup>®</sup>, and Nasdaq-100 Index<sup>®</sup>, are trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by the Adviser. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

Direxion Funds Prospectus

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Overview of the Fund

The Direxion Funds (the "Trust") is a registered investment company offering a number of separate series. This Prospectus describes shares of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund (the "Fund"). Rafferty Asset Management, LLC serves as the investment adviser to the Fund ("Rafferty" or "Adviser").

The Fund seeks to provide calendar month leveraged investment results, before fees and expenses, that correspond to 125% the performance of the NASDAQ 100<sup>®</sup> Index (the "Index").

The Fund does not attempt to provide returns which are a multiple of the return of the underlying index for periods other than a calendar month. The Fund rebalances its portfolio on a monthly basis, increasing exposure in response to that month's gains or reducing exposure in response to that month's losses.

Also, the exposure to the Index received by an investor who purchases the Fund intra-month will differ from the Fund's stated monthly leveraged investment objective by an amount determined by the movement of the Index from its value at the end of the prior calendar month. If the Index moves in a direction favorable to the Fund between the close of the market at the end of one month through the time in the next calendar month when the investor purchases the Fund, the investor will receive less exposure to the Index than the stated fund monthly leveraged investment objective. Conversely, if the Index moves in a direction adverse to the Fund, the investor will receive more exposure to the Index than the stated fund monthly leveraged investment objective.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Such investors are expected to monitor and manage their portfolios frequently. Investors in the Fund should: (a) understand the risks associated with the use of leverage; (b) understand the consequences of seeking monthly leveraged investment results; and (c) intend to actively monitor and manage their investments. Investors who do not understand the Fund or do not intend to actively manage their funds and monitor their investments should not buy the Fund.** 

**There is no assurance that the Fund will achieve its investment objective and an investment in the Fund could lose money. The Fund is not a complete investment program.** 

**Changes in Investment Objective.** The Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Defensive Policy.** Generally, the Fund pursues its investment objective regardless of market conditions and does not generally take defensive positions.

Additional Information Regarding Investment Techniques and Policies

Rafferty uses statistical and quantitative analysis to determine the investments the Fund makes and the techniques it employs. Rafferty relies upon a pre-determined model to generate orders that result in repositioning the Fund's investments in accordance with its monthly leveraged investment objective. Using this approach, Rafferty determines the type, quantity and mix of investment positions that it believes in combination should produce monthly returns consistent with the Fund's investment objective. In general, if the Fund is performing as designed, the return of the Index will dictate the return for the Fund. Rafferty does not invest the assets of the Fund in securities, derivatives or other investments based on Rafferty's view of the investment merit of a particular security, instrument or company, nor does it conduct conventional investment research or analysis or forecast market movements or trends. The Fund pursues its investment objective regardless of the market conditions and does not generally take defensive positions. If the Fund takes a temporary defensive position, it may not meet its investment objective during such periods.

Rafferty attempts to provide 125%, before fees and expenses, of the return of the Index for a calendar month. To do this, Rafferty creates net "long" positions for the Fund. (Rafferty may create short positions in the Fund even though the net exposure in the Fund will be long.) Long positions move in the same direction as the Index, advancing when the Index advances and declining when the Index declines. Short positions move in the opposite direction of the Index, advancing when the Index declines and declining when the Index advances.

At the close of the markets at the end of each calendar month, the Fund will position its portfolio to ensure that the Fund's exposure to the Index is consistent with the Fund's stated investment objective. The impact of market movements during the month determines whether a portfolio needs to be repositioned. If the Index has risen in a given month, the Fund's net assets should rise, meaning its exposure will typically need to be increased. Conversely, if the Index has fallen in a given month, the Fund's net assets should fall, meaning its exposure will typically need to be reduced. The Fund's portfolio may also need to be changed to reflect changes in the composition of the Index.

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The Fund has a clearly articulated monthly leveraged investment objective which requires the Fund to seek economic exposure in excess of its net assets (*i.e*., economic leverage). To meet its objectives, the Fund invests in some combination of financial instruments so that it generates economic exposure consistent with the Fund's investment objective.

The Fund generally may hold a representative sample of the securities in the Index. The sampling of securities that is held by the Fund is intended to maintain high correlation with, and similar aggregate characteristics (*e.g*., market capitalization and industry weightings) to, the Index. The Fund also may invest in securities that are not included in the Index or may overweight or underweight certain components of the Index. The Fund offered in this Prospectus is non-diversified, which means that it may invest in the securities of a limited number of issuers.

**The Effects of Fees and Expenses on the Return of the Fund for a Single Calendar Month**. To create the necessary exposure, the Fund uses leveraged investment techniques, which necessarily incur brokerage and financing charges. In light of these charges and the Fund's operating expenses, the expected return of the Fund over one calendar month is equal to the gross expected return, which is the monthly Index return multiplied by the Fund's monthly leveraged investment objective, minus (i) financing charges incurred by the portfolio and (ii) daily operating expenses. For instance, if the Index returns 2% on a given day, the gross expected return of the Fund would be 3%, but the net expected return, which factors in the cost of financing the portfolio and the impact of operating expenses, would be lower. The Fund will reposition its portfolio at the end of every calendar month. Therefore, if an investor purchases Fund shares at the close of the markets at the end of a given calendar month, the investor's exposure to the Index would reflect 125% of the performance of the Index during the following calendar month, subject to the charges and expenses noted above.

The Fund may have difficulty in achieving its monthly leveraged investment objective due to fees, expenses, transaction costs, income items, accounting standards, significant purchase and redemption activity by Fund shareholders and/or disruptions or a temporary lack of liquidity in the markets for the securities held by the Fund.

An exchange or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may result in the Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and/or may incur substantial trading losses.

If the Fund is unable to obtain leveraged exposure to the Index consistent with its investment objective, such as situations in which the instruments utilized by the Fund are thinly traded or have a limited market, the Fund could, among other things, fail to meet its monthly investment objective.

**Examples of the Impact of Monthly Leveraging and Compounding.** For a period longer than one calendar month, the pursuit of calendar month goals may result in calendar month leveraged compounding, which means that the return of the Index over a period of time greater than one calendar month multiplied by the Fund's calendar month target (*e.g.*, 125%) generally will not equal the Fund's performance over that same period. As such, although federal regulations require that this prospectus include annualized performance and multi-year expense information for the Fund, investors should bear in mind that the Fund seeks calendar month, and not annual, investment results. A one-year period is used for illustrative purposes only. Deviations from the returns of the Index times the Fund's multiplier (125%) can occur over short periods.

Consider the following examples:

Mary is considering investments in two Funds, Fund A or Fund B. Fund A is a traditional index fund which seeks (before fees and expenses) to match the performance of the XYZ index. Fund B is a leveraged Fund and seeks calendar month leveraged investment results (before fees and expenses) that correspond to 125% of the calendar month performance of the XYZ index.

In January, the XYZ index increases in value from $100 to $105, a gain of 5%. In February, the XYZ index declines from $105 back to $100, a loss of 4.76%. In the aggregate, the XYZ index has not moved.

An investment in Fund A would be expected to gain 5% in January and lose 4.76% in February to return to its original value. The following example assumes a $100 investment in Fund A when the index is also valued at $100:

**FUND A – A Traditional Index Fund** 

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| | | | | |
|:---|:---|:---|:---|:---|
| Month | &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Value<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index Monthly<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Cumulative<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Value of<br> Investment<br>|
|  | $100.00 |  |  | $100.00 |
| January | $105.00 | 5.00% | 5.00% | $105.00 |
| February | $100.00 | -4.76% | 0.00% | $100.00 |

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The same $100 investment in Fund B, however, would be expected to gain 6.25% in January (125% of 5%) but decline 5.95% in February.

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**FUND B – 1.25X Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Month | &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Value<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index Monthly<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; 125% of<br> Monthly Index<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Value of<br> Investment<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Cumulative<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Investment<br> Cumulative<br> Performance<br>|
|  | $100.00 |  |  | $100.00 |  |  |
| January | $105.00 | 5.00% | 6.25% | $106.25 | 5.00% | 6.25% |
| February | $100.00 | -4.76% | -5.95% | $99.93 | 0.00% | -0.07% |

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Although the percentage decline is smaller in February than the percentage gain in January, the loss is applied to a higher principal amount so the investment in Fund B has a loss of 0.07% even when the aggregate index value for the two-month period has not declined. (These calculations do not include the charges for expense ratio and the financing charges.)

An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 125% exposure to the Index from the time of their investment through the end of the month. The actual exposure is a function of the performance of the Index from the end of the prior calendar month to the date of investment in the Fund. If the Fund's shares are held through the end of a calendar month or months, the Fund's performance is likely to deviate from the multiple of the Index's performance for the longer period.

**Examples of the Impact of Index Volatility**. The Fund rebalances its portfolio on a monthly basis, increasing exposure in response to that calendar month's gains or reducing exposure in response to that calendar's losses. Monthly rebalancing will typically cause the Fund to lose money if the Index experiences volatility. An index's volatility rate is a statistical measure of the magnitude of fluctuations in the index's returns over a defined period. For periods longer than a calendar month, volatility in the performance of the Index from month to month is the primary cause of any disparity between the Fund's actual returns and the returns of the Index for such period. Volatility causes such disparity because it exacerbates the effects of compounding on the Fund's returns. In addition, the effects of volatility are magnified in the Funds due to leverage. Consider the following three examples that demonstrate the effect of volatility on a hypothetical fund:

**<u>Example 1</u> <u>– Underlying Index Experiences Low Volatility</u>** 

Mary invests $10.00 in a 1.25X Bull Fund on the last day of Calendar Month 1. During Calendar Month 2, the Fund's underlying index rises from 100 to 102, a 2% gain. Mary's investment rises 2.5% to $10.25. Mary holds her investment through the end of Calendar Month 3, during which the 1.25X Bull Fund's underlying index rises from 102 to 104, a gain of 1.96%. Mary's investment rises to $10.50, a gain during Calendar Month 3 of 2.45%. For the two calendar month period since Mary invested in the 1.25X Bull Fund, the underlying index gained 4% although Mary's investment increased by 4.95%. Because the underlying index continued to trend upwards with low volatility, Mary's return closely correlates to the 125% return of the return of the underlying index for the period.

**<u>Example 2</u> <u>– Underlying Index Experiences High Volatility</u>** 

Mary invests $10.00 in a 1.25X Bull Fund on the last day of Calendar Month 1. During Calendar Month 2, the 1.25X Bull Fund's underlying index rises from 100 to 110, a 10% gain, and Mary's investment rises 12.5% to $11.25. Mary continues to hold her investment through the end of Calendar Month 3, during which the 1.25X Bull Fund's underlying index declines from 110 to 90, a loss of 18.18%. Mary's investment declines by 22.73%, from $11.25 to $8.69. For the two calendar month period since Mary invested in the 1.25X Bull Fund, its underlying index lost 10% while Mary's investment decreased from $10 to $8.69, a 13.1% loss. The volatility of the underlying index affected the correlation between the underlying index's return for the two calendar month periods and Mary's return. In this situation, Mary lost more than 1.25 times the return of the underlying index.

**<u>Example 3</u> <u>– Intra Month Investment with Volatility</u>** 

The examples above assumed that Mary purchased the Fund on the last day of the relevant calendar month and received exposure equal to 125% of her investment. If she made an investment on a subsequent day, she would have received a beta determined by the performance of the underlying index from the end of the prior calendar month until the date of the purchase.

Mary invests $10.00 in a 1.25X Bull Fund on the 5th day of Calendar Month 1. From the end of the prior calendar month until the day on which Mary invests, the underlying index moves from 100 to 102, a 2% gain. In light of that gain, the 1.25X Bull Fund beta at the point at which Mary invests is 124%. During the remainder of Calendar Month 1, the 1.25X Bull Fund's underlying index rises from 102 to 110, a gain of 7.84%, and Mary's investment rises 9.72% (which is the underlying index gain of 7.84% multiplied by the 124% beta that she received) to $10.97.

**Market Volatility**. The Fund seeks to provide a return which is a multiple of the calendar month performance of the Index. The Fund does not attempt to, and should not be expected to, provide returns which are a multiple of the return of the Index for periods other than one calendar month. The Fund rebalances its portfolio on a calendar month basis, increasing exposure in response to that month's gains or reducing exposure in response to that month's losses.

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Monthly rebalancing will impair the Fund's performance if the Index experiences volatility. For instance, the Fund would be expected to lose 3.9% (as shown in Table 1 below) if the Index provided no return over a one year period and experienced annualized volatility of 25%. If the Index's annualized volatility were to rise to 50%, the hypothetical loss for a one year period for the Fund widens to approximately 12.6%.

**Table 1 – Impact of Hypothetical Volatility Levels on Returns** 

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| | |
|:---|:---|
| Volatility Range | 1.25X Bull Fund Loss |
| 10% | &nbsp;&nbsp;&nbsp;&nbsp; -0.7% |
| 25% | &nbsp;&nbsp;&nbsp;&nbsp; -3.9% |
| 50% | &nbsp;&nbsp;&nbsp;&nbsp; -12.6% |
| 75% | &nbsp;&nbsp;&nbsp;&nbsp; -21.9% |
| 100% | &nbsp;&nbsp;&nbsp;&nbsp; -30.9% |

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The annualized volatility for the Index for the five year period ended September 30, 2025 was 23.11%. Since market volatility has negative implications for the Fund which rebalances on a calendar month basis, investors should be sure to monitor and manage their investments in the Fund, particularly in volatile markets. The negative implications of volatility noted in Table 1 can be combined with the recent volatility provided above to give investors some sense of the risks of holding the Fund for longer periods over the past five years. Historical index volatility and performance are not likely indicative of future volatility and performance. This information is intended to simply underscore the fact that the Fund is designed as a short-term trading vehicle. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios.

**The Projected Returns of the Fund for Shares Held Longer than a Calendar Month**. The Fund seeks calendar month investment results which should not be equated with seeking a goal for longer than a calendar month. For instance, if the Index gains 10% during a year, the Fund should not be expected to provide a return of 12.5% for the year. This is true because the pursuit of calendar month goals may result in calendar month compounding, which means that the return of the Index over a period of time greater than one calendar month multiplied by 125% will not generally equal the Fund's performance over that same period.

The following tables set out a range of hypothetical calendar month performances during a given calendar year of a hypothetical underlying index and demonstrate how changes in the index impact the hypothetical Fund's performance for each calendar month and cumulatively up to, and including, the entire calendar year. The tables are based on a hypothetical $100 investment in the hypothetical Fund over a 12-month calendar period and do not reflect expenses of any kind.

**Table 2 – The Index Lacks a Clear Trend for a Period Longer Than One Month** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Index | Index | Index | Fund | Fund | Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  |
| January | 105 | 5.00% | 5.00% | $106.25 | 6.25% | 6.25% |
| February | 110 | 4.76% | 10.00% | $112.57 | 5.95% | 12.57% |
| March | 100 | -9.09% | 0.00% | $99.78 | -11.36% | -0.22% |
| April | 90 | -10.00% | -10.00% | $87.31 | -12.50% | -12.69% |
| May | 85 | -5.56% | -15.00% | $81.24 | -6.94% | -18.76% |
| June | 100 | 17.65% | 0.00% | $99.16 | 22.06% | -0.84% |
| July | 95 | -5.00% | -5.00% | $92.97 | -6.25% | -7.03% |
| August | 100 | 5.26% | 0.00% | $99.08 | 6.58% | -0.92% |
| September | 105 | 5.00% | 5.00% | $105.27 | 6.25% | 5.27% |
| October | 100 | -4.76% | 0.00% | $99.01 | -5.95% | -0.99% |
| November | 95 | -5.00% | -5.00% | $92.82 | -6.25% | -7.18% |
| December | 105 | 10.53% | 5.00% | $105.04 | 13.16% | 5.04% |

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The cumulative annual performance of the hypothetical underlying index in Table 2 is 5.00%. The return of the hypothetical Fund for the calendar year is 13.16%. The volatility of the hypothetical underlying index's performance and the lack of a clear trend results in performance for the hypothetical Fund for the period which bears little relationship to the performance of the hypothetical underlying index for the year.

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**Table 3 – The Index Rises in a Clear Trend** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Index | Index | Index | Fund | Fund | Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  |
| January | 102 | 2.00% | 2.00% | $102.50 | 2.50% | 2.50% |
| February | 104 | 1.96% | 4.00% | $105.01 | 2.45% | 5.01% |
| March | 106 | 1.92% | 6.00% | $107.54 | 2.40% | 7.54% |
| April | 108 | 1.89% | 8.00% | $110.07 | 2.36% | 10.07% |
| May | 110 | 1.85% | 10.00% | $112.62 | 2.31% | 12.62% |
| June | 112 | 1.82% | 12.00% | $115.18 | 2.27% | 15.18% |
| July | 114 | 1.79% | 14.00% | $117.75 | 2.23% | 17.75% |
| August | 116 | 1.75% | 16.00% | $120.33 | 2.19% | 20.33% |
| September | 118 | 1.72% | 18.00% | $122.93 | 2.16% | 22.93% |
| October | 120 | 1.69% | 20.00% | $125.53 | 2.12% | 25.52% |
| November | 122 | 1.67% | 22.00% | $128.15 | 2.08% | 18.15% |
| December | 124 | 1.64% | 24.00% | $130.77 | 2.05% | 30.77% |

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The cumulative annual performance of the hypothetical underlying index in Table 3 is 24.00%. The return of the hypothetical Fund for the calendar year is 30.77%. In this case, because of the positive hypothetical underlying index trend, the hypothetical Fund's gain is greater than 125% of the hypothetical underlying index gain for the year.

**Table 4 – The Index Declines in a Clear Trend** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Index | Index | Index | Fund | Fund | Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  |
| January | 98 | -2.00% | -2.00% | $97.50 | -2.50% | -2.50% |
| February | 96 | -2.04% | -4.00% | $95.01 | -2.55% | -4.99% |
| March | 94 | -2.08% | -6.00% | $92.54 | -2.60% | -7.46% |
| April | 92 | -2.13% | -8.00% | $90.08 | -2.66% | -9.92% |
| May | 90 | -2.17% | -10.00% | $87.63 | -2.72% | -12.37% |
| June | 88 | -2.22% | -12.00% | $85.20 | -2.78% | -14.80% |
| July | 86 | -2.27% | -14.00% | $82.78 | -2.84% | -17.22% |
| August | 84 | -2.33% | -16.00% | $80.37 | -2.91% | -19.63% |
| September | 82 | -2.38% | -18.00% | $77.98 | -2.98% | -22.02% |
| October | 80 | -2.44% | -20.00% | $75.60 | -3.05% | -24.40% |
| November | 78 | -2.50% | -22.00% | $73.24 | -3.13% | -26.76% |
| December | 76 | -2.56% | -24.00% | $70.89 | -3.21% | -29.11% |

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The cumulative annual performance of the hypothetical underlying index in Table 4 is –24.00%. The return of the hypothetical Fund for the calendar year is –29.11%. In this case, because of the negative hypothetical underlying index trend, the hypothetical

Fund's decline is less than 125% of the hypothetical underlying index decline for the year.

Direxion Funds Prospectus

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ADDITIONAL INFORMATION REGARDING PRINCIPAL Risks

An investment in the Fund entails risks. The Fund may not achieve its investment objective and may decline in value. In addition, a Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review and understand all of the Fund's risks before making an investment. The Fund is not a complete investment program. Risks of investing in the Fund are described below.

**Effects of Compounding and Market Volatility Risk**

The Fund's performance for periods greater than a full calendar month which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month will be the result of each month's returns compounded over the period, which is likely to differ from an Index's performance times the stated multiple in the Fund's investment objective, before fees and expenses. Compounding has a significant impact on leveraged funds and funds that rebalance monthly.

Over time, the cumulative percentage increase or decrease in the value of the Fund's portfolio may diverge significantly from the cumulative percentage increase or decrease in 125% of the return of the Index due to the compounding effect of losses and gains on the returns of the Fund. It also is expected that the Fund's use of leverage will cause the Fund to underperform the return of 125% of the Index in a trendless or flat market.

The chart below provides examples of how Index volatility could affect the Fund's performance. The Index's volatility rate is a statistical measure of the magnitude of fluctuations in the returns of the Index. Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities in the Index. The chart below illustrates the impact of two principal factors – Index volatility and Index performance – on Fund performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates (to obtain leveraged exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from 125% of the performance of the Index.

As shown below, the Fund would be expected to lose 3.9% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. If the Index's annualized volatility were to rise to 75%, the hypothetical loss for a one-year period for the Fund widens to approximately 53.6%.

At higher ranges of volatility, there is a chance of a significant loss of value in the Fund. For instance, if the Index's annualized

volatility is 100%, the Fund would be expected to lose approximately 30.9% of its value, even if the cumulative return of the Index for the year was 0%. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One Year**<br> **Index**<br>| **125%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-75%** | -70.4% | -71.9% | -76.2% | -80.7% | -84.9% |
| **-50%** | **-63%** | -59.7% | -61.5% | -66.5% | -72.5% | -77.6% |
| **-40%** | **-50%** | -48.6% | -50.7% | -56.5% | -63.3% | -69.8% |
| **-30%** | **-38%** | -37.0% | -39.4% | -45.7% | -53.0% | -60.5% |
| **-20%** | **-25%** | -25.1% | -27.7% | -35.1% | -42.7% | -50.6% |
| **-10%** | **-13%** | -13.0% | -16.0% | -24.0% | -32.4% | -40.7% |
| **0%** | **0%** | -0.7% | -3.9% | -12.6% | -21.9% | -30.9% |
| **10%** | **13%** | 11.9% | 8.3% | -1.1% | -11.87% | -20.6% |
| **20%** | **25%** | 24.5% | 20.6% | 10.3% | -0.7% | -9.3% |
| **30%** | **38%** | 37.3% | 33.0% | 21.9% | 10.4% | 1.9% |
| **40%** | **50%** | 50.2% | 45.4% | 33.3% | 21.7% | 11.2% |
| **50%** | **63%** | 63.2% | 57.9% | 44.8% | 33.1% | 22.0% |
| **60%** | **75%** | 76.2% | 70.3% | 56.2% | 42.60% | 33.4% |

---

The charts is intended to underscore the fact that the Fund is designed as a short-term trading vehicle for investors who intend to actively monitor and manage their portfolios.

For additional information and examples demonstrating the effects of volatility and index performance on the long-term performance of the Fund, see the "Additional Information Regarding Investment Techniques and Policies" section, and "Special Note Regarding the Correlation Risks of the Fund" in the Fund's Statement of Additional Information ("SAI").

Holding an unmanaged position opens the investor to the risk of market volatility adversely affecting the performance of the investment. The Fund is not appropriate for investors who do not intend to actively monitor and manage their portfolios.

**Derivatives Risk** 

The Fund may obtain exposure through derivatives by investing in swap agreements, futures contracts, forward contracts, options, and options on futures contracts. Investing in derivatives may be considered aggressive and may expose the Fund to risks different from, and possibly greater than, risks associated with investing directly in the reference asset(s) underlying the derivative. The use of derivatives may result in larger losses or smaller gains than investing in the underlying securities directly. The use of derivatives may expose the Fund to additional risks such as counterparty risk, liquidity risk and increased correlation risk. When the Fund uses derivatives, there may be imperfect correlation between the value of the underlying reference assets and

Direxion Funds Prospectus

------

the derivative, which may prevent the Fund from achieving its investment objective.

The Fund expects to use a combination of swaps on the Index and swaps on an ETF that is designed to track the performance of that index. The performance of an ETF may not track the performance of the Index due to embedded costs and other factors. Thus, to the extent the Fund invests in swaps that use an ETF as the reference asset, the Fund may be subject to greater correlation risk and may not achieve as high a degree of correlation with the Index as it would if the Fund only used swaps on the Index. If the Index have a dramatic intraday move in value that causes a material decline in the Fund's NAV, the terms of the swap agreement between the Fund and its counterparty may allow the counterparty to immediately close out of the transaction with the Fund. In such circumstances, the Fund may be unable to enter into another swap agreement or invest in other derivatives to achieve the desired exposure consistent with the Fund's leveraged investment objective. This may prevent the Fund from achieving its leveraged investment objective particularly if the Index reverses all or a portion of its intraday move by the end of the day. The value of an investment in the Fund may change quickly and without warning. Any financing, borrowing or other costs associated with using derivatives may also have the effect of lowering the Fund's return. Such costs may increase as interest rates rise.

In addition, the Fund's investments in derivatives are subject to the following risks:

● *Swap Agreements*. Swap agreements are entered into primarily with major global financial institutions for a specified period which may range from one day to more than one year. In a standard swap transaction, two parties agree to exchange the return (or differentials in rates of return) earned or realized on particular predetermined reference or underlying securities or instruments. The gross return to be exchanged or swapped between the parties is calculated based on a notional amount or the return on or change in value of a particular dollar amount invested in a reference asset. Swap agreements are generally traded over-the-counter, and therefore, may not receive regulatory protection, which may exposure investors to significant losses.

● *Futures Contracts*. A futures contact is a contract to purchase or sell a particular security, or the cash value of an index, at a specified future date at a price agreed upon when the contract is made. Under such contracts, no delivery of the actual securities is required. Rather, upon the expiration of the contract, settlement is made by exchanging cash in an amount equal to the difference between the contract price and the closing price of a security or index at expiration, net of the variation margin that was previously paid.

● *Forward Contracts*. Forward contracts are two-party contracts pursuant to which one party agrees to pay the counterparty a fixed price for an agreed upon amount of commodities, securities, or the cash value of the commodities, securities or the securities index, at an agreed upon date. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which

may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract.

● *Options*. An option is a contract that gives the purchaser (holder) of the option, in return for a premium, the right to buy from (call) or sell to (put) the seller (writer) of the option the security or currency underlying the option at a specified exercise price at any time during the term of the option (normally not exceeding nine months). The writer of an option has the obligation upon exercise of the option to deliver the underlying security or currency upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security or currency.

● *Options on Futures Contracts*. An option on a futures contract provides the holder with the right to enter into a "long" position in the underlying futures contract, in the case of a call option, or a "short" position in the underlying futures contract in the case of a put option, at a fixed exercise price to a stated expiration date. Upon exercise of the option by the holder, the contract market clearing house establishes a corresponding short position for the writer of the option, in the case of a call option, or a corresponding long position, in the case of a put option.

**Leverage Risk** 

To achieve its monthly investment objective, the Fund employs leverage and is exposed to the risk that adverse calendar month performance of the Index will be leveraged. This means that, if the Index experiences adverse calendar month performance, your investment in the Fund will be reduced by an amount equal to 1.25% for every 1% of adverse performance, not including the cost of financing the portfolio and the impact of operating expenses, which would further lower your investment. Leverage will also have the effect of magnifying any difference in the Fund's correlation with the Index.

**Counterparty Risk** 

Counterparty risk is the risk that a counterparty is unwilling or unable to make timely payments to meet its contractual obligations with respect to the amount the Fund expects to receive from a counterparty to a financial instrument entered into by the Fund. The Fund generally enters into derivatives transactions, such as the swap agreements, with counterparties such that either party can terminate the contract without penalty prior to the termination date. If a counterparty terminates a contract, the Fund may not be able to invest in other derivatives to achieve the desired exposure, or achieving such exposure may be more expensive. The Fund may be negatively impacted if a counterparty becomes bankrupt or otherwise fails to perform its obligations under such a contract, or if any collateral posted by the counterparty for the benefit of the Fund is insufficient or there are delays in the Fund's ability to access such collateral. If the counterparty becomes bankrupt or defaults on its payment obligations to the Fund, it may experience significant delays in obtaining any recovery, may obtain only a limited recovery or obtain no recovery and the value of an investment held by the Fund may decline. The Fund may also not be

Direxion Funds Prospectus

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able to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, if such remedies are stayed or eliminated under special resolutions adopted in the United States, the European Union and various other jurisdictions. European Union rules and regulations intervene when a financial institution is experiencing financial difficulties and could reduce, eliminate, or convert to equity a counterparty's obligations to the Fund (sometimes referred to as a "bail in").

The Fund typically enters into transactions with counterparties that present minimal risks based on the Adviser's assessment of the counterparty's creditworthiness, or its capacity to meet its financial obligations during the term of the derivative agreement or contract. The Adviser considers factors such as counterparty credit rating among other factors when determining whether a counterparty is creditworthy. The Adviser regularly monitors the creditworthiness of each counterparty with which the Fund transacts. The Fund generally enters into swap agreements or other financial instruments with major, global financial institutions and seeks to mitigate risks by generally requiring that the counterparties for the Fund to post collateral, marked to market daily, in an amount approximately equal to what the counterparty owes the Fund, subject to certain minimum thresholds. To the extent any such collateral is insufficient or there are delays in accessing the collateral, the Fund will be exposed to the risks described above. If a counterparty's credit ratings decline, the Fund may be subject to a bail-in, as described above.

Because the Fund may enter into swap agreements with a limited number of counterparties, which may increase the Fund's exposure to counterparty credit risk. The Fund does not specifically limit its counterparty risk with respect to any single counterparty. There is a risk that no suitable counterparties are willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. Additionally, although a counterparty to a centrally cleared swap agreement and/or an exchange-traded futures contract is often backed by a futures commission merchant ("FCM") or a clearing organization that is further backed by a group of financial institutions, there may be instances in which a FCM or a clearing organization would fail to perform its obligations, causing significant losses to the Fund.

**Rebalancing Risk** 

If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

**Intra-Calendar Month Investment Risk** 

The Fund seeks calendar month leveraged investment results. Thus, an investor who purchases shares on a day other than the last business day of a calendar month will likely obtain more, or less, than 125% investment exposure to the Index, depending upon the movement of the Index from the end of the prior calendar month until the time of investment by an investor. If, since the beginning of the month, the Index has moved in a direction favorable to the Fund at the time of an investor's investment in it, the investor will receive exposure to the Index less than 125%. Conversely, if the Index has moved in a direction adverse to the Fund at the time of an investor's investment in it, the investor will receive exposure to the Index greater than 125%.

**Monthly Index Correlation Risk** 

There can be no guarantee that the Fund will achieve a high degree of correlation with its investment objective relative to the Index. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. A number of factors may adversely affect the Fund's correlation with the Index, including fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly as a reference asset for derivative instruments, income items, valuation methodology, accounting standards and disruptions or illiquidity in the markets for the securities or derivatives held by the Fund. Market disruptions, regulatory restrictions or extreme volatility will also adversely affect the Fund's ability to adjust exposure to the required levels. Activities surrounding index reconstitutions and other index repositioning events may hinder the Fund's ability to meet its calendar month leveraged investment objective.

Because the Index may include instruments that trade on a different market than the Fund, the Fund's return may vary from a multiple of the performance of the Index because different markets may close before the Exchange opens or may not be open for business on the same calendar days as the Fund. Additionally, due to differences in trading hours between these different markets, and because the Index may be calculated using prices obtained at times other than the Fund's NAV calculation time, correlation to the Index may be measured by comparing the Fund's monthly return to a multiple of the calendar month performance of the Index or by comparing the monthly change in the Fund's NAV per share to a multiple of the calendar month performance of one or more U.S. ETFs that reflect the values of the securities in the Index as of a Fund's NAV calculation time. It is important to note that correlation to these ETFs may vary from the correlation to the Index due to embedded costs and other factors.

The Fund may not have investment exposure to all securities in the Index, or its weighting of investment exposure to such stocks or industries may be different from that of the Index. In addition, the Fund may invest in securities or financial instruments not included in the Index. The Fund may take or refrain from taking positions in order to improve tax efficiency or comply with regulatory restrictions, either of which may negatively affect the Fund's correlation with the

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Index. The Fund may be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Additionally, securities in the Index may trade on markets that may not be open on the same day as the Fund, which may cause a difference between the performance of the Fund and the Index.

Any of these factors individually or in combination with other factors could decrease the correlation between the monthly performance of the Fund and the Index and may hinder the Fund's ability to meet its leveraged investment objective.

**Other Investment Companies (including ETFs) Risk** 

The Fund may invest in, or obtain exposure to, another investment company, including an ETF (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, including an ETF, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. The Fund must rely on the underlying fund to achieve its investment objective. Accordingly, if the underlying fund fails to achieve its investment objective, the Fund's performance will likely be adversely affected. To the extent the Fund obtains exposure to an underlying fund, including an ETF, by entering into a derivatives contract whose reference asset is the underlying fund, the Fund will not be a shareholder of the underlying fund but will still be exposed to the risk that it may fail to achieve its investment objective and adversely impact the Fund.

In addition, to the extent that the Fund invests in an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure, including any risks associated with representative sampling . For example, shares of ETFs may trade at a discount or a premium to an ETF's net asset value, which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend sales or redemptions of its shares due to market circumstances that make it impracticable to conduct such transactions, any of which may adversely impact the Fund's performance. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

**Passive Investment and Index Performance Risk** 

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index

relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry calculations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the methodology underlying the Index or the calculation of the Index will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell a constituent due to a decline in its performance or based on changes to the prospects of a constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

**Market Risk** 

The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, inflation rates and/or investor expectations concerning such rates, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, and public health risks. Interest rates and inflation rates may change frequently and drastically as a result of various factors and the Fund's investments may not keep pace with these changes.

Securities markets also may experience long periods of decline in value. During a general downturn in the securities markets, multiple asset classes may decline in value simultaneously and changes in the financial condition of a single issuer can impact a market the markets broadly. The Fund is subject to the risk that geopolitical events will disrupt markets and adversely affect global economies, markets, and exchanges. Local, regional or global events such as war, tariffs and trade wars, acts of terrorism, natural disasters, the spread of infectious illness or other public health issues, conflicts and social unrest or other events could have a significant impact on the Fund, its investments and the Fund's ability to achieve its investment objective. The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to the federal agencies and regulatory policies will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities, including the various counterparties utilized by the Fund.

Markets and market participants are increasingly reliant on information data systems. Inaccurate data, software or other technology malfunctions, programming inaccuracies, unauthorized use or access and similar circumstances may

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impair the performance of these systems and may have an adverse impact upon a single issuer, a group of issuers, or securities markets more broadly.

**Liquidity Risk** 

Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that are attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index.

To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties. Under such circumstances, the Fund may be unable to rebalance its exposure properly which may result in significantly more or less exposure and losses to the Fund. In such an instance, the Fund may increase its transaction fee, utilize derivatives instruments that are less correlated to the Index, change its investment objective, reduce its exposure or close.

**Consumer Discretionary Sector Risk** 

Because companies in the consumer discretionary sector manufacture products and provide discretionary services directly to the consumer, the success of these companies is tied closely to the performance of the overall domestic and international economy, including the functioning of the global supply chain, interest rates, inflation, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending, and may be strongly affected by social trends and marketing campaigns. Also, companies in the consumer discretionary sector may be subject to intense competition, which may have an adverse impact on a company's profitability. Changes in demographics and consumer tastes also can affect the demand for, and success of, consumer discretionary products in the marketplace.

**Information Technology Sector Risk** 

The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs. In addition, many information technology companies have limited product lines, markets, financial resources or personnel. Information technology companies and companies that rely

heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile and less liquid than the overall market. Information technology companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the information technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel. Companies in the application software industry, in particular, may also be negatively affected by the risk that subscription renewal rates for their products and services decline or fluctuate, leading to declining revenues. Companies in the systems software industry may be adversely affected by, among other things, actual or perceived security vulnerabilities in their products and services, which may result in individual or class action lawsuits, state or federal enforcement actions and other remediation costs. Companies in the computer software industry may also be affected by the availability and price of computer software technology components.

**Large-Capitalization Company Risk** 

Large-capitalization companies typically have significant financial resources, extensive product lines and broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at rates that may be achieved by well-managed smaller and mid-size companies, which may affect the companies' returns.

**Mid-Capitalization Company Risk** 

Mid-capitalization companies often have narrower markets for their goods and/or services and more limited managerial and financial resources. Furthermore, those companies often have limited product lines, services, markets, financial resources, less stable earnings, or are dependent on a small management group. In addition, because these stocks are not well known to the investing public, do not have significant institutional ownership and are followed by relatively few security analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease the value and liquidity of securities held by a Fund. As a result, the price of mid-capitalization companies can be more volatile and they may be less liquid than large-capitalization companies, which could increase the volatility of a Fund's portfolio.

**Depositary Receipt Risk** 

To the extent the Fund invests in, or has exposure to, foreign companies, investment may be in the form of depositary receipts or other securities convertible into securities of foreign issuers. American Depositary Receipts ("ADRs") are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. European Depositary Receipts ("EDRs") are receipts issued in Europe that evidence a similar ownership arrangement. Global Depositary Receipts ("GDRs") are receipts issued throughout the world that evidence a similar

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arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world. Depositary receipts will not necessarily be denominated in the same currency as their underlying securities. The issuers of certain depository receipts are under no obligation to distribute shareholder communications to holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Investments in depository receipts may be less liquid than the underlying shares in their primary trading markets. The issuers of depository receipts may discontinue issuing new depository receipts and withdraw existing depository receipts at any time.

Depositary receipts may be purchased through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may establish an unsponsored facility without participation by the issuer of the depositary security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts of the deposited securities. Fund investments in depositary receipts, which include ADRs, GDRs and EDRs, are deemed to be investments in foreign securities for purposes of the Fund's investment strategy.

**Foreign Securities Risk** 

Foreign instruments may involve greater risks than domestic instruments. As a result, the Fund's returns and NAV may be affected to a large degree by fluctuations in currency exchange rates, interest 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 United States, and there may be less public information available about foreign companies. Pursuant to regulatory changes effective in May 2024, many U.S., Canadian, and Mexican securities transitioned to a "T+1" (trade date plus one day) settlement cycle, while securities trading in most other foreign securities markets have longer settlement cycles. As a result, there are potential operational, settlement and other risks for the Funds associated with differences in the timing of settlement cycles between markets.

Foreign securities may involve additional risk, including, greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, organizations, entities and/or individuals, changes in international trade patterns, trade barriers, and other

protectionists or retaliatory measures. Additionally, the Fund may be impacted by a limitation on foreign ownership of securities, the imposition of withholding or other taxes, restrictions on the repatriation of cash or other assets, higher transaction and custody costs, delays in the settlement of securities, difficulties in enforcing contractual obligations and lower levels of regulation in the securities markets.

**Early Close/Trading Halt Risk** 

An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

**Equity Securities Risk** 

Publicly-issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests will cause the NAV of the Fund to fluctuate.

**High Portfolio Turnover Risk** 

Monthly rebalancing of the Fund's holdings pursuant to its monthly investment objective causes a much greater number of portfolio transactions when compared to most funds. In addition, there is the possibility of significantly increased short-term capital gains (which will be taxable to shareholders as ordinary income when distributed to them). The Fund calculates portfolio turnover without including the short-term cash instruments or derivative transactions that comprise the majority of the Fund's trading. As such, if the Fund's extensive use of derivative instruments were reflected, the calculated portfolio turnover rate would be significantly higher.

**Market Timing Activity Risk** 

Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading to take advantage of anticipated changes in market conditions. Frequent trading could increase the rate of the Fund's portfolio turnover, which involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups/mark-downs and other transaction costs on the sale of securities and reinvestments in other securities. Such sales also may result in adverse tax consequences to the Fund's shareholders from distributions to them of net gains realized on the sales. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund's performance. In addition, large movements of assets into and out of the Fund may have a negative impact on its ability to achieve its investment objective or its desired level of operating expenses. The risks associated with market timing activity and high portfolio turnover will have a negative impact on longer-term investments. Please see the "Financial

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Highlights" section of this Prospectus for the Fund's historic portfolio turnover rates.

**Money Market Instrument Risk** 

Money market instruments, including money market funds, depositary accounts and repurchase agreements may be used for cash management purposes. Money market funds may be subject to credit risk with respect to the short-term debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Repurchase agreements are contracts in which a seller of securities agrees to buy the securities back at a specified time and price. Repurchase agreements may be subject to market and credit risk related to the collateral securing the repurchase agreement. Money market instruments may also be subject to credit risks associated with the instruments in which they invest. There is no guarantee that money market instruments will maintain a stable value, and they may lose money.

**Non-Diversification Risk** 

The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. This means it has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer or the credit of a single counterparty and make the Fund more susceptible to risks associated with a single economic, political or regulatory occurrence than a diversified fund.

**Tax Risk** 

To qualify as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended, the Fund must meet certain requirements concerning the source of its income for each taxable year, meet certain asset diversification tests at the end of each taxable quarter, and meet annual distribution requirements. If in any year, the Fund were to fail to qualify as a RIC, and it was ineligible to, or was not able to, cure such failure, the Fund would be taxed in the same manner as an ordinary corporation subject to U.S. federal income tax on all of its income at the fund level as well as a tax to shareholders on such income when distributed by the Fund as an ordinary dividend. The resulting taxes could substantially reduce the Fund's net assets and the amount of income available for distribution. In addition, to requalify as a RIC, the Fund would be required to recognize unrealized gains, pay substantial taxes and interest and make certain distributions.

Other Risks of the Fund

**Investment Strategy Implementation Risk** 

The Adviser utilizes a quantitative methodology to select investments for the Fund. Although this methodology is designed to correlate the Fund's monthly performance with 125% of the monthly performance of the Index, there is

no assurance that the implementation of such methodology will be successful and will enable the Fund to achieve its investment objective.

**Commodity Pool Registration Risk** 

The Funds are considered commodity pools, and therefore each are subject to regulation under the Commodity Exchange Act and CFTC rules. Registration as a commodity pool requires compliance with such additional laws, regulations and enforcement policies which may potentially increase compliance costs and may affect the operations and financial performance of the Fund.

**Cybersecurity Risk** 

The increased use of technologies, such as the internet, to conduct business increases the operational, information security and related "cyber" risks both directly to the Fund and through its service providers. Similar types of cyber security risks are also present for issuers of securities in which the Fund may invest, which could result in material adverse consequences for such issuers. Unlike many other types of risks faced by the Fund, these risks typically are not covered by insurance. Cyber incidents can result from deliberate attacks or unintentional events. Cyber incidents may include, but are not limited to, gaining unauthorized access to digital systems (*e.g.*, through "hacking" or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, causing physical damage to computer or network systems, or causing operational disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (*i.e*., efforts to make network services unavailable to intended users).

Failures or breaches of the electronic systems of the Fund, the Fund's adviser, distributor, other service providers, counterparties, securities trading venues, or the issuers of securities in which the Fund invests have the ability to cause disruptions and negatively impact the Fund's business operations, potentially resulting in financial losses to the Fund and its shareholders. Cyber attacks may also interfere with the Fund's calculation of its NAV, result in the submission of erroneous trades , and could lead to violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs and/or additional compliance costs. While the Fund has established business continuity plans, there are inherent limitations in such plans, including the possibility that certain risks have not been identified and that prevention and remediation efforts will not be successful. Furthermore, the Fund cannot control the cyber security plans and systems of the Fund's service providers or issuers of securities in which the Fund invests.

**Investment Risk** 

An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. When you sell your Shares, they could be worth less than what you paid for them.

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**Risk of Global Economic Shock** 

Widespread disease, including public health disruptions, pandemics and epidemics (for example, COVID-19 including its variants), have been and may continue to be highly disruptive to economies and markets. Health crises could exacerbate political, social, and economic risks, and result in breakdowns, delays, shutdowns, social isolation, civil unrest, periods of high unemployment, shortages in and disruptions to the medical care and consumer goods and services industries, and other disruptions to important global, local and regional supply chains, with potential corresponding results on the performance of the Fund and its investments.

Additionally, wars, military conflicts, sanctions, acts of terrorism, sustained elevated inflation, supply chain issues or other events could have a significant negative impact on global financial markets and economies. Russia's military incursions in Ukraine have led to, and may lead to additional sanctions being levied by the United States, European Union and other countries against Russia. The ongoing hostilities between the two countries could result in additional widespread conflict and could have a severe adverse effect on the region and certain markets. Sanctions on Russian exports could have a significant adverse impact on the Russian economy and related markets and could affect the value of the Fund's investments, even beyond any direct exposure the Fund may have to the region or to adjoining geographic regions. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could have a severe adverse effect on the region, including significant negative impacts on the economy and the markets for certain securities and commodities, such as oil and natural gas. Furthermore, the possibility of a prolonged conflict between Hamas and Israel, and the potential expansion of the conflict in the surrounding areas and the involvement of other nations in such conflict, such as the Houthi movement's attacks on marine vessels in the Red Sea, could further destabilize the Middle East region and introduce new uncertainties in global markets, including the oil and natural gas markets. How long such tensions and related events will last cannot be predicted. These tensions and any related events could have significant impact on the Fund performance and the value of an investment in the Fund.

**Natural Disaster/Epidemic Risk** 

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics (for example, COVID-19), have been and can be highly disruptive to economies and markets and have recently led, and may continue to lead, to increased market volatility and significant market losses. Such natural disaster and health crises could

exacerbate political, social, and economic risks, and result in significant breakdowns, delays, shutdowns, social isolation, and other disruptions to important global, local and regional supply chains affected, with potential corresponding results on the operating performance of the Fund and its investments. A climate of uncertainty and panic, including the contagion of infectious viruses or diseases, may adversely affect global, regional, and local economies and reduce the availability of potential investment opportunities, and increases the difficulty of performing due diligence and modeling market conditions, potentially reducing the accuracy of financial projections. Under these circumstances, the Fund may have difficulty achieving its investment objective, which may adversely impact Fund performance. Further, such events can be highly disruptive to economies and markets, significantly disrupt the operations of individual companies (including, but not limited to, the Fund's investment advisor, third party service providers, and counterparties), sectors, industries, markets, securities and commodity exchanges, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund's investments. These factors can cause substantial market volatility, exchange trading suspensions and closures, changes in the availability of and the margin requirements for certain instruments, and can impact the ability of the Fund to complete redemptions and otherwise affect Fund performance. A widespread crisis would also affect the global economy in ways that cannot necessarily be foreseen. How long such events will last and whether they will continue or recur cannot be predicted. Impacts from these events could have a significant impact on the Fund's performance, resulting in losses to your investment.

**Operational Risk** 

The Fund and its service providers are subject to operational risks arising from, among other things, human error, systems and technology errors and disruptions, including related to the use of artificial intelligence, failed or inadequate controls, and fraud. These errors may adversely affect the Fund's operations, including its ability to execute its investment process or calculate or disseminate its net asset value in a timely manner. While the Fund seeks to minimize such events through controls and oversight, there may still be failures and the Fund may be unable to recover any damages associated with such failures. These failures may have a material adverse effect on the Fund's returns.

**Regulatory Risk** 

The Fund is subject to the risk that a change in U.S. law and related regulations will impact the way the Fund operates, increase the particular costs of the Fund's operations and/or change the competitive landscape. Additional legislative or regulatory changes could occur that may materially and adversely affect the Fund.

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About Your Investment

**Share Price of the Fund**

A fund's share price is known as its NAV. The Fund's share price is calculated as of the close of regular trading on the NYSE, usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The NYSE may close early on the Business Day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

The value of the Fund's assets that trade in markets outside the United States or in currencies other than the U.S. Dollar may fluctuate when foreign markets are open but the Fund is not open for business.

All shareholder transaction orders received in good form by the Fund's transfer agent or an authorized financial intermediary by the time that the Fund calculates its NAV (as described above) will be processed at that day's NAV, plus any applicable sales charges. Transaction orders received after the time that the Fund calculates its NAV will receive the next calculated NAV, plus any applicable sales charges.

Share price is calculated by dividing the Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." The Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations:

● Equity securities listed and traded principally on any domestic or foreign national securities exchange are valued at the last sales price. Exchange-traded funds are valued at the last sales price prior to Valuation Time. Securities primarily traded in the NASDAQ Global Market<sup>®</sup> are valued using the NASDAQ<sup>®</sup> Official Closing Price. Over-the counter securities are valued at the last sales price in the over-the-counter market;

● Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time;

● Options are valued at the composite price, using National Best Bid and Offer quotes; and

● Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that the Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as the Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

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**Rule 12b-1 Fees**

The Fund has adopted an Investor Class distribution plan under Rule 12b-1 (the "Investor Class Plan") pursuant to which the Fund pays for distribution and services provided to Fund shareholders. Because these fees are paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

Pursuant to its Investor Class Plan, the Fund may pay an annual Rule 12b-1 fee of up to 1.00% of its average daily net assets. The Board of Trustees has currently authorized the Fund to pay a maximum annual Rule 12b-1 fee of 0.25% of its average daily net assets.

Under an agreement with the Fund, your registered investment adviser, financial planner, broker-dealer or other financial intermediary ("Financial Adviser"), may receive Rule 12b-1 fees from the Fund. In exchange, your Financial Adviser may provide a number of services, such as: placing your orders and issuing confirmations; providing investment advice, research and other advisory services; handling correspondence for individual accounts; acting as the sole shareholder of record for individual shareholders; issuing shareholder statements and reports; executing daily investment "sweep" functions; and other shareholder services as described in the Fund's Statement of Additional Information ("SAI"). For more information on these and other services, you should speak directly to your Financial Adviser. Your Financial Adviser may charge additional account fees for services beyond those specified above.

**Additional Payments to Financial Intermediaries**

The Adviser (and its affiliates) may make substantial payments to financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Adviser receives from the Fund. These payments may be made to financial intermediaries for marketing, promotional or related expenses. These payments, sometimes referred to as "revenue sharing," do not change the price paid by investors to purchase shares of the Fund or the amount investors in the Fund would receive as proceeds from the redemption of such shares and will not increase the expenses of investing in the Fund.

Examples of "revenue sharing" payments include, but are not limited to, payment to financial institutions for "shelf space" or access to a third party platform or portfolio offering list or other marketing programs, including, but not limited to, inclusion of the Fund on preferred or recommended sales lists, mutual fund "supermarket" platforms and other formal sales programs; granting the Adviser access to the financial institution's sales force; granting the Adviser access to the financial institution's conferences and meetings; assistance in training and educating the financial institution's personnel; and obtaining other forms of marketing support. Revenue sharing payments also may be made to financial intermediaries that provide various services to the Fund, including but not limited to, record keeping, shareholder servicing, transaction processing, sub-accounting services and other administrative services. The Adviser may make other payments or allow other promotional incentives to financial intermediaries to the extent permitted by the SEC, by the Financial Industry Regulatory Authority, Inc. ("FINRA") and by other applicable laws and regulations.

The level of revenue sharing payments made to financial intermediaries may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of the Fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of the Fund available to its customers and may allow the Fund greater access to the financial institution's customers.

**Shareholder Services Guide**

You may invest in the Fund through traditional investment accounts, including Automatic Investment Plans, individual retirement accounts ("IRAs") (including Roth IRAs), self-directed retirement plans or company-sponsored retirement plans. Applications and descriptions of any service fees for retirement or other accounts are available directly from the Fund. You may invest directly with the Fund or through certain financial intermediaries. Any transaction effected through a financial intermediary may be subject to a processing fee. The minimum initial investment is set forth below. Rafferty may waive these minimum requirements at its discretion. Contact Rafferty if you need additional information or assistance.

Shares of the Fund have not been registered for sale outside of the United States. The Fund generally does not sell shares to investors residing outside of the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.

The Fund offers the option to submit purchase orders through your financial intermediary or to send purchase orders to the Fund as described in the table below.

Direxion Funds Prospectus

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| Minimum Investment: <br> Traditional Investment <br> Accounts<br>| &nbsp;&nbsp; $25,000 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $500 |
| Minimum Investment: <br> Retirement Accounts <br> (Traditional, Roth and Spousal <br> IRAs)<br>| &nbsp;&nbsp; $25,000 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $500 |
| By Mail | &nbsp;&nbsp; ●Complete and sign your application. <br> Remember to include all required <br> documents (if any).<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase.<br> ●Send the signed application and check to <br> (regular mail):<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (The Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Fund.)<br>| ●Complete an Investment Slip or provide <br> written instructions with your name, <br> account number and the Fund in which you <br> would like to invest.<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase and your account number.<br> ●Send the Investment Slip and check to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (The Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Fund.)<br>|
| By Wire | &nbsp;&nbsp; ●Contact Direxion at (800) 851-0511 to make <br> arrangements to send in your application <br> via facsimile or mail.<br> ●Fax the application according to <br> instructions the representative will give <br> you.<br> ●Mail the original application to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> ●Call (800) 851-0511 to: (a) confirm receipt of <br> the application; (b) receive an account <br> number; and (c) receive a confirmation <br> number.<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Fund and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions.<br>| ●Contact Direxion at (800) 851-0511 with <br> your account number, the amount wired <br> and the Fund(s) in which you want to <br> invest.<br> ●You will receive a confirmation number; <br> retain your confirmation number.<br> ●Instruct your bank to wire the money to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US Bank NA, Milwaukee, WI 53202<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABA 075000022<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit: US Bancorp Fund Services, LLC<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACCT # 112-952-137<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FFC: Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Your name and Direxion Account<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number)<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Fund and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions. <br>|

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Direxion Funds Prospectus

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| By Telephone | &nbsp;&nbsp; You may not make initial investments by <br> telephone.<br>| ●If you did not decline telephone options on <br> your account application, your account has <br> been open for at least 7 business days, and <br> you have banking information established <br> on your account, you may purchase shares <br> by telephone.<br> ●The minimum telephone purchase is equal <br> to the subsequent investment purchase <br> amount for your account type.<br> ●Contact Direxion at (800) 851-0511 to <br> purchase additional shares of the Fund. <br> Orders will be accepted via the electronic <br> funds transfer through the Automated <br> Clearing House ("ACH") network.<br> ●Shares will be purchased at the NAV <br> calculated on the day your order is placed <br> provided that your order is received prior to <br> market close.<br>|
| Through Financial <br> Intermediaries<br>| Contact your financial intermediary. | Contact your financial intermediary. |

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\*

The Adviser may set different investment minimums for certain securities dealers, banks and other financial institutions that provide certain shareholder services or omnibus processing for the Fund in fee-based mutual fund programs.

**Contact Information** 

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| | |
|:---|:---|
| By Telephone | (800) 851-0511 |
| Fax | (Faxes may be accepted, but must be pre-authorized by a representative. Please call (800) 851-0511 <br> to receive authorization and the fax number.)<br>|
| Internet | www.direxion.com |
| Regular Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252Kansas City, MO 64121-9252<br>|
| Overnight Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> 801 Pennsylvania Ave, Suite 219252<br> Kansas City, MO 64105-1307<br>|

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Shares of the Fund are redeemable. If you opened your shareholder account through a financial intermediary, you will ordinarily submit your exchange or redemption order through that financial intermediary. You may exchange or redeem Fund shares as described in the following table.

**Instructions for Exchanging or Redeeming Shares** 

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| | |
|:---|:---|
| By Mail | Send written instructions sufficient to process your request to:<br> Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252<br> Kansas City, MO 64121-9252<br>|
| By Telephone | (800) 851-0511 for Individual Investors<br> (877) 437-9363 for Financial Professionals<br>|
| By Internet | ●Log on to www.direxion.com. Establish an account ID and password by following the instructions <br> on the site.<br> ●Follow the instructions on the site.<br>|
| &nbsp;&nbsp; Through Financial <br> Intermediaries<br>| Contact your financial intermediary. |

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Direxion Funds Prospectus

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Account and Transaction Policies

**Payment for Shares.** All purchases must be made in U.S. Dollars through a U.S. bank. The Fund will not accept payment in cash or money orders. In addition, to prevent check fraud, the Fund does not accept third party checks, U.S. Treasury checks, credit card checks, traveler's checks, or starter checks for the purchase of shares. We are unable to accept post-dated checks or any conditional order or payment. If your check does not clear, you will be charged a $25.00 fee. In addition, you may be responsible for losses sustained by the Fund for any returned payment.

You will receive written confirmation by mail, but we do not issue share certificates.

**Anti-Money Laundering Program.** The Fund's transfer agent will verify certain information from investors as part of the Fund's anti-money laundering program.

The USA PATRIOT Act of 2001 requires financial institutions, including the Fund, to adopt certain policies and programs to prevent money laundering activities, including procedures to verify the identity of customers opening new accounts. When completing a new account application, you will be required to supply your full name, date of birth, social security number and permanent street address to assist in verifying your identity. If you are opening the account in the name of a legal entity (*e.g.*, partnership, limited liability company, business trust, corporation, etc.), you must also supply the identity of the beneficial owners. Mailing addresses containing only a P.O. Box will not be accepted. Until such verification is made, the Fund may temporarily limit additional share purchases. In addition, the Fund may limit additional share purchases or close an account if they are unable to verify a shareholder's identity. As required by law, the Fund may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct.

If the Fund does not have a reasonable belief of the identity of a shareholder, the account will be rejected or the shareholder will not be allowed to perform a transaction on the account until such information is received. The Fund may also reserve the right to close the account within five business days if clarifying information and/or documentation is not received.

**Good Form.** Good form means that your purchase (whether direct or through a financial intermediary) is complete and contains all necessary information, has all supporting documentation (such as trust documents, beneficiary designations, proper signature guarantees, IRA rollover forms, etc.) and is accompanied by sufficient purchase proceeds. For a purchase request to be in good form, it must include: (1) the name of the Fund; (2) the dollar amount or share amount to be purchased; and (3) your purchase application or investment stub. An application that is sent to the transfer agent does not constitute a purchase order until the transfer agent processes the application and receives correct payment by check or wire transfer. The Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC's post office box, of purchase applications or redemption requests does not constitute receipt by the transfer agent of the Fund. Receipt of purchase orders or redemption requests is based on when the order is received at the Transfer Agent's offices.

Certain transactions through a financial intermediary may not be deemed in good form if such financial intermediary failed to properly notify the Fund of such trade or trades. In particular, financial intermediaries that transact in shares of the Fund through the Fundserv system must, in many cases, notify the Fund of trades before placing them in the Fundserv system. In the event that a financial intermediary transacts in shares of the Fund through the Fundserv system without notifying the Fund of such trades in advance, such transaction may be deemed not to have been received in good form. In practice, this means that a confirmation from a financial intermediary is not binding on the Fund. In the event that a trade is deemed not to have been received in good form, for whatever reason, a purchase, redemption or exchange request may be rejected or canceled and, in the event of a redemption which is canceled, the Fund shall have the right to a return of proceeds. Cancellation of a trade is processed at the NAV at which the trade was originally received and is ordinarily completed the next business day. Please contact your financial intermediary to determine how it processes transactions in shares of the Fund.

**Financial Intermediaries.** If you opened your shareholder account through a financial intermediary, you will ordinarily submit your transaction orders through that financial intermediary. Financial intermediaries are responsible for placing orders promptly with the Fund and forwarding payment promptly, as well as ensuring that you receive copies of the Fund's Prospectus. Financial intermediaries may charge fees for the services they provide to you in connection with processing your transaction order or maintaining your account with them. Each intermediary also may have its own rules about share transactions, limits on the number of share transactions you are permitted to make in a given time period, and may have earlier cut-off times for processing your transaction. For more information about your financial intermediary's rules and procedures, you should contact your financial intermediary directly. In addition, Rafferty may, from time to time, at its own expense, compensate financial intermediaries for distribution or marketing services.

**Order Policies.** There are certain times when you may be unable to sell shares of the Fund or proceeds may be delayed. This may occur during emergencies, unusual market conditions or when the Fund cannot determine the value of its assets or sell its holdings. The Fund reserves the right to reject any purchase order or suspend offering of its shares. Generally, the Fund may reject a purchase if it is disruptive to the efficient management of the Fund.

Direxion Funds Prospectus

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**Telephone Transactions.** For your protection, the Fund may require some form of personal identification prior to accepting your telephone request such as verification of your social security number, account number or other information. If an account has more than one owner or authorized person, the Fund will accept telephone instructions from any one owner or authorized person. We also may record the conversation for accuracy. During times of unusually high market activity or extreme market changes, you should be aware that it may be difficult to place your request in a timely manner. Telephone trades must be received by or prior to market close. Please allow sufficient time to place your telephone transaction. Telephone redemption and exchange transaction privileges are automatically granted, unless you declined such privileges on your account application. If you previously declined telephone privileges and would like to add this option to your account, please contact the Fund at (800) 851-0511 for instructions. The maximum amount that may be redeemed by telephone is $100,000. Once a telephone transaction has been placed, it cannot be canceled or modified after the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern Time).

**Automatic Investment Plan.** For your convenience, the Fund offers an Automatic Investment Plan ("AIP"). Under the AIP, after you make your initial minimum investment of $25,000, you authorize the Fund to withdraw the amount you wish to invest from your personal bank account on a monthly basis. The AIP requires a minimum monthly investment of $500. If you wish to participate in the AIP, please complete the "Automatic Investment Plan" section on the account application or call the Fund at (800) 851-0511 if you have any questions. In order to participate in the AIP, your bank or financial institution must be a member of the ACH network. The Fund may terminate or modify this privilege at any time. You may change your investment amount or terminate your participation in the AIP at any time by notifying the Fund's transfer agent by telephone or in writing, five days prior to the effective date of the next transaction. A fee, currently $25, will be imposed if your AIP transaction is returned.

**Signature Guarantees.** In certain instances when you sell shares of the Fund, we will need your signature guaranteed. Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program ("STAMP"). A notary public cannot guarantee signatures. Your signature must be guaranteed, by either a Medallion program member or a non-Medallion program member, if:

● You are changing your account ownership;

● When a redemption request is received by the transfer agent and the account address has changed within the last 30 calendar days;

● The redemption proceeds are payable or sent to any person, address or bank account other than the one listed on record with the Fund;

● The sale is greater than $100,000; or

● There are other unusual situations as determined by the Fund's transfer agent.

Non-financial transactions including establishing or modifying certain services on an account may require a signature guarantee, signature verification or other acceptable signature authentication from a financial institution source. The Fund may waive any signature guarantee requirement at its discretion.

**Exchange Policies.** You may exchange Investor Class shares of your current Fund(s) for Investor Class shares of any other Fund (as well as other Funds advised by Rafferty not offered in this Prospectus) at the next determined NAV after receipt of your order in good form without any charges. The Fund can only honor exchanges between accounts registered in the same name and having the same address and taxpayer identification number. If your exchange establishes a new position in the Fund, you must exchange at least $1,000 or, if your account value is less than that, your entire account balance will be exchanged. You may exchange by telephone unless you declined telephone exchange privileges on your account application.

**Redemption Proceeds.** Redemption proceeds from any sale of shares will normally be sent within one business day, but at least within seven days, from the time the Fund receives your request in good order. A redemption request will be considered in good order if: 1) the number or amount of shares and the class of shares to be redeemed and shareholder account number have been indicated; and 2) any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account. For investments that have been made by check or ACH, payment on sales requests may be delayed until the Fund's transfer agent is reasonably satisfied that the purchase payment has been collected by the Fund, which may require up to 10 calendar days. Your proceeds will be sent via check, wire or electronic funds transfer through the ACH network using the address or bank account listed on the transfer agent's records. You will be charged a wire transfer fee of $15.00, which will be deducted from your account balance on dollar specific redemption requests or from the proceeds on share specific requests. This fee is in addition to any fees that may be imposed by your bank. Your proceeds will be wired only to the bank listed on the transfer agent's records. There is no charge for payment sent through the ACH network and proceeds are generally available within 2 to 3 days. Shareholders who have an IRA or other retirement plan must indicate on their written redemption request whether to withhold federal income tax. Redemption requests failing to indicate an election not to have tax withheld will generally be subject to 10% withholding. The Fund also offers a Systematic Withdrawal Plan for shareholders who require periodic payments, such as those from IRAs. For more information on this option, please contact the Fund at (800) 851-0511.

Direxion Funds Prospectus

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The Fund typically expects to meet redemption requests by paying out available cash or proceeds from selling portfolio holdings, which may include cash equivalent portfolio holdings. In stressed market conditions and other appropriate circumstances, redemption methods may include borrowing funds or redeeming in kind. The Fund may stop selling its shares and postpone redemption payments at times when the NYSE is closed or has restricted trading or the SEC has determined that an emergency condition exists.

**Redemption In-Kind.** The Fund reserves the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Fund's portfolio. It is not expected that the Fund would do so except in unusual circumstances. If the Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash and will bear any market risks associated with such securities until they are converted into cash.

**Short-Term Trading**. The Fund anticipates that a significant portion of its assets will come from professional money managers and investors who use the Fund as part of their "asset allocation" and/or "market timing" investment strategies. These strategies often call for frequent trading to take advantage of anticipated changes in market conditions.

Frequent trading increases the rate of the Fund's portfolio turnover, which increases the overall expenses of managing the Fund, due to increased brokerage commissions or dealer mark-ups/mark-downs and other transaction costs on the sale of securities and reinvestments in other securities. In addition, frequent trading may dilute the value of Fund shares held by long-term shareholders and may interfere with the efficient management of the Fund's portfolios. Although the Fund reserves the right to reject any purchase orders or suspend the offering of Fund shares, the Fund does not currently impose any trading restrictions on Fund shareholders nor actively monitor for trading abuses. The Fund's Board of Trustees has approved the short-term trading policy of the Fund. The costs associated with the Fund's portfolio turnover will have a negative impact on longer-term investors as noted previously in the Prospectus.

**Low Balance Accounts.** If your total account balance falls below $10,000 due to withdrawals, then we may sell your shares of the Fund. We will inform you in writing 30 days prior to selling your shares. If you do not bring your total account balance up to $10,000 within 30 days, we may sell your shares and send you the proceeds. We will not sell your shares if your account value falls due to market fluctuations.

**Electronic Delivery of Reports.** Fund shareholders can save paper by electing to receive their account documents by e-mail in place of paper copies. You may choose electronic delivery ("E-Delivery") for Prospectuses, supplements, Annual and Semi-Annual Reports. To enroll in E-Delivery you can opt-in when completing a direct account application with Direxion Funds. You can also register, cancel, change your e-mail address or change your consent options by logging onto www.direxion.com/edelivery.

**Householding.** In an effort to decrease costs, the Fund intends to reduce the number of duplicate prospectuses and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders we reasonably believe are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call toll-free at (800) 851-0511 to request individual copies of these documents. Once the Fund receives notice to stop householding, we will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.

**Shareholder Inactivity.** Under certain circumstances, if no activity occurs in an account within a time period specified by state law, your shares in the Fund may be transferred to that state.

**Lost Shareholder.** It is important that the Fund maintain a correct address for each investor. An incorrect address may cause an investor's account statements and other mailings to be returned to the Fund. Based upon statutory requirements for returned mail, the Fund will attempt to locate the investor or rightful owner of the account. If the Fund is unable to locate the investor, then it will determine whether the investor's account can legally be considered abandoned. The Fund is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction. Investors with a state of residence in Texas have the ability to designate a representative to receive legislatively required unclaimed property due diligence notifications. Please contact the Texas Comptroller of Public Accounts for further information.

Management of the Fund

Rafferty provides investment management services to the Fund. Rafferty has been managing investment companies since 1997. Rafferty is located at 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of August 31, 2025, the Adviser had approximately $52.3 billion in assets under management.

Under an investment advisory agreement between the Trust and Rafferty, the Fund pays Rafferty a fee at an annualized rate based on a percentage of its average daily net assets of 0.75%.

As a result of the Operating Expense Limitation Agreement, for the fiscal year ended August 31, 2025, the Adviser received a management fee of 0.00% as a percentage of average daily net assets from the Fund.

A discussion regarding the basis on which the Board of Trustees approved the investment advisory agreement for the Fund is included in the Fund's Annual Financial Statements and Additional Information for the fiscal year ended August 31, 2025.

Direxion Funds Prospectus

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Rafferty has entered into an Operating Expense Limitation Agreement with the Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.15% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any contractual expense waiver or reimbursement is subject to recoupment by the Adviser within three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. Rafferty may pay, reimburse or otherwise assume one or more of the excluded expenses, in which case such expense will be subject to the Operating Expense Limitation Agreement and recoupment by Rafferty in accordance with the Agreement. This Agreement may be terminated or revised at any time with the consent of the Board of Trustees.

Paul Brigandi and Tony Ng are jointly and primarily responsible for the day-to-day management of the Fund (the "Portfolio Managers"). An investment trading team of Rafferty employees assists the Portfolio Managers in the day-to-day management of the Fund subject to their primary responsibility and oversight. The Portfolio Managers work with the investment trading team to decide the target allocation of the Fund's investments and on a day-to-day basis, an individual portfolio trader executes transactions for the Fund consistent with the target allocation. The members of the investment trading team rotate periodically among the various series of the Trust, including the Fund, so that no single individual is assigned to a specific Fund for extended periods of time.

Mr. Brigandi has been a Portfolio Manager at Rafferty since June 2004. Mr. Brigandi was previously involved in the equity trading training program for Fleet Boston Financial Corporation from August 2002 to April 2004. Mr. Brigandi is a 2002 graduate of Fordham University.

Mr. Ng has been a Portfolio Manager at Rafferty since April 2006. Mr. Ng was previously a Team Leader in the Trading Assistant Group with Goldman Sachs from 2004 to 2006. He was employed with Deutsche Asset Management from 1998 to 2004. Mr. Ng graduated from State University of New York at Buffalo in 1998.

The Fund's SAI provides additional information about the investment team members' compensation, other accounts they manage and their ownership of shares of the Fund.

Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI. Currently, disclosure of the Fund's holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the quarterly holdings report on Form N-PORT. The Annual and Semi-Annual Reports will be available by contacting the Direxion Funds, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121-9252 or calling (800) 851-0511.

other service providers

ALPS Distributors, Inc. ("Distributor") serves as the Fund's distributor. U.S. Bancorp Fund Services, LLC ("USBFS") serves as the Fund's administrator, fund accountant and transfer agent. U.S. Bank, N.A., an affiliate of USBFS, serves as the Fund's custodian.

Distributions and Taxes

**Distributions.** The Fund distributes dividends from its net investment income at least annually. Net investment income generally consists of interest income and dividends received on investments, less expenses.

The Fund also distributes any realized net capital gains and net gains from foreign currency transactions, if any, at least annually. The Fund realizes capital gains mainly from sales of its portfolio assets for a profit.

Dividends and other distributions (collectively, "distributions") will be reinvested in additional distributing Fund shares automatically at the Fund's NAV per share unless you request otherwise in writing or via telephone at least five days prior to the record date of the distribution. The Fund reserves the right, if you elect to receive distributions from the Fund by check and the U.S. Postal Service cannot deliver the check or the check remains uncashed for six months, to reinvest the amount of the check in your account, without interest, in additional Fund shares at the Fund's then-current NAV per share

Direxion Funds Prospectus

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and to reinvest all subsequent distributions in shares of the Fund until an updated address is received. The check will not be held separate from the shares in your account.

Due to the pattern of purchases and redemptions of the Fund, the Fund's total net assets may fluctuate significantly over the course of a year. Because the Fund may declare and pay distributions at any time, an investor may receive a distribution, which may be taxable, shortly after making an investment in the Fund.

**Taxes.** Federal income tax consequences of a distribution will vary depending on whether the distribution is from net investment income, net foreign currency gains, or net capital gains and, in the latter case, how long the Fund has held the assets the sale of which generated the gains, not how long you held your Fund shares. Distributions of net gains on sales of assets held for one year or less, and distributions of certain foreign currency gains, are taxed as dividends (that is, ordinary income). Distributions of gains on sales of assets held longer than one year (long-term capital gains), and distributions of other foreign currency gains are taxed at lower capital gains rates.

The following table illustrates the potential tax consequences for taxable accounts (of individual shareholders):

---

| | |
|:---|:---|
| Type of Transaction | Federal Tax Rate/Treatment\* |
| &nbsp;&nbsp; Dividend (other than "qualified dividend <br> income" ("QDI") (see below)) distribution<br>| Ordinary income rate |
| Distribution of QDI | Long-term capital gains rate |
| Distribution of net short-term capital gains | Ordinary income rate |
| Distribution of net long-term capital gains | Long-term capital gains rate |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for more than one year<br>| Long-term capital gain or loss |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for one year or less<br>| &nbsp;&nbsp; Gain is taxed at the same rate as ordinary <br> income; loss is subject to special rules<br>|

---

\*

Tax consequences for tax-deferred retirement accounts (such as 401(k) plan accounts and IRAs) or non-taxable shareholders will be different. You should consult your tax specialist for more information about your personal situation.

QDI consists of dividends the Fund receives from most U.S. corporations and "qualified foreign corporations," provided that the Fund satisfies certain holding periods and other restrictions regarding the stock on which the dividends were paid. (Dividends received from other investment companies, including ETFs that are taxed as RICs will only qualify for QDI treatment to the extent that the other investment company reports the qualifying portion to its shareholders in writing.) The Fund's dividends attributable to its QDI are taxed to individual shareholders at the long-term capital gains rates (see the next paragraph) for shareholders who satisfy those restrictions regarding their Fund shares. A portion of the Fund's dividends (excluding dividends from foreign corporations) also may be eligible for the dividends-received deduction allowed to corporations, subject to similar restrictions.

Net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) an individual or certain other non-corporate shareholder realizes on a redemption or exchange of Fund shares, is subject to federal income tax at a maximum rate of 15% or 20% for those non-corporate shareholders with taxable income exceeding certain thresholds.

If you are a non-retirement account shareholder of the Fund, then each year we will send you a Form 1099 that tells you the amount of Fund distributions you received for the prior calendar year, the tax status of those distributions and a list of reportable redemption transactions, including, for redeemed shares that were acquired after December 31, 2011 ("Covered Shares"), basis information and whether they had a short-term (one year or less) or long-term (more than one year) holding period. Normally, distributions are taxable in the year you receive them. However, any distributions declared in the last three months of a calendar year and paid in January of the following year generally are taxable as if received on December 31 of the year they are declared.

If you are a taxable non-corporate shareholder of the Fund and do not provide the Fund with your correct taxpayer identification number (normally your social security number), the Fund is required to withhold and remit to the Internal Revenue Service ("IRS") 24% of all dividends and other distributions and redemption proceeds (regardless of whether you realize a gain or loss) otherwise payable to you. If you are such a shareholder and are otherwise subject to backup withholding, we also are required to withhold and remit to the IRS the same percentage of all dividends and other distributions otherwise payable to you. Any tax withheld may be applied against your tax liability when you file your tax return.

A shareholder's basis in Covered Shares will be determined in accordance with the Fund's default method, which currently is average basis, unless the shareholder affirmatively elects in writing (which may be electronic) to use a different acceptable basis determination method, such as a specific identification method. The basis determination method a Fund shareholder elects may not be changed with respect to a redemption of Covered Shares after the settlement date of the redemption. Fund shareholders should consult with their tax advisors to determine the best IRS-accepted basis method for their tax situation and to obtain more information about how the basis reporting law applies to them.

An individual must pay a 3.8% federal tax on the lesser of (1) the individual's "net investment income," which generally includes dividends, interest, and net gains from the disposition of investment property (including dividends and capital gain distributions the Fund pays), or (2) the excess of the individual's "modified adjusted gross income" over a threshold

Direxion Funds Prospectus

------

amount ($250,000 for married persons filing jointly and $200,000 for single taxpayers). This tax is in addition to any other taxes due on that income. A similar tax will apply for those years to estates and trusts. Shareholders should consult their own tax advisers regarding the effect, if any, this provision may have on their investment in Fund shares.

Additional Information ABOUT THE TRUST

The Trust enters into contractual arrangements with various parties, which may include, among others, the Fund's investment adviser, custodian, and transfer agent, who provide services to the Fund. Shareholders are not parties to any such contractual arrangements and are not intended beneficiaries of those contractual arrangements, and those contractual arrangements are not intended to create in any shareholder any right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the Trust.

This Prospectus provides information concerning the Fund that you should consider in determining whether to purchase Fund shares. Neither this Prospectus nor the SAI is intended, or should be read, to be or give rise to an agreement or contract between the Trust or the Fund and any investor, or to give rise to any rights in any shareholder or other person other than any rights under federal or state law that may not be waived.

Many states have unclaimed property rules that provide for transfer to the state (also known as "escheatment") of unclaimed property under various circumstances. These circumstances include inactivity (e.g., no owner-initiated contact for a certain period), returned mail (e.g., when mail sent to a shareholder is returned by the post office as undeliverable), or a combination of both inactivity and returned mail. Unclaimed or inactive accounts may be subject to escheatment laws, and the Fund and the Fund's transfer agent will not be liable to shareholders and their representatives for good faith compliance with those laws.

Index Licensors

**NASDAQ Index.** The NASDAQ-100<sup>®</sup> Index is not sponsored, endorsed, sold or promoted by The NASDAQ OMX Group, Inc. or its affiliates (NASDAQ OMX, with its affiliates, are referred to as the "Corporations"). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund. The Corporations make no representation or warranty, express or implied to the owners of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund or any member of the public regarding the advisability of investing in securities generally or in the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund particularly, or the ability of the NASDAQ-100<sup>®</sup> Index to track general stock market performance. The Corporations' only relationship to Rafferty Asset Management, LLC ("Licensee") is in the licensing of the NASDAQ<sup>®</sup>, OMX<sup>®</sup>, NASDAQ OMX<sup>®</sup>, and NASDAQ-100<sup>®</sup> Index, Index registered trademarks, and certain trade names and service marks of the Corporations and the use of the NASDAQ-100<sup>®</sup> Index which is determined, composed and calculated by NASDAQ OMX without regard to Licensee or the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund. NASDAQ OMX has no obligation to take the needs of the Licensee or the owners of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund into consideration in determining, composing or calculating the NASDAQ-100<sup>®</sup> Index. The Corporations are not responsible for and have not participated in the determination of the timing of, prices at, or quantities of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund to be issued or in the determination or calculation of the equation by which the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund is to be converted into cash. The Corporations have no liability in connection with the administration, marketing or trading of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund.

THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE NASDAQ-100<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE NASDAQ-100<sup>®</sup> INDEX, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ-100<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ-100<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Direxion Funds Prospectus

------

Financial Highlights

The financial highlights table is intended to help you understand the financial performance of the Fund for the periods indicated. The information set forth below has been derived from the financial statements which were audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, whose report, along with the Fund's financial statements, are included in the Annual shareholder report, which is available upon request and incorporated by reference into the Fund's SAI. Certain information reflects financial results for a single share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and other distributions).

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Net Asset**<br> **Value,**<br> **Beginning of**<br> **Year**<br>| **Net**<br> **Investment**<br> **Income**<br> **(Loss)**<sup>1</sup><br>| **Net Realized**<br> **and**<br> **Unrealized**<br> **Gain (Loss)**<br> **on Investments**<sup>2</sup><br>| **Net Increase**<br> **(Decrease)**<br> **in Net**<br> **Asset Value**<br> **Resulting**<br> **from** <br> **Operations**<br>| **Dividends**<br> **from Net**<br> **Investment**<br> **Income**<br>| **Distributions**<br> **from Realized**<br> **Capital Gains**<br>| **Return of**<br> **Capital**<br> **Distributions**<br>| **Total**<br> **Distributions**<br>| **Net Asset**<br> **Value,**<br> **End of**<br> **Year**<br>| **Total**<br> **Return**<sup>3</sup><br>|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund** |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $75.00 | 0.91 | 14.90 | 15.81 | (2.23)<br>| – | – | (2.23)<br>| $88.58 | 21.44<br> %<br>|
| Year ended August 31, 2024 | $57.69 | 1.23 | 16.22 | 17.45 | (0.14)<br>| – | – | (0.14)<br>| $75.00 | 30.30<br> %<br>|
| Year ended August 31, 2023 | $44.25 | 0.73 | 12.71 | 13.44 | – | – | – | – | $57.69 | 30.37<br> %<br>|
| Year ended August 31, 2022 | $65.56 | (0.67)<br>| (15.86)<br>| (16.53)<br>| – | (4.78)<br>| – | (4.78)<br>| $44.25 | -27.50<br> %<br>|
| Year ended August 31, 2021 | $52.59 | (0.61)<br>| 17.67 | 17.06 | – | (4.09)<br>| – | (4.09)<br>| $65.56 | 34.93<br> %<br>|

---

Direxion Funds Prospectus

------

Financial Highlights (continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **Portfolio**<br> **Turnover**<br> **Rate**<sup>6</sup> |
|  | **Net Assets,**<br> **End of**<br> **Year**<br> **(000's)**<br>| **Total**<br> **Expenses**<sup>4</sup><br>| **Net**<br> **Expenses**<sup>4,5</sup><br>| **Net**<br> **Investment**<br> **Income (Loss)**<br> **after**<br> **Expense**<br> **Reimbursement**<br> **/Recoupment**<sup>4</sup><br>| **Total**<br> **Expenses**<br>| **Net**<br> **Expenses**<sup>5</sup><br>| **Net**<br> **Investment**<br> **Income (Loss)**<br> **after**<br> **Expense**<br> **Reimbursement**<br> **/Recoupment**<br>| **Portfolio**<br> **Turnover**<br> **Rate**<sup>6</sup> |
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund** |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $8776 | 2.45<br> %<br>| 1.22<br> %<br>| 1.14<br> %<br>| 2.38<br> %<br>| 1.15<br> %<br>| 1.21<br> %<br>| 820<br> %<br>|
| Year ended August 31, 2024 | $12831 | 1.88<br> %<br>| 1.25<br> %<br>| 1.89<br> %<br>| 1.78<br> %<br>| 1.15<br> %<br>| 1.99<br> %<br>| 1132<br> %<br>|
| Year ended August 31, 2023 | $13993 | 2.30<br> %<br>| 1.19<br> %<br>| 1.47<br> %<br>| 2.26<br> %<br>| 1.15<br> %<br>| 1.51<br> %<br>| 1037<br> %<br>|
| Year ended August 31, 2022 | $7281 | 1.77<br> %<br>| 1.35<br> %<br>| -1.15<br> %<br>| 1.57<br> %<br>| 1.15<br> %<br>| -0.95<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2021 | $20940 | 1.50<br> %<br>| 1.15<br> %<br>| -1.13<br> %<br>| 1.50<br> %<br>| 1.15<br> %<br>| -1.13<br> %<br>| 0<br> %<br>|

---

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

Due to the timing of sales and redemptions of capital shares, the net realized and unrealized gain (loss) per share will not equal the Fund's changes in net realized and unrealized gain (loss) on investments and swaps for the period.

Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at the net asset value during the period and redemption on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain expenses had not been reimbursed by the investment adviser.

Includes interest expense and extraordinary expense which is comprised of excise tax expense.

Net expenses include effects of any reimbursement or recoupment.

Portfolio turnover is not annualized and does not include effects of turnover of the swap or future contracts portfolio. Short-term securities with maturities less than or equal to 366 days are also excluded from portfolio turnover calculation.

Direxion Funds Prospectus

------

![](g58398img293431651.gif)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

Investor Class

More Information On The Direxion Funds

***Statement of Additional Information ("SAI"):*** 

The Fund's SAI contains more information on the Fund and its applicable investment policies. The SAI is incorporated in this Prospectus by reference (meaning it is legally part of this Prospectus). A current SAI is on file with the Securities and Exchange Commission ("SEC").

***Annual and Semi-Annual Reports to Shareholders:*** 

The Fund's reports provide additional information on the Fund's investment holdings, performance data and information discussing the market conditions and investment strategies that significantly affected the Fund's performance during that period. The Fund's Form N-CSR will contain additional information about the Fund's investments and the Fund's annual and semi-annual financial statements. **To Obtain the SAI or Fund Reports Free of Charge or for Other Information, such as Fund Financial Statements, or Shareholder Inquiries:** 

Write to: Direxion Funds c/o U.S. Bank Global Fund Services PO Box 219252 Kansas City, MO 64121-9252 <br> Call: (800) 851-0511 <br> By Internet: www.direxion.com

Reports and other information about the Fund may be viewed on screen or downloaded from the EDGAR Database on the SEC's website at http://www.sec.gov. Copies of these documents may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.

SEC File Number: 811-08243

------

![](g58398img4c3dc29e1.gif)

Direxion Funds

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

www.direxion.com

---

| | |
|:---|:---|
| Bull Funds | Bear Fund |
| Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund (DXSLX) |  |
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund (DXQLX) |  |
| Direxion Monthly Small Cap Bull 1.75X Fund (DXRLX) |  |
| Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund (DXKLX) | Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund (DXKSX) |

---

Investor Class

**The funds offered in this Prospectus (each a "Fund" and collectively the "Funds") seek *calendar month leveraged* investment results and are riskier than most mutual funds because the Funds seek 1.75 times the calendar month performance of a respective underlying index. The Funds with "Bull" in their names attempt to provide calendar month investment results that correspond to 1.75 times the calendar month performance of an underlying index and are collectively referred to as the "Bull Funds." The Fund with "Bear" in its name attempts to provide calendar month investment results that correspond to 1.75 times the inverse (or opposite) of the performance of an underlying index, a result that is the opposite of most mutual funds, and is referred to as the "Bear Fund."** 

**The Funds are not suitable for all investors. The Funds are designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Investors in the Funds should:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**

**understand the risks associated with the use of leverage,** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**

**understand the consequences of seeking calendar month leveraged investment results,** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**

**for the Bear Fund, understand the risk of shorting, and** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**

**intend to actively monitor and manage their investments.** 

**Investors who do not understand the Funds or do not intend to actively manage and monitor their investments should not buy the Funds.** 

**There is no assurance that any Fund will achieve its investment objective and an investment in a Fund could lose money. No single Fund is a complete investment program.** 

**An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 175% (for a Bull Fund) or -175% (for the Bear Fund) exposure to the underlying index from that point until the end of the month. The actual exposure is a function of the performance of the underlying index from the end of the prior calendar month to an investor's purchase date. If a Fund's shares are held for a period other than a calendar month, the Fund's performance is likely to deviate from 175% (for a Bull Fund) or -175% (for the Bear Fund) of the underlying index's performance for the period the Fund is held. This deviation will increase with higher underlying index volatility and longer holding periods.**

*These securities have not been approved or disapproved by the U.S. Securities and Exchange Commission ("SEC") or the U.S. Commodity Futures Trading Commission ("CFTC"), nor have the SEC or CFTC passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.*

December 29, 2025

------

**Table of Contents**

---

| | |
|:---|:---|
| **[Summary Section](#xx_108cae4a-b917-4810-9655-e221ecc2910d_1)** | **1** |
| [Direxion Monthly S&P 500](#xx_108cae4a-b917-4810-9655-e221ecc2910d_1)<sup>®</sup>[Bull 1.75X Fund](#xx_108cae4a-b917-4810-9655-e221ecc2910d_1) | **1** |
| &nbsp;&nbsp; [Direxion Monthly NASDAQ-100](#xx_e961f890-39dc-4ca9-83f1-7ef66e751c54_1)<sup>®</sup>[Bull 1.75X](#xx_e961f890-39dc-4ca9-83f1-7ef66e751c54_1)<br> [Fund](#xx_e961f890-39dc-4ca9-83f1-7ef66e751c54_1)<br>| **8** |
| &nbsp;&nbsp; [Direxion Monthly Small Cap Bull 1.75X](#xx_10d651d3-403e-44d9-a396-37ff751b6a17_1)<br> [Fund](#xx_10d651d3-403e-44d9-a396-37ff751b6a17_1)<br>| **15** |
| &nbsp;&nbsp; [Direxion Monthly 7-10 Year Treasury Bull](#xx_0a5e0560-3205-48ba-83d8-6fcd37c64788_1)<br> [1.75X Fund](#xx_0a5e0560-3205-48ba-83d8-6fcd37c64788_1)<br>| **22** |
| &nbsp;&nbsp; [Direxion Monthly 7-10 Year Treasury Bear](#xx_d814bc37-5072-4fd4-b731-9b5339fb9d00_1)<br> [1.75X Fund](#xx_d814bc37-5072-4fd4-b731-9b5339fb9d00_1)<br>| **29** |
| **[Overview of the Funds](#xx_97e6dea3-c093-441e-a3fa-15367ecbff07_1)** | **36** |
| &nbsp;&nbsp; **[Additional Information Regarding](#xx_97e6dea3-c093-441e-a3fa-15367ecbff07_1)**<br> **[Investment Techniques and Policies](#xx_97e6dea3-c093-441e-a3fa-15367ecbff07_1)**<br>| **36** |
| &nbsp;&nbsp; **[ADDITIONAL INFORMATION REGARDING](#xx_0b4a82bc-1aba-4079-b7da-8a97ad68fab3_1)**<br> **[PRINCIPAL Risks](#xx_0b4a82bc-1aba-4079-b7da-8a97ad68fab3_1)**<br>| **43** |
| [Other Risks of the Funds](#xx_0b4a82bc-1aba-4079-b7da-8a97ad68fab3_11) | **53** |
| **[About Your Investment](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_1)** | **56** |
| [Share Price of the Funds](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_1) | **56** |
| [Rule 12b-1 Fees](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_2) | **57** |
| &nbsp;&nbsp; [Additional Payments to Financial](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_2)<br> [Intermediaries](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_2)<br>| **57** |
| [Shareholder Services Guide](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_2) | **57** |
| **[Account and Transaction Policies](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_5)** | **60** |
| **[Management of the Funds](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_7)** | **62** |
| **[Portfolio Holdings](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_8)** | **63** |
| **[other service providers](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_8)** | **63** |
| **[Distributions and Taxes](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_8)** | **63** |
| &nbsp;&nbsp; **[Additional Information ABOUT THE](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_10)**<br> **[TRUST](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_10)**<br>| **65** |
| **[Index Licensors](#xx_0f0b7ab0-fecd-40ce-b35c-87bf99a27ab5_10)** | **65** |
| **[Financial Highlights](#xx_6c16e019-043d-4634-85b3-8ba06462a274_1)** | **68** |
| &nbsp;&nbsp; **[More Information On The Direxion](#xx_31169645-ba0f-4cc2-9584-af7106b5852d_1)**<br> **[Funds](#xx_31169645-ba0f-4cc2-9584-af7106b5852d_1)**<br>| **Back Cover** |

---

------

Summary Section

Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund

**Important Information Regarding the Fund**

The Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund (the "Fund") seeks ***calendar month leveraged (1.75X)*** investment results and is very different from most other mutual funds. As a result, the Fund may be riskier than alternatives that do not use leverage because the Fund's objective is to magnify the monthly performance of the S&P 500<sup>®</sup> Index (the "Index"). The return for investors that invest for periods longer or shorter than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, should not be expected to be 175% of the performance of the Index for the period. The return of the Fund for a period longer than a full calendar month will be the result of each full calendar month's compounded return over the period, which will very likely differ from 175% of the return of the Index for that period. Longer holding periods, higher volatility of the Index and leverage increase the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as, or more than, the return of the Index.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking calendar month leveraged (1.75X) investment results, understand the risks associated with the use of leverage and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a calendar month, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the Index's performance increases. An investor could lose the full principal value of his/her investment within a calendar month if the Index loses more than 57.5% in one month.**

**Investment Objective**

The Fund seeks monthly investment results, before fees and expenses, of 175% of the calendar month performance of the Index. **The Fund does not seek to achieve its stated investment objective for a period of time different than a full calendar month.**

**Fees and Expenses of the Fund**

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

---

| | |
|:---|:---|
| Management Fees | 0.75% |
| Distribution and/or Service (12b-1) Fees | 0.25% |
| Other Expenses of the Fund | 0.43% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.06% |
| Total Annual Fund Operating Expenses | 1.49% |
| Expense Cap/Reimbursement<sup>(2)</sup> | 0.00% |
| &nbsp;&nbsp; Total Annual Fund Operating Expenses After <br> Expense Cap/Reimbursement<br>| 1.49% |

---

<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

<sup>(2)</sup>

For the fiscal year ended August 31, 2025, as a result of a portion of the Adviser's management fee and/or a previous reimbursement of Other Expenses, the Adviser recouped fees in the amount of 0.02%.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $152 | $471 | $813 | $1779 |

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**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 0% of the average value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the Fund's extensive use of derivatives was reflected, the Fund's portfolio turnover rate would be significantly higher.

**Principal Investment Strategy**

The Index is designed to be comprised of stocks that are the 500 leading, large-cap U.S.-listed issuers. S&P Dow Jones Indices selects constituents on the basis of market capitalization, financial viability of the company, sector representation, public float, liquidity and price of a company's

Direxion Funds Prospectus

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shares outstanding. The Index is a float-adjusted and market capitalization-weighted index.

As of October 31, 2025, the Index consisted of 503 constituents which were concentrated in the information technology sector. The Index is rebalanced quarterly.

The components of the Index and the percentages represented by various sectors in the Index may change over time. The Fund will concentrate its investment in a particular industry or group of industries (*i.e.*, hold 25% or more of its total assets in the stocks of a particular industry or group of industries) to approximately the same extent as the Index is so concentrated.

The Fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, securities of the Index, and exchange-traded funds ("ETFs") that track the Index, that, in combination, provide 1.75X monthly leveraged exposure to the Index, consistent with the Fund's investment objective. The financial instruments in which the Fund most commonly invests are swap agreements which are intended to produce economically leveraged investment results.

The Fund may invest in the securities of the Index, a representative sample of the securities in the Index that has aggregate characteristics similar to those of the Index, an ETF that tracks the Index or a substantially similar index, and derivatives, such as swaps on the Index or an ETF that tracks the same Index or a substantially similar index, that provide leveraged exposure to the above.

The Fund will attempt to achieve its investment objective without regard to overall market movement or the increase or decrease of the value of the securities in the Index. On a day-to-day basis, the Fund is expected to hold ETFs, money market funds, deposit accounts with institutions with high quality credit ratings, and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles *(i.e., investment grade or higher)*, including U.S. government securities and repurchase agreements. The Fund seeks to remain fully invested at all times consistent with its stated investment objective.

Because a significant portion of the assets of the Fund may come from investors using "asset allocation" and "market timing" investment strategies, the Fund may engage in frequent trading.

The Fund is "non-diversified," meaning that a relatively high percentage of its assets may be invested in a limited number of issuers of securities. Additionally, the Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its leveraged investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely

review all of the risks listed below and understand them before making an investment in the Fund.

***Effects of Compounding and Market Volatility Risk* —** 

The Fund's performance for periods greater than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, will be the result of each month's returns compounded over the period, which is likely to differ from 175% of the Index's performance, before fees and expenses. Compounding has a significant impact on funds that are leveraged and that rebalance monthly. The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an investment in the Fund is held and the volatility of the Index during the shareholder's holding period.

Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities of the Index. The chart below provides examples of how Index volatility and its return could affect the Fund's performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Actual Fund returns are expected to vary from these estimates. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from 175% of the performance of the Index.

As shown in the chart below, the Fund would be expected to lose 4% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant loss of value in the Fund, even if the Index's return is flat. **For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose 48.1% of its value, even if the cumulative Index return for the year was 0%.** Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than 175% of the performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than 175% of the performance of the Index. The table below is not a representation of the Fund's actual returns, which may be significantly better or worse than the returns shown below as a result of any of the factors discussed above or in "Monthly Index Correlation Risk" below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ from the volatility of the Index.

Direxion Funds Prospectus

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-105%** | -80.0% | -80.7% | -82.9% | -86.1% | -89.6% |
| **-50%** | **-87.5%** | -70.5% | -71.5% | -74.8% | -79.4% | -84.6% |
| **-40%** | **-70%** | -59.4% | -60.7% | -65.3% | -71.7% | -78.8% |
| **-30%** | **-52.5%** | -46.8% | -48.6% | -54.5% | -63.0% | -72.2% |
| **-20%** | **-35%** | -32.8% | -35.0% | -42.6% | -53.2% | -64.9% |
| **-10%** | **-17.5%** | -17.4% | -20.2% | -29.4% | -42.5% | -56.9% |
| **0%** | **0%** | -0.7% | -4.0% | -15.1% | -30.9% | -48.1% |
| **10%** | **17.5%** | 17.4% | 13.4% | 0.3% | -18.3% | -38.7% |
| **20%** | **35%** | 36.7% | 32.1% | 16.8% | -4.9% | -28.6% |
| **30%** | **52.5%** | 57.2% | 51.9% | 34.3% | 9.4% | -17.9% |
| **40%** | **70%** | 79.0% | 72.9% | 52.9% | 24.6% | -6.5% |
| **50%** | **87.5%** | 102.0% | 95.1% | 72.5% | 40.6% | 5.5% |
| **60%** | **105%** | 126.1% | 118.5% | 93.2% | 57.4% | 18.1% |

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The Index's annualized historical volatility rate for the five year period ended September 30, 2025 was 17.13%. The Index's highest volatility rate for any twelve-month period (October 1 to September 30) during the five year period was 24.19% and volatility for a shorter period of time may have been substantially higher. The Index's annualized performance for the five-year period ended September 30, 2025 was 16.46%. Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

**For information regarding the effects of volatility and Index performance on the long-term performance of the Fund, see "Additional Information Regarding Investment Techniques and Policies" in the Fund's statutory prospectus, and "Negative Implications of Leveraged Monthly Goals In Volatile Markets" in the Fund's Statement of Additional Information under "Investment Policies and Techniques."**

***Leverage Risk —*** The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. An investment in the Fund typically results in the magnification of a decline in the monthly performance of the Index resulting in a larger loss being incurred than if there was no leverage utilized. This means that an investment in the Fund will be reduced by an amount equal to 1.75% for every 1% monthly decline in the Index, not including the costs of financing leverage and other operating expenses, which would further reduce its value. The Fund could lose an amount greater than its net assets in the event of an Index decline of more than 57.5% of the Index. This would result in a total loss of a shareholder's investment in one month even if the Index subsequently reverses all or a portion of its previous loss prior to the end of the day. A total loss of a shareholder's investment in the Fund may occur in a single month even if the Index does not lose all of its value. Leverage will also have the effect of magnifying any differences in the Fund's correlation with the Index and may increase the volatility of the Fund.

Under market circumstances that cause leverage to be expensive or unavailable, the Fund could, among other things,

limit or suspend purchase of Fund Shares, change its investment objective by, for example, seeking to track an alternative index or reducing its leverage multiple, or the Fund could close.

***Derivatives Risk —*** Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.

The Fund's investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the performance of its reference asset for various reasons, including due to fees and other costs associated with it.

Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index due to costs associated with trading ETFs, such as an ETF's premium or discount which is the difference between its market price and its net asset value. If the Index has a dramatic intramonth increase or decrease that causes a material change in the Fund's performance and/or net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter into another swap agreement or invest in other derivatives to achieve its investment objective. This may occur even if the Index reverses all or a portion of its intramonth movement by the end of the month.

Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service providers such as the Fund's custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased credit risk with respect to the custodian bank holding the assets.

***Counterparty Risk —*** If a counterparty is unwilling or unable to make timely payments to meet its contractual obligations or fails to return holdings that are subject to the agreement with the counterparty, the Fund will lose money and/or not be able to meet its monthly leveraged investment objective.

Because the Fund may enter into swap agreements with a limited number of counterparties, this increases the Fund's exposure to counterparty credit risk. Further, there is a risk

Direxion Funds Prospectus

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that no suitable counterparties will be willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its leveraged investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. The risk that no suitable counterparties will enter into or continue to provide swap exposure to the Fund may be heightened when there is significant volatility in the overall market or the reference asset.

***Rebalancing Risk —*** If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

***Intra-Calendar Month Investment Risk —*** The intra-month performance will be different from the performance of the Fund when measured from the close of the market at the end of one calendar month until the close of the market on the last day of the subsequent calendar month. An investor that purchases shares on a day other than the last business day of a calendar month may experience performance that is greater than, or less than, the Fund's stated investment objective. If there is a significant intra-month market event and/or the securities of the Index experience a significant change in value, the Fund may not meet its investment objective or be unable to rebalance its portfolio appropriately.

***Monthly Index Correlation Risk —*** A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index and therefore achieve its monthly leveraged investment objective. The Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each calendar month. The possibility of the Fund being materially over- or under-exposed to the Index increases during months when the Index is volatile.

Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly, the Fund's valuation methodology differing from the Index's valuation methodology, accounting standards and their application to income items, disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also adversely affect the Fund's ability to adjust exposure to meet its monthly leveraged investment objective.

The derivatives or investments the Fund utilizes to obtain exposure may not provide the expected correlation to the Index resulting in the Fund not performing as expected. Additionally, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the securities may be different from

that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index and impacting the Fund's correlation to the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index reconstitutions and other Index rebalancing events may also hinder the Fund's ability to meet its monthly leveraged investment objective.

***Other Investment Companies (including ETFs) Risk***—

The Fund may invest in, or obtain exposure to, another investment company, including an ETF or a money market fund (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. If the underlying fund fails to achieve its investment objective the Fund's performance will likely be adversely affected.

In addition, to the extent that the Fund invests in, or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure. Shares of ETFs may trade at a discount or a premium to an ETF's net asset value which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend purchases or redemption of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the Fund. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

***Passive Investment and Index Performance Risk —***

A third party (the "Index Provider"), who is unaffiliated with the Fund or Rafferty Asset Management, LLC ("Rafferty" or "Adviser"), maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry concentrations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the Index's methodology or calculation will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

Direxion Funds Prospectus

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The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Liquidity Risk —***Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index. To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties.

***Information Technology Sector Risk —*** The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs. In addition, many information technology companies have limited product lines, markets, financial resources or personnel. The prices

of information technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile and less liquid than the overall market. Information technology companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the information technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel. Companies in the application software industry, in particular, may also be negatively affected by the risk that subscription renewal rates for their products and services decline or fluctuate, leading to declining revenues. Companies in the systems software industry may be adversely affected by, among other things, actual or perceived security vulnerabilities in their products and services, which may result in individual or class action lawsuits, state or federal enforcement actions and other remediation costs. Companies in the computer software industry may also be affected by the availability and price of computer software technology components.

***Large-Capitalization Company Risk —*** Large-capitalization companies typically have significant financial resources, extensive product lines and broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to changes in business, product, financial, or market conditions and may not be able to maintain growth at rates that may be achieved by well-managed smaller and mid-size companies, which may affect the companies' returns.

***Mid-Capitalization Company Risk*** - Mid-capitalization companies often have narrower markets for their goods and/or services, more limited product lines, services, markets, managerial and financial resources, less stable earnings, or are dependent on a small management group. In addition, because these stocks are not well known to the investing public, do not have significant institutional ownership and are followed by relatively few security analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. As a result, the price of mid-capitalization companies can be more volatile and they may be less liquid than large-capitalization companies, which could increase the volatility of the Fund's portfolio.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, and may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

***Equity Securities Risk —*** Publicly issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests, and/or has exposure to, will cause the net asset value of the Fund to fluctuate.

Direxion Funds Prospectus

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***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Market Timing Activity Risk —*** Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading, which may lead to large shareholder transactions into and out of the Fund. These large movements of assets may lead to increased portfolio turnover, higher transaction costs and the possibility of increased net realized capital gains, including net short-term capital gains. Additionally, these large movement of assets may have a negative impact on the Fund's ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, the Fund's expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus.

***Non-Diversification Risk —*** The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year. The table shows how the Fund's average annual returns for the one-year, five-year and ten-year periods compare with those of at least one broad-based market index for the same periods. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

The performance noted below, and prior to August 1, 2022, reflects the Fund's previous monthly leveraged investment objective, before fees and expenses, of 200% of the Index. If the Fund had continued to seek its previous investment objective, the calendar year performance of the Fund would have varied from that shown.

**Total Return for the Calendar Years Ended December 31**

![](g58398monthsp500bull2x_35.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 42.12<br> %<br>| June 30, 2020 |
| Worst Quarter | &nbsp;&nbsp; -37.86<br> %<br>| March 31, 2020 |
| Year-to-Date | 21.03<br> %<br>| September 30, 2025 |

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 37.72% | &nbsp;&nbsp; 19.58% | &nbsp;&nbsp; 19.03% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; 32.74% | &nbsp;&nbsp; 17.72% | &nbsp;&nbsp; 16.97% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; 22.70% | &nbsp;&nbsp; 15.08% | &nbsp;&nbsp; 15.04% |
| &nbsp;&nbsp; **S&P 500 Index** (reflects no <br> deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 25.02% | &nbsp;&nbsp; 14.53% | &nbsp;&nbsp; 13.10% |

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After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of time.

**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Portfolio Managers.** The following members of Rafferty's investment team are jointly and primarily responsible for the day-to-day management of the Fund:

<u> Portfolio Managers</u> <u> Years of Service with the Fund</u> <u> Primary Title</u> <br> Paul Brigandi Since Inception in May 2006 Portfolio Manager <br> Tony Ng Since Inception in May 2006 Portfolio Manager

**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121), overnight mail (Direxion Funds - Direxion Monthly S&P 500<sup>®</sup> 

Direxion Funds Prospectus

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Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, 801 Pennsylvania Ave, Suite 219252, Kansas City, MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: <br> Traditional <br> Investment Accounts<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (Traditional, Roth <br> and Spousal <br> individual retirement <br> accounts)<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

**Index Information**

The "S&P 500<sup>®</sup> Index" is a product of S&P Dow Jones Indices LLC ("SPDJI"), and has been licensed for use by Rafferty. Standard & Poor's<sup>®</sup> and S&P<sup>®</sup> are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones<sup>®</sup> is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. The Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500<sup>®</sup> Index.

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Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund

**Important Information Regarding the Fund**

The Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund (the "Fund") seeks ***calendar month leveraged (1.75X)*** investment results and is very different from most other mutual funds. As a result, the Fund may be riskier than alternatives that do not use leverage because the Fund's objective is to magnify the monthly performance of the NASDAQ-100<sup>®</sup> Index (the "Index"). The return for investors that invest for periods longer or shorter than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, should not be expected to be 175% of the performance of the Index for the period. The return of the Fund for a period longer than a full calendar month will be the result of each full calendar month's compounded return over the period, which will very likely differ from 175% of the return of the Index for that period. Longer holding periods, higher volatility of the Index and leverage increase the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as, or more than, the return of the Index.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking calendar month leveraged (1.75X) investment results, understand the risks associated with the use of leverage and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a calendar month, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the Index's performance increases. An investor could lose the full principal value of his/her investment within a calendar month if the Index loses more than 57.5% in one month.**

**Investment Objective**

The Fund seeks monthly investment results, before fees and expenses, of 175% of the calendar month performance of the Index. **The Fund does not seek to achieve its stated investment objective for a period of time different than a full calendar month.**

**Fees and Expenses of the Fund**

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

---

| | |
|:---|:---|
| Management Fees | 0.75% |
| Distribution and/or Service (12b-1) Fees | 0.25% |
| Other Expenses of the Fund | 0.38% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.15% |
| Total Annual Fund Operating Expenses<sup>(2)</sup> | 1.53% |
| Expense Cap/Reimbursement<sup>(3)</sup> <br>| -0.01% |
| &nbsp;&nbsp; Total Annual Fund Operating Expenses After <br> Expense Cap/Reimbursement<br>| 1.52% |

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<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

<sup>(2)</sup>

Rafferty Asset Management, LLC ("Rafferty" or the "Adviser"), has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if overall Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.

<sup>(3)</sup>

For the fiscal year ended August 31, 2025, as a result of a portion of the Adviser's management fee and/or a previous reimbursement of Other Expenses, the Adviser recouped fees in the amount of 0.01%.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $155 | $482 | $833 | $1823 |

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**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 12% of the average

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value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the Fund's extensive use of derivatives was reflected, the Fund's portfolio turnover rate would be significantly higher.

**Principal Investment Strategy**

The Index is a modified market capitalization-weighted index and includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market<sup>®</sup> based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, communication services, retail/wholesale trade and biotechnology. It does not contain securities of financial companies or investment companies. Each security must have been traded for at least three full months and have a minimum three-month average daily trading volume of 200,000 shares. The Index is reviewed on an annual basis in December.

As of October 31, 2025, the Index consisted of 101 securities which were concentrated in the information technology and consumer discretionary sectors.

The components of the Index and the percentages represented by various sectors in the Index may change over time. The Fund will concentrate its investment in a particular industry or group of industries (*i.e.*, hold 25% or more of its total assets in the stocks of a particular industry or group of industries) to approximately the same extent as the Index is so concentrated.

The Fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, securities of the Index, and exchange-traded funds ("ETFs") that track the Index, that, in combination, provide 1.75X monthly leveraged exposure to the Index, consistent with the Fund's investment objective. The financial instruments in which the Fund most commonly invests are swap agreements which are intended to produce economically leveraged investment results.

The Fund may invest in the securities of the Index, a representative sample of the securities in the Index that has aggregate characteristics similar to those of the Index, an ETF that tracks the Index or a substantially similar index, and derivatives, such as swaps on the Index or an ETF that tracks the same Index or a substantially similar index, that provide leveraged exposure to the above.

The Fund will attempt to achieve its investment objective without regard to overall market movement or the increase or decrease of the value of the securities in the Index. On a day-to-day basis, the Fund is expected to hold ETFs, money market funds, deposit accounts with institutions with high quality credit ratings, and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles *(i.e., investment grade or higher)*, including U.S. government securities and repurchase agreements. The Fund seeks to remain fully invested at all times consistent with its stated investment objective.

Because a significant portion of the assets of the Fund may come from investors using "asset allocation" and "market

timing" investment strategies, the Fund may engage in frequent trading.

The Fund is "non-diversified," meaning that a relatively high percentage of its assets may be invested in a limited number of issuers of securities. Additionally, the Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its leveraged investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review all of the risks listed below and understand them before making an investment in the Fund.

***Effects of Compounding and Market Volatility Risk* —** 

The Fund's performance for periods greater than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, will be the result of each month's returns compounded over the period, which is likely to differ from 175% of the Index's performance, before fees and expenses. Compounding has a significant impact on funds that are leveraged and that rebalance monthly. The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an investment in the Fund is held and the volatility of the Index during the shareholder's holding period.

Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities of the Index. The chart below provides examples of how Index volatility and its return could affect the Fund's performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Actual Fund returns are expected to vary from these estimates. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from 175% of the performance of the Index.

As shown in the chart below, the Fund would be expected to lose 4% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant loss of value in the Fund, even if the Index's return is flat. **For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose 48.1%** 

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**of its value, even if the cumulative Index return for the year was 0%.** Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than 175% of the performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than 175% of the performance of the Index. The table below is not a representation of the Fund's actual returns, which may be significantly better or worse than the returns shown below as a result of any of the factors discussed above or in "Monthly Index Correlation Risk" below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ from the volatility of the Index.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-105%** | -80.0% | -80.7% | -82.9% | -86.1% | -89.6% |
| **-50%** | **-87.5%** | -70.5% | -71.5% | -74.8% | -79.4% | -84.6% |
| **-40%** | **-70%** | -59.4% | -60.7% | -65.3% | -71.7% | -78.8% |
| **-30%** | **-52.5%** | -46.8% | -48.6% | -54.5% | -63.0% | -72.2% |
| **-20%** | **-35%** | -32.8% | -35.0% | -42.6% | -53.2% | -64.9% |
| **-10%** | **-17.5%** | -17.4% | -20.2% | -29.4% | -42.5% | -56.9% |
| **0%** | **0%** | -0.7% | -4.0% | -15.1% | -30.9% | -48.1% |
| **10%** | **17.5%** | 17.4% | 13.4% | 0.3% | -18.3% | -38.7% |
| **20%** | **35%** | 36.7% | 32.1% | 16.8% | -4.9% | -28.6% |
| **30%** | **52.5%** | 57.2% | 51.9% | 34.3% | 9.4% | -17.9% |
| **40%** | **70%** | 79.0% | 72.9% | 52.9% | 24.6% | -6.5% |
| **50%** | **87.5%** | 102.0% | 95.1% | 72.5% | 40.6% | 5.5% |
| **60%** | **105%** | 126.1% | 118.5% | 93.2% | 57.4% | 18.1% |

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The Index's annualized historical volatility rate for the five year period ended September 30, 2025 was 23.11%. The Index's highest volatility rate for any twelve-month period (October 1 to September 30) during the five year period was 32.52% and volatility for a shorter period of time may have been substantially higher. The Index's annualized performance for the five-year period ended September 30, 2025 was 17.58%. Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

**For information regarding the effects of volatility and Index performance on the long-term performance of the Fund, see "Additional Information Regarding Investment Techniques and Policies" in the Fund's statutory prospectus, and "Negative Implications of Leveraged Monthly Goals In Volatile Markets" in the Fund's Statement of Additional Information under "Investment Policies and Techniques."**

***Leverage Risk —*** The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. An investment in the Fund typically results in the magnification of a decline in the monthly performance of the Index resulting in a larger loss being incurred than if there was no leverage utilized. This means that an investment in the Fund will be reduced by an amount equal to 1.75% for every 1% monthly decline in the Index, not including the costs of financing leverage and other operating expenses,

which would further reduce its value. The Fund could lose an amount greater than its net assets in the event of an Index decline of more than 57.5% of the Index. This would result in a total loss of a shareholder's investment in one month even if the Index subsequently reverses all or a portion of its previous loss prior to the end of the day. A total loss of a shareholder's investment in the Fund may occur in a single month even if the Index does not lose all of its value. Leverage will also have the effect of magnifying any differences in the Fund's correlation with the Index and may increase the volatility of the Fund.

Under market circumstances that cause leverage to be expensive or unavailable, the Fund could, among other things, limit or suspend purchase of Fund Shares, change its investment objective by, for example, seeking to track an alternative index or reducing its leverage multiple, or the Fund could close.

***Derivatives Risk —*** Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.

The Fund's investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the performance of its reference asset for various reasons, including due to fees and other costs associated with it.

Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index due to costs associated with trading ETFs, such as an ETF's premium or discount which is the difference between its market price and its net asset value. If the Index has a dramatic intramonth increase or decrease that causes a material change in the Fund's performance and/or net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter into another swap agreement or invest in other derivatives to achieve its investment objective. This may occur even if the Index reverses all or a portion of its intramonth movement by the end of the month.

Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service

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providers such as the Fund's custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased credit risk with respect to the custodian bank holding the assets.

***Counterparty Risk —*** If a counterparty is unwilling or unable to make timely payments to meet its contractual obligations or fails to return holdings that are subject to the agreement with the counterparty, the Fund will lose money and/or not be able to meet its monthly leveraged investment objective.

Because the Fund may enter into swap agreements with a limited number of counterparties, this increases the Fund's exposure to counterparty credit risk. Further, there is a risk that no suitable counterparties will be willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its leveraged investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. The risk that no suitable counterparties will enter into or continue to provide swap exposure to the Fund may be heightened when there is significant volatility in the overall market or the reference asset.

***Rebalancing Risk —*** If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

***Intra-Calendar Month Investment Risk —*** The intra-month performance will be different from the performance of the Fund when measured from the close of the market at the end of one calendar month until the close of the market on the last day of the subsequent calendar month. An investor that purchases shares on a day other than the last business day of a calendar month may experience performance that is greater than, or less than, the Fund's stated investment objective. If there is a significant intra-month market event and/or the securities of the Index experience a significant change in value, the Fund may not meet its investment objective or be unable to rebalance its portfolio appropriately.

***Monthly Index Correlation Risk —*** A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index and therefore achieve its monthly leveraged investment objective. The Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each calendar month. The possibility of the Fund being materially over- or under-exposed to the Index increases during months when the Index is volatile.

Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly, the Fund's valuation methodology differing from the Index's

valuation methodology, accounting standards and their application to income items, disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also adversely affect the Fund's ability to adjust exposure to meet its monthly leveraged investment objective.

The derivatives or investments the Fund utilizes to obtain exposure may not provide the expected correlation to the Index resulting in the Fund not performing as expected. Additionally, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the securities may be different from that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index and impacting the Fund's correlation to the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index reconstitutions and other Index rebalancing events may also hinder the Fund's ability to meet its monthly leveraged investment objective.

***Other Investment Companies (including ETFs) Risk***—

The Fund may invest in, or obtain exposure to, another investment company, including an ETF or a money market fund (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. If the underlying fund fails to achieve its investment objective the Fund's performance will likely be adversely affected.

In addition, to the extent that the Fund invests in, or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure. Shares of ETFs may trade at a discount or a premium to an ETF's net asset value which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend purchases or redemption of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the Fund. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

***Passive Investment and Index Performance Risk —***

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential

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constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry concentrations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the Index's methodology or calculation will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Liquidity Risk —***Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index. To the extent that the instruments utilized by the Fund are

thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties.

***Consumer Discretionary Sector Risk —***Because companies in the consumer discretionary sector manufacture products and provide discretionary services directly to the consumer, the success of these companies is tied closely to the performance of the overall domestic and international economy, including the functioning of the global supply chain, interest rates, and inflation competition and consumer confidence. Success depends heavily on disposable household income and consumer spending, and may be strongly affected by social trends and marketing campaigns. Also, companies in the consumer discretionary sector may be subject to intense competition, which may have an adverse impact on a company's profitability. Changes in demographics and consumer tastes also can affect the demand for, and success of, consumer discretionary products in the marketplace.

***Information Technology Sector Risk —*** The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs. In addition, many information technology companies have limited product lines, markets, financial resources or personnel. The prices of information technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile and less liquid than the overall market. Information technology companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the information technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel. Companies in the application software industry, in particular, may also be negatively affected by the risk that subscription renewal rates for their products and services decline or fluctuate, leading to declining revenues. Companies in the systems software industry may be adversely affected by, among other things, actual or perceived security vulnerabilities in their products and services, which may result in individual or class action lawsuits, state or federal enforcement actions and other remediation costs. Companies in the computer software industry may also be affected by the availability and price of computer software technology components.

***Large-Capitalization Company Risk —*** Large-capitalization companies typically have significant financial resources, extensive product lines and broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to changes in business, product, financial, or market conditions and may not be able to maintain growth at rates that may be achieved by well-managed smaller and mid-size companies, which may affect the companies' returns.

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***Depositary Receipt Risk —*** To the extent the Fund invests in, and/or has exposure to, foreign companies, the Fund's investment may be in the form of depositary receipts or other securities convertible into securities of foreign issuers including American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), and Global Depositary Receipts ("GDRs"). Such investments continue to be subject to most of the risks associated with investing directly in foreign securities, including political and exchange rate risks. The issuers of certain depository receipts are under no obligation to distribute shareholder communications to holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Investments in depository receipts may be less liquid than the underlying shares in their primary trading markets. The issuers of depository receipts may discontinue issuing new depository receipts and withdraw existing depository receipts at any time.

***Foreign Securities Risk —*** Investing in, and/or having exposure to, foreign instruments may involve greater risks than investing in domestic instruments. As a result, the Fund's returns and net asset value 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. Additionally, the Fund may be impacted by a limitation on foreign ownership of securities, the imposition of withholding or other taxes, restrictions on the repatriation of cash or other assets, higher transaction and custody costs, delays in the settlement of securities, difficulties in enforcing contractual obligations and lower levels of regulation in the securities markets.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, and may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

***Equity Securities Risk —*** Publicly issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests, and/or has exposure to, will cause the net asset value of the Fund to fluctuate.

***Market Timing Activity Risk —*** Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading, which may lead to large shareholder transactions into and out of the Fund. These large movements of assets may lead to increased portfolio turnover, higher transaction costs and the possibility of increased net realized capital gains, including net short-term capital gains. Additionally, these large movement of assets may have a negative impact on the

Fund's ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, the Fund's expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus.

***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Non-Diversification Risk —*** The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year. The table shows how the Fund's average annual returns for the one-year, five-year and ten-year periods compare with those of at least one broad-based market index for the same periods. The Nasdaq Composite Index is included in the table as the Fund's primary benchmark for regulatory reasons. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

The performance noted below, and prior to August 1, 2022, reflects the Fund's previous monthly leveraged investment objective, before fees and expenses, of 200% of the Index. If the Fund had continued to seek its previous investment objective, the calendar year performance of the Fund would have varied from that shown.

**Total Return for the Calendar Years Ended December 31**

![](g58398monthnas100bull2x_35.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 64.45<br> %<br>| June 30, 2020 |
| Worst Quarter | &nbsp;&nbsp; -42.18<br> %<br>| June 30, 2022 |
| Year-to-Date | 26.29<br> %<br>| September 30, 2025 |

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 39.27% | &nbsp;&nbsp; 29.48% | &nbsp;&nbsp; 29.01% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; 39.04% | &nbsp;&nbsp; 27.16% | &nbsp;&nbsp; 26.89% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; 23.23% | &nbsp;&nbsp; 23.25% | &nbsp;&nbsp; 24.25% |
| &nbsp;&nbsp; **Nasdaq Composite Index** <br> (reflects no deduction for <br> fees, expenses or taxes)<br>| &nbsp;&nbsp; 29.57% | &nbsp;&nbsp; 17.49% | &nbsp;&nbsp; 16.20% |
| &nbsp;&nbsp; **NASDAQ-100 Index** (reflects <br> no deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 25.88% | &nbsp;&nbsp; 20.18% | &nbsp;&nbsp; 18.53% |

---

After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of time.

**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Portfolio Managers.** The following members of Rafferty's investment team are jointly and primarily responsible for the day-to-day management of the Fund:

<u> Portfolio Managers</u> <u> Years of Service with the Fund</u> <u> Primary Title</u> <br> Paul Brigandi Since Inception in May 2006 Portfolio Manager <br> Tony Ng Since Inception in May 2006 Portfolio Manager

**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121), overnight mail (Direxion Funds - Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, 801 Pennsylvania Ave, Suite 219252, Kansas City,

MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: <br> Traditional <br> Investment Accounts<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (Traditional, Roth <br> and Spousal <br> individual retirement <br> accounts)<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

**Index Information**

Nasdaq<sup>®</sup>, Nasdaq-100<sup>®</sup>, and Nasdaq-100 Index<sup>®</sup>, are trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by the Adviser. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

Direxion Funds Prospectus

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Direxion Monthly Small Cap Bull 1.75X Fund

**Important Information Regarding the Fund**

The Direxion Monthly Small Cap Bull 1.75X Fund (the "Fund") seeks ***calendar month leveraged (1.75X)*** investment results and is very different from most other mutual funds. As a result, the Fund may be riskier than alternatives that do not use leverage because the Fund's objective is to magnify the monthly performance of the Russell 2000<sup>®</sup> Index (the "Index"). The return for investors that invest for periods longer or shorter than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, should not be expected to be 175% of the performance of the Index for the period. The return of the Fund for a period longer than a full calendar month will be the result of each full calendar month's compounded return over the period, which will very likely differ from 175% of the return of the Index for that period. Longer holding periods, higher volatility of the Index and leverage increase the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as, or more than, the return of the Index.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking calendar month leveraged (1.75X) investment results, understand the risks associated with the use of leverage and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a calendar month, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the Index's performance increases. An investor could lose the full principal value of his/her investment within a calendar month if the Index loses more than 57.5% in one month.**

**Investment Objective**

The Fund seeks monthly investment results, before fees and expenses, of 175% of the calendar month performance of the Index. **The Fund does not seek to achieve its stated investment objective for a period of time different than a full calendar month.**

**Fees and Expenses of the Fund**

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

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| | |
|:---|:---|
| Management Fees | 0.75% |
| Distribution and/or Service (12b-1) Fees | 0.25% |
| Other Expenses of the Fund | 0.83% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.14% |
| Total Annual Fund Operating Expenses<sup>(2)</sup> | 1.97% |
| Expense Cap/Reimbursement | -0.37% |
| &nbsp;&nbsp; Total Annual Fund Operating Expenses After <br> Expense Cap/Reimbursement<br>| 1.60% |

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<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

<sup>(2)</sup>

Rafferty Asset Management, LLC ("Rafferty" or the "Adviser"), has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if overall Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $163 | $583 | $1028 | $2266 |

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**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 19% of the average value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the Fund's extensive use of derivatives was

Direxion Funds Prospectus

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reflected, the Fund's portfolio turnover rate would be significantly higher.

**Principal Investment Strategy**

The Index measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000<sup>®</sup> Index, based on a combination of their market capitalization and current index membership. The Index is reconstituted annually and enhanced by initial public offerings quarterly.

As of October 31, 2025, the Index consisted of 1,958 securities which were concentrated in the healthcare, financials, and industrials sectors.

The components of the Index and the percentages represented by various sectors in the Index may change over time. The Fund will concentrate its investment in a particular industry or group of industries (*i.e.*, hold 25% or more of its total assets in the stocks of a particular industry or group of industries) to approximately the same extent as the Index is so concentrated.

The Fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, securities of the Index, and exchange-traded funds ("ETFs") that track the Index, that, in combination, provide 1.75X monthly leveraged exposure to the Index, consistent with the Fund's investment objective. The financial instruments in which the Fund most commonly invests are swap agreements which are intended to produce economically leveraged investment results.

The Fund may invest in the securities of the Index, a representative sample of the securities in the Index that has aggregate characteristics similar to those of the Index, an ETF that tracks the Index or a substantially similar index, and derivatives, such as swaps on the Index or an ETF that tracks the same Index or a substantially similar index, that provide leveraged exposure to the above.

The Fund will attempt to achieve its investment objective without regard to overall market movement or the increase or decrease of the value of the securities in the Index. On a day-to-day basis, the Fund is expected to hold ETFs, money market funds, deposit accounts with institutions with high quality credit ratings, and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles *(i.e., investment grade or higher)*, including U.S. government securities and repurchase agreements. The Fund seeks to remain fully invested at all times consistent with its stated investment objective.

Because a significant portion of the assets of the Fund may come from investors using "asset allocation" and "market timing" investment strategies, the Fund may engage in frequent trading.

The Fund is "non-diversified," meaning that a relatively high percentage of its assets may be invested in a limited number of issuers of securities. Additionally, the Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its leveraged investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review all of the risks listed below and understand them before making an investment in the Fund.

***Effects of Compounding and Market Volatility Risk* —** 

The Fund's performance for periods greater than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, will be the result of each month's returns compounded over the period, which is likely to differ from 175% of the Index's performance, before fees and expenses. Compounding has a significant impact on funds that are leveraged and that rebalance monthly. The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an investment in the Fund is held and the volatility of the Index during the shareholder's holding period.

Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities of the Index. The chart below provides examples of how Index volatility and its return could affect the Fund's performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Actual Fund returns are expected to vary from these estimates. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from 175% of the performance of the Index.

As shown in the chart below, the Fund would be expected to lose 4% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant loss of value in the Fund, even if the Index's return is flat. **For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose 48.1% of its value, even if the cumulative Index return for the year was 0%.** Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than 175% of the performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than 175% of the performance of the Index. The table below is not a representation of the Fund's actual returns, which may be

Direxion Funds Prospectus

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significantly better or worse than the returns shown below as a result of any of the factors discussed above or in "Monthly Index Correlation Risk" below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ from the volatility of the Index.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-105%** | -80.0% | -80.7% | -82.9% | -86.1% | -89.6% |
| **-50%** | **-87.5%** | -70.5% | -71.5% | -74.8% | -79.4% | -84.6% |
| **-40%** | **-70%** | -59.4% | -60.7% | -65.3% | -71.7% | -78.8% |
| **-30%** | **-52.5%** | -46.8% | -48.6% | -54.5% | -63.0% | -72.2% |
| **-20%** | **-35%** | -32.8% | -35.0% | -42.6% | -53.2% | -64.9% |
| **-10%** | **-17.5%** | -17.4% | -20.2% | -29.4% | -42.5% | -56.9% |
| **0%** | **0%** | -0.7% | -4.0% | -15.1% | -30.9% | -48.1% |
| **10%** | **17.5%** | 17.4% | 13.4% | 0.3% | -18.3% | -38.7% |
| **20%** | **35%** | 36.7% | 32.1% | 16.8% | -4.9% | -28.6% |
| **30%** | **52.5%** | 57.2% | 51.9% | 34.3% | 9.4% | -17.9% |
| **40%** | **70%** | 79.0% | 72.9% | 52.9% | 24.6% | -6.5% |
| **50%** | **87.5%** | 102.0% | 95.1% | 72.5% | 40.6% | 5.5% |
| **60%** | **105%** | 126.1% | 118.5% | 93.2% | 57.4% | 18.1% |

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The Index's annualized historical volatility rate for the five year period ended September 30, 2025 was 23.09%. The Index's highest volatility rate for any twelve-month period (October 1 to September 30) during the five year period was 28.15% and volatility for a shorter period of time may have been substantially higher. The Index's annualized performance for the five-year period ended September 30, 2025 was 11.55%. Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

**For information regarding the effects of volatility and Index performance on the long-term performance of the Fund, see "Additional Information Regarding Investment Techniques and Policies" in the Fund's statutory prospectus, and "Negative Implications of Leveraged Monthly Goals In Volatile Markets" in the Fund's Statement of Additional Information under "Investment Policies and Techniques."**

***Leverage Risk —*** The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. An investment in the Fund typically results in the magnification of a decline in the monthly performance of the Index resulting in a larger loss being incurred than if there was no leverage utilized. This means that an investment in the Fund will be reduced by an amount equal to 1.75% for every 1% monthly decline in the Index, not including the costs of financing leverage and other operating expenses, which would further reduce its value. The Fund could lose an amount greater than its net assets in the event of an Index decline of more than 57.5% of the Index. This would result in a total loss of a shareholder's investment in one month even if the Index subsequently reverses all or a portion of its previous loss prior to the end of the day. A total loss of a shareholder's investment in the Fund may occur in a single month even if the Index does not lose all of its value.

Leverage will also have the effect of magnifying any differences in the Fund's correlation with the Index and may increase the volatility of the Fund.

Under market circumstances that cause leverage to be expensive or unavailable, the Fund could, among other things, limit or suspend purchase of Fund Shares, change its investment objective by, for example, seeking to track an alternative index or reducing its leverage multiple, or the Fund could close.

***Derivatives Risk —*** Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.

The Fund's investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the performance of its reference asset for various reasons, including due to fees and other costs associated with it.

Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index due to costs associated with trading ETFs, such as an ETF's premium or discount which is the difference between its market price and its net asset value. If the Index has a dramatic intramonth increase or decrease that causes a material change in the Fund's performance and/or net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter into another swap agreement or invest in other derivatives to achieve its investment objective. This may occur even if the Index reverses all or a portion of its intramonth movement by the end of the month.

Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service providers such as the Fund's custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased credit risk with respect to the custodian bank holding the assets.

***Counterparty Risk —*** If a counterparty is unwilling or unable to make timely payments to meet its contractual obligations or fails to return holdings that are subject to the agreement

Direxion Funds Prospectus

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with the counterparty, the Fund will lose money and/or not be able to meet its monthly leveraged investment objective.

Because the Fund may enter into swap agreements with a limited number of counterparties, this increases the Fund's exposure to counterparty credit risk. Further, there is a risk that no suitable counterparties will be willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its leveraged investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. The risk that no suitable counterparties will enter into or continue to provide swap exposure to the Fund may be heightened when there is significant volatility in the overall market or the reference asset.

***Rebalancing Risk —*** If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

***Intra-Calendar Month Investment Risk —*** The intra-month performance will be different from the performance of the Fund when measured from the close of the market at the end of one calendar month until the close of the market on the last day of the subsequent calendar month. An investor that purchases shares on a day other than the last business day of a calendar month may experience performance that is greater than, or less than, the Fund's stated investment objective. If there is a significant intra-month market event and/or the securities of the Index experience a significant change in value, the Fund may not meet its investment objective or be unable to rebalance its portfolio appropriately.

***Monthly Index Correlation Risk —*** A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index and therefore achieve its monthly leveraged investment objective. The Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each calendar month. The possibility of the Fund being materially over- or under-exposed to the Index increases during months when the Index is volatile.

Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly, the Fund's valuation methodology differing from the Index's valuation methodology, accounting standards and their application to income items, disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also adversely affect the Fund's ability to adjust exposure to meet its monthly leveraged investment objective.

The derivatives or investments the Fund utilizes to obtain exposure may not provide the expected correlation to the Index resulting in the Fund not performing as expected. Additionally, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the securities may be different from that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index and impacting the Fund's correlation to the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index reconstitutions and other Index rebalancing events may also hinder the Fund's ability to meet its monthly leveraged investment objective.

***Other Investment Companies (including ETFs) Risk***—

The Fund may invest in, or obtain exposure to, another investment company, including an ETF or a money market fund (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. If the underlying fund fails to achieve its investment objective the Fund's performance will likely be adversely affected.

In addition, to the extent that the Fund invests in, or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure. Shares of ETFs may trade at a discount or a premium to an ETF's net asset value which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend purchases or redemption of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the Fund. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

***Passive Investment and Index Performance Risk —***

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry concentrations in the Index will fluctuate with changes in constituents' market values such that the Index may become

Direxion Funds Prospectus

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more, or less, concentrated over time. There can be no guarantee that the Index's methodology or calculation will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Liquidity Risk —***Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index. To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties.

***Financials Sector Risk —***Performance of companies in the financials sector may be materially impacted by many factors, including but not limited to, government regulations, economic conditions, credit rating downgrades, changes in interest rates and decreased liquidity in credit markets.

Profitability of these companies is largely dependent on the availability and cost of capital and can fluctuate significantly when interest rates change. Credit losses resulting from financial difficulties of borrowers also can negatively impact the sector. These companies are also subject to substantial government regulation and intervention, which may adversely impact the scope of their activities, the prices they can charge, the amount of capital they must maintain, and potentially, their size. Government regulation may change frequently and may have significant adverse consequences for financial companies, including effects that are not intended by such regulation. The impact of more stringent capital requirements, or recent or future regulation in various countries on any individual financial company or of the financials sector as a whole, cannot be predicted. Traditional financial companies may face competition from decentralized finance (DeFi) or open finance platforms, which seek to democratize access to financial services, such as borrowing, lending, custody, trading, derivatives and insurance, by removing third-party intermediaries. The financials sector is also a target for cyber attacks and may experience technology malfunctions and disruptions, which have occurred more frequently in recent years.

***Healthcare Sector Risk —*** The profitability of companies in the healthcare sector may be affected by extensive, costly and uncertain government regulation, restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), changes in the demand for medical products and services, an increased emphasis on outpatient services, limited product lines, industry innovation and/or consolidation, changes in technologies and other market developments. Many healthcare companies are heavily dependent on obtaining and defending patents, which may be time consuming and costly. The expiration of patents may adversely affect the profitability of these companies. Many healthcare companies are subject to extensive litigation based on product liability and similar claims. In addition, their products can become obsolete due to industry innovation, changes in technologies or other market developments. Many new products in the health care sector require significant research and development and may be subject to regulatory approvals, all of which may be time consuming and costly with no guarantee that any product will come to market.

***Industrials Sector Risk —*** Stock prices of issuers in the industrials sector are affected by supply and demand both for their specific product or service and for industrials sector products and services in general. Government regulation, world events including trade disputes, exchange rates and economic conditions, technological developments and liabilities for environmental damage and general civil liabilities will also affect the performance of investment in such issuers. Aerospace and defense companies, a component of the industrials sector, can be significantly affected by government spending policies because companies involved in this industry rely to a significant extent on U.S. and foreign government demand for their products and services. Thus, the financial condition of, and investor interest in, aerospace and defense companies are heavily influenced by government defense

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spending policies which are typically under pressure from efforts to control government spending budgets. Transportation companies, another component of the industrials sector, are subject to cyclical performance and therefore investment in such companies may experience occasional sharp price movements which may result from changes in the economy, fuel prices, labor agreements and insurance costs. The industrials sector may also be adversely affected by changes or trends in commodity prices, which may be influenced by unpredictable factors. Issuers with high carbon intensity or high switching costs associated with the transition to low carbon alternatives may be more impacted by climate transition risks.

***Micro-Capitalization Company Risk*** - Micro-capitalization companies often have limited product lines, narrower markets for their goods and/or services and more limited managerial and financial resources than larger, more established companies, including companies which are considered small- or mid-capitalization. As a result, their performance can be more volatile and they face greater risk of business failure.

***Small- and/or Mid-Capitalization Company Risk —***

Small- and mid-capitalization companies often have narrower markets for their goods and/or services, less stable earnings, and more limited managerial and financial resources and often have limited product lines, services, markets, financial resources or are dependent on a small management group. Because these stocks are not well-known to the investing public, do not have significant institutional ownership and are followed by relatively few security analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease the value and liquidity of such securities resulting in more volatile performance. These companies may face greater risk of business failure.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, and may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

***Equity Securities Risk —*** Publicly issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests, and/or has exposure to, will cause the net asset value of the Fund to fluctuate.

***Market Timing Activity Risk —*** Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading, which may lead to large shareholder transactions into and out of the Fund. These large movements of assets may lead to increased portfolio turnover, higher transaction costs and the possibility of increased net realized capital gains, including

net short-term capital gains. Additionally, these large movement of assets may have a negative impact on the Fund's ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, the Fund's expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus.

***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Non-Diversification Risk —*** The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year. The table shows how the Fund's average annual returns for the one-year, five-year and ten-year periods compare with those of at least one broad-based market index for the same periods. The S&P 500<sup>®</sup> Index is included in the table as the Fund's primary benchmark for regulatory reasons. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

The performance noted below, and prior to August 1, 2022, reflects the Fund's previous monthly leveraged investment objective, before fees and expenses, of 200% of the Index. If the Fund had continued to seek its previous investment objective, the calendar year performance of the Fund would have varied from that shown.

**Total Return for the Calendar Years Ended December 31**

![](g58398img2e86240b2.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 66.37<br> %<br>| December 31, 2020 |
| Worst Quarter | &nbsp;&nbsp; -56.48<br> %<br>| March 31, 2020 |
| Year-to-Date | 12.49<br> %<br>| September 30, 2025 |

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 10.68% | &nbsp;&nbsp; 3.58% | &nbsp;&nbsp; 7.05% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; 10.43% | &nbsp;&nbsp; 3.39% | &nbsp;&nbsp; 6.50% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; 6.38% | &nbsp;&nbsp; 2.70% | &nbsp;&nbsp; 5.42% |
| &nbsp;&nbsp; **S&P 500 Index** (reflects no <br> deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 25.02% | &nbsp;&nbsp; 14.53% | &nbsp;&nbsp; 13.10% |
| &nbsp;&nbsp; **Russell 2000 Index** (reflects no <br> deduction for fees, <br> expenses or taxes)<br>| &nbsp;&nbsp; 11.54% | &nbsp;&nbsp; 7.40% | &nbsp;&nbsp; 7.82% |

---

After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of time.

**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Portfolio Managers.** The following members of Rafferty's investment team are jointly and primarily responsible for the day-to-day management of the Fund:

<u> Portfolio Managers</u> <u> Years of Service with the Fund</u> <u> Primary Title</u> <br> Paul Brigandi Since 2004 Portfolio Manager <br> Tony Ng Since 2006 Portfolio Manager

**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Direxion Monthly Small Cap Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121),

overnight mail (Direxion Funds - Direxion Monthly Small Cap Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, 801 Pennsylvania Ave, Suite 219252, Kansas City, MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: <br> Traditional <br> Investment Accounts<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (Traditional, Roth <br> and Spousal <br> individual retirement <br> accounts)<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

**Index Information**

The Russell 2000<sup>®</sup> Index is a trademark of Frank Russell Company ("Russell") and has been licensed for use by the Trust. The Fund is not sponsored, endorsed, sold or promoted by Russell. Russell makes no representation regarding the advisability of investing in the Fund.

Direxion Funds Prospectus

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Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund

**Important Information Regarding the Fund**

The Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund (the "Fund") seeks ***calendar month leveraged (1.75X)*** investment results and is very different from most other mutual funds. As a result, the Fund may be riskier than alternatives that do not use leverage because the Fund's objective is to magnify the monthly performance of the ICE U.S. Treasury 7-10 Year Bond Index (the "Index"). The return for investors that invest for periods longer or shorter than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, should not be expected to be 175% of the performance of the Index for the period. The return of the Fund for a period longer than a full calendar month will be the result of each full calendar month's compounded return over the period, which will very likely differ from 175% of the return of the Index for that period. Longer holding periods, higher volatility of the Index and leverage increase the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as, or more than, the return of the Index.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking calendar month leveraged (1.75X) investment results, understand the risks associated with the use of leverage and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a calendar month, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the Index's performance increases. An investor could lose the full principal value of his/her investment within a calendar month if the Index loses more than 57.5% in one month.**

**Investment Objective**

The Fund seeks monthly investment results, before fees and expenses, of 175% of the calendar month performance of the Index. **The Fund does not seek to achieve its stated investment objective for a period of time different than a full calendar month.**

**Fees and Expenses of the Fund**

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

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| | |
|:---|:---|
| Management Fees | 0.75% |
| Distribution and/or Service (12b-1) Fees | 0.25% |
| Other Expenses of the Fund | 0.75% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.11% |
| Total Annual Fund Operating Expenses<sup>(2)</sup> | 1.86% |
| Expense Cap/Reimbursement<sup>(3)</sup> | -0.39% |
| &nbsp;&nbsp; Total Annual Fund Operating Expenses After <br> Expense Cap/Reimbursement<br>| 1.47% |

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<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

<sup>(2)</sup>

Rafferty Asset Management, LLC ("Rafferty" or the "Adviser"), has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if overall Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.

<sup>(3)</sup>

For the fiscal year ended August 31, 2025, as a result of a portion of the Adviser's management fee and/or a previous reimbursement of Other Expenses, the Adviser recouped fees in the amount of 0.06%.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $150 | $547 | $970 | $2148 |

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**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 296% of the average

Direxion Funds Prospectus

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value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the Fund's extensive use of derivatives was reflected, the Fund's portfolio turnover rate would be significantly higher.

**Principal Investment Strategy**

The Index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than or equal to seven years and less than ten years. Eligible securities must be fixed rate, denominated in U.S. dollars, and have $300 million or more of outstanding face value, excluding amounts held by the Federal Reserve. Securities excluded from the Index are inflation-linked securities, Treasury bills, cash management bills, any government agency debt issued with or without a government guarantee and zero-coupon issues that have been stripped from coupon-paying bonds. The Index is not adjusted for securities that may become eligible or ineligible for inclusion in the Index intra-month. The Index is reconstituted and rebalanced on the last business day of each month.

The Index was comprised of 14 constituents as of October 31, 2025.

The Fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, securities of the Index, and exchange-traded funds ("ETFs") that track the Index, that, in combination, provide 1.75X monthly leveraged exposure to the Index, consistent with the Fund's investment objective. The financial instruments in which the Fund most commonly invests are swap agreements which are intended to produce economically leveraged investment results.

The Fund may invest in the securities of the Index, a representative sample of the securities in the Index that has aggregate characteristics similar to those of the Index, an ETF that tracks the Index or a substantially similar index, and derivatives, such as swaps on the Index or an ETF that tracks the same Index or a substantially similar index, that provide leveraged exposure to the above.

The Fund will attempt to achieve its investment objective without regard to overall market movement or the increase or decrease of the value of the securities in the Index. On a day-to-day basis, the Fund is expected to hold ETFs, money market funds, deposit accounts with institutions with high quality credit ratings, and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles *(i.e., investment grade or higher)*, including U.S. government securities and repurchase agreements. The Fund seeks to remain fully invested at all times consistent with its stated investment objective.

Because a significant portion of the assets of the Fund may come from investors using "asset allocation" and "market timing" investment strategies, the Fund may engage in frequent trading.

The Fund is "non-diversified," meaning that a relatively high percentage of its assets may be invested in a limited number of issuers of securities. Additionally, the Fund's investment

objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its leveraged investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review all of the risks listed below and understand them before making an investment in the Fund.

***Effects of Compounding and Market Volatility Risk* —** 

The Fund's performance for periods greater than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, will be the result of each month's returns compounded over the period, which is likely to differ from 175% of the Index's performance, before fees and expenses. Compounding has a significant impact on funds that are leveraged and that rebalance monthly. The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an investment in the Fund is held and the volatility of the Index during the shareholder's holding period.

Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities of the Index. The chart below provides examples of how Index volatility and its return could affect the Fund's performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Actual Fund returns are expected to vary from these estimates. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from 175% of the performance of the Index.

As shown in the chart below, the Fund would be expected to lose 4% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant loss of value in the Fund, even if the Index's return is flat. **For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose 48.1% of its value, even if the cumulative Index return for the year was 0%.** Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than 175% of the performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than 175% of

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the performance of the Index. The table below is not a representation of the Fund's actual returns, which may be significantly better or worse than the returns shown below as a result of any of the factors discussed above or in "Monthly Index Correlation Risk" below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ from the volatility of the Index.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-105%** | -80.0% | -80.7% | -82.9% | -86.1% | -89.6% |
| **-50%** | **-87.5%** | -70.5% | -71.5% | -74.8% | -79.4% | -84.6% |
| **-40%** | **-70%** | -59.4% | -60.7% | -65.3% | -71.7% | -78.8% |
| **-30%** | **-52.5%** | -46.8% | -48.6% | -54.5% | -63.0% | -72.2% |
| **-20%** | **-35%** | -32.8% | -35.0% | -42.6% | -53.2% | -64.9% |
| **-10%** | **-17.5%** | -17.4% | -20.2% | -29.4% | -42.5% | -56.9% |
| **0%** | **0%** | -0.7% | -4.0% | -15.1% | -30.9% | -48.1% |
| **10%** | **17.5%** | 17.4% | 13.4% | 0.3% | -18.3% | -38.7% |
| **20%** | **35%** | 36.7% | 32.1% | 16.8% | -4.9% | -28.6% |
| **30%** | **52.5%** | 57.2% | 51.9% | 34.3% | 9.4% | -17.9% |
| **40%** | **70%** | 79.0% | 72.9% | 52.9% | 24.6% | -6.5% |
| **50%** | **87.5%** | 102.0% | 95.1% | 72.5% | 40.6% | 5.5% |
| **60%** | **105%** | 126.1% | 118.5% | 93.2% | 57.4% | 18.1% |

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The Index's annualized historical volatility rate for the five year period ended September 30, 2025 was 7.48%. The Index's highest volatility rate for any twelve-month period (October 1 to September 30) during the five year period was 9.81% and volatility for a shorter period of time may have been substantially higher. The Index's annualized performance for the five-year period ended September 30, 2025 was -2.14%. Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

**For information regarding the effects of volatility and Index performance on the long-term performance of the Fund, see "Additional Information Regarding Investment Techniques and Policies" in the Fund's statutory prospectus, and "Negative Implications of Leveraged Monthly Goals In Volatile Markets" in the Fund's Statement of Additional Information under "Investment Policies and Techniques."**

***Leverage Risk —*** The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. An investment in the Fund typically results in the magnification of a decline in the monthly performance of the Index resulting in a larger loss being incurred than if there was no leverage utilized. This means that an investment in the Fund will be reduced by an amount equal to 1.75% for every 1% monthly decline in the Index, not including the costs of financing leverage and other operating expenses, which would further reduce its value. The Fund could lose an amount greater than its net assets in the event of an Index decline of more than 57.5% of the Index. This would result in a total loss of a shareholder's investment in one month even if the Index subsequently reverses all or a portion of its previous loss prior to the end of the day. A total loss

of a shareholder's investment in the Fund may occur in a single month even if the Index does not lose all of its value. Leverage will also have the effect of magnifying any differences in the Fund's correlation with the Index and may increase the volatility of the Fund.

Under market circumstances that cause leverage to be expensive or unavailable, the Fund could, among other things, limit or suspend purchase of Fund Shares, change its investment objective by, for example, seeking to track an alternative index or reducing its leverage multiple, or the Fund could close.

***Derivatives Risk —*** Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.

The Fund's investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the performance of its reference asset for various reasons, including due to fees and other costs associated with it.

Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index due to costs associated with trading ETFs, such as an ETF's premium or discount which is the difference between its market price and its net asset value. If the Index has a dramatic intramonth increase or decrease that causes a material change in the Fund's performance and/or net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter into another swap agreement or invest in other derivatives to achieve its investment objective. This may occur even if the Index reverses all or a portion of its intramonth movement by the end of the month.

Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service providers such as the Fund's custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased credit risk with respect to the custodian bank holding the assets.

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***Counterparty Risk —*** If a counterparty is unwilling or unable to make timely payments to meet its contractual obligations or fails to return holdings that are subject to the agreement with the counterparty, the Fund will lose money and/or not be able to meet its monthly leveraged investment objective.

Because the Fund may enter into swap agreements with a limited number of counterparties, this increases the Fund's exposure to counterparty credit risk. Further, there is a risk that no suitable counterparties will be willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its leveraged investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its leveraged investment objective. The risk that no suitable counterparties will enter into or continue to provide swap exposure to the Fund may be heightened when there is significant volatility in the overall market or the reference asset.

***Rebalancing Risk —*** If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

***Intra-Calendar Month Investment Risk —*** The intra-month performance will be different from the performance of the Fund when measured from the close of the market at the end of one calendar month until the close of the market on the last day of the subsequent calendar month. An investor that purchases shares on a day other than the last business day of a calendar month may experience performance that is greater than, or less than, the Fund's stated investment objective. If there is a significant intra-month market event and/or the securities of the Index experience a significant change in value, the Fund may not meet its investment objective or be unable to rebalance its portfolio appropriately.

***Monthly Index Correlation Risk —*** A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index and therefore achieve its monthly leveraged investment objective. The Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each calendar month. The possibility of the Fund being materially over- or under-exposed to the Index increases during months when the Index is volatile.

Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly, the Fund's valuation methodology differing from the Index's valuation methodology, accounting standards and their application to income items, disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also adversely affect the Fund's ability

to adjust exposure to meet its monthly leveraged investment objective.

The derivatives or investments the Fund utilizes to obtain exposure may not provide the expected correlation to the Index resulting in the Fund not performing as expected. Additionally, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the securities may be different from that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index and impacting the Fund's correlation to the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index reconstitutions and other Index rebalancing events may also hinder the Fund's ability to meet its monthly leveraged investment objective.

***Other Investment Companies (including ETFs) Risk***—

The Fund may invest in, or obtain exposure to, another investment company, including an ETF or a money market fund (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund's proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund's own operations. If the underlying fund fails to achieve its investment objective the Fund's performance will likely be adversely affected.

In addition, to the extent that the Fund invests in, or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure. Shares of ETFs may trade at a discount or a premium to an ETF's net asset value which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend purchases or redemption of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the Fund. If an underlying fund's shares are suspended from trading on an exchange, the Fund may not be able to obtain the required exposure to meet its investment objective.

***Passive Investment and Index Performance Risk —***

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index

Direxion Funds Prospectus

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construction and computation processes. Industry concentrations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the Index's methodology or calculation will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Liquidity Risk —***Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index. To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties.

***U.S. Treasury Obligations Risk —*** A security backed by the U.S. Treasury or the full faith and credit of the United States

is guaranteed only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. U.S. Treasury obligations may differ from other securities in their interest rates, maturities, times of issuance and other characteristics. Changes in the financial condition or credit rating of the U.S government may cause the value of U.S. Treasury obligations to decline.

***Credit Risk —*** There is a risk that the issuer or guarantor of a debt security could go bankrupt or be unable or unwilling to make interest payments and/or repay principal. Changes in an issuer's financial strength or in an issuer's or debt security's credit rating also may affect a security's value and thus have an impact on Fund net asset value and performance. Generally, the longer the maturity and the lower the credit quality of a security, the more sensitive it is to credit risk.

***Debt Instrument Risk —*** The value of debt instruments may increase or decrease as a result of: market fluctuations; changes in interest rates; actual or perceived inability of issuers, guarantors, or liquidity providers to make scheduled principal or interest payments; or illiquidity in debt securities markets. The Fund's income may decline if interest rates fall. Debt instruments are also impacted by political, regulatory, market and economic developments that impact the market in general and specific economic sectors, industries or segments of the fixed income market. In general, rising interest rates lead to a decline in the value of debt securities and debt securities with longer durations tend to be more sensitive to interest rate changes usually making their prices more volatile than those of securities with shorter durations.

***Interest Rate Risk —*** Interest rate risk is the chance that bond prices overall will decline because of rising interest rates. Securities with longer maturities generally are more sensitive to interest rate changes and subject to greater fluctuations in value. The risks associated with changing interest rates may have unpredictable effects on the markets and the Fund's investments. Fluctuations in interest rates may also affect the liquidity and volatility of fixed income securities and instruments held by the Fund.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, and may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

***High Portfolio Turnover Risk***— Monthly rebalancing of the Fund's holdings pursuant to its monthly investment objective causes a much greater number of portfolio transactions when compared to most funds. In addition, there is the possibility of significantly increased short-term capital gains (which will be taxable to shareholders as ordinary income when distributed to them). The Fund calculates portfolio turnover without including the short-term cash instruments or derivative transactions that comprise the majority of the Fund's trading. As such, if the Fund's extensive use of derivative instruments were reflected, the calculated portfolio turnover rate would be significantly higher.

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***Market Timing Activity Risk —*** Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading, which may lead to large shareholder transactions into and out of the Fund. These large movements of assets may lead to increased portfolio turnover, higher transaction costs and the possibility of increased net realized capital gains, including net short-term capital gains. Additionally, these large movement of assets may have a negative impact on the Fund's ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, the Fund's expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus.

***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Non-Diversification Risk —*** The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year. The table shows how the Fund's average annual returns for the one-year, five-year and ten-year periods compare with those of at least one broad-based market index for the same periods. The Bloomberg U.S. Aggregate Bond Index is included in the table as the Fund's primary benchmark for regulatory reasons. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

The performance shown prior to May 2, 2016 reflects the Fund's previous monthly leveraged investment objective, before fees and expenses, of 200% of the NYSE 7-10 Year Treasury Bond Index. As of May 2, 2016, the Fund began to seek a monthly leveraged investment objective, before fees and expenses, of 200% of the ICE U.S. Treasury 7-10 Year Bond Index.

The performance noted below, and prior to August 1, 2022, reflects the Fund's previous monthly leveraged investment objective, before fees and expenses, of 200% of the Index. If the Fund had continued to seek either of its previous investment objectives, the calendar year performance of the Fund would have varied from that shown.

**Total Return for the Calendar Years Ended December 31**

![](g58398img3425feca3.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 20.33<br> %<br>| March 31, 2020 |
| Worst Quarter | &nbsp;&nbsp; -13.20<br> %<br>| March 31, 2022 |
| Year-to-Date | 7.57<br> %<br>| September 30, 2025 |

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; -7.57% | &nbsp;&nbsp; -7.23% | &nbsp;&nbsp; -2.56% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; -7.95% | &nbsp;&nbsp; -7.64% | &nbsp;&nbsp; -3.05% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; -4.46% | &nbsp;&nbsp; -5.39% | &nbsp;&nbsp; -2.00% |
| &nbsp;&nbsp; **Bloomberg U.S. Aggregate** <br> **Bond Index** (reflects no <br> deduction for fees, expenses <br> or taxes)<br>| &nbsp;&nbsp; 1.25% | &nbsp;&nbsp; -0.33% | &nbsp;&nbsp; 1.35% |
| &nbsp;&nbsp; **ICE U.S. Treasury 7-10 Year** <br> **Bond Index** (reflects no <br> deduction for fees, expenses <br> or taxes)<br>| &nbsp;&nbsp; -0.54% | &nbsp;&nbsp; -1.38% | &nbsp;&nbsp; 0.73% |
| &nbsp;&nbsp; **Bloomberg Intermediate US** <br> **Government/Credit Bond** <br> **Index** (reflects no deduction <br> for fees, expenses or taxes)<br>| &nbsp;&nbsp; 3.00% | &nbsp;&nbsp; 0.86% | &nbsp;&nbsp; 1.71% |

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After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

In addition, the "Return After Taxes on Distributions and Sale of Fund Shares" is higher because the calculation recognizes a capital loss upon the redemption of Fund shares.

Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of time.

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**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Portfolio Managers.** The following members of Rafferty's investment team are jointly and primarily responsible for the day-to-day management of the Fund:

<u> Portfolio Managers</u> <u> Years of Service with the Fund</u> <u> Primary Title</u> <br> Paul Brigandi Since Inception in March 2005 Portfolio Manager <br> Tony Ng Since April 2006 Portfolio Manager

**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121), overnight mail (Direxion Funds - Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund, c/o U.S. Bank Global Fund Services, 801 Pennsylvania Ave, Suite 219252, Kansas City, MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: <br> Traditional <br> Investment Accounts<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (Traditional, Roth <br> and Spousal <br> individual retirement <br> accounts)<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

**Index Information**

**ICE Data Indices, LLC**. Neither Rafferty nor the Fund is sponsored, endorsed, sold or promoted by ICE Data Indices, LLC or its affiliates ("Vendor"). Vendor makes no representation or warranty regarding the advisability of investing in securities generally, in the Fund particularly, or the ability of the ICE U.S. Treasury 7-10 Year Bond Index to track general financial market performance.

VENDOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE ICE INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL VENDOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Direxion Funds Prospectus

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Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund

**Important Information Regarding the Fund**

The Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund (the "Fund") seeks ***calendar month inverse leveraged (-1.75X)*** investment results and is very different from most other mutual funds. As a result, the Fund may be riskier than alternatives that do not use leverage because the Fund's objective is to magnify the monthly inverse performance of the ICE U.S. Treasury 7-10 Year Bond Index (the "Index"). The return for investors that invest for periods longer or shorter than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, should not be expected to be -175% of the performance of the Index for the period. The return of the Fund for a period longer than a full calendar month will be the result of each full calendar month's compounded return over the period, which will very likely differ from -175% of the return of the Index for that period. Longer holding periods, higher volatility of the Index and leverage increase the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as, or more than, the return of the Index.

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking calendar month inverse leveraged (-1.75X) investment results, understand the risks associated with the use of leverage and shorting and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a calendar month, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the Index's performance decreases. An investor could lose the full principal value of his/her investment within a calendar month if the Index gains more than 57.5% in one month.**

**Investment Objective**

The Fund seeks monthly investment results, before fees and expenses, of 175% of the ***inverse (or opposite)*** of the calendar month performance of the Index. **The Fund does not seek to achieve its stated investment objective for a period of time different than a full calendar month.**

**Fees and Expenses of the Fund**

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

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| | |
|:---|:---|
| Management Fees | 0.75% |
| Distribution and/or Service (12b-1) Fees | 0.25% |
| Other Expenses of the Fund | 1.70% |
| Acquired Fund Fees and Expenses<sup>(1)</sup> | 0.07% |
| Total Annual Fund Operating Expenses<sup>(2)</sup> | 2.77% |
| Expense Cap/Reimbursement<sup>(3)</sup> | -1.32% |
| &nbsp;&nbsp; Total Annual Fund Operating Expenses After <br> Expense Cap/Reimbursement<br>| 1.45% |

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<sup>(1)</sup>

"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money market funds. Because acquired fund fees and expenses are not borne directly by the Fund, they will not be reflected in the expense information in the Fund's financial statements and the information presented in the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.

<sup>(2)</sup>

Rafferty Asset Management, LLC ("Rafferty" or the "Adviser"), has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2027, to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if overall Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.

<sup>(3)</sup>

For the fiscal year ended August 31, 2025, as a result of a portion of the Adviser's management fee and/or a previous reimbursement of Other Expenses, the Adviser recouped fees in the amount of 0.13%.

**Example -** This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 1 Year | 3 Years | 5 Years | 10 Years |
| Investor Class | $148 | $734 | $1347 | $3003 |

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**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 0% of the average

Direxion Funds Prospectus

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value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the Fund's extensive use of derivatives was reflected, the Fund's portfolio turnover rate would be significantly higher.

**Principal Investment Strategy**

The Index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than or equal to seven years and less than ten years. Eligible securities must be fixed rate, denominated in U.S. dollars, and have $300 million or more of outstanding face value, excluding amounts held by the Federal Reserve. Securities excluded from the Index are inflation-linked securities, Treasury bills, cash management bills, any government agency debt issued with or without a government guarantee and zero-coupon issues that have been stripped from coupon-paying bonds. The Index is not adjusted for securities that may become eligible or ineligible for inclusion in the Index intra-month. The Index is reconstituted and rebalanced on the last business day of each month.

The Index was comprised of 14 constituents as of October 31, 2025.

The Fund, under normal circumstances, invests at least 80% of the Fund's net assets (plus borrowing for investment purposes) in financial instruments, including swap agreements, futures contracts, or short positions, that, in combination, provide 1.75X calendar month inverse (opposite) or short exposure to the Index or to exchange-traded funds ("ETFs") that track the Index, consistent with the Fund's investment objective. The financial instruments in which the Fund most commonly invests are swap agreements and futures agreements which are intended to produce economically inverse leveraged investment results.

The Fund is designed to lose money when the Index rises, which is a result that is the opposite from traditional index tracking funds. In order to achieve its monthly inverse investment objective, the Fund may invest in a combination of financial instruments, such as swaps that provide short exposure to the Index or to an ETF that tracks the same Index or a substantially similar index, short securities of the Index or short an ETF that tracks the same Index or a substantially similar index, or short futures contracts that provide short exposure to the Index. The Fund may gain inverse leveraged exposure utilizing financial instruments that provide short exposure to a representative sample of the securities in the Index that have aggregate characteristics similar to those of the Index. The Fund invests in derivatives as a substitute for directly shorting securities in order to gain inverse leveraged exposure to the Index or its components. On a day-to-day basis, the Fund is expected to hold money market funds, deposit accounts with institutions with high quality credit ratings, and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles, including U.S. government securities and repurchase agreements. The Fund seeks to remain fully invested at all times consistent with its stated inverse leveraged investment objective.

Because a significant portion of the assets of the Fund may come from investors using "asset allocation" and "market timing" investment strategies, the Fund may engage in frequent trading.

The Fund is "non-diversified," meaning that a relatively high percentage of its assets may be invested in a limited number of issuers of securities. Additionally, the Fund's investment objective is not a fundamental policy and may be changed by the Fund's Board of Trustees without shareholder approval.

**Principal Investment Risks**

An investment in the Fund entails risk. The Fund may not achieve its inverse leveraged investment objective and there is a risk that you could lose all of your money invested in the Fund. The Fund is not a complete investment program. In addition, the Fund presents risks not traditionally associated with most mutual funds. It is important that investors closely review all of the risks listed below and understand them before making an investment in the Fund. **While the realization of certain of the risks described below may benefit the Fund due to its inverse investment objective, such occurrences may introduce more volatility to the Fund, which could have a significant negative impact on Fund performance.**

***Effects of Compounding and Market Volatility Risk* —** 

The Fund's performance for periods greater than a full calendar month, which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month, will be the result of each month's returns compounded over the period, which is likely to differ from -175% of the Index's performance, before fees and expenses. Compounding has a significant impact on funds that are inverse leveraged and that rebalance monthly. The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an investment in the Fund is held and the volatility of the Index during the shareholder's holding period.

Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with inverse leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities of the Index. The chart below provides examples of how Index volatility and its return could affect the Fund's performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Actual Fund returns are expected to vary from these estimates. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates (to obtain inverse leveraged exposure) of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a full calendar month to vary from -175% of the performance of the Index.

Direxion Funds Prospectus

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As shown in the chart below, the Fund would be expected to lose 14% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant loss of value in the Fund, even if the Index's return is flat. **For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose 91% of its value, even if the cumulative Index return for the year was 0%.** Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than -175% of the performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than -175% of the performance of the Index. The table below is not a representation of the Fund's actual returns, which may be significantly better or worse than the returns shown below as a result of any of the factors discussed above or in "Monthly Inverse Index Correlation Risk" below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ from the volatility of the Index.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| **-175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Simple Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **105%** | 385.2% | 327.6% | 172.4% | 28.4% | -55.2% |
| **-50%** | **87.5%** | 228.4% | 189.4% | 84.3% | -13.1% | -69.7% |
| **-40%** | **70%** | 138.7% | 110.3% | 34.0% | -36.8% | -78.0% |
| **-30%** | **52.5%** | 82.2% | 60.6% | 2.3% | -51.8% | -83.2% |
| **-20%** | **35%** | 44.3% | 27.1% | -19.0% | -61.8% | -86.7% |
| **-10%** | **17.5%** | 17.4% | 3.5% | -34.1% | -68.9% | -89.2% |
| **0%** | **0%** | -2.4% | -14.0% | -45.2% | -74.2% | -91.0% |
| **10%** | **-17.5%** | -17.4% | -27.2% | -53.6% | -78.1% | -92.4% |
| **20%** | **-35%** | -29.0% | -37.5% | -60.2% | -81.2% | -93.4% |
| **30%** | **-52.5%** | -38.3% | -45.6% | -65.4% | -83.7% | -94.3% |
| **40%** | **-70%** | -45.8% | -52.3% | -69.6% | -85.7% | -95.0% |
| **50%** | **-87.5%** | -52.0% | -57.7% | -73.0% | -87.3% | -95.6% |
| **60%** | **-105%** | -57.1% | -62.2% | -75.9% | -88.7% | -96.0% |

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The Index's annualized historical volatility rate for the five year period ended September 30, 2025 was 7.48%. The Index's highest volatility rate for any twelve-month period (October 1 to September 30) during the five year period was 9.81% and volatility for a shorter period of time may have been substantially higher. The Index's annualized performance for the five-year period ended September 30, 2025 was -2.14%. Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

**For information regarding the effects of volatility and Index performance on the long-term performance of the Fund, see "Additional Information Regarding Investment Techniques and Policies" in the Fund's statutory prospectus, and "Negative Implications of Leveraged Monthly Goals In Volatile Markets" in the Fund's Statement of Additional Information under "Investment Policies and Techniques."**

***Leverage Risk —*** The Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize

leverage. An investment in the Fund typically results in the magnification of a rise in the monthly performance of the Index resulting in a larger loss being incurred than if there was no leverage utilized. This means that an investment in the Fund will be reduced by an amount equal to 1.75% for every 1% monthly rise in the Index, not including the costs of financing leverage and other operating expenses, which would further reduce its value. The Fund could lose an amount greater than its net assets in the event of an Index rise of more than 57.5% of the Index. This would result in a total loss of a shareholder's investment in one month even if the Index subsequently reverses all or a portion of its previous loss prior to the end of the day. A total loss of a shareholder's investment in the Fund may occur in a single month even if the Index does not lose all of its value. Leverage will also have the effect of magnifying any differences in the Fund's correlation with the Index and may increase the volatility of the Fund.

Under market circumstances that cause leverage to be expensive or unavailable, the Fund could, among other things, limit or suspend purchase of Fund Shares, change its investment objective by, for example, seeking to track an alternative index or reducing its leverage multiple, or the Fund could close.

***Derivatives Risk —*** Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.

The Fund's investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the performance of its reference asset for various reasons, including due to fees and other costs associated with it.

Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index due to costs associated with trading ETFs, such as an ETF's premium or discount which is the difference between its market price and its net asset value. If the Index has a dramatic intramonth increase or decrease that causes a material change in the Fund's performance and/or net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter into another swap agreement or invest in other derivatives to achieve its investment objective. This may occur even if

Direxion Funds Prospectus

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the Index reverses all or a portion of its intramonth movement by the end of the month.

Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service providers such as the Fund's custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased credit risk with respect to the custodian bank holding the assets.

***Counterparty Risk —*** If a counterparty is unwilling or unable to make timely payments to meet its contractual obligations or fails to return holdings that are subject to the agreement with the counterparty, the Fund will lose money and/or not be able to meet its monthly inverse leveraged investment objective.

Because the Fund may enter into swap agreements with a limited number of counterparties, this increases the Fund's exposure to counterparty credit risk. Further, there is a risk that no suitable counterparties will be willing to enter into, or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its inverse leveraged investment objective or rebalance properly, which may result in significant losses to the Fund, or the Fund may decide to change its inverse leveraged investment objective. The risk that no suitable counterparties will enter into or continue to provide swap exposure to the Fund may be heightened when there is significant volatility in the overall market or the reference asset.

***Rebalancing Risk —*** If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund's investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

***Shorting or Inverse Risk*** – The Fund will lose money when the value of the Index rises because of the Fund's inverse or short exposure – this result is the opposite from a traditional index fund. The Fund's assets will increase in value when the Index's return decreases. The Fund's assets will decrease in value when the Index's return increases. Because historically most assets have risen in value over the long term, short exposure or positions and therefore, the value of the Fund is expected to depreciate in value over time, notwithstanding any separate effects of compounding and the Fund's repositioning of inverse exposure. Additionally, if the level of the Index approaches a 57.5% increase at any point in the month, an investor could lose their entire investment. Accordingly, short positions and exposure may be riskier and more speculative than traditional investments. The costs of obtaining short exposure or maintaining short positions will lower the Fund's returns.

To the extent that the Fund obtains short exposure from derivatives, the Fund may be exposed to heightened volatility, reduced correlation to the Index or limited liquidity related to the reference asset of the underlying short position, which will adversely impact the Fund's ability to meet its investment objective or adversely impact its performance. If the Fund were to experience this volatility or decreased liquidity, the Fund may be required to obtain short exposure through alternative investment strategies that may have less correlation to the Index, less liquidity or are more costly to implement. If the reference asset underlying the short position is thinly traded or has a limited market, there may be a lack of available securities or counterparties for the Fund to enter into a short position or obtain short exposure from a derivative instrument.

***Intra-Calendar Month Investment Risk —*** The intra-month performance will be different from the performance of the Fund when measured from the close of the market at the end of one calendar month until the close of the market on the last day of the subsequent calendar month. An investor that purchases shares on a day other than the last business day of a calendar month may experience performance that is greater than, or less than, the Fund's stated investment objective. If there is a significant intra-month market event and/or the securities of the Index experience a significant change in value, the Fund may not meet its investment objective or be unable to rebalance its portfolio appropriately.

***Monthly Inverse Index Correlation Risk —*** A number of factors may affect the Fund's ability to achieve a high degree of inverse correlation with the Index and therefore achieve its monthly inverse leveraged investment objective. The Fund's exposure to the Index is impacted by the Index's movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each calendar month. The possibility of the Fund being materially over- or under-exposed to the Index increases during months when the Index is volatile.

Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly, the Fund's valuation methodology differing from the Index's valuation methodology, accounting standards and their application to income items, disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also adversely affect the Fund's ability to adjust exposure to meet its monthly inverse leveraged investment objective.

In addition, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the securities may be different from that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index reconstitutions and other Index rebalancing events may also hinder the Fund's ability to meet its monthly inverse leveraged investment objective.

Direxion Funds Prospectus

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***Passive Investment and Index Performance Risk —***

A third party (the "Index Provider"), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation processes. Industry concentrations in the Index will fluctuate with changes in constituents' market values such that the Index may become more, or less, concentrated over time. There can be no guarantee that the Index's methodology or calculation will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on the Fund.

The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless that constituent is removed from the Index with which the Fund seeks correlated performance.

***Market Risk —*** The Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, geopolitical events, tariffs, trade wars, natural disasters, and public health risks. Interest rates and inflation rates may change frequently and drastically due to various factors and the Fund's investments may be adversely impacted.

The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to its federal agencies and changes to regulatory policies, will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities.

***Liquidity Risk —***Holdings of the Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain market conditions or restrictions may prevent the Fund from limiting losses,

realizing gains or achieving its investment objective. In certain market conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's transactions could exacerbate illiquidity and price volatility in the securities of the Index. To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment objective due to a lack of available investments or counterparties.

***U.S. Treasury Obligations Risk —*** A security backed by the U.S. Treasury or the full faith and credit of the United States is guaranteed only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. U.S. Treasury obligations may differ from other securities in their interest rates, maturities, times of issuance and other characteristics. Changes in the financial condition or credit rating of the U.S government may cause the value of U.S. Treasury obligations to decline.

***Credit Risk —*** There is a risk that the issuer or guarantor of a debt security could go bankrupt or be unable or unwilling to make interest payments and/or repay principal. Changes in an issuer's financial strength or in an issuer's or debt security's credit rating also may affect a security's value and thus have an impact on Fund net asset value and performance. Generally, the longer the maturity and the lower the credit quality of a security, the more sensitive it is to credit risk.

***Debt Instrument Risk —*** The value of debt instruments may increase or decrease as a result of: market fluctuations; changes in interest rates; actual or perceived inability of issuers, guarantors, or liquidity providers to make scheduled principal or interest payments; or illiquidity in debt securities markets. The Fund's income may decline if interest rates fall. Debt instruments are also impacted by political, regulatory, market and economic developments that impact the market in general and specific economic sectors, industries or segments of the fixed income market. In general, rising interest rates lead to a decline in the value of debt securities and debt securities with longer durations tend to be more sensitive to interest rate changes usually making their prices more volatile than those of securities with shorter durations.

***Interest Rate Risk —*** Interest rate risk is the chance that bond prices overall will decline because of rising interest rates. Securities with longer maturities generally are more sensitive to interest rate changes and subject to greater fluctuations in value. The risks associated with changing interest rates may have unpredictable effects on the markets and the Fund's investments. Fluctuations in interest rates may also affect the liquidity and volatility of fixed income securities and instruments held by the Fund.

***Early Close/Trading Halt Risk —*** An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, and

Direxion Funds Prospectus

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may be unable to accurately price its investments, which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.

***Market Timing Activity Risk —*** Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading, which may lead to large shareholder transactions into and out of the Fund. These large movements of assets may lead to increased portfolio turnover, higher transaction costs and the possibility of increased net realized capital gains, including net short-term capital gains. Additionally, these large movement of assets may have a negative impact on the Fund's ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, the Fund's expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus.

***Money Market Instrument Risk —*** The Fund may use a variety of money market instruments for cash management purposes, including money market funds, depositary accounts and repurchase agreements. Money market funds may be subject to credit risk with respect to the debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial institution in which the depository account is held. Money market instruments may lose money.

***Non-Diversification Risk —*** The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.

**Fund Performance**

The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have varied from calendar year to calendar year. The bar chart shows changes in the Fund's performance from calendar year to calendar year. The table shows how the Fund's average annual returns for the one-year, five-year and ten-year periods compare with those of at least one broad-based market index for the same periods. The Bloomberg U.S. Aggregate Bond Index is included in the table as the Fund's primary benchmark for regulatory reasons. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance is available on the Fund's website at www.direxion.com/mutual-funds?producttab=performance or by calling the Fund toll-free at (800) 851-0511.

The performance shown prior to May 2, 2016 reflects the Fund's previous monthly inverse leveraged investment objective, before fees and expenses, of -200% of the NYSE 7-10 Year Treasury Bond Index. As of May 2, 2016, the Fund began to seek a monthly inverse leveraged investment

objective, before fees and expenses, of -200% of the ICE U.S. Treasury 7-10 Year Bond Index.

The performance noted below, and prior to August 1, 2022, reflects the Fund's previous monthly inverse leveraged investment objective, before fees and expenses, of -200% of the Index. If the Fund had continued to seek either of its previous investment objectives, the calendar year performance of the Fund would have varied from that shown.

**Total Return for the Calendar Years Ended December 31**

![](g58398img157f49694.jpg)

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| | | |
|:---|:---|:---|
|  | Returns | Period Ending |
| Best Quarter | 13.15<br> %<br>| March 31, 2022 |
| Worst Quarter | &nbsp;&nbsp; -18.15<br> %<br>| March 31, 2020 |
| Year-to-Date | &nbsp;&nbsp; -4.09<br> %<br>| September 30, 2025 |

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**Average Annual Total Returns** (for the periods ended 12/31/2024)

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Investor Class** |  |  |  |
| Return Before Taxes | &nbsp;&nbsp; 12.57% | &nbsp;&nbsp; 6.10% | &nbsp;&nbsp; -0.01% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions<br>| &nbsp;&nbsp; 8.38% | &nbsp;&nbsp; 4.61% | &nbsp;&nbsp; -0.77% |
| &nbsp;&nbsp; Return After Taxes on <br> Distributions and Sale of <br> Fund Shares<br>| &nbsp;&nbsp; 7.34% | &nbsp;&nbsp; 4.10% | &nbsp;&nbsp; -0.34% |
| &nbsp;&nbsp; **Bloomberg U.S. Aggregate** <br> **Bond Index** (reflects no <br> deduction for fees, expenses <br> or taxes)<br>| &nbsp;&nbsp; 1.25% | &nbsp;&nbsp; -0.33% | &nbsp;&nbsp; 1.35% |
| &nbsp;&nbsp; **ICE U.S. Treasury 7-10 Year** <br> **Bond Index** (reflects no <br> deduction for fees, expenses <br> or taxes)<br>| &nbsp;&nbsp; -0.54% | &nbsp;&nbsp; -1.38% | &nbsp;&nbsp; 0.73% |
| &nbsp;&nbsp; **Bloomberg Intermediate US** <br> **Government/Credit Bond** <br> **Index** (reflects no deduction <br> for fees, expenses or taxes)<br>| &nbsp;&nbsp; 3.00% | &nbsp;&nbsp; 0.86% | &nbsp;&nbsp; 1.71% |

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After-tax returns are calculated using the historically highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

In addition, the "Return After Taxes on Distributions and Sale of Fund Shares" is higher than the "Returns After Taxes on Distributions" for the ten year period because the calculation recognizes a capital loss upon the redemption of Fund shares.

Direxion Funds Prospectus

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Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of time.

**Management**

**Investment Adviser.** Rafferty Asset Management, LLC is the Fund's investment adviser.

**Portfolio Managers.** The following members of Rafferty's investment team are jointly and primarily responsible for the day-to-day management of the Fund:

<u> Portfolio Managers</u> <u> Years of Service with the Fund</u> <u> Primary Title</u> <br> Paul Brigandi Since Inception in May 2004 Portfolio Manager <br> Tony Ng Since April 2006 Portfolio Manager

**Purchase and Sale of Fund Shares**

You may purchase or redeem Fund shares on any business day by written request via regular mail (Direxion Funds – Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121), overnight mail (Direxion Funds - Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund, c/o U.S. Bank Global Fund Services, 801 Pennsylvania Ave, Suite 219252, Kansas City, MO 64105-1307), by wire transfer, by telephone at (800) 851-0511, or through a financial intermediary. Purchases and redemptions by telephone are only permitted if you previously established these options on your account. The Fund accepts investments in the following minimum amounts:

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent <br> Purchases<br>|
| &nbsp;&nbsp; Minimum <br> Investment: <br> Traditional <br> Investment Accounts<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |
| &nbsp;&nbsp; Minimum <br> Investment: <br> Retirement Accounts <br> (Traditional, Roth <br> and Spousal <br> individual retirement <br> accounts)<br>| $25,000 or a lesser <br> amount if you are a <br> client of a securities <br> dealer, bank or other <br> financial institution.<br>| $500 |

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**Tax Information**

The Fund's distributions to you are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Distributions on investments made through those arrangements may be taxed later upon withdrawal of assets from them. The Fund intends

to distribute income, if any, and capital gains, if any, at least annually.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

**Index Information**

**ICE Data Indices, LLC**. Neither Rafferty nor the Fund is sponsored, endorsed, sold or promoted by ICE Data Indices, LLC or its affiliates ("Vendor"). Vendor makes no representation or warranty regarding the advisability of investing in securities generally, in the Fund particularly, or the ability of the ICE U.S. Treasury 7-10 Year Bond Index to track general financial market performance.

VENDOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE ICE INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL VENDOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Direxion Funds Prospectus

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Overview of the Funds

The Direxion Funds (the "Trust") is a registered investment company offering a number of separate series. This Prospectus describes shares of the funds noted below (each a "Fund" and collectively, the "Funds"). Rafferty Asset Management, LLC serves as the investment adviser to each Fund ("Rafferty" or "Adviser").

The Funds with the word "Bull" in their name (the "Bull Funds"), attempt to provide investment results that correlate positively to the return of an underlying index, meaning the Bull Funds attempt to move in the same direction as the underlying index. The Fund with the word "Bear" in its name (the "Bear Fund"), attempts to provide investment results that correlate negatively to the return of an underlying index, meaning that the Bear Fund attempts to move in the opposite or inverse direction of the underlying index.

Each Fund seeks to provide a return which is a multiple of the monthly performance of its underlying index. No Fund attempts to provide returns which are a multiple of the return of the underlying index for periods other than a calendar month. Each Fund rebalances its portfolio on a monthly basis, increasing exposure in response to that month's gains or reducing exposure in response to that month's losses.

The exposure to the underlying index received by an investor who purchases a Fund intra-month will differ from the Fund's stated monthly leveraged investment objective by an amount determined by the movement of the underlying index from its value at the end of the prior calendar month. If the underlying index moves in a direction favorable to the Fund between the close of the market at the end of one month through the time in the next calendar month when the investor purchases the Fund, the investor will receive less exposure to the underlying index than the stated fund monthly leveraged investment objective. Conversely, if the underlying index moves in a direction adverse to the Fund, the investor will receive more exposure to the underlying index than the stated fund monthly leveraged investment objective.

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| | |
|:---|:---|
| **Fund** | **Monthly Leveraged**<br> **Investment Objective**<br>|
| Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund<br> S&P 500<sup>®</sup> Index | &nbsp;&nbsp; 175% |
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund<br> NASDAQ-100<sup>®</sup> Index | &nbsp;&nbsp; 175% |
| Direxion Monthly Small Cap Bull 1.75X Fund<br> Russell 2000<sup>®</sup> Index | &nbsp;&nbsp; 175% |
| Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | &nbsp;&nbsp; 175% |
| Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund | &nbsp;&nbsp; -175% |

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**The Funds are not suitable for all investors. The Funds are designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Such investors are expected to monitor and manage their portfolios frequently. Investors in the Funds should: (a) understand the risks associated with the use of leverage; (b) understand the consequences of seeking calendar month leveraged investment results; (c) for the Bear Fund, understand the risk of shorting; and (d) intend to actively monitor and manage their investments. Investors who do not understand the Funds or do not intend to actively manage their funds and monitor their investments should not buy the Funds.** 

**There is no assurance that the Funds will achieve their investment objective and an investment in a Fund could lose money. No single Fund is a complete investment program.** 

**Changes in Investment Objective.** Each Fund's investment objective is not a fundamental policy and may be changed by the Funds' Board of Trustees without shareholder approval.

**Defensive Policy**. Generally, each Fund pursues its investment objective regardless of market conditions and does not take defensive positions.

Additional Information Regarding Investment Techniques and Policies

Rafferty uses statistical and quantitative analysis to determine the investments each Fund makes and the techniques it employs. Rafferty relies upon a pre-determined model to generate orders that result in repositioning each Fund's investments in accordance with its monthly leveraged investment objective. Using this approach, Rafferty determines the type, quantity and mix of investment positions that it believes in combination should produce monthly returns consistent with a Fund's investment objective. In general, if a Fund is performing as designed, the return of the underlying index will dictate the return for that Fund. Rafferty does not invest the assets of a Fund in securities, derivatives or other investments based on Rafferty's view of the investment merit of a particular security, instrument or company, nor does it conduct conventional investment research or analysis or forecast market movements or trends. Each Fund pursues its investment objective regardless of the market conditions and does not generally take defensive positions. If a Fund takes a temporary defensive position, it may not meet its investment objective during such periods.

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For the Bull Funds, Rafferty attempts to provide 175%, before fees and expenses, of the return of each Bull Fund's underlying index for a calendar month. The Bear Fund is managed to provide 175% of the inverse (or opposite), before fees and expenses, of the return of the Bear Fund's underlying index for a calendar month. To do this, Rafferty creates net "long" positions for the Bull Funds and a net "short" position for the Bear Fund. (Rafferty may create short positions in the Bull Funds and long positions in the Bear Fund even though the net exposure in the Bull Funds will be long and the net exposure in the Bear Fund will be short.) Long positions move in the same direction as their underlying index, advancing when the underlying index advances and declining when the underlying index declines. Short positions move in the opposite direction of their underlying index, advancing when the underlying index declines and declining when the underlying index advances.

At the close of the markets at the end of each calendar month, each Fund will position its portfolio to ensure that the Fund's exposure to its underlying index is consistent with the Fund's stated investment objective. The impact of market movements during the month determines whether a portfolio needs to be repositioned. If the underlying index has risen in a given month, a Bull Fund's net assets should rise, meaning its exposure will typically need to be increased. Conversely, if the underlying index has fallen in a given month, a Bull Fund's net assets should fall, meaning its exposure will typically need to be reduced. If the underlying index has risen in a given month, the Bear Fund's net assets should fall, meaning its exposure will typically need to be reduced. If the underlying index has fallen in a given month, the Bear Fund's net assets should rise, meaning its exposure will typically need to be increased. Any of the Funds' portfolios may also need to be changed to reflect changes in the composition of its underlying index.

Each Fund has a clearly articulated monthly leveraged investment objective which requires the Fund to seek economic exposure in excess of its net assets (*i.e*., economic leverage). To meet its objectives, each Fund invests in some combination of financial instruments so that it generates economic exposure consistent with the Fund's investment objective.

The Bull Funds generally may hold a representative sample of the securities in the underlying index. The sampling of securities that is held by a Bull Fund is intended to maintain high correlation with, and similar aggregate characteristics (*e.g*., market capitalization and industry weightings) to, the underlying index. A Bull Fund also may invest in securities that are not included in its underlying index or may overweight or underweight certain components of the underlying index. Certain Funds' assets may be concentrated in an industry or group of industries to the extent that a Fund's underlying index concentrates in a particular industry or group of industries. In addition, each Fund offered in this Prospectus is non-diversified, which means that it may invest in the securities of a limited number of issuers.

**The Effects of Fees and Expenses on the Return of a Bull Fund for a Single Calendar Month.** To create the necessary exposure, a Bull Fund uses leveraged investment techniques, which necessarily incur brokerage and financing charges. In light of these charges and each Bull Fund's operating expenses, the expected return of a Bull Fund over one calendar month is equal to the gross expected return, which is the monthly underlying index return multiplied by a Bull Fund's monthly leveraged investment objective, minus (i) financing charges incurred by the portfolio and (ii) operating expenses. For instance, if a Bull Fund's underlying index returns 2% on a given day, the gross expected return of the related Bull Fund would be 3.5%, but the net expected return, which factors in the cost of financing the portfolio and the impact of operating expenses, would be lower. Each Bull Fund will reposition its portfolio at the end of every calendar month. Therefore, if an investor purchases Fund shares at the close of the markets at the end of a given calendar month, the investor's exposure to the underlying index of a Bull Fund would reflect 175% of the performance of the underlying index during the following calendar month, subject to the charges and expenses noted above.

**The Effects of Fees and Expenses on the Return of the Bear Fund for a Single Calendar Month.** To create the necessary exposure, the Bear Fund engages in short selling—borrowing and selling securities it does not own. The money that the Bear Fund receives from short sales—the short sale proceeds—is an asset of the Bear Fund that can generate income to help offset the Bear Fund's operating expenses. However, the costs of creating short exposure, which may require the Bear Fund's counterparties to borrow and sell certain securities, may offset or outweigh such income. As the holder of a short position the Bear Fund also is responsible for paying the dividends and interest accruing on the short position, which is an expense to the Bear Fund that could cause the Fund to lose money on the short sale and may adversely affect its performance. The Bear Fund will reposition its portfolio at the end of every calendar month. Therefore, if an investor purchases the Bear Fund at the close of the markets at the end of a given calendar month, the investor's exposure to the underlying index of the Bear Fund would reflect 175% of the inverse performance of the underlying index during the following calendar month, subject to the charges and expenses noted above.

A Fund may have difficulty in achieving its monthly leveraged investment objective due to fees, expenses, transaction costs, income items, accounting standards, significant purchase and redemption activity by Fund shareholders and/or disruptions or a temporary lack of liquidity in the markets for the securities held by the Fund. Additionally, if a Fund's underlying index includes foreign securities or a Fund tracks a foreign market index where the foreign market closes before or after the New York Stock Exchange ("NYSE") closes (generally at 4 p.m. Eastern Time), the performance of the underlying index may differ from the expected monthly leveraged performance.

An exchange or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may be restricted, which may result in a Fund being unable to buy or sell certain securities or financial

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instruments. In such circumstances, a Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and/or may incur substantial trading losses.

If a Fund is unable to obtain leveraged or leveraged inverse exposure to its underlying index consistent with its investment objective, such as situations in which the instruments utilized by a Fund are thinly traded or have a limited market, a Fund could, among other things, fail to meet its monthly investment objective.

**A Cautionary Note to Investors Regarding Dramatic Index Movement**. A Fund could lose an amount greater than its net assets in the event of a movement of its underlying index in excess of 57.5% in a direction adverse to the Fund (meaning a decline in the value of the underlying index of a Bull Fund and a gain in the value of the underlying index for the Bear Fund). Rafferty will attempt to position each Fund's portfolio to ensure that a Fund does not gain or lose all of its NAV on a given day. It may not be possible to limit a Fund's losses, and shareholders should not expect such protection. The risk of total loss exists.

If the underlying index of a Fund has a dramatic adverse move that causes a material decline in a Fund's net assets, the terms of a Fund's swap agreements may permit the counterparty to immediately close out the swap transaction. In that event, a Fund may be unable to enter into another swap agreement or invest in other derivatives to achieve exposure consistent with a Fund's investment objective. This may prevent a Fund from achieving its leveraged or inverse leveraged investment objective, even if the underlying index later reverses all or a portion the move, and result in significant losses.

**Examples of the Impact of Monthly Leverage and Compounding.** For a period longer than one calendar month, the pursuit of calendar month goals may result in calendar month leveraged compounding, which means that the return of an underlying index over a period of time greater than one calendar month multiplied by a Fund's calendar month target (*e.g.*, 175% or -175%) generally will not equal a Fund's performance over that same period. As such, although federal regulations require that this Prospectus include annualized performance and multi-year expense information for each Fund, investors should bear in mind that the Funds seek calendar month, and not annual, investment results. A one-year period is used for illustrative purposes only. Deviations from the returns of a Fund's underlying index times a Fund's multiplier (175% or -175%) can occur over short periods.

Consider the following examples:

Mary is considering investments in three Funds, Fund A, Fund B and Fund C. Fund A is a traditional index fund which seeks (before fees and expenses) to match the performance of the XYZ index. Fund B is a leveraged Fund and seeks calendar month leveraged investment results (before fees and expenses) that correspond to 175% of the calendar month performance of the XYZ index. Fund C is a leveraged Fund and seeks calendar month leveraged investment results (before fees and expenses) that correspond to -175% of the calendar month performance of the XYZ index.

In January, the XYZ index increases in value from $100 to $105, a gain of 5%. In February, the XYZ index declines from $105 back to $100, a loss of 4.76%. In the aggregate, the XYZ index has not moved.

An investment in Fund A would be expected to gain 5% in January and lose 4.76% in February to return to its original value. The following example assumes a $100 investment in Fund A when the index is also valued at $100:

**FUND A – A Traditional Index Fund** 

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| | | | | |
|:---|:---|:---|:---|:---|
| Month | &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Value<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index Monthly<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Cumulative<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Value of<br> Investment<br>|
|  | $100.00 |  |  | $100.00 |
| January | $105.00 | 5.00% | 5.00% | $105.00 |
| February | $100.00 | -4.76% | 0.00% | $100.00 |

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The same $100 investment in Fund B, however, would be expected to gain 8.75% in January (175% of 5%) but decline 8.33% in February.

**FUND B – 1.75X Bull Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Month | &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Value<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index Monthly<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; 175% of<br> Monthly Index<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Value of<br> Investment<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Cumulative<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Investment<br> Cumulative<br> Performance<br>|
|  | $100.00 |  |  | $100.00 |  |  |
| January | $105.00 | 5.00% | 8.75% | $108.75 | 5.00% | 8.75% |
| February | $100.00 | -4.76% | -8.33% | $99.69 | 0.00% | -0.31% |

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Although the percentage decline is smaller in February than the percentage gain in January, the loss is applied to a higher principal amount so the investment in Fund B has a loss of 0.31% even when the aggregate index value for the two-month period has not declined. (These calculations do not include the charges for expense ratio and the financing charges.)

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Because Fund C seeks leveraged inverse returns, the same $100 investment in Fund C would be expected to lose 8.75% in January and then gain 8.33% in February.

**FUND C – 1.75X Bear Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Month | Index Value | &nbsp;&nbsp;&nbsp;&nbsp; Index Monthly<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; -175% of<br> Index Monthly<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Value of<br> Investment<br>| &nbsp;&nbsp;&nbsp;&nbsp; Index<br> Cumulative<br> Performance<br>| &nbsp;&nbsp;&nbsp;&nbsp; Investment<br> Cumulative<br> Performance<br>|
|  | $100.00 |  |  | $100.00 |  |  |
| January | $105.00 | 5.00% | -8.75% | $91.25 | 5.00% | -8.75% |
| February | $100.00 | -4.76% | 8.33% | $98.85 | 0.00% | -1.15% |

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Because the gain in February is multiplied by the already-diminished investment, the investment in Fund C does not make up its January losses even though the index has returned to its original value.

An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 175% or -175% (as applicable) exposure to the underlying index from the time of investment through the end of the month. The actual exposure is a function of the performance of the underlying index from the end of the prior calendar month to the date of investment in the Fund. If a Fund's shares are held through the end of a calendar month or months, the Fund's performance is likely to deviate from the multiple of the underlying index's performance for the longer period.

**Examples of the Impact of Index Volatility**. Each Fund rebalances its portfolio on a monthly basis, increasing exposure in response to that calendar month's gains or reducing exposure in response to that calendar's losses. Monthly rebalancing will typically cause a Fund to lose money if the underlying index experiences volatility. The volatility rate of an underlying index is a statistical measure of the magnitude of fluctuations in the index's returns over a defined period. For periods longer than a calendar month, volatility in the performance of the underlying index from month to month is the primary cause of any disparity between a Fund's actual returns and the returns of the underlying index for such period. Volatility causes such disparity because it exacerbates the effects of compounding on a Fund's returns. In addition, the effects of volatility are magnified in the Funds due to leverage. Consider the following three examples that demonstrate the effect of volatility on a hypothetical fund:

**<u>Example 1</u> <u>– Underlying Index Experiences Low Volatility</u>** 

Mary invests $10.00 in a hypothetical Bull Fund on the last day of Calendar Month 1. During Calendar Month 2, the Fund's underlying index rises from 100 to 102, a 2% gain. Mary's investment rises 3.5% to $10.35. Mary holds her investment through the end of Calendar Month 3, during which the Bull Fund's underlying index rises from 102 to 104, a gain of 1.96%. Mary's investment rises to $10.71, a gain during Calendar Month 3 of 3.43%. For the two calendar month period since Mary invested in the Bull Fund, the underlying index gained 4% although Mary's investment increased by 7.1%. Because the underlying index continued to trend upwards with low volatility, Mary's return closely correlates to the 175% return of the return of the underlying index for the period.

John invests $10.00 in a hypothetical Bear Fund on the last day of Calendar Month 1. During Calendar Month 2, the Fund's underlying index gains 2%, and John's investment falls by 3.5% to $9.65. At the end of Calendar Month 3, the underlying index rises by 1.96%, and John's Fund falls by 3.43% to $9.32. For the two calendar month period the underlying index returned 4% while the Fund lost 6.8%. John's return still correlates to -175% return of the underlying index, but not as closely as Mary's investment in a Bull Fund.

**<u>Example 2</u> <u>– Underlying Index Experiences High Volatility</u>** 

Mary invests $10.00 in a hypothetical Bull Fund on the last day of Calendar Month 1. During Calendar Month 2, the Bull Fund's underlying index rises from 100 to 110, a 10% gain, and Mary's investment rises 17.5% to $11.75. Mary continues to hold her investment through the end of Calendar Month 3, during which the Bull Fund's underlying index declines from 110 to 90, a loss of 18.18%. Mary's investment declines by 31.82%, from $11.75 to $8.01. For the two calendar month period since Mary invested in the Bull Fund, its underlying index lost 10% while Mary's investment decreased from $10 to $8.01, a 19.9% loss. The volatility of the underlying index affected the correlation between the underlying index's return for the two calendar month periods and Mary's return. In this situation, Mary lost more than 1.75 times the return of the underlying index.

Conversely, John invests $10.00 in a hypothetical Bear Fund on the last day of Calendar Month 1. During Calendar Month 2, the Fund's underlying index rises from 100 to 102, a 2% gain, and John's investment falls 3.5% to $9.65. John continues to hold his investment through the end of Calendar Month 3, during which the Fund's underlying index declines from 102 to 98, a loss of 3.92%. John's investment rises by 6.86%, from $9.65 to $10.31. For the two calendar month period

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since John invested in the Fund, the Fund's underlying index lost 2% while John's investment increased from $10 to $10.31, a 3.1% gain. The volatility of the underlying index affected the correlation between the underlying index's return for the two calendar period and John's return. In this situation, John gained less than 1.75 times the return of the underlying index.

**<u>Example 3</u> <u>– Intra Month Investment with Volatility</u>** 

The examples above assumed that Mary purchased the Fund on the last day of the relevant calendar month and received exposure equal to 175% of her investment. If she made an investment on a subsequent day, she would have received a beta determined by the performance of the underlying index from the end of the prior calendar month until the date of the purchase.

Mary invests $10.00 in the hypothetical Bull Fund on the 5<sup>th</sup> day of Calendar Month 1. From the end of the prior calendar month until the day on which Mary invests, the underlying index moved from 100 to 94, a 6% loss. In light of that loss, the hypothetical Bull Fund's beta at the point at which Mary invests is 184%. During the remainder of Calendar Month 1, the Bull Fund's underlying index rises from 94 to 97, a gain of 3.19%, and Mary's investment rises 5.87% (which is the underlying index's gain of 3.19% multiplied by the 184% beta that she received) to $10.59.

**Market Volatility**. Each Fund seeks to provide a return which is a multiple of the calendar month performance of an underlying index. No Fund attempts to, and no Fund should be expected to, provide returns which are a multiple of the return of an underlying index for periods other than one calendar month. Each Fund rebalances its portfolio on a calendar month basis, increasing exposure in response to that month's gains or reducing exposure in response to that month's losses.

Monthly rebalancing will impair a Fund's performance if its underlying index experiences volatility. For instance, a Bull Fund would be expected to lose 4.0% (as shown in Table 1 below) if its underlying index provided no return over a one year period and experienced annualized volatility of 25%. The Bear Fund would be expected to lose 17.1% (as shown in Table 1 below) if its underlying index provided no return over a one year period and had annualized volatility of 25%. If an underlying index's annualized volatility were to rise to 50%, the hypothetical loss for a one year period for a Bull Fund widens to approximately 15.1% while the loss for the Bear Fund rises to 52.8%.

**Table 1 – Impact of Hypothetical Volatility Levels on Returns** 

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| | | |
|:---|:---|:---|
| Volatility Range | 1.75X Bull Fund Loss | 1.75X Bear Fund Loss |
| 10% | &nbsp;&nbsp;&nbsp;&nbsp; 0.7% | &nbsp;&nbsp;&nbsp;&nbsp; 3.0% |
| 25% | &nbsp;&nbsp;&nbsp;&nbsp; 4.0% | &nbsp;&nbsp;&nbsp;&nbsp; 17.1% |
| 50% | &nbsp;&nbsp;&nbsp;&nbsp; 15.1% | &nbsp;&nbsp;&nbsp;&nbsp; 52.8% |
| 75% | &nbsp;&nbsp;&nbsp;&nbsp; 30.9% | &nbsp;&nbsp;&nbsp;&nbsp; 81.5% |
| 100% | &nbsp;&nbsp;&nbsp;&nbsp; 48.1% | &nbsp;&nbsp;&nbsp;&nbsp; 95.0% |

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Table 2 shows the annualized volatility for each of the indexes to which one of the Funds is benchmarked over the five year period ended September 30, 2025. The Funds' underlying indexes have historical volatility rates over that period ranging from 7.48% to 23.11%. Since market volatility has negative implications for the Funds which rebalance on a calendar month basis, investors should be sure to monitor and manage their investments in the Funds, particularly in volatile markets. The negative implications of volatility noted in Table 1 can be combined with the recent volatility ranges of various indexes in Table 2 to give investors some sense of the risks of holding the Funds for longer periods over the past five years. Historical index volatility and performance are not likely indicative of future volatility and performance. These tables are intended to simply underscore the fact that each Fund is designed as a short-term trading vehicle. The Funds are not intended to be used by, and are not appropriate for, investors who do not intend to actively monitor and manage their portfolios.

**Table 2 – Historic Volatility of each Fund's Underlying Index** 

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| | |
|:---|:---|
| Index | &nbsp;&nbsp;&nbsp; 5-Year Historical<br> Volatility Rate<br>|
| ICE U.S. Treasury 7-10 Year Bond Index | &nbsp;&nbsp;&nbsp;&nbsp; 7.48% |
| NASDAQ-100<sup>®</sup> Index | &nbsp;&nbsp;&nbsp;&nbsp; 23.11% |
| Russell 2000<sup>®</sup> Index | &nbsp;&nbsp;&nbsp;&nbsp; 23.09% |
| S&P 500<sup>®</sup> Index | &nbsp;&nbsp;&nbsp;&nbsp; 17.13% |

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**The Projected Returns of the Fund for Shares Held Longer than a Calendar Month**. Each Fund seeks calendar month investment results which should not be equated with seeking a goal for longer than a calendar month. For instance, if the underlying index gains 10% during a year, a Bull Fund should not be expected to provide a return of 17.5% for the year. This is true because the pursuit of calendar month goals may result in calendar month compounding, which means that the return of the underlying index over a period of time greater than one calendar month multiplied by 175% or -175% will not generally equal a Fund's performance over that same period.

The following tables set out a range of hypothetical calendar month performances during a given calendar year of a hypothetical underlying index and demonstrate how changes in the index impact the hypothetical Funds' performance for each calendar

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month and cumulatively up to, and including, the entire calendar year. The tables are based on a hypothetical $100 investment in the hypothetical Funds over a 12-month calendar period and do not reflect expenses of any kind.

**Table 3 – The Index Lacks a Clear Trend for a Period Longer Than One Month** 

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Index | Index | Index | Bull Fund | Bull Fund | Bull Fund | Bear Fund | Bear Fund | Bear Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  | $100.00 |  |  |
| January | 105 | 5.00% | 5.00% | $108.75 | 8.75% | 8.75% | $91.25 | -8.75% | -8.75% |
| February | 110 | 4.76% | 10.00% | $117.81 | 8.33% | 17.81% | $83.65 | -8.33% | -16.35% |
| March | 100 | -9.09% | 0.00% | $99.07 | -15.91% | -0.93% | $96.96 | 15.91% | -3.04% |
| April | 90 | -10.00% | -10.00% | $81.73 | -17.50% | -18.27% | $113.92 | 17.50% | 13.92% |
| May | 85 | -5.56% | -15.00% | $73.78 | -9.73% | -26.22% | $125.01 | 9.73% | 25.01% |
| June | 100 | 17.65% | 0.00% | $96.57 | 30.89% | -3.43% | $86.40 | -30.89% | -13.60% |
| July | 95 | -5.00% | -5.00% | $88.12 | -8.75% | -11.88% | $93.96 | 8.75% | -6.04% |
| August | 100 | 5.26% | 0.00% | $96.23 | 9.21% | -3.77% | $85.31 | -9.21% | -14.69% |
| September | 105 | 5.00% | 5.00% | $104.65 | 8.75% | 4.65% | $77.84 | -8.75% | -22.16% |
| October | 100 | -4.76% | 0.00% | $95.93 | -8.33% | -4.07% | $84.33 | 8.33% | -15.67% |
| November | 95 | -5.00% | -5.00% | $87.54 | -8.75% | -12.46% | $91.71 | 8.75% | -8.29% |
| December | 105 | 10.53% | 5.00% | $103.67 | 18.43% | 3.67% | $74.81 | -18.43% | -25.19% |

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The cumulative annual performance of the hypothetical underlying index in Table 3 is 5%. The return of the hypothetical Bull Fund for the calendar year is 3.67%, while the return of the hypothetical Bear Fund for the calendar year is -25.19%. The volatility of the hypothetical underlying index's performance and the lack of a clear trend results in performance for each hypothetical Fund for the period which bears little relationship to the performance of the hypothetical underlying index for the year.

**Table 4 – The Index Rises in a Clear Trend** 

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Index | Index | Index | Bull Fund | Bull Fund | Bull Fund | Bear Fund | Bear Fund | Bear Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  | $100.00 |  |  |
| January | 102 | 2.00% | 2.00% | $103.50 | 3.50% | 3.50% | $96.50 | -3.50% | -3.50% |
| February | 104 | 1.96% | 4.00% | $107.05 | 3.43% | 7.05% | $93.19 | -3.43% | -6.81% |
| March | 106 | 1.92% | 6.00% | $110.65 | 3.36% | 10.65% | $90.06 | -3.36% | -9.94% |
| April | 108 | 1.89% | 8.00% | $114.31 | 3.31% | 14.31% | $87.08 | -3.31% | -12.92% |
| May | 110 | 1.85% | 10.00% | $118.01 | 3.24% | 18.01% | $84.26 | -3.24% | -15.74% |
| June | 112 | 1.82% | 12.00% | $121.77 | 3.19% | 21.77% | $81.58 | -3.19% | -18.42% |
| July | 114 | 1.79% | 14.00% | $125.58 | 3.13% | 25.58% | $79.02 | -3.13% | -20.98% |
| August | 116 | 1.75% | 16.00% | $129.43 | 3.06% | 29.43% | $76.60 | -3.06% | -23.40% |
| September | 118 | 1.72% | 18.00% | $133.32 | 3.01% | 33.32% | $74.30 | -3.01% | -25.70% |
| October | 120 | 1.69% | 20.00% | $137.26 | 2.96% | 37.26% | $72.10 | -2.96% | -27.90% |
| November | 122 | 1.67% | 22.00% | $141.28 | 2.92% | 41.28% | $69.99 | -2.92% | -30.01% |
| December | 124 | 1.64% | 24.00% | $145.33 | 2.87% | 45.33% | $67.98 | -2.87% | -32.02% |

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The cumulative annual performance of the hypothetical underlying index in Table 4 is 24%. The return of the hypothetical Bull Fund for the calendar year is 45.33%, while the return of the hypothetical Bear Fund for the calendar year is -32.02%. In this case, because of the positive hypothetical underlying index trend, the hypothetical Bull Fund's gain is greater than 175% of the hypothetical underlying index gain and the hypothetical Bear Fund's decline is less than 175% of the hypothetical underlying index gain for the year.

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**Table 5 – The Index Declines in a Clear Trend** 

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Index | Index | Index | Bull Fund | Bull Fund | Bull Fund | Bear Fund | Bear Fund | Bear Fund |
|  | Value | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>| NAV | Calendar<br> Month<br> Performance<br>| Cumulative<br> Performance<br>|
|  | 100 |  |  | $100.00 |  |  | $100.00 |  |  |
| January | 98 | -2.00% | -2.00% | $96.50 | -3.50% | -3.50% | $103.50 | 3.50% | 3.50% |
| February | 96 | -2.04% | -4.00% | $93.05 | -3.57% | -6.95% | $107.19 | 3.57% | 7.19% |
| March | 94 | -2.08% | -6.00% | $89.67 | -3.64% | -10.33% | $111.10 | 3.64% | 11.10% |
| April | 92 | -2.13% | -8.00% | $86.33 | -3.73% | -13.67% | $115.24 | 3.73% | 15.24% |
| May | 90 | -2.17% | -10.00% | $83.05 | -3.80% | -16.95% | $119.61 | 3.80% | 19.61% |
| June | 88 | -2.22% | -12.00% | $79.82 | -3.89% | -20.18% | $124.26 | 3.89% | 24.26% |
| July | 86 | -2.27% | -14.00% | $76.65 | -3.97% | -23.35% | $129.20 | 3.97% | 29.20% |
| August | 84 | -2.33% | -16.00% | $73.52 | -4.08% | -26.48% | $134.47 | 4.08% | 34.47% |
| September | 82 | -2.38% | -18.00% | $70.46 | -4.17% | -29.54% | $140.07 | 4.17% | 40.07% |
| October | 80 | -2.44% | -20.00% | $67.45 | -4.27% | -32.55% | $146.05 | 4.27% | 46.05% |
| November | 78 | -2.50% | -22.00% | $64.50 | -4.38% | -35.50% | $152.44 | 4.38% | 52.44% |
| December | 76 | -2.56% | -24.00% | $61.61 | -4.48% | -38.39% | $159.27 | 4.48% | 59.27% |

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The cumulative annual performance of the hypothetical underlying index in Table 5 is -24%. The return of the hypothetical Bull Fund for the calendar year is -38.39%, while the return of the hypothetical Bear Fund for the calendar year is 59.27%. In this case, because of the negative hypothetical underlying index trend, the hypothetical Bull Fund's decline is less than 175% of the hypothetical underlying index decline and the hypothetical Bear Fund's gain is greater than 175% of the hypothetical underlying index decline for the year.

Direxion Funds Prospectus

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ADDITIONAL INFORMATION REGARDING PRINCIPAL Risks

An investment in a Fund entails risks. A Fund may not achieve its investment objective and may decline in value. In addition, a Fund presents risks not traditionally associated with most mutual funds. For example, due to the Funds' monthly leveraged or inverse leveraged investment objectives, a small adverse move in a Fund's underlying index will result in larger and potentially substantial declines in that Fund. It is important that investors closely review and understand all of a Fund's risks before making an investment. A Fund is not a complete investment program. **The realization of certain of the risks described below may result in adverse market movements that may actually benefit the Bear Fund due to its inverse investment objective, such occurrences may introduce more volatility to the Bear Fund, which could have a significant negative impact on Fund performance.** The table below provides the risks of investing in the Funds. Following the table, each risk is explained.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund | Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund | Direxion Monthly Small Cap Bull 1.75X Fund | Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund |
| Effects of Compounding and Market Volatility Risk | X | X | X | X | X |
| Leverage Risk | X | X | X | X | X |
| Derivatives Risk | X | X | X | X | X |
| Counterparty Risk | X | X | X | X | X |
| Rebalancing Risk | X | X | X | X | X |
| Shorting Risk |  |  |  |  | X |
| Intra-Calendar Month Investment Risk | X | X | X | X | X |
| Monthly Index Correlation Risk | X | X | X | X |  |
| Monthly Inverse Index Correlation Risk |  |  |  |  | X |
| Other Investment Companies (including ETFs) Risk | X | X | X | X |  |
| Passive Investment Risk and Index Performance Risk | X | X | X | X | X |
| Market Risk | X | X | X | X | X |
| Liquidity Risk | X | X | X | X | X |
| Consumer Discretionary Sector Risk |  | X |  |  |  |
| Credit Risk |  |  |  | X | X |
| Debt Instrument Risk |  |  |  | X | X |
| Financials Sector Risk |  |  | X |  |  |
| Healthcare Sector Risk |  |  | X |  |  |
| Industrials Sector Risk |  |  | X |  |  |
| Information Technology Sector Risk | X | X |  |  |  |
| Interest Rate Risk |  |  |  | X | X |
| U.S. Treasury Obligations Risk |  |  |  | X | X |
| Large Capitalization Company Risk | X | X |  |  |  |
| Micro-Capitalization Company Risk |  |  | X |  |  |
| Mid-Capitalization Company Risk | X |  |  |  |  |
| Small- and/or Mid-Capitalization Company Risk |  |  | X |  |  |
| Depositary Receipt Risk |  | X |  |  |  |
| Foreign Securities Risk |  | X |  |  |  |
| Early Close/Trading Halt Risk | X | X | X | X | X |
| Equity Securities Risk | X | X | X |  |  |
| High Portfolio Turnover Risk |  |  |  | X |  |
| Market Timing Activity Risk | X | X | X | X | X |
| Money Market Instrument Risk | X | X | X | X | X |
| Non-Diversification Risk | X | X | X | X | X |

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Direxion Funds Prospectus

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**Effects of Compounding and Market Volatility Risk**

Each Fund's performance for periods greater than a full calendar month which is defined as the period from the end of the last business day of one calendar month through the close of trading on the last business day of the following calendar month will be the result of each month's returns compounded over the period, which is likely to differ from an underlying index's performance times the stated multiple in a Fund's investment objective, before fees and expenses. Compounding has a significant impact on leveraged funds and funds that rebalance monthly.

Over time, the cumulative percentage increase or decrease in the value of a Fund's portfolio may diverge significantly from the cumulative percentage increase or decrease in 175% or -175% of the return of a Fund's underlying index due to the compounding effect of losses and gains on the returns of a Fund. It also is expected that a Fund's use of leverage will cause the Fund to underperform the return of 175% or -175% of its underlying index in a trendless or flat market.

The chart below provides examples of how index volatility could affect a Fund's performance. An index's volatility rate is a statistical measure of the magnitude of fluctuations in the returns of the index. Fund performance for periods greater than one calendar month can be estimated given any set of assumptions for the following factors: a) index volatility; b) index performance; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities in its underlying index. The chart below illustrates the impact of two principal factors – index volatility and index performance – on Fund performance. The chart shows estimated Fund returns for a number of combinations of index volatility and index performance over a one-year period. Performance shown in the chart assumes that: (i) no dividends were paid with respect to the securities included in its underlying index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates of 0%. If Fund expenses and/or actual borrowing/lending rates were reflected, the estimated returns would be different than those shown. Particularly during periods of higher index volatility, compounding will cause results for periods longer than a full calendar month to vary from 175% or -175% of the performance of the underlying index.

As shown below, a Bull Fund would be expected to lose 4% and the Bear Fund would be expected to lose 14% if the underlying index provided no return over a one year period during which the underlying index experienced annualized volatility of 25%. If the underlying index's annualized volatility were to rise to 75%, the hypothetical loss for a one year period widens to approximately 53.6% for a Bull Fund and 74.2% for the Bear Fund. At higher ranges of volatility, there is a chance of a significant loss of value even if the underlying index is flat. For instance, if the underlying index's annualized volatility is 100%, it is likely that a Bull Fund would lose 48.1% of its value, and the Bear Fund would lose approximately 91% of its value, even if the underlying index's cumulative return for the year was only 0%.

**Bull Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-105%** | -80.0% | -80.7% | -82.9% | -86.1% | -89.6% |
| **-50%** | **-87.5%** | -70.5% | -71.5% | -74.8% | -79.4% | -84.6% |
| **-40%** | **-70%** | -59.4% | -60.7% | -65.3% | -71.7% | -78.8% |
| **-30%** | **-52.5%** | -46.8% | -48.6% | -54.5% | -63.0% | -72.2% |
| **-20%** | **-35%** | -32.8% | -35.0% | -42.6% | -53.2% | -64.9% |
| **-10%** | **-17.5%** | -17.4% | -20.2% | -29.4% | -42.5% | -56.9% |
| **0%** | **0%** | -0.7% | -4.0% | -15.1% | -30.9% | -48.1% |
| **10%** | **17.5%** | 17.4% | 13.4% | 0.3% | -18.3% | -38.7% |
| **20%** | **35%** | 36.7% | 32.1% | 16.8% | -4.9% | -28.6% |
| **30%** | **52.5%** | 57.2% | 51.9% | 34.3% | 9.4% | -17.9% |
| **40%** | **70%** | 79.0% | 72.9% | 52.9% | 24.6% | -6.5% |
| **50%** | **87.5%** | 102.0% | 95.1% | 72.5% | 40.6% | 5.5% |
| **60%** | **105%** | 126.1% | 118.5% | 93.2% | 57.4% | 18.1% |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**Bear Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| **-175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Simple Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **105%** | 385.2% | 327.6% | 172.4% | 28.4% | -55.2% |
| **-50%** | **87.5%** | 228.4% | 189.4% | 84.3% | -13.1% | -69.7% |
| **-40%** | **70%** | 138.7% | 110.3% | 34.0% | -36.8% | -78.0% |
| **-30%** | **52.5%** | 82.2% | 60.6% | 2.3% | -51.8% | -83.2% |
| **-20%** | **35%** | 44.3% | 27.1% | -19.0% | -61.8% | -86.7% |
| **-10%** | **17.5%** | 17.4% | 3.5% | -34.1% | -68.9% | -89.2% |
| **0%** | **0%** | -2.4% | -14.0% | -45.2% | -74.2% | -91.0% |
| **10%** | **-17.5%** | -17.4% | -27.2% | -53.6% | -78.1% | -92.4% |
| **20%** | **-35%** | -29.0% | -37.5% | -60.2% | -81.2% | -93.4% |
| **30%** | **-52.5%** | -38.3% | -45.6% | -65.4% | -83.7% | -94.3% |
| **40%** | **-70%** | -45.8% | -52.3% | -69.6% | -85.7% | -95.0% |
| **50%** | **-87.5%** | -52.0% | -57.7% | -73.0% | -87.3% | -95.6% |
| **60%** | **-105%** | -57.1% | -62.2% | -75.9% | -88.7% | -96.0% |

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The charts are intended to underscore the fact that a Fund is designed as a short-term trading vehicle for investors who intend to actively monitor and manage their portfolios.

For additional information and examples demonstrating the effects of volatility and index performance on the long-term performance of a Fund, see the "Additional Information Regarding Investment Techniques and Policies" section, and "Special Note Regarding the Correlation Risks of the Funds" in the Funds' Statement of Additional Information ("SAI").

Holding an unmanaged position opens the investor to the risk of market volatility adversely affecting the performance of the investment. A Fund is not appropriate for investors who do not intend to actively monitor and manage their portfolios.

**Leverage Risk** 

To achieve its monthly investment objective, each Fund employs leverage and which typically results in the adverse calendar month performance of a Fund's underlying index being magnified. This means that, if a Fund's underlying index experiences adverse calendar month performance,

Direxion Funds Prospectus

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an investment in the Fund will be reduced by an amount equal to 1.75% for every 1% of adverse performance, not including the costs of financing leverage and other operating expenses, which would further reduce its value.

A Fund could lose an amount greater than its net assets if its underlying index moves more than 57.5% in a direction adverse to the Fund (meaning a decline in the value of the underlying index of a Bull Fund and a gain in the value of the underlying index for the Bear Fund). This would result in a total loss of a shareholder's investment in one month even if its underlying index subsequently reverses all or a portion of its earlier monthly change. A total loss may occur in a single month even if its underlying index does not lose all of its value. Leverage will also have the effect of magnifying any differences in a Fund's correlation with the underlying index or may increase a Fund's volatility.

Under market circumstances that cause leverage to be expensive or unavailable, a Fund could, among other things, limit or suspend purchase of Fund Shares, change its investment objective by, for example, seeking to track an alternative index or reducing its leverage multiple, or the Fund could close.

**Derivatives Risk** 

A Fund may obtain exposure through derivatives by investing in swap agreements, futures contracts, forward contracts, options, and options on futures contracts. Investing in derivatives may be considered aggressive and may expose a Fund to risks different from, and possibly greater than, risks associated with investing directly in the reference asset(s) underlying the derivative. The use of derivatives may result in larger losses or smaller gains than investing in the underlying securities directly, or in the case of the Bear Fund, directly shorting the underlying securities. The use of derivatives may expose a Fund to additional risks such as counterparty risk, liquidity risk and increased monthly correlation risk. When a Fund uses derivatives, there may be imperfect correlation between the value of the underlying reference assets and the derivative, which may prevent a Fund from achieving its investment objective.

A Fund expects to use a combination of swaps on the underlying index and swaps on an ETF that is designed to track the performance of that index. The performance of an ETF may not track the performance of its underlying index due to embedded costs and other factors. Thus, to the extent a Fund invests in swaps that use an ETF as the reference asset, the Fund may be subject to greater correlation risk and may not achieve as high a degree of correlation with its underlying index as it would if the Fund only used swaps on the underlying index. If the underlying index has a dramatic intraday move in value that causes a material decline in a Fund's NAV, the terms of the swap agreement between a Fund and its counterparty may allow the counterparty to immediately close out of the transaction with a Fund. In such circumstances, a Fund may be unable to enter into another swap agreement or invest in other derivatives to achieve the desired exposure consistent with a Fund's monthly leveraged investment objective. This may prevent a Fund from achieving its monthly leveraged investment objective particularly if the underlying index

reverses all or a portion of its intraday move by the end of the day. The value of an investment in the Fund may change quickly and without warning. Any financing, borrowing or other costs associated with using derivatives may also have the effect of lowering a Fund's return. Such costs may increase as interest rates rise.

In addition, a Fund's investments in derivatives are subject to the following risks:

● *Swap Agreements*. Swap agreements are entered into primarily with major global financial institutions for a specified period which may range from one day to more than one year. In a standard swap transaction, two parties agree to exchange the return (or differentials in rates of return) earned or realized on particular predetermined reference or underlying securities or instruments. The gross return to be exchanged or swapped between the parties is calculated based on a notional amount or the return on or change in value of a particular dollar amount invested in a reference asset. Swap agreements are generally traded over-the-counter, and therefore, may not receive regulatory protection, which may exposure investors to significant losses.

● *Futures Contracts*. A futures contact is a contract to purchase or sell a particular security, or the cash value of an index, at a specified future date at a price agreed upon when the contract is made. Under such contracts, no delivery of the actual securities is required. Rather, upon the expiration of the contract, settlement is made by exchanging cash in an amount equal to the difference between the contract price and the closing price of a security or index at expiration, net of the variation margin that was previously paid.

● *Forward Contracts*. Forward contracts are two-party contracts pursuant to which one party agrees to pay the counterparty a fixed price for an agreed upon amount of commodities, securities, or the cash value of the commodities, securities or the securities index, at an agreed upon date. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract.

● *Options*. An option is a contract that gives the purchaser (holder) of the option, in return for a premium, the right to buy from (call) or sell to (put) the seller (writer) of the option the security or currency underlying the option at a specified exercise price at any time during the term of the option (normally not exceeding nine months). The writer of an option has the obligation upon exercise of the option to deliver the underlying security or currency upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security or currency.

● *Options on Futures Contracts*. An option on a futures contract provides the holder with the right to enter into a "long" position in the underlying futures contract, in the case of a call option, or a "short" position in the underlying futures contract in the case of a put option, at a fixed exercise price to a stated expiration date. Upon exercise of the option by the holder, the contract market

Direxion Funds Prospectus

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clearing house establishes a corresponding short position for the writer of the option, in the case of a call option, or a corresponding long position, in the case of a put option.

**Counterparty Risk** 

Counterparty risk is the risk that a counterparty is unwilling or unable to make timely payments to meet its contractual obligations with respect to the amount a Fund expects to receive from a counterparty to a financial instrument entered into by a Fund. Each Fund generally enters into derivatives transactions, such as the swap agreements, with counterparties such that either party can terminate the contract without penalty prior to the termination date. If a counterparty terminates a contract, a Fund may not be able to invest in other derivatives to achieve the desired exposure, or achieving such exposure may be more expensive. A Fund may be negatively impacted if a counterparty becomes bankrupt or otherwise fails to perform its obligations under such a contract, or if any collateral posted by the counterparty for the benefit of a Fund is insufficient or there are delays in a Fund's ability to access such collateral. If the counterparty becomes bankrupt or defaults on its payment obligations to a Fund, it may experience significant delays in obtaining any recovery, may obtain only a limited recovery or obtain no recovery and the value of an investment held by a Fund may decline. The Fund may also not be able to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, if such remedies are stayed or eliminated under special resolutions adopted in the United States, the European Union and various other jurisdictions. European Union rules and regulations intervene when a financial institution is experiencing financial difficulties and could reduce, eliminate, or convert to equity a counterparty's obligations to a Fund (sometimes referred to as a "bail in").

A Fund typically enters into transactions with counterparties that present minimal risks based on the Adviser's assessment of the counterparty's creditworthiness, or its capacity to meet its financial obligations during the term of the derivative agreement or contract. The Adviser considers factors such as counterparty credit rating among other factors when determining whether a counterparty is creditworthy. The Adviser regularly monitors the creditworthiness of each counterparty with which a Fund transacts. Each Fund generally enters into swap agreements or other financial instruments with major, global financial institutions and seeks to mitigate risks by generally requiring that the counterparties for each Fund to post collateral, marked to market daily, in an amount approximately equal to what the counterparty owes a Fund, subject to certain minimum thresholds. To the extent any such collateral is insufficient or there are delays in accessing the collateral, the Funds will be exposed to the risks described above. If a counterparty's credit ratings decline, a Fund may be subject to a bail-in, as described above.

Because a Fund may enter into swap agreements with a limited number of counterparties, which may increase a Fund's exposure to counterparty credit risk. A Fund does not specifically limit its counterparty risk with respect to any single counterparty. There is a risk that no suitable

counterparties are willing to enter into, or continue to enter into, transactions with a Fund and, as a result, a Fund may not be able to achieve its investment objective or rebalance properly, which may result in significant losses to a Fund, or a Fund may decide to change its leveraged investment objective. Additionally, although a counterparty to a centrally cleared swap agreement and/or an exchange-traded futures contract is often backed by a futures commission merchant ("FCM") or a clearing organization that is further backed by a group of financial institutions, there may be instances in which a FCM or a clearing organization would fail to perform its obligations, causing significant losses to a Fund.

**Rebalancing Risk** 

If for any reason a Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, a Fund's investment exposure may not be consistent with its investment objective. In these instances, a Fund may have investment exposure to the underlying index that is significantly greater or less than its stated investment objective. A Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.

**Shorting or Inverse Risk** 

For the Bear Fund, shareholders should lose money when the underlying index rises, which is a result that is the opposite from traditional index tracking funds. The Bear Fund may engage in short sales or obtain short exposure that is designed to earn the Bear Fund a profit from the decline in the price of particular securities, baskets of securities or indices. If the market price of the underlying security or underlying index goes down between the time the Bear Fund sells the security or underlying index and buys it back, the Bear Fund will realize a gain on the transaction. Conversely, if the underlying security or underlying index goes up in price during the period, the Bear Fund will realize a loss on the transaction. Any such loss is increased by the cost the Bear Fund must pay to short the underlying security or underlying index or obtain short exposure. Likewise, any gain will be decreased by the costs the Bear Fund must pay to short a position or obtain short exposure. The Bear Fund's investment performance may also suffer if the Bear Fund is required to close out a short position earlier than it had intended. In addition, the Bear Fund may be subject to expenses related to short sales that are not typically associated with investing in securities directly, such as costs of borrowing and margin account maintenance costs associated with the Bear Fund's open short positions. As the holder of a short position, the Bear Fund also is responsible for paying the dividends and interest accruing on the short position, which is an expense to the Bear Fund that could cause the Bear Fund to lose money on the short sale and may adversely affect its performance.

The Bear Fund will typically obtain inverse or "short" exposure through the use of derivatives such as swap agreements or futures contracts, which may expose the Bear Fund to certain risks such as an increase in volatility or decrease in the liquidity of the securities or financial instruments of

Direxion Funds Prospectus

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the underlying short position. If the Bear Fund were to experience this volatility or decreased liquidity, the Bear Fund's return may be lower, the Fund's ability to obtain inverse exposure through the use of derivatives may be limited or the Bear Fund may be required to obtain inverse exposure through alternative investment strategies that may be less desirable or more costly to implement. If the securities or financial instruments underlying the short positions are thinly traded or have a limited market due to various factors, including regulatory action, the Bear Fund may be unable to meet its investment objective due to a lack of available securities, financial instruments or counterparties. The Bear Fund may not be able to issue additional Shares during period when it cannot meet its investment objective due to these factors. Any income, dividends or payments by the assets underlying the Bear Fund's short positions will negatively impact the Fund.

**Intra-Calendar Month Investment Risk** 

A Fund seeks calendar month leveraged investment results. Thus, an investor who purchases shares on a day other than the last business day of a calendar month will likely obtain more, or less, than 175% (for a Bull Fund) or -175% (for the Bear Fund) investment exposure to its underlying index, depending upon the movement of its underlying index from the end of the prior calendar month until the time of investment by an investor. If, since the beginning of the month, its underlying index has moved in a direction favorable to a Fund at the time of an investor's investment in it, the investor will receive exposure to its underlying index less than 175% (for a Bull Fund) or -175% (for the Bear Fund). Conversely, if its underlying index has moved in a direction adverse to a Fund at the time of an investor's investment in it, the investor will receive exposure to its underlying index greater than 175% (for a Bull Fund) or -175% (for the Bear Fund).

**Monthly Index Correlation Risk** 

There can be no guarantee that a Bull Fund will achieve a high degree of correlation with its investment objective relative to its underlying index. Failure to achieve a high degree of correlation may prevent a Bull Fund from achieving its investment objective. A number of factors may adversely affect a Bull Fund's correlation with its underlying index, including fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in ETFs, directly or indirectly as a reference asset for derivative instruments, income items, valuation methodology, accounting standards and disruptions or illiquidity in the markets for the securities or derivatives held by a Bull Fund. Market disruptions, regulatory restrictions or extreme volatility will also adversely affect a Bull Fund's ability to adjust exposure to the required levels. Activities surrounding index reconstitutions and other index repositioning events may hinder a Bull Fund's ability to meet its calendar month leveraged investment objective.

Because an underlying index may include instruments that trade on a different market than a Bull Fund, a Bull Fund's return may vary from a multiple of the performance of an underlying index because different markets may close before

the Exchange opens or may not be open for business on the same calendar days as a Bull Fund. Additionally, due to differences in trading hours between these different markets, and because the underlying index may be calculated using prices obtained at times other than a Fund's NAV calculation time, correlation to the underlying index may be measured by comparing the Fund's monthly return to a multiple of the calendar month performance of an underlying index or by comparing the monthly change in a Fund's NAV per share to a multiple of the calendar month performance of one or more U.S. ETFs that reflect the values of the securities underlying an underlying index as of a Fund's NAV calculation time. It is important to note that correlation to these ETFs may vary from the correlation to an underlying index due to embedded costs and other factors.

A Bull Fund may not have investment exposure to all securities in its underlying index, or its weighting of investment exposure to such stocks or industries may be different from that of its underlying index. In addition, a Bull Fund may invest in securities or financial instruments not included in its underlying index. A Bull Fund may take or refrain from taking positions in order to improve tax efficiency or comply with regulatory restrictions, either of which may negatively affect a Bull Fund's correlation with its underlying index. A Bull Fund may be subject to large movements of assets into and out of a Bull Fund, potentially resulting in a Bull Fund being over- or under-exposed to its underlying index. Additionally, securities in a Fund's underlying index may trade on markets that may not be open on the same day as a Bull Fund, which may cause a difference between the performance of a Bull Fund and its underlying index.

Any of these factors individually or in combination with other factors could decrease the correlation between the monthly performance of a Bull Fund and its underlying index and may hinder a Bull Fund's ability to meet its leveraged investment objective.

**Monthly Inverse Index Correlation Risk** 

Each Bear Fund is negatively correlated to its underlying index and should lose money when its underlying index rises — a result that is the opposite from traditional index funds.

There can be no guarantee that the Bear Fund will achieve a high degree of correlation with its inverse leveraged investment objective relative to its underlying index. Failure to achieve a high degree of correlation may prevent the Bear Fund from achieving its investment objective. A number of factors may adversely affect the Bear Fund's correlation with its underlying index, including fees, expenses, transaction costs, financing costs related to the use of derivatives, use of an ETF as a reference asset for derivative instruments, income items, valuation methodology, accounting standards and disruptions or illiquidity in the markets for the securities or derivatives held by the Bear Fund. Market disruptions, regulatory restrictions or extreme volatility will also adversely affect the Bear Fund's ability to adjust exposure to the required levels. Activities surrounding index reconstitutions and other

Direxion Funds Prospectus

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index repositioning events may hinder the Bear Fund's ability to meet its calendar month inverse leveraged investment objective.

Because an underlying index may include instruments that trade on a different market than the Bear Fund, the Bear Fund's return may vary from the inverse of a multiple of the performance of an underlying index because different markets may close before the Exchange opens or may not be open for business on the same calendar days as the Bear Fund. Additionally, due to differences in trading hours between these different markets, and because the underlying index may be calculated using prices obtained at times other than a Fund's NAV calculation time, correlation to the underlying index may be measured by comparing the Fund's monthly return to the inverse of a multiple of the calendar month performance of an underlying index or by comparing the monthly change in a Fund's NAV per share to a multiple of the inverse of the calendar month performance of one or more U.S. ETFs that reflect the values of the securities underlying an underlying index as of a Fund's NAV calculation time. It is important to note that correlation to these ETFs may vary from the correlation to an underlying index due to embedded costs and other factors. Additionally, there may be legal restrictions or limitation imposed by governments of certain countries which may limit the size of a Fund's holding or otherwise limit a Fund's ability to achieve its investment objective.

The Bear Fund may not have investment exposure to all securities in its underlying index, or its weighting of investment exposure to such stocks or industries may be different from that of its underlying index. In addition, the Bear Fund may invest in securities or financial instruments not included in its underlying index. The Bear Fund may take or refrain from taking positions in order to improve tax efficiency or comply with regulatory restrictions, either of which may negatively affect the Bear Fund's inverse correlation with its underlying index. The Bear Fund may be subject to large movements of assets into and out of the Bear Fund, potentially resulting in the Bear Fund being over- or under-exposed to its underlying index. Additionally, securities in a Fund's underlying index may trade on markets that may not be open on the same day as the Bear Fund, which may cause a difference between the performance of the Bear Fund and its underlying index.

Any of these factors individually or in combination with other factors could decrease the correlation between the monthly performance of the Bear Fund and its underlying index and may hinder the Bear Fund's ability to meet its inverse leveraged investment objective.

**Other Investment Companies (including ETFs) Risk** 

A Fund may invest in, or obtain exposure to, another investment company, including an ETF (each, an "underlying fund"), to pursue its investment objective or manage cash. When investing in an underlying fund, including an ETF, a Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear a Fund's

proportionate share of the fees and expenses of the underlying fund, in addition to the fees and expenses of a Fund's own operations. A Fund must rely on the underlying fund to achieve its investment objective. Accordingly, if the underlying fund fails to achieve its investment objective, a Fund's performance will likely be adversely affected. To the extent a Fund obtains exposure to an underlying fund, including an ETF, by entering into a derivatives contract whose reference asset is the underlying fund, a Fund will not be a shareholder of the underlying fund but will still be exposed to the risk that it may fail to achieve its investment objective and adversely impact the Fund.

In addition, to the extent that a Fund invests in an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure, including any risks associated with representative sampling . For example, shares of ETFs may trade at a discount or a premium to an ETF's net asset value, which may result in an ETF's market price being more or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF's bid-ask spread, and/or the underlying fund may suspend sales or redemptions of its shares due to market circumstances that make it impracticable to conduct such transactions, any of which may adversely impact a Fund's performance. If an underlying fund's shares are suspended from trading on an exchange, a Fund may not be able to obtain the required exposure to meet its investment objective.

**Passive Investment and Index Performance Risk** 

A third party (the "Index Provider"), who is unaffiliated with a Fund or Adviser, maintains and exercises complete control over an underlying index. Each Index Provider may delay or add a rebalance date, which may adversely impact the performance of a Fund and its correlation to an underlying index. There is no guarantee that the methodology used by a Index Provider to identify constituents for an underlying index will achieve its intended result or positive performance. Each underlying index relies on various sources of information to assess the potential constituents of an underlying index, including information that may be based on assumptions or estimates. There is no assurance that the sources of information are reliable, and the Adviser does not assess the due diligence conducted by each Index Provider with respect to the data it uses or an underlying index construction and computation processes. Industry calculations in an underlying index will fluctuate with changes in constituents' market values such that an underlying index may become more, or less, concentrated over time. There can be no guarantee that the methodology underlying an underlying index or the calculation of an underlying index will be free from error or that an error will be identified and/or corrected, which may have an adverse impact on a Fund.

A Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market conditions. For example, a Fund generally will not sell a constituent due to a decline in its performance

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or based on changes to the prospects of a constituent, unless that constituent is removed from an underlying index with which a Fund seeks correlated performance.

**Market Risk** 

A Fund's investments are subject to changes in general economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, inflation rates and/or investor expectations concerning such rates, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and closures, and public health risks. Interest rates and inflation rates may change frequently and drastically as a result of various factors and a Fund's investments may not keep pace with these changes.

Securities markets also may experience long periods of decline in value. During a general downturn in the securities markets, multiple asset classes may decline in value simultaneously and changes in the financial condition of a single issuer can impact a market the markets broadly. A Fund is subject to the risk that geopolitical events will disrupt markets and adversely affect global economies, markets, and exchanges. Local, regional or global events such as war, tariffs and trade wars, acts of terrorism, natural disasters, the spread of infectious illness or other public health issues, conflicts and social unrest or other events could have a significant impact on a Fund, its investments and a Fund's ability to achieve its investment objective. The economic, fiscal, monetary and foreign policies of the U.S. government, including the imposition of tariffs, changes to the federal agencies and regulatory policies will impact the U.S. economy and could lead to increased market volatility and may adversely impact the overall market and individual securities, including the various counterparties utilized by the Fund.

Markets and market participants are increasingly reliant on information data systems. Inaccurate data, software or other technology malfunctions, programming inaccuracies, unauthorized use or access and similar circumstances may impair the performance of these systems and may have an adverse impact upon a single issuer, a group of issuers, or securities markets more broadly.

**Liquidity Risk** 

Holdings of a Fund may be difficult to buy or sell or may be illiquid, particularly during times of market turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in changing or volatile markets. If a Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price a Fund may be adversely impacted. Certain market conditions or restrictions may prevent a Fund from limiting losses, realizing gains or achieving its investment objective. In certain market conditions a Fund may be one of many market participants that are attempting to transact in the securities of its underlying index. Under such circumstances, the market for securities of its underlying index may lack sufficient liquidity for all market participants'

trades. Therefore, a Fund may have more difficulty transacting in the securities or financial instruments and a Fund's transactions could exacerbate illiquidity and price volatility in the securities of its underlying index.

To the extent that the instruments utilized by a Fund are thinly traded or have a limited market, a Fund may be unable to meet its investment objective due to a lack of available investments or counterparties. Under such circumstances, a Fund may be unable to rebalance its exposure properly which may result in significantly more or less exposure and losses to a Fund. In such an instance, a Fund may increase its transaction fee, utilize derivatives instruments that are less correlated to its underlying index, change its investment objective, reduce its exposure or close.

**Consumer Discretionary Sector Risk** 

Because companies in the consumer discretionary sector manufacture products and provide discretionary services directly to the consumer, the success of these companies is tied closely to the performance of the overall domestic and international economy, including the functioning of the global supply chain, interest rates, inflation, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending, and may be strongly affected by social trends and marketing campaigns. Also, companies in the consumer discretionary sector may be subject to intense competition, which may have an adverse impact on a company's profitability. Changes in demographics and consumer tastes also can affect the demand for, and success of, consumer discretionary products in the marketplace.

**Credit Risk** 

There is a risk that the issuer or guarantor of a debt security could go bankrupt or be unable or unwilling to make interest payments and/or repay principal. Changes in an issuer's financial strength or in an issuer's or debt security's credit rating also may affect a security's value and thus have an impact on Fund performance. The degree of credit risk for a particular security may be reflected in its credit rating. Lower rated debt securities involve greater credit risk, including the possibility of default or bankruptcy. Generally, the longer the maturity and the lower the credit quality of a security, the more sensitive it is to credit risk.

**Debt Instrument Risk** 

The value of debt instruments may increase or decrease as a result of the following: market fluctuations; changes in interest rates; actual or perceived inability of issuers, guarantors, or liquidity providers to make scheduled principal or interest payments; or illiquidity in debt securities markets. A Fund's income may decline if interest rates fall. Debt instruments are also impacted by political, regulatory, market and economic developments that impact the market in general and specific economic sectors, industries or segments of the fixed income market. In general, rising interest rates lead to a decline in the value of debt securities and debt securities with longer durations tend to be more sensitive to interest rate changes usually making their prices more volatile than those of securities with shorter durations. To the extent that interest rates rise, certain underlying

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obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall. Declining interest rates may lead to prepayment of obligations and cause reduced rates of return due to reinvestment of interest and principal payments at lower interest rates.

**Financials Sector Risk** 

Performance of companies in the financials sector are subject to extensive governmental regulation which may limit both the amounts and types of loans and other financial commitments they can make, the interest rates and fees they can charge, the scope of their activities, the prices they can charge and the amount of capital they must maintain. Profitability of such companies is largely dependent on the availability and cost of capital funds and can fluctuate significantly when interest rates change or due to increased competition. In addition, deterioration of the credit markets generally may cause an adverse impact in a broad range of markets, including U.S. and international credit and interbank money markets generally, thereby affecting a wide range of financial institutions and markets. Certain events in the financials sector may cause an unusually high degree of volatility in the financial markets, both domestic and foreign, and cause certain financial services companies to incur large losses. Securities of financial services companies may experience a dramatic decline in value when such companies experience substantial declines in the valuations of their assets, take action to raise capital (such as the issuance of debt or equity securities), or cease operations. Credit losses resulting from financial difficulties of borrowers and financial losses associated with investment activities can negatively impact the sector. Insurance companies may be subject to severe price competition. Adverse economic, business or political developments could adversely affect financial institutions engaged in mortgage finance or other lending or investing activities directly or indirectly connected to the value of real estate. The financials sector is also a target for cyber attacks and may experience technology malfunctions and disruptions, which have occurred more frequently in recent years. Traditional financial companies may face competition from decentralized finance (DeFi) or open finance platforms, which seek to democratize access to financial services, such as borrowing, lending, custody, trading, derivatives and insurance, by removing third-party intermediaries. The impact of more stringent capital requirements, recent or future regulation on any individual financial company or recent or future regulation on the financials sector as a whole cannot be predicted.

**Healthcare Sector Risk** 

The profitability of companies in the healthcare sector may be affected by extensive, costly and uncertain government regulation, restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), changes in the demand for medical products and services, an increased emphasis on outpatient services, limited product lines, industry innovation and/or consolidation, changes in technologies and other market developments. Many healthcare companies are heavily dependent on obtaining and defending patents, which may be time consuming and costly. The expiration of patents may adversely affect the profitability of these

companies. Many healthcare companies are subject to extensive litigation based on product liability and similar claims. In addition, their products can become obsolete due to industry innovation, changes in technologies or other market developments. Many new products in the health care sector require significant research and development and may be subject to regulatory approvals, all of which may be time consuming and costly with no guarantee that any product will come to market.

**Industrials Sector Risk** 

Stock prices of issuers in the industrials sector are affected by supply and demand both for their specific product or service and for industrials sector products and services in general. Government regulation, world events, including trade disputes, exchange rates and economic conditions, technological developments and liabilities for environmental damage and general civil liabilities will also affect the performance of investment in such issuers. Aerospace and defense companies, a component of the industrials sector, can be significantly affected by government spending policies because companies involved in this industry rely to a significant extent on U.S. and foreign government demand for their products and services. Thus, the financial condition of, and investor interest in, aerospace and defense companies are heavily influenced by government defense spending policies which are typically under pressure from efforts to control government spending budgets. Transportation companies, another component of the industrials sector, are subject to cyclical performance and therefore investment in such companies may experience occasional sharp price movements which may result from changes in the economy, fuel prices, labor agreements and insurance costs. The industrials sector may also be adversely affected by changes or trends in commodity prices, which may be influenced by unpredictable factors. Issuers with high carbon intensity or high switching costs associated with the transition to low carbon alternatives may be more impacted by climate transition risks.

**Information Technology Sector Risk** 

The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs. In addition, many information technology companies have limited product lines, markets, financial resources or personnel. Information technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile and less liquid than the overall market. Information technology companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the information technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel. Companies in the application software industry, in particular, may also be negatively affected by the risk that subscription renewal rates for their products and services decline or fluctuate, leading to declining revenues. Companies in the systems software industry may be adversely

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affected by, among other things, actual or perceived security vulnerabilities in their products and services, which may result in individual or class action lawsuits, state or federal enforcement actions and other remediation costs. Companies in the computer software industry may also be affected by the availability and price of computer software technology components.

**Interest Rate Risk** 

Debt securities, and securities that provide exposure to debt securities, have varying levels of sensitivity to changes in interest rates. In addition, a Fund is subject to the risk that interest rates may change and exhibit increased volatility, thus affecting the performance of a Fund. Securities with longer maturities can be more sensitive to interest rate changes, and rising rates normally cause the value of fixed income securities with longer durations to decline; while falling rates normally cause the value of fixed income securities with longer durations to increase. An increase in interest rates may lead to heightened volatility in the fixed-income markets and adversely affect the liquidity of certain fixed-income investments. A decrease in fixed-income market maker capacity may act to decrease liquidity in the fixed-income markets and act to further increase volatility, affecting a Fund's return.

In addition, short-term and long-term interest rates do not necessarily move in the same amount or the same direction. Short-term securities tend to react to changes in short-term interest rates, and long-term securities tend to react to changes in long-term interest rates. The impact of an interest rate change may be significant for other asset classes as well, whether because of the impact of interest rates on economic activity or because of changes in the relative attractiveness of asset classes due to changes in interest rates. For instance, higher interest rates may make investments in debt securities more attractive, thus reducing investments in equities. The link between interest rates and debt security prices tends to be weaker with lower-rated debt securities than with investment-grade debt securities.

**U.S. Treasury Obligations Risk** 

A security backed by the U.S. Treasury or the full faith and credit of the United States is guaranteed only as to the timely payment of interest and principal when held to maturity. Nevertheless, circumstances could arise that could prevent the timely payment of interest or principal, such as reaching the legislative "debt ceiling." Such non-payment would result in losses to a Fund and substantial negative consequences for the U.S. economy and the global financial system. The market prices for such securities are not guaranteed and will fluctuate. U.S. Treasury obligations may differ from other securities in their interest rates, maturities, times of issuance and other characteristics. Changes in the financial condition, national debt or credit rating of the U.S. government may cause the value of U.S. Treasury obligations to decline.

A high national debt level may increase market pressures to meet government funding needs, which may drive debt cost higher and lead the government to issue additional

debt, thereby increasing refinancing risk. A high national debt also raises concerns that the U.S. government will not be able to make principal or interest payments when they are due. If market participants determine that U.S. sovereign debt levels have become unsustainable, the value of the U.S. dollar could decline, thus increasing inflationary pressures, particularly with respect to services outsourced to non-U.S. providers and imported goods and constrain or prevent the U.S. government from implementing effective countercyclical fiscal policy in economic downturns. Because U.S. government debt obligations are often used as a benchmark for other borrowing arrangements, a downgrade could also result in higher interest rates for a range of borrowers, cause disruptions in the international bond markets and have a substantial adverse effect on the U.S. and global economy.

**Large-Capitalization Company Risk** 

Large-capitalization companies typically have significant financial resources, extensive product lines and broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at rates that may be achieved by well-managed smaller and mid-size companies, which may affect the companies' returns.

**Micro-Capitalization Company Risk** 

Micro-capitalization companies often have limited product lines, narrower markets for their goods and/or services and more limited managerial and financial resources than larger, more established companies, including companies which are considered small- or mid-capitalization. In addition, because these stocks are not well known to the investing public, do not have significant institutional ownership and are followed by relatively few security analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. Adverse publicity and investor perceptions, whether based on fundamental analysis or rumor, can decrease the value and liquidity of such securities. As a result, their performance can be more volatile and they face greater risk of business failure.

**Mid-Capitalization Company Risk** 

Mid-capitalization companies often have narrower markets for their goods and/or services and more limited managerial and financial resources. Furthermore, those companies often have limited product lines, services, markets, financial resources, less stable earnings, or are dependent on a small management group. In addition, because these stocks are not well known to the investing public, do not have significant institutional ownership and are followed by relatively few security analysts, there will normally be less publicly available information concerning these securities compared to what is available for the securities of larger companies. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease the value and liquidity of securities held by a Fund. As a result, the price of

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mid-capitalization companies can be more volatile and they may be less liquid than large-capitalization companies, which could increase the volatility of a Fund's portfolio.

**Small- and/or Mid-Capitalization Company Risk** 

Small- and/or mid-capitalization companies often have narrower markets for their goods and/or services, less stable earnings, and more limited managerial and financial resources. Furthermore, those companies often have limited product lines, services, markets, financial resources or are dependent on a small management group. Because these stocks are not well-known to the investing public, there will normally be less publicly available information concerning these securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, can decrease the value and liquidity of such securities, resulting in more volatile performance. They also face greater risk of business failure.

**Depositary Receipt Risk** 

To the extent a Fund invests in, or has exposure to, foreign companies, investment may be in the form of depositary receipts or other securities convertible into securities of foreign issuers. American Depositary Receipts ("ADRs") are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. European Depositary Receipts ("EDRs") are receipts issued in Europe that evidence a similar ownership arrangement. Global Depositary Receipts ("GDRs") are receipts issued throughout the world that evidence a similar arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world. Depositary receipts will not necessarily be denominated in the same currency as their underlying securities. The issuers of certain depository receipts are under no obligation to distribute shareholder communications to holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Investments in depository receipts may be less liquid than the underlying shares in their primary trading markets. The issuers of depository receipts may discontinue issuing new depository receipts and withdraw existing depository receipts at any time.

Depositary receipts may be purchased through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may establish an unsponsored facility without participation by the issuer of the depositary security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts of the deposited securities. Fund investments in depositary receipts, which

include ADRs, GDRs and EDRs, are deemed to be investments in foreign securities for purposes of a Fund's investment strategy.

**Foreign Securities Risk** 

Foreign instruments may involve greater risks than domestic instruments. As a result, a Fund's returns and NAV may be affected to a large degree by fluctuations in currency exchange rates, interest 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 United States, and there may be less public information available about foreign companies. Pursuant to regulatory changes effective in May 2024, many U.S., Canadian, and Mexican securities transitioned to a "T+1" (trade date plus one day) settlement cycle, while securities trading in most other foreign securities markets have longer settlement cycles. As a result, there are potential operational, settlement and other risks for the Funds associated with differences in the timing of settlement cycles between markets.

Foreign securities may involve additional risk, including, greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, organizations, entities and/or individuals, changes in international trade patterns, trade barriers, and other protectionists or retaliatory measures. Additionally, a Fund may be impacted by a limitation on foreign ownership of securities, the imposition of withholding or other taxes, restrictions on the repatriation of cash or other assets, higher transaction and custody costs, delays in the settlement of securities, difficulties in enforcing contractual obligations and lower levels of regulation in the securities markets.

**Early Close/Trading Halt Risk** 

An exchange or market may close or issue trading halts on specific securities or financial instruments. Under such circumstances, each Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, may be unable to accurately price its investments, which means each Fund may be unable to achieve its investment objective and it may incur substantial losses.

**Equity Securities Risk** 

Publicly-issued equity securities, including common stocks, are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which a Fund invests will cause the NAV of the Fund to fluctuate.

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**High Portfolio Turnover Risk** 

Monthly rebalancing of a Fund's holdings pursuant to its monthly investment objective causes a much greater number of portfolio transactions when compared to most funds. In addition, there is the possibility of significantly increased short-term capital gains (which will be taxable to shareholders as ordinary income when distributed to them). A Fund calculates portfolio turnover without including the short-term cash instruments or derivative transactions that comprise the majority of a Fund's trading. As such, if a Fund's extensive use of derivative instruments were reflected, the calculated portfolio turnover rate would be significantly higher.

**Market Timing Activity Risk** 

Rafferty expects a significant portion of the assets of a Fund to come from professional money managers and investors who use a Fund as part of "asset allocation" and "market timing" investment strategies. These strategies often call for frequent trading to take advantage of anticipated changes in market conditions. Frequent trading could increase the rate of a Fund's portfolio turnover, which involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups/mark-downs and other transaction costs on the sale of securities and reinvestments in other securities. Such sales also may result in adverse tax consequences to a Fund's shareholders from distributions to them of net gains realized on the sales. The trading costs and tax effects associated with portfolio turnover may adversely affect a Fund's performance. In addition, large movements of assets into and out of a Fund may have a negative impact on its ability to achieve its investment objective or its desired level of operating expenses. The risks associated with market timing activity and high portfolio turnover will have a negative impact on longer-term investments. Please see the "Financial Highlights" section of this Prospectus for a Fund's historic portfolio turnover rates.

**Non-Diversification Risk** 

Each Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. This means it has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase a Fund's volatility and increase the risk that a Fund's performance will decline based on the performance of a single issuer or the credit of a single counterparty and make a Fund more susceptible to risks associated with a single economic, political or regulatory occurrence than a diversified fund.

**Tax Risk** 

To qualify as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended, a Fund must meet certain requirements concerning the source of its income for each taxable year, meet certain asset diversification tests at the end of each taxable quarter, and meet annual distribution requirements. If in any year, a Fund were to fail to qualify as a RIC, and it was ineligible

to, or was not able to, cure such failure, a Fund would be taxed in the same manner as an ordinary corporation subject to U.S. federal income tax on all of its income at the fund level as well as a tax to shareholders on such income when distributed by a Fund as an ordinary dividend. The resulting taxes could substantially reduce a Fund's net assets and the amount of income available for distribution. In addition, to requalify as a RIC, a Fund would be required to recognize unrealized gains, pay substantial taxes and interest and make certain distributions.

Other Risks of the Funds

**Investment Strategy Implementation Risk** 

The Adviser utilizes a quantitative methodology to select investments for each Fund. Although this methodology is designed to correlate each Bull Fund's monthly performance with 175% of the monthly performance of its underlying index and the Bear Fund's monthly performance with -175% of the monthly performance of its underlying index, there is no assurance that the implementation of such methodology will be successful and will enable a Fund to achieve its investment objective.

**Aggressive Investment Technique Risk** 

Using investment techniques that may be considered aggressive, such as futures contracts, options and swap agreements, includes the risk of potentially dramatic changes (losses) in the value of the instruments, imperfect correlations between the price of the instrument and the underlying asset, security or index, and volatility of a Fund.

**Commodity Pool Registration Risk** 

The Funds are considered commodity pools, and therefore each is subject to regulation under the Commodity Exchange Act and CFTC rules. Registration as a commodity pool requires compliance with such additional laws, regulations and enforcement policies which may potentially increase compliance costs and may affect the operations and financial performance of the Funds.

**Cybersecurity Risk** 

The increased use of technologies, such as the internet, to conduct business increases the operational, information security and related "cyber" risks both directly to a Fund and through its service providers. Similar types of cyber security risks are also present for issuers of securities in which a Fund may invest, which could result in material adverse consequences for such issuers. Unlike many other types of risks faced by a Fund, these risks typically are not covered by insurance. Cyber incidents can result from deliberate attacks or unintentional events. Cyber incidents may include, but are not limited to, gaining unauthorized access to digital systems (*e.g.*, through "hacking" or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, causing physical damage to computer or network systems, or causing operational disruption. Cyber attacks may also be carried out in a manner

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that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (*i.e*., efforts to make network services unavailable to intended users).

Failures or breaches of the electronic systems of a Fund, a Fund's adviser, distributor, other service providers, counterparties, securities trading venues, or the issuers of securities in which a Fund invests have the ability to cause disruptions and negatively impact a Fund's business operations, potentially resulting in financial losses to a Fund and its shareholders. Cyber attacks may also interfere with the Fund's calculation of its NAV, result in the submission of erroneous trades , and could lead to violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs and/or additional compliance costs. While a Fund has established business continuity plans, there are inherent limitations in such plans, including the possibility that certain risks have not been identified and that prevention and remediation efforts will not be successful. Furthermore, a Fund cannot control the cyber security plans and systems of a Fund's service providers or issuers of securities in which a Fund invests.

**Investment Risk** 

An investment in a Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. When you sell your Shares, they could be worth less than what you paid for them.

**Risk of Global Economic Shock** 

Widespread disease, including public health disruptions, pandemics and epidemics (for example, COVID-19 including its variants), have been and may continue to be highly disruptive to economies and markets. Health crises could exacerbate political, social, and economic risks, and result in breakdowns, delays, shutdowns, social isolation, civil unrest, periods of high unemployment, shortages in and disruptions to the medical care and consumer goods and services industries, and other disruptions to important global, local and regional supply chains, with potential corresponding results on the performance of a Fund and its investments.

Additionally, wars, military conflicts, sanctions, acts of terrorism, sustained elevated inflation, supply chain issues or other events could have a significant negative impact on global financial markets and economies. Russia's military incursions in Ukraine have led to, and may lead to additional sanctions being levied by the United States, European Union and other countries against Russia. The ongoing hostilities between the two countries could result in additional widespread conflict and could have a severe adverse effect on the region and certain markets. Sanctions on Russian exports could have a significant adverse impact on the Russian economy and related markets and could affect the value of a Fund's investments, even beyond any direct exposure a Fund may have to the region or to adjoining geographic regions. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could have a severe adverse effect on the region, including significant negative impacts on the economy and the markets for certain securities and commodities, such

as oil and natural gas. Furthermore, the possibility of a prolonged conflict between Hamas and Israel, and the potential expansion of the conflict in the surrounding areas and the involvement of other nations in such conflict, such as the Houthi movement's attacks on marine vessels in the Red Sea, could further destabilize the Middle East region and introduce new uncertainties in global markets, including the oil and natural gas markets. How long such tensions and related events will last cannot be predicted. These tensions and any related events could have significant impact on a Fund performance and the value of an investment in a Fund.

**Natural Disaster/Epidemic Risk** 

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics (for example, COVID-19), have been and can be highly disruptive to economies and markets and have recently led, and may continue to lead, to increased market volatility and significant market losses. Such natural disaster and health crises could exacerbate political, social, and economic risks, and result in significant breakdowns, delays, shutdowns, social isolation, and other disruptions to important global, local and regional supply chains affected, with potential corresponding results on the operating performance of each Fund and its investments. A climate of uncertainty and panic, including the contagion of infectious viruses or diseases, may adversely affect global, regional, and local economies and reduce the availability of potential investment opportunities, and increases the difficulty of performing due diligence and modeling market conditions, potentially reducing the accuracy of financial projections. Under these circumstances, each Fund may have difficulty achieving its investment objective, which may adversely impact Fund performance. Further, such events can be highly disruptive to economies and markets, significantly disrupt the operations of individual companies (including, but not limited to, each Fund's investment advisor, third party service providers, and counterparties), sectors, industries, markets, securities and commodity exchanges, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of each Fund's investments. These factors can cause substantial market volatility, exchange trading suspensions and closures, changes in the availability of and the margin requirements for certain instruments, and can impact the ability of each Fund to complete redemptions and otherwise affect Fund performance. A widespread crisis would also affect the global economy in ways that cannot necessarily be foreseen. How long such events will last and whether they will continue or recur cannot be predicted. Impacts from these events could have a significant impact on each Fund's performance, resulting in losses to your investment.

**Money Market Instrument Risk** 

Money market instruments, including money market funds, depositary accounts and repurchase agreements may be used for cash management purposes. Money market funds may be subject to credit risk with respect to the short-term debt instruments in which they invest. Depository accounts may be subject to credit risk with respect to the financial

Direxion Funds Prospectus

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institution in which the depository account is held. Repurchase agreements are contracts in which a seller of securities agrees to buy the securities back at a specified time and price. Repurchase agreements may be subject to market and credit risk related to the collateral securing the repurchase agreement. Money market instruments may also be subject to credit risks associated with the instruments in which they invest. There is no guarantee that money market instruments will maintain a stable value, and they may lose money.

**Operational Risk** 

A Fund and its service providers are subject to operational risks arising from, among other things, human error, systems and technology errors and disruptions, including related to the use of artificial intelligence, failed or inadequate controls, and fraud. These errors may adversely affect a Fund's

operations, including its ability to execute its investment process or calculate or disseminate its net asset value in a timely manner. While a Fund seeks to minimize such events through controls and oversight, there may still be failures and a Fund may be unable to recover any damages associated with such failures. These failures may have a material adverse effect on a Fund's returns.

**Regulatory Risk** 

Each Fund is subject to the risk that a change in U.S. law and related regulations will impact the way a Fund operates, increase the particular costs of a Fund's operations and/or change the competitive landscape. Additional legislative or regulatory changes could occur that may materially and adversely affect each Fund.

Direxion Funds Prospectus

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About Your Investment

**Share Price of the Funds**

A fund's share price is known as its NAV. Each Fund's share price is calculated as of the close of regular trading on the NYSE, usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The NYSE may close early on the Business Day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

The value of each Fund's assets that trade in markets outside the United States or in currencies other than the U.S. Dollar may fluctuate when foreign markets are open but the Fund is not open for business.

All shareholder transaction orders received in good form by a Fund's transfer agent or an authorized financial intermediary by the time that each Fund calculates its NAV (as described above) will be processed at that day's NAV, plus any applicable sales charges. Transaction orders received after the time that a Fund calculates its NAV will receive the next calculated NAV, plus any applicable sales charges.

Share price is calculated by dividing a Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." Each Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations:

● Equity securities listed and traded principally on any domestic or foreign national securities exchange are valued at the last sales price. Exchange-traded funds are valued at the last sales price prior to Valuation Time. Securities primarily traded in the NASDAQ Global Market<sup>®</sup> are valued using the NASDAQ<sup>®</sup> Official Closing Price. Over-the counter securities are valued at the last sales price in the over-the-counter market;

● Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time;

● Options are valued at the composite price, using National Best Bid and Offer quotes; and

● Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that a Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as a Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

Direxion Funds Prospectus

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**Rule 12b-1 Fees**

Each Fund has adopted an Investor Class distribution plan under Rule 12b-1 (the "Investor Class Plan") pursuant to which each Fund pays for distribution and services provided to Fund shareholders. Because these fees are paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

Pursuant to its Investor Class Plan, each Fund may pay an annual Rule 12b-1 fee of up to 1.00% of its average daily net assets. The Board of Trustees has currently authorized each Fund to pay a maximum annual Rule 12b-1 fee of 0.25% of its average daily net assets.

Under an agreement with the Funds, your registered investment adviser, financial planner, broker-dealer or other financial intermediary ("Financial Adviser"), may receive Rule 12b-1 fees from the Funds. In exchange, your Financial Adviser may provide a number of services, such as: placing your orders and issuing confirmations; providing investment advice, research and other advisory services; handling correspondence for individual accounts; acting as the sole shareholder of record for individual shareholders; issuing shareholder statements and reports; executing daily investment "sweep" functions; and other shareholder services as described in the Funds' Statement of Additional Information ("SAI"). For more information on these and other services, you should speak directly to your Financial Adviser. Your Financial Adviser may charge additional account fees for services beyond those specified above.

**Additional Payments to Financial Intermediaries**

The Adviser (and its affiliates) may make substantial payments to financial intermediaries and service providers for distribution and/or shareholder servicing activities, out of their own resources, including the profits from the advisory fees the Adviser receives from the Funds. These payments may be made to financial intermediaries for marketing, promotional or related expenses. These payments, sometimes referred to as "revenue sharing," do not change the price paid by investors to purchase shares of the Funds or the amount investors in the Funds would receive as proceeds from the redemption of such shares and will not increase the expenses of investing in the Funds.

Examples of "revenue sharing" payments include, but are not limited to, payment to financial institutions for "shelf space" or access to a third party platform or portfolio offering list or other marketing programs, including, but not limited to, inclusion of a Fund on preferred or recommended sales lists, mutual fund "supermarket" platforms and other formal sales programs; granting the Adviser access to the financial institution's sales force; granting the Adviser access to the financial institution's conferences and meetings; assistance in training and educating the financial institution's personnel; and obtaining other forms of marketing support. Revenue sharing payments also may be made to financial intermediaries that provide various services to the Funds, including but not limited to, record keeping, shareholder servicing, transaction processing, sub-accounting services and other administrative services. The Adviser may make other payments or allow other promotional incentives to financial intermediaries to the extent permitted by the SEC, by the Financial Industry Regulatory Authority, Inc. ("FINRA") and by other applicable laws and regulations.

The level of revenue sharing payments made to financial intermediaries may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of a Fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of a Fund available to its customers and may allow the Funds greater access to the financial institution's customers.

**Shareholder Services Guide**

You may invest in the Funds through traditional investment accounts, including Automatic Investment Plans, individual retirement accounts ("IRAs") (including Roth IRAs), self-directed retirement plans or company-sponsored retirement plans. Applications and descriptions of any service fees for retirement or other accounts are available directly from the Funds. You may invest directly with the Funds or through certain financial intermediaries. Any transaction effected through a financial intermediary may be subject to a processing fee. The minimum initial investment is set forth below and may be invested in as many of the Funds as you wish, subject to a minimum investment in each Fund of $25,000. Rafferty may waive these minimum requirements at its discretion. Contact Rafferty if you need additional information or assistance.

Shares of the Funds have not been registered for sale outside of the United States. A Fund generally does not sell shares to investors residing outside of the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.

Each Fund offers the option to submit purchase orders through your financial intermediary or to send purchase orders to a Fund as described in the table below.

Direxion Funds Prospectus

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| Minimum Investment: <br> Traditional Investment <br> Accounts<br>| &nbsp;&nbsp; $25,000 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $500 |
| Minimum Investment: <br> Retirement Accounts <br> (Traditional, Roth and Spousal <br> IRAs)<br>| &nbsp;&nbsp; $25,000 or a lesser amount if you are a client <br> of a securities dealer, bank or other financial <br> institution.\*<br>| $500 |
| By Mail | &nbsp;&nbsp; ●Complete and sign your application. <br> Remember to include all required <br> documents (if any).<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase.<br> ●Send the signed application and check to <br> (regular mail):<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Each Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Funds.)<br>| ●Complete an Investment Slip or provide <br> written instructions with your name, <br> account number and the Fund in which you <br> would like to invest.<br> ●Make a check payable to "Direxion Funds" <br> and indicate the Fund you would like to <br> purchase and your account number.<br> ●Send the Investment Slip and check to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Overnight Mail – do not send express or <br> overnight delivery to the P.O. Box <br> address): Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;801 Pennsylvania Ave, Suite 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64105-1307<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> (Each Fund does not consider the U.S. Postal <br> Service or other independent delivery services <br> to be their agents. Therefore, deposit in the <br> mail or with such services, or receipt at U.S. <br> Bancorp Fund Services, LLC's post office box, <br> of purchase orders or redemption requests <br> does not constitute receipt by the transfer <br> agent of the Funds.)<br>|
| By Wire | &nbsp;&nbsp; ●Contact Direxion at (800) 851-0511 to make <br> arrangements to send in your application <br> via facsimile or mail.<br> ●Fax the application according to <br> instructions the representative will give <br> you.<br> ●Mail the original application to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P.O. Box 219252<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kansas City, MO 64121-9252<br> ●Call (800) 851-0511 to: (a) confirm receipt of <br> the application; (b) receive an account <br> number; and (c) receive a confirmation <br> number.<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Funds and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions.<br>| ●Contact Direxion at (800) 851-0511 with <br> your account number, the amount wired <br> and the Fund(s) in which you want to <br> invest.<br> ●You will receive a confirmation number; <br> retain your confirmation number.<br> ●Instruct your bank to wire the money to:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US Bank NA, Milwaukee, WI 53202<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABA 075000022<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit: US Bancorp Fund Services, LLC<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACCT # 112-952-137<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FFC: Direxion Funds<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Your name and Direxion Account<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number)<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br> Wired funds must be received prior to market <br> close to be eligible for same day pricing. The <br> Funds and U.S. Bank, N.A. are not responsible <br> for the consequences of delays resulting from <br> the banking or Federal Reserve wire system or <br> from incomplete wiring instructions. <br>|

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Direxion Funds Prospectus

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| | | |
|:---|:---|:---|
| Purchase Methods | Initial Purchases | Subsequent Purchases |
| By Telephone | &nbsp;&nbsp; You may not make initial investments by <br> telephone.<br>| ●If you did not decline telephone options on <br> your account application, your account has <br> been open for at least 7 business days, and <br> you have banking information established <br> on your account, you may purchase shares <br> by telephone.<br> ●The minimum telephone purchase is equal <br> to the subsequent investment purchase <br> amount for your account type.<br> ●Contact Direxion at (800) 851-0511 to <br> purchase additional shares of the Funds. <br> Orders will be accepted via the electronic <br> funds transfer through the Automated <br> Clearing House ("ACH") network.<br> ●Shares will be purchased at the NAV <br> calculated on the day your order is placed <br> provided that your order is received prior to <br> market close.<br>|
| Through Financial <br> Intermediaries<br>| Contact your financial intermediary. | Contact your financial intermediary. |

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\*

The Adviser may set different investment minimums for certain securities dealers, banks and other financial institutions that provide certain shareholder services or omnibus processing for the Funds in fee-based mutual fund programs.

**Contact Information** 

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| | |
|:---|:---|
| By Telephone | (800) 851-0511 |
| Fax | (Faxes may be accepted, but must be pre-authorized by a representative. Please call (800) 851-0511 <br> to receive authorization and the fax number.)<br>|
| Internet | www.direxion.com |
| Regular Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252Kansas City, MO 64121-9252<br>|
| Overnight Mail | Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> 801 Pennsylvania Ave, Suite 219252<br> Kansas City, MO 64105-1307<br>|

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Shares of each Fund are redeemable. If you opened your shareholder account through a financial intermediary, you will ordinarily submit your exchange or redemption order through that financial intermediary. You may exchange or redeem Fund shares as described in the following table.

**Instructions for Exchanging or Redeeming Shares** 

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| | |
|:---|:---|
| By Mail | Send written instructions sufficient to process your request to:<br> Direxion Funds<br> c/o U.S. Bank Global Fund Services<br> PO Box 219252<br> Kansas City, MO 64121-9252<br>|
| By Telephone | (800) 851-0511 for Individual Investors<br> (877) 437-9363 for Financial Professionals<br>|
| By Internet | ●Log on to www.direxion.com. Establish an account ID and password by following the instructions <br> on the site.<br> ●Follow the instructions on the site.<br>|
| &nbsp;&nbsp; Through Financial <br> Intermediaries<br>| Contact your financial intermediary. |

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Direxion Funds Prospectus

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Account and Transaction Policies

**Payment for Shares.** All purchases must be made in U.S. Dollars through a U.S. bank. The Funds will not accept payment in cash or money orders. In addition, to prevent check fraud, each Fund does not accept third party checks, U.S. Treasury checks, credit card checks, traveler's checks, or starter checks for the purchase of shares. We are unable to accept post-dated checks or any conditional order or payment. If your check does not clear, you will be charged a $25.00 fee. In addition, you may be responsible for losses sustained by the Funds for any returned payment.

You will receive written confirmation by mail, but we do not issue share certificates.

**Anti-Money Laundering Program.** The Funds' transfer agent will verify certain information from investors as part of the Funds' anti-money laundering program.

The USA PATRIOT Act of 2001 requires financial institutions, including the Funds, to adopt certain policies and programs to prevent money laundering activities, including procedures to verify the identity of customers opening new accounts. When completing a new account application, you will be required to supply your full name, date of birth, social security number and permanent street address to assist in verifying your identity. If you are opening the account in the name of a legal entity (*e.g.*, partnership, limited liability company, business trust, corporation, etc.), you must also supply the identity of the beneficial owners. Mailing addresses containing only a P.O. Box will not be accepted. Until such verification is made, the Funds may temporarily limit additional share purchases. In addition, the Funds may limit additional share purchases or close an account if they are unable to verify a shareholder's identity. As required by law, the Funds may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct.

If a Fund does not have a reasonable belief of the identity of a shareholder, the account will be rejected or the shareholder will not be allowed to perform a transaction on the account until such information is received. The Funds may also reserve the right to close the account within five business days if clarifying information and/or documentation is not received.

**Good Form.** Good form means that your purchase (whether direct or through a financial intermediary) is complete and contains all necessary information, has all supporting documentation (such as trust documents, beneficiary designations, proper signature guarantees, IRA rollover forms, etc.) and is accompanied by sufficient purchase proceeds. For a purchase request to be in good form, it must include: (1) the name of the Fund; (2) the dollar amount or share amount to be purchased; and (3) your purchase application or investment stub. An application that is sent to the transfer agent does not constitute a purchase order until the transfer agent processes the application and receives correct payment by check or wire transfer. A Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC's post office box, of purchase applications or redemption requests does not constitute receipt by the transfer agent of the Fund. Receipt of purchase orders or redemption requests is based on when the order is received at the Transfer Agent's offices.

Certain transactions through a financial intermediary may not be deemed in good form if such financial intermediary failed to properly notify the Funds of such trade or trades. In particular, financial intermediaries that transact in shares of the Funds through the Fundserv system must, in many cases, notify the Funds of trades before placing them in the Fundserv system. In the event that a financial intermediary transacts in shares of the Funds through the Fundserv system without notifying the Funds of such trades in advance, such transaction may be deemed not to have been received in good form. In practice, this means that a confirmation from a financial intermediary is not binding on the Funds. In the event that a trade is deemed not to have been received in good form, for whatever reason, a purchase, redemption or exchange request may be rejected or canceled and, in the event of a redemption which is canceled, the Funds shall have the right to a return of proceeds. Cancellation of a trade is processed at the NAV at which the trade was originally received and is ordinarily completed the next business day. Please contact your financial intermediary to determine how it processes transactions in shares of the Funds.

**Financial Intermediaries.** If you opened your shareholder account through a financial intermediary, you will ordinarily submit your transaction orders through that financial intermediary. Financial intermediaries are responsible for placing orders promptly with the Funds and forwarding payment promptly, as well as ensuring that you receive copies of the Funds' Prospectus. Financial intermediaries may charge fees for the services they provide to you in connection with processing your transaction order or maintaining your account with them. Each intermediary also may have its own rules about share transactions, limits on the number of share transactions you are permitted to make in a given time period, and may have earlier cut-off times for processing your transaction. For more information about your financial intermediary's rules and procedures, you should contact your financial intermediary directly. In addition, Rafferty may, from time to time, at its own expense, compensate financial intermediaries for distribution or marketing services.

**Order Policies.** There are certain times when you may be unable to sell shares of the Funds or proceeds may be delayed. This may occur during emergencies, unusual market conditions or when a Fund cannot determine the value of its assets or sell its holdings. A Fund reserves the right to reject any purchase order or suspend offering of its shares. Generally, the Funds may reject a purchase if it is disruptive to the efficient management of the Funds.

Direxion Funds Prospectus

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**Telephone Transactions.** For your protection, the Funds may require some form of personal identification prior to accepting your telephone request such as verification of your social security number, account number or other information. If an account has more than one owner or authorized person, the Funds will accept telephone instructions from any one owner or authorized person. We also may record the conversation for accuracy. During times of unusually high market activity or extreme market changes, you should be aware that it may be difficult to place your request in a timely manner. Telephone trades must be received by or prior to market close. Please allow sufficient time to place your telephone transaction. Telephone redemption and exchange transaction privileges are automatically granted, unless you declined such privileges on your account application. If you previously declined telephone privileges and would like to add this option to your account, please contact the Funds at (800) 851-0511 for instructions. The maximum amount that may be redeemed by telephone is $100,000. Once a telephone transaction has been placed, it cannot be canceled or modified after the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern Time).

**Automatic Investment Plan.** For your convenience, each Fund offers an Automatic Investment Plan ("AIP"). Under the AIP, after you make your initial minimum investment of $25,000, you authorize the Funds to withdraw the amount you wish to invest from your personal bank account on a monthly basis. The AIP requires a minimum monthly investment of $500. If you wish to participate in the AIP, please complete the "Automatic Investment Plan" section on the account application or call the Funds at (800) 851-0511 if you have any questions. In order to participate in the AIP, your bank or financial institution must be a member of the ACH network. The Funds may terminate or modify this privilege at any time. You may change your investment amount or terminate your participation in the AIP at any time by notifying the Funds' transfer agent by telephone or in writing, five days prior to the effective date of the next transaction. A fee, currently $25, will be imposed if your AIP transaction is returned.

**Signature Guarantees.** In certain instances when you sell shares of the Funds, we will need your signature guaranteed. Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program ("STAMP"). A notary public cannot guarantee signatures. Your signature must be guaranteed, by either a Medallion program member or a non-Medallion program member, if:

● You are changing your account ownership;

● When a redemption request is received by the transfer agent and the account address has changed within the last 30 calendar days;

● The redemption proceeds are payable or sent to any person, address or bank account other than the one listed on record with the Funds;

● The sale is greater than $100,000; or

● There are other unusual situations as determined by the Funds' transfer agent.

Non-financial transactions including establishing or modifying certain services on an account may require a signature guarantee, signature verification or other acceptable signature authentication from a financial institution source. A Fund may waive any signature guarantee requirement at its discretion.

**Exchange Policies.** You may exchange Investor Class shares of your current Fund(s) for Investor Class shares of any other Fund (as well as other Funds advised by Rafferty not offered in this Prospectus) at the next determined NAV after receipt of your order in good form without any charges. The Funds can only honor exchanges between accounts registered in the same name and having the same address and taxpayer identification number. If your exchange establishes a new position in a Fund, you must exchange at least $1,000 or, if your account value is less than that, your entire account balance will be exchanged. You may exchange by telephone unless you declined telephone exchange privileges on your account application.

**Redemption Proceeds.** Redemption proceeds from any sale of shares will normally be sent within one business day, but at least within seven days, from the time a Fund receives your request in good order. A redemption request will be considered in good order if: 1) the number or amount of shares and the class of shares to be redeemed and shareholder account number have been indicated; and 2) any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account. For investments that have been made by check or ACH, payment on sales requests may be delayed until the Funds' transfer agent is reasonably satisfied that the purchase payment has been collected by a Fund, which may require up to 10 calendar days. Your proceeds will be sent via check, wire or electronic funds transfer through the ACH network using the address or bank account listed on the transfer agent's records. You will be charged a wire transfer fee of $15.00, which will be deducted from your account balance on dollar specific redemption requests or from the proceeds on share specific requests. This fee is in addition to any fees that may be imposed by your bank. Your proceeds will be wired only to the bank listed on the transfer agent's records. There is no charge for payment sent through the ACH network and proceeds are generally available within 2 to 3 days. Shareholders who have an IRA or other retirement plan must indicate on their written redemption request whether to withhold federal income tax. Redemption requests failing to indicate an election not to have tax withheld will generally be subject to 10% withholding. Each Fund also offers a Systematic Withdrawal Plan for shareholders who require periodic payments, such as those from IRAs. For more information on this option, please contact the Funds at (800) 851-0511.

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Each Fund typically expects to meet redemption requests by paying out available cash or proceeds from selling portfolio holdings, which may include cash equivalent portfolio holdings. In stressed market conditions and other appropriate circumstances, redemption methods may include borrowing funds or redeeming in kind. Each Fund may stop selling its shares and postpone redemption payments at times when the NYSE is closed or has restricted trading or the SEC has determined that an emergency condition exists.

**Redemption In-Kind.** Each Fund reserves the right to pay redemption proceeds to you in whole or in part by a distribution of securities from each Fund's portfolio. It is not expected that the Funds would do so except in unusual circumstances. If a Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash and will bear any market risks associated with such securities until they are converted into cash.

**Short-Term Trading**. Each Fund anticipates that a significant portion of its assets will come from professional money managers and investors who use the Funds as part of their "asset allocation" and/or "market timing" investment strategies. These strategies often call for frequent trading to take advantage of anticipated changes in market conditions.

Frequent trading increases the rate of the Funds' portfolio turnover, which increases the overall expenses of managing the Funds, due to increased brokerage commissions or dealer mark-ups/mark-downs and other transaction costs on the sale of securities and reinvestments in other securities. In addition, frequent trading may dilute the value of Fund shares held by long-term shareholders and may interfere with the efficient management of the Funds' portfolios. Although each Fund reserves the right to reject any purchase orders or suspend the offering of Fund shares, each Fund does not currently impose any trading restrictions on Fund shareholders nor actively monitor for trading abuses. The Funds' Board of Trustees has approved the short-term trading policy of the Funds. The costs associated with the Funds' portfolio turnover will have a negative impact on longer-term investors as noted previously in the Prospectus.

**Low Balance Accounts.** If your total account balance falls below $10,000 due to withdrawals, then we may sell your shares of the Funds. We will inform you in writing 30 days prior to selling your shares. If you do not bring your total account balance up to $10,000 within 30 days, we may sell your shares and send you the proceeds. We will not sell your shares if your account value falls due to market fluctuations.

**Electronic Delivery of Reports.** Fund shareholders can save paper by electing to receive their account documents by e-mail in place of paper copies. You may choose electronic delivery ("E-Delivery") for Prospectuses, supplements, Annual and Semi-Annual Reports. To enroll in E-Delivery you can opt-in when completing a direct account application with Direxion Funds. You can also register, cancel, change your e-mail address or change your consent options by logging onto www.direxion.com/edelivery.

**Householding.** In an effort to decrease costs, each Fund intends to reduce the number of duplicate prospectuses and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders we reasonably believe are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call toll-free at (800) 851-0511 to request individual copies of these documents. Once a Fund receives notice to stop householding, we will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.

**Shareholder Inactivity.** Under certain circumstances, if no activity occurs in an account within a time period specified by state law, your shares in a Fund may be transferred to that state.

**Lost Shareholder.** It is important that the Funds maintain a correct address for each investor. An incorrect address may cause an investor's account statements and other mailings to be returned to the Funds. Based upon statutory requirements for returned mail, each Fund will attempt to locate the investor or rightful owner of the account. If a Fund is unable to locate the investor, then it will determine whether the investor's account can legally be considered abandoned. Each Fund is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction. Investors with a state of residence in Texas have the ability to designate a representative to receive legislatively required unclaimed property due diligence notifications. Please contact the Texas Comptroller of Public Accounts for further information.

Management of the Funds

Rafferty provides investment management services to the Funds. Rafferty has been managing investment companies since 1997. Rafferty is located at 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of August 31, 2025, the Adviser had approximately $52.3 billion in assets under management.

Under an investment advisory agreement between the Trust and Rafferty, each Fund pays Rafferty a fee at an annualized rate based on a percentage of its average daily net assets of 0.75%.

For the fiscal year ended August 31, 2025, the Adviser received net management fees as a percentage of average daily net assets from each Fund as follows:

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| | |
|:---|:---|
| Fund | Percentage |
| Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund | &nbsp;&nbsp;&nbsp;&nbsp; 0.77% |
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund | &nbsp;&nbsp;&nbsp;&nbsp; 0.75% |
| Direxion Monthly Small Cap Bull 1.75X Fund | &nbsp;&nbsp;&nbsp;&nbsp; 0.38% |
| Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | &nbsp;&nbsp;&nbsp;&nbsp; 0.42% |
| Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund | &nbsp;&nbsp;&nbsp;&nbsp; 0.00% |

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A discussion regarding the basis on which the Board of Trustees approved the investment advisory agreement for the Funds is included in the Funds' Annual Financial Statements and Additional Information for the fiscal year ended August 31, 2025.

Rafferty has entered into an Operating Expense Limitation Agreement with each Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse each Fund for Other Expenses through September 1, 2027, to the extent that a Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses).

Any contractual expense waiver or reimbursement is subject to recoupment by the Adviser within three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. Rafferty may pay, reimburse or otherwise assume one or more of the excluded expenses, in which case such expense will be subject to the Operating Expense Limitation Agreement and recoupment by Rafferty in accordance with the Agreement. This Agreement may be terminated or revised at any time with the consent of the Board of Trustees.

Paul Brigandi and Tony Ng are jointly and primarily responsible for the day-to-day management of the Funds (the "Portfolio Managers"). An investment trading team of Rafferty employees assists the Portfolio Managers in the day-to-day management of the Funds subject to their primary responsibility and oversight. The Portfolio Managers work with the investment trading team to decide the target allocation of each Fund's investments and on a day-to-day basis, an individual portfolio trader executes transactions for the Funds consistent with the target allocation. The members of the investment trading team rotate periodically among the various series of the Trust, including the Funds, so that no single individual is assigned to a specific Fund for extended periods of time.

Mr. Brigandi has been a Portfolio Manager at Rafferty since June 2004. Mr. Brigandi was previously involved in the equity trading training program for Fleet Boston Financial Corporation from August 2002 to April 2004. Mr. Brigandi is a 2002 graduate of Fordham University.

Mr. Ng has been a Portfolio Manager at Rafferty since April 2006. Mr. Ng was previously a Team Leader in the Trading Assistant Group with Goldman Sachs from 2004 to 2006. He was employed with Deutsche Asset Management from 1998 to 2004. Mr. Ng graduated from State University of New York at Buffalo in 1998.

The Funds' SAI provides additional information about the investment team members' compensation, other accounts they manage and their ownership of shares of the Funds.

Portfolio Holdings

A description of the Funds' policies and procedures with respect to the disclosure of the Funds' portfolio securities is available in the Funds' SAI. Currently, disclosure of the Funds' holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the quarterly holdings report on Form N-PORT. The Annual and Semi-Annual Reports will be available by contacting the Direxion Funds, c/o U.S. Bank Global Fund Services, PO Box 219252, Kansas City, MO 64121-9252 or calling (800) 851-0511.

other service providers

ALPS Distributors, Inc. ("Distributor") serves as the Funds' distributor. U.S. Bancorp Fund Services, LLC ("USBFS") serves as the Funds' administrator, fund accountant and transfer agent. U.S. Bank, N.A., an affiliate of USBFS, serves as the Funds' custodian.

Distributions and Taxes

**Distributions.** Each Fund distributes dividends from its net investment income at least annually. Net investment income generally consists of interest income and dividends received on investments, less expenses.

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Each Fund also distributes any realized net capital gains and net gains from foreign currency transactions, if any, at least annually. A Fund realizes capital gains mainly from sales of its portfolio assets for a profit.

Dividends and other distributions (collectively, "distributions") will be reinvested in additional distributing Fund shares automatically at a Fund's NAV per share unless you request otherwise in writing or via telephone at least five days prior to the record date of the distribution. Each Fund reserves the right, if you elect to receive distributions from the Fund by check and the U.S. Postal Service cannot deliver the check or the check remains uncashed for six months, to reinvest the amount of the check in your account, without interest, in additional Fund shares at the Fund's then-current NAV per share and to reinvest all subsequent distributions in shares of the Fund until an updated address is received. The check will not be held separate from the shares in your account.

Due to the pattern of purchases and redemptions of the Funds, a Fund's total net assets may fluctuate significantly over the course of a year. Because a Fund may declare and pay distributions at any time, an investor may receive a distribution, which may be taxable, shortly after making an investment in a Fund.

**Taxes.** Federal income tax consequences of a distribution will vary depending on whether the distribution is from net investment income, net foreign currency gains, or net capital gains and, in the latter case, how long a Fund has held the assets the sale of which generated the gains, not how long you held your Fund shares. Distributions of net gains on sales of assets held for one year or less, and distributions of certain foreign currency gains, are taxed as dividends (that is, ordinary income). Distributions of gains on sales of assets held longer than one year (long-term capital gains), and distributions of other foreign currency gains are taxed at lower capital gains rates.

The following table illustrates the potential tax consequences for taxable accounts (of individual shareholders):

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| | |
|:---|:---|
| Type of Transaction | Federal Tax Rate/Treatment\* |
| &nbsp;&nbsp; Dividend (other than "qualified dividend <br> income" ("QDI") (see below)) distribution<br>| Ordinary income rate |
| Distribution of QDI | Long-term capital gains rate |
| Distribution of net short-term capital gains | Ordinary income rate |
| Distribution of net long-term capital gains | Long-term capital gains rate |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for more than one year<br>| Long-term capital gain or loss |
| &nbsp;&nbsp; Redemption or exchange of Fund shares <br> owned for one year or less<br>| &nbsp;&nbsp; Gain is taxed at the same rate as ordinary <br> income; loss is subject to special rules<br>|

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\*

Tax consequences for tax-deferred retirement accounts (such as 401(k) plan accounts and IRAs) or non-taxable shareholders will be different. You should consult your tax specialist for more information about your personal situation.

QDI consists of dividends a Fund receives from most U.S. corporations and "qualified foreign corporations," provided that the Fund satisfies certain holding periods and other restrictions regarding the stock on which the dividends were paid. (Dividends received from other investment companies, including ETFs that are taxed as RICs will only qualify for QDI treatment to the extent that the other investment company reports the qualifying portion to its shareholders in writing.) A Fund's dividends attributable to its QDI are taxed to individual shareholders at the long-term capital gains rates (see the next paragraph) for shareholders who satisfy those restrictions regarding their Fund shares. A portion of a Fund's dividends (excluding dividends from foreign corporations) also may be eligible for the dividends-received deduction allowed to corporations, subject to similar restrictions.

Net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) an individual or certain other non-corporate shareholder realizes on a redemption or exchange of Fund shares, is subject to federal income tax at a maximum rate of 15% or 20% for those non-corporate shareholders with taxable income exceeding certain thresholds.

If you are a non-retirement account shareholder of a Fund, then each year we will send you a Form 1099 that tells you the amount of Fund distributions you received for the prior calendar year, the tax status of those distributions and a list of reportable redemption transactions, including, for redeemed shares that were acquired after December 31, 2011 ("Covered Shares"), basis information and whether they had a short-term (one year or less) or long-term (more than one year) holding period. Normally, distributions are taxable in the year you receive them. However, any distributions declared in the last three months of a calendar year and paid in January of the following year generally are taxable as if received on December 31 of the year they are declared.

If you are a taxable non-corporate shareholder of a Fund and do not provide the Fund with your correct taxpayer identification number (normally your social security number), the Fund is required to withhold and remit to the Internal Revenue Service ("IRS") 24% of all dividends and other distributions and redemption proceeds (regardless of whether you realize a gain or loss) otherwise payable to you. If you are such a shareholder and are otherwise subject to backup withholding, we also are required to withhold and remit to the IRS the same percentage of all dividends and other distributions otherwise payable to you. Any tax withheld may be applied against your tax liability when you file your tax return.

A shareholder's basis in Covered Shares will be determined in accordance with the Funds' default method, which currently is average basis, unless the shareholder affirmatively elects in writing (which may be electronic) to use a different acceptable

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basis determination method, such as a specific identification method. The basis determination method a Fund shareholder elects may not be changed with respect to a redemption of Covered Shares after the settlement date of the redemption. Fund shareholders should consult with their tax advisors to determine the best IRS-accepted basis method for their tax situation and to obtain more information about how the basis reporting law applies to them.

An individual must pay a 3.8% federal tax on the lesser of (1) the individual's "net investment income," which generally includes dividends, interest, and net gains from the disposition of investment property (including dividends and capital gain distributions a Fund pays), or (2) the excess of the individual's "modified adjusted gross income" over a threshold amount ($250,000 for married persons filing jointly and $200,000 for single taxpayers). This tax is in addition to any other taxes due on that income. A similar tax will apply for those years to estates and trusts. Shareholders should consult their own tax advisers regarding the effect, if any, this provision may have on their investment in Fund shares.

Additional Information ABOUT THE TRUST

The Trust enters into contractual arrangements with various parties, which may include, among others, the Funds' investment adviser, custodian, and transfer agent, who provide services to the Funds. Shareholders are not parties to any such contractual arrangements and are not intended beneficiaries of those contractual arrangements, and those contractual arrangements are not intended to create in any shareholder any right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the Trust.

This Prospectus provides information concerning the Funds that you should consider in determining whether to purchase Fund shares. Neither this Prospectus nor the SAI is intended, or should be read, to be or give rise to an agreement or contract between the Trust or the Funds and any investor, or to give rise to any rights in any shareholder or other person other than any rights under federal or state law that may not be waived.

Many states have unclaimed property rules that provide for transfer to the state (also known as "escheatment") of unclaimed property under various circumstances. These circumstances include inactivity (e.g., no owner-initiated contact for a certain period), returned mail (e.g., when mail sent to a shareholder is returned by the post office as undeliverable), or a combination of both inactivity and returned mail. Unclaimed or inactive accounts may be subject to escheatment laws, and the Funds and the Funds' transfer agent will not be liable to shareholders and their representatives for good faith compliance with those laws.

Index Licensors

**ICE Data Indices, LLC ("ICE Data")**. ICE Data is used with permission. ICE U.S. Treasury 7-10 Year Bond Index (the "ICE Index") is a service/trade mark of ICE Data Indices, LLC or its affiliates and has been licensed for use by Rafferty Asset Management, LLC in connection with Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund and Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund (the "Product"). Neither Rafferty Asset Management, LLC (the "Licensee"), the Direxion Shares ETF Trust (the "Trust") nor the Product, as applicable, is sponsored, endorsed, sold or promoted by ICE Data Indices, LLC, its affiliates or its Third Party Suppliers ("ICE Data and its Suppliers"). ICE Data and its Suppliers make no representations or warranties regarding the advisability of investing in securities generally, in the Product particularly, the Trust or the ability of the Index to track general stock market performance. ICE Data's only relationship to Rafferty Asset Management, LLC is the licensing of certain trademarks and trade names and the Index or components thereof. The Index is determined, composed and calculated by ICE Data without regard to the Licensee or the Product or its holders. ICE Data has no obligation to take the needs of the Licensee or the holders of the Product into consideration in determining, composing or calculating the Index. ICE Data is not responsible for and has not participated in the determination of the timing of, prices of, or quantities of the Product to be issued or in the determination or calculation of the equation by which the Product is to be priced, sold, purchased, or redeemed. Except for certain custom index calculation services, all information provided by ICE Data is general in nature and not tailored to the needs of Licensee or any other person, entity or group of persons. ICE Data has no obligation or liability in connection with the administration, marketing, or trading of the Product. ICE Data is not an investment advisor. Inclusion of a security within an index is not a recommendation by ICE Data to buy, sell, or hold such security, nor is it considered to be investment advice.

ICE DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS, EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM ("INDEX DATA"). ICE DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND THE INDEX DATA, WHICH ARE PROVIDED ON AN "AS IS" BASIS AND YOUR USE IS AT YOUR OWN RISK.

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**NASDAQ Index.** The NASDAQ-100<sup>®</sup> Index is not sponsored, endorsed, sold or promoted by The NASDAQ OMX Group, Inc. or its affiliates (NASDAQ OMX, with its affiliates, are referred to as the "Corporations"). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund. The Corporations make no representation or warranty, express or implied to the owners of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund or any member of the public regarding the advisability of investing in securities generally or in the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund particularly, or the ability of the NASDAQ-100<sup>®</sup> Index to track general stock market performance. The Corporations' only relationship to Rafferty Asset Management, LLC ("Licensee") is in the licensing of the NASDAQ<sup>®</sup>, OMX<sup>®</sup>, NASDAQ OMX<sup>®</sup>, and NASDAQ-100<sup>®</sup> Index, Index registered trademarks, and certain trade names and service marks of the Corporations and the use of the NASDAQ-100<sup>®</sup> Index which is determined, composed and calculated by NASDAQ OMX without regard to Licensee or the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund. NASDAQ OMX has no obligation to take the needs of the Licensee or the owners of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund into consideration in determining, composing or calculating the NASDAQ-100<sup>®</sup> Index. The Corporations are not responsible for and have not participated in the determination of the timing of, prices at, or quantities of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund to be issued or in the determination or calculation of the equation by which the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund is to be converted into cash. The Corporations have no liability in connection with the administration, marketing or trading of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund.

THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE NASDAQ-100<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE NASDAQ-100<sup>®</sup> INDEX, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ-100<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ-100<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

**FTSE/Russell Index**. The Direxion Monthly Small Cap Bull 1.75X Fund is not sponsored, endorsed, sold or promoted by Frank Russell Company ("Russell"). Russell makes no representation or warranty, express or implied, to the owners of the Direxion Monthly Small Cap Bull 1.75X Fund or any member of the public regarding the advisability of investing in securities generally or in the Direxion Monthly Small Cap Bull 1.75X Fund particularly or the ability of the Russell 2000<sup>®</sup> Index to track general stock market performance or a segment of the same. Russell's publication of the Russell 2000<sup>®</sup> Index in no way suggests or implies an opinion by Russell as to the advisability of investment in any or all of the securities upon which the Russell 2000<sup>®</sup> Index is based. Russell's only relationship to the Trust is the licensing of certain trademarks and trade names of Russell and of the Russell 2000<sup>®</sup> Index which is determined, composed and calculated by Russell without regard to the Trust or Direxion Monthly Small Cap Bull 1.75X Fund. Russell is not responsible for and has not reviewed the Trust or Direxion Monthly Small Cap Bull 1.75X Fund nor any associated literature or publications and Russell makes no representation or warranty express or implied as to their accuracy or completeness, or otherwise. Russell reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000<sup>®</sup> Index. Russell has no obligation or liability in connection with the administration, marketing or trading of the Direxion Monthly Small Cap Bull 1.75X Fund.

RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE RUSSELL 2000<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN AND RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. RUSSELL MAKES NO WARRANTY, EXPRESS OF IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE TRUST, INVESTORS, OWNERS OF THE DIREXION MONTHLY SMALL CAP BULL 1.75X FUND AND THE DIREXION MONTHLY SMALL CAP BEAR 1.75X FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL 2000<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RUSSELL 2000<sup>®</sup> INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

**Standard and Poor's Index.** The S&P 500<sup>®</sup> Index (the "S&P Index") is a trademark of S&P Global Inc. ("S&P Global"), and has been licensed for use by the Trust. The Funds are not sponsored, endorsed, sold or promoted by S&P Global or its third party licensors. Neither S&P Global nor its third party licensors makes any representation or warranty, express or implied, to the owners of the Funds or any member of the public regarding the advisability of investing in securities generally or in the Funds particularly or the ability of the S&P Index to track general stock market performance. S&P Global's only relationship to the Funds is the licensing of certain trademarks and trade names of S&P Global and the third party licensors and of the S&P Index which are determined, composed and calculated by S&P Global or its third party licensors without regard to the Funds. S&P Global has no obligation to take the needs of the Funds or the owners of the Funds into consideration in determining, composing or calculating the S&P Index. S&P Global is not responsible for and has not participated in the determination of the prices and amount of the Funds or the timing of the issuance or sale of the Funds or in the determination of the net asset value of the Funds. S&P Global has no obligation or liability in connection with the administration, marketing or trading of the Funds.

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NEITHER S&P GLOBAL, ITS AFFILIATES NOR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P GLOBAL, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P GLOBAL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE MARKS, THE S&P INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P GLOBAL, ITS AFFILIATES OR THEIR THIRD PARTY LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.

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Financial Highlights

The financial highlights table is intended to help you understand the financial performance of the Funds for the periods indicated. The information set forth below has been derived from the financial statements which were audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, whose report, along with the Funds' financial statements, are included in the Annual shareholder report, which is available upon request and incorporated by reference into the Funds' SAI. Certain information reflects financial results for a single share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in each Fund (assuming reinvestment of all dividends and other distributions).

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Net Asset**<br> **Value,**<br> **Beginning of**<br> **Year**<br>| **Net**<br> **Investment**<br> **Income**<br> **(Loss)**<sup>1</sup><br>| **Net Realized**<br> **and**<br> **Unrealized**<br> **Gain (Loss)**<br> **on Investments**<sup>2</sup><br>| **Net Increase**<br> **(Decrease)**<br> **in Net**<br> **Asset Value**<br> **Resulting**<br> **from** <br> **Operations**<br>| **Dividends**<br> **from Net**<br> **Investment**<br> **Income**<br>| **Distributions**<br> **from Realized**<br> **Capital Gains**<br>| **Return of**<br> **Capital**<br> **Distributions**<br>| **Total**<br> **Distributions**<br>| **Net Asset**<br> **Value,**<br> **End of**<br> **Year**<br>| **Total**<br> **Return**<sup>3</sup><br>|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.75X Fund** |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $82.62 | 0.87 | 22.89 | 23.76 | (0.87)<br>| – | – | (0.87)<br>| $105.51 | 28.94<br> %<br>|
| Year ended August 31, 2024 | $58.98 | 0.78 | 23.16 | 23.94 | (0.30)<br>| – | – | (0.30)<br>| $82.62 | 47.40<br> %<br>|
| Year ended August 31, 2023 | $42.30 | 0.59 | 16.09 | 16.68 | – | – | – | – | $58.98 | 39.42<br> %<br>|
| Year ended August 31, 2022 | $81.98 | (0.62)<br>| (29.72)<br>| (30.34)<br>| – | (9.34)<br>| – | (9.34)<br>| $42.30 | -42.34<br> %<br>|
| Year ended August 31, 2021 | $57.31 | (0.80)<br>| 31.53 | 30.73 | – | (6.06)<br>| – | (6.06)<br>| $81.98 | 59.47<br> %<br>|
| **Direxion Monthly S&P 500**<sup>®</sup> **Bull 1.75X Fund** |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $68.97 | 0.92 | 12.74 | 13.66 | (1.20)<br>| (6.69)<br>| – | (7.89)<br>| $74.74 | 20.92<br> %<br>|
| Year ended August 31, 2024 | $49.22 | 0.96 | 19.14 | 20.10 | (0.35)<br>| – | – | (0.35)<br>| $68.97 | 41.07<br> %<br>|
| Year ended August 31, 2023 | $40.98 | 0.65 | 7.59 | 8.24 | – | – | – | – | $49.22 | 20.11<br> %<br>|
| Year ended August 31, 2022 | $59.67 | (0.50)<br>| (13.39)<br>| (13.89)<br>| – | (4.80)<br>| – | (4.80)<br>| $40.98 | -25.79<br> %<br>|
| Year ended August 31, 2021 | $37.00 | (0.55)<br>| 23.93 | 23.38 | – | (0.71)<br>| – | (0.71)<br>| $59.67 | 64.19<br> %<br>|
| **Direxion Monthly Small Cap Bull 1.75X Fund** |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $86.76 | 1.27 | 3.54 | 4.81 | (1.20)<br>| – | – | (1.20)<br>| $90.37 | 5.65<br> %<br>|
| Year ended August 31, 2024 | $71.53 | 1.24 | 14.55 | 15.79 | (0.56)<br>| – | – | (0.56)<br>| $86.76 | 22.18<br> %<br>|
| Year ended August 31, 2023 | $71.90 | 1.07 | (1.44)<br>| (0.37)<br>| – | – | – | – | $71.53 | -0.52<br> %<br>|
| Year ended August 31, 2022 | $115.43 | (0.96)<br>| (41.64)<br>| (42.60)<br>| – | (0.93)<br>| – | (0.93)<br>| $71.90 | -37.17<br> %<br>|
| Year ended August 31, 2021 | $56.90 | (1.26)<br>| 59.79 | 58.53 | – | – | – | – | $115.43 | 102.87<br> %<br>|
| **Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund** |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $25.09 | 0.58 | (1.13)<br>| (0.55)<br>| (2.92)<br>| – | – | (2.92)<br>| $21.62 | -1.42<br> %<br>|
| Year ended August 31, 2024 | $24.58 | 0.67 | 0.09 | 0.76 | (0.25)<br>| – | – | (0.25)<br>| $25.09 | 3.09<br> %<br>|
| Year ended August 31, 2023 | $27.88 | 0.56 | (3.86)<br>| (3.30)<br>| – | – | – | – | $24.58 | -11.82<br> %<br>|
| Year ended August 31, 2022 | $37.54 | (0.26)<br>| (9.40)<br>| (9.66)<br>| – | – | – | – | $27.88 | -25.74<br> %<br>|
| Year ended August 31, 2021 | $42.14 | (0.40)<br>| (2.92)<br>| (3.32)<br>| – | (1.28)<br>| – | (1.28)<br>| $37.54 | -8.06<br> %<br>|
| **Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund** |  |  |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $27.35 | 0.84 | 0.72 | 1.56 | (1.15)<br>| – | – | (1.15)<br>| $27.76 | 5.69<br> %<br>|
| Year ended August 31, 2024 | $31.32 | 1.08 | (0.94)<br>| 0.14 | (4.11)<br>| – | – | (4.11)<br>| $27.35 | 0.02<br> %<br>|
| Year ended August 31, 2023 | $27.27 | 0.90 | 3.15 | 4.05 | – | – | – | – | $31.32 | 14.84<br> %<br>|
| Year ended August 31, 2022 | $21.43 | (0.24)<br>| 6.08 | 5.84 | – | – | – | – | $27.27 | 27.26<br> %<br>|
| Year ended August 31, 2021 | $20.65 | (0.29)<br>| 1.07 | 0.78 | – | – | – | – | $21.43 | 3.76<br> %<br>|

---

Direxion Funds Prospectus

------

Financial Highlights (continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **RATIOS TO AVERAGE NET ASSETS** | **Portfolio**<br> **Turnover**<br> **Rate**<sup>6</sup> |
|  | **Net Assets,**<br> **End of**<br> **Year**<br> **(,000)**<br>| **Total**<br> **Expenses**<sup>4</sup><br>| **Net**<br> **Expenses**<sup>4,5</sup><br>| **Net**<br> **Investment**<br> **Income (Loss)**<br> **after**<br> **Expense**<br> **Reimbursement**<br> **/Recoupment**<sup>4</sup><br>| **Total**<br> **Expenses**<br>| **Net**<br> **Expenses**<sup>5</sup><br>| **Net**<br> **Investment**<br> **Income (Loss)**<br> **after**<br> **Expense**<br> **Reimbursement**<br> **/Recoupment**<br>| **Portfolio**<br> **Turnover**<br> **Rate**<sup>6</sup> |
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.75X Fund** |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $531023 | 1.37<br> %<br>| 1.37<br> %<br>| 0.96<br> %<br>| 1.32<br> %<br>| 1.32<br> %<br>| 1.01<br> %<br>| 12<br> %<br>|
| Year ended August 31, 2024 | $445946 | 1.42<br> %<br>| 1.44<br> %<br>| 1.12<br> %<br>| 1.33<br> %<br>| 1.35<br> %<br>| 1.21<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2023 | $360701 | 1.43<br> %<br>| 1.41<br> %<br>| 1.32<br> %<br>| 1.37<br> %<br>| 1.35<br> %<br>| 1.38<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2022 | $273423 | 1.33<br> %<br>| 1.34<br> %<br>| -0.99<br> %<br>| 1.32<br> %<br>| 1.33<br> %<br>| -0.98<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2021 | $595324 | 1.33<br> %<br>| 1.36<br> %<br>| -1.29<br> %<br>| 1.32<br> %<br>| 1.35<br> %<br>| -1.28<br> %<br>| 0<br> %<br>|
| **Direxion Monthly S&P 500**<sup>®</sup> **Bull 1.75X Fund** |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $122155 | 1.41<br> %<br>| 1.43<br> %<br>| 1.36<br> %<br>| 1.33<br> %<br>| 1.35<br> %<br>| 1.44<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2024 | $119743 | 1.51<br> %<br>| 1.53<br> %<br>| 1.69<br> %<br>| 1.33<br> %<br>| 1.35<br> %<br>| 1.87<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2023 | $83188 | 1.51<br> %<br>| 1.42<br> %<br>| 1.54<br> %<br>| 1.44<br> %<br>| 1.35<br> %<br>| 1.61<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2022 | $85872 | 1.36<br> %<br>| 1.36<br> %<br>| -0.96<br> %<br>| 1.35<br> %<br>| 1.35<br> %<br>| -0.95<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2021 | $124964 | 1.33<br> %<br>| 1.35<br> %<br>| -1.22<br> %<br>| 1.33<br> %<br>| 1.35<br> %<br>| -1.22<br> %<br>| 0<br> %<br>|
| **Direxion Monthly Small Cap Bull 1.75X Fund** |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $9248 | 1.83<br> %<br>| 1.46<br> %<br>| 1.54<br> %<br>| 1.72<br> %<br>| 1.35<br> %<br>| 1.65<br> %<br>| 19<br> %<br>|
| Year ended August 31, 2024 | $14733 | 1.66<br> %<br>| 1.50<br> %<br>| 1.69<br> %<br>| 1.51<br> %<br>| 1.35<br> %<br>| 1.84<br> %<br>| 35<br> %<br>|
| Year ended August 31, 2023 | $11017 | 1.78<br> %<br>| 1.41<br> %<br>| 1.54<br> %<br>| 1.72<br> %<br>| 1.35<br> %<br>| 1.60<br> %<br>| 24<br> %<br>|
| Year ended August 31, 2022 | $10577 | 1.60<br> %<br>| 1.35<br> %<br>| -1.01<br> %<br>| 1.60<br> %<br>| 1.35<br> %<br>| -1.01<br> %<br>| 33<br> %<br>|
| Year ended August 31, 2021 | $23514 | 1.54<br> %<br>| 1.35<br> %<br>| -1.28<br> %<br>| 1.54<br> %<br>| 1.35<br> %<br>| -1.28<br> %<br>| 0<br> %<br>|
| **Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund** |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $23532 | 1.69<br> %<br>| 1.36<br> %<br>| 2.64<br> %<br>| 1.68<br> %<br>| 1.35<br> %<br>| 2.65<br> %<br>| 296<br> %<br>|
| Year ended August 31, 2024 | $12598 | 1.67<br> %<br>| 1.39<br> %<br>| 2.79<br> %<br>| 1.63<br> %<br>| 1.35<br> %<br>| 2.83<br> %<br>| 399<br> %<br>|
| Year ended August 31, 2023 | $3533 | 1.73<br> %<br>| 1.37<br> %<br>| 2.13<br> %<br>| 1.71<br> %<br>| 1.35<br> %<br>| 2.15<br> %<br>| 351<br> %<br>|
| Year ended August 31, 2022 | $5146 | 1.66<br> %<br>| 1.35<br> %<br>| -0.77<br> %<br>| 1.66<br> %<br>| 1.35<br> %<br>| -0.77<br> %<br>| 144<br> %<br>|
| Year ended August 31, 2021 | $25364 | 1.44<br> %<br>| 1.35<br> %<br>| -1.04<br> %<br>| 1.44<br> %<br>| 1.35<br> %<br>| -1.04<br> %<br>| 0<br> %<br>|
| **Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund** |  |  |  |  |  |  |  |  |
| Year ended August 31, 2025 | $1288 | 2.57<br> %<br>| 1.38<br> %<br>| 2.96<br> %<br>| 2.54<br> %<br>| 1.35<br> %<br>| 2.99<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2024 | $3188 | 1.98<br> %<br>| 1.55<br> %<br>| 3.52<br> %<br>| 1.78<br> %<br>| 1.35<br> %<br>| 3.72<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2023 | $15151 | 2.16<br> %<br>| 1.42<br> %<br>| 2.99<br> %<br>| 2.09<br> %<br>| 1.35<br> %<br>| 3.06<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2022 | $2650 | 2.28<br> %<br>| 1.37<br> %<br>| -0.99<br> %<br>| 2.26<br> %<br>| 1.35<br> %<br>| -0.97<br> %<br>| 0<br> %<br>|
| Year ended August 31, 2021 | $9273 | 2.57<br> %<br>| 1.35<br> %<br>| -1.34<br> %<br>| 2.57<br> %<br>| 1.35<br> %<br>| -1.34<br> %<br>| 0<br> %<br>|

---

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

Due to the timing of sales and redemptions of capital shares, the net realized and unrealized gain (loss) per share will not equal the Fund's changes in net realized and unrealized gain (loss) on investments and swaps for the period.

Direxion Funds Prospectus

------

Financial Highlights (continued)

Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at the net asset value during the period and redemption on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain expenses had not been reimbursed by the investment adviser.

Includes interest expense and extraordinary expense which is comprised of excise tax expense.

Net expenses include effects of any reimbursement or recoupment.

Portfolio turnover is not annualized and is calculated without regard to short-term securities that have a maturity of less than one year and does not include effects of turnover of the swap contracts portfolio.

Direxion Funds Prospectus

------

![](g58398img4c3dc29e1.gif)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

Investor Class

More Information On The Direxion Funds

***Statement of Additional Information ("SAI"):*** 

The Funds' SAI contains more information on the Funds and their applicable investment policies. The SAI is incorporated in this Prospectus by reference (meaning it is legally part of this Prospectus). A current SAI is on file with the Securities and Exchange Commission ("SEC").

***Annual and Semi-Annual Reports to Shareholders:*** 

The Funds' reports provide additional information on the Funds' investment holdings, performance data and information discussing the market conditions and investment strategies that significantly affected the Funds' performance during that period. The Funds' Form N-CSR will contain additional information about the Funds' investments and the Funds' annual and semi-annual financial statements. **To Obtain the SAI or Fund Reports Free of Charge or for Other Information, such as Fund Financial Statements, or Shareholder Inquiries:** 

Write to: Direxion Funds c/o U.S. Bank Global Fund Services PO Box 219252 Kansas City, MO 64121-9252 <br> Call: (800) 851-0511 <br> By Internet: www.direxion.com

Reports and other information about the Funds may be viewed on screen or downloaded from the EDGAR Database on the SEC's website at http://www.sec.gov. Copies of these documents may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.

SEC File Number: 811-08243

------

![](g283282img828a3bef1.gif)

Direxion Funds

Statement of Additional Information

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

www.direxion.com

**Hilton Tactical Income Fund**

**Investor Class (HCYAX)**

**Institutional Class (HCYIX)**

The Direxion Funds (the "Trust") is an investment company that offers shares of a variety of mutual funds to the public. This Statement of Additional Information ("SAI") relates to the Investor Class Shares and Institutional Class Shares of the Hilton Tactical Income Fund (the "Fund").

This SAI, dated December 29, 2025, is not a prospectus. It should be read in conjunction with the Fund's prospectus dated December 29, 2025 ("Prospectus"). This SAI is incorporated by reference into the Prospectus. In other words, it is legally part of the Prospectus. To receive a copy of the Prospectus, without charge, write or call the Trust at the address or telephone number listed above.

December 29, 2025

------

**Table of Contents** 

---

| | |
|:---|:---|
|  | Page |
| [The Direxion Funds](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_1) | 1  |
| [Classification of the Fund](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_1) | 1  |
| [Investment Policies and Techniques](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_1) | 1  |
| [Asset-Backed Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_1) | 1  |
| [Bank Obligations](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_2) | 2  |
| [Corporate Debt Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_2) | 2  |
| [Cybersecurity Risk](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_3) | 3  |
| [Depositary Receipts](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_3) | 3  |
| [Equity Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_4) | 4  |
| [Foreign Currencies](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_4) | 4  |
| [Foreign Currency Exchange-Related Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_6) | 6  |
| [Foreign Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_7) | 7  |
| [Illiquid Investments and Restricted Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_15) | 15  |
| [Initial Public Offerings](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_16) | 16  |
| [Junk Bonds](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_16) | 16  |
| [Master Limited Partnerships](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_16) | 16  |
| [Interest Rate Risk](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_17) | 17  |
| [Mortgage-Backed Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_17) | 17  |
| [Municipal Obligations](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_18) | 18  |
| [Futures Contracts, Options, and Other Derivative Strategies](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_18) | 18  |
| [Other Investment Companies](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_24) | 24  |
| [Real Estate Investment Trusts](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_25) | 25  |
| [Real Estate Operating Companies](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_25) | 25  |
| [Royalty Trusts](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_25) | 25  |
| [Unrated Debt Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_26) | 26  |
| [U.S. Government Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_26) | 26  |
| [U.S. Government Sponsored Enterprises](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_27) | 27  |
| [When-Issued Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_27) | 27  |
| [Zero-Coupon, Payment-In-Kind and Strip Securities](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_27) | 27  |
| [Other Investment Risks and Practices](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_28) | 28  |
| [Securities Lending](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_28) | 28  |
| [Investment Restrictions](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_29) | 29  |
| [Portfolio Transactions and Brokerage](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_30) | 30  |
| [Portfolio Holdings Information](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_31) | 31  |
| [Management of the Trust](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_31) | 31  |
| [The Board of Trustees](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_31) | 31  |
| [Risk Oversight](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_31) | 31  |
| [Board Structure and Related Matters](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_32) | 32  |
| [Board Committees](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_34) | 34  |
| [Principal Officers of the Trust](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_35) | 35  |
| [Principal Shareholders, Control Persons and Management Ownership](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_37) | 37  |
| [Investment Adviser](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_38) | 38  |
| [Subadviser](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_39) | 39  |
| [Portfolio Managers](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_40) | 40  |

---

i

------

---

| | |
|:---|:---|
|  | Page |
| [Proxy Voting Policies and Procedures](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_40) | 40  |
| [Fund Administrator, Fund Accountant, Transfer Agent and Custodian](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_41) | 41  |
| [Distributor](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_42) | 42  |
| [Distribution Plan](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_42) | 42  |
| [Independent Registered Public Accounting Firm](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_43) | 43  |
| [Legal Counsel](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_43) | 43  |
| [Determination of Net Asset Value](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_43) | 43  |
| [Redemptions](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_44) | 44  |
| [Redemption In-Kind](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_44) | 44  |
| [Redemptions by Telephone](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_44) | 44  |
| [Receiving Payment](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_44) | 44  |
| [Redemption Fees](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_45) | 45  |
| [Anti-Money Laundering](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_45) | 45  |
| [Exchange Privilege](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_45) | 45  |
| [Shareholder and Other Information](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_45) | 45  |
| [Dividends, Other Distributions and Taxes](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_46) | 46  |
| [Dividends and other Distributions](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_46) | 46  |
| [Taxes](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_46) | 46  |
| [Financial Statements](#xx_0424d273-5521-4737-b1dc-0475cabfb53f_49) | 49  |
| [APPENDIX A](#xx_abc4bb5e-e8b0-4a28-addc-834e065a9f47_1) | A-1 |

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The Direxion Funds

The Trust is a Massachusetts business trust organized on June 6, 1997 and is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of 8 separate series.

The Hilton Tactical Income Fund (the "Fund") is a series of the Trust. Rafferty Asset Management, LLC ("Rafferty" or "Adviser") serves as the Fund's investment adviser and Hilton Capital Management, LLC ("Hilton" or "Subadviser") serves as the Fund's subadviser.

Classification of the Fund

The Fund is a diversified series of the Trust pursuant to the 1940 Act. The Fund is considered "diversified" because with respect to 75% of the Fund's total assets, the Fund may not purchase the securities of any issuer (other than securities issued by other investment companies or by the U.S. government or its agencies) if, as a result, (i) more than 5% of the value of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer.

Since the Fund intends to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended, (the "Code"), the Fund will limit its investment, excluding cash, cash items (including receivables), U.S. government securities and securities of other regulated investment companies, so that at the close of each quarter of the taxable year, (1) not more than 25% of the Fund's total assets will be invested in the securities of a single issuer, and (2) with respect to 50% of its total assets, not more than 5% of the Fund's total assets will be invested in the securities of a single issuer nor represent more than 10% of the issuer's outstanding voting securities.

Investment Policies and Techniques

The Fund primarily seeks income with a secondary investment objective of capital appreciation consistent with the preservation of capital.

The Fund offers Investor Class Shares and Institutional Class Shares. Investor Class Shares are made available through your registered investment adviser, financial planner, broker-dealer or other financial intermediary ("Financial Advisor"). Institutional Class Shares are made available through investment advisers, banks, trust companies or other authorized representatives without a sales charge. Investor Class Shares are subject to a Rule 12b-1 fee. The Institutional Class Shares pay no Rule 12b-1 fees. The Fund is not suitable for purchase by active investors (also known as "market timers"). The Fund is intended for long-term investment purposes only and imposes a 1.00% redemption fee on Fund shares redeemed within thirty (30) days of the date of purchase in order to avoid market timing activities.

The Fund's investment objective is a non-fundamental policy of the Fund that may be changed by the Board without shareholder approval.

Subject to the limitations described in the "Investment Restrictions" section, the Fund may engage in the investment strategies discussed below.

**Defensive Policy.** At the Subadviser's discretion, the Fund may invest in high-quality, short-term debt securities and money market instruments for (i) temporary defensive purposes in response to adverse market, economic or political conditions and (ii) to retain flexibility in meeting redemptions, paying expenses and identifying and assessing investment opportunities. These short-term debt securities and money market instruments include cash, shares of other mutual funds, commercial paper, certificates of deposit, bankers' acceptances, U.S. government securities, discount notes and repurchase agreements. To the extent that the Fund invests in money market mutual funds for its cash position, there will be some duplication of expenses because the Fund will bear its pro rata portion of such money market fund's management fees and operational expenses. When investing for temporary defense purposes, the Subadviser may invest up to 100% of the Fund's total assets in such instruments. Taking a temporary defensive position may result in the Fund not achieving its investment objective.

Asset-Backed Securities

The Fund may invest in asset-backed securities of any rating or maturity. Asset-backed securities are securities issued by trusts and special purpose entities that are backed by pools of assets, such as automobile and credit-card receivables and home equity loans, which pass through the payments on the underlying obligations to the security holders (less servicing fees paid to the originator or fees for any credit enhancement). Typically, the originator of the loan or accounts receivable paper transfers it to a specially created trust, which repackages it as securities with a minimum denomination and a specific

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term. The securities are then privately placed or publicly offered. Examples include certificates for automobile receivables and so-called plastic bonds, backed by credit card receivables.

The value of an asset-backed security is affected by, among other things, changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans and the financial institution providing any credit enhancement. Payments of principal and interest passed through to holders of asset-backed securities are frequently supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or by having a priority to certain of the borrower's other assets. The degree of credit enhancement varies, and generally applies to only a portion of the asset-backed security's par value. Value is also affected if any credit enhancement has been exhausted.

Bank Obligations

*<u>Money Market Instruments</u>*. The Fund may invest in bankers' acceptances, certificates of deposit, demand and time deposits, savings shares and commercial paper of domestic banks and savings and loans that have assets of at least $1 billion and capital, surplus, and undivided profits of over $100 million as of the close of their most recent fiscal year, or instruments that are insured by the Bank Insurance Fund or the Savings Institution Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). The Fund also may invest in high quality, short-term, corporate debt obligations, including variable rate demand notes, having terms-to-maturity of less than 397 days. Because there is no secondary trading market in demand notes, the inability of the issuer to make required payments could impact adversely the Fund's ability to resell when it deems advisable to do so.

The Fund may invest in foreign money market instruments, which typically involve more risk than investing in U.S. money market instruments. See "Foreign Securities" below. These risks include, among others, higher brokerage commissions, less public information, and less liquid markets in which to sell and meet large shareholder redemption requests.

*<u>Bankers' Acceptances</u>*. Bankers' acceptances generally are negotiable instruments (time drafts) drawn to finance the export, import, domestic shipment or storage of goods. They are termed "accepted" when a bank writes on the draft its agreement to pay it at maturity, using the word "accepted." The bank is, in effect, unconditionally guaranteeing to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset, or it may be sold in the secondary market at the going rate of interest for a specified maturity.

*<u>Certificates of Deposit ("CDs")</u>*. The FDIC is an agency of the U.S. government that insures the deposits of certain banks and savings and loan associations up to $250,000 per deposit. The interest on such deposits may not be insured to the extent this limit is exceeded. Current federal regulations also permit such institutions to issue insured negotiable CDs in amounts of $250,000 or more without regard to the interest rate ceilings on other deposits. To remain fully insured, these investments must be limited to $250,000 per insured bank or savings and loan association.

*<u>Commercial Paper</u>*. Commercial paper includes notes, drafts or similar instruments payable on demand or having a maturity at the time of issuance not exceeding nine months, exclusive of days of grace or any renewal thereof. The Fund may invest in commercial paper rated A-l or A-2 by Standard & Poor's<sup>®</sup> Ratings Services ("S&P<sup>®</sup>") or Prime-1 or Prime-2 by Moody's Investors Service<sup>®</sup>, Inc. ("Moody's"), and in other lower quality commercial paper.

In March 2023, the shut-down of certain financial institutions raised economic concerns over disruption in the U.S. banking system. There can be no certainty that the actions taken by the U.S. government to strengthen public confidence in the U.S. banking system will be effective in mitigating the effects of financial institution failures on the economy and restoring public confidence in the U.S. banking system.

Corporate Debt Securities

The Fund may invest in investment grade corporate debt securities of any rating or maturity. Investment grade corporate bonds are those rated BBB or better by S&P<sup>®</sup> or Baa or better by Moody's. Securities rated BBB by S&P<sup>®</sup> are considered investment grade, but Moody's considers securities rated Baa to have speculative characteristics. See Appendix A for a description of corporate bond ratings. The Fund may also invest in unrated securities.

Corporate debt securities are fixed-income securities issued by businesses to finance their operations, although corporate debt instruments may also include bank loans to companies. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their maturities and secured or un-secured status. Commercial paper has the shortest term and is usually unsecured.

The broad category of corporate debt securities includes debt issued by domestic or foreign companies of all kinds, including those with small-, mid- and large-capitalizations. Corporate debt may be rated investment-grade or below investment-grade and may carry variable or floating rates of interest.

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Because of the wide range of types and maturities of corporate debt securities, as well as the range of creditworthiness of its issuers, corporate debt securities have widely varying potentials for return and risk profiles. For example, commercial paper issued by a large established domestic corporation that is rated investment grade may have a modest return on principal, but carries relatively limited risk. On the other hand, a long-term corporate note issued by a small foreign corporation from an emerging market country that has not been rated may have the potential for relatively large returns on principal, but carries a relatively high degree of risk.

Corporate debt securities carry both credit risk and interest rate risk. Credit risk is the risk that the Fund could lose money if the issuer of a corporate debt security is unable to pay interest or repay principal when it is due. Some corporate debt securities that are rated below investment grade are generally considered speculative because they present a greater risk of loss, including default, than higher-quality debt securities. The credit risk of a particular issuer's debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of higher-ranking senior securities may receive amounts otherwise payable to the holders of more junior securities. Interest rate risk is the risk that the value of certain corporate debt securities will tend to fall when interest rates rise. In general, corporate debt securities with longer terms tend to fall more in value when interest rates rise than corporate debt securities with shorter terms.

Cybersecurity Risk

The Fund may be susceptible to operational risks through breaches in cybersecurity. A cybersecurity incident may refer to either intentional or unintentional events that allow an unauthorized party to gain access to fund assets, investor data, or proprietary information, or cause the Fund or a service provider to suffer data corruption or lose operational functionality. A cybersecurity incident could, among other things, result in the loss or theft of investor data or funds, employees being unable to access electronic systems ("denial of services"), loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or remediation costs associated with system repairs. Any of these results could have a substantial impact on the Fund. For example, if a cybersecurity incident results in a denial of service, employees could be unable to access electronic systems to perform critical duties for the Fund, such as trading, NAV calculation, shareholder accounting or fulfillment of Fund share purchases and redemptions. Cybersecurity incidents could cause the Fund, Rafferty or any of its service providers to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures, or financial loss of a significant magnitude. They may also cause the Fund to violate applicable privacy and other laws. The Fund's Adviser and service providers have established risk management program and systems that seek to reduce the risks associated with cybersecurity, as well as business continuity plans in the event there is a cybersecurity breach. However, there is no guarantee that such efforts will succeed, especially since the Fund does not directly control the cybersecurity systems of the issuers of securities in which the Fund invests or the Fund's third party service providers (including the Fund's transfer agent and custodian).

Depositary Receipts

To the extent the Fund invests in stocks of foreign corporations, the Fund's investment in such stocks may also be in the form of depositary receipts or other securities convertible into securities of foreign issuers. Depository receipts are receipts, typically issued by a financial institution, with evidence of underlying securities issued by a non-U.S. issuer. Types of depositary receipts include American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs"). Depository receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted.

ADRs are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. Investments in ADRs have certain advantages over direct investment in the underlying foreign securities because: (i) ADRs are U.S. dollar-denominated investments that are easily transferable and for which market quotations are readily available, and (ii) issuers whose securities are represented by ADRs are generally subject to auditing, accounting and financial reporting standards similar to those applied to domestic issuers. By investing in ADRs rather than directly in the stock of foreign issuers outside the U.S. the Fund may avoid certain risks related to investing in foreign securities in non-U.S. markets, however, ADRs do not eliminate all risks inherent in investing in the securities of foreign issuers.

EDRs are receipts issued in Europe that evidence a similar ownership arrangement. GDRs are receipts issued throughout the world that evidence a similar arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world.

Depositary receipts may be purchased through "sponsored" or "unsponsored" facilities, in which the Fund may invest. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may

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establish an unsponsored facility without participation by the issuer of the depositary security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts of the deposited securities.

Fund investments in depositary receipts, which include ADRs, GDRs and EDRs, are deemed to be investments in foreign securities for purposes of the Fund's investment strategy.

Equity Securities

*<u>Common Stocks</u>*. The Fund may invest in common stocks. Common stocks represent the residual ownership interest in the issuer and are entitled to the income and increase in the value of the assets and business of the entity after all of its obligations and preferred stock are satisfied. Common stocks generally have voting rights. Common stocks fluctuate in price in response to many factors including historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.

*<u>Convertible Securities</u>*. The Fund may invest in convertible securities that may be considered high yield securities. Convertible securities include corporate bonds, notes and preferred stock that can be converted into or exchanged for a prescribed amount of common stock of the same or a different issue within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or dividends paid on preferred stock until the convertible stock matures or is redeemed, converted or exchanged. While no securities investment is without some risk, investments in convertible securities generally entail less risk than the issuer's common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed income security. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. While convertible securities generally offer lower interest or dividend yields than nonconvertible debt securities of similar quality, they do enable the investor to benefit from increases in the market price of the underlying common stock. When investing in convertible securities, the Fund may invest in the lowest credit rating category.

*<u>Preferred Stock</u>*. The Fund may invest in preferred stock. A preferred stock blends the characteristics of a bond and common stock. It can offer the higher yield of a bond and has priority over common stock in equity ownership, but does not have the seniority of a bond and its participation in the issuer's growth may be limited. Preferred stock has preference over common stock in the receipt of dividends and in any residual assets after payment to creditors if the issuer is dissolved. Although the dividend is set at a fixed annual rate, in some circumstances it can be changed or omitted by the issuer. When investing in preferred stocks, the Fund may invest in the lowest credit rating category.

*<u>Warrants and Rights</u>*. The Fund may purchase warrants and rights, which are instruments that permit the Fund to acquire, by subscription, the capital stock of a corporation at a set price, regardless of the market price for such stock. Warrants may be either perpetual or of limited duration, but they usually do not have voting rights or pay dividends. The market price of warrants is usually significantly less than the current price of the underlying stock. Thus, there is a greater risk that warrants might drop in value at a faster rate than the underlying stock.

Foreign Currencies

The Fund may invest directly and indirectly in foreign currencies. Investments in foreign currencies are subject to numerous risks not least being the fluctuation of foreign currency exchange rates with respect to the U.S. Dollar. Exchange rates fluctuate for a number of reasons.

*<u>Inflation</u>*. Exchange rates change to reflect changes in a currency's buying power. Different countries experience different inflation rates due to different monetary and fiscal policies, different product and labor market conditions, and a host of other factors.

*<u>Trade Deficits</u>*. Countries with trade deficits tend to experience a depreciating currency. Inflation may be the cause of a trade deficit, making a country's goods more expensive and less competitive and so reducing demand for its currency.

*<u>Interest Rates</u>*. High interest rates may raise currency values in the short term by making such currencies more attractive to investors. However, since high interest rates are often the result of high inflation, long-term results may be the opposite.

*<u>Budget Deficits and Low Savings Rates</u>*. Countries that run large budget deficits and save little of their national income tend to suffer a depreciating currency because they are forced to borrow abroad to finance their deficits. Payments of interest on this debt can inundate the currency markets with the currency of the debtor nation. Budget deficits also can indirectly contribute to currency depreciation if a government chooses inflationary measures to cope with its deficits and debt.

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*<u>Political Factors</u>*. Political instability in a country can cause a currency to depreciate. Demand for a certain currency may fall if a country appears a less desirable place in which to invest and do business.

*<u>Government Control</u>*. Through their own buying and selling of currencies, the world's central banks sometimes manipulate exchange rate movements. In addition, governments occasionally issue statements to influence people's expectations about the direction of exchange rates, or they may instigate policies with an exchange rate target as the goal.

The value of the Fund's investments is calculated in U.S. Dollars each day that the New York Stock Exchange ("NYSE") is open for business. As a result, to the extent that the Fund's assets are invested in instruments denominated in foreign currencies and the currencies appreciate relative to the U.S. Dollar, the Fund's NAV per share as expressed in U.S. Dollars (and, therefore, the value of your investment) should increase. If the U.S. Dollar appreciates relative to the other currencies, the opposite should occur.

The currency-related gains and losses experienced by the Fund will be based on changes in the value of portfolio securities attributable to currency fluctuations only in relation to the original purchase price of such securities as stated in U.S. Dollars. Gains or losses on shares of the Fund will be based on changes attributable to fluctuations in the NAV of such shares, expressed in U.S. Dollars, in relation to the original U.S. Dollar purchase price of the shares. The amount of appreciation or depreciation in the Fund's assets also will be affected by the net investment income generated by the money market instruments in which the Fund invests and by changes in the value of the securities that are unrelated to changes in currency exchange rates.

The Fund may incur currency exchange costs when it sells instruments denominated in one currency and buys instruments denominated in another.

*<u>Currency Transactions</u>*. The Fund conducts currency exchange transactions on a spot basis. Currency transactions made on a spot basis are for cash at the spot rate prevailing in the currency exchange market for buying or selling currency. The Fund also enters into forward currency contracts. See "Futures Contracts, Options, and Other Derivative Strategies" section below. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into on the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A currency forward contract will tend to reduce or eliminate exposure to the currency that is sold, and increase exposure to the currency that is purchased, similar to when a fund sells a security denominated in one currency and purchases a security denominated in another currency. For example, the Fund may enter into a forward contract when it owns a security that is denominated in a non-U.S. currency and desires to "lock in" the U.S. dollar value of the security.

The Fund may invest in a combination of forward currency contracts and U.S. Dollar-denominated market instruments in an attempt to obtain an investment result that is substantially the same as a direct investment in a foreign currency-denominated instrument. This investment technique creates a "synthetic" position in the particular foreign-currency instrument whose performance the Subadviser is trying to duplicate. For example, the combination of U.S. Dollar-denominated instruments with "long" forward currency exchange contracts creates a position economically equivalent to a money market instrument denominated in the foreign currency itself. Such combined positions are sometimes necessary when the money market in a particular foreign currency is small or relatively illiquid.

The Fund may invest in forward currency contracts to hedge either specific transactions (transaction hedging) or portfolio positions (position hedging). Transaction hedging is the purchase or sale of forward currency contracts with respect to specific receivables or payables of the Fund in connection with the purchase and sale of portfolio securities. Position hedging is the sale of a forward currency contract on a particular currency with respect to portfolio positions denominated or quoted in that currency.

The Fund may use forward currency contracts for position hedging if consistent with its policy of trying to expose its net assets to foreign currencies. The Fund is not required to enter into forward currency contracts for hedging purposes and it is possible that the Fund may not be able to hedge against a currency devaluation that is so generally anticipated that the Fund is unable to contract to sell the currency at a price above the devaluation level it anticipates. It also is possible, under certain circumstances, that the Fund may have to limit its currency transactions to qualify as a "regulated investment company" ("RIC") under the Code. See "Dividends, Other Distributions and Taxes."

The Fund currently does not intend to enter into a forward currency contract with a term of more than one year, or to engage in position hedging with respect to the currency of a particular country to more than the aggregate market value (at the time the hedging transaction is entered into) of its portfolio securities denominated in (or quoted in or currently convertible into or directly related through the use of forward currency contracts in conjunction with money market instruments to) that particular currency.

Under definitions adopted by the Commodity Futures Trading Commission ("CFTC") and SEC, non-deliverable forwards are considered swaps, and therefore are included in the definition of "commodity interests." Although non-deliverable forwards have historically been traded in the over-the-counter ("OTC") market, as swaps they may in the future be required to be centrally cleared and traded on public facilities. For more information on central clearing and trading of cleared swaps,

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see "Cleared swaps," "Risks of cleared swaps," "Comprehensive swaps regulation" and "Developing government regulation of derivatives." Currency forwards that qualify as deliverable forwards are not regulated as swaps for most purposes, and are not included in the definition of "commodity interests." However these forwards are subject to some requirements applicable to swaps, including reporting to swap data repositories, documentation requirements, and business conduct rules applicable to swap dealers. CFTC regulation of currency forwards, especially non-deliverable forwards, may restrict the Fund's ability to use these instruments in the manner described above or subject the investment manager to CFTC registration and regulation as a commodity pool operator ("CPO").

At or before the maturity of a forward currency contract, the Fund may either sell a portfolio security and make delivery of the currency, or retain the security and terminate its contractual obligation to deliver the currency by buying an "offsetting" contract obligating it to buy, on the same maturity date, the same amount of the currency. If the Fund engages in an offsetting transaction, it may later enter into a new forward currency contract to sell the currency.

If the Fund engages in an offsetting transaction, it will incur a gain or loss to the extent that there has been movement in forward currency contract prices. If forward prices go down during the period between the date the Fund enters into a forward currency contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. If forward prices go up, the Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell.

Since the Fund invests in money market instruments denominated in foreign currencies, it may hold foreign currencies pending investment or conversion into U.S. Dollars. Although the Fund values its assets daily in U.S. Dollars, it does not convert its holdings of foreign currencies into U.S. Dollars on a daily basis. The Fund will convert its holdings from time to time, however, and incur the costs of currency conversion. Foreign exchange dealers do not charge a fee for conversion, but they do realize a profit based on the difference between the prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, and offer to buy the currency at a lower rate if the Fund tries to resell the currency to the dealer.

*<u>Risks of currency forward contracts</u>.* Should exchange rates move in an unexpected manner, the Fund may not achieve the anticipated benefits of the transaction, or it may realize losses. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised, including because of the counterparty's bankruptcy or insolvency. While the Fund uses only counterparties that meet its credit quality standards, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited. Currency forward contracts may limit potential gain from a positive change in the relationship between the U.S. Dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not engaged in such contracts. Moreover, there may be an imperfect correlation between the Fund's portfolio holdings of securities denominated in a particular currency and the currencies bought or sold in the forward contracts entered into by the Fund. This imperfect correlation may cause the Fund to sustain losses that will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.

*<u>Foreign Currency Options</u>*. The Fund may invest in foreign currency-denominated securities and may buy or sell put and call options on foreign currencies. The Fund may buy or sell put and call options on foreign currencies either on exchanges or in the OTC market. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a foreign currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits which may limit the ability of the Fund to reduce foreign currency risk using such options. OTC options differ from traded options in that they are two-party contracts with price and other terms negotiated between buyer and seller, and generally do not have as much market liquidity as exchange-traded options.

Foreign Currency Exchange-Related Securities

*<u>Foreign Currency Warrants</u>*. Foreign currency warrants such as Currency Exchange Warrants<sup>SM</sup> ("CEWs<sup>SM</sup>") are warrants which entitle the holder to receive from their issuer an amount of cash (generally, for warrants issued in the United States, in U.S. Dollars) which is calculated pursuant to a predetermined formula and based on the exchange rate between a specified foreign currency and the U.S. Dollar as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time. Foreign currency warrants have been issued in connection with U.S. Dollar-denominated debt offerings by major corporate issuers in an attempt to reduce the foreign currency exchange risk which, from the point of view of prospective purchasers of the securities, is inherent in the international fixed-income marketplace. Foreign currency warrants may attempt to reduce the foreign exchange risk assumed by purchasers of a security by, for example, providing for a supplemental payment in the event that the U.S. Dollar depreciates against the value of a major foreign currency such as the Japanese yen or the Euro. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (*e.g.*, unless the U.S. Dollar appreciates or depreciates against the particular foreign

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currency to which the warrant is linked or indexed). Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges. Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. In the case of any exercise of warrants, there may be a time delay between the time a holder of warrants gives instructions to exercise and the time the exchange rate relating to exercise is determined, during which time the exchange rate could change significantly, thereby affecting both the market and cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be suspended permanently, which would result in the loss of any remaining "time value" of the warrants (*i.e.*, the difference between the current market value and the exercise value of the warrants), and, in the case the warrants were "out-of-the-money," in a total loss of the purchase price of the warrants.

Warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the Options Clearing Corporation ("OCC"). Unlike foreign currency options issued by OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants is generally considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving significantly larger amounts of foreign currencies. Foreign currency warrants are subject to significant foreign exchange risk, including risks arising from complex political or economic factors.

*<u>Principal Exchange Rate Linked Securities</u>*. Principal exchange rate linked securities ("PERLs<sup>SM</sup>") are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the U.S. Dollar and a particular foreign currency at or about that time. The return on "standard" principal exchange rate linked securities is enhanced if the foreign currency to which the security is linked appreciates against the U.S. Dollar, and is adversely affected by increases in the foreign exchange value of the U.S. Dollar; "reverse" principal exchange rate linked securities are like the "standard" securities, except that their return is enhanced by increases in the value of the U.S. Dollar and adversely impacted by increases in the value of foreign currency. Interest payments on the securities are generally made in U.S. Dollars at rates that reflect the degree of foreign currency risk assumed or given up by the purchaser of the notes (*i.e.*, at relatively higher interest rates if the purchaser has assumed some of the foreign exchange risk, or relatively lower interest rates if the issuer has assumed some of the foreign exchange risk, based on the expectations of the current market). Principal exchange rate linked securities may in limited cases be subject to acceleration of maturity (generally, not without the consent of the holders of the securities), which may have an adverse impact on the value of the principal payment to be made at maturity.

*<u>Performance Indexed Paper</u>*. Performance indexed paper ("PIPs<sup>SM</sup>") is U.S. Dollar-denominated commercial paper the yield of which is linked to certain foreign exchange rate movements. The yield to the investor on performance indexed paper is established at maturity as a function of spot exchange rates between the U.S. Dollar and a designated currency as of or about that time (generally, the index maturity two days prior to maturity). The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on U.S. Dollar-denominated commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.

Foreign Securities

The Fund may have both direct and indirect exposure to foreign securities through investments in publicly traded securities such as stocks and bonds, stock index futures contracts, options on stock index futures contracts and options on securities and on stock indices to foreign securities. In most cases, the best available market for foreign securities will be on exchanges or in over-the-counter ("OTC") markets located outside the United States.

Investing in foreign securities carries political and economic risks distinct from those associated with investing in the United States. Non-U.S. securities may be subject to currency risks or to foreign government taxes. There may be less information publicly available about a non-U.S. issuer than about a U.S. issuer, and a foreign issuer may or may not be subject uniform accounting, auditing and financial reporting standards and practices comparable to those in the U.S. Other risks of investing in such securities include political or economic instability in the country involved, the difficulty of predicting international trade patterns and the possibility of the imposition of exchange controls. The prices of such securities may be more volatile than those of U.S. securities. There maybe also be the possibility of expropriation of assets or nationalization, imposition of withholding taxes on dividend or interest payments, difficulty obtaining and enforcing judgments against foreign entities or diplomatic developments which could affect investment in these countries. Losses and other expenses may be incurred in converting currencies in connection with purchases and sales of foreign securities.

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Non-U.S. stock markets may not be as developed or efficient as, and may be more volatile than, those in the U.S. While the volume of shares traded on non-U.S. stock markets generally has been growing, such markets usually have substantially less volume than U.S. markets. Therefore, the Fund's investment in non-U.S. equity securities may be less liquid and subject to more rapid and erratic price movements than comparable securities listed for trading on U.S. exchanges. Non-U.S. equity securities may trade at price/earnings multiples higher than comparable U.S. securities and such levels may not be sustainable. There may be less government supervision and regulation of foreign stock exchanges, brokers, banks and listed companies abroad than in the U.S. Moreover, settlement practices for transactions in foreign markets may differ from those in U.S. markets. Such differences may include delays beyond periods customary in the U.S. and practices, such as delivery of securities prior to receipt of payment, that increase the likelihood of a failed settlement, which can result in losses to the Fund. The value of non-U.S. investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Foreign brokerage commissions, custodial expenses and other fees are also generally higher than for securities traded in the U.S. This may cause the Fund to incur higher portfolio transaction costs than domestic equity funds. Fluctuations in exchanges rates may also affect the earning power and asset value of the foreign entity issuing a security, even on denominated in U.S. dollars. Dividend and interest payments may be repatriated based on the exchange rate at the time of disbursement, and restrictions on capital flows may be imposed.

*<u>Developing and Emerging Markets</u>*. Emerging and developing markets abroad may offer special opportunities for investing, but may have greater risks than more developed foreign markets, such as those in Europe, Canada, Australia, New Zealand and Japan. There may be even less liquidity in their securities markets, and settlements of purchases and sales of securities may be subject to additional delays. They are subject to greater risks of limitations on the repatriation of income and profits because of currency restrictions imposed by local governments. Those countries may also be subject to the risk of greater political and economic instability, which can greatly affect the volatility of prices of securities in those countries.

Investing in emerging market securities imposes risks different from, or greater than, risks of investing in foreign developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales and future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. Dollar. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Additional risks of emerging markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. Shareholder claims and legal remedies that are common in the United States may be difficult or impossible to pursue in many emerging market countries. In addition, due to jurisdictional limitations, matters of comity and various other factors, U.S. authorities may be limited in their ability to bring enforcement actions against non-U.S. companies and non-U.S. persons in certain emerging market countries. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions.

*<u>Asia-Pacific Countries</u>*. In addition to the risks associated with foreign and emerging markets, the developing market Asia-Pacific countries in which the Fund may invest are subject to certain additional or specific risks. The Fund may make substantial investments in Asia-Pacific countries. In the Asia-Pacific markets, there is a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries. Many of these markets also may be affected by developments with respect to more established markets in the region, such as Japan and Hong Kong. Brokers in developing market Asia-Pacific countries typically are fewer in number and less well-capitalized than brokers in the United States. These factors, combined with the U.S. regulatory requirements for open-end investment companies and the restrictions on foreign investment, result in potentially fewer investment opportunities for the Fund and may have an adverse impact on the Fund's investment performance.

Many of the developing market Asia-Pacific countries may be subject to a greater degree of economic, political and social instability than is the case in the United States and Western European countries. Such instability may result from, among other things: (i) authoritarian governments or military involvement in political and economic decision-making, including changes in government through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; and/or (v) ethnic, religious and racial disaffection. In addition, the governments of many of such countries, such as Indonesia, have a heavy role in regulating and supervising the economy.

An additional risk common to most such countries is that the economy is heavily export-oriented and, accordingly, is dependent upon international trade. The existence of overburdened infrastructure and obsolete financial systems also present risks in certain countries, as do environmental problems. Certain economies also depend to a significant degree upon exports of primary commodities and, therefore, are vulnerable to changes in commodity prices that, in turn, may be affected by a variety of factors. The legal systems in certain developing market Asia-Pacific countries also may have an adverse impact

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on the Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholder's investment, the notion of limited liability is less clear in certain emerging market Asia-Pacific countries. Similarly, the rights of investors in developing market Asia-Pacific companies may be more limited than those of shareholders of U.S. corporations. It may be difficult or impossible to obtain and/or enforce a judgment in a developing market Asia-Pacific country.

Governments of many developing market Asia-Pacific countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In certain cases, the government owns or controls many companies, including the largest in the country. Accordingly, government actions in the future could have a significant effect on economic conditions in developing market Asia-Pacific countries, which could affect private sector companies and the Fund itself, as well as the value of securities in the Fund's portfolio. In addition, economic statistics of developing market Asia-Pacific countries may be less reliable than economic statistics of more developed nations.

It is possible that developing market Asia-Pacific issuers may not be subject to the same accounting, auditing and financial reporting standards as U.S. companies. Inflation accounting rules in some developing market Asia-Pacific countries require companies that keep accounting records in the local currency, for both tax and accounting purposes, to restate certain assets and liabilities on the company's balance sheet in order to express items in terms of currency of constant purchasing power. Inflation accounting may indirectly generate losses or profits for certain developing market Asia-Pacific companies. In addition, satisfactory custodial services for investment securities may not be available in some developing Asia-Pacific countries, which may result in the Fund incurring additional costs and delays in providing transportation and custody services for such securities outside such countries.

Certain developing Asia-Pacific countries are especially large debtors to commercial banks and foreign governments. Fund management may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular developing Asia-Pacific country. The Fund may invest in countries in which foreign investors, including management of the Fund, have had no or limited prior experience.

*<u>Brazil</u>*. Investing in Brazil involves certain considerations not typically associated with investing in the United States. Additional considerations include: (i) investment and repatriation controls, which could affect the Fund's ability to operate, and to qualify for the favorable tax treatment afforded to RICs for U.S. federal income tax purposes; (ii) fluctuations in the rate of exchange between the Brazilian Real and the U.S. Dollar; (iii) the generally greater price volatility and lesser liquidity that characterize Brazilian securities markets, as compared with U.S. markets; (iv) the effect that balance of trade could have on Brazilian economic stability and the Brazilian government's economic policy; (v) potentially high rates of inflation, a rising unemployment rate, and a high level of debt, each of which may hinder economic growth; (vi) governmental involvement in and influence on the private sector; (vii) Brazilian accounting, auditing and financial standards and requirements, which differ from those in the United States; (viii) political and other considerations, including changes in applicable Brazilian tax laws; and (ix) restrictions on investments by foreigners. In addition, commodities, such as oil, gas and minerals, represent a significant percentage of Brazil's exports and, therefore, its economy is particularly sensitive to fluctuations in commodity prices. Additionally, an investment in Brazil is subject to certain risks stemming from political and economic corruption.

*<u>China</u>*. Investing in China involves special considerations not typically associated with investing in countries with more democratic governments or more established economies or currency markets. These risks include: (i) the risk of nationalization or expropriation of assets or confiscatory taxation; (ii) greater governmental involvement in and control over the economy, interest rates and currency exchange rates; (iii) controls on foreign investment and limitations on repatriation of invested capital; (iv) greater social, economic and political uncertainty ; (v) dependency on exports and the corresponding importance of international trade; (vi) currency exchange rate fluctuations; (vii) differences in, or lack of, auditing and financial reporting standards that may result in unavailability of material information about issuers and restrictions on issuers' ability to access the U.S. capital markets; and (viii) the risk that certain companies, including those in which the Fund may invest, may have dealings with countries subject to sanctions or embargoes imposed by the U.S. government or identified as state sponsors of terrorism.

For over three decades, the Chinese government has been reforming economic and market practice and has been providing a larger sphere for private ownership of property. While currently contributing to growth and prosperity, the government could technically decide not to continue to support these economic reform programs and return to the completely centrally planned economy that existed prior to 1978. There is also a greater risk in China than in many other countries of currency fluctuations, currency non-convertibility, interest rate fluctuations and higher rates of inflation as a result of internal social unrest or conflicts with other countries. China is an emerging market and demonstrates significantly higher volatility from time to time in comparison to developed markets. The government of China maintains strict currency controls in support of economic, trade and political objectives and regularly intervenes in the currency market. The government's actions in this respect may not be transparent or predictable. As a result, the value of the Yuan (or renminbi), and the value of securities designed to provide exposure to the Yuan, can change quickly and arbitrarily. Furthermore, it is difficult for foreign investors to directly access money market securities in China because of investment and trading restrictions. Chinese law also prohibits direct foreign investments in certain issuers in certain industries. Chinese companies listed on U.S. exchanges often use variable interest entities ("VIEs") in their structure. Instead of directly owning the equity securities of a Chinese operating company, in a VIE structure, a non-U.S. shell company (often organized in the Cayman Islands) that is listed and traded on a U.S. exchange enters into service contracts and other contracts with the Chinese operating company which provide the

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foreign shell company with exposure to the Chinese company. Although the U.S. listed shell company has no equity ownership of the Chinese operating company, the contractual arrangements provide the U.S. listed shell company economic exposure to the Chinese operating company and permit the U.S. listed shell company to consolidate the Chinese operating company into its financial statements. VIE structures are subject to legal and regulatory uncertainties and risks. Intervention by the Chinese government with respect to VIE structures or the non-enforcement of VIE-related contractual rights could significantly affect a Chinese operating company's business, the enforceability of the U.S. listed shell company's contractual arrangements with the Chinese operating company and the value of the U.S. listed stock. Intervention by the Chinese government could include nationalization of the Chinese operating company, confiscation of its assets, restrictions on operations and/or constraints on the use of VIE structures. In addition, because the Chinese operating company is not owned, directly or indirectly, by the U.S. listed shell company, the U.S. listed shell company cannot control the Chinese operating company and must rely on the Chinese operating company to perform its contractual obligations in order for the U.S. listed company to receive economic benefits. In addition, PRC companies listed on U.S. exchanges, including ADRs and companies that rely on VIE structures, may be delisted if they do not meet U.S. accounting standards and auditor oversight requirements. Delisting could significantly decrease the liquidity and value of the securities of these companies, decrease the ability of a Fund to invest in such securities and increase the cost of the Fund if it is required to seek alternative markets in which to invest in such securities.

While the economy of China has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Reduction in spending on Chinese products and services, the institution of additional tariffs or other trade barriers, including as a result of heightened trade tensions between China and the United States, or a downturn in any of the economies of China's key trading partners may have an adverse impact on the Chinese economy. Actions like these may have unanticipated and disruptive effects on the Chinese economy. Any such response that targets Chinese financial markets or securities exchanges could interfere with orderly trading, delay settlement or cause market disruptions. These and other factors may decrease the value and liquidity of the Fund's investments. The Chinese economy may experience a significant slowdown as a result of, among other things, a deterioration of global demand for Chinese exports, as well as contraction in spending on domestic goods by Chinese consumers. In addition, China may experience substantial rates of inflation or economic recessions, which would have a negative effect on its economy and securities market.

Hong Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative Region of the PRC under the principle of "one country, two systems." Although China is obligated to maintain the current capitalist economic and social system of Hong Kong through June 30, 2047, the continuation of economic and social freedoms enjoyed in Hong Kong is dependent on the government of China. Since 1997, there have been tensions between the Chinese government and many people in Hong Kong regarding China's perceived tightening of control over Hong Kong's semi-autonomous liberal political, economic, legal, and social framework. Recent protests may prompt the Chinese and Hong Kong governments to rapidly address Hong Kong's future relationship with mainland China, which remains unresolved. Due to the interconnected nature of the Hong Kong and Chinese economies, this instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets.

There has been increased attention to Chinese companies from the U.S. government and U.S. regulators, including the Department of the Treasury ("DOT") and its Office of Foreign Assets Control ("OFAC"). In a series of actions between November 2020 and June 2021, the DOT prohibited investment by U.S. investors in the publicly traded securities of certain companies tied to the Chinese military or China's surveillance technology sector. The prohibited companies were described in the executive orders as "Chinese Military Industrial Complex Companies," and the restrictions on investing in such companies was interpreted by OFAC to extend to instruments that are derivative of, or designed to provide investment exposure to, these companies, including diversified investment companies. More recently, the DOT issued regulations which will prohibit or require notification of investments by certain U.S. persons in certain sub-sets of national security technologies and products including semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems in or related to "countries of concern," defined as China including Hong Kong and Macau. These regulations are in effect as of January 2, 2025. Although it cannot be fully known at this time, these rules may significantly reduce the liquidity of such investments, force the Fund to sell certain positions at inopportune times or unfavorable prices and restrict future investments by the Fund. Audits performed by PCAOB-registered accounting firms in mainland China and Hong Kong may be less reliable than those performed by firms subject to PCAOB inspection. Accordingly, information about the Chinese securities in which the Fund invests may be less reliable or complete. Under amendments to the Sarbanes-Oxley Act enacted in December 2020, which requires that the PCAOB be permitted to inspect the accounting firm of a U.S.-listed Chinese issuer, Chinese companies with securities listed on U.S. exchanges may be delisted if the PCAOB is unable to inspect the accounting firm.

Recently, there have been intensified concerns about trade tariffs and a potential trade war between China and the United States. Future tariffs imposed by China and the United States on the other country's products, or other escalating actions, may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China's export industry with a potentially negative impact to the Fund.

For decades, a state of hostility has existed between Taiwan and the PRC. Beijing has long deemed Taiwan a part of the "one China" and has made a nationalist cause of recovering it. This situation poses a threat to Taiwan's economy and could

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negatively affect its stock market. In addition, China could be affected by military events on the Korean peninsula or internal instability within North Korea. These situations may cause uncertainty in the Chinese market and may adversely affect performance of the Chinese economy.

Foreign investors had historically been unable to participate in the PRC securities market. However, in late 2002, Investment Regulations promulgated by the China Securities Regulatory Commission ("CSRC") came into effect, which were replaced by the updated Investment Regulations (i.e., "Measures for the Administration of the Securities Investments of Qualified Foreign Institutional Investors in the PRC"), which came into effect on September 1, 2006, that provided a legal framework for certain Qualified Foreign Institutional Investors ("QFIIs") to invest in PRC securities and certain other securities historically not eligible for investment by non-Chinese investors, through quotas granted by China's State Administration of Foreign Exchange ("SAFE") to those QFIIs which have been approved by the CSRC. The RMB QFII ("RQFII") program was instituted in December 2011 and is substantially similar to the QFII program, but provides for greater flexibility in repatriating assets. In 2020, the PRC government eliminated QFII and RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer be subject to quotas when investing in PRC securities (but will remain subject to foreign shareholder limits), and merged the two programs into the Qualified Foreign Investor regime ("QFI").

China A-shares are equity securities of companies based in mainland China that trade on Chinese stock exchanges such as the Shanghai Stock Exchange ("SSE") and the Shenzhen Stock Exchange ("SZSE") ("A-shares"). The ability of the Fund to invest in China A-Shares is dependent, in part, on the availability of A-Shares either through the trading and clearing facilities of a participating exchange located outside of mainland China ("Stock Connect Programs") which currently include the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Shanghai-London Stock Connect, and China-Japan Stock Connect, and/or through a QFI license. Thus, the Fund's investment in A-Shares may be limited by the daily A-Shares quota limitation and by the amount of A-Shares available through the Stock Connect Programs.

The Stock Connect Programs are subject to daily and aggregate quota limitations, and an investor cannot purchase and sell the same security on the same trading day, which may restrict the Fund's ability to invest in A-Shares through the Stock Connect Programs and to enter into or exit trades on a timely basis. The Shanghai and Shenzhen markets may be open at a time when the participating exchanges located outside of mainland China are not active, with the result that prices of A-Shares may fluctuate at times when the Fund is unable to add to or exit a position. The mainland Chinese and Hong Kong regulators launched an enhanced trading calendar for Stock Connect to allow Stock Connect trading on all the days which are trading days in both mainland Chinese and Hong Kong markets, even when the corresponding settlement days would be public holidays. Only certain A-Shares are eligible to be accessed through the Stock Connect Programs. Such securities may lose their eligibility at any time, in which case they may no longer be able to be purchased or sold through the Stock Connect Programs. Because the Stock Connect Programs are still evolving, the actual effect on the market for trading A-Shares with the introduction of large numbers of foreign investors is still relatively unknown. In addition, there is no assurance that the necessary systems required to operate the Stock Connect Programs will function properly or will continue to be adapted to changes and developments in both markets. In the event that the relevant systems do not function properly, trading through the Stock Connect Programs could be disrupted. The Stock Connect Programs are subject to regulations promulgated by regulatory authorities for both exchanges and further regulations or restrictions, such as limitations on redemptions or suspension of trading, may adversely impact the Stock Connect Programs, if the authorities believe it necessary to assure orderly markets or for other reasons. There is no guarantee that the participating exchanges will continue to support the Stock Connect Programs in the future. Each of the foregoing could restrict the Fund from selling its investments, adversely affect the value of its holdings and negatively affect the Fund's ability to meet shareholder redemptions.

*<u>Europe</u>.* Investing in European countries may impose economic and political risks associated with Europe in general and the specific European countries in which it invests. The economies and markets of European countries are often closely connected and interdependent, and events in one European country can have an adverse impact on other European countries. The Fund makes investments in securities of issuers that are domiciled in, or have significant operations in, member countries of the Economic and Monetary Union of the European Union (the "EU"), which requires member countries to comply with restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls, each of which may significantly affect every country in Europe. Decreasing imports or exports, changes in governmental or EU regulations on trade, changes in the exchange rate of the euro (the common currency of certain EU countries), the default or threat of default by an EU member country on its sovereign debt, and/or an economic recession in an EU member country may have a significant adverse effect on the economies of EU member countries and their trading partners, including some or all of the emerging markets materials sector countries. Although certain European countries do not use the euro, many of these countries are obliged to meet the criteria for joining the euro zone. Consequently, these countries must comply with many of the restrictions noted above. The European financial markets have experienced volatility and adverse trends in recent years due to concerns about economic downturns or rising government debt levels in several European countries, including , but not limited to, Austria, Belgium, Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. In order to prevent further economic deterioration, certain countries, without prior warning, can institute "capital controls." Countries may use these controls to restrict volatile movements of capital entering and exiting their country. Such controls may negatively affect the Fund's investments. A default or debt restructuring by any European country would adversely impact holders of that country's debt and sellers of credit default swaps linked to that country's creditworthiness, which may be located in countries other

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than those listed above. In addition, the credit ratings of certain European countries were recently downgraded. These downgrades may result in further deterioration of investor confidence. These events have adversely affected the value and exchange rate of the euro and may continue to significantly affect the economies of every country in Europe, including countries that do not use the euro and non-EU member countries. Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not produce the desired results, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and other entities of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition, one or more countries may abandon the euro and/or withdraw from the EU. The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching and could adversely impact the value of investments in the region.

In a referendum held on June 23, 2016, the United Kingdom (the "UK") resolved to leave the EU (referred to as "Brexit"). On January 31, 2020, the UK officially withdrew from the EU pursuant to a withdrawal agreement, providing for a transition period in which the UK negotiated and finalized a trade deal with the EU, the EU-UK Trade and Cooperation Agreement (the "Trade Agreement"). As a result, since January 1, 2021, the United Kingdom is no longer part of the EU customs union and single market, nor is it subject to EU policies and international agreements. The Trade Agreement, among other things, provides for zero tariffs and zero quotas on all goods that comply with appropriate rules of origin and establishes the treatment and level of access the United Kingdom and EU have agreed to grant each other's service suppliers and investors. The Trade Agreement also covers digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, social security coordination, law enforcement and judicial cooperation in criminal matters, thematic cooperation and participation in EU programs. Even with the Trade Agreement in place, the UK's withdrawal from the EU may create new barriers to trade in goods and services and to cross-border mobility and exchanges.

The UK has one of the largest economies in Europe, and member countries of the EU are substantial trading partners of the UK. The City of London's economy is dominated by financial services and uncertainty remains regarding the treatment of cross-border trade in financial services. While the Trade Agreement includes certain provisions to support cross-border trade in financial services, it is not comprehensively addressed in the Trade Agreement and the parties continue to discuss 'equivalence' rights to allow market access for cross-border financial services. In March 2021, the EU and the UK reached a memorandum of understanding, establishing a framework for voluntary regulatory cooperation on financial services. Without access to the EU single market, certain financial services in the UK may move outside of the UK as a result of its withdrawal from the EU. In addition, financial services firms in the UK may need to move staff and comply with two separate sets of rules or lose business to financial services firms in the EU. Furthermore, the withdrawal from the EU creates the potential for decreased trade, the possibility of capital outflows, devaluation of the pound sterling, the cost of higher corporate bond spreads due to continued uncertainty, and the risk that all the above could damage business and consumer spending as well as foreign direct investment. As a result of the withdrawal from the EU, the British economy and its currency may be negatively impacted by changes to its economic and political relations with the EU. Additional member countries seeking to withdraw from the EU would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties.

Brexit may also have a destabilizing impact on the EU to the extent that other member states similarly seek to withdraw from the EU. Any further exits from the EU would likely cause additional market disruptions globally and introduce new legal and regulatory uncertainties.

Russia's increasing international assertiveness could negatively impact EU economic activity. The effect on the economies of EU countries of the Russia/Ukraine war and Russia's response to sanctions imposed by the US and other countries are impossible to predict, but have been and could continue to be significant.

*<u>India</u>*. Investments in India involve special considerations not typically associated with investing in countries with more established economies or currency markets. Political, religious, and border disputes persist in India. India has recently experienced and may continue to experience civil unrest and hostilities with certain of its neighboring countries, including Pakistan, and the Indian government has confronted separatist movements in several Indian states, including Kashmir. Government control over the economy, currency fluctuations or blockage, and the risk of nationalization or expropriation of assets offer higher potential losses. Governmental actions could have a negative effect on the economic conditions in India, which could adversely affect the value and liquidity of investments made by the Fund. The securities markets in India are comparatively underdeveloped with some exceptions and consist of a small number of listed companies with small market capitalization, greater price volatility and substantially less liquidity than companies in more developed markets. The limited liquidity of the Indian securities market may also affect the Fund's ability to acquire or dispose of securities at the price or time that it desires or the Fund's ability to track underlying securities.

The Indian government exercises significant influence over many aspects of the economy, and the number of public sector enterprises in India is substantial. While the Indian government has implemented economic structural reform with the objectives of liberalizing India's exchange and trade policies, reducing the fiscal deficit, controlling inflation, promoting a sound monetary policy, reforming the financial sector, and placing greater reliance on market mechanisms to direct economic activity, there can be no assurance that these policies will continue or that the economic recovery will be sustained.

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Global factors and foreign actions may inhibit the flow of foreign capital on which India is dependent to sustain its growth. In addition, the Reserve Bank of India has imposed limits on foreign ownership of Indian companies, which may decrease the liquidity of the Fund's portfolio and result in extreme volatility in the prices of Indian securities. In November 2016, the Indian government eliminated certain large denomination cash notes as legal tender, causing uncertainty in certain financial markets. These factors, coupled with the lack of extensive accounting, auditing and financial reporting standards and practices, as applicable in the United States, may increase the risk of loss for the Fund.

Securities laws in India are relatively new and unsettled and, as a result, there is a risk of significant and unpredictable change in laws governing foreign investment, securities regulation, title to securities and shareholder rights. Foreign investors in particular may be adversely affected by new or amended laws and regulations. Certain Indian regulatory approvals, including approvals from the Securities and Exchange Board of India, the central government and the tax authorities (to the extent that tax benefits need to be utilized), may be required before the Fund can make investments in Indian companies. Foreign investors in India still face burdensome taxes on investments in income producing securities.

While the Indian economy has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Technology and software sectors represent a significant portion of the total capitalization of the Indian securities markets. The value of these companies will generally fluctuate in response to technological and regulatory developments, and, as a result, the Fund's holdings are expected to experience correlated fluctuations. Natural disasters, such as tsunamis, flooding or droughts, could occur in India or surrounding areas and could negatively affect the Indian economy. Agriculture occupies a prominent position in the Indian economy, therefore, it may be negatively affected by adverse weather conditions and the effects of global climate change. These and other factors may decrease the value and liquidity of the Fund's investments.

*<u>Italy</u>.* Investment in Italian issuers involves risks that are specific to Italy, including, regulatory, political, currency, and economic risks. Italy's economy is dependent upon external trade with other economies—specifically Germany, France and other Western European developed countries. As a result, Italy is dependent on the economies of these other countries and any change in the price or demand for Italy's exports may have an adverse impact on its economy. Interest rates on Italy's debt may rise to levels that may make it difficult for it to service high debt levels without significant financial help from the EU and could potentially lead to default. Recently, the Italian economy has experienced volatility due to concerns about economic downturn and rising government debt levels. Italy has been warned by the Economic and Monetary Union of the EU to reduce its public spending and debt and actions by Italy to cut spending or increase taxes in response could have significant adverse effects on the Italian economy. These events have adversely impacted the Italian economy, causing credit agencies to lower Italy's sovereign debt rating in the past, and could decrease outside investment in Italian companies. High amounts of debt and public spending may stifle Italian economic growth or cause prolonged periods of recession.

*<u>Japan</u>*. Japanese investments may be significantly affected by events influencing Japan's economy and changes in the exchange rate between the Japanese yen and the U.S. Dollar. Japan's economy fell into a long recession in the 1990s. After a few years of mild recovery in the mid-2000s, Japan's economy fell into another recession as a result of the recent global economic crisis. In recent years, Japan's government has approved fiscal stimulus packages in order to stimulate its slowing economy, which has been negatively affected by decreased demand from China and by recent political conflicts with South Korea. Japan is heavily dependent on exports and foreign oil and may be adversely affected by higher commodity prices, trade tariffs, protectionist measures, competition from emerging economies, and the economic conditions of its trading partners, such as China. Furthermore, Japan is located in a seismically active area, and in 2011 experienced an earthquake and a tsunami that significantly affected important elements of its infrastructure and resulted in a nuclear crisis. The risks of natural disaster of varying degrees, such as earthquakes and tsunamis, and the resulting damage, continue to exist. Japan's economic prospects may be affected by the political and military situations of its near neighbors, notably North and South Korea, China, and Russia. In addition, the Japanese economic growth rate could be impacted by Bank of Japan monetary policies, rising interest rates, tax increases, budget deficits, consumer confidence and volatility in the Japanese yen. In the longer term, Japan will have to address the effects of an aging population, such as a shrinking workforce and higher welfare costs. These demographic shifts and fundamental structural changes to the labor markets may negatively impact Japan's economic competitiveness.

*<u>South Korea</u>*. South Korean investments may be significantly affected by events influencing its economy, which is heavily dependent on exports and the demand for certain finished goods. South Korea's main industries include electronics, automobile production, chemicals, shipbuilding, steel, textiles, clothing, footwear, and food processing. Conditions that weaken demand for such products worldwide or in other Asian countries could have a negative impact on the South Korean economy as a whole. The South Korean economy's reliance on international trade makes it highly sensitive to fluctuations in international commodity prices, currency exchanges rates and government regulation, and vulnerable to downturns of the world economy, particularly with respects to its four largest export markets (the EU, Japan, United States, and China). South Korea has experienced modest economic growth in recent years, but such continued growth may slow due, in part, to the economic slowdown in China and the increased competitive advantage of Japanese exports with the weakened yen. The South Korean economy's long-term challenges include an aging population, inflexible labor market, and overdependence on exports to drive economic growth. Relations between South Korea and North Korea remain tense, as exemplified in periodic acts of hostility, and the possibility of serious military engagement still exists. Armed conflict between North Korea and South Korea could have a severe adverse impact on the South Korean economy and its securities markets.

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*<u>Latin America</u>*. The economies of certain Latin American countries have experienced high interest rates, economic volatility, inflation, currency devaluations, government defaults, high unemployment rates and political instability which can adversely affect issuers in these countries. In addition, commodities (such as oil, gas and minerals) represent a significant percentage of the region's exports and many economies in this region are particularly sensitive to fluctuations in commodity prices. Adverse economic events in one country may have a significant adverse effect on other countries of this region. The governments of certain countries in Latin America may exercise substantial influence over many aspects of the private sector and may own or control many companies. Future government actions could have a significant effect on the economic conditions in such countries, which could have a negative impact on the securities in which the Fund invests. Diplomatic developments may also adversely affect investments in certain countries in Latin America. Some countries in Latin America may be affected by public corruption and crime, including organized crime. Certain countries in Latin America may be heavily dependent upon international trade and, consequently, have been and may continue to be negatively affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These countries also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. In addition, certain issuers located in countries in Latin America in which the Fund invests may be the subject of sanctions (for example, the U.S. has imposed sanctions on certain Venezuelan individuals, corporate entities and the Venezuelan government) or have dealings with countries subject to sanctions and/or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. An issuer may sustain damage to its reputation if it is identified as an issuer that has dealings with such countries. The Fund may be adversely affected if it invests in such issuers. Certain Latin American countries may also have managed currencies, which are maintained at artificial levels to the U.S. Dollar rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency which, in turn, can have a disruptive and negative effect on foreign investors. Certain Latin American countries also restrict the free conversion of their currency into foreign currencies, including the U.S. Dollar. There is no significant foreign exchange market for many currencies and it would, as a result, be difficult for the Fund to engage in foreign currency transactions designed to protect the value of the Fund's interests in securities denominated in such currencies. Finally, a number of Latin American countries are among the largest debtors of developing countries. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies.

*<u>Mexico</u>*. Investment in Mexican issuers involves risks that are specific to Mexico, including regulatory, political, and economic risks. In the past, Mexico has experienced high interest rates, economic volatility, significant devaluation of its currency (the peso), and high unemployment rates. The Mexican economy is dependent upon external trade with other economies, specifically with the United States and certain Latin American countries. Additionally, a high level of foreign investment in Mexican assets may increase Mexico's exposure to risks associated with changes in international investor sentiment. In 2018, the United States, Mexico and Canada signed and ratified the United States-Mexico-Canada Agreement ("USMCA"), which replaces the current North American Free Trade Agreement among the three countries. The USMCA has facilitated economic and financial integration among the United States, Canada and Mexico; however, any disruption and uncertainty regarding USMCA may have a significant and adverse impact on Mexico's outlook and the value of the Fund's investments in securities economically tied to Mexico.

The Mexican economy is heavily dependent on trade with, and foreign investment from, the U.S. and Canada, which are Mexico's principal trading partners. Any changes in the supply, demand, price or other economic component of Mexico's imports or exports, as well as any reductions in foreign investment from, or changes in the economies of, the U.S. or Canada, may have an adverse impact on the Mexican economy. Because commodities such as oil and gas, minerals and metals represent a large portion of the region's exports, the economies of these countries are particularly sensitive to fluctuations in commodity prices. Mexico's economy has also become increasingly manufacturing-oriented. Because Mexico's top export is automotive vehicles, its economy is strongly tied to the U.S. automotive market, and changes to certain segments in the U.S. market could have an impact on the Mexican economy. The automotive industry and other industrial products can be highly cyclical, and companies in these industries may suffer periodic operating losses. These industries can also be significantly affected by labor relations and fluctuating component prices. The agricultural and mining sectors of Mexico's economy also account for a large portion of its exports, and Mexico is susceptible to fluctuations in the price and demand for agricultural products and natural resources. In addition, Mexico has privatized or has begun the process of privatization of certain entities and industries, and some investors have suffered losses due to the inability of the newly privatized entities to adjust to a competitive environment and changing regulatory standards.

Mexico has been destabilized by local insurrections, social upheavals and drug-related violence. Additionally, violence near border areas, border-related political disputes, and other social upheaval may lead to strained international relations. Mexico has also experienced contentious and very closely decided elections. Changes in political parties and other political events may affect the economy and contribute to additional instability. Recurrence of these or similar conditions may adversely impact the Mexican economy.

*<u>Russia</u>*. Investing in Russia involves risks and special considerations not typically associated with investing in United States. Since the breakup of the Soviet Union at the end of 1991, Russia has experienced dramatic political, economic, and social

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change. The political system in Russia is emerging from a long history of extensive state involvement in economic affairs. The country is undergoing a rapid transition from a centrally-controlled command system to a market-oriented, democratic model. As a result, companies in Russia are characterized by a lack of: (i) management with experience of operating in a market economy; (ii) modern technology; and, (iii) a sufficient capital base with which to develop and expand their operations. It is unclear what will be the future effect on Russian companies, if any, of Russia's continued attempts to move toward a more market-oriented economy. Russia's economy has been characterized by high rates of inflation, high rates of unemployment, declining gross domestic product, deficit government spending, and a devalued currency. The economic reform program has involved major disruptions and dislocations in various sectors of the economy, and those problems have been exacerbated by growing liquidity problems. Russia's economy is also heavily reliant on the energy and defense-related sectors, and is therefore susceptible to the risks associated with these industries. The laws and regulations in Russia affecting Western business investment continue to evolve in an unpredictable manner. Russian laws and regulations, particularly those involving taxation, foreign investment and trade, title to property or securities, and transfer of title, which may be applicable to the Fund's activities are relatively new and can change quickly and unpredictably in a manner far more volatile than in the United States or other developed market economies. Although basic commercial laws are in place, they are often unclear or contradictory and subject to varying interpretation, and may at any time be amended, modified, repealed or replaced in a manner adverse to the interest of the Fund.

Russia's invasion of the Ukraine, and corresponding events in late February 2022, have had, and could continue to have, severe adverse effects on regional and global economic markets for securities and commodities. Following Russia's actions, various governments, including the United States, have issued and continue to issue broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on transactions with certain Russian companies, financial institutions, officials and individuals; new investment by US persons in Russian enterprises; restrictions on the ability of US persons to sell securities held through the Russian central securities depository or through certain other financial institutions; the removal by certain countries and the European Union of selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications ("SWIFT"), the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The recent events, including sanctions and the potential for future sanctions, including any impacting Russia's energy sector, and other actions, and Russia's retaliatory responses to those sanctions and actions, may continue to adversely impact the Russian economy and economies of surrounding countries and may result in the continuing or further decline of the value and liquidity of Russian securities, particularly those held by US persons including the Fund and securities of surrounding countries, a continued weakening of currencies in the region and continued exchange closures, and may have other adverse consequences on the economies of countries in the region that could impact the value of investments in the region and impair the ability of the Fund to buy, sell, receive or deliver securities of companies in the region or the Fund's ability to collect interest payments on fixed income securities in the region. For example, exports in Eastern Europe have been disrupted for certain key commodities, pushing commodity prices to record highs, and energy prices in Europe have increased significantly. Moreover, those events have, and could continue to have, an adverse effect on global markets performance and liquidity, thereby negatively affecting the value of the Fund's investments beyond any direct exposure to issuers in the region. The duration of ongoing hostilities and the vast array of sanctions and related events cannot be predicted. Those events present material uncertainty and risk with respect to markets globally and the performance of the Fund and its investments or operations could be negatively impacted.

Illiquid Investments and Restricted Securities

The Fund may purchase and hold illiquid investments. The term "illiquid investments" for this purpose means any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund will not acquire illiquid securities if, as a result, such securities would comprise more than 15% of the value of the Fund's net assets. Rafferty, subject to oversight by the Board of Trustees, has the ultimate authority to determine, to the extent permissible under the federal securities laws, which securities are liquid or illiquid for purposes of this 15% limitation under the Fund's liquidity risk management program, adopted pursuant to Rule 22e-4 under the 1940 Act. Illiquid securities will be priced at fair value as determined in good faith under procedures adopted by the Board of Trustees. If, through the appreciation of illiquid securities or the depreciation of liquid securities, the Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid securities, including restricted securities which are not readily marketable, Rafferty will report such occurrence to the Board of Trustees and take such steps as are deemed advisable to protect liquidity in accordance with the Fund's liquidity risk management program.

The Fund may not be able to sell illiquid investments when Rafferty considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were liquid. In addition, the sale of illiquid investments may require more time and result in higher dealer discounts and other selling expenses than does the sale of investments that are not illiquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and investment in illiquid investments may have an adverse impact on NAV.

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Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers. Institutional markets for restricted securities that have developed as a result of Rule 144A provide both readily ascertainable values for certain restricted securities and the ability to liquidate an investment to satisfy share redemption orders. This policy does not include restricted securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"), which the Trust's Board of Trustees ("Board" or "Trustees"), or Rafferty, under Board-approved guidelines, has determined are liquid. The Fund currently does not anticipate investing in such restricted securities. However, to the extent that the Fund does invest in such restricted securities, an insufficient number of qualified institutional buyers interested in purchasing Rule 144A-eligible securities held by the Fund could adversely affect the marketability of such portfolio securities, and the Fund may be unable to dispose of such securities promptly or at reasonable prices.

Initial Public Offerings

The Fund may invest in securities offered companies in initial public offerings ("IPOs"). Because IPO shares frequently are volatile in price, the Fund may hold IPO shares for a very short period of time. This may increase the turnover of the Fund's portfolio and may lead to increased expenses to the Fund, such as commissions and transaction costs. By selling IPO shares, the Fund may realize taxable capital gains that it will subsequently distribute to shareholders. Companies that offer securities in IPOs tend to typically have small market capitalizations and therefore their securities may be more volatile and less liquid than those issued by larger companies. Certain companies offering securities in an IPO may have limited operating experience and, as a result face a greater risk of business failure.

Junk Bonds

The Fund may invest in lower-rated debt securities, including securities in the lowest credit rating category, of any maturity, otherwise known as "junk bonds."

Junk bonds generally offer a higher current yield than that available for higher-grade issues. However, lower-rated securities involve higher risks, in that they are especially subject to adverse changes in general economic conditions and in the industries in which the issuers are engaged, to changes in the financial condition of the issuers and to price fluctuations in response to changes in interest rates. During periods of economic downturn or rising interest rates, highly leveraged issuers may experience financial stress that could adversely affect their ability to make payments of interest and principal and increase the possibility of default. In addition, the market for lower-rated debt securities has expanded rapidly in recent years, and its growth paralleled a long economic expansion. At times in recent years, the prices of many lower-rated debt securities declined substantially, reflecting an expectation that many issuers of such securities might experience financial difficulties. As a result, the yields on lower-rated debt securities rose dramatically, but such higher yields did not reflect the value of the income stream that holders of such securities expected, but rather, the risk that holders of such securities could lose a substantial portion of their value as a result of the issuers' financial restructuring or default. There can be no assurance that such declines will not recur.

The market for lower-rated debt issues generally is thinner and less active than that for higher quality securities, which may limit the Fund's ability to sell such securities at fair value in response to changes in the economy or financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the values and liquidity of lower-rated securities, especially in a thinly traded market. Changes by recognized rating services in their rating of a fixed-income security may affect the value of these investments. The Fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Rafferty will monitor the investment to determine whether continued investment in the security will assist in meeting the Fund's investment objective.

Master Limited Partnerships

Investing in master limited partnerships ("MLPs") involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. Investments held by MLPs may be relatively illiquid, limiting the MLPs' ability to vary their portfolios promptly in response to changes in economic or other conditions. MLPs may have limited financial resources, their securities may trade infrequently and in limited volume, and they may be subject to more abrupt or erratic price movements than securities of larger or more broadly based companies. Distributions from an MLP may consist in part of a return of the amount originally invested, which would not be taxable to the extent the distributions do not exceed the investor's adjusted basis in its MLP interest. These reductions in the Fund's adjusted tax basis in the MLP securities will increase the amount of gain (or decrease the amount of loss) recognized by the Fund on a subsequent sale of the securities. The risks of investing in an MLP generally include those inherent in investing in a partnership as opposed to a corporation. For example, state law governing partnerships is often less restrictive than

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state law governing corporations. Accordingly, there may be fewer protections afforded investors in an MLP than investors in a corporation. Although unitholders of an MLP are generally limited in their liability, similar to a corporation's shareholders, creditors typically have the right to seek the return of distributions made to unitholders if the liability in question arose before the distributions were paid. This liability may stay attached to a unitholder even after it sells its units.

Interest Rate Risk

Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, have historically utilized the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. LIBOR was discontinued as a benchmark rate but synthetic values of U.S. dollar LIBOR tenors were published using the unrepresentative methodology of the U.S. LIBOR Act ("synthetic-U.S. dollar LIBOR") until September 30, 2024.

Synthetic U.S. dollar LIBOR will be calculated using the same methodology used in the LIBOR Act. Synthetic U.S. dollar LIBOR cannot be used for cleared derivatives, but could be used in untransitioned legacy contracts unless they contain fallback language addressing LIBOR that has become "unrepresentative." There is a risk that any of these synthetic U.S. dollar LIBOR maturities may cease to be published before these dates.

Also in 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is a broad measure of the cost of overnight borrowings secured by Treasury Department securities, as an appropriate replacement for U.S. dollar LIBOR.

The Federal Reserve Bank of New York began publishing SOFR in April, 2018, with the expectation that it could be used on a voluntary basis in new instruments and for new transactions under existing instruments. However, SOFR is fundamentally different from LIBOR. It is a secured, nearly risk-free rate, while LIBOR is an unsecured rate that includes an element of bank credit risk. Also, while term SOFR for various maturities has been adopted by some parties and for some types of transactions, SOFR is strictly an overnight rate, while LIBOR historically has been published for various maturities, ranging from overnight to one year. Thus, LIBOR may be expected to be higher than SOFR, and the spread between the two is likely to widen in times of market stress. Certain existing contracts provide for a spread adjustment when transitioning to SOFR from LIBOR, but there is no assurance that it will provide adequate compensation. Term SOFR rates for various maturities, may not be available, recommended, or operationally feasible at the applicable benchmark replacement date.

Various financial industry groups have implemented the transition from LIBOR to SOFR or another new benchmark, but there are obstacles to converting certain longer-term securities and transactions. The transition process might lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. It also could lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur particularly with respect to synthetic values of LIBOR or could occur throughout the transition period.

Mortgage-Backed Securities

The Fund may invest in mortgage-backed securities. A mortgage-backed security is a type of pass-through security, which is a security representing pooled debt obligations repackaged as interests that pass income through an intermediary to investors. In the case of mortgage-backed securities, the ownership interest is in a pool of mortgage loans.

Mortgage-backed securities are most commonly issued or guaranteed by the Government National Mortgage Association ("Ginnie Mae<sup>®</sup>" or "GNMA"), Federal National Mortgage Association ("Fannie Mae<sup>®</sup>" or "FNMA") or Federal Home Loan Mortgage Corporation ("Freddie Mac<sup>®</sup>" or "FHLMC"), but may also be issued or guaranteed by other private issuers. GNMA is a government-owned corporation that is an agency of the U.S. Department of Housing and Urban Development. It guarantees, with the full faith and credit of the United States, full and timely payment of all monthly principal and interest on its mortgage-backed securities. FNMA is a publicly owned, government-sponsored corporation that mostly packages mortgages backed by the Federal Housing Administration, but also sells some non-governmentally backed mortgages. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest only by FNMA. FHLMC is a publicly chartered agency that buys qualifying residential mortgages from lenders, re-packages them and provides certain guarantees. Pass-through securities issued by FHLMC are guaranteed as to timely payment of principal and interest only by FHLMC.

The Federal Housing Finance Agency ("FHFA") mandated that Fannie Mae and Freddie Mac cease issuing their own mortgage-backed securities and begin issuing "Uniform Mortgage-Backed Securities" or "UMBS" in 2019. Each UMBS has a 55-day remittance cycle and can be used as collateral in either a Fannie Mae or Freddie Mac security or held for investment. Mortgage-backed securities issued by private issuers, whether or not such obligations are subject to guarantees by the private issuer, may entail greater risk than obligations directly guaranteed by the U.S. government. The average life of a mortgage-backed security is likely to be substantially less than the original maturity of the mortgage pools underlying the securities. Prepayments of principal by mortgagors and mortgage foreclosures will usually result in the return of the greater part of principal invested far in advance of the maturity of the mortgages in the pool.

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Collateralized mortgage obligations ("CMOs") are debt obligations collateralized by mortgage loans or mortgage pass-through securities (collateral collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-through securities are interests in a trust composed of Mortgage Assets and all references in this section to CMOs include multi-class pass-through securities. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of the premium if any has been paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal and interest payments on the Mortgage Assets may be allocated among the various classes of CMOs in several ways. Typically, payments of principal, including any prepayments, on the underlying mortgages are applied to the classes in the order of their respective stated maturities or final distribution dates, so that no payment of principal is made on CMOs of a class until all CMOs of other classes having earlier stated maturities or final distribution dates have been paid in full.

Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage securities. The Fund will only invest in SMBS issued by Ginnie Mae, which are obligations backed by the full faith and credit of the U.S. government. SMBS are usually structured with two or more classes that receive different proportions of the interest and principal distributions from a pool of Mortgage Assets. The Fund will only invest in SMBS whose Mortgage Assets are U.S. government obligations. A common type of SMBS will be structured so that one class receives some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities. The market value of any class which consists primarily, or entirely, of principal payments generally is unusually volatile in response to changes in interest rates.

Investment in mortgage-backed securities poses several risks, including among others, prepayment, market and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions. Market risk reflects the risk that the price of a security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and the Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold. Credit risk reflects the risk that the Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. government-sponsored entities are guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the "pass-through" payments may, at times, be difficult.

Municipal Obligations

The Fund may invest in municipal obligations. Municipal securities are fixed-income securities issued by states, counties, cities and other political subdivisions and authorities. Although most municipal securities are exempt from federal income tax, municipalities also may issue taxable securities. Tax exempt securities are generally classified by their source of payment. In addition to the usual risks associated with investing for income, the value of municipal obligations can be affected by changes in the actual or perceived credit quality of the issuers. The credit quality of a municipal obligation can be affected by, among other factors: a) the financial condition of the issuer or guarantor; b) the issuer's future borrowing plans and sources of revenue; c) the economic feasibility of the revenue bond project or general borrowing purpose; d) political or economic developments in the region or jurisdiction where the security is issued; and e) the liquidity of the security. Because municipal obligations are generally traded OTC, the liquidity of a particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal issues can be enhanced by demand features, which enable the Fund to demand payment from the issuer or a financial intermediary on short notice.

Futures Contracts, Options, and Other Derivative Strategies

Generally, derivatives are financial instruments whose value depends on, or is derived from, the value of one or more underlying assets, reference rates, or indices or other market factors ("reference assets") and may relate to stocks, bonds, interest rates, credit, currencies, commodities, digital assets or related indices. Derivative instruments can provide an efficient means to gain long or short exposure to the value of a reference asset without actually owning or selling the instrument. Examples of derivative instruments include futures contracts, swap agreements, options, options on futures contracts and forward currency contracts.

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The Fund may enter into derivatives instruments which may include futures contracts, forward contracts, options on currencies, commodities, indices, or futures contracts and swaps which provide long and short exposure to reference assets. Derivatives may be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund's losses may be greater if it invests in derivatives than if it invests in non-derivative instruments. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligations.

The use of derivative instruments is subject to applicable regulations of the SEC, the several exchanges upon which they are traded and the CFTC. In addition, the Fund's ability to use derivative instruments will be limited by tax considerations. See "Dividends, Other Distributions and Taxes."

Under current CFTC regulations, if the Fund uses commodity interests (such as futures contracts, options on futures contracts and swaps) other than for bona fide hedging purposes (as defined by the CFTC) the aggregate initial margin and premiums required to establish these positions (after taking into account unrealized profits and unrealized losses on any such positions and excluding the amount by which options that are "in-the-money" at the time of purchase) may not exceed 5% of the Fund's NAV, or alternatively, the aggregate net notional value of those positions, as determined at the time the most recent position was established, may not exceed 100% of the fund's NAV (after taking into account unrealized profits and unrealized losses on any such positions). Pursuant to a claim for exemption filed with the National Futures Association, the Fund is not deemed to be a commodity pool operator or a commodity pool under the Commodity Exchange Act (the "CEA").

The Fund is subject to the risk that a change in U.S. law and related regulations will impact the way the Fund operates, increase the particular costs of the Fund's operation and/or change the competitive landscape. In this regard, any further amendment to the CEA or its related regulations that subject the Fund to additional regulation may have adverse impacts on the Fund's operations and expenses. Rule 18f-4 under the 1940 Act, which governs the use of derivatives by registered investment companies, imposes limits on the amount of derivatives a fund could enter into and eliminated the asset segregation framework previously used by funds to comply with Section 18 of the 1940 Act, and requires funds whose use of derivatives is more than a limited specified exposure to establish and maintain a derivatives risk management program and appoint a derivatives risk manager. The Fund is in compliance with the requirements of Rule 18f-4.

In addition to the instruments, strategies and risks described below and in the Prospectus, Rafferty may discover additional derivative instruments and other similar or related techniques. These new opportunities may become available as Rafferty develops new techniques, as regulatory authorities broaden the range of permitted transactions and as new derivative instruments or other techniques are developed. Rafferty may utilize these instruments or other similar or related techniques to the extent that they are consistent with the Fund's investment objective and permitted by the Fund's investment limitations and applicable regulatory authorities. The Fund's Prospectus or this SAI will be supplemented to the extent that new products or techniques involve materially different risks than those described below or in the Prospectus.

*Special Risks*. The use of derivative instruments involves special considerations and risks, certain of which are described below. Risks pertaining to particular derivative instruments are described in the sections that follow.

(1) Options and futures prices can diverge from the prices of their underlying instruments. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect or no correlation also may result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, and from imposition of daily price fluctuation limits or trading halts.

(2) As described below, the Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in Financial Instruments involving obligations to third parties (*e.g.*, Financial Instruments other than purchased options). If the Fund were unable to close out its positions in such Financial Instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. These requirements might impair the Fund's ability to sell a portfolio security or make an investment when it would otherwise be favorable to do so or require that the Fund sell a portfolio security at a disadvantageous time. The Fund's ability to close out a position in a Financial Instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction (the "counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any position can be closed out at a time and price that is favorable to the Fund.

(3) Losses may arise due to unanticipated market price movements, lack of a liquid secondary market for any particular instrument at a particular time or due to losses from premiums paid by the Fund on options transactions.

*<u>Cover</u>*. Transactions using derivative instruments, other than purchased options, expose the Fund to an obligation to another party. The Fund may not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities or other options or futures contracts or (2) cash and liquid assets with a value, marked-to-market daily, sufficient to cover its potential obligations to the extent not covered as provided in (1) above. The Fund will comply with contractual requirements regarding cover for these instruments and will, if the requirements so require, set aside cash or liquid assets in an account with its custodian, U.S. Bank, N.A. ("Custodian"), in the prescribed amount as determined daily.

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Assets used as cover or held in an account cannot be sold while the position in the corresponding derivative instrument is open, unless they are replaced with other appropriate assets. As a result, the commitment of a large portion of the Fund's assets to cover or accounts could impede portfolio management or the Fund's ability to meet redemption requests or other current obligations.

*<u>Futures Contracts</u>*. The Fund may use certain options (traded on an exchange or OTC), futures contracts (sometimes referred to as "futures") and options on futures contracts as a substitute for a comparable market position in the underlying security or index, to attempt to hedge or limit the exposure of the Fund's position, to create a synthetic money market position, for certain tax-related purposes or to effect closing transactions.

Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference instrument, such as a specific security, currency or commodity, at a specified price at a specified later date. A "sale" of a futures contract means the acquisition of a contractual obligation to deliver the underlying reference instrument called for by the contract at a specified price on a specified date. A "purchase" of a futures contract means the acquisition of a contractual obligation to acquire the underlying reference instrument called for by the contract at a specified price on a specified date. The purchase or sale of a futures contract will allow the Fund to increase or decrease its exposure to the underlying reference instrument without having to buy the actual instrument.

The underlying reference instruments to which futures contracts may relate include non-U.S. currencies, interest rates, stock and bond indices and debt securities, including U.S. government debt obligations. In most cases the contractual obligation under a futures contract may be offset, or "closed out," before the settlement date so that the parties do not have to make or take delivery. The closing out of a contractual obligation is usually accomplished by buying or selling, as the case may be, an identical, offsetting futures contract. This transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the underlying instrument or asset. If the original position entered into is a long position (futures contract purchased), there will be a gain (loss) if the offsetting sell transaction is carried out at a higher (lower) price, inclusive of commissions. If the original position entered into is a short position (futures contract sold) there will be a gain (loss) if the offsetting buy transaction is carried out at a lower (higher) price, inclusive of commissions.

Certain futures contracts are cash-settled, meaning the futures contract obligates the seller to deliver (and purchaser to accept) an amount of cash equal to a specific dollar amount multiplied by the difference between the final settlement price of a specific futures contract and the price at which the agreement is made. No physical delivery of the underlying asset is made.

Whether the Fund realizes a gain/loss from futures activities depends generally upon the movements in the underlying reference asset (generally a commodity, currency, security or index). The extent of the Fund's loss from an unhedged short position in a futures contract is potentially unlimited, and investors may lose the amount that they invest plus any profits recognized on their investment.

Futures contracts may be bought and sold on U.S. and non-U.S. exchanges. Futures contracts in the U.S. have been designed by exchanges that have been designated "contract markets" by the CFTC and must be executed through a futures commission merchant ("FCM"), which is a brokerage firm that is a member of the relevant contract market. Each exchange guarantees performance of the contracts as between the clearing members of the exchange, thereby reducing the risk of counterparty default. Because all transactions in the futures market are made, offset, or fulfilled by an FCM through a clearinghouse associated with the exchange on which the contracts are traded, the Fund will incur brokerage fees when it buys or sells futures contracts. The Fund generally buys and sells futures contracts only on contract markets (including exchanges or boards of trade) where there appears to be an active market for the futures contracts, but there is no assurance that an active market will exist for any particular contract or at any particular time. An active market makes it more likely that futures contracts will be liquid and bought and sold at competitive market prices. In addition, many of the futures contracts available may be relatively new instruments without a significant trading history. As a result, there can be no assurance that an active market will develop or continue to exist.

When the Fund enters into a futures contract, it must deliver to an account controlled by the FCM (that has been selected by the Fund), an amount referred to as "initial margin" that is typically calculated as an amount equal to the volatility in market value of a contract over a fixed period. Initial margin requirements are determined by the respective exchanges on which the futures contracts are traded and the FCM. Thereafter, a "variation margin" amount may be required to be paid by the Fund or received by the Fund in accordance with margin controls set for such accounts, depending upon changes in the marked-to-market value of the futures contract. The account is marked-to-market daily and the variation margin is monitored by the Fund's investment manager and custodian on a daily basis. When the futures contract is closed out, if the Fund has a loss equal to, or greater than, the margin amount, the margin amount is paid to the FCM along with any loss in excess of the margin amount. If the Fund has a loss of less than the margin amount, the excess margin is returned to the Fund. If the Fund has a gain, the full margin amount and the amount of the gain is paid to the Fund. Some futures contracts provide for the delivery of securities that are different than those that are specified in the contract. For a futures contract for delivery of debt securities, on the settlement date of the contract, adjustments to the contract can be made to recognize differences in value arising from the delivery of debt securities with a different interest rate from that of the

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particular debt securities that were specified in the contract. In some cases, securities called for by a futures contract may not have been issued when the contract was written.

*Risks of Futures Contracts.* The Fund's use of futures contracts is subject to the risks associated with derivative instruments generally. The Fund may not be able to properly effect its strategy when a liquid market is unavailable for the futures contract the Fund wishes to close, which may at times occur. If the Fund were unable to liquidate a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, the Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

A purchase or sale of a futures contract may result in losses to the Fund in excess of the amount that the Fund delivered as initial margin. Because of the relatively low margin deposits required, futures trading involves a high degree of leverage; as a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, or gain, to the Fund. In addition, if the Fund has insufficient cash to meet daily variation margin requirements or close out a futures position, it may have to sell securities from its portfolio at a time when it may be disadvantageous to do so. Adverse market movements could cause the Fund to experience substantial losses on an investment in a futures contract. There is a risk of loss by the Fund of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Fund has an open position in a futures contract. The assets of the Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, the Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty.

The difference (called the "spread") between prices in the cash market for the purchase and sale of the underlying reference instrument and the prices in the futures market is subject to fluctuations and distortions due to differences in the nature of those two markets. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions that could distort the normal pricing spread between the cash and futures markets. Second, the liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery of the underlying instrument. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, resulting in pricing distortion. Third, from the point of view of speculators, the margin deposit requirements that apply in the futures market are less onerous than similar margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. When such distortions occur, a correct forecast of general trends in the price of an underlying reference instrument by the investment manager may still not necessarily result in a profitable transaction.

Futures contracts that are traded on non-U.S. exchanges may not be as liquid as those purchased on CFTC-designated contract markets. In addition, non-U.S. futures contracts may be subject to varied regulatory oversight. The price of any non-U.S. futures contract and, therefore, the potential profit and loss thereon, may be affected by any change in the non-U.S. exchange rate between the time a particular order is placed and the time it is liquidated, offset or exercised.

The CFTC and the various exchanges have established limits referred to as "speculative position limits" on the maximum net long or net short position that any person, such as the Fund, may hold or control in a particular futures contract. Trading limits are also imposed on the maximum number of contracts that any person may trade on a particular trading day. An exchange may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The regulation of futures, as well as other derivatives, is a rapidly changing area of law.

Futures exchanges may also limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. This daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.

*Risks Associated with Commodity Futures Contracts*. There are several additional risks associated with transactions in commodity futures contracts.

Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while the Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.

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In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for the Fund. If the nature of hedgers and speculators in futures markets has shifted when it is time for the Fund to reinvest the proceeds of a maturing contract in a new futures contract, the Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.

The commodities which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices and commodity-linked instruments, including futures contracts, than on traditional securities. Certain commodities are also subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment risks which subject the Fund's investments to greater volatility than investments in traditional securities.

*<u>Forward Contracts</u>*. The Fund may enter into equity, equity index or interest rate forward contracts for purposes of attempting to gain exposure to an index or group of securities without actually purchasing these securities, or to hedge a position. Forward contracts are two-party contracts pursuant to which one party agrees to pay the counterparty a fixed price for an agreed upon amount of commodities, securities, or the cash value of the commodities, securities or the securities index, at an agreed upon date. Because they are two-party contracts and may have terms greater than seven days, forward contracts may be considered to be illiquid for the Fund's illiquid investment limitations. The Fund will not enter into any forward contract unless Rafferty believes that the other party to the transaction is creditworthy. The Fund bears the risk of loss of the amount expected to be received under a forward contract in the event of the default or bankruptcy of a counterparty. If such a default occurs, the Fund will have contractual remedies pursuant to the forward contract, but such remedies may be subject to bankruptcy and insolvency laws which could affect the Fund's rights as a creditor.

*<u>Options</u>*. The value of an option position will reflect, among other things, the current market value of the underlying investment, the time remaining until expiration, the relationship of the exercise price to the market price of the underlying investment and general market conditions. Options that expire unexercised have no value. Options currently are traded on the Chicago Board Options Exchange<sup>®</sup> and other options exchanges, as well as the OTC markets.

By buying a call option on a security, the Fund has the right, in return for the premium paid, to buy the security underlying the option at the exercise price. By writing (selling) a call option and receiving a premium, the Fund becomes obligated during the term of the option to deliver securities underlying the option at the exercise price if the option is exercised. By buying a put option, the Fund has the right, in return for the premium, to sell the security underlying the option at the exercise price. By writing a put option, the Fund becomes obligated during the term of the option to purchase the securities underlying the option at the exercise price.

Because options premiums paid or received by the Fund are small in relation to the market value of the investments underlying the options, buying and selling put and call options can be more speculative than investing directly in securities.

The Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, the Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, the Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Fund to realize profits or limit losses on an option position prior to its exercise or expiration.

*Risks of Options on Currencies and Securities*. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded option transaction. In contrast, OTC options are contracts between the Fund and its counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when the Fund purchases an OTC option, it relies on the counterparty from which it purchased the option to make or take delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premium paid by the Fund as well as the loss of any expected benefit of the transaction.

The Fund's ability to establish and close out positions in exchange-traded options depends on the existence of a liquid market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. There can be no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the counterparty, the Fund might be unable to close out an OTC option position at any time prior to its expiration.

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If the Fund were unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by the Fund could cause material losses because the Fund would be unable to sell the investment used as cover for the written option until the option expires or is exercised.

*<u>Options on Indices</u>*. An index fluctuates with changes in the market values of the securities included in the index. Options on indices give the holder the right to receive an amount of cash upon exercise of the option. Receipt of this cash amount will depend upon the closing level of the index upon which the option is based being greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. Some stock index options are based on a broad market index that includes more than nine constituents or on a narrower index which is generally considered to include only nine or fewer constituents.

Each of the exchanges has established limitations governing the maximum number of call or put options on the same index that may be bought or written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). Under these limitations, option positions of all investment companies advised by Rafferty are combined for purposes of these limits. Pursuant to these limitations, an exchange may order the liquidation of positions and may impose other sanctions or restrictions. These position limits may restrict the number of listed options that the Fund may buy or sell.

Puts and calls on indices are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question rather than on price movements in individual securities or futures contracts. When the Fund writes a call on an index, it receives a premium and agrees that, prior to the expiration date, the purchaser of the call, upon exercise of the call, will receive from the Fund an amount of cash if the closing level of the index upon which the call is based is greater than the exercise price of the call. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call multiplied by a specific factor ("multiplier"), which determines the total value for each point of such difference. When the Fund buys a call on an index, it pays a premium and has the same rights to such call as are indicated above. When the Fund buys a put on an index, it pays a premium and has the right, prior to the expiration date, to require the seller of the put, upon the Fund's exercise of the put, to deliver to the Fund an amount of cash if the closing level of the index upon which the put is based is less than the exercise price of the put, which amount of cash is determined by the multiplier, as described above for calls. When the Fund writes a put on an index, it receives a premium and the purchaser of the put has the right, prior to the expiration date, to require the Fund to deliver to it an amount of cash equal to the difference between the closing level of the index and the exercise price times the multiplier if the closing level is less than the exercise price.

*Risks of Options on Indices*. If the Fund has purchased an index option and exercises it before the closing index value for that day is available, it runs the risk that the level of the index may subsequently change. If such a change causes the exercised option to fall out-of-the-money, the Fund will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer.

*<u>OTC Options</u>*. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of OTC options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows the Fund great flexibility to tailor the option to its needs, OTC options generally involve greater risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded.

*<u>Options on Futures Contracts</u>*. When the Fund writes an option on a futures contract, it becomes obligated, in return for the premium paid, to assume a position in the futures contract at a specified exercise price at any time during the term of the option. If the Fund writes a call, it assumes a short futures position. If it writes a put, it assumes a long futures position. When the Fund purchases an option on a futures contract, it acquires the right in return for the premium it pays to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put).

Whether the Fund realizes a gain or loss from futures activities depends upon movements in the underlying security or index. The extent of the Fund's loss from an unhedged short position from writing unhedged call options on futures contracts is potentially unlimited. The Fund only purchases and sells options on futures contracts that are traded on a U.S. exchange or board of trade.

Purchasers and sellers of options on futures can enter into offsetting closing transactions, similar to closing transactions in options, by selling or purchasing, respectively, an instrument identical to the instrument purchased or sold. Positions in options on futures contracts may be closed only on an exchange or board of trade that provides a secondary market. However, there can be no assurance that a liquid secondary market will exist for a particular contract at a particular time. In such event, it may not be possible to close a futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of an option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.

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If the Fund were unable to liquidate an option on a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

*Risks of Options on Futures Contracts*. The ordinary spreads between prices in the cash and futures markets (including the options on futures markets), due to differences in the natures of those markets, are subject to the following factors, which may create distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions, which could distort the normal relationships between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions.

*<u>Combined Positions</u>*. The Fund may purchase and write options in combination with each other. For example, the Fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.

Other Investment Companies

The Fund may invest in the securities of other investment companies, including open- and closed-end funds and exchange-traded funds ("ETFs"). Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear the Fund's proportionate share of the fees and expenses of the other investment company, in addition to the fees and expenses Fund shareholders bear in connection with the Fund's own operations.

The Fund intends to limit its investments in securities issued by other investment companies in accordance with the 1940 Act and the rules promulgated thereunder. Section 12(d)(1) of the 1940 Act precludes the Fund from acquiring (i) more than 3% of the total outstanding shares of another investment company; (ii) shares of another investment company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (iii) shares of another registered investment company and all other investment companies having an aggregate value in excess of 10% of the value of the total assets of the Fund. In addition, the Fund is subject to Section 12(d)(1)(C), which provides that the Fund may not acquire shares of a closed-end fund if, immediately after such acquisition, the Fund and other investment companies having the same adviser as the Fund would hold more than 10% of the closed-end fund's total outstanding voting stock.

Section 12(d)(1)(F) of the 1940 Act provides that the provisions of paragraph 12(d)(1)(A) and (B) shall not apply to securities of an unaffiliated investment company purchased or otherwise acquired by the Fund if (i) immediately after such purchase or acquisition not more than 3% of the total outstanding shares of such investment company is owned by the Fund and all affiliated persons of the Fund; and (ii) the Fund has not offered or sold, and is not proposing to offer or sell its shares through a principal underwriter or otherwise at a public or offering price that includes a sales load of more than 1 1/2%. If the Fund invests in unaffiliated investment companies pursuant to Section 12(d)(1)(F), it must comply with the following voting restrictions: when the Fund exercises voting rights, by proxy or otherwise, with respect to unaffiliated investment companies owned by the Fund, the Fund will either seek instruction from the Fund's shareholders with regard to the voting of all proxies and vote in accordance with such instructions, or vote the shares held by the Fund in the same proportion as the vote of all other holders of such security. In addition, an unaffiliated investment company purchased by the Fund pursuant to Section 12(d)(1)(F) shall not be required to redeem its shares in an amount exceeding 1% of such investment company's total outstanding shares in any period of less than thirty days.

To the extent that the Fund invests in open-end or closed-end investment companies that invest primarily in the securities of companies located outside the United States, see the risks related to foreign securities set forth above.

Rule 12d1-4 allows a fund or ETF to acquire the securities of another fund in excess of the limitations imposed by Section 12 of the 1940 Act without obtaining an exemptive order from the SEC subject to certain limitations and conditions. Prior to a fund acquiring securities of another fund that exceed the limits of Section 12(d)(1) of the 1940 Act, the acquiring fund must enter into a Fund of Funds Agreement with the acquired fund. Rule 12d1-4 outlines the requirements of the Fund of Funds Agreements and specifies the responsibilities of Fund management related to "fund of funds" arrangements. Rule 12d1-4 was effective as of January 19, 2021 and its requirements have been implemented by the Funds that will be part of a fund of funds arrangement.

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*<u>Exchange-Traded Products</u>*. The Fund may invest in exchange traded products ("ETPs"), which include ETFs, partnerships, commodity pools or trusts that are bought and sold on a securities exchange. ETPs trade like stocks on a securities exchange at market price rather than NAV and, as a result, ETP shares may trade at a price greater than NAV (premium) or less than NAV (discount). The Fund may also invest in exchange-traded notes ("ETNs"), which are structured debt securities, whereby the issuer of the ETN promises to pay ETN holders the return on an index or market segment over a certain period of time and then return the principal of the investment at maturity. Whereas ETPs' liabilities are secured by their portfolio securities, ETNs' liabilities are unsecured general obligations of the issuer. Therefore, ETNs are subject to the credit risk of the issuer of the ETN, which is different than other ETPs. The value of an ETN security should also be expected to fluctuate with the credit rating of the issuer. Most ETPs and ETNs are designed to track a particular market segment or index, although an ETP or ETN may be actively managed. ETPs and ETNs share expenses associated with their operation, typically including advisory fees and other management expenses. When the Fund invests in an ETP or ETN, in addition to directly bearing expenses associated with its own operations, it will bear its pro rata portion of the ETP's or ETN's expenses. ETPs and ETNs trade like stocks on a securities exchange at market prices rather than NAV and as a result ETP or ETN shares may trade at a price greater than NAV (premium) or less than NAV (discount). The risks of owning an ETP or ETN generally reflect the risks of owning the underlying securities the ETP or ETN is designed to track, although lack of liquidity in an ETP or ETN could result in it being more volatile than the underlying portfolio of securities. In addition, because of ETP or ETN expenses, compared to owning the underlying securities directly, it may be more costly to own an ETP or ETN.

*<u>Money Market Funds</u>*. Money market funds are open-end registered investment companies that historically have traded at a stable $1.00 per share price. However, money market funds that do not meet the definition of a "retail money market fund" or "government money market fund" under the 1940 Act are required to transact at a floating NAV per share (*i.e.*, in a manner similar to how all other non-money market mutual funds transact), instead of at a $1.00 stable share price. Money market funds may also impose liquidity fees and redemption gates for use in times of market stress. If a Fund invests in a money market fund with a floating NAV, the impact on the trading and value of the money market instruments may negatively affect the Fund's return potential.

Real Estate Investment Trusts

The Fund may make investments in real estate investment trusts ("REITs"). REITs include equity, mortgage and hybrid REITs. Equity REITs own real estate properties, and their revenue comes principally from rent. Mortgage REITs loan money to real estate owners, and their revenue comes principally from interest earned on their mortgage loans. Hybrid REITs combine characteristics of both equity and mortgage REITs. The value of an equity REIT may be affected by changes in the value of the underlying property, while a mortgage REIT may be affected by the quality of the credit extended. The performance of both types of REITs depends upon conditions in the real estate industry, management skills and the amount of cash flow. The risks associated with REITs include defaults by borrowers, self-liquidation, failure to qualify as a pass-through entity under the federal tax law, failure to qualify as an exempt entity under the 1940 Act and the fact that REITs are not diversified.

Real Estate Operating Companies

The Fund may make investments in Real Estate Operating Companies ("REOCs"). A REOC is typically structured as a "C" corporation under the Code and is not required to distribute any portion of its income. A REOC, therefore, does not receive the same favorable tax treatment that is accorded a REIT. In addition, the value of the Fund's securities issued by REOCs may be adversely affected by income streams derived from businesses other than real estate ownership.

Royalty Trusts

The Fund may invest in U.S. royalty trusts. U.S. royalty trusts are generally not subject to U.S. federal corporate income taxation at the trust or entity level. Instead, each unit holder of the U.S. royalty trust is required to take into account its share of all items of the U.S. royalty trust's income, gain, loss, deduction and expense. It is possible that the Fund's share of taxable income from a U.S. royalty trust may exceed the cash actually distributed to it from the U.S. royalty trust in a given year. In such a case, the Fund will have less after-tax cash available for distribution to shareholders.

The Fund's allocable share of certain percentage depletion deductions and intangible drilling costs of the U.S. royalty trusts in which the Fund invests may be treated as items of tax preference to be allocated to Fund shareholders for purposes of calculating a Fund shareholder's alternative minimum taxable income.

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Unrated Debt Securities

The Fund may also invest in unrated debt securities. Unrated debt, while not necessarily lower in quality than rated securities, may not have as broad a market. Because of the size and perceived demand for the issue, among other factors, certain issuers may decide not to pay the cost of getting a rating for their bonds. The creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on the security, will be analyzed to determine whether to purchase unrated bonds.

U.S. Government Securities

The Fund may invest in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities ("U.S. government securities") in pursuit of its investment objective, in order to deposit such securities as initial or variation margin, as "cover" for the investment techniques it employs, as part of a cash reserve or for liquidity purposes.

U.S. government securities are high-quality instruments issued or guaranteed as to principal or interest by the U.S. Treasury Department ("U.S. Treasury") or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are backed by the right of the issuer to borrow from the U.S. Treasury; others are backed by discretionary authority of the U.S. government to purchase the agencies' obligations; while others are supported only by the credit of the instrumentality. In the case of securities not backed by the full faith and credit of the United States, the investor must look principally to the agency issuing or guaranteeing the obligation for ultimate repayment.

Yields on short-, intermediate- and long-term U.S. government securities are dependent on a variety of factors, including the general conditions of the money and bond markets, the size of a particular offering and the maturity of the obligation. Debt securities with longer maturities tend to produce higher capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market value of U.S. government securities generally varies inversely with changes in the market interest rates. An increase in interest rates, therefore, generally would reduce the market value of the Fund's portfolio investments in U.S. government securities, while a decline in interest rates generally would increase the market value of the Fund's portfolio investments in these securities. U.S. government securities include U.S. Treasury obligations, which includes U.S. Treasury Bills (which mature within one year of the date they are issued), U.S. Treasury Notes (which have maturities of one to ten years) and U.S. Treasury Bonds (which generally have maturities of more than 10 years). All such U.S. Treasury obligations are backed by the full faith and credit of the United States.

U.S. government securities also include obligations issued by U.S. government agencies and instrumentalities ("GSEs") that are backed by the full faith and credit of the U.S. government (such as securities issued or guaranteed by the Federal Housing Administration, Ginnie Mae<sup>®</sup>, the Export-Import Bank of the United States, the General Services Administration and the Maritime Administration and certain securities issued by the Small Business Administration).

Also, U.S. government securities include securities that are guaranteed by U.S. government-sponsored entities that are not backed by the full faith and credit of the U.S. government (such as Fannie Mae, Freddie Mac, or the Federal Home Loan Banks). These U.S. government-sponsored entities, although chartered and sponsored by the U.S. Congress, are not guaranteed, nor insured, by the U.S. government. They are supported only by the credit of the issuing agency, instrumentality or corporation.

Since 2008, Fannie Mae and Freddie Mac have been in conservatorship and have received significant capital support through U.S. Treasury preferred stock purchases, as well as U.S. Treasury and Federal Reserve purchases of their mortgage backed securities ("MBS"). The FHFA and the U.S. Treasury (through its agreement to purchase Fannie Mae and Freddie Mac preferred stock) have imposed strict limits on the size of their mortgage portfolios. The MBS purchase programs ended in 2010 but the U.S. Treasury has continued its support for the entities' capital as necessary to prevent a negative net worth and other governmental entities have provided significant support to Fannie Mae and Freddie Mac. There is no guarantee, however, that they will continue to do so. Accordingly, no assurance can be given that Fannie Mae and Freddie Mac will remain successful in meeting their obligations with respect to the debt and MBSs that they issue.

In addition, the problems faced by Fannie Mae and Freddie Mac, resulting in their being placed into federal conservatorship and receiving significant U.S. government support, have sparked serious debate among federal policy makers regarding the continued role of the U.S. government in providing liquidity for mortgage loans. Discussions among policymakers have continued as to whether Fannie Mae and Freddie Mac should be nationalized, privatized, restructured, or eliminated altogether. Fannie Mae and Freddie Mac have been the subject of several legal actions and investigations related to certain accounting, disclosure, or corporate governance matters, which (along with any resulting financial restatements) may continue to have an adverse effect on the guaranteeing entities.

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U.S. Government Sponsored Enterprises

U.S. government sponsored enterprises ("GSE") securities are securities issued by the U.S. government or its agencies or instrumentalities. Some obligations issued by GSEs are supported by the discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality and others only by the credit of the agency or instrumentality. Those securities bear fixed, floating or variable rates of interest. Interest may fluctuate based on generally recognized reference rates or the relationship of rates. While the U.S. government currently provides financial support to such GSEs or instrumentalities, no assurance can be given that it will always do so, since it is not so obligated by law.

Certain U.S. government debt securities, such as securities of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury. Others, such as securities issued by Fannie Mae<sup>®</sup> and Freddie Mac<sup>®</sup>, are supported only by the credit of the corporation. In the case of securities not backed by the full faith and credit of the United States, a fund must look principally to the agency issuing or guaranteeing the obligation in the event the agency or instrumentality does not meet its commitments. The U.S. government may choose not to provide financial support to GSEs or instrumentalities if it is not legally obligated to do so. A fund will invest in securities of such instrumentalities only when Rafferty is satisfied that the credit risk with respect to any such instrumentality is comparatively minimal.

When-Issued Securities

The Fund may enter into firm commitment agreements for the purchase of securities on a specified future date. The Fund may purchase, for example, new issues of fixed-income instruments on a when-issued basis, whereby the payment obligation, or yield to maturity, or coupon rate on the instruments may not be fixed at the time of transaction. The Fund will not purchase securities on a when-issued basis if, as a result, more than 15% of its net assets would be so invested. If the Fund enters into a firm commitment agreement, liability for the purchase price and the rights and risks of ownership of the security accrue to the Fund at the time it becomes obligated to purchase such security, although delivery and payment occur at a later date. Accordingly, if the market price of the security should decline, the effect of such an agreement would be to obligate the Fund to purchase the security at a price above the current market price on the date of delivery and payment.

Zero-Coupon, Payment-In-Kind and Strip Securities

The Fund may invest in zero-coupon, payment-in-kind and strip securities of any rating or maturity. Zero-coupon securities make no periodic interest payment but are sold at a deep discount from their face value, otherwise known as "original issue discount" or "OID." The buyer earns a rate of return determined by the gradual appreciation of the security, which is redeemed at face value on a specified maturity date. The OID varies depending on the time remaining until maturity, as well as market interest rates, liquidity of the security, and the issuer's perceived credit quality. If the issuer defaults, the Fund may not receive any return on its investment. Because zero-coupon securities bear no interest and compound semi-annually at the rate fixed at the time of issuance, their value generally is more volatile than the value of other fixed-income securities. Since zero-coupon security holders do not receive interest payments, when interest rates rise, zero-coupon securities fall more dramatically in value than securities paying interest on a current basis. When interest rates fall, zero-coupon securities rise more rapidly in value because the securities reflect a fixed rate of return. Payment-in-kind securities allow the issuer, at its option, to make current interest payments either in cash or in additional debt obligations of the issuer. Both zero-coupon securities and payment-in-kind securities allow an issuer to avoid the need to generate cash to meet current interest payments.

An investment in zero-coupon securities and delayed interest securities (which do not make interest payments until after a specified time) may cause the Fund to recognize income and be required to make distributions thereof to shareholders before it receives any cash payments on its investment. Moreover, even though payment-in-kind securities do not pay current interest in cash, the Fund nonetheless is required to accrue interest income on these investments and to distribute the interest income at least annually to shareholders. See "Dividends, Other Distributions and Taxes – Income from Zero Coupon and Payment-in-Kind Securities." Thus, the Fund could be required at times to liquidate other investments to satisfy distribution requirements.

The Fund may also invest in strips, which are debt securities whose interest coupons are taken out and traded separately after the securities are issued but otherwise are comparable to zero-coupon securities. Like zero-coupon securities and payment-in-kind securities, strips are generally more sensitive to interest rate fluctuations than interest paying securities of comparable term and quality.

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Other Investment Risks and Practices

*<u>Borrowing</u>*. The Fund may borrow money for investment purposes, which is a form of leveraging. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Leverage will magnify changes in the Fund's NAV and on the Fund's investments. Although the principal of such borrowings will be fixed, the Fund's assets may change in value during the time the borrowing is outstanding. Leverage also creates interest expenses for the Fund. To the extent the income derived from securities purchased with borrowed funds exceeds the interest the Fund will have to pay, that Fund's net income will be greater than it would be if leverage were not used. Conversely, if the income from the assets obtained with borrowed funds is not sufficient to cover the cost of leveraging, the net income of the Fund will be less than it would be if leverage were not used, and therefore the amount available for shareholders will be reduced.

The Fund may borrow money to facilitate management of the Fund's portfolio by enabling the Fund to meet redemption requests when the liquidation of portfolio instruments would be inconvenient or disadvantageous. Such borrowing is not for investment purposes and will be repaid by the borrowing Fund promptly.

As required by the 1940 Act, the Fund must maintain continuous asset coverage (total assets, including assets acquired with borrowed funds, less liabilities exclusive of borrowings) of 300% of all amounts borrowed. If at any time the value of the required asset coverage declines as a result of market fluctuations or other reasons, the Fund may be required to sell some of its portfolio investments within three days to reduce the amount of its borrowings and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell portfolio instruments at that time.

*<u>Portfolio Turnover</u>*. The Trust anticipates that the Fund's annual portfolio turnover may vary year to year. The Fund's portfolio turnover rate is calculated by the value of the securities purchased or securities sold, excluding all securities whose terms-to-maturity at the time of acquisition were less than 397 days, divided by the average monthly value of such securities owned during the year. Based on this calculation, instruments with remaining terms-to-maturity of less than 397 days are excluded from the portfolio turnover rate. Such instruments generally would include futures contracts and options, since such contracts generally have remaining terms-to-maturity of less than 397 days. In any given period, all of the Fund's investments may have remaining terms-to-maturity of less than 397 days; in that case, the portfolio turnover rate for that period would be equal to zero. However, the Fund's portfolio turnover rate calculated with all securities whose terms-to-maturity were less than 397 days is anticipated to be unusually high.

High portfolio turnover involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales also may result in adverse tax consequences to a Fund's shareholders resulting from its distributions of increased net capital gains, if any, recognized as a result of the sales. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund's performance.

Securities Lending

The Fund may lend portfolio securities to certain borrowers that Rafferty determines to be creditworthy. The borrowers provide collateral that is maintained in an amount at least equal to the current market value of the securities loaned, marked to market daily. Borrowers continuously secure their obligations to return securities on loan from the Fund by depositing any combination of short-term U.S. government securities and cash as collateral with the Fund. No securities loan will be made on behalf of the Fund if, as a result, the aggregate value of all securities loaned by the Fund exceeds one-third of the value of the Fund's total assets (including the value of the collateral received) or such lower limit as set by Rafferty or the Board. The Fund may terminate a loan at any time and obtain the return of the securities loaned. The Fund receives, by way of substitute payment, the value of any interest or cash or non-cash distributions paid on the loaned securities that it would have received if the securities were not on loan. Any gain or loss in the market price of the borrowed securities that occurs during the term of the loan inures to the lending Fund and that Fund's shareholders.

With respect to loans that are collateralized by cash, the borrower may be entitled to receive a fee based on the amount of cash collateral. The Fund is typically compensated by the difference between the amount earned on the reinvestment of cash collateral and the fee paid to the borrower. In the case of collateral other than cash, the Fund is typically compensated by a fee paid by the borrower equal to a percentage of the market value of the loaned securities. A Fund may also receive such fees on "special" loans that are cash-collateralized. Any cash collateral may be reinvested in money market funds. Such money market fund shares will not be subject to a sales load, redemption fee, distribution fee or service fee. However, such investments are subject to investment risk.

Securities lending involves exposure to certain risks, including operational risk (*i.e.*, the risk of losses resulting from problems in the settlement and accounting process), "gap" risk (*i.e.*, the risk of a mismatch between the return of cash collateral reinvestments and the fees the Fund has agreed to pay a borrower), and credit, legal, counterparty and market risk. If a securities lending counterparty were to default, the Fund would be subject to the risk of a possible delay in receiving collateral

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or in recovering the loaned securities, or to a possible loss of rights in the collateral. In the event a borrower does not return the Fund's securities as agreed, the Fund could experience losses if the proceeds received from liquidating the collateral do not at least equal the value of the loaned security at the time the collateral is liquidated, plus the transaction costs incurred in purchasing replacement securities. This event could trigger adverse tax consequences for the Fund. The Fund could lose money if its investment of cash collateral declines in value over the period of the loan. Substitute payments for dividends received by the Fund while its securities are loaned out will not be considered qualified dividend income.

Investment Restrictions

In addition to the investment policies and limitations described above and described in the Prospectus, the Trust, on behalf of the Fund has adopted the following investment policies, which are fundamental policies that may not be changed without the affirmative vote of a majority of the outstanding voting securities of the Fund. Under the 1940 Act, a "vote of a majority of the outstanding voting securities of the Fund" means the affirmative vote of the lesser of: (1) more than 50% of the outstanding shares of the Fund; or (2) 67% or more of the shares of the Fund present at a shareholders' meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy.

The Fund's investment objective is a non-fundamental policy of the Fund. Non-fundamental policies may be changed by the Board without shareholder approval.

For purposes of the following limitations, all percentage limitations apply immediately after a purchase or initial investment. Except with respect to borrowing money, if a percentage limitation is adhered to at the time of the investment, a later increase or decrease in the percentage resulting from any change in value or net assets will not result in a violation of such restrictions. If at any time the Fund's borrowings exceed its limitations due to a decline in net assets, such borrowings will be reduced within three days (not including Sundays and holidays), or such longer period as may be permitted by the 1940 Act, to the extent necessary to comply with the one-third limitation.

**The Fund shall not:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Issue senior securities, borrow money or pledge its assets, except that (i) the Fund may borrow from banks in amounts not exceeding one-third of its total assets (including the amount borrowed) less liabilities (other than borrowings); and (ii) this restriction shall not prohibit the Fund from engaging in options transactions, reverse repurchase agreements, purchasing securities on a when-issued, delayed delivery or forward delivery basis or short sales in accordance with its objectives and strategies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Underwrite the securities of other issuers (except that the Fund may engage in transactions involving the acquisition, disposition or resale of its portfolio securities under circumstances where it may be considered to be an underwriter under the Securities Act);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Purchase or sell real estate or interests in real estate, unless acquired as a result of ownership of securities (although the Fund may purchase and sell securities which are secured by real estate and securities of companies that invest or deal in real estate);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Purchase or sell physical commodities or commodities contracts, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from engaging in transactions involving currencies and futures contracts and options thereon or investing in securities or other instruments that are secured by physical commodities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Make loans of money (except for the lending of the Fund's portfolio securities, repurchase agreements and purchases of debt securities consistent with the investment policies of the Fund);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Invest in the securities of any one industry or group of industries if, as a result, 25% or more of the Fund's total assets would be invested in the securities of such industry or group of industries, except that the foregoing does not apply to securities issued or guaranteed by the U.S. government, its agencies or instrumentalities; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. With respect to 75% of the Fund's total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or, to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief, securities of other investment companies) if, as a result, (1) more than 5% of the Fund's total assets would be invested in the securities of that issuer; or (2) the Fund would hold more than 10% of the outstanding voting securities of that issuer.

The following paragraph describes a non-fundamental investment restriction applicable to the Fund. This restriction can be changed by the Board of Trustees, but the change will only be effective after prior written notice is given to shareholders of the Fund.

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The Fund may not hold more than 15% of the value of its net assets in illiquid securities. Illiquid securities are those securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued them. Illiquid securities may include restricted securities not determined by the Board of Trustees to be liquid, non-negotiable time deposits, over-the-counter options, and repurchase agreements providing for settlement in more than seven days after notice.

Portfolio Transactions and Brokerage

Subject to the general supervision by the Trustees and Rafferty, Hilton is responsible for decisions to buy and sell securities and derivatives for the Fund, the selection of broker-dealers to effect the transactions, and the negotiation of brokerage commissions, if any. Hilton expects that the Fund may execute brokerage or other agency transactions through registered broker-dealers, for a commission, in conformity with the 1940 Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder.

When selecting a broker or dealer to execute portfolio transactions, Hilton considers many factors, including the rate of commission or the size of the broker-dealer's "spread," the size and difficulty of the order, the nature of the market for the security, operational capabilities of the broker-dealer and the research, statistical and economic data furnished by the broker-dealer to Hilton.

In effecting portfolio transactions for the Fund, Hilton seeks to receive the closing prices of securities that are in line with those of the securities included in the applicable index and seeks to execute trades of such securities at the commission rates reasonably available. With respect to agency transactions, Hilton may execute trades at a higher rate of commission if reasonable in relation to brokerage and research services provided to the Fund or Hilton. Such services may include the following: information as to the availability of securities for purchase or sale; statistical or factual information or opinions pertaining to investment; wire services; and appraisals or evaluations of portfolio securities. During the last fiscal year, no Fund directed its brokerage commissions to a broker because of research provided.

The Fund believes that the requirement to always seek the lowest possible commission cost could impede effective portfolio management and preclude the Fund and Hilton from obtaining a high quality of brokerage and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, Hilton relies upon its experience and knowledge regarding commissions generally charged by various brokers and on its judgment in evaluating the brokerage and research services received from the broker effecting the transaction. In addition to commission rates, when selecting a broker for a particular transaction, Hilton considers the following factors, among others: the broker's availability, willingness to commit capital, reputation and integrity, facilities reliability, access to research, execution capacity and responsiveness.

For purchases and sales of derivatives (*i.e.*, financial instruments whose value is derived from the value of an underlying asset, interest rate or index), Hilton evaluates counterparties on the following factors: reputation and financial strength; execution prices, commission costs, ability to handle complex orders; ability to provide prompt and full execution; accuracy of reports and confirmation provided; reliability; type and quality of research provided; financing and other associated costs related to the transaction; and whether the total cost or proceeds in each transaction is the most favorable under the circumstances.

Hilton may use research and services provided to it by brokers in servicing the Fund; however, not all such services may be used by Hilton in connection with the Fund. While the receipt of such information and services is useful in varying degrees and may reduce the amount of research or services otherwise provided to the Fund by Hilton, the receipt of such information and these services does not reduce the investment advisory fee paid by the Fund.

Purchases and sales of U.S. government securities normally are transacted through issuers, underwriters or major dealers in U.S. government securities acting as principals. Such transactions are made on a net basis and do not involve payment of brokerage commissions. The cost of securities purchased from an underwriter usually includes a commission paid by the issuer to the underwriters; transactions with dealers normally reflect the spread between bid and asked prices.

Aggregate brokerage commissions paid by the Fund for the fiscal periods shown are set forth in the table below:

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| | |
|:---|:---|
| **Hilton Tactical Income Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $45450 |
| Year Ended August 31, 2024 | $28320 |
| Year Ended August 31, 2023 | $24143 |

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The brokerage commissions for the Fund have increased during the fiscal years presented due to an increase in the cost of the transactions of the Fund.

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Portfolio Holdings Information

The Trust maintains portfolio holdings disclosure policies that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the Fund's portfolio investments to ensure that such disclosure is in the best interests of the Fund's shareholders. In adopting the policies, the Board considered actual and potential material conflicts that could arise between the interest of Fund shareholders, the Adviser, the Subadviser, the Fund's distributor, or any other affiliated person of the Fund. Disclosure of the Fund's complete holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the holdings report on Form N-PORT. These reports are available, free of charge, on the EDGAR database on the SEC's website at www.sec.gov.

From time to time, rating and ranking organizations such as Standard & Poor's<sup>®</sup> and Morningstar<sup>®</sup>, Inc. may request complete portfolio holdings information in connection with rating the Fund. Similarly, pension plan sponsors, consultants and/or other financial institutions may request a complete list of portfolio holdings in order to assess the risks of the Fund's portfolio along with related performance attribution statistics. The Trust believes that these third parties have legitimate objectives in requesting such portfolio holdings information. To prevent such parties from potentially misusing the complete portfolio holdings information, the Fund will generally only disclose such information as of the end of the most recent calendar quarter, with a lag of approximately 60 days. In addition, the Fund's Chief Compliance Officer ("CCO") may grant exceptions to permit additional disclosure of the complete portfolio holdings information at differing times and with differing lag times to rating agencies and to the parties noted above, provided that (1) the recipient is subject to a confidentiality agreement; (2) the recipient will utilize the information to reach certain conclusions about the investment management characteristics of the Fund and will not use the information to facilitate or assist in any investment program; and (3) the recipient will not provide access to third parties to this information. The CCO shall report any disclosures made pursuant to this exception to the Board.

In addition, the Fund's service providers, such as custodian, administrator, transfer agent, distributor, legal counsel and independent registered public accounting firm may receive portfolio holdings information in connection with their services to the Fund. In no event shall the Adviser, the Subadviser, any affiliates or employees, or the Fund receive any direct or indirect compensation in connection with the disclosure of information about the Fund's portfolio holdings.

In the event a portfolio holdings disclosure to be made pursuant to the policies presents a conflict of interest between the Fund's shareholders and the Adviser, the Subadviser, the Fund's distributor and their affiliates or employees and any affiliated person of the Fund, the disclosure will not be made unless a majority of the Board members who are not "interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees") approves such disclosure.

Management of the Trust

**The Board of Trustees**

The Trust is governed by its Board of Trustees (the "Board"). The Board is responsible for and oversees the overall management and operations of the Trust and the Fund, which includes the general oversight and review of the Fund's investment activities, in accordance with federal law and the law of the Commonwealth of Massachusetts, as well as the stated policies of the Fund. The Board oversees the Trust's officers and service providers, including Rafferty, which is responsible for the management of the day-to-day operations of the Fund based on policies and agreements reviewed and approved by the Board. In carrying out these responsibilities, the Board regularly interacts with and receives reports from senior personnel of service providers, including personnel from Rafferty. The Board also is assisted by the Trust's independent auditor (who reports directly to the Trust's Audit Committee), independent counsel and other professionals as appropriate.

**Risk Oversight**

Consistent with its responsibility for oversight of the Trust and the Fund, the Board oversees the management of risks relating to the administration and operation of the Trust and the Fund. Rafferty, as part of its responsibilities for the day-to-day operations of the Fund, is responsible for day-to-day risk management for the Fund. The Board, in the exercise of its reasonable business judgment performs its risk management oversight directly and, as to certain matters, through its committees (described below) and through the Board members who are not "interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees"). The following provides an overview of the principal, but not all, aspects of the Board's oversight of risk management for the Trust and the Fund.

The Board has adopted, and periodically reviews, policies and procedures designed to address risks to the Trust and the Fund. In addition, under the general oversight of the Board, Rafferty and other service providers to the Fund have themselves adopted a variety of policies, procedures and controls designed to address particular risks to the Fund. Different processes, procedures and controls are employed with respect to different types of risks.

The Board also oversees risk management for the Trust and the Fund through review of regular reports, presentations and other information from officers of the Trust and other persons. The Trust's CCO and senior officers of Rafferty regularly

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report to the Board on a range of matters, including those relating to risk management. The Board also regularly receives reports from Rafferty and U.S. Bancorp Fund Services, LLC ("USBFS") with respect to the Fund's investments. In addition to regular reports from these parties, the Board also receives reports regarding other service providers to the Trust, either directly or through Rafferty, USBFS or the CCO, on a periodic or regular basis. At least annually, the Board receives a report from the CCO regarding the effectiveness of the Fund's compliance program. Also, the Board receives regular reports, presentations and other information from Rafferty, including in connection with the Board's consideration of the renewal of each of the Trust's agreements with Rafferty and the Trust's distribution plan under Rule 12b-1 under the 1940 Act.

The CCO reports regularly to the Board on Fund valuation matters. The Audit Committee receives regular reports from the Trust's independent registered public accounting firm on internal control and financial reporting matters. On at least a quarterly basis, the Independent Trustees meet with the CCO to discuss matters relating to the Fund's compliance program.

**Board Structure and Related Matters**

Independent Trustees constitute at least two-thirds of the Board. The Trustees discharge their responsibilities collectively as a Board, as well as through Board committees, each of which operates pursuant to a charter approved by the Board that delineates the specific responsibilities of that committee. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee and the Qualified Legal Compliance Committee. For example, the Audit Committee is responsible for specific matters related to oversight of the Fund's independent auditors, subject to approval of the Audit Committee's recommendations by the Board. The members and responsibilities of each Board committee are summarized below.

The Board periodically evaluates its structure and composition as well as various aspects of its operations. The Chairman of the Board is not an Independent Trustee and the Board has chosen not to have a lead Independent Trustee. However, the Board believes that its leadership structure, including its Independent Trustees and Board committees, is appropriate for the Trust in light of, among other factors, the asset size and nature of the Fund, the number of funds overseen by the Board, the arrangements for the conduct of the Fund's operations, the number of Trustees, and the Board's responsibilities. On an annual basis, the Board conducts a self-evaluation that considers, among other matters, whether the Board and its committees are functioning effectively and whether, given the size and composition of the Board and each of its committees, the Trustees are able to oversee effectively the number of funds in the complex.

The Trust is part of the Direxion Family of Investment Companies, which is comprised of the 8 separate series within the Trust and 250 separate series within the Direxion Shares ETF Trust. The same persons who constitute the Board also constitute the Board of Trustees of the Direxion Shares ETF Trust.

The Board holds four regularly scheduled meetings each year and the Independent Trustees hold one additional meeting in connection with the annual contract renewals. The Board may hold special meetings, as needed, to address matters arising between regular meetings. During a portion of each meeting, the Independent Trustees meet outside of management's presence. The Independent Trustees may hold special meetings, as needed.

The Trustees of the Trust are identified in the tables below, which provide information regarding their age, business address and principal occupation during the past five years including any affiliation with Rafferty, the length of service to the Trust, and the position, if any, that they hold on the board of directors of companies other than the Trust as of the date of this SAI. Each of the Trustees of the Trust also serve on the Board of the Direxion Shares ETF Trust, the other registered investment company in the Direxion complex. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022.

**Interested Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Daniel D. O'Neill<sup>(1)</sup> <br>Age: 57<br>| &nbsp;&nbsp; Chairman of the <br> Board of Trustees<br>| &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, April 2021 – <br> September 2022; <br> Managing <br> Director, Rafferty <br> Asset <br> Management, <br> LLC, January 1999 <br> – January 2019.<br>| 258 | None. |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(3)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Angela Brickl<sup>(2)</sup> <br>Age: 49<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; President, Rafferty <br> Asset <br> Management, LLC <br> since September <br> 2022; Chief <br> Operating Officer, <br> Rafferty Asset <br> Management, LLC <br> May 2021 – <br> September 2022; <br> General Counsel, <br> Rafferty Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| 258 | None. |

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**Independent Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(4)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| David L. Driscoll<br> Age: 56 <br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Board Member, <br> Algorithmic <br> Research and <br> Trading, since <br> 2022; Board <br> Advisor, University <br> Common Real <br> Estate, since 2012; <br> Member, Kendrick <br> LLC, since 2006; <br> Partner, King <br> Associates, LLP, <br> since 2004; <br> Principal, Grey <br> Oaks LLP, since <br> 2003.<br>| 258 | None. |
| Kathleen M. Berkery<br> Age: 58<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2019<br>| &nbsp;&nbsp; Chief Financial <br> Officer, Metro <br> Physical Therapy, <br> LLC, since 2023; <br> Chief Financial <br> Officer, Student <br> Sponsor Partners, <br> 2021 - 2023; <br> Senior Manager- <br> Trusts & Estates, <br> Rynkar, Vail & <br> Barrett, LLC, 2018 <br> - 2021.<br>| 258 | None. |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(4)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Carlyle Peake<br> Age: 54<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Head of US & <br> LATAM Debt <br> Syndicate, BBVA <br> Securities, Inc., <br> since 2011.<br>| 258 | None. |
| Mary Jo Collins<br> Age: 69<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Managing <br> Director, B. Riley <br> Financial, March <br> – December <br> 2022; Managing <br> Director, Imperial <br> Capital LLC, from <br> 2020-2022; <br> Director, Royal <br> Bank of Canada, <br> 2014-2020.<br>| 258 | None. |
| Bradley Kurtzman<br> Age: 52<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2025<br>| &nbsp;&nbsp; Partner, <br> Squarepoint <br> Capital, since May <br> 2019; Managing <br> Director, Deutsche <br> Bank 2012-2019.<br>| 258 | None. |

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<sup>(1)</sup>

Mr. O'Neill is affiliated with Rafferty because he owns a beneficial interest in Rafferty.

<sup>(2)</sup>

Ms. Brickl is affiliated with Rafferty because she serves as an officer of Rafferty.

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250

funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

In addition to the information set forth in the tables above and other relevant qualifications, experience, attributes or skills applicable to a particular Trustee, the following provides further information about the qualifications and experience of each Trustee.

Daniel D. O'Neill: Mr. O'Neill has extensive experience in the investment management business. Mr. O'Neill was the Managing Director of Rafferty from 1999 through January 2019 and Chief Executive Officer at Rafferty from April 2021 through September 2022.

Angela Brickl: Ms. Brickl has extensive experience in the investment management business, including serving as Chief Operating Officer from April 2021 to September 2022 and since November 2024, and President of Rafferty from September 2022 to November 2024. Ms. Brickl also serves as Rafferty's General Counsel and served as Chief Compliance Officer from 2012 through March 2023.

David L. Driscoll: Mr. Driscoll has extensive experience with risk assessment and strategic planning as a partner and manager of various real estate partnerships and companies.

Kathleen M. Berkery: Ms. Berkery has extensive experience with estate planning, estate administration, fiduciary income taxation, financial planning, finance, as well as business sales and development, and marketing.

Carlyle Peake: Mr. Peake has extensive global capital markets experience, as well as experience with client relations and sales of securities by issuers and investors and valuing, structuring, and negotiating complex debt issues for corporate and sovereign entities.

Mary Jo Collins: Ms. Collins has extensive experience evaluating credit risk of investment grade securities, including corporate bonds, preferred stocks, and hybrid securities, as well as managing relationships with retail and institutional investors.

Bradley M. Kurtzman: Mr. Kurtzman has extensive expertise in the management of large portfolios various asset classes (equities, rates, credit commodities) with a particular focus on the use of derivatives which includes trading, analytics, market risk management, and operational efficiency.

**Board Committees**

The Trust has an Audit Committee, consisting of each Independent Trustee. The primary responsibilities of the Trust's Audit Committee are set forth in its charter, which include making recommendations to the Board as to the engagement or discharge of the Trust's independent registered public accounting firm (including the audit fees charged by the auditors), supervising

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investigations into matters relating to audit matters, reviewing with the independent registered public accounting firm of the results of audits, and addressing any other matters regarding audits. The Audit Committee met three times during the Trust's most recent fiscal year.

The Trust also has a Nominating and Governance Committee, consisting of each Independent Trustee. The primary responsibilities of the Nominating and Governance Committee are to make recommendations to the Board on issues related to the composition and operation of the Board, and communicate with management on those issues. The Nominating and Governance Committee also evaluates and nominates Board member candidates. In evaluating Board member candidates, the Nominating and Governance Committee considers the extent to which potential candidates possess sufficiently diverse skill sets and diversity characteristics that would contribute to the Board's overall effectiveness. The Nominating and Governance Committee will consider nominees recommended by shareholders. Such recommendations should be in writing and addressed to the Fund with attention to the Nominating and Governance Committee Chair. The recommendations must include the following preliminary information regarding the nominee: (1) name; (2) date of birth; (3) education; (4) business professional or other relevant experience and areas of expertise; (5) current business, professional or other relevant experience and areas of expertise; (6) current business and home addresses and contact information; (7) other board positions or prior experience; and (8) any knowledge and experience relating to investment companies and investment company governance. The Nominating and Governance Committee met three times during the Trust's most recent fiscal year.

The Trust has a Qualified Legal Compliance Committee, consisting of each Independent Trustee. The primary responsibility of the Trust's Qualified Legal Compliance Committee is to receive, review and take appropriate action with respect to any report made or referred to the Committee by an attorney of evidence of a material violation of applicable U.S. federal or state securities law, material breach of a fiduciary duty under U.S. federal or state law or a similar material violation by the Trust or by any officer, director, employee or agent of the Trust. The Audit Committee serves as the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee did not meet during the Trust's most recent fiscal year.

**Principal Officers of the Trust**

The officers of the Trust conduct and supervise its daily business. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of the date of this SAI, the officers of the Trust, their ages, their business address and their principal occupations during the past five years are as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Douglas Yones<br> Age: 50<br>| &nbsp;&nbsp; Chief Executive <br> Officer<br>| Since 2024 | &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, since 2024; <br> Head of Exchange <br> Traded Products, <br> NYSE, until 2024.<br>| N/A | N/A |

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---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Angela Brickl<sup>(1)</sup> <br>Age: 49<br>| &nbsp;&nbsp; Chief Operating <br> Officer<br> General Counsel<br>| &nbsp;&nbsp; Since 2024<br> Since 2022<br>| &nbsp;&nbsp; Chief Operating <br> Officer, Rafferty <br> Asset <br> Management, LLC <br> May 2021 – <br> September 2022 <br> and since <br> November 2024; <br> President, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2022– November <br> 2024; General <br> Counsel, Rafferty <br> Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| N/A | N/A |
| Todd Sherman<br> Age: 44<br>| &nbsp;&nbsp; Chief Compliance <br> Officer<br>| Since 2023 | &nbsp;&nbsp; Chief Risk Officer, <br> Rafferty Asset <br> Management, <br> LLC, since 2018; <br> SVP Head of Risk, <br> 2012–2018.<br>| N/A | N/A |
| Patrick J. Rudnick<br> Age: 52<br>| &nbsp;&nbsp; Principal Executive<br> Officer <br>| Since 2018 | &nbsp;&nbsp; Senior Vice <br> President, Rafferty <br> Asset <br> Management, <br> LLC, since March <br> 2013.<br>| N/A | N/A |
| Corey Noltner<br> Age: 36<br>| &nbsp;&nbsp; Principal Financial <br> Officer<br>| Since 2021 | &nbsp;&nbsp; Senior Business <br> Analyst, Rafferty <br> Asset <br> Management, <br> LLC, since October <br> 2015.<br>| N/A | N/A |
| Alyssa Sherman<br> Age: 36<br>| Secretary | Since 2022 | &nbsp;&nbsp; Assistant General <br> Counsel, Rafferty <br> Asset <br> Management, <br> LLC, since April <br> 2021; Associate, <br> K&L Gates LLP, <br> September 2015 <br> – March 2021.<br>| N/A | N/A |

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<sup>(1)</sup>

Ms. Brickl serves on the Board of Trustees of the Direxion Funds and Direxion Shares ETF Trust.

<sup>(2)</sup>

Pursuant to the Trust's By-laws, each officer shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, removal or resignation. Officers serve at the pleasure of the Board of Trustees and may be removed at any time with or without cause.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250

funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

The following table shows the amount of equity securities owned in the Fund and the Direxion Family of Investment Companies by the Trustees as of the calendar year ended December 31, 2024:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Dollar Range of Equity** <br> **Securities Owned:**<br>| **Interested Trustees:** | **Interested Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** |
|  | &nbsp;&nbsp; **Daniel D.** <br> **O'Neill**<br>| &nbsp;&nbsp; **Angela**<br> **Brickl**<br>| &nbsp;&nbsp; **David L.** <br> **Driscoll**<br>| &nbsp;&nbsp; **Kathleen** <br> **M.**<br> **Berkery**<br>| &nbsp;&nbsp; **Carlyle**<br> **Peake**<br>| &nbsp;&nbsp; **Mary Jo**<br> **Collins**<br>| &nbsp;&nbsp; **Bradley**<br> **Kurtzman**<br>|
| &nbsp;&nbsp; Hilton Tactical Income <br> Fund<br>| &nbsp;&nbsp; $10000 - <br> $50000<br>| $0 | $0 | $0 | $0 | $0 | $0 |
| &nbsp;&nbsp; Aggregate Dollar <br> Range of Equity <br> Securities in the <br> Direxion Family of <br> Investment <br> Companies<sup>(1)</sup> <br>| &nbsp;&nbsp; $10000 - <br> $50000<br>| $0 | $1- $10000 | $0 | $0 | $0 | &nbsp;&nbsp; Over <br> $100,000<br>|

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<sup>(1)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250

funds registered with the SEC, the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC and the Direxion Insurance Trust which, as of the date of this SAI, does not have any funds registered with the SEC.

The Trust's Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law. However, they are not protected against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office.

No officer, director or employee of Rafferty receives any compensation from the Fund for acting as a Trustee or officer of the Trust. The following table shows the compensation earned by each Trustee for the Trust's fiscal year ended August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Name of Person,** <br> **Position**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the** <br> **Trust**<sup>(1)</sup> <br>| **Pension or** <br> **Retirement Benefits** <br> **Accrued As Part of** <br> **the Trust's** <br> **Expenses**<br>| &nbsp;&nbsp; **Estimated** <br> **Annual Benefits** <br> **Upon Retirement**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the Direxion** <br> **Family of** <br> **Investment** <br> **Companies Paid** <br> **to the Trustees**<sup>(2)</sup> <br>|
| **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** |
| Daniel D. O'Neill  | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| Angela Brickl | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** |
| David L. Driscoll | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Kathleen M. Berkery | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Mary Jo Collins | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Carlyle Peake | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Bradley Kurtzman | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |

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<sup>(1)</sup>

Trustee compensation is allocated across the operational Funds of the Trust based on the proportion of the Fund's net assets to the total net assets of the operational Funds of the Trust.

<sup>(2)</sup>

For the fiscal year ended August 31, 2025, Trustees' fees and expenses in the amount of $112,500 were incurred by the Trust.

Principal Shareholders, Control Persons and Management Ownership

A principal shareholder is any person who owns of record or beneficially 5% or more of the outstanding shares of the Fund. A control person is a shareholder that owns beneficially or through controlled companies more than 25% of the voting securities of a company or acknowledges the existence of control. Shareholders owning voting securities in excess of 25% may determine the outcome of any matter affecting and voted on by shareholders of the Fund.

As of December 1, 2025, the following shareholders were considered to be either a principal shareholder or control person of the Fund:

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**Hilton Tactical Income Fund (Investor Class)** 

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **Jurisdiction** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| National Financial Services LLC<br> 499 Washington Boulevard<br> Jersey City, NJ 07310-2010<br>| &nbsp;&nbsp; Fidelity Global <br> Brokerage Group, <br> Inc.<br>| DE | 38.45% | Record |
| LPL Financial Holdings Inc.<br> 4707 Executive Drive<br> San Diego, CA 92121<br>| N/A | N/A | 21.55% | N/A |
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| N/A | N/A | 16.95% | Record |
| Pershing LLC<br> PO Box 2052<br> Jersey City, NJ 070303-2052<br>| N/A | N/A | 9.11% | Record |
| Morgan Stanley Smith Barney LLC<br> 2000 Westchester Avenue<br> Purchase, NY 10577-2539<br>| N/A | N/A | 8.07% | N/A |

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**Hilton Tactical Income Fund (Institutional Class)** 

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **Jurisdiction** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| National Financial Services LLC<br> 499 Washington Boulevard<br> Jersey City, NJ 07310-2010<br>| &nbsp;&nbsp; Fidelity Global <br> Brokerage Group, <br> Inc.<br>| DE | 41.43% | Record |
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>| DE | 31.56% | Record |
| Pershing LLC<br> PO Box 2052<br> Jersey City, NJ 07303-2052<br>| N/A | N/A | 18.10% | N/A |

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In addition, as of December 1, 2025, the Trustees and Officers as a group owned less than 1% of the outstanding shares of the Fund.

Investment Adviser

Rafferty Asset Management, LLC, 535 Madison Avenue, 37th Floor, New York, NY 10022, provides investment advice to the Fund. Rafferty was organized as a New York limited liability company in June 1997. Michael Rafferty and Kathleen Rafferty Hay control Rafferty through their ownership in Rafferty Holdings, LLC and Daniel D. O'Neill controls Rafferty through his ownership in Minakian Partners, LLC.

Under an Investment Advisory Agreement ("Advisory Agreement") between Rafferty and the Trust, on behalf of the Fund, Rafferty provides a continuous investment program for the Fund's assets in accordance with its investment objectives, policies and limitations, and oversees the day-to-day operations of the Fund, subject to the supervision of the Trustees. Rafferty bears all costs associated with providing these advisory services and the expenses of the Trustees who are affiliated with or interested persons of Rafferty. The Trust bears all other expenses that are not assumed by Rafferty as described in the Prospectus. The Trust also is liable for nonrecurring expenses as may arise, including litigation to which the Fund may be a party. The Trust also may have an obligation to indemnify its Trustees and officers with respect to any such litigation.

The Advisory Agreement was initially approved by the Trustees (including all Independent Trustees) and Rafferty, as sole shareholder of the Fund, in compliance with the 1940 Act. After an initial approval period of two years, the Advisory Agreement is renewable with respect to the Fund, so long as its continuance is approved at least annually (1) by the vote, cast in person at a meeting called for that purpose, of a majority of the Independent Trustees of the Trust; and (2) by the majority vote of either the full Board or the vote of a majority of the outstanding shares of the Fund. The Advisory Agreement automatically terminates upon assignment and is terminable on a 60-day written notice either by the Trust or Rafferty.

Pursuant to the Advisory Agreement, the Fund pays Rafferty 0.79% at an annual rate based on its average daily net assets.

The Fund is responsible for its own operating expenses. Rafferty has entered into an Operating Expense Limitation Agreement with the Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to cap all or a portion of its advisory fees and management services and/or reimburse the Fund for Other Expenses (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses) through September 1, 2026 to the

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extent that the Fund's Total Annual Fund Operating Expenses exceed 1.12% for Investor Class Shares and 0.87% for Institutional Class Shares of the Fund's average daily net assets. Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time at the discretion of the Board upon notice to the Adviser and without the approval of Fund shareholders.

The table below shows the advisory fees incurred by the Fund and the amount of fees waived and/or reimbursed by Rafferty for the fiscal year ended August 31.

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| | | | |
|:---|:---|:---|:---|
|  | &nbsp;&nbsp; **Advisory Fees** <br> **Accrued**<br>| **Fees Waived and Expenses**<br> **Absorbed by Adviser**<br>| &nbsp;&nbsp; **Total Fees** <br> **Paid to** <br> **Adviser**<br>|
| Year Ended August 31, 2025 | $974025 | &nbsp;&nbsp; $271920 | $702105 |
| Year Ended August 31, 2024 | $934600 | &nbsp;&nbsp; $276835 | $657765 |
| Year Ended August 31, 2023 | $920408 | &nbsp;&nbsp; $322570 | $597838 |

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Pursuant to the Management Services Agreement, Rafferty provides certain administrative services to the Fund, including as follows: coordinating and implementing the Trust's contractual obligations with the Fund's other service providers; monitoring, overseeing and reviewing the performance of such service providers to ensure adherence to applicable contractual obligations; preparing or coordinating reports and presentations to the Board of Trustees by such service providers as requested, or deemed necessary pursuant to regulatory requirements; providing certain financial reporting services, compliance and risk management services. Effective November 1, 2024, for these services, the Trust pays to Rafferty a fee at the annual rate of 0.05% on the first $25 billion of aggregate average daily net assets of the Trust and the Direxion Shares ETF Trust, 0.0475% on aggregate average daily net assets between $25 billion and $50 billion and 0.045% on aggregate average daily net assets above $50 billion. This Management Services Fee may be waived under the Operating Expense Limitation Agreement that Rafferty has entered into with the Fund. This arrangement may be terminated at any time with the consent of the Board.

The tables below show the Management Services Fees paid by the Fund as of the fiscal years ended August 31:

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| | |
|:---|:---|
|  | **Management Fees Paid** |
| Year Ended August 31, 2025\* | $55064 |
| Year Ended August 31, 2024 | $29025 |
| Year Ended August 31, 2023 | $28904 |

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\*The fees for the most recent fiscal year are higher than previous years due to an increase in the fee rate paid by the Fund due to the expanded list of services provided under the Management Services Agreement by Rafferty thereunder.

Rafferty shall not be liable to the Trust or any shareholder for anything done or omitted by it, except acts or omissions involving willful misfeasance, bad faith, negligence or reckless disregard of the duties imposed upon it by its agreement with the Trust or for any losses that may be sustained in the purchase, holding or sale of any security.

Pursuant to Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Trust, Rafferty and the Fund's distributor have adopted Codes of Ethics. These codes permit portfolio managers and other access persons of the Fund to invest in securities that may be owned by the Fund, subject to certain restrictions.

Subadviser

Under a separate Investment Subadvisory Agreement ("Subadvisory Agreement") between Rafferty and Hilton, subject to oversight by Rafferty and the Board, Hilton provides investment management and asset allocation advice to the Fund for a fee payable by Rafferty. Rafferty and Hilton are affiliated companies under common control by Michael Rafferty and Kathleen Rafferty Hay through their ownership in Rafferty Holdings, LLC. Hilton implements the Fund's investment strategy by making investment decisions for the Fund and by placing all brokerage orders for the purchase and sale of those securities.

For the investment subadvisory services provided to the Fund, Rafferty pays Hilton a subadvisory fee at an annualized rate of 0.59% of the Fund's average daily net assets from the advisory fee Rafferty received from the Fund.

The table below shows the amount of subadvisory fees incurred by the Fund for the fiscal periods noted below.

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| | |
|:---|:---|
| **Hilton Tactical Income Fund** | &nbsp;&nbsp; **Subadvisory Fees** <br> **Incurred**<br>|
| Year Ended August 31, 2025 | $782710 |
| Year Ended August 31, 2024 | $727044 |
| Year Ended August 31, 2023 | $716290 |

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The Subadvisory Agreement was initially approved by the Board (including all Independent Trustees) and Rafferty, as the sole shareholder of the Fund, in compliance with the 1940 Act. The Subadvisory Agreement continued in force for an initial two-year period, and now must be approved each year by (1) a vote, cast in person at a meeting called for that purpose, of a majority of those Trustees who are not "interested persons" of Rafferty, Hilton or the Trust; and by (2) the majority vote of either the full Board or the vote of a majority of the outstanding shares of Fund. The Subadvisory Agreement automatically terminates on assignment and is terminable on not less than a 60-day written notice by Rafferty or a 90-day written notice by Hilton. Under the terms of the Advisory Agreement, Rafferty automatically becomes responsible for the obligations of Hilton upon termination of the Subadvisory Agreement.

Portfolio Managers

C. Craig O'Neill, Alexander D. Oxenham, and Timothy Reilly of Hilton serve as the portfolio managers of the Fund (the "Portfolio Managers").

In addition to the Fund, Mr. O'Neill, Mr. Oxenham, and Mr. Reilly manage the following other accounts as of August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Accounts** | &nbsp;&nbsp; **Total Number** <br> **of Accounts**<br>| **Total Assets**<br> **(in millions)**<br>| &nbsp;&nbsp; **Total Number of** <br> **Accounts with** <br> **Performance** <br> **Based Fees**<br>| &nbsp;&nbsp; **Total Assets** <br> **of Accounts with** <br> **Performance** <br> **Based Fees**<br>|
| Registered Investment Companies | 1 | &nbsp;&nbsp; $129 | 0 | $0 |
| Other Pooled Investment Vehicles | 1 | &nbsp;&nbsp; $0 | 0 | $0 |
| Other Accounts | 7137 | &nbsp;&nbsp; $2941 | 0 | $0 |

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The Portfolio Managers' management of "other accounts" may give rise to potential conflicts of interest in connection with the management of the Fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby a Portfolio Manager could favor one account over another. Another potential conflict could include the Portfolio Managers' knowledge about the size, timing and possible market impact of Fund trades, whereby the Portfolio Managers could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, the Adviser has established policies and procedures to ensure that the purchase and sale of securities among all accounts it manages are fairly and equitably allocated.

Hilton compensates the Portfolio Managers for their management of the Fund. The Portfolio Managers' compensation is based on a combination of competitive base salary and as each is a shareholder of Hilton, a share of the profits from the operations of the firm. The Portfolio Managers' entire compensation package is paid by Hilton and not by any client account or the Adviser.

Each Portfolio Manager owns over $100,000 of the Fund.

Proxy Voting Policies and Procedures

The Board has adopted policies and procedures with respect to voting proxies (the "Proxy Policy") related to portfolio securities of the Fund. Pursuant to these policies and procedures the Board of the Trust has delegated responsibility for voting such proxies to the Adviser, subject to the Board's continuing oversight.

The Proxy Policy is intended to protect shareholder interests and comply with applicable state and federal corporate and securities laws. It applies to any voting rights with respect to securities held in accounts of the Fund. To assist the Adviser in its responsibility for voting proxies and administering the overall proxy voting process, the Adviser has retained Institutional Shareholder Services ("ISS") as an expert in the proxy voting and corporate governance area. ISS is a subsidiary of Vestar Capital Partners VI, L.P.; a leading U.S. middle market private equity firm. The services provided by ISS include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. ISS issues monthly reports which are reviewed by the Adviser to assure proxies are being voted properly. The Adviser and ISS also perform checks on a quarterly basis to match the voting activity with available shareholder meeting information. ISS' management meets on a regular basis to discuss its approach to new developments and amendments to existing proxy voting guidelines (the "Guidelines"). Information on such developments and amendments are then provided to the Adviser.

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The Guidelines are maintained and implemented by ISS and are an extensive list of common proxy voting issues with recommended voting actions based on the overall goal of achieving maximum shareholder value and protection of shareholder interests and rights. Generally, proxies are voted in accordance with the voting recommendations contained in the Guidelines. If necessary, the Adviser will be consulted by ISS on non-routine issues. Proxy issues and factors considered when resolving proxy issues in the Guidelines include, but are not limited to:

● Election of Directors – considering all factors such as director qualifications, term of office and age limits.

● Proxy Contests – considering factors such as voting nominees in contested elections and reimbursement of expenses.

● Election of Auditors – considering factors such as independence and reputation of the auditing firm.

● Proxy Contest Defenses – considering factors such as board structure and cumulative voting.

● Tender Offer Defenses – considering factors such as poison pills (stock purchase rights plans) and fair price provisions.

● Miscellaneous Governance Issues – considering factors such as confidential voting and equal access.

● Capital Structure – considering factors such as common stock authorization and stock distributions.

● Executive and Director Compensation – considering factors such as performance goals and employee stock purchase plans.

● State of Incorporation – considering factors such as state takeover statutes and voting on reincorporation proposals.

● Mergers and Corporate Restructuring – considering factors such as spin-offs and asset sales.

● Mutual Fund Proxy Voting – considering factors such as election of directors and proxy contests.

● Social and Corporate Responsibility Issues – considering factors such as social, environmental and labor issues.

A full description of the Guidelines and voting policy is maintain by the Adviser, and a complete copy of the Guidelines is available without charge, upon request by calling the Adviser at (800) 851-0511.

<u>Conflicts of Interest</u>

From time to time, proxy issues may pose a material conflict of interest between the Fund's shareholders and the Adviser, the Distributor or any affiliates thereof. Due to the limited nature of the Adviser's activities (*e.g.*, no underwriting business, no publicly-traded affiliates, no investment banking activities, and no research recommendations), conflicts of interest are likely to be infrequent. Nevertheless, it shall be the duty of the Adviser to monitor potential conflicts of interest. In the event a conflict of interest arises, the Adviser will be responsible for voting the proxy, will communicate how the proxy should be voted to ISS, and will confirm ISS voted the proxy consistent with the Adviser's direction.

<u>Proxy Voting Recordkeeping</u> 

The Adviser, with the assistance of ISS, maintains for a period of at least five years, a record of each proxy statement received and materials that were considered when the proxy was voted during the calendar year. Information on how the Fund voted proxies relating to portfolio securities for the 12-month (or shorter) period ended June 30 is available without charge, upon request, by calling the Adviser at (800) 851-0511 or on the SEC's website at <u>http://www.sec.gov</u>.

Fund Administrator, Fund Accountant, Transfer Agent and Custodian

U.S. Bancorp Fund Services, LLC ("Administrator"), 615 East Michigan Street, Milwaukee, Wisconsin 53202, provides administrative, fund accounting and transfer agent services to the Fund. U.S. Bank, N.A., Custody Operations, 1555 N. River Center Drive, Suite 302, Milwaukee, Wisconsin, 53202, an affiliate of the Administrator, provides custodian services to the Fund.

Effective November 1, 2025, the Trust entered into an Amended and Restated Fund Servicing Agreement, pursuant to which the Administrator provides the Trust with certain administrative, accounting and transfer agency services. As compensation for these services, the Trust pays the Administrator a fee based on the Trust's total average daily net assets. The Administrator is also entitled to certain out-of-pocket expenses.

Prior to November 1, 2025, pursuant to an Administration Servicing Agreement between the Trust and the Administrator, and a Fund Accounting Servicing Agreement between the Trust and the Administrator, the Administrator provided the Trust with administrative and certain management services (other than investment advisory services), as well as accounting services, including portfolio accounting services, tax accounting services and financial reporting services. As compensation for these services, the Trust paid the Administrator a fee based on the Trust's total average daily net assets. The Administrator was also entitled to certain out-of-pocket expenses. Beginning November 1, 2024, the Adviser assumed payment of a portion of the Trust's fees. Effective November 1, 2025, the Administrator discontinued providing certain management (*e.g*. officer) services and tax accounting services to the Trust.

U.S. Bank N.A. ("Custodian") serves as the custodian of the Fund's assets. The Custodian holds and administers the assets in the Fund's portfolio. Prior to November 1, the Trust and Custodian were parties to a Custody Agreement. Effective November 1, 2025, the Custodian and Trust entered into an Amended and Restated Custody Agreement (together, the "Custody Agreements"). Pursuant to both Custody Agreements, the Custodian receives an annual fee based on the Trust's total average daily net assets. The Custodian also is entitled to certain out-of-pocket expenses.

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In addition, U.S. Bank N.A. and/or its affiliates may receive revenue from certain broker-dealers that are paid Rule 12b-1 or similar fees from funds in which the Fund invests. In recognition of this revenue, the Custodian and/or its affiliates have credited the Trust and may further credit the Trust in the future for fees otherwise payable by the Fund. The amount of fees paid by the Trust pursuant to the Agreements noted above, for the fiscal years indicated, is set forth in the table below.

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| | |
|:---|:---|
|  | **Fees paid to the Administrator**  |
| Year Ended August 31, 2025 | $14089 |
| Year Ended August 31, 2024 | $79423 |
| Year Ended August 31, 2023 | $65323 |

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\*The fees for the most recent fiscal year are lower than in previous years due to a decrease in the fee rate paid by the Fund under the Amended and Restated Fund Servicing Agreement, due to the more limited scope of services provided.

Distributor

ALPS Distributors, Inc., located at 1290 Broadway, Suite 1000, Denver, Colorado 80203, serves as the distributor ("Distributor") in connection with the continuous offering of the Fund's shares. The Distributor is a broker-dealer registered with the SEC under the Exchange Act and a member of the Financial Industry Regulatory Authority. The Distributor and participating dealers with whom it has entered into dealer agreements offer shares of the Fund as agents on a best-efforts basis and are not obligated to sell any specific number of shares.

Distribution Plan

Rule 12b-1 under the 1940 Act, as amended (the "Rule"), provides that an investment company may bear expenses of distributing its shares only pursuant to a plan adopted in accordance with the Rule. The Trustees have adopted a Rule 12b-1 Plan of Distribution (the "Investor Class Plan") for the Investor Class Shares pursuant to which the Investor Class Shares may pay certain expenses incurred in the distribution of its shares and the servicing and maintenance of existing shareholder accounts. The Distributor, as the Fund's principal underwriter, and Rafferty may have a direct or indirect financial interest in the Investor Class Plan or any related agreement.

Pursuant to the Investor Class Plan, the Investor Class Shares of the Fund may pay up to 1.00% of the Investor Class Shares' average daily net assets. The Board has currently authorized the Fund to pay Rule 12b-1 fees of 0.25% of the Investor Class Shares' average daily net assets.

The Institutional Class Shares do not pay Rule 12b-1 fees.

Under an agreement with the Fund, your Financial Advisor may provide services, as described in the Prospectus, and as described above, and receive Rule 12b-1 fees from the Investor Class Shares.

The Investor Class Plan was approved by the Trustees and the Independent Trustees of the Fund. In approving the Investor Class Plan, the Trustees determined that there is a reasonable likelihood that the Investor Class Plan will benefit the Fund and its shareholders. The Trustees will review quarterly and annually a written report provided by the Treasurer of the amounts expended under the Investor Class Plan and the purpose for which such expenditures were made.

The Investor Class Plan permits payments to be made by the Fund to the Distributor or other third parties for expenditures incurred in connection with the distribution of Fund shares to investors. The Distributor or other third parties are authorized to engage in advertising, the preparation and distribution of sales literature and other promotional activities on behalf of the Fund. In addition, the Investor Class Plan authorizes payments by the Fund to the Distributor or other third parties for the cost related to selling or servicing efforts, preparing, printing and distributing Fund prospectuses, statements of additional information, and shareholder reports to investors.

The table below shows the amount of Rule 12b-1 fees incurred and the allocation of such fees by the Fund's Investor Shares, for the fiscal year ended August 31, 2024.

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| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **(Investor Class)**<br> **12b-1 fees Incurred**<br>|
| $15918 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp; **Advertising** <br> **and** <br> **Marketing**<br>| **Printing** <br> **and** <br> **Postage**<br>| &nbsp;&nbsp; **Payment to** <br> **Distributor**<br>| &nbsp;&nbsp; **Payment to** <br> **Dealers**<br>| &nbsp;&nbsp; **Compensation** <br> **to Sales** <br> **Personnel**<br>| &nbsp;&nbsp; **Interest**<br> **Carrying,**<br> **or Other**<br> **Finance** <br> **Charges**<br>| &nbsp;&nbsp; **Other**<br> **Marketing** <br> **Expenses**<br>|
| Hilton Tactical Income Fund | $0 | &nbsp;&nbsp; $0 | $206 | $15712 | $0 | $0 | $0 |

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Independent Registered Public Accounting Firm

Ernst & Young LLP ("EY"), 700 Nicollet Mall, Suite 500, Minneapolis, Minnesota, 55402, is the independent registered public accounting firm for the Trust. The Financial Statements of the Fund for the fiscal period ended August 31, 2025, audited by EY, have been included in reliance on their report given on their authority as experts in accounting and auditing.

Legal Counsel

The Trust has selected K&L Gates LLP, 1601 K Street, N.W., Washington, DC 20006, as its legal counsel.

Determination of Net Asset Value

A fund's share price is known as its NAV. The Fund's share price is calculated as of the close of regular trading on the New York Stock Exchange ("NYSE"), usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition to these holidays, the Bond Market is not open on Columbus Day and Veterans' Day. The NYSE may close early on the business day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

Share price is calculated by dividing the Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." The Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations.

An equity security listed or traded on an exchange, domestic or foreign, is valued at its last sales price on the principal exchange prior to Valuation Time. Exchange-traded Funds are valued at the last sales price prior to the Valuation Time. Securities primarily traded on the NASDAQ Global Market<sup>®</sup> ("NASDAQ<sup>®</sup>") for which market quotations are readily available shall be valued using the NASDAQ<sup>®</sup> Official Closing Price ("NOCP") provided by NASDAQ<sup>®</sup> each Business Day. The NOCP is the most recently reported price as of 4:00:02 p.m. Eastern Time, unless that price is outside the range of the "inside" bid and asked price in that case, NASDAQ<sup>®</sup> will adjust the price to equal the inside bid or asked price, whichever is closer. Over-the counter securities are valued at the last sales price in the over-the-counter market.

Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time.

Exchange-traded options and options on futures are valued at the composite price using the National Best Bid and Offer quotes ("NBBO"). NBBO consists of the highest bid price and lowest asked price across any of the exchanges on which an option is quoted, thus providing a view across the entire U.S. options marketplace. Specifically, composite pricing looks at the last trades on exchanges where the options are traded. If there are no trades for the option on a given business day, the composite option pricing calculates the mean of the highest bid price and lowest ask price across the exchanges where the option is traded. Non-exchange traded options are valued at the mean between the last bid and asked quotations.

Dividend income and other distributions are recorded on the ex-distribution date.

Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies as described below.

For purposes of calculating its daily NAV, the Fund typically reflects changes in its holdings of portfolio securities on the first business day following a portfolio trade (commonly known as "T+1 accounting"). However, the Fund is permitted to include same day trades when calculating its NAV (commonly referred to as "trade date accounting") on days when the Fund receives substantial redemptions. Such redemptions can result in an adverse impact on the Fund's NAV when there is a disparity between the trade price and the closing price of the security. Thus, the Fund's use of trade date accounting is likely to lessen the impact of substantial redemptions on the Fund's NAV.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by

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the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that the Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as the Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

Redemptions

**Redemption In-Kind**

The Trust has filed a notice of election under Rule 18f-1 of the 1940 Act, which obligates the Fund to redeem shares for any shareholder for cash during any 90-day period up to $250,000 or 1% of the Fund's NAV, whichever is less. Any redemption beyond this amount also will be in cash unless the Trustees determine that further cash payments will have a material adverse effect on remaining shareholders. In such a case, the Fund will pay all or a portion of the remainder of the redemption in portfolio instruments, valued in the same way as the Fund determines NAV. The portfolio instruments will be selected in a manner that the Trustees deem fair and equitable. To the extent that the Fund redeems its shares in this manner, the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and the possibility of a lack of a liquid market for those securities. Shareholders who receive futures contracts or options on futures contracts in connection with a redemption in-kind may be responsible for making any margin payments due on those contracts.

**Redemptions by Telephone**

Shareholders may redeem shares of the Fund by telephone. When acting on verbal instructions believed to be genuine, the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees are not liable for any loss resulting from a fraudulent telephone transaction request and the investor will bear the risk of loss. In acting upon telephone instructions, these parties use procedures that are reasonably designed to ensure that such instructions are genuine, such as (1) obtaining some or all of the following information: account number, name(s) and social security number(s) registered to the account, and personal identification; (2) recording all telephone transactions; and (3) sending written confirmation of each transaction to the registered owner. To the extent that the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees do not employ such procedures, some or all of them may be liable for losses due to unauthorized or fraudulent transactions.

**Receiving Payment**

Payment of redemption proceeds typically will be made within one business day, but at least within seven days, following the Fund's receipt of your request (if received in good order as described below) for redemption. For investments that have been made by check or ACH, payment on redemption requests may be delayed until the transfer agent is reasonably satisfied that the purchase payment has been collected by the Trust (which may require up to 10 calendar days). To avoid redemption delays, purchases should be made by direct wire transfer.

A redemption request will be considered to be received in "good order" if:

● The dollar amount or number of shares and the class of shares to be redeemed and shareholder account number have been indicated;

● Any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account;

● Any written request is accompanied by certificates representing the shares that have been issued, if any, and the certificates

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have been endorsed for transfer exactly as the name or names appear on the certificates or an accompanying stock power has been attached; and

● The signatures on any written redemption request in excess of $100,000 or more and on any certificates for shares (or an accompanying stock power) have been guaranteed by a national bank, a state bank that is insured by the FDIC, a trust company or by any member firm of the New York, American, Boston, Chicago, Pacific or Philadelphia Stock Exchanges. Signature guarantees also will be accepted from savings banks and certain other financial institutions that are deemed acceptable by USBFS, as transfer agent, under its current signature guarantee program.

The right of redemption may be suspended or the date of payment postponed for any period during which (1) the NYSE is closed (other than customary weekend or holiday closings); (2) trading on the NYSE is restricted; (3) situations where an emergency exists as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets or disposal of the Fund's securities is not reasonably practicable; or (4) the SEC has issued an order for the protection of the Fund's shareholders.

**Redemption Fees**

The Fund is not suitable for purchase by active investors. The Fund is intended for long-term investment purposes only and discourages shareholders from engaging in "market-timing" or other types of excessive short-term trading that could adversely affect shareholder returns. Consequently, the Board has adopted policies to prevent frequent purchases and redemptions of shares of the Fund. In an effort to discourage short-term trading and defray costs related to such trading, the Board has approved a redemption fee of 1.00% on sales and exchanges (collectively "redemptions") of Investor Class and Institutional Class Shares of the Fund made within thirty (30) days of the date of purchase (including shares acquired through an exchange).

**Anti-Money Laundering**

The Fund is required to comply with various federal anti-money laundering laws and regulations. Consequently, the Fund may be required to "freeze" the account of a shareholder if the shareholder appears to be involved in suspicious activity or if certain account information matches information on government lists of known terrorists or other suspicious persons, or the Fund may be required to transfer the account or proceeds of the account to a government agency. In addition, pursuant to the Fund's Customer Identification Program, the Fund's transfer agent will complete a thorough review of all new opening account applications and will not transact business with any person or entity whose identity cannot be adequately verified.

Exchange Privilege

An exchange is effected through the redemption of the shares tendered for exchange and the purchase of shares being acquired at their respective NAVs as next determined following receipt by the Fund whose shares are being exchanged of (1) proper instructions and all necessary supporting documents; or (2) a telephone request for such exchange in accordance with the procedures set forth in the Prospectus and below. Telephone requests for an exchange received by the Fund before 4:00 p.m. Eastern Time will be effected at the close of regular trading on that day. Requests for an exchange received after the close of regular trading will be effected on the NYSE's next trading day. Due to the volume of calls or other unusual circumstances, telephone exchanges may be difficult to implement during certain time periods.

The Trust reserves the right to reject any order to acquire its shares through exchange or otherwise to restrict or terminate the exchange privilege at any time. In addition, the Trust may terminate this exchange privilege upon 60 days' notice.

Shareholder and Other Information

Each share of the Fund gives the shareholder one vote in matters submitted to shareholders for a vote. Each share of the Fund has equal voting rights, except that, in matters affecting only a particular series, only shares of that series are entitled to vote. Share voting rights are not cumulative, and shares have no preemptive or conversion rights. Shares are not transferable. As a Massachusetts business trust, the Trust is not required to hold annual shareholder meetings. Shareholder approval will be sought only for certain changes in a Trust's or the Fund's operation and for the election of Trustees under certain circumstances. Trustees may be removed by the Trustees or by shareholders at a special meeting. A special meeting of shareholders shall be called by the Trustees upon the written request of shareholders owning at least 10% of a Trust's outstanding shares.

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Dividends, Other Distributions and Taxes

The Tax Cuts and Jobs Act ("TCJA") made significant changes to the Code's rules for taxation of individuals and corporations, generally effective for taxable years beginning after December 31, 2017. Many of the changes applicable to individuals were made permanent by the One Big Beautiful Bill Act ("OBBBA"). The TCJA , as extended by OBBBA, made only minor changes to the RIC rules in the Code, but the changes affected shareholders and the Fund, including various investments that the Fund may make. Potential investors are urged to consult their own tax advisors for more detailed information.

**Dividends and other Distributions**

As stated in the Prospectus, the Fund declares and distributes dividends to its shareholders from its net investment income at least annually; for these purposes, net investment income includes dividends, accrued interest, and accretion of OID and market discount, less amortization of market premium and estimated expenses, and is calculated immediately prior to the determination of the Fund's NAV per share. The Fund also distributes its net short-term capital gain, if any, annually but may make more frequent distributions thereof if necessary to avoid income or excise taxes. The Fund may realize net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) and thus anticipates making annual distributions thereof. The Trustees may revise this distribution policy, or postpone the payment of distributions, if the Fund has or anticipates any large unexpected expense, loss, or fluctuation in net assets that, in the Trustees' opinion, might have a significant adverse effect on its shareholders.

**Taxes**

*<u>Taxation of Shareholders</u>*. Dividends (including distributions of the excess of net short-term capital gain over net long-term capital loss ("short-term gain")) the Fund distributes, if any, are taxable to its shareholders as ordinary income (at rates up to 37% for individuals), except to the extent they constitute "qualified dividend income" ("QDI") (as further described in the Prospectus), regardless of whether the dividends are reinvested in Fund shares or received in cash. Distributions of the Fund's net capital gain, if any, are taxable to its shareholders as long-term capital gains, regardless of how long they have held their Fund shares and whether the distributions are reinvested in Fund shares or received in cash.

A shareholder's redemption of Fund shares may result in a taxable gain, depending on whether the redemption proceeds are more or less than the shareholder's adjusted basis in the shares. An exchange of Fund shares for shares of another fund advised by Rafferty generally will have similar consequences. If Fund shares are redeemed at a loss after being held for six months or less, the loss will be treated as long-term, instead of short-term, capital loss to the extent of any capital gain distributions received on those shares. Investors also should be aware that if shares are purchased shortly before the record date for any dividend or capital gain distribution, the shareholder will pay full price for the shares and receive some portion of the purchase price back as a taxable distribution (with the tax consequences described in the Prospectus.)

*<u>Regulated Investment Company Status</u>*. The Fund is treated as a separate entity for federal tax purposes and intends to continue to qualify for treatment as a RIC. If the Fund so qualifies and satisfies the Distribution Requirement (defined below) for a taxable year, it will not be subject to federal income tax on the part of its investment company taxable income (generally consisting of net investment income, net short-term capital gain, and net gains and losses from certain foreign currency transactions, all determined without regard to any deduction for dividends paid) and net capital gain it distributes to its shareholders for that year.

To qualify for treatment as a RIC, the Fund must distribute to its shareholders for each taxable year at least the sum of 90% of its investment company taxable income ("Distribution Requirement") and 90% of its net exempt interest income and must meet several additional requirements. These requirements include the following: (1) the Fund must derive at least 90% of its gross income each taxable year from (a) dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from options, futures, or forward contracts) derived with respect to its business of investing in securities or those currencies, and (b) net income from an interest in a "qualified publicly traded partnership" ("QPTP") ("Income Requirement"); and (2) at the close of each quarter of the Fund's taxable year, (a) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities, with those other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets and that does not represent more than 10% of the issuer's outstanding voting securities (equity securities of QPTPs being considered voting securities for these purposes), and (b) not more than 25% of the value of its total assets may be invested in (i) securities (other than U.S. government securities or the securities of other RICs) of any one issuer, (ii) securities (other than securities of other RICs) of two or more issuers the Fund controls that are determined to be engaged in the same, similar, or related trades or businesses, or (iii) securities of one or more QPTPs (collectively, "Diversification Requirements"). The Internal Revenue Service ("IRS") has ruled that income from a derivative contract on a commodity index generally is not qualifying income ("Qualifying Income") for purposes of the Income Requirement.

Although the Fund intends to continue to satisfy all the foregoing requirements, there is no assurance that the Fund will be able to do so. The investment by the Fund primarily in options and futures positions entails some risk that it might fail to satisfy one or both of the Diversification Requirements. There is some uncertainty regarding the valuation of such positions

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for purposes of those requirements; accordingly, it is possible that the method of valuation the Fund uses, pursuant to which it would expect to be treated as satisfying the Diversification Requirements, would not be accepted in an audit by the IRS, which might apply a different method resulting in disqualification of the Fund.

If the Fund failed to qualify for treatment as a RIC for any taxable year, (1) it would be taxed on the full amount of its taxable income, including net capital gain, for that year at corporate income tax rates (up to 21%), (2) it would not be able to deduct for the distributions it makes to its shareholders, and (3) the shareholders would treat all those distributions, including distributions of net capital gain, as dividends -- that is, ordinary income, except for the part of those dividends that is QDI, which is subject to a maximum federal income tax rate of 20% for individuals -- to the extent of the Fund's earnings and profits; those dividends would be eligible for the dividends-received deduction available to corporations under certain circumstances. In addition, the Fund would be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying for RIC treatment. However, the Regulated Investment Company Modernization Act of 2010 provides certain savings provisions that enable a RIC to cure a failure to satisfy any of the Income and Diversification Requirements as long as the failure "is due to reasonable cause and not due to willful neglect" and the RIC pays a deductible tax calculated in accordance with those provisions and meets certain other requirements.

*<u>Excise Tax</u>*. The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gain net income for the one-year period ending on October 31 of that year, plus certain other amounts.

*<u>Income from Foreign Securities</u>*. Dividends and interest the Fund receives, and gains it realizes, on foreign securities may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield and/or total return on its securities. Tax conventions between certain countries and the United States may reduce or eliminate these foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors.

Gains or losses (1) from the disposition of foreign currencies, including forward currency contracts, (2) on the disposition of each foreign-currency-denominated debt security that are attributable to fluctuations in the value of the foreign currency between the dates of acquisition and disposition of the security, and (3) that are attributable to fluctuations in exchange rates that occur between the time the Fund accrues dividends, interest, or other receivables, or expenses or other liabilities, denominated in a foreign currency and the time the Fund actually collects the receivables or pays the liabilities, generally will be treated as ordinary income or loss. These gains or losses will increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders.

The Fund may invest in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in general, meets either of the following tests for a taxable year: (1) at least 75% of its gross income for the taxable year is passive; or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, the Fund will be subject to federal income tax on a portion of any "excess distribution" it receives on the stock of a PFIC or of any gain on its disposition of the stock (collectively, "PFIC income"), plus interest thereon, even if the Fund distributes the PFIC income as a dividend to its shareholders. The balance of the PFIC income will be included in the Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders. Fund distributions thereof will not be eligible for the 20% maximum federal income tax rate on individuals' QDI.

If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified electing fund" ("QEF"), then, in lieu of the foregoing tax and interest obligation, the Fund would be required to include in income each taxable year its pro rata share of the QEF's annual ordinary earnings and net capital gain — which the Fund probably would have to distribute to satisfy the Distribution Requirement and avoid imposition of the Excise Tax —even if the Fund did not receive those earnings and gain from the QEF. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof.

The Fund may elect to "mark to market" its stock in any PFIC. "Marking-to-market," in this context, means including in gross income each taxable year (and treating as ordinary income) the excess, if any, of the fair market value of the PFIC's stock over the Fund's adjusted basis therein as of the end of that year. Pursuant to the election, the Fund also would be allowed to deduct (as an ordinary, not a capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains with respect to that stock the Fund included in income for prior taxable years under the election. The Fund's adjusted basis in each PFIC's stock with respect to which it makes this election would be adjusted to reflect the amounts of income included and deductions taken thereunder.

*<u>Derivatives Strategies</u>*. The use of derivatives strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward contracts, involves complex rules that will determine for income tax purposes the amount, character and timing of recognition of the gains and losses the Fund realizes in connection therewith. Gains from the disposition of foreign currencies (except certain gains therefrom that may be excluded by future regulations), and gains from options, futures, and forward contracts the Fund derives with respect to its business of investing in securities or foreign currencies, will be treated as Qualifying Income. The Fund will monitor its transactions, make appropriate tax elections and make

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appropriate entries in its books and records when it acquires any foreign currency, option, futures contract, forward contract or hedged investment to mitigate the effect of these rules, seek to prevent its disqualification as a RIC and minimize the imposition of federal income and excise taxes.

Some futures contracts, foreign currency contracts that are traded in the interbank market, and "nonequity options" (*i.e.*, certain listed options, such as those on a "broad-based" securities index) — except any "securities futures contract" that is not a "dealer securities futures contract" (both as defined in the Code) and any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement — in which the Fund may invest may be subject to Code section 1256 (collectively "section 1256 contracts"). Section 1256 contracts that the Fund holds at the end of its taxable year must be "marked-to-market" (that is, treated as having been sold at that time for their fair market value) for federal income tax purposes, with the result that unrealized gains or losses will be treated as though they were realized. Sixty percent of any net gain or loss recognized on these deemed sales, and 60% of any net realized gain or loss from any actual sales of section 1256 contracts, will be treated as long-term capital gain or loss, and the balance will be treated as short-term capital gain or loss. These rules may operate to increase the amount that the Fund must distribute to satisfy the Distribution Requirement (*i.e.*, with respect to the portion treated as short-term capital gain), which will be taxable to its shareholders as ordinary income when distributed to them, and to increase the net capital gain the Fund recognizes, without in either case increasing the cash available to it. The Fund may elect not to have the foregoing rules apply to any "mixed straddle" (that is, a straddle, which the Fund clearly identifies in accordance with applicable regulations, at least one (but not all) of the positions of which are section 1256 contracts), although doing so may have the effect of increasing the relative proportion of short-term capital gain (taxable as ordinary income) and thus increasing the amount of dividends it must distribute. Section 1256 contracts also may be marked-to-market for purposes of the Excise Tax.

Code section 1092 (dealing with straddles) also may affect the taxation of options, futures and forward contracts in which the Fund may invest. That section defines a "straddle" as offsetting positions with respect to actively traded personal property; for these purposes, options, futures and forward contracts are positions in personal property. Under that section, any loss from the disposition of a position in a straddle may be deducted only to the extent the loss exceeds the unrecognized gain on the offsetting position(s) of the straddle. In addition, these rules may postpone the recognition of loss that otherwise would be recognized under the marked-to-market rules discussed above. The regulations under section 1092 also provide certain "wash sale" rules, which apply to transactions where a position is sold at a loss and a new offsetting position is acquired within a prescribed period, and "short sale" rules applicable to straddles. If the Fund makes certain elections, the amount, character and timing of recognition of gains and losses from the affected straddle positions would be determined under rules that vary according to the elections made. Because only a few of the regulations implementing the straddle rules have been promulgated, the tax consequences to the Fund of straddle transactions are not entirely clear.

If a call option written by the Fund lapses (*i.e.*, terminates without being exercised), the amount of the premium it received for the option will be short-term capital gain. If the Fund enters into a closing purchase transaction with respect to a written call option, it will have a short-term capital gain or loss based on the difference between the premium it received for the option it wrote and the premium it pays for the option it buys. If such an option is exercised and the Fund thus sells the securities or futures contract subject to the option, the premium the Fund received will be added to the exercise price to determine the gain or loss on the sale. If a call option purchased by the Fund lapses, it will realize short-term or long-term capital loss, depending on its holding period for the security or futures contract subject thereto. If the Fund exercises a purchased call option, the premium it paid for the option will be added to the basis in the subject securities or futures contract.

*<u>Income from Zero-Coupon and Payment-in-Kind Securities</u>*. The Fund may acquire zero-coupon or other securities (such as strips and delayed interest securities) issued with OID. As a holder of those securities, the Fund must include in its gross income the OID that accrues on the securities during the taxable year, even if it receives no corresponding payment on them during the year. Similarly, the Fund must include in its gross income securities it receives as "interest" on payment-in-kind securities. With respect to "market discount bonds" (*i.e.*, bonds purchased at a price less than their issue price plus the portion of OID previously accrued thereon), the Fund may elect to accrue and include in income taxable each year a portion of the bonds' market discount. Because the Fund annually must distribute substantially all of its investment company taxable income, including any accrued OID, market discount, and other non-cash income, to satisfy the Distribution Requirement and avoid imposition of the Excise Tax, the Fund may be required in a particular year to distribute as a dividend an amount that is greater than the total amount of cash it actually receives. Those distributions will be made from the Fund's cash assets or from the proceeds of sales of portfolio securities, if necessary. The Fund may realize capital gains or losses from those sales, which would increase or decrease its investment company taxable income and/or net capital gain.

*<u>Constructive Sales</u>*. If the Fund has an "appreciated financial position" -- generally, an interest (including an interest through an option, futures or forward contract, or short sale) with respect to any stock, debt instrument (other than "straight debt"), or partnership interest the fair market value of which exceeds its adjusted basis -- and enters into a "constructive sale" of the position, the Fund will be treated as having made an actual sale thereof, with the result that it will recognize gain at that time. A constructive sale generally consists of a short sale, an offsetting notional principal contract, or a futures or forward contract the Fund or a related person enters into with respect to the same or substantially identical property. In

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addition, if the appreciated financial position is itself a short sale or such a contract, acquisition of the underlying property or substantially identical property will be deemed a constructive sale. The foregoing will not apply, however, to the Fund's transaction during any taxable year that otherwise would be treated as a constructive sale if the transaction is closed within 30 days after the end of that year and the Fund holds the appreciated financial position unhedged for 60 days after that closing (*i.e.*, at no time during that 60-day period is the Fund's risk of loss regarding that position reduced by reason of certain specified transactions with respect to substantially identical or related property, such as having an option to sell, being contractually obligated to sell, making a short sale, or granting an option to buy substantially identical stock or securities).

\* \* \* \* \*

The foregoing is only a general summary of some of the important federal income tax considerations generally affecting the Fund. No attempt is made to present a complete explanation of the federal tax treatment of the Fund's activities, and this discussion is not intended as a substitute for careful tax planning. Accordingly, potential investors are urged to consult their own tax advisers for more detailed information and for information regarding any state, local, or foreign taxes applicable to the Fund and to distributions therefrom.

*<u>Capital Loss Carryforwards</u>*. As of August 31, 2025, the Fund had no short-term or long-term capital loss carryforwards on a tax basis. The Fund utilized $1,930,567 of prior year capital losses.

Pursuant to the Regulated Investment Company Modernization Act of 2010, capital losses sustained in taxable years beginning after December 22, 2010, will not expire and may be carried over without limitation.

Financial Statements

The Fund's financial statements for the fiscal year ended August 31, 2025, are incorporated herein by reference from the Fund's Annual Financial Statements and Additional Information dated August 31, 2025.

To receive a copy of the Prospectus or Annual or Semi-Annual Financial Statements and Additional Information, without charge, write to or call the Trust at the contact information listed below:

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| | |
|:---|:---|
| Write to: | Direxion Funds |
|  | 535 Madison Avenue<br> 37<sup>th</sup> Floor<br>|
|  | New York, New York 10022 |
| Call: | (800) 851-0511 |
| By Internet: | www.direxion.com |

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**APPENDIX A**

**Description of Corporate Bond Ratings**

Moody's Investors Service and S&P Global Ratings are two prominent independent rating agencies that rate the quality of bonds. Following are expanded explanations of the ratings shown in the Prospectus and this SAI.

***Moody's Investors Service – Global Long-Term Ratings***

Ratings assigned on Moody's global long-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Moody's defines credit risk as the risk that an entity may not meet its contractual financial obligations as they come due and any estimated financial loss in the event of default or impairment. The contractual financial obligations addressed by Moody's ratings are those that call for, without regard to enforceability, the payment of an ascertainable amount, which may vary based upon standard sources of variation (e.g., floating interest rates), by an ascertainable date. Moody's rating addresses the issuer's ability to obtain cash sufficient to service the obligation, and its willingness to pay. Moody's ratings do not address non-standard sources of variation in the amount of the principal obligation (e.g., equity indexed), absent an express statement to the contrary in a press release accompanying an initial rating. Long-term ratings are assigned to issuers or obligations with an original maturity of eleven months or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment. Moody's issues ratings at the issuer level and instrument level. Typically, ratings are made publicly available although private and unpublished ratings may also be assigned.

**Aaa**: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa**: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A**: Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa**: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba**: Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B**: Obligations rated B are considered speculative and are subject to high credit risk.

**Caa**: Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca**: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C**: Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.\*

\* By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

***Moody's Investors Service – National Scale Long-Term Ratings***

Moody's long-term National Scale Ratings (NSRs) are opinions of the relative creditworthiness of issuers and financial obligations within a particular country. NSRs are not designed to be compared among countries; rather, they address relative credit risk within a given country. Moody's assigns national scale ratings in certain local capital markets in which investors have found the global rating scale provides inadequate differentiation among credits or is inconsistent with a rating scale already in common use in the country. In each specific country, the last two characters of the rating indicate the country in which the issuer is located or the financial obligation was issued (*e.g.*, Aaa.ke for Kenya).

**Aaa.n**: Issuers or issues rated Aaa.n demonstrate the strongest creditworthiness relative to other domestic issuers and issuances.

**Aa.n**: Issuers or issues rated Aa.n demonstrate very strong creditworthiness relative to other domestic issuers and issuances.

**A.n**: Issuers or issues rated A.n present above-average creditworthiness relative to other domestic issuers and issuances.

**Baa.n**: Issuers or issues rated Baa.n represent average creditworthiness relative to other domestic issuers and issuances.

**Ba.n**: Issuers or issues rated Ba.n demonstrate below-average creditworthiness relative to other domestic issuers and issuances.

**B.n**: Issuers or issues rated B.n demonstrate weak creditworthiness relative to other domestic issuers and issuances.

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**Caa.n**: Issuers or issues rated Caa.n demonstrate very weak creditworthiness relative to other domestic issuers and issuances.

**Ca.n**: Issuers or issues rated Ca.n demonstrate extremely weak creditworthiness relative to other domestic issuers and issuances.

**C.n**: Issuers or issues rated C.n demonstrate the weakest creditworthiness relative to other domestic issuers and issuances.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

***S&P Global Ratings – Long-Term Issue Credit Ratings\****

An S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&P Global Ratings' view of the obligor's capacity and willingness to meet its financial commitments as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. Issue credit ratings can be either long-term or short-term. Short-term issue credit ratings are generally assigned to those obligations considered short-term in the relevant market, typically with an original maturity of no more than 365 days. Short-term issue credit ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. We would typically assign a long-term issue credit rating to an obligation with an original maturity of greater than 365 days. However, the ratings we assign to certain instruments may diverge from these guidelines based on market practices.

Issue credit ratings are based, in varying degrees, on S&P Global Ratings' analysis of the following considerations:

● The likelihood of payment--the capacity and willingness of the obligor to meet its financial commitments on an obligation in accordance with the terms of the obligation;

● The nature and provisions of the financial obligation, and the promise we impute; and

● The protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

An issue rating is an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

**AAA**: An obligation rated 'AAA' has the highest rating assigned by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is extremely strong.

**AA**: An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitments on the obligation is very strong.

**A**: An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitments on the obligation is still strong.

**BBB**: An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor's capacity to meet its financial commitments on the obligation.

**BB; B; CCC; CC; and C**: Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposure to adverse conditions.

**BB**: An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor's inadequate capacity to meet its financial commitments on the obligation.

**B**: An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments on the obligation.

**CCC**: An obligation rated 'CCC' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.

**CC**: An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.

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**C**: An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared with obligations that are rated higher.

**D**: An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within the next five business days in the absence of a stated grace period or within the earlier of the stated grace period or the next 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

\*Ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.

***Moody's Investors Service – Municipal Short Term Debt and Demand Obligation Ratings***

We use the global short-term Prime rating scale for commercial paper issued by US municipalities and nonprofits. These commercial paper programs may be backed by external letters of credit or liquidity facilities, or by an issuer's self-liquidity.

For other short-term municipal obligations, we use one of two other short-term rating scales, the Municipal Investment Grade (MIG) and Variable Municipal Investment Grade (VMIG) scales discussed below.

We use the MIG scale for US municipal cash flow notes, bond anticipation notes and certain other short-term obligations, which typically mature in three years or less.

**MIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2**: This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3**: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG**: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

For variable rate demand obligations (VRDOs), Moody's assigns both a long-term rating and a short-term payment obligation rating. The long-term rating addresses the issuer's ability to meet scheduled principal and interest payments. The short-term payment obligation rating addresses the ability of the issuer or the liquidity provider to meet any purchase price payment obligation resulting from optional tenders ("on demand") and/or mandatory tenders of the VRDO. The short-term payment obligation rating uses the VMIG scale. Transitions of VMIG ratings with conditional liquidity support differ from transitions of Prime ratings reflecting the risk that external liquidity support will terminate if the issuer's long-term rating drops below investment grade.

For VRDOs, we typically assign a VMIG rating if the frequency of the payment obligation is less than every three years. If the frequency of the payment obligation is less than three years, but the obligation is payable only with remarketing proceeds, the VMIG short-term rating is not assigned and it is denoted as "NR."

Industrial development bonds in the US where the obligor is a corporate may carry a VMIG rating that reflects Moody's view of the relative likelihood of default and loss. In these cases, liquidity assessment is based on the liquidity of the corporate obligor.

**VMIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 2**: This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 3**: This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections.

**SG**: This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have a sufficiently strong short-term rating or may lack the structural or legal protections.

***S&P Global Ratings – Municipal Short-Term Note Ratings***

An S&P Global Ratings U.S. municipal note rating reflects S&P Global Ratings opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P Global Ratings analysis will review the following considerations:

● Amortization schedule--the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

● Source of payment--the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

**SP-1**: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2**: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3**: Speculative capacity to pay principal and interest.

**D**: 'D' is assigned upon failure to pay the note when due, completion of a distressed debt restructuring, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.

***Moody's Investors Service – Global Short Term Rating Scale***

Ratings assigned on Moody's global short-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.

**P-1:** Ratings of Prime-1 reflect a superior ability to repay short-term obligations.

**P-2:** Ratings of Prime-2 reflect a strong ability to repay short-term obligations.

**P-3:** Ratings of Prime-3 reflect an acceptable ability to repay short-term obligations.

**NP:** Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

***S&P Global Ratings –Short-Term Issue Credit Ratings***

**A-1**: A short-term obligation rated 'A-1' is rated in the highest category by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitments on these obligations is extremely strong.

**A-2**: A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory.

**A-3**: A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.

**B**: A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial commitments.

**C**: A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.

**D**: A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example, due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, 'AAA/A-1+' or 'A-1+/A-1'). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, 'SP-1+/A-1+').

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Direxion Funds

Statement of Additional Information

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

www.direxion.com

The Direxion Funds (the "Trust") is an investment company that offers shares of a variety of mutual funds to the public. This Statement of Additional Information ("SAI") relates to the Investor Class Shares of the Fund listed below.

**Direxion Monthly High Yield Bull 1.2X Fund**

**Investor Class (DXHYX)**

**The fund offered in this SAI (the "Fund") seeks *calendar month leveraged* investment results and is riskier than most mutual funds because the Fund seeks 1.2 times the calendar month performance of a respective underlying index.** 

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Investors in the Fund should:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**

**understand the risks associated with the use of leverage;**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**

**understand the consequences of seeking calendar month leveraged investment results; and**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**

**intend to actively monitor and manage their investments.**

**Investors who do not understand the Fund or do not intend to actively manage and monitor their investments should not buy the Fund.**

**There is no assurance that the Fund will achieve its investment objective and an investment in the Fund could lose money. No single Fund is a complete investment program.**

**An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 120% exposure to the underlying index from that point until the end of the month. The actual exposure is a function of the performance of the underlying index from the end of the prior calendar month to an investor's purchase date. If a Fund's shares are held for a period other than a calendar month, the Fund's performance is likely to deviate from 120% of the underlying index's performance for the period the Fund is held. This deviation will increase with higher underlying index volatility and longer holding periods.**

This SAI, dated December 29, 2025, is not a prospectus. It should be read in conjunction with the Fund's prospectus dated December 29, 2025 ("Prospectus"). This SAI is incorporated by reference into the Prospectus. In other words, it is legally part of the Prospectus. To receive a copy of the Prospectus, without charge, write or call the Trust at the address or telephone number listed above.

December 29, 2025

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**Table of Contents** 

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| | |
|:---|:---|
|  | Page |
| [The Direxion Funds](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_1) | 1  |
| [Classification of the Fund](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_1) | 1  |
| [Investment Policies and Techniques](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_1) | 1  |
| [Asset-Backed Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_1) | 1  |
| [Bank Obligations](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_2) | 2  |
| [Caps, Floors and Collars](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_2) | 2  |
| [Corporate Debt Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_2) | 2  |
| [Cybersecurity Risk](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_3) | 3  |
| [Depositary Receipts](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_3) | 3  |
| [Equity Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_4) | 4  |
| [Foreign Currencies](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_4) | 4  |
| [Foreign Currency Exchange-Related Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_6) | 6  |
| [Foreign Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_7) | 7  |
| [Hybrid Instruments](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_15) | 15  |
| [Illiquid Investments and Restricted Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_16) | 16  |
| [Indexed Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_16) | 16  |
| [Interest Rate Risk](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_16) | 16  |
| [Junk Bonds](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_17) | 17  |
| [Mortgage-Backed Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_17) | 17  |
| [Municipal Obligations](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_18) | 18  |
| [Futures Contracts, Options, and Other Derivative Strategies](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_19) | 19  |
| [Other Investment Companies](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_24) | 24  |
| [Repurchase Agreements](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_25) | 25  |
| [Reverse Repurchase Agreements](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_26) | 26  |
| [Short Sales](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_26) | 26  |
| [Swap Agreements](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_26) | 26  |
| [Unrated Debt Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_31) | 31  |
| [U.S. Government Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_31) | 31  |
| [U.S. Government Sponsored Enterprises](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_32) | 32  |
| [When-Issued Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_32) | 32  |
| [Zero-Coupon, Payment-In-Kind and Strip Securities](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_32) | 32  |
| [Other Investment Risks and Practices](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_33) | 33  |
| [Securities Lending](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_33) | 33  |
| [Correlation and Tracking Risk](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_34) | 34  |
| [Leverage](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_34) | 34  |
| [Investment Restrictions](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_36) | 36  |
| [Portfolio Transactions and Brokerage](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_36) | 36  |
| [Portfolio Holdings Information](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_38) | 38  |
| [Management of the Trust](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_38) | 38  |
| [The Board of Trustees](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_38) | 38  |
| [Risk Oversight](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_38) | 38  |
| [Board Structure and Related Matters](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_39) | 39  |
| [Board Committees](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_41) | 41  |
| [Principal Officers of the Trust](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_42) | 42  |

---

i

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| | |
|:---|:---|
|  | Page |
| [Principal Shareholders, Control Persons and Management Ownership](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_44) | 44  |
| [Investment Adviser](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_45) | 45  |
| [Portfolio Managers](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_46) | 46  |
| [Proxy Voting Policies and Procedures](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_47) | 47  |
| [Fund Administrator, Fund Accountant, Transfer Agent and Custodian](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_48) | 48  |
| [Distributor](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_48) | 48  |
| [Distribution Plan and Service Fees](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_48) | 48  |
| [Independent Registered Public Accounting Firm](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_49) | 49  |
| [Legal Counsel](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_49) | 49  |
| [Determination of Net Asset Value](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_49) | 49  |
| [Redemptions](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_50) | 50  |
| [Redemption In-Kind](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_50) | 50  |
| [Redemptions by Telephone](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_51) | 51  |
| [Receiving Payment](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_51) | 51  |
| [Anti-Money Laundering](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_51) | 51  |
| [Exchange Privilege](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_51) | 51  |
| [Shareholder and Other Information](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_52) | 52  |
| [Dividends, Other Distributions and Taxes](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_52) | 52  |
| [Dividends and other Distributions](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_52) | 52  |
| [Taxes](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_52) | 52  |
| [Financial Statements](#xx_05bd4e7e-ee2e-43c1-9ac9-d41542ca7253_55) | 55  |
| [APPENDIX A](#xx_3fe47e84-580b-4fdd-94e1-392443dff8b5_1) | A-1 |

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ii

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The Direxion Funds

The Trust is a Massachusetts business trust organized on June 6, 1997 and is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of 8 separate series.

This SAI relates to the Investor Class Shares of the Direxion Monthly High Yield Bull 1.2X Fund (the "Fund").

There is no assurance that the Fund will achieve its investment objectives and an investment in the Fund could lose money. The Fund is not a complete investment program. The Fund offers Investor Class shares. Investor Class shares are designed for sale directly to investors without a sales charge. The Investor Class of the Fund is subject to fees under Rule 12b-1 of the 1940 Act.

Classification of the Fund

The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. This means it has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer or the credit of a single counterparty, and the Fund may be more susceptible to any single economic, political or regulatory occurrence than a diversified company.

Investment Policies and Techniques

The Fund seeks to provide calendar month leveraged investment results, before fees and expenses, which correspond to the performance of the Solactive High Yield Beta Index (the "Index"). The Fund attempts to provide investment results that correlate positively to the return of the Index, meaning the Fund attempts to move in the same direction as the Index. For example, the monthly target for the Fund is 120% of the calendar month performance of the Index. If, over a given calendar month, the Index gains 1%, the Fund is designed to gain approximately 1.2% (which is equal to 120% of 1%). Conversely, if the Index loses 1% over a given calendar month, the Fund is designed to lose approximately 1.2%.

The Fund's investment objective is a non-fundamental policy of the Fund that may be changed by the Board without shareholder approval.

Subject to the limitations described in the "Investment Restrictions" section, the Fund may engage in the investment strategies discussed below.

**Defensive Policy**. Generally, the Fund pursues its investment objective regardless of market conditions and does not take defensive positions.

Asset-Backed Securities

The Fund may invest in asset-backed securities of any rating or maturity. Asset-backed securities are securities issued by trusts and special purpose entities that are backed by pools of assets, such as automobile and credit-card receivables and home equity loans, which pass through the payments on the underlying obligations to the security holders (less servicing fees paid to the originator or fees for any credit enhancement). Typically, the originator of the loan or accounts receivable paper transfers it to a specially created trust, which repackages it as securities with a minimum denomination and a specific term. The securities are then privately placed or publicly offered. Examples include certificates for automobile receivables and so-called plastic bonds, backed by credit card receivables.

The value of an asset-backed security is affected by, among other things, changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans and the financial institution providing any credit enhancement. Payments of principal and interest passed through to holders of asset-backed securities are frequently supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or by having a priority to certain of the borrower's other assets. The degree of credit enhancement varies, and generally applies to only a portion of the asset-backed security's par value. Value is also affected if any credit enhancement has been exhausted.

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Bank Obligations

*<u>Money Market Instruments</u>*. The Fund may invest in bankers' acceptances, certificates of deposit, demand and time deposits, savings shares and commercial paper of domestic banks and savings and loans that have assets of at least $1 billion and capital, surplus, and undivided profits of over $100 million as of the close of their most recent fiscal year, or instruments that are insured by the Bank Insurance Fund or the Savings Institution Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). The Fund also may invest in high quality, short-term, corporate debt obligations, including variable rate demand notes, having terms-to-maturity of less than 397 days. Because there is no secondary trading market in demand notes, the inability of the issuer to make required payments could impact adversely the Fund's ability to resell when it deems advisable to do so.

The Fund may invest in foreign money market instruments, which typically involve more risk than investing in U.S. money market instruments. See "Foreign Securities" below. These risks include, among others, higher brokerage commissions, less public information, and less liquid markets in which to sell and meet large shareholder redemption requests.

*<u>Bankers' Acceptances</u>*. Bankers' acceptances generally are negotiable instruments (time drafts) drawn to finance the export, import, domestic shipment or storage of goods. They are termed "accepted" when a bank writes on the draft its agreement to pay it at maturity, using the word "accepted." The bank is, in effect, unconditionally guaranteeing to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset, or it may be sold in the secondary market at the going rate of interest for a specified maturity.

*<u>Certificates of Deposit ("CDs")</u>*. The FDIC is an agency of the U.S. government that insures the deposits of certain banks and savings and loan associations up to $250,000 per deposit. The interest on such deposits may not be insured to the extent this limit is exceeded. Current federal regulations also permit such institutions to issue insured negotiable CDs in amounts of $250,000 or more without regard to the interest rate ceilings on other deposits. To remain fully insured, these investments must be limited to $250,000 per insured bank or savings and loan association.

*<u>Commercial Paper</u>*. Commercial paper includes notes, drafts or similar instruments payable on demand or having a maturity at the time of issuance not exceeding nine months, exclusive of days of grace or any renewal thereof. The Fund may invest in commercial paper rated A-l or A-2 by Standard & Poor's<sup>®</sup> Ratings Services ("S&P<sup>®</sup>") or Prime-1 or Prime-2 by Moody's Investors Service<sup>®</sup>, Inc. ("Moody's"), and in other lower quality commercial paper.

In March 2023, the shut-down of certain financial institutions raised economic concerns over disruption in the U.S. banking system. There can be no certainty that the actions taken by the U.S. government to strengthen public confidence in the U.S. banking system will be effective in mitigating the effects of financial institution failures on the economy and restoring public confidence in the U.S. banking system.

Caps, Floors and Collars

The Fund may enter into caps, floors and collars relating to securities, interest rates or currencies. In a cap or floor, the buyer pays a premium (which is generally, but not always, a single up-front amount) for the right to receive payments from the other party if, on specified payment dates, the applicable rate, index or asset is greater than (in the case of a cap) or less than (in the case of a floor) an agreed level, for the period involved and the applicable notional amount. A collar is a combination instrument in which the same party buys a cap and sells a floor. Depending upon the terms of the cap and floor comprising the collar, the premiums will partially, or entirely, offset each other. The notional amount of a cap, collar or floor is used to calculate payments, but is not itself exchanged. The Fund may be both a buyer and seller of these instruments. In addition, the Fund may engage in combinations of put and call options on securities (also commonly known as collars), which may involve physical delivery of securities. Like swaps, caps, floors and collars are very flexible products. The terms of the transactions entered by the Fund may vary from the typical examples described here.

Corporate Debt Securities

The Fund may invest in investment grade corporate debt securities of any rating or maturity. Investment grade corporate bonds are those rated BBB or better by S&P<sup>®</sup> or Baa or better by Moody's. Securities rated BBB by S&P<sup>®</sup> are considered investment grade, but Moody's considers securities rated Baa to have speculative characteristics. See Appendix A for a description of corporate bond ratings. The Fund may also invest in unrated securities.

Corporate debt securities are fixed-income securities issued by businesses to finance their operations, although corporate debt instruments may also include bank loans to companies. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their maturities and secured or un-secured status. Commercial paper has the shortest term and is usually unsecured.

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The broad category of corporate debt securities includes debt issued by domestic or foreign companies of all kinds, including those with small-, mid- and large-capitalizations. Corporate debt may be rated investment-grade or below investment-grade and may carry variable or floating rates of interest.

Because of the wide range of types and maturities of corporate debt securities, as well as the range of creditworthiness of its issuers, corporate debt securities have widely varying potentials for return and risk profiles. For example, commercial paper issued by a large established domestic corporation that is rated investment grade may have a modest return on principal, but carries relatively limited risk. On the other hand, a long-term corporate note issued by a small foreign corporation from an emerging market country that has not been rated may have the potential for relatively large returns on principal, but carries a relatively high degree of risk.

Corporate debt securities carry both credit risk and interest rate risk. Credit risk is the risk that the Fund could lose money if the issuer of a corporate debt security is unable to pay interest or repay principal when it is due. Some corporate debt securities that are rated below investment grade are generally considered speculative because they present a greater risk of loss, including default, than higher-quality debt securities. The credit risk of a particular issuer's debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of higher-ranking senior securities may receive amounts otherwise payable to the holders of more junior securities. Interest rate risk is the risk that the value of certain corporate debt securities will tend to fall when interest rates rise. In general, corporate debt securities with longer terms tend to fall more in value when interest rates rise than corporate debt securities with shorter terms.

Cybersecurity Risk

The Fund may be susceptible to operational risks through breaches in cybersecurity. A cybersecurity incident may refer to either intentional or unintentional events that allow an unauthorized party to gain access to fund assets, investor data, or proprietary information, or cause the Fund or a service provider to suffer data corruption or lose operational functionality. A cybersecurity incident could, among other things, result in the loss or theft of investor data or funds, employees being unable to access electronic systems ("denial of services"), loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or remediation costs associated with system repairs. Any of these results could have a substantial impact on the Fund. For example, if a cybersecurity incident results in a denial of service, employees could be unable to access electronic systems to perform critical duties for the Fund, such as trading, NAV calculation, shareholder accounting or fulfillment of Fund share purchases and redemptions. Cybersecurity incidents could cause the Fund, Rafferty Asset Management, LLC ("Rafferty" or "Adviser") or any of its service providers to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures, or financial loss of a significant magnitude. They may also cause the Fund to violate applicable privacy and other laws. The Fund's Adviser and service providers have established risk management program and systems that seek to reduce the risks associated with cybersecurity, as well as business continuity plans in the event there is a cybersecurity breach. However, there is no guarantee that such efforts will succeed, especially since the Fund does not directly control the cybersecurity systems of the issuers of securities in which the Fund invests or the Fund's third party service providers (including the Fund's transfer agent and custodian).

Depositary Receipts

To the extent the Fund invests in stocks of foreign corporations, the Fund's investment in such stocks may also be in the form of depositary receipts or other securities convertible into securities of foreign issuers. Depository receipts are receipts, typically issued by a financial institution, with evidence of underlying securities issued by a non-U.S. issuer. Types of depositary receipts include American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs"). Depository receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted.

ADRs are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. Investments in ADRs have certain advantages over direct investment in the underlying foreign securities because: (i) ADRs are U.S. dollar-denominated investments that are easily transferable and for which market quotations are readily available, and (ii) issuers whose securities are represented by ADRs are generally subject to auditing, accounting and financial reporting standards similar to those applied to domestic issuers. By investing in ADRs rather than directly in the stock of foreign issuers outside the U.S. the Fund may avoid certain risks related to investing in foreign securities in non-U.S. markets, however, ADRs do not eliminate all risks inherent in investing in the securities of foreign issuers.

EDRs are receipts issued in Europe that evidence a similar ownership arrangement. GDRs are receipts issued throughout the world that evidence a similar arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities

------

markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world.

Depositary receipts may be purchased through "sponsored" or "unsponsored" facilities, in which the Fund may invest. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may establish an unsponsored facility without participation by the issuer of the depositary security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts of the deposited securities.

Fund investments in depositary receipts, which include ADRs, GDRs and EDRs, are deemed to be investments in foreign securities for purposes of the Fund's investment strategy.

Equity Securities

*<u>Common Stocks</u>*. The Fund may invest in common stocks. Common stocks represent the residual ownership interest in the issuer and are entitled to the income and increase in the value of the assets and business of the entity after all of its obligations and preferred stock are satisfied. Common stocks generally have voting rights. Common stocks fluctuate in price in response to many factors including historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.

*<u>Convertible Securities</u>*. The Fund may invest in convertible securities that may be considered high yield securities. Convertible securities include corporate bonds, notes and preferred stock that can be converted into or exchanged for a prescribed amount of common stock of the same or a different issue within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or dividends paid on preferred stock until the convertible stock matures or is redeemed, converted or exchanged. While no securities investment is without some risk, investments in convertible securities generally entail less risk than the issuer's common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed income security. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. While convertible securities generally offer lower interest or dividend yields than nonconvertible debt securities of similar quality, they do enable the investor to benefit from increases in the market price of the underlying common stock. When investing in convertible securities, the Fund may invest in the lowest credit rating category.

*<u>Preferred Stock</u>*. The Fund may invest in preferred stock. A preferred stock blends the characteristics of a bond and common stock. It can offer the higher yield of a bond and has priority over common stock in equity ownership, but does not have the seniority of a bond and its participation in the issuer's growth may be limited. Preferred stock has preference over common stock in the receipt of dividends and in any residual assets after payment to creditors if the issuer is dissolved. Although the dividend is set at a fixed annual rate, in some circumstances it can be changed or omitted by the issuer. When investing in preferred stocks, the Fund may invest in the lowest credit rating category.

*<u>Warrants and Rights</u>*. The Fund may purchase warrants and rights, which are instruments that permit the Fund to acquire, by subscription, the capital stock of a corporation at a set price, regardless of the market price for such stock. Warrants may be either perpetual or of limited duration, but they usually do not have voting rights or pay dividends. The market price of warrants is usually significantly less than the current price of the underlying stock. Thus, there is a greater risk that warrants might drop in value at a faster rate than the underlying stock.

Foreign Currencies

The Fund may invest directly and indirectly in foreign currencies. Investments in foreign currencies are subject to numerous risks not least being the fluctuation of foreign currency exchange rates with respect to the U.S. Dollar. Exchange rates fluctuate for a number of reasons.

*<u>Inflation</u>*. Exchange rates change to reflect changes in a currency's buying power. Different countries experience different inflation rates due to different monetary and fiscal policies, different product and labor market conditions, and a host of other factors.

*<u>Trade Deficits</u>*. Countries with trade deficits tend to experience a depreciating currency. Inflation may be the cause of a trade deficit, making a country's goods more expensive and less competitive and so reducing demand for its currency.

*<u>Interest Rates</u>*. High interest rates may raise currency values in the short term by making such currencies more attractive to investors. However, since high interest rates are often the result of high inflation, long-term results may be the opposite.

*<u>Budget Deficits and Low Savings Rates</u>*. Countries that run large budget deficits and save little of their national income tend to suffer a depreciating currency because they are forced to borrow abroad to finance their deficits. Payments of

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interest on this debt can inundate the currency markets with the currency of the debtor nation. Budget deficits also can indirectly contribute to currency depreciation if a government chooses inflationary measures to cope with its deficits and debt.

*<u>Political Factors</u>*. Political instability in a country can cause a currency to depreciate. Demand for a certain currency may fall if a country appears a less desirable place in which to invest and do business.

*<u>Government Control</u>*. Through their own buying and selling of currencies, the world's central banks sometimes manipulate exchange rate movements. In addition, governments occasionally issue statements to influence people's expectations about the direction of exchange rates, or they may instigate policies with an exchange rate target as the goal.

The value of the Fund's investments is calculated in U.S. Dollars each day that the New York Stock Exchange ("NYSE") is open for business. As a result, to the extent that the Fund's assets are invested in instruments denominated in foreign currencies and the currencies appreciate relative to the U.S. Dollar, the Fund's NAV per share as expressed in U.S. Dollars (and, therefore, the value of your investment) should increase. If the U.S. Dollar appreciates relative to the other currencies, the opposite should occur.

The currency-related gains and losses experienced by the Fund will be based on changes in the value of portfolio securities attributable to currency fluctuations only in relation to the original purchase price of such securities as stated in U.S. Dollars. Gains or losses on shares of the Fund will be based on changes attributable to fluctuations in the NAV of such shares, expressed in U.S. Dollars, in relation to the original U.S. Dollar purchase price of the shares. The amount of appreciation or depreciation in the Fund's assets also will be affected by the net investment income generated by the money market instruments in which the Fund invests and by changes in the value of the securities that are unrelated to changes in currency exchange rates.

The Fund may incur currency exchange costs when it sells instruments denominated in one currency and buys instruments denominated in another.

*<u>Currency Transactions</u>*. The Fund conducts currency exchange transactions on a spot basis. Currency transactions made on a spot basis are for cash at the spot rate prevailing in the currency exchange market for buying or selling currency. The Fund also enters into forward currency contracts. See "Futures Contracts, Options, and Other Derivative Strategies" section below. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into on the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A currency forward contract will tend to reduce or eliminate exposure to the currency that is sold, and increase exposure to the currency that is purchased, similar to when a fund sells a security denominated in one currency and purchases a security denominated in another currency. For example, the Fund may enter into a forward contract when it owns a security that is denominated in a non-U.S. currency and desires to "lock in" the U.S. dollar value of the security.

The Fund may invest in a combination of forward currency contracts and U.S. Dollar-denominated market instruments in an attempt to obtain an investment result that is substantially the same as a direct investment in a foreign currency-denominated instrument. This investment technique creates a "synthetic" position in the particular foreign-currency instrument whose performance the Adviser is trying to duplicate. For example, the combination of U.S. Dollar-denominated instruments with "long" forward currency exchange contracts creates a position economically equivalent to a money market instrument denominated in the foreign currency itself. Such combined positions are sometimes necessary when the money market in a particular foreign currency is small or relatively illiquid.

The Fund may invest in forward currency contracts to hedge either specific transactions (transaction hedging) or portfolio positions (position hedging). Transaction hedging is the purchase or sale of forward currency contracts with respect to specific receivables or payables of the Fund in connection with the purchase and sale of portfolio securities. Position hedging is the sale of a forward currency contract on a particular currency with respect to portfolio positions denominated or quoted in that currency.

The Fund may use forward currency contracts for position hedging if consistent with its policy of trying to expose its net assets to foreign currencies. The Fund is not required to enter into forward currency contracts for hedging purposes and it is possible that the Fund may not be able to hedge against a currency devaluation that is so generally anticipated that the Fund is unable to contract to sell the currency at a price above the devaluation level it anticipates. It also is possible, under certain circumstances, that the Fund may have to limit its currency transactions to qualify as a "regulated investment company" ("RIC") under Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended ("Code"). See "Dividends, Other Distributions and Taxes."

The Fund currently does not intend to enter into a forward currency contract with a term of more than one year, or to engage in position hedging with respect to the currency of a particular country to more than the aggregate market value (at the time the hedging transaction is entered into) of its portfolio securities denominated in (or quoted in or currently convertible into or directly related through the use of forward currency contracts in conjunction with money market instruments to) that particular currency.

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Under definitions adopted by the Commodity Futures Trading Commission ("CFTC") and SEC, non-deliverable forwards are considered swaps, and therefore are included in the definition of "commodity interests." Although non-deliverable forwards have historically been traded in the over-the-counter ("OTC") market, as swaps they may in the future be required to be centrally cleared and traded on public facilities. For more information on central clearing and trading of cleared swaps, see "Cleared swaps," "Risks of cleared swaps," "Comprehensive swaps regulation" and "Developing government regulation of derivatives." Currency forwards that qualify as deliverable forwards are not regulated as swaps for most purposes, and are not included in the definition of "commodity interests." However these forwards are subject to some requirements applicable to swaps, including reporting to swap data repositories, documentation requirements, and business conduct rules applicable to swap dealers. CFTC regulation of currency forwards, especially non-deliverable forwards, may restrict the Fund's ability to use these instruments in the manner described above or subject the investment manager to CFTC registration and regulation as a commodity pool operator ("CPO").

At or before the maturity of a forward currency contract, the Fund may either sell a portfolio security and make delivery of the currency, or retain the security and terminate its contractual obligation to deliver the currency by buying an "offsetting" contract obligating it to buy, on the same maturity date, the same amount of the currency. If the Fund engages in an offsetting transaction, it may later enter into a new forward currency contract to sell the currency.

If the Fund engages in an offsetting transaction, it will incur a gain or loss to the extent that there has been movement in forward currency contract prices. If forward prices go down during the period between the date the Fund enters into a forward currency contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. If forward prices go up, the Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell.

Since the Fund invests in money market instruments denominated in foreign currencies, it may hold foreign currencies pending investment or conversion into U.S. Dollars. Although the Fund values its assets daily in U.S. Dollars, it does not convert its holdings of foreign currencies into U.S. Dollars on a daily basis. The Fund will convert its holdings from time to time, however, and incur the costs of currency conversion. Foreign exchange dealers do not charge a fee for conversion, but they do realize a profit based on the difference between the prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, and offer to buy the currency at a lower rate if the Fund tries to resell the currency to the dealer.

*<u>Risks of currency forward contracts</u>.* Should exchange rates move in an unexpected manner, the Fund may not achieve the anticipated benefits of the transaction, or it may realize losses. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised, including because of the counterparty's bankruptcy or insolvency. While the Fund uses only counterparties that meet its credit quality standards, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited. Currency forward contracts may limit potential gain from a positive change in the relationship between the U.S. Dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not engaged in such contracts. Moreover, there may be an imperfect correlation between the Fund's portfolio holdings of securities denominated in a particular currency and the currencies bought or sold in the forward contracts entered into by the Fund. This imperfect correlation may cause the Fund to sustain losses that will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.

*<u>Foreign Currency Options</u>*. The Fund may invest in foreign currency-denominated securities and may buy or sell put and call options on foreign currencies. The Fund may buy or sell put and call options on foreign currencies either on exchanges or in the OTC market. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a foreign currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits which may limit the ability of the Fund to reduce foreign currency risk using such options. OTC options differ from traded options in that they are two-party contracts with price and other terms negotiated between buyer and seller, and generally do not have as much market liquidity as exchange-traded options.

Foreign Currency Exchange-Related Securities

*<u>Foreign Currency Warrants</u>*. Foreign currency warrants such as Currency Exchange Warrants<sup>SM</sup> ("CEWs<sup>SM</sup>") are warrants which entitle the holder to receive from their issuer an amount of cash (generally, for warrants issued in the United States, in U.S. Dollars) which is calculated pursuant to a predetermined formula and based on the exchange rate between a specified foreign currency and the U.S. Dollar as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time. Foreign currency warrants have been issued in connection with U.S. Dollar-denominated debt offerings by major corporate issuers in an attempt to reduce the foreign currency exchange risk which, from the point of view of prospective purchasers of the securities, is inherent in the international fixed-income marketplace. Foreign currency warrants may attempt to reduce the foreign exchange risk assumed by purchasers of a security

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by, for example, providing for a supplemental payment in the event that the U.S. Dollar depreciates against the value of a major foreign currency such as the Japanese yen or the Euro. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (*e.g.*, unless the U.S. Dollar appreciates or depreciates against the particular foreign currency to which the warrant is linked or indexed). Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges. Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. In the case of any exercise of warrants, there may be a time delay between the time a holder of warrants gives instructions to exercise and the time the exchange rate relating to exercise is determined, during which time the exchange rate could change significantly, thereby affecting both the market and cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be suspended permanently, which would result in the loss of any remaining "time value" of the warrants (*i.e.*, the difference between the current market value and the exercise value of the warrants), and, in the case the warrants were "out-of-the-money," in a total loss of the purchase price of the warrants.

Warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the Options Clearing Corporation ("OCC"). Unlike foreign currency options issued by OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants is generally considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving significantly larger amounts of foreign currencies. Foreign currency warrants are subject to significant foreign exchange risk, including risks arising from complex political or economic factors.

*<u>Principal Exchange Rate Linked Securities</u>*. Principal exchange rate linked securities ("PERLs<sup>SM</sup>") are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the U.S. Dollar and a particular foreign currency at or about that time. The return on "standard" principal exchange rate linked securities is enhanced if the foreign currency to which the security is linked appreciates against the U.S. Dollar, and is adversely affected by increases in the foreign exchange value of the U.S. Dollar; "reverse" principal exchange rate linked securities are like the "standard" securities, except that their return is enhanced by increases in the value of the U.S. Dollar and adversely impacted by increases in the value of foreign currency. Interest payments on the securities are generally made in U.S. Dollars at rates that reflect the degree of foreign currency risk assumed or given up by the purchaser of the notes (*i.e.*, at relatively higher interest rates if the purchaser has assumed some of the foreign exchange risk, or relatively lower interest rates if the issuer has assumed some of the foreign exchange risk, based on the expectations of the current market). Principal exchange rate linked securities may in limited cases be subject to acceleration of maturity (generally, not without the consent of the holders of the securities), which may have an adverse impact on the value of the principal payment to be made at maturity.

*<u>Performance Indexed Paper</u>*. Performance indexed paper ("PIPs<sup>SM</sup>") is U.S. Dollar-denominated commercial paper the yield of which is linked to certain foreign exchange rate movements. The yield to the investor on performance indexed paper is established at maturity as a function of spot exchange rates between the U.S. Dollar and a designated currency as of or about that time (generally, the index maturity two days prior to maturity). The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on U.S. Dollar-denominated commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.

Foreign Securities

The Fund may have both direct and indirect exposure to foreign securities through investments in publicly traded securities such as stocks and bonds, stock index futures contracts, options on stock index futures contracts and options on securities and on stock indices to foreign securities. In most cases, the best available market for foreign securities will be on exchanges or in OTC markets located outside the United States.

Investing in foreign securities carries political and economic risks distinct from those associated with investing in the United States. Non-U.S. securities may be subject to currency risks or to foreign government taxes. There may be less information publicly available about a non-U.S. issuer than about a U.S. issuer, and a foreign issuer may or may not be subject uniform accounting, auditing and financial reporting standards and practices comparable to those in the U.S. Other risks of investing in such securities include political or economic instability in the country involved, the difficulty of predicting international trade patterns and the possibility of the imposition of exchange controls. The prices of such securities may be more volatile than those of U.S. securities. There maybe also be the possibility of expropriation of assets or nationalization, imposition of withholding taxes on dividend or interest payments, difficulty obtaining and enforcing judgments against foreign entities

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or diplomatic developments which could affect investment in these countries. Losses and other expenses may be incurred in converting currencies in connection with purchases and sales of foreign securities.

Non-U.S. stock markets may not be as developed or efficient as, and may be more volatile than, those in the U.S. While the volume of shares traded on non-U.S. stock markets generally has been growing, such markets usually have substantially less volume than U.S. markets. Therefore, the Fund's investment in non-U.S. equity securities may be less liquid and subject to more rapid and erratic price movements than comparable securities listed for trading on U.S. exchanges. Non-U.S. equity securities may trade at price/earnings multiples higher than comparable U.S. securities and such levels may not be sustainable. There may be less government supervision and regulation of foreign stock exchanges, brokers, banks and listed companies abroad than in the U.S. Moreover, settlement practices for transactions in foreign markets may differ from those in U.S. markets. Such differences may include delays beyond periods customary in the U.S. and practices, such as delivery of securities prior to receipt of payment, that increase the likelihood of a failed settlement, which can result in losses to the Fund. The value of non-U.S. investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Foreign brokerage commissions, custodial expenses and other fees are also generally higher than for securities traded in the U.S. This may cause the Fund to incur higher portfolio transaction costs than domestic equity funds. Fluctuations in exchanges rates may also affect the earning power and asset value of the foreign entity issuing a security, even on denominated in U.S. dollars. Dividend and interest payments may be repatriated based on the exchange rate at the time of disbursement, and restrictions on capital flows may be imposed.

*<u>Developing and Emerging Markets</u>*. Emerging and developing markets abroad may offer special opportunities for investing, but may have greater risks than more developed foreign markets, such as those in Europe, Canada, Australia, New Zealand and Japan. There may be even less liquidity in their securities markets, and settlements of purchases and sales of securities may be subject to additional delays. They are subject to greater risks of limitations on the repatriation of income and profits because of currency restrictions imposed by local governments. Those countries may also be subject to the risk of greater political and economic instability, which can greatly affect the volatility of prices of securities in those countries.

Investing in emerging market securities imposes risks different from, or greater than, risks of investing in foreign developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales and future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. Dollar. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Additional risks of emerging markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. Shareholder claims and legal remedies that are common in the United States may be difficult or impossible to pursue in many emerging market countries. In addition, due to jurisdictional limitations, matters of comity and various other factors, U.S. authorities may be limited in their ability to bring enforcement actions against non-U.S. companies and non-U.S. persons in certain emerging market countries. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions.

*<u>Asia-Pacific Countries</u>*. In addition to the risks associated with foreign and emerging markets, the developing market Asia-Pacific countries in which the Fund may invest are subject to certain additional or specific risks. The Fund may make substantial investments in Asia-Pacific countries. In the Asia-Pacific markets, there is a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries. Many of these markets also may be affected by developments with respect to more established markets in the region, such as Japan and Hong Kong. Brokers in developing market Asia-Pacific countries typically are fewer in number and less well-capitalized than brokers in the United States. These factors, combined with the U.S. regulatory requirements for open-end investment companies and the restrictions on foreign investment, result in potentially fewer investment opportunities for the Fund and may have an adverse impact on the Fund's investment performance.

Many of the developing market Asia-Pacific countries may be subject to a greater degree of economic, political and social instability than is the case in the United States and Western European countries. Such instability may result from, among other things: (i) authoritarian governments or military involvement in political and economic decision-making, including changes in government through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; and/or (v) ethnic, religious and racial disaffection. In addition, the governments of many of such countries, such as Indonesia, have a heavy role in regulating and supervising the economy.

An additional risk common to most such countries is that the economy is heavily export-oriented and, accordingly, is dependent upon international trade. The existence of overburdened infrastructure and obsolete financial systems also present risks in certain countries, as do environmental problems. Certain economies also depend to a significant degree upon exports

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of primary commodities and, therefore, are vulnerable to changes in commodity prices that, in turn, may be affected by a variety of factors. The legal systems in certain developing market Asia-Pacific countries also may have an adverse impact on the Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholder's investment, the notion of limited liability is less clear in certain emerging market Asia-Pacific countries. Similarly, the rights of investors in developing market Asia-Pacific companies may be more limited than those of shareholders of U.S. corporations. It may be difficult or impossible to obtain and/or enforce a judgment in a developing market Asia-Pacific country.

Governments of many developing market Asia-Pacific countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In certain cases, the government owns or controls many companies, including the largest in the country. Accordingly, government actions in the future could have a significant effect on economic conditions in developing market Asia-Pacific countries, which could affect private sector companies and the Fund itself, as well as the value of securities in the Fund's portfolio. In addition, economic statistics of developing market Asia-Pacific countries may be less reliable than economic statistics of more developed nations.

It is possible that developing market Asia-Pacific issuers may not be subject to the same accounting, auditing and financial reporting standards as U.S. companies. Inflation accounting rules in some developing market Asia-Pacific countries require companies that keep accounting records in the local currency, for both tax and accounting purposes, to restate certain assets and liabilities on the company's balance sheet in order to express items in terms of currency of constant purchasing power. Inflation accounting may indirectly generate losses or profits for certain developing market Asia-Pacific companies. In addition, satisfactory custodial services for investment securities may not be available in some developing Asia-Pacific countries, which may result in the Fund incurring additional costs and delays in providing transportation and custody services for such securities outside such countries.

Certain developing Asia-Pacific countries are especially large debtors to commercial banks and foreign governments. Fund management may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular developing Asia-Pacific country. The Fund may invest in countries in which foreign investors, including management of the Fund, have had no or limited prior experience.

*<u>Brazil</u>*. Investing in Brazil involves certain considerations not typically associated with investing in the United States. Additional considerations include: (i) investment and repatriation controls, which could affect the Fund's ability to operate, and to qualify for the favorable tax treatment afforded to RICs for U.S. federal income tax purposes; (ii) fluctuations in the rate of exchange between the Brazilian Real and the U.S. Dollar; (iii) the generally greater price volatility and lesser liquidity that characterize Brazilian securities markets, as compared with U.S. markets; (iv) the effect that balance of trade could have on Brazilian economic stability and the Brazilian government's economic policy; (v) potentially high rates of inflation, a rising unemployment rate, and a high level of debt, each of which may hinder economic growth; (vi) governmental involvement in and influence on the private sector; (vii) Brazilian accounting, auditing and financial standards and requirements, which differ from those in the United States; (viii) political and other considerations, including changes in applicable Brazilian tax laws; and (ix) restrictions on investments by foreigners. In addition, commodities, such as oil, gas and minerals, represent a significant percentage of Brazil's exports and, therefore, its economy is particularly sensitive to fluctuations in commodity prices. Additionally, an investment in Brazil is subject to certain risks stemming from political and economic corruption.

*<u>China</u>*. Investing in China involves special considerations not typically associated with investing in countries with more democratic governments or more established economies or currency markets. These risks include: (i) the risk of nationalization or expropriation of assets or confiscatory taxation; (ii) greater governmental involvement in and control over the economy, interest rates and currency exchange rates; (iii) controls on foreign investment and limitations on repatriation of invested capital; (iv) greater social, economic and political uncertainty ; (v) dependency on exports and the corresponding importance of international trade; (vi) currency exchange rate fluctuations; (vii) differences in, or lack of, auditing and financial reporting standards that may result in unavailability of material information about issuers and restrictions on issuers' ability to access the U.S. capital markets; and (viii) the risk that certain companies, including those in which the Fund may invest, may have dealings with countries subject to sanctions or embargoes imposed by the U.S. government or identified as state sponsors of terrorism.

For over three decades, the Chinese government has been reforming economic and market practice and has been providing a larger sphere for private ownership of property. While currently contributing to growth and prosperity, the government could technically decide not to continue to support these economic reform programs and return to the completely centrally planned economy that existed prior to 1978. There is also a greater risk in China than in many other countries of currency fluctuations, currency non-convertibility, interest rate fluctuations and higher rates of inflation as a result of internal social unrest or conflicts with other countries. China is an emerging market and demonstrates significantly higher volatility from time to time in comparison to developed markets. The government of China maintains strict currency controls in support of economic, trade and political objectives and regularly intervenes in the currency market. The government's actions in this respect may not be transparent or predictable. As a result, the value of the Yuan (or renminbi), and the value of securities designed to provide exposure to the Yuan, can change quickly and arbitrarily. Furthermore, it is difficult for foreign investors to directly access money market securities in China because of investment and trading restrictions. Chinese law also prohibits direct foreign investments in certain issuers in certain industries. Chinese companies listed on U.S. exchanges often use variable interest entities ("VIEs") in their structure. Instead of directly owning the equity securities of a Chinese operating

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company, in a VIE structure, a non-U.S. shell company (often organized in the Cayman Islands) that is listed and traded on a U.S. exchange enters into service contracts and other contracts with the Chinese operating company which provide the foreign shell company with exposure to the Chinese company. Although the U.S. listed shell company has no equity ownership of the Chinese operating company, the contractual arrangements provide the U.S. listed shell company economic exposure to the Chinese operating company and permit the U.S. listed shell company to consolidate the Chinese operating company into its financial statements. VIE structures are subject to legal and regulatory uncertainties and risks. Intervention by the Chinese government with respect to VIE structures or the non-enforcement of VIE-related contractual rights could significantly affect a Chinese operating company's business, the enforceability of the U.S. listed shell company's contractual arrangements with the Chinese operating company and the value of the U.S. listed stock. Intervention by the Chinese government could include nationalization of the Chinese operating company, confiscation of its assets, restrictions on operations and/or constraints on the use of VIE structures. In addition, because the Chinese operating company is not owned, directly or indirectly, by the U.S. listed shell company, the U.S. listed shell company cannot control the Chinese operating company and must rely on the Chinese operating company to perform its contractual obligations in order for the U.S. listed company to receive economic benefits. In addition, PRC companies listed on U.S. exchanges, including ADRs and companies that rely on VIE structures, may be delisted if they do not meet U.S. accounting standards and auditor oversight requirements. Delisting could significantly decrease the liquidity and value of the securities of these companies, decrease the ability of a Fund to invest in such securities and increase the cost of the Fund if it is required to seek alternative markets in which to invest in such securities.

While the economy of China has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Reduction in spending on Chinese products and services, the institution of additional tariffs or other trade barriers, including as a result of heightened trade tensions between China and the United States, or a downturn in any of the economies of China's key trading partners may have an adverse impact on the Chinese economy. Actions like these may have unanticipated and disruptive effects on the Chinese economy. Any such response that targets Chinese financial markets or securities exchanges could interfere with orderly trading, delay settlement or cause market disruptions. These and other factors may decrease the value and liquidity of the Fund's investments. The Chinese economy may experience a significant slowdown as a result of, among other things, a deterioration of global demand for Chinese exports, as well as contraction in spending on domestic goods by Chinese consumers. In addition, China may experience substantial rates of inflation or economic recessions, which would have a negative effect on its economy and securities market.

Hong Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative Region of the PRC under the principle of "one country, two systems." Although China is obligated to maintain the current capitalist economic and social system of Hong Kong through June 30, 2047, the continuation of economic and social freedoms enjoyed in Hong Kong is dependent on the government of China. Since 1997, there have been tensions between the Chinese government and many people in Hong Kong regarding China's perceived tightening of control over Hong Kong's semi-autonomous liberal political, economic, legal, and social framework. Recent protests may prompt the Chinese and Hong Kong governments to rapidly address Hong Kong's future relationship with mainland China, which remains unresolved. Due to the interconnected nature of the Hong Kong and Chinese economies, this instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets.

There has been increased attention to Chinese companies from the U.S. government and U.S. regulators, including the Department of the Treasury ("DOT") and its Office of Foreign Assets Control ("OFAC"). In a series of actions between November 2020 and June 2021, the DOT prohibited investment by U.S. investors in the publicly traded securities of certain companies tied to the Chinese military or China's surveillance technology sector. The prohibited companies were described in the executive orders as "Chinese Military Industrial Complex Companies," and the restrictions on investing in such companies was interpreted by OFAC to extend to instruments that are derivative of, or designed to provide investment exposure to, these companies, including diversified investment companies. More recently, the DOT issued regulations which will prohibit or require notification of investments by certain U.S. persons in certain sub-sets of national security technologies and products including semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems in or related to "countries of concern," defined as China including Hong Kong and Macau. These regulations are in effect as of January 2, 2025. Although it cannot be fully known at this time, these rules may significantly reduce the liquidity of such investments, force the Fund to sell certain positions at inopportune times or unfavorable prices and restrict future investments by the Fund. Audits performed by PCAOB-registered accounting firms in mainland China and Hong Kong may be less reliable than those performed by firms subject to PCAOB inspection. Accordingly, information about the Chinese securities in which the Fund invests may be less reliable or complete. Under amendments to the Sarbanes-Oxley Act enacted in December 2020, which requires that the PCAOB be permitted to inspect the accounting firm of a U.S.-listed Chinese issuer, Chinese companies with securities listed on U.S. exchanges may be delisted if the PCAOB is unable to inspect the accounting firm.

Recently, there have been intensified concerns about trade tariffs and a potential trade war between China and the United States. Future tariffs imposed by China and the United States on the other country's products, or other escalating actions, may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China's export industry with a potentially negative impact to the Fund.

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For decades, a state of hostility has existed between Taiwan and the PRC. Beijing has long deemed Taiwan a part of the "one China" and has made a nationalist cause of recovering it. This situation poses a threat to Taiwan's economy and could negatively affect its stock market. In addition, China could be affected by military events on the Korean peninsula or internal instability within North Korea. These situations may cause uncertainty in the Chinese market and may adversely affect performance of the Chinese economy.

Foreign investors had historically been unable to participate in the PRC securities market. However, in late 2002, Investment Regulations promulgated by the China Securities Regulatory Commission ("CSRC") came into effect, which were replaced by the updated Investment Regulations (i.e., "Measures for the Administration of the Securities Investments of Qualified Foreign Institutional Investors in the PRC"), which came into effect on September 1, 2006, that provided a legal framework for certain Qualified Foreign Institutional Investors ("QFIIs") to invest in PRC securities and certain other securities historically not eligible for investment by non-Chinese investors, through quotas granted by China's State Administration of Foreign Exchange ("SAFE") to those QFIIs which have been approved by the CSRC. The RMB QFII ("RQFII") program was instituted in December 2011 and is substantially similar to the QFII program, but provides for greater flexibility in repatriating assets. In 2020, the PRC government eliminated QFII and RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer be subject to quotas when investing in PRC securities (but will remain subject to foreign shareholder limits), and merged the two programs into the Qualified Foreign Investor regime ("QFI").

China A-shares are equity securities of companies based in mainland China that trade on Chinese stock exchanges such as the Shanghai Stock Exchange ("SSE") and the Shenzhen Stock Exchange ("SZSE") ("A-shares"). The ability of the Fund to invest in China A-Shares is dependent, in part, on the availability of A-Shares either through the trading and clearing facilities of a participating exchange located outside of mainland China ("Stock Connect Programs") which currently include the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Shanghai-London Stock Connect, and China-Japan Stock Connect, and/or through a QFI license. Thus, the Fund's investment in A-Shares may be limited by the daily A-Shares quota limitation and by the amount of A-Shares available through the Stock Connect Programs.

The Stock Connect Programs are subject to daily and aggregate quota limitations, and an investor cannot purchase and sell the same security on the same trading day, which may restrict the Fund's ability to invest in A-Shares through the Stock Connect Programs and to enter into or exit trades on a timely basis. The Shanghai and Shenzhen markets may be open at a time when the participating exchanges located outside of mainland China are not active, with the result that prices of A-Shares may fluctuate at times when the Fund is unable to add to or exit a position. The mainland Chinese and Hong Kong regulators launched an enhanced trading calendar for Stock Connect to allow Stock Connect trading on all the days which are trading days in both mainland Chinese and Hong Kong markets, even when the corresponding settlement days would be public holidays. Only certain A-Shares are eligible to be accessed through the Stock Connect Programs. Such securities may lose their eligibility at any time, in which case they may no longer be able to be purchased or sold through the Stock Connect Programs. Because the Stock Connect Programs are still evolving, the actual effect on the market for trading A-Shares with the introduction of large numbers of foreign investors is still relatively unknown. In addition, there is no assurance that the necessary systems required to operate the Stock Connect Programs will function properly or will continue to be adapted to changes and developments in both markets. In the event that the relevant systems do not function properly, trading through the Stock Connect Programs could be disrupted. The Stock Connect Programs are subject to regulations promulgated by regulatory authorities for both exchanges and further regulations or restrictions, such as limitations on redemptions or suspension of trading, may adversely impact the Stock Connect Programs, if the authorities believe it necessary to assure orderly markets or for other reasons. There is no guarantee that the participating exchanges will continue to support the Stock Connect Programs in the future. Each of the foregoing could restrict the Fund from selling its investments, adversely affect the value of its holdings and negatively affect the Fund's ability to meet shareholder redemptions.

*<u>Europe</u>.* Investing in European countries may impose economic and political risks associated with Europe in general and the specific European countries in which it invests. The economies and markets of European countries are often closely connected and interdependent, and events in one European country can have an adverse impact on other European countries. The Fund makes investments in securities of issuers that are domiciled in, or have significant operations in, member countries of the Economic and Monetary Union of the European Union (the "EU"), which requires member countries to comply with restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls, each of which may significantly affect every country in Europe. Decreasing imports or exports, changes in governmental or EU regulations on trade, changes in the exchange rate of the euro (the common currency of certain EU countries), the default or threat of default by an EU member country on its sovereign debt, and/or an economic recession in an EU member country may have a significant adverse effect on the economies of EU member countries and their trading partners, including some or all of the emerging markets materials sector countries. Although certain European countries do not use the euro, many of these countries are obliged to meet the criteria for joining the euro zone. Consequently, these countries must comply with many of the restrictions noted above. The European financial markets have experienced volatility and adverse trends in recent years due to concerns about economic downturns or rising government debt levels in several European countries, including , but not limited to, Austria, Belgium, Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. In order to prevent further economic deterioration, certain countries, without prior warning, can institute "capital controls." Countries may use these controls to restrict volatile movements of capital entering and exiting their country. Such controls may negatively affect the Fund's

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investments. A default or debt restructuring by any European country would adversely impact holders of that country's debt and sellers of credit default swaps linked to that country's creditworthiness, which may be located in countries other than those listed above. In addition, the credit ratings of certain European countries were recently downgraded. These downgrades may result in further deterioration of investor confidence. These events have adversely affected the value and exchange rate of the euro and may continue to significantly affect the economies of every country in Europe, including countries that do not use the euro and non-EU member countries. Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not produce the desired results, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and other entities of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition, one or more countries may abandon the euro and/or withdraw from the EU. The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching and could adversely impact the value of investments in the region.

In a referendum held on June 23, 2016, the United Kingdom (the "UK") resolved to leave the EU (referred to as "Brexit"). On January 31, 2020, the UK officially withdrew from the EU pursuant to a withdrawal agreement, providing for a transition period in which the UK negotiated and finalized a trade deal with the EU, the EU-UK Trade and Cooperation Agreement (the "Trade Agreement"). As a result, since January 1, 2021, the United Kingdom is no longer part of the EU customs union and single market, nor is it subject to EU policies and international agreements. The Trade Agreement, among other things, provides for zero tariffs and zero quotas on all goods that comply with appropriate rules of origin and establishes the treatment and level of access the United Kingdom and EU have agreed to grant each other's service suppliers and investors. The Trade Agreement also covers digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, social security coordination, law enforcement and judicial cooperation in criminal matters, thematic cooperation and participation in EU programs. Even with the Trade Agreement in place, the UK's withdrawal from the EU may create new barriers to trade in goods and services and to cross-border mobility and exchanges.

The UK has one of the largest economies in Europe, and member countries of the EU are substantial trading partners of the UK. The City of London's economy is dominated by financial services and uncertainty remains regarding the treatment of cross-border trade in financial services. While the Trade Agreement includes certain provisions to support cross-border trade in financial services, it is not comprehensively addressed in the Trade Agreement and the parties continue to discuss 'equivalence' rights to allow market access for cross-border financial services. In March 2021, the EU and the UK reached a memorandum of understanding, establishing a framework for voluntary regulatory cooperation on financial services. Without access to the EU single market, certain financial services in the UK may move outside of the UK as a result of its withdrawal from the EU. In addition, financial services firms in the UK may need to move staff and comply with two separate sets of rules or lose business to financial services firms in the EU. Furthermore, the withdrawal from the EU creates the potential for decreased trade, the possibility of capital outflows, devaluation of the pound sterling, the cost of higher corporate bond spreads due to continued uncertainty, and the risk that all the above could damage business and consumer spending as well as foreign direct investment. As a result of the withdrawal from the EU, the British economy and its currency may be negatively impacted by changes to its economic and political relations with the EU. Additional member countries seeking to withdraw from the EU would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties.

Brexit may also have a destabilizing impact on the EU to the extent that other member states similarly seek to withdraw from the EU. Any further exits from the EU would likely cause additional market disruptions globally and introduce new legal and regulatory uncertainties.

Russia's increasing international assertiveness could negatively impact EU economic activity. The effect on the economies of EU countries of the Russia/Ukraine war and Russia's response to sanctions imposed by the US and other countries are impossible to predict, but have been and could continue to be significant.

*<u>India</u>*. Investments in India involve special considerations not typically associated with investing in countries with more established economies or currency markets. Political, religious, and border disputes persist in India. India has recently experienced and may continue to experience civil unrest and hostilities with certain of its neighboring countries, including Pakistan, and the Indian government has confronted separatist movements in several Indian states, including Kashmir. Government control over the economy, currency fluctuations or blockage, and the risk of nationalization or expropriation of assets offer higher potential losses. Governmental actions could have a negative effect on the economic conditions in India, which could adversely affect the value and liquidity of investments made by the Fund. The securities markets in India are comparatively underdeveloped with some exceptions and consist of a small number of listed companies with small market capitalization, greater price volatility and substantially less liquidity than companies in more developed markets. The limited liquidity of the Indian securities market may also affect the Fund's ability to acquire or dispose of securities at the price or time that it desires or the Fund's ability to track the Index.

The Indian government exercises significant influence over many aspects of the economy, and the number of public sector enterprises in India is substantial. While the Indian government has implemented economic structural reform with the objectives of liberalizing India's exchange and trade policies, reducing the fiscal deficit, controlling inflation, promoting a

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sound monetary policy, reforming the financial sector, and placing greater reliance on market mechanisms to direct economic activity, there can be no assurance that these policies will continue or that the economic recovery will be sustained.

Global factors and foreign actions may inhibit the flow of foreign capital on which India is dependent to sustain its growth. In addition, the Reserve Bank of India has imposed limits on foreign ownership of Indian companies, which may decrease the liquidity of the Fund's portfolio and result in extreme volatility in the prices of Indian securities. In November 2016, the Indian government eliminated certain large denomination cash notes as legal tender, causing uncertainty in certain financial markets. These factors, coupled with the lack of extensive accounting, auditing and financial reporting standards and practices, as applicable in the United States, may increase the risk of loss for the Fund.

Securities laws in India are relatively new and unsettled and, as a result, there is a risk of significant and unpredictable change in laws governing foreign investment, securities regulation, title to securities and shareholder rights. Foreign investors in particular may be adversely affected by new or amended laws and regulations. Certain Indian regulatory approvals, including approvals from the Securities and Exchange Board of India, the central government and the tax authorities (to the extent that tax benefits need to be utilized), may be required before the Fund can make investments in Indian companies. Foreign investors in India still face burdensome taxes on investments in income producing securities.

While the Indian economy has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Technology and software sectors represent a significant portion of the total capitalization of the Indian securities markets. The value of these companies will generally fluctuate in response to technological and regulatory developments, and, as a result, the Fund's holdings are expected to experience correlated fluctuations. Natural disasters, such as tsunamis, flooding or droughts, could occur in India or surrounding areas and could negatively affect the Indian economy. Agriculture occupies a prominent position in the Indian economy, therefore, it may be negatively affected by adverse weather conditions and the effects of global climate change. These and other factors may decrease the value and liquidity of the Fund's investments.

*<u>Italy</u>.* Investment in Italian issuers involves risks that are specific to Italy, including, regulatory, political, currency, and economic risks. Italy's economy is dependent upon external trade with other economies—specifically Germany, France and other Western European developed countries. As a result, Italy is dependent on the economies of these other countries and any change in the price or demand for Italy's exports may have an adverse impact on its economy. Interest rates on Italy's debt may rise to levels that may make it difficult for it to service high debt levels without significant financial help from the EU and could potentially lead to default. Recently, the Italian economy has experienced volatility due to concerns about economic downturn and rising government debt levels. Italy has been warned by the Economic and Monetary Union of the EU to reduce its public spending and debt and actions by Italy to cut spending or increase taxes in response could have significant adverse effects on the Italian economy. These events have adversely impacted the Italian economy, causing credit agencies to lower Italy's sovereign debt rating in the past, and could decrease outside investment in Italian companies. High amounts of debt and public spending may stifle Italian economic growth or cause prolonged periods of recession.

*<u>Japan</u>*. Japanese investments may be significantly affected by events influencing Japan's economy and changes in the exchange rate between the Japanese yen and the U.S. Dollar. Japan's economy fell into a long recession in the 1990s. After a few years of mild recovery in the mid-2000s, Japan's economy fell into another recession as a result of the recent global economic crisis. In recent years, Japan's government has approved fiscal stimulus packages in order to stimulate its slowing economy, which has been negatively affected by decreased demand from China and by recent political conflicts with South Korea. Japan is heavily dependent on exports and foreign oil and may be adversely affected by higher commodity prices, trade tariffs, protectionist measures, competition from emerging economies, and the economic conditions of its trading partners, such as China. Furthermore, Japan is located in a seismically active area, and in 2011 experienced an earthquake and a tsunami that significantly affected important elements of its infrastructure and resulted in a nuclear crisis. The risks of natural disaster of varying degrees, such as earthquakes and tsunamis, and the resulting damage, continue to exist. Japan's economic prospects may be affected by the political and military situations of its near neighbors, notably North and South Korea, China, and Russia. In addition, the Japanese economic growth rate could be impacted by Bank of Japan monetary policies, rising interest rates, tax increases, budget deficits, consumer confidence and volatility in the Japanese yen. In the longer term, Japan will have to address the effects of an aging population, such as a shrinking workforce and higher welfare costs. These demographic shifts and fundamental structural changes to the labor markets may negatively impact Japan's economic competitiveness.

*<u>South Korea</u>*. South Korean investments may be significantly affected by events influencing its economy, which is heavily dependent on exports and the demand for certain finished goods. South Korea's main industries include electronics, automobile production, chemicals, shipbuilding, steel, textiles, clothing, footwear, and food processing. Conditions that weaken demand for such products worldwide or in other Asian countries could have a negative impact on the South Korean economy as a whole. The South Korean economy's reliance on international trade makes it highly sensitive to fluctuations in international commodity prices, currency exchanges rates and government regulation, and vulnerable to downturns of the world economy, particularly with respects to its four largest export markets (the EU, Japan, United States, and China). South Korea has experienced modest economic growth in recent years, but such continued growth may slow due, in part, to the economic slowdown in China and the increased competitive advantage of Japanese exports with the weakened yen. The South Korean economy's long-term challenges include an aging population, inflexible labor market, and overdependence on exports to drive economic growth. Relations between South Korea and North Korea remain tense, as exemplified in periodic acts of

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hostility, and the possibility of serious military engagement still exists. Armed conflict between North Korea and South Korea could have a severe adverse impact on the South Korean economy and its securities markets.

*<u>Latin America</u>*. The economies of certain Latin American countries have experienced high interest rates, economic volatility, inflation, currency devaluations, government defaults, high unemployment rates and political instability which can adversely affect issuers in these countries. In addition, commodities (such as oil, gas and minerals) represent a significant percentage of the region's exports and many economies in this region are particularly sensitive to fluctuations in commodity prices. Adverse economic events in one country may have a significant adverse effect on other countries of this region. The governments of certain countries in Latin America may exercise substantial influence over many aspects of the private sector and may own or control many companies. Future government actions could have a significant effect on the economic conditions in such countries, which could have a negative impact on the securities in which the Fund invests. Diplomatic developments may also adversely affect investments in certain countries in Latin America. Some countries in Latin America may be affected by public corruption and crime, including organized crime. Certain countries in Latin America may be heavily dependent upon international trade and, consequently, have been and may continue to be negatively affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These countries also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. In addition, certain issuers located in countries in Latin America in which the Fund invests may be the subject of sanctions (for example, the U.S. has imposed sanctions on certain Venezuelan individuals, corporate entities and the Venezuelan government) or have dealings with countries subject to sanctions and/or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. An issuer may sustain damage to its reputation if it is identified as an issuer that has dealings with such countries. The Fund may be adversely affected if it invests in such issuers. Certain Latin American countries may also have managed currencies, which are maintained at artificial levels to the U.S. Dollar rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency which, in turn, can have a disruptive and negative effect on foreign investors. Certain Latin American countries also restrict the free conversion of their currency into foreign currencies, including the U.S. Dollar. There is no significant foreign exchange market for many currencies and it would, as a result, be difficult for the Fund to engage in foreign currency transactions designed to protect the value of the Fund's interests in securities denominated in such currencies. Finally, a number of Latin American countries are among the largest debtors of developing countries. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies.

*<u>Mexico</u>*. Investment in Mexican issuers involves risks that are specific to Mexico, including regulatory, political, and economic risks. In the past, Mexico has experienced high interest rates, economic volatility, significant devaluation of its currency (the peso), and high unemployment rates. The Mexican economy is dependent upon external trade with other economies, specifically with the United States and certain Latin American countries. Additionally, a high level of foreign investment in Mexican assets may increase Mexico's exposure to risks associated with changes in international investor sentiment. In 2018, the United States, Mexico and Canada signed and ratified the United States-Mexico-Canada Agreement ("USMCA"), which replaces the current North American Free Trade Agreement among the three countries. The USMCA has facilitated economic and financial integration among the United States, Canada and Mexico; however, any disruption and uncertainty regarding USMCA may have a significant and adverse impact on Mexico's outlook and the value of the Fund's investments in securities economically tied to Mexico.

The Mexican economy is heavily dependent on trade with, and foreign investment from, the U.S. and Canada, which are Mexico's principal trading partners. Any changes in the supply, demand, price or other economic component of Mexico's imports or exports, as well as any reductions in foreign investment from, or changes in the economies of, the U.S. or Canada, may have an adverse impact on the Mexican economy. Because commodities such as oil and gas, minerals and metals represent a large portion of the region's exports, the economies of these countries are particularly sensitive to fluctuations in commodity prices. Mexico's economy has also become increasingly manufacturing-oriented. Because Mexico's top export is automotive vehicles, its economy is strongly tied to the U.S. automotive market, and changes to certain segments in the U.S. market could have an impact on the Mexican economy. The automotive industry and other industrial products can be highly cyclical, and companies in these industries may suffer periodic operating losses. These industries can also be significantly affected by labor relations and fluctuating component prices. The agricultural and mining sectors of Mexico's economy also account for a large portion of its exports, and Mexico is susceptible to fluctuations in the price and demand for agricultural products and natural resources. In addition, Mexico has privatized or has begun the process of privatization of certain entities and industries, and some investors have suffered losses due to the inability of the newly privatized entities to adjust to a competitive environment and changing regulatory standards.

Mexico has been destabilized by local insurrections, social upheavals and drug-related violence. Additionally, violence near border areas, border-related political disputes, and other social upheaval may lead to strained international relations. Mexico has also experienced contentious and very closely decided elections. Changes in political parties and other political events may affect the economy and contribute to additional instability. Recurrence of these or similar conditions may adversely impact the Mexican economy.

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*<u>Russia</u>*. Investing in Russia involves risks and special considerations not typically associated with investing in United States. Since the breakup of the Soviet Union at the end of 1991, Russia has experienced dramatic political, economic, and social change. The political system in Russia is emerging from a long history of extensive state involvement in economic affairs. The country is undergoing a rapid transition from a centrally-controlled command system to a market-oriented, democratic model. As a result, companies in Russia are characterized by a lack of: (i) management with experience of operating in a market economy; (ii) modern technology; and, (iii) a sufficient capital base with which to develop and expand their operations. It is unclear what will be the future effect on Russian companies, if any, of Russia's continued attempts to move toward a more market-oriented economy. Russia's economy has been characterized by high rates of inflation, high rates of unemployment, declining gross domestic product, deficit government spending, and a devalued currency. The economic reform program has involved major disruptions and dislocations in various sectors of the economy, and those problems have been exacerbated by growing liquidity problems. Russia's economy is also heavily reliant on the energy and defense-related sectors, and is therefore susceptible to the risks associated with these industries. The laws and regulations in Russia affecting Western business investment continue to evolve in an unpredictable manner. Russian laws and regulations, particularly those involving taxation, foreign investment and trade, title to property or securities, and transfer of title, which may be applicable to the Fund's activities are relatively new and can change quickly and unpredictably in a manner far more volatile than in the United States or other developed market economies. Although basic commercial laws are in place, they are often unclear or contradictory and subject to varying interpretation, and may at any time be amended, modified, repealed or replaced in a manner adverse to the interest of the Fund.

Russia's invasion of the Ukraine, and corresponding events in late February 2022, have had, and could continue to have, severe adverse effects on regional and global economic markets for securities and commodities. Following Russia's actions, various governments, including the United States, have issued and continue to issue broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on transactions with certain Russian companies, financial institutions, officials and individuals; new investment by US persons in Russian enterprises; restrictions on the ability of US persons to sell securities held through the Russian central securities depository or through certain other financial institutions; the removal by certain countries and the European Union of selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications ("SWIFT"), the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The recent events, including sanctions and the potential for future sanctions, including any impacting Russia's energy sector, and other actions, and Russia's retaliatory responses to those sanctions and actions, may continue to adversely impact the Russian economy and economies of surrounding countries and may result in the continuing or further decline of the value and liquidity of Russian securities, particularly those held by US persons including the Fund and securities of surrounding countries, a continued weakening of currencies in the region and continued exchange closures, and may have other adverse consequences on the economies of countries in the region that could impact the value of investments in the region and impair the ability of the Fund to buy, sell, receive or deliver securities of companies in the region or the Fund's ability to collect interest payments on fixed income securities in the region. For example, exports in Eastern Europe have been disrupted for certain key commodities, pushing commodity prices to record highs, and energy prices in Europe have increased significantly. Moreover, those events have, and could continue to have, an adverse effect on global markets performance and liquidity, thereby negatively affecting the value of the Fund's investments beyond any direct exposure to issuers in the region. The duration of ongoing hostilities and the vast array of sanctions and related events cannot be predicted. Those events present material uncertainty and risk with respect to markets globally and the performance of the Fund and its investments or operations could be negatively impacted.

Hybrid Instruments

The Fund may invest in hybrid instruments. A hybrid instrument is a type of potentially high-risk derivative that combines a traditional stock, bond, or commodity with an option or forward contract. Generally, the principal amount, amount payable upon maturity or redemption, or interest rate of a hybrid is tied (positively or negatively) to the price of some commodity, currency or securities index or another interest rate or some other economic factor (each a "benchmark"). The interest rate or (unlike most fixed income securities) the principal amount payable at maturity of a hybrid security may be increased or decreased, depending on changes in the value of the benchmark. A hybrid could be, for example, a bond issued by an oil company that pays a small base level of interest, in addition to interest that accrues when oil prices exceed a certain predetermined level. Such a hybrid instrument would be a combination of a bond and a call option on oil.

Hybrids can be used as an efficient means of pursuing a variety of investment goals, including currency hedging, and increased total return. Hybrids may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. Dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating

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rate of interest. The purchase of hybrids also exposes the Fund to the credit risk of the issuer of the hybrids. These risks may cause significant fluctuations in the NAV of the Fund.

Certain issuers of structured products such as hybrid instruments may be deemed to be investment companies as defined in the 1940 Act. As a result, the Fund's investment in these products may be subject to limits applicable to investments in investment companies and may be subject to restrictions contained in the 1940 Act.

Illiquid Investments and Restricted Securities

The Fund may purchase and hold illiquid investments. The term "illiquid investments" for this purpose means any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund will not acquire illiquid securities if, as a result, such securities would comprise more than 15% of the value of the Fund's net assets. Rafferty, subject to oversight by the Board of Trustees, has the ultimate authority to determine, to the extent permissible under the federal securities laws, which securities are liquid or illiquid for purposes of this 15% limitation under the Fund's liquidity risk management program, adopted pursuant to Rule 22e-4 under the 1940 Act. Illiquid securities will be priced at fair value as determined in good faith under procedures adopted by the Board of Trustees. If, through the appreciation of illiquid securities or the depreciation of liquid securities, the Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid securities, including restricted securities which are not readily marketable, Rafferty will report such occurrence to the Board of Trustees and take such steps as are deemed advisable to protect liquidity in accordance with the Fund's liquidity risk management program.

The Fund may not be able to sell illiquid investments when Rafferty considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were liquid. In addition, the sale of illiquid investments may require more time and result in higher dealer discounts and other selling expenses than does the sale of investments that are not illiquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and investment in illiquid investments may have an adverse impact on NAV.

Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers. Institutional markets for restricted securities that have developed as a result of Rule 144A provide both readily ascertainable values for certain restricted securities and the ability to liquidate an investment to satisfy share redemption orders. This policy does not include restricted securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"), which the Trust's Board of Trustees ("Board" or "Trustees"), or Rafferty, under Board-approved guidelines, has determined are liquid. The Fund currently does not anticipate investing in such restricted securities. However, to the extent that the Fund does invest in such restricted securities, an insufficient number of qualified institutional buyers interested in purchasing Rule 144A-eligible securities held by the Fund could adversely affect the marketability of such portfolio securities, and the Fund may be unable to dispose of such securities promptly or at reasonable prices.

Indexed Securities

The Fund may purchase indexed securities, which are securities, the value of which varies positively or negatively in relation to the value of other securities, securities indices or other financial indicators, consistent with its investment objective. Indexed securities may be debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Recent issuers of indexed securities have included banks, corporations and certain U.S. government agencies.

The performance of indexed securities depends to a great extent on the performance of the security or other instrument to which they are indexed and also may be influenced by interest rate changes in the United States and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Indexed securities may be more volatile than the underlying instruments. Certain indexed securities that are not traded on an established market may be deemed illiquid. See "Illiquid Investments and Restricted Securities" above.

Interest Rate Risk

Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, have historically utilized the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. LIBOR was discontinued as a benchmark rate but synthetic values of U.S. dollar LIBOR tenors were published using the unrepresentative methodology of the U.S. LIBOR Act ("synthetic-U.S. dollar LIBOR") until September 30, 2024.

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Synthetic U.S. dollar LIBOR will be calculated using the same methodology used in the LIBOR Act. Synthetic U.S. dollar LIBOR cannot be used for cleared derivatives, but could be used in untransitioned legacy contracts unless they contain fallback language addressing LIBOR that has become "unrepresentative." There is a risk that any of these synthetic U.S. dollar LIBOR maturities may cease to be published before these dates.

Also in 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is a broad measure of the cost of overnight borrowings secured by Treasury Department securities, as an appropriate replacement for U.S. dollar LIBOR.

The Federal Reserve Bank of New York began publishing SOFR in April, 2018, with the expectation that it could be used on a voluntary basis in new instruments and for new transactions under existing instruments. However, SOFR is fundamentally different from LIBOR. It is a secured, nearly risk-free rate, while LIBOR is an unsecured rate that includes an element of bank credit risk. Also, while term SOFR for various maturities has been adopted by some parties and for some types of transactions, SOFR is strictly an overnight rate, while LIBOR historically has been published for various maturities, ranging from overnight to one year. Thus, LIBOR may be expected to be higher than SOFR, and the spread between the two is likely to widen in times of market stress. Certain existing contracts provide for a spread adjustment when transitioning to SOFR from LIBOR, but there is no assurance that it will provide adequate compensation. Term SOFR rates for various maturities, may not be available, recommended, or operationally feasible at the applicable benchmark replacement date.

Various financial industry groups have implemented the transition from LIBOR to SOFR or another new benchmark, but there are obstacles to converting certain longer-term securities and transactions. The transition process might lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. It also could lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur particularly with respect to synthetic values of LIBOR or could occur throughout the transition period.

Junk Bonds

The Fund may invest in lower-rated debt securities, including securities in the lowest credit rating category, of any maturity, otherwise known as "junk bonds."

Junk bonds generally offer a higher current yield than that available for higher-grade issues. However, lower-rated securities involve higher risks, in that they are especially subject to adverse changes in general economic conditions and in the industries in which the issuers are engaged, to changes in the financial condition of the issuers and to price fluctuations in response to changes in interest rates. During periods of economic downturn or rising interest rates, highly leveraged issuers may experience financial stress that could adversely affect their ability to make payments of interest and principal and increase the possibility of default. In addition, the market for lower-rated debt securities has expanded rapidly in recent years, and its growth paralleled a long economic expansion. At times in recent years, the prices of many lower-rated debt securities declined substantially, reflecting an expectation that many issuers of such securities might experience financial difficulties. As a result, the yields on lower-rated debt securities rose dramatically, but such higher yields did not reflect the value of the income stream that holders of such securities expected, but rather, the risk that holders of such securities could lose a substantial portion of their value as a result of the issuers' financial restructuring or default. There can be no assurance that such declines will not recur.

The market for lower-rated debt issues generally is thinner and less active than that for higher quality securities, which may limit the Fund's ability to sell such securities at fair value in response to changes in the economy or financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the values and liquidity of lower-rated securities, especially in a thinly traded market. Changes by recognized rating services in their rating of a fixed-income security may affect the value of these investments. The Fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Rafferty will monitor the investment to determine whether continued investment in the security will assist in meeting the Fund's investment objective.

Mortgage-Backed Securities

The Fund may invest in mortgage-backed securities. A mortgage-backed security is a type of pass-through security, which is a security representing pooled debt obligations repackaged as interests that pass income through an intermediary to investors. In the case of mortgage-backed securities, the ownership interest is in a pool of mortgage loans.

Mortgage-backed securities are most commonly issued or guaranteed by the Government National Mortgage Association ("Ginnie Mae<sup>®</sup>" or "GNMA"), Federal National Mortgage Association ("Fannie Mae<sup>®</sup>" or "FNMA") or Federal Home Loan Mortgage Corporation ("Freddie Mac<sup>®</sup>" or "FHLMC"), but may also be issued or guaranteed by other private issuers. GNMA is a government-owned corporation that is an agency of the U.S. Department of Housing and Urban Development. It guarantees, with the full faith and credit of the United States, full and timely payment of all monthly principal and interest on its

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mortgage-backed securities. FNMA is a publicly owned, government-sponsored corporation that mostly packages mortgages backed by the Federal Housing Administration, but also sells some non-governmentally backed mortgages. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest only by FNMA. FHLMC is a publicly chartered agency that buys qualifying residential mortgages from lenders, re-packages them and provides certain guarantees. Pass-through securities issued by FHLMC are guaranteed as to timely payment of principal and interest only by FHLMC.

The Federal Housing Finance Agency ("FHFA") mandated that Fannie Mae and Freddie Mac cease issuing their own mortgage-backed securities and begin issuing "Uniform Mortgage-Backed Securities" or "UMBS" in 2019. Each UMBS has a 55-day remittance cycle and can be used as collateral in either a Fannie Mae or Freddie Mac security or held for investment. Mortgage-backed securities issued by private issuers, whether or not such obligations are subject to guarantees by the private issuer, may entail greater risk than obligations directly guaranteed by the U.S. government. The average life of a mortgage-backed security is likely to be substantially less than the original maturity of the mortgage pools underlying the securities. Prepayments of principal by mortgagors and mortgage foreclosures will usually result in the return of the greater part of principal invested far in advance of the maturity of the mortgages in the pool.

Collateralized mortgage obligations ("CMOs") are debt obligations collateralized by mortgage loans or mortgage pass-through securities (collateral collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-through securities are interests in a trust composed of Mortgage Assets and all references in this section to CMOs include multi-class pass-through securities. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of the premium if any has been paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal and interest payments on the Mortgage Assets may be allocated among the various classes of CMOs in several ways. Typically, payments of principal, including any prepayments, on the underlying mortgages are applied to the classes in the order of their respective stated maturities or final distribution dates, so that no payment of principal is made on CMOs of a class until all CMOs of other classes having earlier stated maturities or final distribution dates have been paid in full.

Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage securities. The Fund will only invest in SMBS issued by Ginnie Mae, which are obligations backed by the full faith and credit of the U.S. government. SMBS are usually structured with two or more classes that receive different proportions of the interest and principal distributions from a pool of Mortgage Assets. The Fund will only invest in SMBS whose Mortgage Assets are U.S. government obligations. A common type of SMBS will be structured so that one class receives some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities. The market value of any class which consists primarily, or entirely, of principal payments generally is unusually volatile in response to changes in interest rates.

Investment in mortgage-backed securities poses several risks, including among others, prepayment, market and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions. Market risk reflects the risk that the price of a security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and the Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold. Credit risk reflects the risk that the Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. government-sponsored entities are guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the "pass-through" payments may, at times, be difficult.

Municipal Obligations

The Fund may invest in municipal obligations. Municipal securities are fixed-income securities issued by states, counties, cities and other political subdivisions and authorities. Although most municipal securities are exempt from federal income tax, municipalities also may issue taxable securities. Tax exempt securities are generally classified by their source of payment. In addition to the usual risks associated with investing for income, the value of municipal obligations can be affected by changes in the actual or perceived credit quality of the issuers. The credit quality of a municipal obligation can be affected by, among other factors: a) the financial condition of the issuer or guarantor; b) the issuer's future borrowing plans and sources of revenue; c) the economic feasibility of the revenue bond project or general borrowing purpose; d) political or

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economic developments in the region or jurisdiction where the security is issued; and e) the liquidity of the security. Because municipal obligations are generally traded OTC, the liquidity of a particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal issues can be enhanced by demand features, which enable the Fund to demand payment from the issuer or a financial intermediary on short notice.

Futures Contracts, Options, and Other Derivative Strategies

Generally, derivatives are financial instruments whose value depends on, or is derived from, the value of one or more underlying assets, reference rates, or indices or other market factors ("reference assets") and may relate to stocks, bonds, interest rates, credit, currencies, commodities, digital assets or related indices. Derivative instruments can provide an efficient means to gain long or short exposure to the value of a reference asset without actually owning or selling the instrument. Examples of derivative instruments include futures contracts, swap agreements, options, options on futures contracts and forward currency contracts.

The Fund may enter into derivatives instruments which may include futures contracts, forward contracts, options on currencies, commodities, indices, or futures contracts and swaps which provide long and short exposure to reference assets. Derivatives may be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund's losses may be greater if it invests in derivatives than if it invests in non-derivative instruments. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligations.

The use of derivative instruments is subject to applicable regulations of the SEC, the several exchanges upon which they are traded and the CFTC. In addition, the Fund's ability to use derivative instruments will be limited by tax considerations. See "Dividends, Other Distributions and Taxes."

Under current CFTC regulations, if the Fund uses commodity interests (such as futures contracts, options on futures contracts and swaps) other than for bona fide hedging purposes (as defined by the CFTC) the aggregate initial margin and premiums required to establish these positions (after taking into account unrealized profits and unrealized losses on any such positions and excluding the amount by which options that are "in-the-money" at the time of purchase) may not exceed 5% of the Fund's NAV, or alternatively, the aggregate net notional value of those positions, as determined at the time the most recent position was established, may not exceed 100% of the fund's NAV (after taking into account unrealized profits and unrealized losses on any such positions). Accordingly, the Fund has registered as a commodity pool, and the Adviser has registered as a commodity pool operator with the National Futures Association.

The Fund is subject to the risk that a change in U.S. law and related regulations will impact the way the Fund operates, increase the particular costs of the Fund's operation and/or change the competitive landscape. In this regard, any further amendment to the Commodity Exchange Act or its related regulations that subject the Fund to additional regulation may have adverse impacts on the Fund's operations and expenses. Rule 18f-4 under the 1940 Act, which governs the use of derivatives by registered investment companies, imposes limits on the amount of derivatives a fund could enter into and eliminated the asset segregation framework previously used by funds to comply with Section 18 of the 1940 Act, and requires funds whose use of derivatives is more than a limited specified exposure to establish and maintain a derivatives risk management program and appoint a derivatives risk manager. The Fund is in compliance with the requirements of Rule 18f-4.

In addition to the instruments, strategies and risks described below and in the Prospectus, Rafferty may discover additional derivative instruments and other similar or related techniques. These new opportunities may become available as Rafferty develops new techniques, as regulatory authorities broaden the range of permitted transactions and as new derivative instruments or other techniques are developed. Rafferty may utilize these instruments or other similar or related techniques to the extent that they are consistent with the Fund's investment objective and permitted by the Fund's investment limitations and applicable regulatory authorities. The Fund's Prospectus or this SAI will be supplemented to the extent that new products or techniques involve materially different risks than those described below or in the Prospectus.

*Special Risks*. The use of derivative instruments involves special considerations and risks, certain of which are described below. Risks pertaining to particular derivative instruments are described in the sections that follow.

(1) Options and futures prices can diverge from the prices of their underlying instruments. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect or no correlation also may result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, and from imposition of daily price fluctuation limits or trading halts.

(2) As described below, the Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in Financial Instruments involving obligations to third parties (*e.g.*, Financial Instruments other than purchased options). If the Fund were unable to close out its positions in such Financial Instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. These requirements might impair the Fund's ability to sell a portfolio security or make an investment when it would otherwise

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be favorable to do so or require that the Fund sell a portfolio security at a disadvantageous time. The Fund's ability to close out a position in a Financial Instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction (the "counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any position can be closed out at a time and price that is favorable to the Fund.

(3) Losses may arise due to unanticipated market price movements, lack of a liquid secondary market for any particular instrument at a particular time or due to losses from premiums paid by the Fund on options transactions.

*<u>Cover</u>*. Transactions using derivative instruments, other than purchased options, expose the Fund to an obligation to another party. The Fund may not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities or other options or futures contracts or (2) cash and liquid assets with a value, marked-to-market daily, sufficient to cover its potential obligations to the extent not covered as provided in (1) above. The Fund will comply with contractual requirements regarding cover for these instruments and will, if the requirements so require, set aside cash or liquid assets in an account with its custodian, U.S. Bank, N.A. ("Custodian"), in the prescribed amount as determined daily.

Assets used as cover or held in an account cannot be sold while the position in the corresponding derivative instrument is open, unless they are replaced with other appropriate assets. As a result, the commitment of a large portion of the Fund's assets to cover or accounts could impede portfolio management or the Fund's ability to meet redemption requests or other current obligations.

*<u>Futures Contracts</u>*. The Fund may use certain options (traded on an exchange or OTC), futures contracts (sometimes referred to as "futures") and options on futures contracts as a substitute for a comparable market position in the underlying security or index, to attempt to hedge or limit the exposure of the Fund's position, to create a synthetic money market position, for certain tax-related purposes or to effect closing transactions.

Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference instrument, such as a specific security, currency or commodity, at a specified price at a specified later date. A "sale" of a futures contract means the acquisition of a contractual obligation to deliver the underlying reference instrument called for by the contract at a specified price on a specified date. A "purchase" of a futures contract means the acquisition of a contractual obligation to acquire the underlying reference instrument called for by the contract at a specified price on a specified date. The purchase or sale of a futures contract will allow the Fund to increase or decrease its exposure to the underlying reference instrument without having to buy the actual instrument.

The underlying reference instruments to which futures contracts may relate include non-U.S. currencies, interest rates, stock and bond indices and debt securities, including U.S. government debt obligations. In most cases the contractual obligation under a futures contract may be offset, or "closed out," before the settlement date so that the parties do not have to make or take delivery. The closing out of a contractual obligation is usually accomplished by buying or selling, as the case may be, an identical, offsetting futures contract. This transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the underlying instrument or asset. If the original position entered into is a long position (futures contract purchased), there will be a gain (loss) if the offsetting sell transaction is carried out at a higher (lower) price, inclusive of commissions. If the original position entered into is a short position (futures contract sold) there will be a gain (loss) if the offsetting buy transaction is carried out at a lower (higher) price, inclusive of commissions.

Certain futures contracts are cash-settled, meaning the futures contract obligates the seller to deliver (and purchaser to accept) an amount of cash equal to a specific dollar amount multiplied by the difference between the final settlement price of a specific futures contract and the price at which the agreement is made. No physical delivery of the underlying asset is made.

Whether the Fund realizes a gain/loss from futures activities depends generally upon the movements in the underlying reference asset (generally a commodity, currency, security or index). The extent of the Fund's loss from an unhedged short position in a futures contract is potentially unlimited, and investors may lose the amount that they invest plus any profits recognized on their investment.

Futures contracts may be bought and sold on U.S. and non-U.S. exchanges. Futures contracts in the U.S. have been designed by exchanges that have been designated "contract markets" by the CFTC and must be executed through a futures commission merchant ("FCM"), which is a brokerage firm that is a member of the relevant contract market. Each exchange guarantees performance of the contracts as between the clearing members of the exchange, thereby reducing the risk of counterparty default. Because all transactions in the futures market are made, offset, or fulfilled by an FCM through a clearinghouse associated with the exchange on which the contracts are traded, the Fund will incur brokerage fees when it buys or sells futures contracts. The Fund generally buys and sells futures contracts only on contract markets (including exchanges or boards of trade) where there appears to be an active market for the futures contracts, but there is no assurance that an active market will exist for any particular contract or at any particular time. An active market makes it more likely that futures contracts will be liquid and bought and sold at competitive market prices. In addition, many of the futures contracts available may be relatively new instruments without a significant trading history. As a result, there can be no assurance that an active market will develop or continue to exist.

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When the Fund enters into a futures contract, it must deliver to an account controlled by the FCM (that has been selected by the Fund), an amount referred to as "initial margin" that is typically calculated as an amount equal to the volatility in market value of a contract over a fixed period. Initial margin requirements are determined by the respective exchanges on which the futures contracts are traded and the FCM. Thereafter, a "variation margin" amount may be required to be paid by the Fund or received by the Fund in accordance with margin controls set for such accounts, depending upon changes in the marked-to-market value of the futures contract. The account is marked-to-market daily and the variation margin is monitored by the Fund's investment manager and custodian on a daily basis. When the futures contract is closed out, if the Fund has a loss equal to, or greater than, the margin amount, the margin amount is paid to the FCM along with any loss in excess of the margin amount. If the Fund has a loss of less than the margin amount, the excess margin is returned to the Fund. If the Fund has a gain, the full margin amount and the amount of the gain is paid to the Fund. Some futures contracts provide for the delivery of securities that are different than those that are specified in the contract. For a futures contract for delivery of debt securities, on the settlement date of the contract, adjustments to the contract can be made to recognize differences in value arising from the delivery of debt securities with a different interest rate from that of the particular debt securities that were specified in the contract. In some cases, securities called for by a futures contract may not have been issued when the contract was written.

*Risks of Futures Contracts.* The Fund's use of futures contracts is subject to the risks associated with derivative instruments generally. The Fund may not be able to properly effect its strategy when a liquid market is unavailable for the futures contract the Fund wishes to close, which may at times occur. If the Fund were unable to liquidate a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, the Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

A purchase or sale of a futures contract may result in losses to the Fund in excess of the amount that the Fund delivered as initial margin. Because of the relatively low margin deposits required, futures trading involves a high degree of leverage; as a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, or gain, to the Fund. In addition, if the Fund has insufficient cash to meet daily variation margin requirements or close out a futures position, it may have to sell securities from its portfolio at a time when it may be disadvantageous to do so. Adverse market movements could cause the Fund to experience substantial losses on an investment in a futures contract. There is a risk of loss by the Fund of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Fund has an open position in a futures contract. The assets of the Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, the Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty.

The difference (called the "spread") between prices in the cash market for the purchase and sale of the underlying reference instrument and the prices in the futures market is subject to fluctuations and distortions due to differences in the nature of those two markets. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions that could distort the normal pricing spread between the cash and futures markets. Second, the liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery of the underlying instrument. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, resulting in pricing distortion. Third, from the point of view of speculators, the margin deposit requirements that apply in the futures market are less onerous than similar margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. When such distortions occur, a correct forecast of general trends in the price of an underlying reference instrument by the investment manager may still not necessarily result in a profitable transaction.

Futures contracts that are traded on non-U.S. exchanges may not be as liquid as those purchased on CFTC-designated contract markets. In addition, non-U.S. futures contracts may be subject to varied regulatory oversight. The price of any non-U.S. futures contract and, therefore, the potential profit and loss thereon, may be affected by any change in the non-U.S. exchange rate between the time a particular order is placed and the time it is liquidated, offset or exercised.

The CFTC and the various exchanges have established limits referred to as "speculative position limits" on the maximum net long or net short position that any person, such as the Fund, may hold or control in a particular futures contract. Trading limits are also imposed on the maximum number of contracts that any person may trade on a particular trading day. An exchange may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The regulation of futures, as well as other derivatives, is a rapidly changing area of law.

Futures exchanges may also limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. This daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements

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during a particular trading day and does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.

*Risks Associated with Commodity Futures Contracts*. There are several additional risks associated with transactions in commodity futures contracts.

Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while the Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.

In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for the Fund. If the nature of hedgers and speculators in futures markets has shifted when it is time for the Fund to reinvest the proceeds of a maturing contract in a new futures contract, the Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.

The commodities which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices and commodity-linked instruments, including futures contracts, than on traditional securities. Certain commodities are also subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment risks which subject the Fund's investments to greater volatility than investments in traditional securities.

*<u>Forward Contracts</u>*. The Fund may enter into equity, equity index or interest rate forward contracts for purposes of attempting to gain exposure to an index or group of securities without actually purchasing these securities, or to hedge a position. Forward contracts are two-party contracts pursuant to which one party agrees to pay the counterparty a fixed price for an agreed upon amount of commodities, securities, or the cash value of the commodities, securities or the securities index, at an agreed upon date. Because they are two-party contracts and may have terms greater than seven days, forward contracts may be considered to be illiquid for the Fund's illiquid investment limitations. The Fund will not enter into any forward contract unless Rafferty believes that the other party to the transaction is creditworthy. The Fund bears the risk of loss of the amount expected to be received under a forward contract in the event of the default or bankruptcy of a counterparty. If such a default occurs, the Fund will have contractual remedies pursuant to the forward contract, but such remedies may be subject to bankruptcy and insolvency laws which could affect the Fund's rights as a creditor.

*<u>Options</u>*. The value of an option position will reflect, among other things, the current market value of the underlying investment, the time remaining until expiration, the relationship of the exercise price to the market price of the underlying investment and general market conditions. Options that expire unexercised have no value. Options currently are traded on the Chicago Board Options Exchange<sup>®</sup> and other options exchanges, as well as the OTC markets.

By buying a call option on a security, the Fund has the right, in return for the premium paid, to buy the security underlying the option at the exercise price. By writing (selling) a call option and receiving a premium, the Fund becomes obligated during the term of the option to deliver securities underlying the option at the exercise price if the option is exercised. By buying a put option, the Fund has the right, in return for the premium, to sell the security underlying the option at the exercise price. By writing a put option, the Fund becomes obligated during the term of the option to purchase the securities underlying the option at the exercise price.

Because options premiums paid or received by the Fund are small in relation to the market value of the investments underlying the options, buying and selling put and call options can be more speculative than investing directly in securities.

The Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, the Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, the Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Fund to realize profits or limit losses on an option position prior to its exercise or expiration.

*Risks of Options on Currencies and Securities*. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded

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option transaction. In contrast, OTC options are contracts between the Fund and its counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when the Fund purchases an OTC option, it relies on the counterparty from which it purchased the option to make or take delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premium paid by the Fund as well as the loss of any expected benefit of the transaction.

The Fund's ability to establish and close out positions in exchange-traded options depends on the existence of a liquid market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. There can be no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the counterparty, the Fund might be unable to close out an OTC option position at any time prior to its expiration.

If the Fund were unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by the Fund could cause material losses because the Fund would be unable to sell the investment used as cover for the written option until the option expires or is exercised.

*<u>Options on Indices</u>*. An index fluctuates with changes in the market values of the securities included in the index. Options on indices give the holder the right to receive an amount of cash upon exercise of the option. Receipt of this cash amount will depend upon the closing level of the index upon which the option is based being greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. Some stock index options are based on a broad market index that includes more than nine constituents or on a narrower index which is generally considered to include only nine or fewer constituents.

Each of the exchanges has established limitations governing the maximum number of call or put options on the same index that may be bought or written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). Under these limitations, option positions of all investment companies advised by Rafferty are combined for purposes of these limits. Pursuant to these limitations, an exchange may order the liquidation of positions and may impose other sanctions or restrictions. These position limits may restrict the number of listed options that the Fund may buy or sell.

Puts and calls on indices are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question rather than on price movements in individual securities or futures contracts. When the Fund writes a call on an index, it receives a premium and agrees that, prior to the expiration date, the purchaser of the call, upon exercise of the call, will receive from the Fund an amount of cash if the closing level of the index upon which the call is based is greater than the exercise price of the call. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call multiplied by a specific factor ("multiplier"), which determines the total value for each point of such difference. When the Fund buys a call on an index, it pays a premium and has the same rights to such call as are indicated above. When the Fund buys a put on an index, it pays a premium and has the right, prior to the expiration date, to require the seller of the put, upon the Fund's exercise of the put, to deliver to the Fund an amount of cash if the closing level of the index upon which the put is based is less than the exercise price of the put, which amount of cash is determined by the multiplier, as described above for calls. When the Fund writes a put on an index, it receives a premium and the purchaser of the put has the right, prior to the expiration date, to require the Fund to deliver to it an amount of cash equal to the difference between the closing level of the index and the exercise price times the multiplier if the closing level is less than the exercise price.

*Risks of Options on Indices*. If the Fund has purchased an index option and exercises it before the closing index value for that day is available, it runs the risk that the level of the index may subsequently change. If such a change causes the exercised option to fall out-of-the-money, the Fund will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer.

*<u>OTC Options</u>*. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of OTC options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows the Fund great flexibility to tailor the option to its needs, OTC options generally involve greater risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded.

*<u>Options on Futures Contracts</u>*. When the Fund writes an option on a futures contract, it becomes obligated, in return for the premium paid, to assume a position in the futures contract at a specified exercise price at any time during the term of the option. If the Fund writes a call, it assumes a short futures position. If it writes a put, it assumes a long futures position. When the Fund purchases an option on a futures contract, it acquires the right in return for the premium it pays to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put).

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Whether the Fund realizes a gain or loss from futures activities depends upon movements in the underlying security or index. The extent of the Fund's loss from an unhedged short position from writing unhedged call options on futures contracts is potentially unlimited. The Fund only purchases and sells options on futures contracts that are traded on a U.S. exchange or board of trade.

Purchasers and sellers of options on futures can enter into offsetting closing transactions, similar to closing transactions in options, by selling or purchasing, respectively, an instrument identical to the instrument purchased or sold. Positions in options on futures contracts may be closed only on an exchange or board of trade that provides a secondary market. However, there can be no assurance that a liquid secondary market will exist for a particular contract at a particular time. In such event, it may not be possible to close a futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of an option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.

If the Fund were unable to liquidate an option on a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

*Risks of Options on Futures Contracts*. The ordinary spreads between prices in the cash and futures markets (including the options on futures markets), due to differences in the natures of those markets, are subject to the following factors, which may create distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions, which could distort the normal relationships between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions.

*<u>Combined Positions</u>*. The Fund may purchase and write options in combination with each other. For example, the Fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.

Other Investment Companies

The Fund may invest in the securities of other investment companies, including open- and closed-end funds and ETFs. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear the Fund's proportionate share of the fees and expenses of the other investment company, in addition to the fees and expenses Fund shareholders bear in connection with the Fund's own operations.

The Fund intends to limit its investments in securities issued by other investment companies in accordance with the 1940 Act and the rules promulgated thereunder. Section 12(d)(1) of the 1940 Act precludes the Fund from acquiring (i) more than 3% of the total outstanding shares of another investment company; (ii) shares of another investment company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (iii) shares of another registered investment company and all other investment companies having an aggregate value in excess of 10% of the value of the total assets of the Fund. In addition, the Fund is subject to Section 12(d)(1)(C), which provides that the Fund may not acquire shares of a closed-end fund if, immediately after such acquisition, the Fund and other investment companies having the same adviser as the Fund would hold more than 10% of the closed-end fund's total outstanding voting stock.

Section 12(d)(1)(F) of the 1940 Act provides that the provisions of paragraph 12(d)(1)(A) and (B) shall not apply to securities of an unaffiliated investment company purchased or otherwise acquired by the Fund if (i) immediately after such purchase or acquisition not more than 3% of the total outstanding shares of such investment company is owned by the Fund and all affiliated persons of the Fund; and (ii) the Fund has not offered or sold, and is not proposing to offer or sell its shares through a principal underwriter or otherwise at a public or offering price that includes a sales load of more than 1 1/2%. If the Fund invests in unaffiliated investment companies pursuant to Section 12(d)(1)(F), it must comply with the following voting restrictions: when the Fund exercises voting rights, by proxy or otherwise, with respect to unaffiliated investment companies owned by the Fund, the Fund will either seek instruction from the Fund's shareholders with regard to the voting of all proxies and vote in accordance with such instructions, or vote the shares held by the Fund in the same proportion as

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the vote of all other holders of such security. In addition, an unaffiliated investment company purchased by the Fund pursuant to Section 12(d)(1)(F) shall not be required to redeem its shares in an amount exceeding 1% of such investment company's total outstanding shares in any period of less than thirty days.

To the extent that the Fund invests in open-end or closed-end investment companies that invest primarily in the securities of companies located outside the United States, see the risks related to foreign securities set forth above.

Rule 12d1-4 allows a fund or ETF to acquire the securities of another fund in excess of the limitations imposed by Section 12 of the 1940 Act without obtaining an exemptive order from the SEC subject to certain limitations and conditions. Prior to a fund acquiring securities of another fund that exceed the limits of Section 12(d)(1) of the 1940 Act, the acquiring fund must enter into a Fund of Funds Agreement with the acquired fund. Rule 12d1-4 outlines the requirements of the Fund of Funds Agreements and specifies the responsibilities of Fund management related to "fund of funds" arrangements. Rule 12d1-4 was effective as of January 19, 2021 and its requirements have been implemented by the Funds that will be part of a fund of funds arrangement.

*<u>Exchange-Traded Products</u>*. The Fund may invest in exchange traded products ("ETPs"), which include ETFs, partnerships, commodity pools or trusts that are bought and sold on a securities exchange. ETPs trade like stocks on a securities exchange at market price rather than NAV and, as a result, ETP shares may trade at a price greater than NAV (premium) or less than NAV (discount). The Fund may also invest in exchange-traded notes ("ETNs"), which are structured debt securities, whereby the issuer of the ETN promises to pay ETN holders the return on an index or market segment over a certain period of time and then return the principal of the investment at maturity. Whereas ETPs' liabilities are secured by their portfolio securities, ETNs' liabilities are unsecured general obligations of the issuer. Therefore, ETNs are subject to the credit risk of the issuer of the ETN, which is different than other ETPs. The value of an ETN security should also be expected to fluctuate with the credit rating of the issuer. Most ETPs and ETNs are designed to track a particular market segment or index, although an ETP or ETN may be actively managed. ETPs and ETNs share expenses associated with their operation, typically including advisory fees and other management expenses. When the Fund invests in an ETP or ETN, in addition to directly bearing expenses associated with its own operations, it will bear its pro rata portion of the ETP's or ETN's expenses. ETPs and ETNs trade like stocks on a securities exchange at market prices rather than NAV and as a result ETP or ETN shares may trade at a price greater than NAV (premium) or less than NAV (discount). The risks of owning an ETP or ETN generally reflect the risks of owning the underlying securities the ETP or ETN is designed to track, although lack of liquidity in an ETP or ETN could result in it being more volatile than the underlying portfolio of securities. In addition, because of ETP or ETN expenses, compared to owning the underlying securities directly, it may be more costly to own an ETP or ETN.

Additionally, the Fund may invest in swap agreements referencing ETFs. If the Fund invests in ETFs or swap agreements referencing ETFs, the underlying ETFs may not necessarily track the Index.

*<u>Money Market Funds</u>*. Money market funds are open-end registered investment companies that historically have traded at a stable $1.00 per share price. However, money market funds that do not meet the definition of a "retail money market fund" or "government money market fund" under the 1940 Act are required to transact at a floating NAV per share (*i.e.*, in a manner similar to how all other non-money market mutual funds transact), instead of at a $1.00 stable share price. Money market funds may also impose liquidity fees and redemption gates for use in times of market stress. If a Fund invests in a money market fund with a floating NAV, the impact on the trading and value of the money market instruments may negatively affect the Fund's return potential.

Repurchase Agreements

The Fund may enter into repurchase agreements with banks 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. Repurchase agreements generally are for a short period of time, usually less than a week. Under a repurchase agreement, the Fund purchases a U.S. government security and simultaneously agrees to sell the security back to the seller at a mutually agreed-upon future price and date, normally one day or a few days later. The resale price is greater than the purchase price, reflecting an agreed-upon market interest rate during the Fund's holding period. While the maturities of the underlying securities in repurchase agreement transactions may be more than one year, the term of each repurchase agreement always will be less than one year. Repurchase agreements with a maturity of more than seven days are considered to be illiquid investments. The Fund may not enter into such a repurchase agreement if, as a result, more than 15% of the value of its net assets would then be invested in such repurchase agreements and other illiquid investments. See "Illiquid Investments and Restricted Securities" above.

The Fund will always receive, as collateral, securities whose market value, including accrued interest, at all times will be at least equal to 100% of the dollar amount invested by the Fund in each repurchase agreement. In the event of default or bankruptcy by the seller, the Fund will liquidate those securities (whose market value, including accrued interest, must be at least 100% of the amount invested by the Fund) held under the applicable repurchase agreement, which securities constitute collateral for the seller's obligation to repurchase the security. If the seller defaults, the Fund might incur a loss if the value of the collateral securing the repurchase agreement declines and might incur disposition costs in connection with liquidating

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the collateral. In addition, if bankruptcy or similar proceedings are commenced with respect to the seller of the security, realization upon the collateral by the Fund may be delayed or limited.

Reverse Repurchase Agreements

The Fund may borrow by entering into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Under a reverse repurchase agreement, the Fund sells securities and agrees to repurchase them at a mutually agreed to price. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with an approved custodian containing liquid high-grade securities, marked-to-market daily, having a value not less than the repurchase price (including accrued interest). Reverse repurchase agreements involve the risk that the market value of securities retained in lieu of sale by the Fund may decline below the price of the securities the Fund has sold but is obliged to repurchase. If the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities. During that time, the Fund's use of the proceeds of the reverse repurchase agreement effectively may be restricted. Reverse repurchase agreements create leverage, a speculative factor, and are considered borrowings for the purpose of the Fund's limitation on borrowing.

Short Sales

The Fund may engage in short sale transactions under which the Fund sells a security it does not own. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender amounts equal to any dividends that accrue during the period of the loan. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet the margin requirements, until the short position is closed out. The Fund will also incur transactions costs when conducting short sales.

Until the Fund closes its short position or replaces the borrowed stock, the Fund will: (1) maintain an account containing cash or liquid assets at such a level that (a) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the stock sold short and (b) the amount deposited in the account plus the amount deposited with the broker as collateral will not be less than the market value of the stock at the time the stock was sold short; or (2) otherwise cover the Fund's short position.

The Fund will incur a loss as a result of a short sales or short exposure to reference assets utilizing derivatives if the price of the security or reference asset increases between the date of the short sale or exposure and the date on which the Fund replaces the borrowed security or terminates the derivatives providing short exposure. The Fund will realize a gain if the price of a security or reference asset declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss will be increased, by the amount of the premium, dividends or interest the Fund may be required to pay, if any, in connection with a short sale or derivatives that provide short exposure.

Swap Agreements

The Fund may enter into swap agreements and other derivatives to obtain long exposure to an underlying asset without actually purchasing such asset. Swap agreements are generally two-party contracts entered into primarily by institutional investors for periods ranging from a day to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," *i.e.*, the return on, or increase/decrease, in value of a particular dollar amount invested in a security or "basket" of securities representing a particular index or an ETF representing a particular index or group of securities.

The Fund may enter into swaps to invest in a market without owning or taking physical custody of securities. For example, in one common type of total return swap, the Fund's counterparty will agree to pay the Fund the rate at which the specified asset or indicator (*e.g.*, security, an ETF, or securities comprising a benchmark index, plus the dividends or interest that would have been received on those assets) increased in value multiplied by the relevant notional amount of the swap. The Fund will agree to pay to the counterparty an interest fee (based on the notional amount) and the rate at which, the specified asset or indicator would decreased in value multiplied by the notional amount of the swap, plus, in certain instances, commissions or trading spreads on the notional amount.

As a result, the swap has a similar economic effect as if the Fund were to invest in the assets underlying the swap in an amount equal to the notional amount of the swap. The return to the Fund on such swap should be the gain or loss on the notional amount plus dividends or interest on the assets less the interest paid by the Fund on the notional amount. However,

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unlike cash investments in the underlying assets, the Fund will not be an owner of the underlying assets and will not have voting or similar rights in respect of such assets.

As a trading technique, Rafferty may substitute physical securities with a swap having investment characteristics substantially similar to the underlying securities.

The use of swaps is a highly specialized activity which involves investment techniques and risks in addition to, and in some cases different from, those associated with ordinary portfolio securities transactions. The primary risks associated with the use of swaps are mispricing or improper valuation, imperfect correlation between movements in the notional amount and the price of the underlying investments, and the inability of the counterparties or clearing organization to perform. If a counterparty's creditworthiness for an over-the-counter swap declines, the value of the swap would likely decline. Moreover, there is no guarantee that the Fund could eliminate its exposure under an outstanding swap by entering into an offsetting swap with the same or another party. In addition, the Fund may use a combination of swaps on the Index and/or swaps on an ETF that is designed to track the performance of the Index. The performance of an ETF may deviate from the performance of the Index due to embedded costs and other factors. Thus, to the extent the Fund invests in swaps that use an ETF as the reference asset, the Fund may be subject to greater correlation risk and may not achieve as high a degree of correlation with the Index as it would if the Fund used only swaps on the Index. Rafferty, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Fund's transactions in swaps.

<u>Common Types of Swaps</u>

The Fund may enter into any of several types of swaps, including:

*Total Return Swaps.* Total return swaps may be used either as economically similar substitutes for owning the reference asset specified in the swap, such as the securities that comprise a given market index, particular securities or commodities, or other assets or indicators. They also may be used as a means of obtaining exposure in markets where the reference asset is unavailable or it may otherwise be impossible or impracticable for the Fund to own that asset. "Total return" refers to the payment (or receipt) of the total return on the underlying reference asset, which is then exchanged for the receipt (or payment) of an interest rate. Total return swaps provide the Fund with the additional flexibility of gaining exposure to a market or sector index by using the most cost-effective vehicle available.

*Interest Rate Swaps.* Interest rate swaps, in their most basic form, involve the exchange by the Fund with another party of their respective commitments to pay or receive interest. For example, the Fund might exchange its right to receive certain floating rate payments in exchange for another party's right to receive fixed rate payments. Interest rate swaps can take a variety of other forms, such as agreements to pay the net differences between two different interest indexes or rates. Despite their differences in form, the function of interest rate swaps is generally the same: to increase or decrease the Fund's exposure to long- or short-term interest rates. For example, the Fund may enter into an interest rate swap to preserve a return or spread on a particular investment or a portion of its portfolio or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date.

*Other Financial Instruments*. Other forms of swaps that the Fund may enter into include: interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor," and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.

<u>Mechanics of Swaps</u>

*Payments*. Most swaps entered into by the Fund calculate and settle the obligations of the parties to the agreement on a "net basis" with a single payment. Consequently, a Fund's current obligations (or rights) under a swap will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). Other swaps may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of the reference entity. The Fund's current obligations under most swaps (*e.g.*, total return swaps, equity/index swaps, interest rate swaps) will be accrued daily (offset against any amounts owed to the Fund by the counterparty to the swap) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating or earmarking cash or other assets determined to be liquid. However, typically no payments will be made until the settlement date. The net amount of the excess, if any, of the Fund's obligations over its entitlements with respect to a swap agreement entered into on a net basis will be accrued daily and an amount of cash or liquid asset having an aggregate NAV at least equal to the accrued excess will be maintained in an account with the Custodian that satisfies the 1940 Act. The Fund also will establish and maintain such accounts with respect to its total obligations under any swaps that are not entered into on a net basis. Obligations under swap agreements so covered will not be construed to be "senior securities" for purposes of the Fund's investment restriction concerning senior securities.

*Counterparty Credit Risk*. The Fund will not enter into any uncleared swap (*i.e.*, not cleared by a central counterparty) unless Rafferty believes that the other party to the transaction is creditworthy. The counterparty to an uncleared swap will

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typically be a major global financial institution. The Fund bears the risk of loss of the amount expected to be received under a swap in the event of the default or bankruptcy of a swap counterparty. If such a default occurs, the Fund will have contractual remedies pursuant to the swaps, but such remedies may be subject to bankruptcy and insolvency laws that could affect the Fund's rights as a creditor. The counterparty risk for cleared swaps is generally lower than for uncleared over-the-counter swaps because, in a cleared swap, a clearing organization becomes substituted for each counterparty to a cleared swap. The clearing organization takes on the obligations of each side of the swap and the Fund would only be exposed to the clearing organization for performance of financial obligations. However, there can be no assurance that the clearing organization, or its members, will satisfy its obligations to the Fund. Upon entering into a cleared swap, the Fund may be required to deposit with its futures commission merchant an amount of cash or cash equivalents equal to a small percentage of the notional amount (this amount is subject to change by the clearing organization that clears the trade). This amount is in the nature of a performance bond or good faith deposit on the cleared swap and is returned to the Fund upon termination of the swap, assuming all contractual obligations have been satisfied. Subsequent payments to and from the broker will be made daily as the price of the swap fluctuates, making the long and short position in the swap contract more or less valuable, a process known as "marking-to-market." The premium (discount) payments are built into the daily price of the swap and thus are amortized through the subsequent payments. The subsequent payment also includes the daily portion of the periodic payment stream.

*Termination and Default Risk*. Swap agreements do not involve the delivery of securities or other underlying assets. Accordingly, if a swap is entered into on a net basis, if the other party to a swap agreement defaults, the Fund's risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any.

<u>Swap Regulation</u>

In recent years, regulators across the globe, including the CFTC and the U.S. banking regulators, have adopted collateral requirements applicable to uncleared swaps. While the Fund is not directly subject to these requirements, where the Fund's counterparty is subject to the requirements, uncleared swaps between the Fund and that counterparty are required to be marked-to-market on a daily basis, and collateral is required to be exchanged to account for any changes in the value of such swaps above certain agreed upon thresholds. The rules impose a number of requirements as to these exchanges of collateral, including as to the timing of transfers, the type of collateral (and valuations for such collateral) and other matters that may be different than what the Fund would agree with its counterparty in the absence of such regulation. In all events, where the Fund is required to post collateral to its swap counterparty, such collateral will be posted to an independent bank custodian, where access to the collateral by the swap counterparty will generally not be permitted unless the Fund is in default on its obligations to the swap counterparty.

In addition to the marked-to-market collateral requirements, regulators have adopted "initial" collateral requirements applicable to uncleared swaps. Where applicable, these rules require parties to an uncleared swap to post, to a custodian that is independent from the parties to the swap, collateral (in addition to any marked-to-market collateral noted above) in an amount that is either (i) specified in a schedule in the rules or (ii) calculated by the regulated party in accordance with a model that has been approved by that party's regulator(s). The initial collateral rules only apply to the swap trading relationships of Funds with average aggregate notional amounts that exceed $8 billion. If the Fund is subject to an initial margin obligation, these rules may impose significant costs on the Fund's ability to engage in uncleared swaps and, as such, could adversely affect Rafferty's ability to manage the Fund, may impair the Fund's ability to achieve its investment objective and/or may result in reduced returns to the Fund's investors.

*Comprehensive swaps regulation.* The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and related regulatory developments have imposed comprehensive new regulatory requirements on swaps and swap market participants. The regulatory framework includes: (1) registration and regulation of swap dealers; (2) requiring central clearing and execution of standardized swaps; (3) imposing collateral requirements on swap transactions; (4) regulating and monitoring swap transactions through position limits and large trader reporting requirements; and (5) imposing recordkeeping and centralized and public reporting requirements, on an anonymous basis, for most swaps. The CFTC is responsible for the regulation of most swaps. The SEC has jurisdiction over a small segment of the market referred to as "security-based swaps," which includes swaps on single securities or credits, or narrow-based indices of securities or credits.

*Uncleared swaps.* In an uncleared swap, the swap counterparty is typically a brokerage firm, bank or other financial institution. The Fund customarily enters into uncleared swaps based on the standard terms and conditions of an International Swaps and Derivatives Association ("ISDA") Master Agreement. ISDA is a voluntary industry association of participants in the OTC derivatives markets that has developed standardized contracts used by such participants that have agreed to be bound by such standardized contracts. In the event that one party to a swap transaction defaults and the transaction is terminated prior to its scheduled termination date, one of the parties may be required to make an early termination payment to the counterparty. An early termination payment may be payable by either the defaulting or non-defaulting party, depending upon which of them is "in-the-money" with respect to the swap at the time of its termination. Early termination payments may be calculated in various ways, but are intended to approximate the amount the "in-the-money" party would have to pay to replace the swap as of the date of its termination. During the term of an uncleared swap, the Fund will be required to pledge to the swap counterparty, from time to time, an amount of cash and/or other assets equal to the total net amount (if any) that would be payable by the Fund to the counterparty if all outstanding swaps between the parties were terminated

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on the date in question, including any early termination payments. Periodically, changes in the amount pledged are made to recognize changes in value of the contract resulting from, among other things, interest on the notional value of the contract, market value changes in the underlying investment, and/or dividends paid by the issuer of the underlying instrument. Likewise, the counterparty will be required to pledge cash or other assets to cover its obligations to the Fund. However, the amount pledged may not always be equal to or more than the amount due to the other party. Therefore, if a counterparty defaults in its obligations to the Fund, the amount pledged by the counterparty and available to the Fund may not be sufficient to cover all the amounts due to the Fund and the Fund may sustain a loss. Rules requiring initial collateral to be posted by certain market participants for uncleared swaps have been adopted. If the Fund is deemed to have material swaps exposure under applicable swap regulations, it will be required to post initial collateral in addition to marked-to-market collateral.

*Cleared swaps.* Certain standardized swaps are subject to mandatory central clearing and exchange-trading. The Dodd-Frank Act and implementing rules will ultimately require the clearing and exchange-trading of many swaps. Mandatory exchange-trading and clearing will occur on a phased-in basis based on the type of market participant, CFTC approval of contracts for central clearing and public trading facilities making such cleared swaps available to trade. To date, the CFTC has designated only certain of the most common types of credit default index swaps and interest rate swaps as subject to mandatory clearing and certain public trading facilities have made certain of those cleared swaps available to trade, additional categories of swaps may in the future be designated as subject to mandatory clearing and trade execution requirements. Central clearing is intended to reduce counterparty credit risk and increase liquidity, but central clearing does not eliminate these risks and may involve additional costs and risks not involved with uncleared swaps. For more information, see "Risks of cleared swaps" below.

In a cleared swap, the Fund's ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank or other financial institution. Cleared swaps are submitted for clearing through each party's FCM, which must be a member of the clearinghouse that serves as the central counterparty. Transactions executed on a swap execution facility may increase market transparency and liquidity but may require the Fund to incur increased expenses to access the same types of swaps that it has used in the past. When the Fund enters into a cleared swap, it must deliver to the central counterparty (via the FCM) initial collateral. The initial collateral requirements are determined by the central counterparty, and are typically calculated as an amount equal to the volatility in market value of the cleared swap over a fixed period, but an FCM may require additional collateral above the amount required by the central counterparty. During the term of the swap agreement, an additional collateral amount may also be required to be paid by the Fund or may be received by the Fund in accordance with collateral controls set for such accounts. If the value of the Fund's cleared swap declines, the Fund will be required to make additional payments to the FCM to settle the change in value. Conversely, if the market value of the Fund's position increases, the FCM will post additional amounts to the Fund's account. At the conclusion of the term of the swap agreement, if the Fund has a loss equal to or greater than the collateral amount, the collateral amount is paid to the FCM along with any loss in excess of the collateral amount. If the Fund has a loss of less than the collateral amount, the excess collateral is returned to the Fund. If the Fund has a gain, the full collateral amount and the amount of the gain is paid to the Fund.

*Risks of swaps generally.* The use of swap transactions is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Whether the Fund will be successful in using swap agreements to achieve its investment goal depends on the ability of the Adviser to correctly predict which types of investments are likely to produce greater returns. If the Adviser, in using swap agreements, is incorrect in its forecasts of market values, interest rates, inflation, currency exchange rates or other applicable factors, the investment performance of the Fund will be less than its performance would have been if it had not used the swap agreements. The risk of loss to the Fund for swap transactions that are entered into on a net basis depends on which party is obligated to pay the net amount to the other party. If the counterparty is obligated to pay the net amount to the Fund, the risk of loss to the Fund is loss of the entire amount that the Fund is entitled to receive. If the Fund is obligated to pay the net amount, the Fund's risk of loss is generally limited to that net amount. If the swap agreement involves the exchange of the entire principal value of a security, the entire principal value of that security is subject to the risk that the other party to the swap will default on its contractual delivery obligations. In addition, the Fund's risk of loss also includes any collateral at risk in the event of default by the counterparty (in an uncleared swap) or the central counterparty or FCM (in a cleared swap), plus any transaction costs.

Because bilateral swap agreements are structured as two-party contracts and may have terms of greater than seven days, these swaps may be considered to be illiquid and, therefore, subject to the Fund's limitation on investments in illiquid securities. If a swap transaction is particularly large or if the relevant market is illiquid, the Fund may not be able to establish or liquidate a position at an advantageous time or price, which may result in significant losses. Participants in the swap markets are not required to make continuous markets in the swap contracts they trade. Participants could refuse to quote prices for swap contracts or quote prices with an unusually wide spread between the price at which they are prepared to buy and the price at which they are prepared to sell. Some swap agreements entail complex terms and may require a greater degree of subjectivity in their valuation. However, the swap markets have grown substantially in recent years, with a large number of financial institutions acting both as principals and agents, utilizing standardized swap documentation. As a

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result, the swap markets have become increasingly liquid. In addition, central clearing and the trading of cleared swaps on public facilities are intended to increase liquidity.

Rafferty, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Fund's swap transactions. Rules adopted under the Dodd-Frank Act require centralized reporting of detailed information about many swaps, whether cleared or uncleared. This information is available to regulators and also, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data is intended to result in greater market transparency. This may be beneficial to funds that use swaps in their trading strategies. However, public reporting imposes additional recordkeeping burdens on these funds, and the safeguards established to protect anonymity may not provide protection of the Fund's identity as intended. Certain IRS positions may limit the Fund's ability to use swap agreements in a desired tax strategy. It is possible that developments in the swap markets and/or the laws relating to swap agreements, including potential government regulation, could adversely affect the Fund's ability to benefit from using swap agreements, or could have adverse tax consequences. For more information about potentially changing regulation, see "Developing government regulation of derivatives" below.

*Risks of uncleared swaps.* Uncleared swaps are typically executed bilaterally with a swap dealer rather than traded on exchanges. As a result, swap participants may not be as protected as participants on organized exchanges. Performance of a swap agreement is the responsibility only of the swap counterparty and not of any exchange or clearinghouse. As a result, the Fund is subject to the risk that a counterparty will be unable or will refuse to perform under such agreement, including because of the counterparty's bankruptcy or insolvency. The Fund risks the loss of the accrued but unpaid amounts under a swap agreement, which could be substantial, in the event of a default, insolvency or bankruptcy by a swap counterparty. In such an event, the Fund will have contractual remedies pursuant to the swap agreements, but bankruptcy and insolvency laws could affect the Fund's rights as a creditor. If the counterparty's creditworthiness declines, the value of a swap agreement would likely decline, potentially resulting in losses. The Adviser will only approve a swap agreement counterparty for the Fund if the Adviser deems the counterparty to be creditworthy. However, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited.

*Risks of cleared swaps.* As noted above, under recent financial reforms, certain types of swaps are, and others eventually are expected to be, required to be cleared through a central counterparty, which may affect counterparty risk and other risks faced by the Fund.

Central clearing is designed to reduce counterparty credit risk and increase liquidity compared to uncleared swaps because central clearing interposes the central clearinghouse as the counterparty to each participant's swap, but it does not eliminate those risks completely and may involve additional costs and risks not involved with uncleared swaps. There is also a risk of loss by the Fund of the initial and variation collateral deposits in the event of bankruptcy of the FCM with which the Fund has an open position, or the central counterparty in a swap contract. The assets of the Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and collateral segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, the Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty. Credit risk of cleared swap participants is concentrated in a few clearinghouses, and the consequences of insolvency of a clearinghouse are not clear.

With cleared swaps, the Fund may not be able to obtain terms as favorable as it would be able to negotiate for a bilateral, uncleared swap. In addition, an FCM may unilaterally amend the terms of its agreement with the Fund, which may include the imposition of position limits or additional collateral requirements with respect to the Fund's investment in certain types of swaps. Central counterparties and FCMs can require termination of existing cleared swap transactions upon the occurrence of certain events, and can also require increases in collateral above the amount that is required at the initiation of the swap agreement. Currently, depending on a number of factors, the collateral required under the rules of the clearinghouse and FCM may be in excess of the collateral required to be posted by the Fund to support its obligations under a similar uncleared swap.

Finally, the Fund is subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, the Fund may be required to break the trade and make an early termination payment to the executing broker.

*Developing government regulation of derivatives.* The regulation of cleared and uncleared swaps, as well as other derivatives, is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative position limits, the implementation of higher collateral requirements, the establishment of daily price limits and the suspension of trading. It is not possible to predict fully the effects of current or future regulation. However, it is possible that developments in government regulation of various types of derivative instruments, such as speculative position limits on certain types of derivatives, or limits or restrictions on the counterparties with which the Fund engages in derivative transactions, may limit or prevent the Fund from using or limit the Fund's use

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of these instruments effectively as a part of its investment strategy, and could adversely affect the Fund's ability to achieve its investment goal(s). The Adviser will continue to monitor developments in the area, particularly to the extent regulatory changes affect the Fund's ability to enter into desired swap agreements. New requirements, even if not directly applicable to the Fund, may increase the cost of the Fund's investments and cost of doing business.

Unrated Debt Securities

The Fund may also invest in unrated debt securities. Unrated debt, while not necessarily lower in quality than rated securities, may not have as broad a market. Because of the size and perceived demand for the issue, among other factors, certain issuers may decide not to pay the cost of getting a rating for their bonds. The creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on the security, will be analyzed to determine whether to purchase unrated bonds.

U.S. Government Securities

The Fund may invest in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities ("U.S. government securities") in pursuit of its investment objective, in order to deposit such securities as initial or variation margin, as "cover" for the investment techniques it employs, as part of a cash reserve or for liquidity purposes.

U.S. government securities are high-quality instruments issued or guaranteed as to principal or interest by the U.S. Treasury Department ("U.S. Treasury") or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are backed by the right of the issuer to borrow from the U.S. Treasury; others are backed by discretionary authority of the U.S. government to purchase the agencies' obligations; while others are supported only by the credit of the instrumentality. In the case of securities not backed by the full faith and credit of the United States, the investor must look principally to the agency issuing or guaranteeing the obligation for ultimate repayment.

Yields on short-, intermediate- and long-term U.S. government securities are dependent on a variety of factors, including the general conditions of the money and bond markets, the size of a particular offering and the maturity of the obligation. Debt securities with longer maturities tend to produce higher capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market value of U.S. government securities generally varies inversely with changes in the market interest rates. An increase in interest rates, therefore, generally would reduce the market value of the Fund's portfolio investments in U.S. government securities, while a decline in interest rates generally would increase the market value of the Fund's portfolio investments in these securities. U.S. government securities include U.S. Treasury obligations, which includes U.S. Treasury Bills (which mature within one year of the date they are issued), U.S. Treasury Notes (which have maturities of one to ten years) and U.S. Treasury Bonds (which generally have maturities of more than 10 years). All such U.S. Treasury obligations are backed by the full faith and credit of the United States.

U.S. government securities also include obligations issued by U.S. government agencies and instrumentalities ("GSEs") that are backed by the full faith and credit of the U.S. government (such as securities issued or guaranteed by the Federal Housing Administration, Ginnie Mae<sup>®</sup>, the Export-Import Bank of the United States, the General Services Administration and the Maritime Administration and certain securities issued by the Small Business Administration).

Also, U.S. government securities include securities that are guaranteed by U.S. government-sponsored entities that are not backed by the full faith and credit of the U.S. government (such as Fannie Mae, Freddie Mac, or the Federal Home Loan Banks). These U.S. government-sponsored entities, although chartered and sponsored by the U.S. Congress, are not guaranteed, nor insured, by the U.S. government. They are supported only by the credit of the issuing agency, instrumentality or corporation.

Since 2008, Fannie Mae and Freddie Mac have been in conservatorship and have received significant capital support through U.S. Treasury preferred stock purchases, as well as U.S. Treasury and Federal Reserve purchases of their mortgage backed securities ("MBS"). The FHFA and the U.S. Treasury (through its agreement to purchase Fannie Mae and Freddie Mac preferred stock) have imposed strict limits on the size of their mortgage portfolios. The MBS purchase programs ended in 2010 but the U.S. Treasury has continued its support for the entities' capital as necessary to prevent a negative net worth and other governmental entities have provided significant support to Fannie Mae and Freddie Mac. There is no guarantee, however, that they will continue to do so. Accordingly, no assurance can be given that Fannie Mae and Freddie Mac will remain successful in meeting their obligations with respect to the debt and MBSs that they issue.

In addition, the problems faced by Fannie Mae and Freddie Mac, resulting in their being placed into federal conservatorship and receiving significant U.S. government support, have sparked serious debate among federal policy makers regarding the continued role of the U.S. government in providing liquidity for mortgage loans. Discussions among policymakers have continued as to whether Fannie Mae and Freddie Mac should be nationalized, privatized, restructured, or eliminated altogether. Fannie Mae and Freddie Mac have been the subject of several legal actions and investigations related to certain accounting,

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disclosure, or corporate governance matters, which (along with any resulting financial restatements) may continue to have an adverse effect on the guaranteeing entities.

U.S. Government Sponsored Enterprises

U.S. government sponsored enterprises ("GSE") securities are securities issued by the U.S. government or its agencies or instrumentalities. Some obligations issued by GSEs are supported by the discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality and others only by the credit of the agency or instrumentality. Those securities bear fixed, floating or variable rates of interest. Interest may fluctuate based on generally recognized reference rates or the relationship of rates. While the U.S. government currently provides financial support to such GSEs or instrumentalities, no assurance can be given that it will always do so, since it is not so obligated by law.

Certain U.S. government debt securities, such as securities of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury. Others, such as securities issued by Fannie Mae<sup>®</sup> and Freddie Mac<sup>®</sup>, are supported only by the credit of the corporation. In the case of securities not backed by the full faith and credit of the United States, a fund must look principally to the agency issuing or guaranteeing the obligation in the event the agency or instrumentality does not meet its commitments. The U.S. government may choose not to provide financial support to GSEs or instrumentalities if it is not legally obligated to do so. A fund will invest in securities of such instrumentalities only when Rafferty is satisfied that the credit risk with respect to any such instrumentality is comparatively minimal.

When-Issued Securities

The Fund may enter into firm commitment agreements for the purchase of securities on a specified future date. The Fund may purchase, for example, new issues of fixed-income instruments on a when-issued basis, whereby the payment obligation, or yield to maturity, or coupon rate on the instruments may not be fixed at the time of transaction. The Fund will not purchase securities on a when-issued basis if, as a result, more than 15% of its net assets would be so invested. If the Fund enters into a firm commitment agreement, liability for the purchase price and the rights and risks of ownership of the security accrue to the Fund at the time it becomes obligated to purchase such security, although delivery and payment occur at a later date. Accordingly, if the market price of the security should decline, the effect of such an agreement would be to obligate the Fund to purchase the security at a price above the current market price on the date of delivery and payment.

Zero-Coupon, Payment-In-Kind and Strip Securities

The Fund may invest in zero-coupon, payment-in-kind and strip securities of any rating or maturity. Zero-coupon securities make no periodic interest payment but are sold at a deep discount from their face value, otherwise known as "original issue discount" or "OID." The buyer earns a rate of return determined by the gradual appreciation of the security, which is redeemed at face value on a specified maturity date. The OID varies depending on the time remaining until maturity, as well as market interest rates, liquidity of the security, and the issuer's perceived credit quality. If the issuer defaults, the Fund may not receive any return on its investment. Because zero-coupon securities bear no interest and compound semi-annually at the rate fixed at the time of issuance, their value generally is more volatile than the value of other fixed-income securities. Since zero-coupon security holders do not receive interest payments, when interest rates rise, zero-coupon securities fall more dramatically in value than securities paying interest on a current basis. When interest rates fall, zero-coupon securities rise more rapidly in value because the securities reflect a fixed rate of return. Payment-in-kind securities allow the issuer, at its option, to make current interest payments either in cash or in additional debt obligations of the issuer. Both zero-coupon securities and payment-in-kind securities allow an issuer to avoid the need to generate cash to meet current interest payments.

An investment in zero-coupon securities and delayed interest securities (which do not make interest payments until after a specified time) may cause the Fund to recognize income and be required to make distributions thereof to shareholders before it receives any cash payments on its investment. Moreover, even though payment-in-kind securities do not pay current interest in cash, the Fund nonetheless is required to accrue interest income on these investments and to distribute the interest income at least annually to shareholders. See "Dividends, Other Distributions and Taxes – Income from Zero Coupon and Payment-in-Kind Securities." Thus, the Fund could be required at times to liquidate other investments to satisfy distribution requirements.

The Fund may also invest in strips, which are debt securities whose interest coupons are taken out and traded separately after the securities are issued but otherwise are comparable to zero-coupon securities. Like zero-coupon securities and payment-in-kind securities, strips are generally more sensitive to interest rate fluctuations than interest paying securities of comparable term and quality.

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Other Investment Risks and Practices

*<u>Borrowing</u>*. The Fund may borrow money for investment purposes, which is a form of leveraging. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Leverage will magnify changes in the Fund's NAV and on the Fund's investments. Although the principal of such borrowings will be fixed, the Fund's assets may change in value during the time the borrowing is outstanding. Leverage also creates interest expenses for the Fund. To the extent the income derived from securities purchased with borrowed funds exceeds the interest the Fund will have to pay, that Fund's net income will be greater than it would be if leverage were not used. Conversely, if the income from the assets obtained with borrowed funds is not sufficient to cover the cost of leveraging, the net income of the Fund will be less than it would be if leverage were not used, and therefore the amount available for shareholders will be reduced.

The Fund may borrow money to facilitate management of the Fund's portfolio by enabling the Fund to meet redemption requests when the liquidation of portfolio instruments would be inconvenient or disadvantageous. Such borrowing is not for investment purposes and will be repaid by the borrowing Fund promptly.

As required by the 1940 Act, the Fund must maintain continuous asset coverage (total assets, including assets acquired with borrowed funds, less liabilities exclusive of borrowings) of 300% of all amounts borrowed. If at any time the value of the required asset coverage declines as a result of market fluctuations or other reasons, the Fund may be required to sell some of its portfolio investments within three days to reduce the amount of its borrowings and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell portfolio instruments at that time.

*<u>Portfolio Turnover</u>*. The Trust anticipates that the Fund's annual portfolio turnover may vary year to year. The Fund's portfolio turnover rate is calculated by the value of the securities purchased or securities sold, excluding all securities whose terms-to-maturity at the time of acquisition were less than 397 days, divided by the average monthly value of such securities owned during the year. Based on this calculation, instruments with remaining terms-to-maturity of less than 397 days are excluded from the portfolio turnover rate. Such instruments generally would include futures contracts and options, since such contracts generally have remaining terms-to-maturity of less than 397 days. In any given period, all of the Fund's investments may have remaining terms-to-maturity of less than 397 days; in that case, the portfolio turnover rate for that period would be equal to zero. However, the Fund's portfolio turnover rate calculated with all securities whose terms-to-maturity were less than 397 days is anticipated to be unusually high.

High portfolio turnover involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales also may result in adverse tax consequences to a Fund's shareholders resulting from its distributions of increased net capital gains, if any, recognized as a result of the sales. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund's performance.

Securities Lending

The Fund may lend portfolio securities to certain borrowers that Rafferty determines to be creditworthy. The borrowers provide collateral that is maintained in an amount at least equal to the current market value of the securities loaned, marked to market daily. Borrowers continuously secure their obligations to return securities on loan from the Fund by depositing any combination of short-term U.S. government securities and cash as collateral with the Fund. No securities loan will be made on behalf of the Fund if, as a result, the aggregate value of all securities loaned by the Fund exceeds one-third of the value of the Fund's total assets (including the value of the collateral received) or such lower limit as set by Rafferty or the Board. The Fund may terminate a loan at any time and obtain the return of the securities loaned. The Fund receives, by way of substitute payment, the value of any interest or cash or non-cash distributions paid on the loaned securities that it would have received if the securities were not on loan. Any gain or loss in the market price of the borrowed securities that occurs during the term of the loan inures to the lending Fund and that Fund's shareholders.

With respect to loans that are collateralized by cash, the borrower may be entitled to receive a fee based on the amount of cash collateral. The Fund is typically compensated by the difference between the amount earned on the reinvestment of cash collateral and the fee paid to the borrower. In the case of collateral other than cash, the Fund is typically compensated by a fee paid by the borrower equal to a percentage of the market value of the loaned securities. A Fund may also receive such fees on "special" loans that are cash-collateralized. Any cash collateral may be reinvested in money market funds. Such money market fund shares will not be subject to a sales load, redemption fee, distribution fee or service fee. However, such investments are subject to investment risk.

Securities lending involves exposure to certain risks, including operational risk (*i.e.*, the risk of losses resulting from problems in the settlement and accounting process), "gap" risk (*i.e.*, the risk of a mismatch between the return of cash collateral reinvestments and the fees the Fund has agreed to pay a borrower), and credit, legal, counterparty and market risk. If a securities lending counterparty were to default, the Fund would be subject to the risk of a possible delay in receiving collateral

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or in recovering the loaned securities, or to a possible loss of rights in the collateral. In the event a borrower does not return the Fund's securities as agreed, the Fund could experience losses if the proceeds received from liquidating the collateral do not at least equal the value of the loaned security at the time the collateral is liquidated, plus the transaction costs incurred in purchasing replacement securities. This event could trigger adverse tax consequences for the Fund. The Fund could lose money if its investment of cash collateral declines in value over the period of the loan. Substitute payments for dividends received by the Fund while its securities are loaned out will not be considered qualified dividend income.

Correlation and Tracking Risk

Several factors may affect the Fund's ability to obtain its monthly leveraged investment objective. Among these factors are: (1) Fund expenses, including brokerage expenses and commissions and financing costs related to derivatives (which may be increased by high portfolio turnover) and other transactions costs and fees; (2) less than all of the securities in the Index being held by the Fund and securities not included in the Index being held by the Fund; (3) an imperfect correlation between the performance of instruments held by the Fund, such as other investment companies, including ETFs, swap agreements, futures contracts and options, and the performance of the underlying securities in the cash market comprising the Index; (4) bid-ask spreads (the effect of which may be increased by portfolio turnover); (5) the Fund holding instruments that are illiquid or the market for which becomes disrupted; (6) the need to conform the Fund's portfolio holdings to comply with that Fund's investment restrictions or policies, or regulatory or tax law requirements; (7) income items, valuation methodologies and accounting standards; (8) significant purchase and redemption activity by shareholders; and (9) market movements that run counter to the leveraged Fund's investments (which will cause divergence between the Fund and the Index over time due to the mathematical effects of leveraging).

There can be no guarantee that the Fund will achieve a high degree of correlation with its leveraged investment objective relative to the Index. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. Activities surrounding index reconstitutions and other index repositioning events may hinder the Fund's ability to meet its calendar month leveraged investment objective.

The Fund may not have investment exposure to all securities in the Index, or its weighting of investment exposure to such stocks or industries may be different from that of the Index. In addition, the Fund may invest in securities or financial instruments not included in the Index. The Fund may take or refrain from taking positions in order to improve tax efficiency or comply with regulatory restrictions, either of which may negatively affect the Fund's leveraged correlation with the Index. The Fund may be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Additionally, securities in the Index may trade on markets that may not be open on the same day as the Fund, which may cause a difference between the performance of the Fund and the Index.

Because the Index may include instruments that trade on a different market than the Fund, the Fund's return may vary from the leveraged performance of the Index because different markets may close before the Exchange opens or may not be open for business on the same calendar days as the Fund. Additionally, due to differences in trading hours between these different markets, and because the value of the Index may be determined using prices obtained at times other than the Fund's NAV calculation time, correlation to the Index may be measured by comparing the Fund's monthly return to the inverse of a multiple of the calendar month performance of the Index or by comparing the monthly change in the Fund's NAV per share to leveraged calendar month performance of one or more U.S. ETFs that reflect the values of the securities underlying the Index as of the Fund's NAV calculation time. It is important to note that correlation to these ETFs may vary from the correlation to the Index due to embedded costs and other factors.

Any of these factors individually or in combination with other factors could decrease the correlation between the monthly leveraged performance of the Fund and the Index and may hinder the Fund's ability to meet its investment objective.

Leverage

The Fund intends regularly to use leveraged investment techniques in pursuing its investment objectives. Utilization of leverage involves special risks and should be considered to be speculative. Leverage exists when the Fund achieves the right to a return on a capital base that exceeds the amount of the Fund's net assets. Leverage creates the potential for greater gains to shareholders of the Fund during favorable market conditions and the risk of magnified losses during adverse market conditions. Leverage is likely to cause higher volatility of the NAV of the Fund's Shares. Leverage may involve the creation of a liability that does not entail any interest costs or the creation of a liability that requires the Fund to pay interest which would decrease the Fund's total return to shareholders. If the Fund achieves its investment objective, during adverse market conditions, shareholders should experience a loss greater than they would have incurred had the Fund not been leveraged.

**Special Note Regarding the Correlation Risks of the Fund**. As discussed in the Prospectus, the Fund is "leveraged" meaning it has an investment objective to match 120% of the performance of the Index for a calendar month. The Fund is subject to all of the correlation risks described in the Prospectus. In addition, there is a special form of correlation risk that derives

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from the Fund's use of leverage, which is that for periods greater than one calendar month, the use of leverage tends to cause the performance of the Fund to be either greater than, or less than, 120% of the Index.

The Fund's return for periods longer than one month is primarily a function of the following:

a) Index performance;

b) Index volatility;

c) financing rates associated with leverage;

d) other fund expenses;

e) dividends paid by companies in the Index; and

f) period of time.

The performance for the Fund can be estimated given any set of assumptions for the factors described above. Illustrated below is the impact of two factors, Index volatility and Index performance, on the Fund. Underlying index volatility is a statistical measure of the magnitude of fluctuations in the returns of the index and is calculated as the standard deviation of the natural logarithms of one plus the index return (calculated daily), multiplied by the square root of the number of trading days per year (assumed to be 252). The illustration estimates Fund returns for a number of combinations of Index performance and Index volatility over a one year period and assumes: a) no dividends paid; b) no fund expenses; and c) borrowing/lending rates (to obtain leverage) of zero percent. If fund expenses were included, the Fund's performance would be lower than shown.

As shown below, the Fund would be expected to lose 3.6% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. If the Index's annualized volatility were to rise to 75%, the hypothetical loss for a one-year period for the Fund widens to approximately 20.5%.

At higher ranges of volatility, there is a chance of a significant loss of value in the Fund. For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose approximately 30.8% of its value, even if the cumulative return of the Index for the year was 0%. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

In the table below, areas shaded green represent those scenarios where the Fund with the investment objective described will outperform (*i.e.*, return more than) 120% of the performance of the Index; conversely, areas shaded red represent those scenarios where the Fund will underperform (*i.e.*, return less than) 120% of the performance of the Index.

The table below is intended to underscore the fact that the Fund is designed as a short-term trading vehicle for investors who intend to actively monitor and manage their portfolios. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For additional information regarding correlation and volatility risk for the Fund, see "Effects of Compounding and Market Volatility Risk" in the Prospectus.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **120%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-72%** | -68.8% | -70.2% | -74.3% | -78.8% | -83.3% |
| **-50%** | **-60%** | -58.1% | -59.8% | -64.7% | -70.0% | -74.9% |
| **-40%** | **-48%** | -47.1% | -49.1% | -54.5% | -61.0% | -66.4% |
| **-30%** | **-36%** | -35.8% | -38.0% | -44.0% | -51.1% | -58.3% |
| **-20%** | **-24%** | -24.2% | -26.7% | -33.4% | -41.2% | -47.9% |
| **-10%** | **-12%** | -12.5% | -15.2% | -22.6% | -30.8% | -38.7% |
| **0%** | **0%** | -0.6% | -3.6% | -11.7% | -20.5% | -30.8% |
| **10%** | **12%** | 11.4% | 8.1% | -0.5% | -10.2% | -18.0% |
| **20%** | **24%** | 23.5% | 19.8% | 10.5% | 0.2% | -7.8% |
| **30%** | **36%** | 35.6% | 31.7% | 21.7% | 11.2% | 1.7% |
| **40%** | **48%** | 47.8% | 43.5% | 32.8% | 21.4% | 9.0% |
| **50%** | **60%** | 60.1% | 55.3% | 43.6% | 31.5% | 22.4% |
| **60%** | **72%** | 72.4% | 67.1% | 54.2% | 42.7% | 33.6% |

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The foregoing table is intended to isolate the effect of Index volatility and Index performance on the return of the Fund. The Fund's actual returns may be significantly greater or less than the returns shown above as a result of any of factors discussed above or under "Effects of Compounding and Market Volatility Risk" in the Prospectus.

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Investment Restrictions

The Trust, on behalf of the Fund, has adopted the following investment policies which are fundamental policies that may not be changed without the affirmative vote of a majority of the outstanding voting securities of the Fund. As defined by the 1940 Act, a "vote of a majority of the outstanding voting securities of the Fund" means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares present at a shareholders' meeting, if more than 50% of the outstanding shares are represented at the meeting in person or by proxy.

For purposes of the following limitations, all percentage limitations apply immediately after a purchase or initial investment. Except with respect to borrowing money, if a percentage limitation is adhered to at the time of the investment, a later increase or decrease in the percentage resulting from any change in value or net assets will not result in a violation of such restrictions. If at any time the Fund's borrowings exceed its limitations due to a decline in net assets, such borrowings will be reduced within three days (not including Sundays and holidays), or such longer period as may be permitted by the 1940 Act, to the extent necessary to comply with the one-third limitation.

**The Fund shall not**:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Lend any security or make any other loan if, as a result, more than 33 1/3% of the value of the Fund's total assets would be lent to other parties, except (1) through the purchase of a portion of an issue of debt securities in accordance with the Fund's investment objective, policies and limitations; or (2) by engaging in repurchase agreements with respect to portfolio securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Underwrite securities of any other issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Purchase, hold, or deal in real estate or oil and gas interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Pledge, mortgage, or hypothecate the Fund's assets, except (1) to the extent necessary to secure permitted borrowings; (2) in connection with the purchase of securities on a forward-commitment or delayed-delivery basis or the sale of securities on a delayed-delivery basis; and (3) in connection with options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Invest in physical commodities, except that the Fund may purchase and sell foreign currency, options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed-delivery basis, and other financial instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Issue any "senior security" (as such term is defined in Section 18(f) of the 1940 Act) (including the amount of senior securities issued by excluding liabilities and indebtedness not constituting senior securities), except (1) that the Fund may issue senior securities in connection with transactions in options, futures, options on futures and forward contracts, swaps, caps, floors, collars and other similar investments; (2) as otherwise permitted herein and in Limitation 4 above and 7 below; and (3) the Fund may make short sales of securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Borrow money, except (1) to the extent permitted under the 1940 Act (which currently limits borrowing to no more than 33 1/3% of the value of the Fund's total assets; (2) as a temporary measure and then only in amounts not to exceed 5% of the value of the Fund's total assets; (3) to enter into reverse repurchase agreements; or (4) to lend portfolio securities. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments shall not constitute borrowing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Invest more than 25% of the value of its net assets in the securities of issuers in any single industry, provided that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.

The Fund has adopted the following investment policy that enables it to invest in another investment company or series thereof that has substantially similar investment objectives and policies:

Notwithstanding any other limitation, the Fund may invest all of its investable assets in an open-end management investment company with substantially the same investment objectives, policies and limitations as the Fund. For this purpose, "all of the Fund's investable assets" means that the only investment securities that will be held by the Fund will be the Fund's interest in the investment company.

Portfolio Transactions and Brokerage

Subject to the general supervision by the Trustees, Rafferty is responsible for decisions to buy and sell securities and derivatives for the Fund, the selection of broker-dealers to effect the transactions, and the negotiation of brokerage commissions, if any. Rafferty expects that the Fund may execute brokerage or other agency transactions through registered broker-dealers, for a commission, in conformity with the 1940 Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder.

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When selecting a broker or dealer to execute portfolio transactions, Rafferty considers many factors, including the rate of commission or the size of the broker-dealer's "spread," the size and difficulty of the order, the nature of the market for the security, operational capabilities of the broker-dealer and the research, statistical and economic data furnished by the broker-dealer to Rafferty.

In effecting portfolio transactions for the Fund, Rafferty seeks to receive the closing prices of securities that are in line with those of the securities included in the Index and seeks to execute trades of such securities at the commission rates reasonably available. With respect to agency transactions, Rafferty may execute trades at a higher rate of commission if reasonable in relation to brokerage and research services provided to the Fund or Rafferty. Such services may include the following: information as to the availability of securities for purchase or sale; statistical or factual information or opinions pertaining to investment; wire services; and appraisals or evaluations of portfolio securities. During the last fiscal year, no Fund directed its brokerage commissions to a broker because of research provided.

The Fund believes that the requirement to always seek the lowest possible commission cost could impede effective portfolio management and preclude the Fund and Rafferty from obtaining a high quality of brokerage and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, Rafferty relies upon its experience and knowledge regarding commissions generally charged by various brokers and on its judgment in evaluating the brokerage and research services received from the broker effecting the transaction. In addition to commission rates, when selecting a broker for a particular transaction, Rafferty considers the following factors, among others: the broker's availability, willingness to commit capital, reputation and integrity, facilities reliability, access to research, execution capacity and responsiveness.

For purchases and sales of derivatives (*i.e.*, financial instruments whose value is derived from the value of an underlying asset, interest rate or index), Rafferty evaluates counterparties on the following factors: reputation and financial strength; execution prices, commission costs, ability to handle complex orders; ability to provide prompt and full execution; accuracy of reports and confirmation provided; reliability; type and quality of research provided; financing and other associated costs related to the transaction; and whether the total cost or proceeds in each transaction is the most favorable under the circumstances.

Rafferty may use research and services provided to it by brokers in servicing the Fund; however, not all such services may be used by Rafferty in connection with the Fund. While the receipt of such information and services is useful in varying degrees and may reduce the amount of research or services otherwise provided to the Fund by Rafferty, the receipt of such information and these services does not reduce the investment advisory fee paid by the Fund.

Purchases and sales of U.S. government securities normally are transacted through issuers, underwriters or major dealers in U.S. government securities acting as principals. Such transactions are made on a net basis and do not involve payment of brokerage commissions. The cost of securities purchased from an underwriter usually includes a commission paid by the issuer to the underwriters; transactions with dealers normally reflect the spread between bid and asked prices.

For the Fund, brokerage fees paid may change significantly from year to year due to Fund asset inflows and outflows stemming from market timing activities. As discussed in the Prospectus, Rafferty expects a significant portion of the assets of the Fund to come from professional money managers and investors who use the Fund as part of "asset allocation" and "market timing" investment strategies. If a large number of investors purchase or sell the Fund, the Fund will need to reposition its portfolio and incur related brokerage fees. Depending on frequency and magnitude of these portfolio transactions, over the course of a year the total impact on brokerage fees paid can vary greatly from year to year. Additionally, the Fund will invest significantly in over-the-counter financial instruments with negotiated terms. These financial instruments often include a provision that requires the Fund to close out its position during periods of higher market volatility. In such instances, the Fund would then reinvest in similar financial instruments in order to continue to seek its investment objective. As a result, depending on the market volatility that the Fund has experienced in the course of a year, the resulting brokerage commissions could vary significantly.

Aggregate brokerage commissions paid by the Fund for the periods shown are set forth in the table below.

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| | |
|:---|:---|
| **Direxion Monthly High Yield Bull 1.2X Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $101402 |
| Year Ended August 31, 2024 | $130593 |
| Year Ended August 31, 2023 | $277962 |

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The brokerage commissions for the Fund have decreased during the fiscal years presented as a result of lower volatility in assets.

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Portfolio Holdings Information

The Trust maintains portfolio holdings disclosure policies that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the Fund's portfolio investments to ensure that such disclosure is in the best interests of the Fund's shareholders. In adopting the policies, the Board considered actual and potential material conflicts that could arise between the interest of Fund shareholders, the Adviser, the Fund's distributor, or any other affiliated person of the Fund. Disclosure of the Fund's complete holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the holdings report on Form N-PORT. These reports are available, free of charge, on the EDGAR database on the SEC's website at www.sec.gov.

From time to time, rating and ranking organizations such as Standard & Poor's<sup>®</sup> and Morningstar<sup>®</sup>, Inc. may request complete portfolio holdings information in connection with rating the Fund. Similarly, pension plan sponsors, consultants and/or other financial institutions may request a complete list of portfolio holdings in order to assess the risks of the Fund's portfolio along with related performance attribution statistics. The Trust believes that these third parties have legitimate objectives in requesting such portfolio holdings information. To prevent such parties from potentially misusing the complete portfolio holdings information, the Fund will generally only disclose such information as of the end of the most recent calendar quarter, with a lag of approximately 60 days. In addition, the Fund's Chief Compliance Officer ("CCO") may grant exceptions to permit additional disclosure of the complete portfolio holdings information at differing times and with differing lag times to rating agencies and to the parties noted above, provided that (1) the recipient is subject to a confidentiality agreement; (2) the recipient will utilize the information to reach certain conclusions about the investment management characteristics of the Fund and will not use the information to facilitate or assist in any investment program; and (3) the recipient will not provide access to third parties to this information. The CCO shall report any disclosures made pursuant to this exception to the Board.

In addition, the Fund's service providers, such as custodian, administrator, transfer agent, distributor, legal counsel and independent registered public accounting firm may receive portfolio holdings information in connection with their services to the Fund. In no event shall the Adviser, any affiliates or employees, or the Fund receive any direct or indirect compensation in connection with the disclosure of information about the Fund's portfolio holdings.

In the event a portfolio holdings disclosure to be made pursuant to the policies presents a conflict of interest between the Fund's shareholders and the Adviser, the Fund's distributor and their affiliates or employees and any affiliated person of the Fund, the disclosure will not be made unless a majority of the Board members who are not "interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees") approves such disclosure.

Management of the Trust

**The Board of Trustees**

The Trust is governed by its Board of Trustees (the "Board"). The Board is responsible for and oversees the overall management and operations of the Trust and the Fund, which includes the general oversight and review of the Fund's investment activities, in accordance with federal law and the law of the Commonwealth of Massachusetts, as well as the stated policies of the Fund. The Board oversees the Trust's officers and service providers, including Rafferty, which is responsible for the management of the day-to-day operations of the Fund based on policies and agreements reviewed and approved by the Board. In carrying out these responsibilities, the Board regularly interacts with and receives reports from senior personnel of service providers, including personnel from Rafferty. The Board also is assisted by the Trust's independent auditor (who reports directly to the Trust's Audit Committee), independent counsel and other professionals as appropriate.

**Risk Oversight**

Consistent with its responsibility for oversight of the Trust and the Fund, the Board oversees the management of risks relating to the administration and operation of the Trust and the Fund. Rafferty, as part of its responsibilities for the day-to-day operations of the Fund, is responsible for day-to-day risk management for the Fund. The Board, in the exercise of its reasonable business judgment performs its risk management oversight directly and, as to certain matters, through its committees (described below) and through the Board members who are not "interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees"). The following provides an overview of the principal, but not all, aspects of the Board's oversight of risk management for the Trust and the Fund.

The Board has adopted, and periodically reviews, policies and procedures designed to address risks to the Trust and the Fund. In addition, under the general oversight of the Board, Rafferty and other service providers to the Fund have themselves adopted a variety of policies, procedures and controls designed to address particular risks to the Fund. Different processes, procedures and controls are employed with respect to different types of risks.

The Board also oversees risk management for the Trust and the Fund through review of regular reports, presentations and other information from officers of the Trust and other persons. The Trust's CCO and senior officers of Rafferty regularly

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report to the Board on a range of matters, including those relating to risk management. The Board also regularly receives reports from Rafferty and U.S. Bancorp Fund Services, LLC ("USBFS") with respect to the Fund's investments. In addition to regular reports from these parties, the Board also receives reports regarding other service providers to the Trust, either directly or through Rafferty, USBFS or the CCO, on a periodic or regular basis. At least annually, the Board receives a report from the CCO regarding the effectiveness of the Fund's compliance program. Also, the Board receives regular reports, presentations and other information from Rafferty, including in connection with the Board's consideration of the renewal of each of the Trust's agreements with Rafferty and the Trust's distribution plan under Rule 12b-1 under the 1940 Act.

The CCO reports regularly to the Board on Fund valuation matters. The Audit Committee receives regular reports from the Trust's independent registered public accounting firm on internal control and financial reporting matters. On at least a quarterly basis, the Independent Trustees meet with the CCO to discuss matters relating to the Fund's compliance program.

**Board Structure and Related Matters**

Independent Trustees constitute at least two-thirds of the Board. The Trustees discharge their responsibilities collectively as a Board, as well as through Board committees, each of which operates pursuant to a charter approved by the Board that delineates the specific responsibilities of that committee. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee and the Qualified Legal Compliance Committee. For example, the Audit Committee is responsible for specific matters related to oversight of the Fund's independent auditors, subject to approval of the Audit Committee's recommendations by the Board. The members and responsibilities of each Board committee are summarized below.

The Board periodically evaluates its structure and composition as well as various aspects of its operations. The Chairman of the Board is not an Independent Trustee and the Board has chosen not to have a lead Independent Trustee. However, the Board believes that its leadership structure, including its Independent Trustees and Board committees, is appropriate for the Trust in light of, among other factors, the asset size and nature of the Fund, the number of funds overseen by the Board, the arrangements for the conduct of the Fund's operations, the number of Trustees, and the Board's responsibilities. On an annual basis, the Board conducts a self-evaluation that considers, among other matters, whether the Board and its committees are functioning effectively and whether, given the size and composition of the Board and each of its committees, the Trustees are able to oversee effectively the number of funds in the complex.

The Trust is part of the Direxion Family of Investment Companies, which is comprised of the 8 separate series within the Trust and 250 separate series within the Direxion Shares ETF Trust. The same persons who constitute the Board also constitute the Board of Trustees of the Direxion Shares ETF Trust.

The Board holds four regularly scheduled meetings each year and the Independent Trustees hold one additional meeting in connection with the annual contract renewals. The Board may hold special meetings, as needed, to address matters arising between regular meetings. During a portion of each meeting, the Independent Trustees meet outside of management's presence. The Independent Trustees may hold special meetings, as needed.

The Trustees of the Trust are identified in the tables below, which provide information regarding their age, business address and principal occupation during the past five years including any affiliation with Rafferty, the length of service to the Trust, and the position, if any, that they hold on the board of directors of companies other than the Trust as of the date of this SAI. Each of the Trustees of the Trust also serve on the Board of the Direxion Shares ETF Trust, the other registered investment company in the Direxion complex. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022.

**Interested Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Daniel D. O'Neill<sup>(1)</sup> <br>Age: 57<br>| &nbsp;&nbsp; Chairman of the <br> Board of Trustees<br>| &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, April 2021 – <br> September 2022; <br> Managing <br> Director, Rafferty <br> Asset <br> Management, <br> LLC, January 1999 <br> – January 2019.<br>| 258 | None. |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(3)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Angela Brickl<sup>(2)</sup> <br>Age: 49<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; President, Rafferty <br> Asset <br> Management, LLC <br> since September <br> 2022; Chief <br> Operating Officer, <br> Rafferty Asset <br> Management, LLC <br> May 2021 – <br> September 2022; <br> General Counsel, <br> Rafferty Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| 258 | None. |

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**Independent Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(4)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| David L. Driscoll<br> Age: 56 <br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Board Member, <br> Algorithmic <br> Research and <br> Trading, since <br> 2022; Board <br> Advisor, University <br> Common Real <br> Estate, since 2012; <br> Member, Kendrick <br> LLC, since 2006; <br> Partner, King <br> Associates, LLP, <br> since 2004; <br> Principal, Grey <br> Oaks LLP, since <br> 2003.<br>| 258 | None. |
| Kathleen M. Berkery<br> Age: 58<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2019<br>| &nbsp;&nbsp; Chief Financial <br> Officer, Metro <br> Physical Therapy, <br> LLC, since 2023; <br> Chief Financial <br> Officer, Student <br> Sponsor Partners, <br> 2021 - 2023; <br> Senior Manager- <br> Trusts & Estates, <br> Rynkar, Vail & <br> Barrett, LLC, 2018 <br> - 2021.<br>| 258 | None. |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(4)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Carlyle Peake<br> Age: 54<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Head of US & <br> LATAM Debt <br> Syndicate, BBVA <br> Securities, Inc., <br> since 2011.<br>| 258 | None. |
| Mary Jo Collins<br> Age: 69<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Managing <br> Director, B. Riley <br> Financial, March <br> – December <br> 2022; Managing <br> Director, Imperial <br> Capital LLC, from <br> 2020-2022; <br> Director, Royal <br> Bank of Canada, <br> 2014-2020.<br>| 258 | None. |
| Bradley Kurtzman<br> Age: 52<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2025<br>| &nbsp;&nbsp; Partner, <br> Squarepoint <br> Capital, since May <br> 2019; Managing <br> Director, Deutsche <br> Bank 2012-2019.<br>| 258 | None. |

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<sup>(1)</sup>

Mr. O'Neill is affiliated with Rafferty because he owns a beneficial interest in Rafferty.

<sup>(2)</sup>

Ms. Brickl is affiliated with Rafferty because she serves as an officer of Rafferty.

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

In addition to the information set forth in the tables above and other relevant qualifications, experience, attributes or skills applicable to a particular Trustee, the following provides further information about the qualifications and experience of each Trustee.

Daniel D. O'Neill: Mr. O'Neill has extensive experience in the investment management business. Mr. O'Neill was the Managing Director of Rafferty from 1999 through January 2019 and Chief Executive Officer at Rafferty from April 2021 through September 2022.

Angela Brickl: Ms. Brickl has extensive experience in the investment management business, including serving as Chief Operating Officer from April 2021 to September 2022 and since November 2024, and President of Rafferty from September 2022 to November 2024. Ms. Brickl also serves as Rafferty's General Counsel and served as Chief Compliance Officer from 2012 through March 2023.

David L. Driscoll: Mr. Driscoll has extensive experience with risk assessment and strategic planning as a partner and manager of various real estate partnerships and companies.

Kathleen M. Berkery: Ms. Berkery has extensive experience with estate planning, estate administration, fiduciary income taxation, financial planning, finance, as well as business sales and development, and marketing.

Carlyle Peake: Mr. Peake has extensive global capital markets experience, as well as experience with client relations and sales of securities by issuers and investors and valuing, structuring, and negotiating complex debt issues for corporate and sovereign entities.

Mary Jo Collins: Ms. Collins has extensive experience evaluating credit risk of investment grade securities, including corporate bonds, preferred stocks, and hybrid securities, as well as managing relationships with retail and institutional investors.

Bradley M. Kurtzman: Mr. Kurtzman has extensive expertise in the management of large portfolios various asset classes (equities, rates, credit commodities) with a particular focus on the use of derivatives which includes trading, analytics, market risk management, and operational efficiency.

**Board Committees**

The Trust has an Audit Committee, consisting of each Independent Trustee. The primary responsibilities of the Trust's Audit Committee are set forth in its charter, which include making recommendations to the Board as to the engagement or discharge of the Trust's independent registered public accounting firm (including the audit fees charged by the auditors), supervising investigations into matters relating to audit matters, reviewing with the independent registered public accounting firm

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of the results of audits, and addressing any other matters regarding audits. The Audit Committee met three times during the Trust's most recent fiscal year.

The Trust also has a Nominating and Governance Committee, consisting of each Independent Trustee. The primary responsibilities of the Nominating and Governance Committee are to make recommendations to the Board on issues related to the composition and operation of the Board, and communicate with management on those issues. The Nominating and Governance Committee also evaluates and nominates Board member candidates. In evaluating Board member candidates, the Nominating and Governance Committee considers the extent to which potential candidates possess sufficiently diverse skill sets and diversity characteristics that would contribute to the Board's overall effectiveness. The Nominating and Governance Committee will consider nominees recommended by shareholders. Such recommendations should be in writing and addressed to the Fund with attention to the Nominating and Governance Committee Chair. The recommendations must include the following preliminary information regarding the nominee: (1) name; (2) date of birth; (3) education; (4) business professional or other relevant experience and areas of expertise; (5) current business, professional or other relevant experience and areas of expertise; (6) current business and home addresses and contact information; (7) other board positions or prior experience; and (8) any knowledge and experience relating to investment companies and investment company governance. The Nominating and Governance Committee met three times during the Trust's most recent fiscal year.

The Trust has a Qualified Legal Compliance Committee, consisting of each Independent Trustee. The primary responsibility of the Trust's Qualified Legal Compliance Committee is to receive, review and take appropriate action with respect to any report made or referred to the Committee by an attorney of evidence of a material violation of applicable U.S. federal or state securities law, material breach of a fiduciary duty under U.S. federal or state law or a similar material violation by the Trust or by any officer, director, employee or agent of the Trust. The Audit Committee serves as the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee did not meet during the Trust's most recent fiscal year.

**Principal Officers of the Trust**

The officers of the Trust conduct and supervise its daily business. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of the date of this SAI, the officers of the Trust, their ages, their business address and their principal occupations during the past five years are as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Douglas Yones<br> Age: 50<br>| &nbsp;&nbsp; Chief Executive <br> Officer<br>| Since 2024 | &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, since 2024; <br> Head of Exchange <br> Traded Products, <br> NYSE, until 2024.<br>| N/A | N/A |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Angela Brickl<sup>(1)</sup> <br>Age: 49<br>| &nbsp;&nbsp; Chief Operating <br> Officer<br> General Counsel<br>| &nbsp;&nbsp; Since 2024<br> Since 2022<br>| &nbsp;&nbsp; Chief Operating <br> Officer, Rafferty <br> Asset <br> Management, LLC <br> May 2021 – <br> September 2022 <br> and since <br> November 2024; <br> President, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2022– November <br> 2024; General <br> Counsel, Rafferty <br> Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| N/A | N/A |
| Todd Sherman<br> Age: 44<br>| &nbsp;&nbsp; Chief Compliance <br> Officer<br>| Since 2023 | &nbsp;&nbsp; Chief Risk Officer, <br> Rafferty Asset <br> Management, <br> LLC, since 2018; <br> SVP Head of Risk, <br> 2012–2018.<br>| N/A | N/A |
| Patrick J. Rudnick<br> Age: 52<br>| &nbsp;&nbsp; Principal Executive<br> Officer <br>| Since 2018 | &nbsp;&nbsp; Senior Vice <br> President, Rafferty <br> Asset <br> Management, <br> LLC, since March <br> 2013.<br>| N/A | N/A |
| Corey Noltner<br> Age: 36<br>| &nbsp;&nbsp; Principal Financial <br> Officer<br>| Since 2021 | &nbsp;&nbsp; Senior Business <br> Analyst, Rafferty <br> Asset <br> Management, <br> LLC, since October <br> 2015.<br>| N/A | N/A |
| Alyssa Sherman<br> Age: 36<br>| Secretary | Since 2022 | &nbsp;&nbsp; Assistant General <br> Counsel, Rafferty <br> Asset <br> Management, <br> LLC, since April <br> 2021; Associate, <br> K&L Gates LLP, <br> September 2015 <br> – March 2021.<br>| N/A | N/A |

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<sup>(1)</sup>

Ms. Brickl serves on the Board of Trustees of the Direxion Funds and Direxion Shares ETF Trust.

<sup>(2)</sup>

Pursuant to the Trust's By-laws, each officer shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, removal or resignation. Officers serve at the pleasure of the Board of Trustees and may be removed at any time with or without cause.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

The following table shows the amount of equity securities owned in the Fund and the Direxion Family of Investment Companies by the Trustees as of the calendar year ended December 31, 2024:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Dollar Range of Equity** <br> **Securities Owned:**<br>| **Interested Trustees:** | **Interested Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** |
|  | &nbsp;&nbsp; **Daniel D.** <br> **O'Neill**<br>| &nbsp;&nbsp; **Angela**<br> **Brickl**<br>| &nbsp;&nbsp; **David L.** <br> **Driscoll**<br>| &nbsp;&nbsp; **Kathleen** <br> **M. Berkery**<br>| &nbsp;&nbsp; **Carlyle**<br> **Peake**<br>| &nbsp;&nbsp; **Mary Jo**<br> **Collins**<br>| &nbsp;&nbsp; **Bradley**<br> **Kurtzman**<br>|
| &nbsp;&nbsp; Direxion Monthly High <br> Yield Bull 1.2X Fund<br>| $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| &nbsp;&nbsp; Aggregate Dollar <br> Range of Equity <br> Securities in the <br> Direxion Family of <br> Investment <br> Companies<sup>(1)</sup> <br>| &nbsp;&nbsp; $10000 - <br> $50000<br>| $0 | &nbsp;&nbsp; $1-<br> $10000<br>| $0 | $0 | $0 | &nbsp;&nbsp; Over <br> $100,000<br>|

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<sup>(1)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

The Trust's Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law. However, they are not protected against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office.

No officer, director or employee of Rafferty receives any compensation from the Fund for acting as a Trustee or officer of the Trust. The following table shows the compensation earned by each Trustee for the Trust's fiscal year ended August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Name of Person,** <br> **Position**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the** <br> **Trust**<sup>(1)</sup> <br>| **Pension or** <br> **Retirement Benefits** <br> **Accrued As Part of** <br> **the Trust's** <br> **Expenses**<br>| &nbsp;&nbsp; **Estimated** <br> **Annual Benefits** <br> **Upon Retirement**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the Direxion** <br> **Family of** <br> **Investment** <br> **Companies Paid** <br> **to the Trustees**<sup>(2)</sup> <br>|
| **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** |
| Daniel D. O'Neill  | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| Angela Brickl | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** |
| David L. Driscoll | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Kathleen M. Berkery | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Mary Jo Collins | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Carlyle Peake | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Bradley Kurtzman | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |

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<sup>(1)</sup>

Trustee compensation is allocated across the operational Funds of the Trust based on the proportion of the Fund's net assets to the total net assets of the operational Funds of the Trust.

<sup>(2)</sup>

For the fiscal year ended August 31, 2025, Trustees' fees and expenses in the amount of $112,500 were incurred by the Trust.

Principal Shareholders, Control Persons and Management Ownership

A principal shareholder is any person who owns of record or beneficially 5% or more of the outstanding shares of the Fund. A control person is a shareholder that owns beneficially or through controlled companies more than 25% of the voting securities of a company or acknowledges the existence of control. Shareholders owning voting securities in excess of 25% may determine the outcome of any matter affecting and voted on by shareholders of the Fund.

As of December 1, 2025, the following shareholders were considered to be either a principal shareholder or control person of the Fund:

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**Direxion Monthly High Yield Bull 1.2X Fund** 

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| | | | |
|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>DE | 93.90% | Record |

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In addition, as of December 1, 2025, the Trustees and Officers as a group did not own any of the outstanding shares of the Fund.

Investment Adviser

Rafferty, 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022, provides investment advice to the Fund. Rafferty was organized as a New York limited liability company in June 1997. Michael Rafferty and Kathleen Rafferty Hay control Rafferty through their ownership in Rafferty Holdings, LLC and Daniel D. O'Neill controls Rafferty through his ownership in Minakian Partners, LLC.

Under an Investment Advisory Agreement ("Advisory Agreement") between Rafferty and the Trust, on behalf of the Fund, Rafferty provides a continuous investment program for the Fund's assets in accordance with its investment objectives, policies and limitations, and oversees the day-to-day operations of the Fund, subject to the supervision of the Trustees. Rafferty shall not be liable to the Trust or any Fund for anything done or omitted by it, except acts or omissions involving willful misfeasance, bad faith, negligence or reckless disregard of the duties imposed upon it by its agreement with the Trust or for any losses that may be sustained in the purchase, holding or sale of any security. Rafferty bears all costs associated with providing these advisory services and the expenses of the Trustees who are affiliated with or interested persons of Rafferty. The Trust bears all other expenses that are not assumed by Rafferty as described in the Prospectus. The Trust also is liable for nonrecurring expenses as may arise, including litigation to which the Fund may be a party. The Trust also may have an obligation to indemnify its Trustees and officers with respect to any such litigation.

The Advisory Agreement was initially approved by the Trustees (including all Independent Trustees) and Rafferty, as sole shareholder of each Fund in compliance with the 1940 Act. After an initial approval period of two years, the Advisory Agreement is renewable with respect to the Fund, so long as its continuance is approved at least annually (1) by the vote, cast at a meeting called for that purpose, of a majority of the Independent Trustees of the Trust; and (2) by the majority vote of either the full Board or the vote of a majority of the outstanding shares of the Fund. The Advisory Agreement automatically terminates on assignment and is terminable upon a 60-day written notice either by the Trust or Rafferty.

Pursuant to the Advisory Agreement, the Fund pays Rafferty a fee at an annualized rate based on a percentage of its average daily net assets of 0.75%.

Although the Fund is responsible for its own operating expenses, Rafferty has entered into an Operating Expense Limitation Agreement with the Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its investment advisory fees and management services fees and/or reimburse the Fund for Other Expenses (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses) through September 1, 2027 to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.35% of the Fund's average daily net assets.

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees upon notice to the Adviser and without the approval of Fund shareholders.

The table below shows the advisory fees incurred by each of the Fund, the amount of fees waived and/or reimbursed by Rafferty, and the total amount of fees paid to Rafferty by each of the Fund for the last three fiscal years ended August 31.

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| | | | |
|:---|:---|:---|:---|
| **Direxion Monthly High Yield Bull 1.2X Fund** | **Advisory fee accrued** | **Fees waived and**<br> **expenses absorbed by**<br> **Adviser**<br>| &nbsp;&nbsp; **Total fees paid to**<br> **(waived by)**<br> **Adviser**<br>|
| Year Ended August 31, 2025<sup>(1)</sup> <br>| $230715 | &nbsp;&nbsp; $103563 | $138456 |
| Year Ended August 31, 2024<sup>(2)</sup> <br>| $338703 | &nbsp;&nbsp; $56563 | $282677 |
| Year Ended August 31, 2023<sup>(3)</sup> <br>| $224501 | &nbsp;&nbsp; $145614 | $182073 |

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(1) For the fiscal year ended August 31, 2025, the Adviser recouped previously waived expenses in the amount of $11,304.

(2) For the fiscal year ended August 31, 2024, the Adviser recouped previously waived expenses in the amount of $537.

(3) For the fiscal year ended August 31, 2023, the Adviser recouped previously waived expenses in the amount of $103,186.

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Pursuant to the Management Services Agreement, Rafferty provides certain administrative services to the Fund, including as follows: coordinating and implementing the Trust's contractual obligations with the Fund's other service providers; monitoring, overseeing and reviewing the performance of such service providers to ensure adherence to applicable contractual obligations; preparing or coordinating reports and presentations to the Board of Trustees by such service providers as requested, or deemed necessary pursuant to regulatory requirements; providing certain financial reporting services, compliance and risk management services. Effective November 1, 2024, for these services, the Trust pays to Rafferty a fee at the annual rate of 0.05% on the first $25 billion of aggregate average daily net assets of the Trust and the Direxion Shares ETF Trust, 0.0475% on aggregate average daily net assets between $25 billion and $50 billion and 0.045% on aggregate average daily net assets above $50 billion. This Management Services Fee may be waived under the Operating Expense Limitation Agreement that Rafferty has entered into with the Fund. This arrangement may be terminated at any time with the consent of the Board.

The table below shows the Management Services Fees paid by the Fund as of the fiscal years ended August 31:

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| | |
|:---|:---|
| **Direxion Monthly High Yield Bull 1.2X Fund** | **Fees Paid** |
| Year Ended August 31, 2025\* | $12857 |
| Year Ended August 31, 2024 | $11076 |
| Year Ended August 31, 2023 | $7427 |

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\*The fees for the most recent fiscal year are higher than previous years due to an increase in the fee rate paid by the Fund due to the expanded list of services provided under the Management Services Agreement by Rafferty thereunder.

Pursuant to Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Trust, Rafferty and the Fund's distributor have adopted Codes of Ethics. These codes permit portfolio managers and other access persons of the Fund to invest in securities that may be owned by the Fund, subject to certain restrictions.

Portfolio Managers

Paul Brigandi and Tony Ng are jointly and primarily responsible for the day-to-day management of the Fund. An investment trading team of Rafferty employees assists Mr. Brigandi and Mr. Ng in the day-to-day management of the Fund subject to their primary responsibility and oversight. The Portfolio Managers work with the investment trading team to decide the target allocation of the Fund's investments and, on a day-to-day basis, an individual portfolio trader executes transactions for the Fund consistent with the target allocation. The members of the investment trading team rotate periodically among the various series of the Trust, including the Fund, so that no single individual is assigned to a specific Fund for extended periods of time.

In addition to the Fund, Mr. Brigandi and Mr. Ng manage the following other accounts as of August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Accounts** | &nbsp;&nbsp; **Total Number** <br> **of Accounts**<br>| **Total Assets**<br> **(In Billions)**<br>| &nbsp;&nbsp; **Total Number of** <br> **Accounts with** <br> **Performance** <br> **Based Fees**<br>| &nbsp;&nbsp; **Total Assets** <br> **of Accounts** <br> **with Performance** <br> **Based Fees**<br>|
| Registered Investment Companies | 122 | &nbsp;&nbsp; $52.1 | 0 | $0 |
| Other Pooled Investment Vehicles | 0 | &nbsp;&nbsp; $0 | 0 | $0 |
| Other Accounts | 0 | &nbsp;&nbsp; $0 | 0 | $0 |

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Rafferty manages other registered investment companies with investment objectives similar to those of the Fund, but does not manage any other pooled investment vehicles or other accounts. Two or more funds advised by Rafferty may invest in the same securities but the nature of each investment (long or short) may be opposite and in different proportions. Rafferty ordinarily executes transactions for the Fund "market-on-close," in which funds purchasing or selling the same security receive the same closing price.

Rafferty has not identified any additional material conflicts between the Fund and other accounts managed by the investment team. However, other actual or apparent conflicts of interest may arise in connection with the day-to-day management of the Fund and other accounts. The management of the Fund and other accounts may result in unequal time and attention being devoted to the Fund and other accounts. Rafferty's management fees for the services it provides to other accounts varies and may be higher or lower than the advisory fees it receives from the Fund. This could create potential conflicts of interest in which the portfolio manager may appear to favor one investment vehicle over another resulting in an account paying higher fees or one investment vehicle out performing another.

The compensation to the investment team, which includes the Portfolio Managers, is paid by Rafferty. Their compensation primarily consists of a fixed base salary and a bonus. The investment team's salary is reviewed annually and increases are determined by factors such as performance and seniority. Bonuses are determined by the individual performance of an

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employee including factors such as attention to detail, process, and efficiency, and are impacted by the overall performance of the firm. The investment team's salary and bonus are not based on the Fund's performance and as a result, no benchmarks are used. Along with all other employees of Rafferty, the investment team may participate in the firm's 401(k) retirement plan where Rafferty may make matching contributions up to a defined percentage of their salary.

Mr. Brigandi and Mr. Ng did not own any shares of the Fund as of August 31, 2025.

Proxy Voting Policies and Procedures

The Board has adopted policies and procedures with respect to voting proxies (the "Proxy Policy") related to portfolio securities of the Fund. Pursuant to these policies and procedures the Board of the Trust has delegated responsibility for voting such proxies to the Adviser, subject to the Board's continuing oversight.

The Proxy Policy is intended to protect shareholder interests and comply with applicable state and federal corporate and securities laws. It applies to any voting rights with respect to securities held in accounts of the Fund. To assist the Adviser in its responsibility for voting proxies and administering the overall proxy voting process, the Adviser has retained Institutional Shareholder Services ("ISS") as an expert in the proxy voting and corporate governance area. ISS is a subsidiary of Vestar Capital Partners VI, L.P.; a leading U.S. middle market private equity firm. The services provided by ISS include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. ISS issues monthly reports which are reviewed by the Adviser to assure proxies are being voted properly. The Adviser and ISS also perform checks on a quarterly basis to match the voting activity with available shareholder meeting information. ISS' management meets on a regular basis to discuss its approach to new developments and amendments to existing proxy voting guidelines (the "Guidelines"). Information on such developments and amendments are then provided to the Adviser.

The Guidelines are maintained and implemented by ISS and are an extensive list of common proxy voting issues with recommended voting actions based on the overall goal of achieving maximum shareholder value and protection of shareholder interests and rights. Generally, proxies are voted in accordance with the voting recommendations contained in the Guidelines. If necessary, the Adviser will be consulted by ISS on non-routine issues. Proxy issues and factors considered when resolving proxy issues in the Guidelines include, but are not limited to:

● Election of Directors – considering all factors such as director qualifications, term of office and age limits.

● Proxy Contests – considering factors such as voting nominees in contested elections and reimbursement of expenses.

● Election of Auditors – considering factors such as independence and reputation of the auditing firm.

● Proxy Contest Defenses – considering factors such as board structure and cumulative voting.

● Tender Offer Defenses – considering factors such as poison pills (stock purchase rights plans) and fair price provisions.

● Miscellaneous Governance Issues – considering factors such as confidential voting and equal access.

● Capital Structure – considering factors such as common stock authorization and stock distributions.

● Executive and Director Compensation – considering factors such as performance goals and employee stock purchase plans.

● State of Incorporation – considering factors such as state takeover statutes and voting on reincorporation proposals.

● Mergers and Corporate Restructuring – considering factors such as spin-offs and asset sales.

● Mutual Fund Proxy Voting – considering factors such as election of directors and proxy contests.

● Social and Corporate Responsibility Issues – considering factors such as social, environmental, and labor issues.

A full description of the Guidelines and voting policy is maintain by the Adviser, and a complete copy of the Guidelines is available without charge, upon request by calling the Adviser at (800) 851-0511.

<u>Conflicts of Interest</u>

From time to time, proxy issues may pose a material conflict of interest between the Fund's shareholders and the Adviser, the Distributor or any affiliates thereof. Due to the limited nature of the Adviser's activities (*e.g.*, no underwriting business, no publicly-traded affiliates, no investment banking activities, and no research recommendations), conflicts of interest are likely to be infrequent. Nevertheless, it is the duty of the Adviser to monitor potential conflicts of interest. In the event a conflict of interest arises, the Adviser will be responsible for voting the proxy, will communicate how the proxy should be voted to ISS, and will confirm ISS voted the proxy consistent with the Adviser's direction.

<u>Proxy Voting Recordkeeping</u> 

The Adviser, with the assistance of ISS, maintains for a period of at least five years, a record of each proxy statement received and materials that were considered when the proxy was voted during the calendar year. Information on how the Fund voted proxies relating to portfolio securities for the 12-month (or shorter) period ended June 30 is available without charge, upon request, by calling the Adviser at (800) 851-0511, by visiting <u>direxion.com</u> or on the SEC's website at <u>http://www.sec.gov</u>.

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Fund Administrator, Fund Accountant, Transfer Agent and Custodian

U.S. Bancorp Fund Services, LLC ("Administrator"), 615 East Michigan Street, Milwaukee, Wisconsin 53202, provides administrative, fund accounting and transfer agent services to the Fund. U.S. Bank, N.A., Custody Operations, 1555 N. River Center Drive, Suite 302, Milwaukee, Wisconsin, 53202, an affiliate of the Administrator, provides custodian services to the Fund.

Effective November 1, 2025, the Trust entered into an Amended and Restated Fund Servicing Agreement, pursuant to which the Administrator provides the Trust with certain administrative, accounting and transfer agency services. As compensation for these services, the Trust pays the Administrator a fee based on the Trust's total average daily net assets. The Administrator is also entitled to certain out-of-pocket expenses.

Prior to November 1, 2025, pursuant to an Administration Servicing Agreement between the Trust and the Administrator, and a Fund Accounting Servicing Agreement between the Trust and the Administrator, the Administrator provided the Trust with administrative and certain management services (other than investment advisory services), as well as accounting services, including portfolio accounting services, tax accounting services and financial reporting services. As compensation for these services, the Trust paid the Administrator a fee based on the Trust's total average daily net assets. The Administrator was also entitled to certain out-of-pocket expenses. Beginning November 1, 2024, the Adviser assumed payment of a portion of the Trust's fees. Effective November 1, 2025, the Administrator discontinued providing certain management (*e.g*. officer) services and tax accounting services to the Trust.

U.S. Bank N.A. ("Custodian") serves as the custodian of the Fund's assets. The Custodian holds and administers the assets in the Fund's portfolio. Prior to November 1, the Trust and Custodian were parties to a Custody Agreement. Effective November 1, 2025, the Custodian and Trust entered into an Amended and Restated Custody Agreement (together, the "Custody Agreements"). Pursuant to both Custody Agreements, the Custodian receives an annual fee based on the Trust's total average daily net assets. The Custodian also is entitled to certain out-of-pocket expenses.

In addition, U.S. Bank N.A. and/or its affiliates may receive revenue from certain broker-dealers that are paid Rule 12b-1 or similar fees from funds in which the Fund's invests. In recognition of this revenue, the Custodian and/or its affiliates have credited the Trust and may further credit the Trust in the future for fees otherwise payable by the Fund. The amount of fees paid by the Trust pursuant to the Agreements noted above, for the fiscal years indicated, is set forth in the table below.

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| | |
|:---|:---|
|  | **Fees paid to the Administrator**  |
| Year Ended August 31, 2025\* | $14089 |
| Year Ended August 31, 2024 | $79423 |
| Year Ended August 31, 2023 | $65323 |

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\*The fees for the most recent fiscal year are lower than in previous years due to a decrease in the fee rate paid by the Funds under the Amended and Restated Fund Servicing Agreement, due to the more limited scope of services provided.

Distributor

ALPS Distributors, Inc., located at 1290 Broadway, Suite 1000, Denver, Colorado 80203, serves as the distributor ("Distributor") in connection with the continuous offering of the Fund's shares. The Distributor is a broker-dealer registered with the SEC under the Exchange Act and a member of the Financial Industry Regulatory Authority. The Distributor and participating dealers with whom it has entered into dealer agreements offer shares of the Fund as agents on a best-efforts basis and are not obligated to sell any specific number of shares.

Distribution Plan and Service Fees

Rule 12b-1 under the 1940 Act, as amended (the "Rule"), provides that an investment company may bear expenses of distributing its shares only pursuant to a plan adopted in accordance with the Rule. The Trustees have adopted a Rule 12b-1 Investor Class Plan of Distribution (the "Investor Class Plan") for shares of the Fund pursuant to which the Fund may pay certain expenses incurred in the distribution of its shares and the servicing and maintenance of existing shareholder accounts. The Distributor, as the Fund's principal underwriter, and Rafferty may have a direct or indirect financial interest in the Investor Class Plan or any related agreement.

Pursuant to the Investor Class Plan, the Fund may pay up to 1.00% of the shares' average daily net assets. The Board has authorized the Fund to pay 0.25% of the Fund's average daily net assets.

Under an agreement with the Fund, your financial advisor may provide services, as described in the Prospectus, and as described above, and receive Rule 12b-1 fees from the Fund.

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The Investor Class Plan was approved by the Trustees and the Independent Trustees of the Fund. In approving the Investor Class Plan, the Trustees determined that there is a reasonable likelihood that the Investor Class Plan will benefit the Fund and its shareholders. The Trustees will review quarterly and annually a written report provided by the Treasurer of the amounts expended under the Investor Class Plan and the purpose for which such expenditures were made.

The Investor Class Plan permits payments to be made by the Fund to the Distributor or other third parties for expenditures incurred in connection with the distribution of Fund shares to investors. The Distributor or other third parties are authorized to engage in advertising, the preparation and distribution of sales literature and other promotional activities on behalf of the Fund. In addition, the Investor Class Plan authorizes payments by the Fund to the Distributor or other third parties for the cost related to selling or servicing efforts, preparing, printing and distributing Fund prospectuses, statements of additional information, and shareholder reports to investors.

The tables below show the amount of Rule 12b-1 fees incurred and the allocation of such fees by the Fund for the fiscal year ended August 31, 2025.

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| | |
|:---|:---|
| **Fund (Investor Class)** | **12b-1 Fees** <br> **Incurred**<br>|
| &nbsp;&nbsp; Direxion Monthly High Yield <br> Bull 1.2X Fund<br>| $76905 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Fund (Investor Class)** | &nbsp;&nbsp; **Advertising** <br> **and** <br> **Marketing**<br>| **Printing**<br> **and** <br> **Postage**<br>| &nbsp;&nbsp; **Payment to** <br> **Distributor**<br>| &nbsp;&nbsp; **Payment to**<br> **Dealers**<br>| &nbsp;&nbsp; **Compensation to** <br> **Sales** <br> **Personnel**<br>| &nbsp;&nbsp; **Interest,**<br> **Carrying,** <br> **or Other** <br> **Financing** <br> **Charges**<br>| &nbsp;&nbsp; **Other** <br> **Marketing** <br> **Expenses**<br>|
| &nbsp;&nbsp; Direxion Monthly High <br> Yield Bull 1.2X Fund<br>| $0 | &nbsp;&nbsp; $0 | $332 | $76573 | $0  | $0 | $0 |

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Independent Registered Public Accounting Firm

Ernst & Young LLP ("EY"), 700 Nicollet Mall, Suite 500, Minneapolis, Minnesota, 55402, is the independent registered public accounting firm for the Trust. The Financial Statements of the Fund for the fiscal period ended August 31, 2025, audited by EY, have been included in reliance on their report given on their authority as experts in accounting and auditing.

Legal Counsel

The Trust has selected K&L Gates LLP, 1601 K Street, N.W., Washington, DC 20006, as its legal counsel.

Determination of Net Asset Value

A fund's share price is known as its NAV. The Fund's share price is calculated as of the close of regular trading on the NYSE, usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition to these holidays, the Bond Market is not open on Columbus Day and Veterans' Day. The NYSE may close early on the business day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

Share price is calculated by dividing the Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." The Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations.

An equity security listed or traded on an exchange, domestic or foreign, is valued at its last sales price on the principal exchange prior to Valuation Time. Exchange-traded Funds are valued at the last sales price prior to the Valuation Time. Securities primarily traded on the NASDAQ Global Market<sup>®</sup> ("NASDAQ<sup>®</sup>") for which market quotations are readily available shall be valued using the NASDAQ<sup>®</sup> Official Closing Price ("NOCP") provided by NASDAQ<sup>®</sup> each Business Day. The NOCP is the most recently reported price as of 4:00:02 p.m. Eastern Time, unless that price is outside the range of the "inside" bid and asked price in that case, NASDAQ<sup>®</sup> will adjust the price to equal the inside bid or asked price, whichever is closer. Over-the counter securities are valued at the last sales price in the over-the-counter market.

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Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time.

Exchange-traded options and options on futures are valued at the composite price using the National Best Bid and Offer quotes ("NBBO"). NBBO consists of the highest bid price and lowest asked price across any of the exchanges on which an option is quoted, thus providing a view across the entire U.S. options marketplace. Specifically, composite pricing looks at the last trades on exchanges where the options are traded. If there are no trades for the option on a given business day, the composite option pricing calculates the mean of the highest bid price and lowest ask price across the exchanges where the option is traded. Non-exchange traded options are valued at the mean between the last bid and asked quotations.

Dividend income and other distributions are recorded on the ex-distribution date.

Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies as described below.

For purposes of calculating its daily NAV, the Fund typically reflects changes in its holdings of portfolio securities on the first business day following a portfolio trade (commonly known as "T+1 accounting"). However, the Fund is permitted to include same day trades when calculating its NAV (commonly referred to as "trade date accounting") on days when the Fund receives substantial redemptions. Such redemptions can result in an adverse impact on the Fund's NAV when there is a disparity between the trade price and the closing price of the security. Thus, the Fund's use of trade date accounting is likely to lessen the impact of substantial redemptions on the Fund's NAV.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that the Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as the Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

Redemptions

**Redemption In-Kind**

The Trust has filed a notice of election under Rule 18f-1 of the 1940 Act, which obligates the Fund to redeem shares for any shareholder for cash during any 90-day period up to $250,000 or 1% of the Fund's NAV, whichever is less. Any redemption beyond this amount also will be in cash unless the Trustees determine that further cash payments will have a material adverse effect on remaining shareholders. In such a case, the Fund will pay all or a portion of the remainder of the redemption in portfolio instruments, valued in the same way as the Fund determines NAV. The portfolio instruments will be selected in a manner that the Trustees deem fair and equitable. To the extent that the Fund redeems its shares in this manner, the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and the possibility of a lack of a liquid market for those securities. Shareholders who receive futures contracts or options on futures contracts in connection with a redemption in-kind may be responsible for making any margin payments due on those contracts.

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**Redemptions by Telephone**

Shareholders may redeem shares of the Fund by telephone. When acting on verbal instructions believed to be genuine, the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees are not liable for any loss resulting from a fraudulent telephone transaction request and the investor will bear the risk of loss. In acting upon telephone instructions, these parties use procedures that are reasonably designed to ensure that such instructions are genuine, such as (1) obtaining some or all of the following information: account number, name(s) and social security number(s) registered to the account, and personal identification; (2) recording all telephone transactions; and (3) sending written confirmation of each transaction to the registered owner. To the extent that the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees do not employ such procedures, some or all of them may be liable for losses due to unauthorized or fraudulent transactions.

**Receiving Payment**

Payment of redemption proceeds typically will be made within one business day, but at least within seven days, following the Fund's receipt of your request (if received in good order as described below) for redemption. For investments that have been made by check or ACH, payment on redemption requests may be delayed until the transfer agent is reasonably satisfied that the purchase payment has been collected by the Trust (which may require up to 10 calendar days). To avoid redemption delays, purchases should be made by direct wire transfer.

A redemption request will be considered to be received in "good order" if:

● The dollar amount or number of shares and the class of shares to be redeemed and shareholder account number have been indicated;

● Any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account;

● Any written request is accompanied by certificates representing the shares that have been issued, if any, and the certificates have been endorsed for transfer exactly as the name or names appear on the certificates or an accompanying stock power has been attached; and

● The signatures on any written redemption request in excess of $100,000 or more and on any certificates for shares (or an accompanying stock power) have been guaranteed by a national bank, a state bank that is insured by the FDIC, a trust company or by any member firm of the New York, American, Boston, Chicago, Pacific or Philadelphia Stock Exchanges. Signature guarantees also will be accepted from savings banks and certain other financial institutions that are deemed acceptable by USBFS, as transfer agent, under its current signature guarantee program.

The right of redemption may be suspended or the date of payment postponed for any period during which (1) the NYSE is closed (other than customary weekend or holiday closings); (2) trading on the NYSE is restricted; (3) situations where an emergency exists as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets or disposal of the Fund's securities is not reasonably practicable; or (4) the SEC has issued an order for the protection of the Fund's shareholders.

**Anti-Money Laundering**

The Fund is required to comply with various federal anti-money laundering laws and regulations. Consequently, the Fund may be required to "freeze" the account of a shareholder if the shareholder appears to be involved in suspicious activity or if certain account information matches information on government lists of known terrorists or other suspicious persons, or the Fund may be required to transfer the account or proceeds of the account to a government agency. In addition, pursuant to the Fund's Customer Identification Program, the Fund's transfer agent will complete a thorough review of all new opening account applications and will not transact business with any person or entity whose identity cannot be adequately verified.

Exchange Privilege

An exchange is effected through the redemption of the shares tendered for exchange and the purchase of shares being acquired at their respective NAVs as next determined following receipt by the Fund whose shares are being exchanged of (1) proper instructions and all necessary supporting documents; or (2) a telephone request for such exchange in accordance with the procedures set forth in the Prospectus and below. Telephone requests for an exchange received by the Fund before 4:00 p.m. Eastern Time will be effected at the close of regular trading on that day. Requests for an exchange received after the close of regular trading will be effected on the NYSE's next trading day. Due to the volume of calls or other unusual circumstances, telephone exchanges may be difficult to implement during certain time periods.

The Trust reserves the right to reject any order to acquire its shares through exchange or otherwise to restrict or terminate the exchange privilege at any time. In addition, the Trust may terminate this exchange privilege upon 60 days' notice.

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Shareholder and Other Information

Each share of the Fund gives the shareholder one vote in matters submitted to shareholders for a vote. Each share of the Fund has equal voting rights, except that, in matters affecting only a particular series, only shares of that series are entitled to vote. Share voting rights are not cumulative, and shares have no preemptive or conversion rights. Shares are not transferable. As a Massachusetts business trust, the Trust is not required to hold annual shareholder meetings. Shareholder approval will be sought only for certain changes in a Trust's or the Fund's operation and for the election of Trustees under certain circumstances. Trustees may be removed by the Trustees or by shareholders at a special meeting. A special meeting of shareholders shall be called by the Trustees upon the written request of shareholders owning at least 10% of a Trust's outstanding shares.

Dividends, Other Distributions and Taxes

The Tax Cuts and Jobs Act ("TCJA") made significant changes to the Code's rules for taxation of individuals and corporations, generally effective for taxable years beginning after December 31, 2017. Many of the changes applicable to individuals were made permanent by the One Big Beautiful Bill Act ("OBBBA"). The TCJA , as extended by OBBBA, made only minor changes to the RIC rules in the Code, but the changes affected shareholders and the Fund, including various investments that the Fund may make. Potential investors are urged to consult their own tax advisors for more detailed information.

**Dividends and other Distributions**

As stated in the Prospectus, the Fund declares and distributes dividends to its shareholders from its net investment income at least annually; for these purposes, net investment income includes dividends, accrued interest, and accretion of OID and market discount, less amortization of market premium and estimated expenses, and is calculated immediately prior to the determination of the Fund's NAV per share. The Fund also distributes its net short-term capital gain, if any, annually but may make more frequent distributions thereof if necessary to avoid income or excise taxes. The Fund may realize net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) and thus anticipates making annual distributions thereof. The Trustees may revise this distribution policy, or postpone the payment of distributions, if the Fund has or anticipates any large unexpected expense, loss, or fluctuation in net assets that, in the Trustees' opinion, might have a significant adverse effect on its shareholders.

**Taxes**

*<u>Taxation of Shareholders</u>*. Dividends (including distributions of the excess of net short-term capital gain over net long-term capital loss ("short-term gain")) the Fund distributes, if any, are taxable to its shareholders as ordinary income (at rates up to 37% for individuals), except to the extent they constitute "qualified dividend income" ("QDI") (as further described in the Prospectus), regardless of whether the dividends are reinvested in Fund shares or received in cash. Distributions of the Fund's net capital gain, if any, are taxable to its shareholders as long-term capital gains, regardless of how long they have held their Fund shares and whether the distributions are reinvested in Fund shares or received in cash.

A shareholder's redemption of Fund shares may result in a taxable gain, depending on whether the redemption proceeds are more or less than the shareholder's adjusted basis in the shares. An exchange of Fund shares for shares of another fund advised by Rafferty generally will have similar consequences. If Fund shares are redeemed at a loss after being held for six months or less, the loss will be treated as long-term, instead of short-term, capital loss to the extent of any capital gain distributions received on those shares. Investors also should be aware that if shares are purchased shortly before the record date for any dividend or capital gain distribution, the shareholder will pay full price for the shares and receive some portion of the purchase price back as a taxable distribution (with the tax consequences described in the Prospectus.)

*<u>Regulated Investment Company Status</u>*. The Fund is treated as a separate entity for federal tax purposes and intends to continue to qualify for treatment as a RIC. If the Fund so qualifies and satisfies the Distribution Requirement (defined below) for a taxable year, it will not be subject to federal income tax on the part of its investment company taxable income (generally consisting of net investment income, net short-term capital gain, and net gains and losses from certain foreign currency transactions, all determined without regard to any deduction for dividends paid) and net capital gain it distributes to its shareholders for that year.

To qualify for treatment as a RIC, the Fund must distribute to its shareholders for each taxable year at least the sum of 90% of its investment company taxable income ("Distribution Requirement") and 90% of its net exempt interest income and must meet several additional requirements. These requirements include the following: (1) the Fund must derive at least 90% of its gross income each taxable year from (a) dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from options, futures, or forward contracts) derived with respect to its business of investing in securities or those currencies, and (b) net income from an interest in a "qualified publicly traded partnership" ("QPTP") ("Income Requirement"); and (2) at the close of each quarter of the Fund's taxable year, (a) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities, with those other securities limited, in

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respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets and that does not represent more than 10% of the issuer's outstanding voting securities (equity securities of QPTPs being considered voting securities for these purposes), and (b) not more than 25% of the value of its total assets may be invested in (i) securities (other than U.S. government securities or the securities of other RICs) of any one issuer, (ii) securities (other than securities of other RICs) of two or more issuers the Fund controls that are determined to be engaged in the same, similar, or related trades or businesses, or (iii) securities of one or more QPTPs (collectively, "Diversification Requirements"). The Internal Revenue Service ("IRS") has ruled that income from a derivative contract on a commodity index generally is not qualifying income ("Qualifying Income") for purposes of the Income Requirement.

Although the Fund intends to continue to satisfy all the foregoing requirements, there is no assurance that the Fund will be able to do so. The investment by the Fund primarily in options and futures positions entails some risk that it might fail to satisfy one or both of the Diversification Requirements. There is some uncertainty regarding the valuation of such positions for purposes of those requirements; accordingly, it is possible that the method of valuation the Fund uses, pursuant to which it would expect to be treated as satisfying the Diversification Requirements, would not be accepted in an audit by the IRS, which might apply a different method resulting in disqualification of the Fund.

If the Fund failed to qualify for treatment as a RIC for any taxable year, (1) it would be taxed on the full amount of its taxable income, including net capital gain, for that year at corporate income tax rates (up to 21%), (2) it would not be able to deduct for the distributions it makes to its shareholders, and (3) the shareholders would treat all those distributions, including distributions of net capital gain, as dividends -- that is, ordinary income, except for the part of those dividends that is QDI, which is subject to a maximum federal income tax rate of 20% for individuals -- to the extent of the Fund's earnings and profits; those dividends would be eligible for the dividends-received deduction available to corporations under certain circumstances. In addition, the Fund would be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying for RIC treatment. However, the Regulated Investment Company Modernization Act of 2010 provides certain savings provisions that enable a RIC to cure a failure to satisfy any of the Income and Diversification Requirements as long as the failure "is due to reasonable cause and not due to willful neglect" and the RIC pays a deductible tax calculated in accordance with those provisions and meets certain other requirements.

*<u>Excise Tax</u>*. The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gain net income for the one-year period ending on October 31 of that year, plus certain other amounts.

*<u>Income from Foreign Securities</u>*. Dividends and interest the Fund receives, and gains it realizes, on foreign securities may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield and/or total return on its securities. Tax conventions between certain countries and the United States may reduce or eliminate these foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors.

Gains or losses (1) from the disposition of foreign currencies, including forward currency contracts, (2) on the disposition of each foreign-currency-denominated debt security that are attributable to fluctuations in the value of the foreign currency between the dates of acquisition and disposition of the security, and (3) that are attributable to fluctuations in exchange rates that occur between the time the Fund accrues dividends, interest, or other receivables, or expenses or other liabilities, denominated in a foreign currency and the time the Fund actually collects the receivables or pays the liabilities, generally will be treated as ordinary income or loss. These gains or losses will increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders.

The Fund may invest in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in general, meets either of the following tests for a taxable year: (1) at least 75% of its gross income for the taxable year is passive; or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, the Fund will be subject to federal income tax on a portion of any "excess distribution" it receives on the stock of a PFIC or of any gain on its disposition of the stock (collectively, "PFIC income"), plus interest thereon, even if the Fund distributes the PFIC income as a dividend to its shareholders. The balance of the PFIC income will be included in the Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders. Fund distributions thereof will not be eligible for the 20% maximum federal income tax rate on individuals' QDI.

If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified electing fund" ("QEF"), then, in lieu of the foregoing tax and interest obligation, the Fund would be required to include in income each taxable year its pro rata share of the QEF's annual ordinary earnings and net capital gain — which the Fund probably would have to distribute to satisfy the Distribution Requirement and avoid imposition of the Excise Tax —even if the Fund did not receive those earnings and gain from the QEF. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof.

The Fund may elect to "mark to market" its stock in any PFIC. "Marking-to-market," in this context, means including in gross income each taxable year (and treating as ordinary income) the excess, if any, of the fair market value of the PFIC's stock over the Fund's adjusted basis therein as of the end of that year. Pursuant to the election, the Fund also would be

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allowed to deduct (as an ordinary, not a capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains with respect to that stock the Fund included in income for prior taxable years under the election. The Fund's adjusted basis in each PFIC's stock with respect to which it makes this election would be adjusted to reflect the amounts of income included and deductions taken thereunder.

*<u>Derivatives Strategies</u>*. The use of derivatives strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward contracts, involves complex rules that will determine for income tax purposes the amount, character and timing of recognition of the gains and losses the Fund realizes in connection therewith. Gains from the disposition of foreign currencies (except certain gains therefrom that may be excluded by future regulations), and gains from options, futures, and forward contracts the Fund derives with respect to its business of investing in securities or foreign currencies, will be treated as Qualifying Income. The Fund will monitor its transactions, make appropriate tax elections and make appropriate entries in its books and records when it acquires any foreign currency, option, futures contract, forward contract or hedged investment to mitigate the effect of these rules, seek to prevent its disqualification as a RIC and minimize the imposition of federal income and excise taxes.

Some futures contracts, foreign currency contracts that are traded in the interbank market, and "nonequity options" (*i.e.*, certain listed options, such as those on a "broad-based" securities index) — except any "securities futures contract" that is not a "dealer securities futures contract" (both as defined in the Code) and any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement — in which the Fund may invest may be subject to Code section 1256 (collectively "section 1256 contracts"). Section 1256 contracts that the Fund holds at the end of its taxable year must be "marked-to-market" (that is, treated as having been sold at that time for their fair market value) for federal income tax purposes, with the result that unrealized gains or losses will be treated as though they were realized. Sixty percent of any net gain or loss recognized on these deemed sales, and 60% of any net realized gain or loss from any actual sales of section 1256 contracts, will be treated as long-term capital gain or loss, and the balance will be treated as short-term capital gain or loss. These rules may operate to increase the amount that the Fund must distribute to satisfy the Distribution Requirement (*i.e.*, with respect to the portion treated as short-term capital gain), which will be taxable to its shareholders as ordinary income when distributed to them, and to increase the net capital gain the Fund recognizes, without in either case increasing the cash available to it. The Fund may elect not to have the foregoing rules apply to any "mixed straddle" (that is, a straddle, which the Fund clearly identifies in accordance with applicable regulations, at least one (but not all) of the positions of which are section 1256 contracts), although doing so may have the effect of increasing the relative proportion of short-term capital gain (taxable as ordinary income) and thus increasing the amount of dividends it must distribute. Section 1256 contracts also may be marked-to-market for purposes of the Excise Tax.

Code section 1092 (dealing with straddles) also may affect the taxation of options, futures and forward contracts in which the Fund may invest. That section defines a "straddle" as offsetting positions with respect to actively traded personal property; for these purposes, options, futures and forward contracts are positions in personal property. Under that section, any loss from the disposition of a position in a straddle may be deducted only to the extent the loss exceeds the unrecognized gain on the offsetting position(s) of the straddle. In addition, these rules may postpone the recognition of loss that otherwise would be recognized under the marked-to-market rules discussed above. The regulations under section 1092 also provide certain "wash sale" rules, which apply to transactions where a position is sold at a loss and a new offsetting position is acquired within a prescribed period, and "short sale" rules applicable to straddles. If the Fund makes certain elections, the amount, character and timing of recognition of gains and losses from the affected straddle positions would be determined under rules that vary according to the elections made. Because only a few of the regulations implementing the straddle rules have been promulgated, the tax consequences to the Fund of straddle transactions are not entirely clear.

If a call option written by the Fund lapses (*i.e.*, terminates without being exercised), the amount of the premium it received for the option will be short-term capital gain. If the Fund enters into a closing purchase transaction with respect to a written call option, it will have a short-term capital gain or loss based on the difference between the premium it received for the option it wrote and the premium it pays for the option it buys. If such an option is exercised and the Fund thus sells the securities or futures contract subject to the option, the premium the Fund received will be added to the exercise price to determine the gain or loss on the sale. If a call option purchased by the Fund lapses, it will realize short-term or long-term capital loss, depending on its holding period for the security or futures contract subject thereto. If the Fund exercises a purchased call option, the premium it paid for the option will be added to the basis in the subject securities or futures contract.

*<u>Income from Zero-Coupon and Payment-in-Kind Securities</u>*. The Fund may acquire zero-coupon or other securities (such as strips and delayed interest securities) issued with OID. As a holder of those securities, the Fund must include in its gross income the OID that accrues on the securities during the taxable year, even if it receives no corresponding payment on them during the year. Similarly, the Fund must include in its gross income securities it receives as "interest" on payment-in-kind securities. With respect to "market discount bonds" (*i.e.*, bonds purchased at a price less than their issue price plus the portion of OID previously accrued thereon), the Fund may elect to accrue and include in income taxable each year a portion of the bonds' market discount. Because the Fund annually must distribute substantially all of its investment company taxable

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income, including any accrued OID, market discount, and other non-cash income, to satisfy the Distribution Requirement and avoid imposition of the Excise Tax, the Fund may be required in a particular year to distribute as a dividend an amount that is greater than the total amount of cash it actually receives. Those distributions will be made from the Fund's cash assets or from the proceeds of sales of portfolio securities, if necessary. The Fund may realize capital gains or losses from those sales, which would increase or decrease its investment company taxable income and/or net capital gain.

*<u>Constructive Sales</u>*. If the Fund has an "appreciated financial position" -- generally, an interest (including an interest through an option, futures or forward contract, or short sale) with respect to any stock, debt instrument (other than "straight debt"), or partnership interest the fair market value of which exceeds its adjusted basis -- and enters into a "constructive sale" of the position, the Fund will be treated as having made an actual sale thereof, with the result that it will recognize gain at that time. A constructive sale generally consists of a short sale, an offsetting notional principal contract, or a futures or forward contract the Fund or a related person enters into with respect to the same or substantially identical property. In addition, if the appreciated financial position is itself a short sale or such a contract, acquisition of the underlying property or substantially identical property will be deemed a constructive sale. The foregoing will not apply, however, to the Fund's transaction during any taxable year that otherwise would be treated as a constructive sale if the transaction is closed within 30 days after the end of that year and the Fund holds the appreciated financial position unhedged for 60 days after that closing (*i.e.*, at no time during that 60-day period is the Fund's risk of loss regarding that position reduced by reason of certain specified transactions with respect to substantially identical or related property, such as having an option to sell, being contractually obligated to sell, making a short sale, or granting an option to buy substantially identical stock or securities).

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The foregoing is only a general summary of some of the important federal income and excise tax considerations generally affecting the Fund. No attempt is made to present a complete explanation of the federal tax treatment of the Fund's activities, and this discussion is not intended as a substitute for careful tax planning. Accordingly, potential investors are urged to consult their own tax advisers for more detailed information and for information regarding any state, local, or foreign taxes applicable to the Fund and to distributions therefrom.

*<u>Capital Loss Carryforwards</u>*. As of August 31, 2025, the Fund had Unlimited Short-Term capital loss carryforwards of $19,827,425 and Unlimited Long-Term capital loss carryforwards of $13,082,073. The Fund did not utilize any capital loss carryforwards for the fiscal year ended August 31, 2025.

To the extent the Fund realizes future net capital gains in any taxable year to which it has available capital loss carryforwards, those gains will be wholly or partly offset by those carryforwards.

Pursuant to the Regulated Investment Company Modernization Act of 2010, capital losses sustained in taxable years beginning after December 22, 2010, will not expire and may be carried over without limitation (in the case of each Fund in the preceding tables, after it uses the capital loss carryforwards that expire).

Financial Statements

The Fund's financial statements for the fiscal year ended August 31, 2025, are incorporated herein by reference from the Fund's Annual Financial Statements and Additional Information dated August 31, 2025.

To receive a copy of the Prospectus or Annual or Semi-Annual Financial Statements and Additional Information, without charge, write to or call the Trust at the contact information listed below:

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|:---|:---|
| Write to: | Direxion Funds |
|  | 535 Madison Avenue<br> 37<sup>th</sup> Floor<br>|
|  | New York, New York 10022 |
| Call: | (800) 851-0511 |
| By Internet: | www.direxion.com |

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**APPENDIX A**

**Description of Corporate Bond Ratings**

Moody's Investors Service and S&P Global Ratings are two prominent independent rating agencies that rate the quality of bonds. Following are expanded explanations of the ratings shown in the Prospectus and this SAI.

***Moody's Investors Service – Global Long-Term Ratings***

Ratings assigned on Moody's global long-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Moody's defines credit risk as the risk that an entity may not meet its contractual financial obligations as they come due and any estimated financial loss in the event of default or impairment. The contractual financial obligations addressed by Moody's ratings are those that call for, without regard to enforceability, the payment of an ascertainable amount, which may vary based upon standard sources of variation (e.g., floating interest rates), by an ascertainable date. Moody's rating addresses the issuer's ability to obtain cash sufficient to service the obligation, and its willingness to pay. Moody's ratings do not address non-standard sources of variation in the amount of the principal obligation (e.g., equity indexed), absent an express statement to the contrary in a press release accompanying an initial rating. Long-term ratings are assigned to issuers or obligations with an original maturity of eleven months or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment. Moody's issues ratings at the issuer level and instrument level. Typically, ratings are made publicly available although private and unpublished ratings may also be assigned.

**Aaa**: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa**: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A**: Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa**: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba**: Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B**: Obligations rated B are considered speculative and are subject to high credit risk.

**Caa**: Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca**: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C**: Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.\*

\* By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

***Moody's Investors Service – National Scale Long-Term Ratings***

Moody's long-term National Scale Ratings (NSRs) are opinions of the relative creditworthiness of issuers and financial obligations within a particular country. NSRs are not designed to be compared among countries; rather, they address relative credit risk within a given country. Moody's assigns national scale ratings in certain local capital markets in which investors have found the global rating scale provides inadequate differentiation among credits or is inconsistent with a rating scale already in common use in the country. In each specific country, the last two characters of the rating indicate the country in which the issuer is located or the financial obligation was issued (*e.g.*, Aaa.ke for Kenya).

**Aaa.n**: Issuers or issues rated Aaa.n demonstrate the strongest creditworthiness relative to other domestic issuers and issuances.

**Aa.n**: Issuers or issues rated Aa.n demonstrate very strong creditworthiness relative to other domestic issuers and issuances.

**A.n**: Issuers or issues rated A.n present above-average creditworthiness relative to other domestic issuers and issuances.

**Baa.n**: Issuers or issues rated Baa.n represent average creditworthiness relative to other domestic issuers and issuances.

**Ba.n**: Issuers or issues rated Ba.n demonstrate below-average creditworthiness relative to other domestic issuers and issuances.

**B.n**: Issuers or issues rated B.n demonstrate weak creditworthiness relative to other domestic issuers and issuances.

------

**Caa.n**: Issuers or issues rated Caa.n demonstrate very weak creditworthiness relative to other domestic issuers and issuances.

**Ca.n**: Issuers or issues rated Ca.n demonstrate extremely weak creditworthiness relative to other domestic issuers and issuances.

**C.n**: Issuers or issues rated C.n demonstrate the weakest creditworthiness relative to other domestic issuers and issuances.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

***S&P Global Ratings – Long-Term Issue Credit Ratings\****

An S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&P Global Ratings' view of the obligor's capacity and willingness to meet its financial commitments as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. Issue credit ratings can be either long-term or short-term. Short-term issue credit ratings are generally assigned to those obligations considered short-term in the relevant market, typically with an original maturity of no more than 365 days. Short-term issue credit ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. We would typically assign a long-term issue credit rating to an obligation with an original maturity of greater than 365 days. However, the ratings we assign to certain instruments may diverge from these guidelines based on market practices.

Issue credit ratings are based, in varying degrees, on S&P Global Ratings' analysis of the following considerations:

● The likelihood of payment--the capacity and willingness of the obligor to meet its financial commitments on an obligation in accordance with the terms of the obligation;

● The nature and provisions of the financial obligation, and the promise we impute; and

● The protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

An issue rating is an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

**AAA**: An obligation rated 'AAA' has the highest rating assigned by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is extremely strong.

**AA**: An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitments on the obligation is very strong.

**A**: An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitments on the obligation is still strong.

**BBB**: An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor's capacity to meet its financial commitments on the obligation.

**BB; B; CCC; CC; and C**: Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposure to adverse conditions.

**BB**: An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor's inadequate capacity to meet its financial commitments on the obligation.

**B**: An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments on the obligation.

**CCC**: An obligation rated 'CCC' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.

**CC**: An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.

------

**C**: An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared with obligations that are rated higher.

**D**: An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within the next five business days in the absence of a stated grace period or within the earlier of the stated grace period or the next 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

\*Ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.

***Moody's Investors Service – Municipal Short Term Debt and Demand Obligation Ratings***

We use the global short-term Prime rating scale for commercial paper issued by US municipalities and nonprofits. These commercial paper programs may be backed by external letters of credit or liquidity facilities, or by an issuer's self-liquidity.

For other short-term municipal obligations, we use one of two other short-term rating scales, the Municipal Investment Grade (MIG) and Variable Municipal Investment Grade (VMIG) scales discussed below.

We use the MIG scale for US municipal cash flow notes, bond anticipation notes and certain other short-term obligations, which typically mature in three years or less.

**MIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2**: This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3**: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG**: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

For variable rate demand obligations (VRDOs), Moody's assigns both a long-term rating and a short-term payment obligation rating. The long-term rating addresses the issuer's ability to meet scheduled principal and interest payments. The short-term payment obligation rating addresses the ability of the issuer or the liquidity provider to meet any purchase price payment obligation resulting from optional tenders ("on demand") and/or mandatory tenders of the VRDO. The short-term payment obligation rating uses the VMIG scale. Transitions of VMIG ratings with conditional liquidity support differ from transitions of Prime ratings reflecting the risk that external liquidity support will terminate if the issuer's long-term rating drops below investment grade.

For VRDOs, we typically assign a VMIG rating if the frequency of the payment obligation is less than every three years. If the frequency of the payment obligation is less than three years, but the obligation is payable only with remarketing proceeds, the VMIG short-term rating is not assigned and it is denoted as "NR."

Industrial development bonds in the US where the obligor is a corporate may carry a VMIG rating that reflects Moody's view of the relative likelihood of default and loss. In these cases, liquidity assessment is based on the liquidity of the corporate obligor.

**VMIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 2**: This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 3**: This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections.

**SG**: This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have a sufficiently strong short-term rating or may lack the structural or legal protections.

***S&P Global Ratings – Municipal Short-Term Note Ratings***

An S&P Global Ratings U.S. municipal note rating reflects S&P Global Ratings opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P Global Ratings analysis will review the following considerations:

● Amortization schedule--the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

● Source of payment--the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

**SP-1**: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2**: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3**: Speculative capacity to pay principal and interest.

**D**: 'D' is assigned upon failure to pay the note when due, completion of a distressed debt restructuring, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.

***Moody's Investors Service – Global Short Term Rating Scale***

Ratings assigned on Moody's global short-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.

**P-1:** Ratings of Prime-1 reflect a superior ability to repay short-term obligations.

**P-2:** Ratings of Prime-2 reflect a strong ability to repay short-term obligations.

**P-3:** Ratings of Prime-3 reflect an acceptable ability to repay short-term obligations.

**NP:** Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

***S&P Global Ratings –Short-Term Issue Credit Ratings***

**A-1**: A short-term obligation rated 'A-1' is rated in the highest category by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitments on these obligations is extremely strong.

**A-2**: A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory.

**A-3**: A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.

**B**: A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial commitments.

**C**: A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.

**D**: A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example, due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, 'AAA/A-1+' or 'A-1+/A-1'). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, 'SP-1+/A-1+').

------

![](g216062img57ea54371.gif)

Direxion Funds

Statement of Additional Information

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

www.direxion.com

The Direxion Funds (the "Trust") is an investment company that offers shares of a variety of mutual funds to the public. This Statement of Additional Information ("SAI") relates to the Investor Class Shares of the Fund listed below.

**Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund (DXNLX)**

Investor Class

**The fund offered in this SAI (the "Fund") seeks *calendar month leveraged* investment results and is riskier than most mutual funds because the Fund seeks 1.25 times the calendar month performance of a respective underlying index.** 

**The Fund is not suitable for all investors. The Fund is designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Investors in the Fund should:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**

**understand the risks associated with the use of leverage;**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**

**understand the consequences of seeking calendar month leveraged investment results; and**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**

**intend to actively monitor and manage their investments.**

**Investors who do not understand the Fund or do not intend to actively manage and monitor their investments should not buy the Fund.**

**There is no assurance that the Fund will achieve its investment objective and an investment in the Fund could lose money. No single Fund is a complete investment program.**

**An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 125% exposure to the underlying index from that point until the end of the month. The actual exposure is a function of the performance of the underlying index from the end of the prior calendar month to an investor's purchase date. If a Fund's shares are held for a period other than a calendar month, the Fund's performance is likely to deviate from 125% of the underlying index's performance for the period the Fund is held. This deviation will increase with higher underlying index volatility and longer holding periods.**

This SAI, dated December 29, 2025, is not a prospectus. It should be read in conjunction with the Fund's prospectus dated December 29, 2025 ("Prospectus"). This SAI is incorporated by reference into the Prospectus. In other words, it is legally part of the Prospectus. To receive a copy of the Prospectus, without charge, write or call the Trust at the address or telephone number listed above.

December 29, 2025

------

**Table of Contents** 

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| | |
|:---|:---|
|  | Page |
| [The Direxion Funds](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_1) | 1  |
| [Classification of the Fund](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_1) | 1  |
| [Investment Policies and Techniques](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_1) | 1  |
| [Asset-Backed Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_1) | 1  |
| [Bank Obligations](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_2) | 2  |
| [Caps, Floors and Collars](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_2) | 2  |
| [Corporate Debt Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_2) | 2  |
| [Cybersecurity Risk](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_3) | 3  |
| [Depositary Receipts](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_3) | 3  |
| [Equity Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_4) | 4  |
| [Foreign Currencies](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_4) | 4  |
| [Foreign Currency Exchange-Related Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_6) | 6  |
| [Foreign Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_7) | 7  |
| [Hybrid Instruments](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_15) | 15  |
| [Illiquid Investments and Restricted Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_16) | 16  |
| [Indexed Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_16) | 16  |
| [Interest Rate Risk](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_16) | 16  |
| [Junk Bonds](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_17) | 17  |
| [Mortgage-Backed Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_17) | 17  |
| [Municipal Obligations](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_18) | 18  |
| [Futures Contracts, Options, and Other Derivative Strategies](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_19) | 19  |
| [Other Investment Companies](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_24) | 24  |
| [Repurchase Agreements](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_25) | 25  |
| [Reverse Repurchase Agreements](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_26) | 26  |
| [Short Sales](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_26) | 26  |
| [Swap Agreements](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_26) | 26  |
| [Unrated Debt Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_31) | 31  |
| [U.S. Government Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_31) | 31  |
| [U.S. Government Sponsored Enterprises](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_32) | 32  |
| [When-Issued Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_32) | 32  |
| [Zero-Coupon, Payment-In-Kind and Strip Securities](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_32) | 32  |
| [Other Investment Risks and Practices](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_33) | 33  |
| [Securities Lending](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_33) | 33  |
| [Correlation and Tracking Risk](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_34) | 34  |
| [Leverage](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_34) | 34  |
| [Investment Restrictions](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_36) | 36  |
| [Portfolio Transactions and Brokerage](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_37) | 37  |
| [Portfolio Holdings Information](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_38) | 38  |
| [Management of the Trust](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_38) | 38  |
| [The Board of Trustees](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_38) | 38  |
| [Risk Oversight](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_38) | 38  |
| [Board Structure and Related Matters](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_39) | 39  |
| [Board Committees](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_41) | 41  |
| [Principal Officers of the Trust](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_42) | 42  |

---

i

------

---

| | |
|:---|:---|
|  | Page |
| [Principal Shareholders, Control Persons and Management Ownership](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_44) | 44  |
| [Investment Adviser](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_45) | 45  |
| [Portfolio Managers](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_46) | 46  |
| [Proxy Voting Policies and Procedures](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_47) | 47  |
| [Fund Administrator, Fund Accountant, Transfer Agent and Custodian](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_48) | 48  |
| [Distributor](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_48) | 48  |
| [Distribution Plan and Service Fees](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_48) | 48  |
| [Independent Registered Public Accounting Firm](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_49) | 49  |
| [Legal Counsel](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_49) | 49  |
| [Determination of Net Asset Value](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_49) | 49  |
| [Redemptions](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_50) | 50  |
| [Redemption In-Kind](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_50) | 50  |
| [Redemptions by Telephone](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_51) | 51  |
| [Receiving Payment](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_51) | 51  |
| [Anti-Money Laundering](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_51) | 51  |
| [Exchange Privilege](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_51) | 51  |
| [Shareholder and Other Information](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_52) | 52  |
| [Dividends, Other Distributions and Taxes](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_52) | 52  |
| [Dividends and other Distributions](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_52) | 52  |
| [Taxes](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_52) | 52  |
| [Financial Statements](#xx_0e5afc09-230a-43bb-a036-a6b3e1b5b5a4_55) | 55  |
| [APPENDIX A](#xx_22e06e7d-dedd-43f1-819d-7ec9539d2aef_1) | A-1 |

---

ii

------

The Direxion Funds

The Trust is a Massachusetts business trust organized on June 6, 1997 and is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of 8 separate series.

This SAI relates to the Investor Class Shares of the Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund (the "Fund").

There is no assurance that the Fund will achieve its investment objectives and an investment in the Fund could lose money. The Fund is not a complete investment program. The Fund offers Investor Class shares. Investor Class shares are designed for sale directly to investors without a sales charge. The Investor Class of the Fund is subject to fees under Rule 12b-1 of the 1940 Act.

Classification of the Fund

The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. This means it has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund's volatility and increase the risk that the Fund's performance will decline based on the performance of a single issuer or the credit of a single counterparty, and the Fund may be more susceptible to any single economic, political or regulatory occurrence than a diversified company.

Investment Policies and Techniques

The Fund seeks to provide calendar month leveraged investment results, before fees and expenses, which correspond to the performance of the NASDAQ 100<sup>®</sup> Index (the "Index"). The Fund attempts to provide investment results that correlate positively to the return of the Index, meaning the Fund attempts to move in the same direction as the Index. For example, the monthly target for the Fund is 125% of the calendar month performance of the Index. If, over a given calendar month, the Index gains 1%, the Fund is designed to gain approximately 1.25% (which is equal to 125% of 1%). Conversely, if the Index loses 1% over a given calendar month, the Fund is designed to lose approximately 1.25%.

The Fund's investment objective is a non-fundamental policy of the Fund that may be changed by the Board without shareholder approval.

Subject to the limitations described in the "Investment Restrictions" section, the Fund may engage in the investment strategies discussed below.

**Defensive Policy**. Generally, the Fund pursues its investment objective regardless of market conditions and does not take defensive positions.

Asset-Backed Securities

The Fund may invest in asset-backed securities of any rating or maturity. Asset-backed securities are securities issued by trusts and special purpose entities that are backed by pools of assets, such as automobile and credit-card receivables and home equity loans, which pass through the payments on the underlying obligations to the security holders (less servicing fees paid to the originator or fees for any credit enhancement). Typically, the originator of the loan or accounts receivable paper transfers it to a specially created trust, which repackages it as securities with a minimum denomination and a specific term. The securities are then privately placed or publicly offered. Examples include certificates for automobile receivables and so-called plastic bonds, backed by credit card receivables.

The value of an asset-backed security is affected by, among other things, changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans and the financial institution providing any credit enhancement. Payments of principal and interest passed through to holders of asset-backed securities are frequently supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or by having a priority to certain of the borrower's other assets. The degree of credit enhancement varies, and generally applies to only a portion of the asset-backed security's par value. Value is also affected if any credit enhancement has been exhausted.

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Bank Obligations

*<u>Money Market Instruments</u>*. The Fund may invest in bankers' acceptances, certificates of deposit, demand and time deposits, savings shares and commercial paper of domestic banks and savings and loans that have assets of at least $1 billion and capital, surplus, and undivided profits of over $100 million as of the close of their most recent fiscal year, or instruments that are insured by the Bank Insurance Fund or the Savings Institution Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). The Fund also may invest in high quality, short-term, corporate debt obligations, including variable rate demand notes, having terms-to-maturity of less than 397 days. Because there is no secondary trading market in demand notes, the inability of the issuer to make required payments could impact adversely the Fund's ability to resell when it deems advisable to do so.

The Fund may invest in foreign money market instruments, which typically involve more risk than investing in U.S. money market instruments. See "Foreign Securities" below. These risks include, among others, higher brokerage commissions, less public information, and less liquid markets in which to sell and meet large shareholder redemption requests.

*<u>Bankers' Acceptances</u>*. Bankers' acceptances generally are negotiable instruments (time drafts) drawn to finance the export, import, domestic shipment or storage of goods. They are termed "accepted" when a bank writes on the draft its agreement to pay it at maturity, using the word "accepted." The bank is, in effect, unconditionally guaranteeing to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset, or it may be sold in the secondary market at the going rate of interest for a specified maturity.

*<u>Certificates of Deposit ("CDs")</u>*. The FDIC is an agency of the U.S. government that insures the deposits of certain banks and savings and loan associations up to $250,000 per deposit. The interest on such deposits may not be insured to the extent this limit is exceeded. Current federal regulations also permit such institutions to issue insured negotiable CDs in amounts of $250,000 or more without regard to the interest rate ceilings on other deposits. To remain fully insured, these investments must be limited to $250,000 per insured bank or savings and loan association.

*<u>Commercial Paper</u>*. Commercial paper includes notes, drafts or similar instruments payable on demand or having a maturity at the time of issuance not exceeding nine months, exclusive of days of grace or any renewal thereof. The Fund may invest in commercial paper rated A-l or A-2 by Standard & Poor's<sup>®</sup> Ratings Services ("S&P<sup>®</sup>") or Prime-1 or Prime-2 by Moody's Investors Service<sup>®</sup>, Inc. ("Moody's"), and in other lower quality commercial paper.

In March 2023, the shut-down of certain financial institutions raised economic concerns over disruption in the U.S. banking system. There can be no certainty that the actions taken by the U.S. government to strengthen public confidence in the U.S. banking system will be effective in mitigating the effects of financial institution failures on the economy and restoring public confidence in the U.S. banking system.

Caps, Floors and Collars

The Fund may enter into caps, floors and collars relating to securities, interest rates or currencies. In a cap or floor, the buyer pays a premium (which is generally, but not always, a single up-front amount) for the right to receive payments from the other party if, on specified payment dates, the applicable rate, index or asset is greater than (in the case of a cap) or less than (in the case of a floor) an agreed level, for the period involved and the applicable notional amount. A collar is a combination instrument in which the same party buys a cap and sells a floor. Depending upon the terms of the cap and floor comprising the collar, the premiums will partially, or entirely, offset each other. The notional amount of a cap, collar or floor is used to calculate payments, but is not itself exchanged. The Fund may be both a buyer and seller of these instruments. In addition, the Fund may engage in combinations of put and call options on securities (also commonly known as collars), which may involve physical delivery of securities. Like swaps, caps, floors and collars are very flexible products. The terms of the transactions entered by the Fund may vary from the typical examples described here.

Corporate Debt Securities

The Fund may invest in investment grade corporate debt securities of any rating or maturity. Investment grade corporate bonds are those rated BBB or better by S&P<sup>®</sup> or Baa or better by Moody's. Securities rated BBB by S&P<sup>®</sup> are considered investment grade, but Moody's considers securities rated Baa to have speculative characteristics. See Appendix A for a description of corporate bond ratings. The Fund may also invest in unrated securities.

Corporate debt securities are fixed-income securities issued by businesses to finance their operations, although corporate debt instruments may also include bank loans to companies. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their maturities and secured or un-secured status. Commercial paper has the shortest term and is usually unsecured.

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The broad category of corporate debt securities includes debt issued by domestic or foreign companies of all kinds, including those with small-, mid- and large-capitalizations. Corporate debt may be rated investment-grade or below investment-grade and may carry variable or floating rates of interest.

Because of the wide range of types and maturities of corporate debt securities, as well as the range of creditworthiness of its issuers, corporate debt securities have widely varying potentials for return and risk profiles. For example, commercial paper issued by a large established domestic corporation that is rated investment grade may have a modest return on principal, but carries relatively limited risk. On the other hand, a long-term corporate note issued by a small foreign corporation from an emerging market country that has not been rated may have the potential for relatively large returns on principal, but carries a relatively high degree of risk.

Corporate debt securities carry both credit risk and interest rate risk. Credit risk is the risk that the Fund could lose money if the issuer of a corporate debt security is unable to pay interest or repay principal when it is due. Some corporate debt securities that are rated below investment grade are generally considered speculative because they present a greater risk of loss, including default, than higher-quality debt securities. The credit risk of a particular issuer's debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of higher-ranking senior securities may receive amounts otherwise payable to the holders of more junior securities. Interest rate risk is the risk that the value of certain corporate debt securities will tend to fall when interest rates rise. In general, corporate debt securities with longer terms tend to fall more in value when interest rates rise than corporate debt securities with shorter terms.

Cybersecurity Risk

The Fund may be susceptible to operational risks through breaches in cybersecurity. A cybersecurity incident may refer to either intentional or unintentional events that allow an unauthorized party to gain access to fund assets, investor data, or proprietary information, or cause the Fund or a service provider to suffer data corruption or lose operational functionality. A cybersecurity incident could, among other things, result in the loss or theft of investor data or funds, employees being unable to access electronic systems ("denial of services"), loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or remediation costs associated with system repairs. Any of these results could have a substantial impact on the Fund. For example, if a cybersecurity incident results in a denial of service, employees could be unable to access electronic systems to perform critical duties for the Fund, such as trading, NAV calculation, shareholder accounting or fulfillment of Fund share purchases and redemptions. Cybersecurity incidents could cause the Fund, Rafferty Asset Management, LLC ("Rafferty" or "Adviser") or any of its service providers to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures, or financial loss of a significant magnitude. They may also cause the Fund to violate applicable privacy and other laws. The Fund's Adviser and service providers have established risk management program and systems that seek to reduce the risks associated with cybersecurity, as well as business continuity plans in the event there is a cybersecurity breach. However, there is no guarantee that such efforts will succeed, especially since the Fund does not directly control the cybersecurity systems of the issuers of securities in which the Fund invests or the Fund's third party service providers (including the Fund's transfer agent and custodian).

Depositary Receipts

To the extent the Fund invests in stocks of foreign corporations, the Fund's investment in such stocks may also be in the form of depositary receipts or other securities convertible into securities of foreign issuers. Depository receipts are receipts, typically issued by a financial institution, with evidence of underlying securities issued by a non-U.S. issuer. Types of depositary receipts include American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs"). Depository receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted.

ADRs are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. Investments in ADRs have certain advantages over direct investment in the underlying foreign securities because: (i) ADRs are U.S. dollar-denominated investments that are easily transferable and for which market quotations are readily available, and (ii) issuers whose securities are represented by ADRs are generally subject to auditing, accounting and financial reporting standards similar to those applied to domestic issuers. By investing in ADRs rather than directly in the stock of foreign issuers outside the U.S. the Fund may avoid certain risks related to investing in foreign securities in non-U.S. markets, however, ADRs do not eliminate all risks inherent in investing in the securities of foreign issuers.

EDRs are receipts issued in Europe that evidence a similar ownership arrangement. GDRs are receipts issued throughout the world that evidence a similar arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities

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markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world.

Depositary receipts may be purchased through "sponsored" or "unsponsored" facilities, in which the Fund may invest. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may establish an unsponsored facility without participation by the issuer of the depositary security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts of the deposited securities.

Fund investments in depositary receipts, which include ADRs, GDRs and EDRs, are deemed to be investments in foreign securities for purposes of the Fund's investment strategy.

Equity Securities

*<u>Common Stocks</u>*. The Fund may invest in common stocks. Common stocks represent the residual ownership interest in the issuer and are entitled to the income and increase in the value of the assets and business of the entity after all of its obligations and preferred stock are satisfied. Common stocks generally have voting rights. Common stocks fluctuate in price in response to many factors including historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.

*<u>Convertible Securities</u>*. The Fund may invest in convertible securities that may be considered high yield securities. Convertible securities include corporate bonds, notes and preferred stock that can be converted into or exchanged for a prescribed amount of common stock of the same or a different issue within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or dividends paid on preferred stock until the convertible stock matures or is redeemed, converted or exchanged. While no securities investment is without some risk, investments in convertible securities generally entail less risk than the issuer's common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed income security. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. While convertible securities generally offer lower interest or dividend yields than nonconvertible debt securities of similar quality, they do enable the investor to benefit from increases in the market price of the underlying common stock. When investing in convertible securities, the Fund may invest in the lowest credit rating category.

*<u>Preferred Stock</u>*. The Fund may invest in preferred stock. A preferred stock blends the characteristics of a bond and common stock. It can offer the higher yield of a bond and has priority over common stock in equity ownership, but does not have the seniority of a bond and its participation in the issuer's growth may be limited. Preferred stock has preference over common stock in the receipt of dividends and in any residual assets after payment to creditors if the issuer is dissolved. Although the dividend is set at a fixed annual rate, in some circumstances it can be changed or omitted by the issuer. When investing in preferred stocks, the Fund may invest in the lowest credit rating category.

*<u>Warrants and Rights</u>*. The Fund may purchase warrants and rights, which are instruments that permit the Fund to acquire, by subscription, the capital stock of a corporation at a set price, regardless of the market price for such stock. Warrants may be either perpetual or of limited duration, but they usually do not have voting rights or pay dividends. The market price of warrants is usually significantly less than the current price of the underlying stock. Thus, there is a greater risk that warrants might drop in value at a faster rate than the underlying stock.

Foreign Currencies

The Fund may invest directly and indirectly in foreign currencies. Investments in foreign currencies are subject to numerous risks not least being the fluctuation of foreign currency exchange rates with respect to the U.S. Dollar. Exchange rates fluctuate for a number of reasons.

*<u>Inflation</u>*. Exchange rates change to reflect changes in a currency's buying power. Different countries experience different inflation rates due to different monetary and fiscal policies, different product and labor market conditions, and a host of other factors.

*<u>Trade Deficits</u>*. Countries with trade deficits tend to experience a depreciating currency. Inflation may be the cause of a trade deficit, making a country's goods more expensive and less competitive and so reducing demand for its currency.

*<u>Interest Rates</u>*. High interest rates may raise currency values in the short term by making such currencies more attractive to investors. However, since high interest rates are often the result of high inflation, long-term results may be the opposite.

*<u>Budget Deficits and Low Savings Rates</u>*. Countries that run large budget deficits and save little of their national income tend to suffer a depreciating currency because they are forced to borrow abroad to finance their deficits. Payments of

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interest on this debt can inundate the currency markets with the currency of the debtor nation. Budget deficits also can indirectly contribute to currency depreciation if a government chooses inflationary measures to cope with its deficits and debt.

*<u>Political Factors</u>*. Political instability in a country can cause a currency to depreciate. Demand for a certain currency may fall if a country appears a less desirable place in which to invest and do business.

*<u>Government Control</u>*. Through their own buying and selling of currencies, the world's central banks sometimes manipulate exchange rate movements. In addition, governments occasionally issue statements to influence people's expectations about the direction of exchange rates, or they may instigate policies with an exchange rate target as the goal.

The value of the Fund's investments is calculated in U.S. Dollars each day that the New York Stock Exchange ("NYSE") is open for business. As a result, to the extent that the Fund's assets are invested in instruments denominated in foreign currencies and the currencies appreciate relative to the U.S. Dollar, the Fund's NAV per share as expressed in U.S. Dollars (and, therefore, the value of your investment) should increase. If the U.S. Dollar appreciates relative to the other currencies, the opposite should occur.

The currency-related gains and losses experienced by the Fund will be based on changes in the value of portfolio securities attributable to currency fluctuations only in relation to the original purchase price of such securities as stated in U.S. Dollars. Gains or losses on shares of the Fund will be based on changes attributable to fluctuations in the NAV of such shares, expressed in U.S. Dollars, in relation to the original U.S. Dollar purchase price of the shares. The amount of appreciation or depreciation in the Fund's assets also will be affected by the net investment income generated by the money market instruments in which the Fund invests and by changes in the value of the securities that are unrelated to changes in currency exchange rates.

The Fund may incur currency exchange costs when it sells instruments denominated in one currency and buys instruments denominated in another.

*<u>Currency Transactions</u>*. The Fund conducts currency exchange transactions on a spot basis. Currency transactions made on a spot basis are for cash at the spot rate prevailing in the currency exchange market for buying or selling currency. The Fund also enters into forward currency contracts. See "Futures Contracts, Options, and Other Derivative Strategies" section below. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into on the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A currency forward contract will tend to reduce or eliminate exposure to the currency that is sold, and increase exposure to the currency that is purchased, similar to when a fund sells a security denominated in one currency and purchases a security denominated in another currency. For example, the Fund may enter into a forward contract when it owns a security that is denominated in a non-U.S. currency and desires to "lock in" the U.S. dollar value of the security.

The Fund may invest in a combination of forward currency contracts and U.S. Dollar-denominated market instruments in an attempt to obtain an investment result that is substantially the same as a direct investment in a foreign currency-denominated instrument. This investment technique creates a "synthetic" position in the particular foreign-currency instrument whose performance the Adviser is trying to duplicate. For example, the combination of U.S. Dollar-denominated instruments with "long" forward currency exchange contracts creates a position economically equivalent to a money market instrument denominated in the foreign currency itself. Such combined positions are sometimes necessary when the money market in a particular foreign currency is small or relatively illiquid.

The Fund may invest in forward currency contracts to hedge either specific transactions (transaction hedging) or portfolio positions (position hedging). Transaction hedging is the purchase or sale of forward currency contracts with respect to specific receivables or payables of the Fund in connection with the purchase and sale of portfolio securities. Position hedging is the sale of a forward currency contract on a particular currency with respect to portfolio positions denominated or quoted in that currency.

The Fund may use forward currency contracts for position hedging if consistent with its policy of trying to expose its net assets to foreign currencies. The Fund is not required to enter into forward currency contracts for hedging purposes and it is possible that the Fund may not be able to hedge against a currency devaluation that is so generally anticipated that the Fund is unable to contract to sell the currency at a price above the devaluation level it anticipates. It also is possible, under certain circumstances, that the Fund may have to limit its currency transactions to qualify as a "regulated investment company" ("RIC") under Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended ("Code"). See "Dividends, Other Distributions and Taxes."

The Fund currently does not intend to enter into a forward currency contract with a term of more than one year, or to engage in position hedging with respect to the currency of a particular country to more than the aggregate market value (at the time the hedging transaction is entered into) of its portfolio securities denominated in (or quoted in or currently convertible into or directly related through the use of forward currency contracts in conjunction with money market instruments to) that particular currency.

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Under definitions adopted by the Commodity Futures Trading Commission ("CFTC") and SEC, non-deliverable forwards are considered swaps, and therefore are included in the definition of "commodity interests." Although non-deliverable forwards have historically been traded in the over-the-counter ("OTC") market, as swaps they may in the future be required to be centrally cleared and traded on public facilities. For more information on central clearing and trading of cleared swaps, see "Cleared swaps," "Risks of cleared swaps," "Comprehensive swaps regulation" and "Developing government regulation of derivatives." Currency forwards that qualify as deliverable forwards are not regulated as swaps for most purposes, and are not included in the definition of "commodity interests." However these forwards are subject to some requirements applicable to swaps, including reporting to swap data repositories, documentation requirements, and business conduct rules applicable to swap dealers. CFTC regulation of currency forwards, especially non-deliverable forwards, may restrict the Fund's ability to use these instruments in the manner described above or subject the investment manager to CFTC registration and regulation as a commodity pool operator ("CPO").

At or before the maturity of a forward currency contract, the Fund may either sell a portfolio security and make delivery of the currency, or retain the security and terminate its contractual obligation to deliver the currency by buying an "offsetting" contract obligating it to buy, on the same maturity date, the same amount of the currency. If the Fund engages in an offsetting transaction, it may later enter into a new forward currency contract to sell the currency.

If the Fund engages in an offsetting transaction, it will incur a gain or loss to the extent that there has been movement in forward currency contract prices. If forward prices go down during the period between the date the Fund enters into a forward currency contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. If forward prices go up, the Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell.

Since the Fund invests in money market instruments denominated in foreign currencies, it may hold foreign currencies pending investment or conversion into U.S. Dollars. Although the Fund values its assets daily in U.S. Dollars, it does not convert its holdings of foreign currencies into U.S. Dollars on a daily basis. The Fund will convert its holdings from time to time, however, and incur the costs of currency conversion. Foreign exchange dealers do not charge a fee for conversion, but they do realize a profit based on the difference between the prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, and offer to buy the currency at a lower rate if the Fund tries to resell the currency to the dealer.

*<u>Risks of currency forward contracts</u>.* Should exchange rates move in an unexpected manner, the Fund may not achieve the anticipated benefits of the transaction, or it may realize losses. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised, including because of the counterparty's bankruptcy or insolvency. While the Fund uses only counterparties that meet its credit quality standards, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited. Currency forward contracts may limit potential gain from a positive change in the relationship between the U.S. Dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not engaged in such contracts. Moreover, there may be an imperfect correlation between the Fund's portfolio holdings of securities denominated in a particular currency and the currencies bought or sold in the forward contracts entered into by the Fund. This imperfect correlation may cause the Fund to sustain losses that will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.

*<u>Foreign Currency Options</u>*. The Fund may invest in foreign currency-denominated securities and may buy or sell put and call options on foreign currencies. The Fund may buy or sell put and call options on foreign currencies either on exchanges or in the OTC market. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a foreign currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits which may limit the ability of the Fund to reduce foreign currency risk using such options. OTC options differ from traded options in that they are two-party contracts with price and other terms negotiated between buyer and seller, and generally do not have as much market liquidity as exchange-traded options.

Foreign Currency Exchange-Related Securities

*<u>Foreign Currency Warrants</u>*. Foreign currency warrants such as Currency Exchange Warrants<sup>SM</sup> ("CEWs<sup>SM</sup>") are warrants which entitle the holder to receive from their issuer an amount of cash (generally, for warrants issued in the United States, in U.S. Dollars) which is calculated pursuant to a predetermined formula and based on the exchange rate between a specified foreign currency and the U.S. Dollar as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time. Foreign currency warrants have been issued in connection with U.S. Dollar-denominated debt offerings by major corporate issuers in an attempt to reduce the foreign currency exchange risk which, from the point of view of prospective purchasers of the securities, is inherent in the international fixed-income marketplace. Foreign currency warrants may attempt to reduce the foreign exchange risk assumed by purchasers of a security

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by, for example, providing for a supplemental payment in the event that the U.S. Dollar depreciates against the value of a major foreign currency such as the Japanese yen or the Euro. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (*e.g.*, unless the U.S. Dollar appreciates or depreciates against the particular foreign currency to which the warrant is linked or indexed). Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges. Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. In the case of any exercise of warrants, there may be a time delay between the time a holder of warrants gives instructions to exercise and the time the exchange rate relating to exercise is determined, during which time the exchange rate could change significantly, thereby affecting both the market and cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be suspended permanently, which would result in the loss of any remaining "time value" of the warrants (*i.e.*, the difference between the current market value and the exercise value of the warrants), and, in the case the warrants were "out-of-the-money," in a total loss of the purchase price of the warrants.

Warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the Options Clearing Corporation ("OCC"). Unlike foreign currency options issued by OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants is generally considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving significantly larger amounts of foreign currencies. Foreign currency warrants are subject to significant foreign exchange risk, including risks arising from complex political or economic factors.

*<u>Principal Exchange Rate Linked Securities</u>*. Principal exchange rate linked securities ("PERLs<sup>SM</sup>") are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the U.S. Dollar and a particular foreign currency at or about that time. The return on "standard" principal exchange rate linked securities is enhanced if the foreign currency to which the security is linked appreciates against the U.S. Dollar, and is adversely affected by increases in the foreign exchange value of the U.S. Dollar; "reverse" principal exchange rate linked securities are like the "standard" securities, except that their return is enhanced by increases in the value of the U.S. Dollar and adversely impacted by increases in the value of foreign currency. Interest payments on the securities are generally made in U.S. Dollars at rates that reflect the degree of foreign currency risk assumed or given up by the purchaser of the notes (*i.e.*, at relatively higher interest rates if the purchaser has assumed some of the foreign exchange risk, or relatively lower interest rates if the issuer has assumed some of the foreign exchange risk, based on the expectations of the current market). Principal exchange rate linked securities may in limited cases be subject to acceleration of maturity (generally, not without the consent of the holders of the securities), which may have an adverse impact on the value of the principal payment to be made at maturity.

*<u>Performance Indexed Paper</u>*. Performance indexed paper ("PIPs<sup>SM</sup>") is U.S. Dollar-denominated commercial paper the yield of which is linked to certain foreign exchange rate movements. The yield to the investor on performance indexed paper is established at maturity as a function of spot exchange rates between the U.S. Dollar and a designated currency as of or about that time (generally, the index maturity two days prior to maturity). The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on U.S. Dollar-denominated commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.

Foreign Securities

The Fund may have both direct and indirect exposure to foreign securities through investments in publicly traded securities such as stocks and bonds, stock index futures contracts, options on stock index futures contracts and options on securities and on stock indices to foreign securities. In most cases, the best available market for foreign securities will be on exchanges or in OTC markets located outside the United States.

Investing in foreign securities carries political and economic risks distinct from those associated with investing in the United States. Non-U.S. securities may be subject to currency risks or to foreign government taxes. There may be less information publicly available about a non-U.S. issuer than about a U.S. issuer, and a foreign issuer may or may not be subject uniform accounting, auditing and financial reporting standards and practices comparable to those in the U.S. Other risks of investing in such securities include political or economic instability in the country involved, the difficulty of predicting international trade patterns and the possibility of the imposition of exchange controls. The prices of such securities may be more volatile than those of U.S. securities. There maybe also be the possibility of expropriation of assets or nationalization, imposition of withholding taxes on dividend or interest payments, difficulty obtaining and enforcing judgments against foreign entities

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or diplomatic developments which could affect investment in these countries. Losses and other expenses may be incurred in converting currencies in connection with purchases and sales of foreign securities.

Non-U.S. stock markets may not be as developed or efficient as, and may be more volatile than, those in the U.S. While the volume of shares traded on non-U.S. stock markets generally has been growing, such markets usually have substantially less volume than U.S. markets. Therefore, the Fund's investment in non-U.S. equity securities may be less liquid and subject to more rapid and erratic price movements than comparable securities listed for trading on U.S. exchanges. Non-U.S. equity securities may trade at price/earnings multiples higher than comparable U.S. securities and such levels may not be sustainable. There may be less government supervision and regulation of foreign stock exchanges, brokers, banks and listed companies abroad than in the U.S. Moreover, settlement practices for transactions in foreign markets may differ from those in U.S. markets. Such differences may include delays beyond periods customary in the U.S. and practices, such as delivery of securities prior to receipt of payment, that increase the likelihood of a failed settlement, which can result in losses to the Fund. The value of non-U.S. investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Foreign brokerage commissions, custodial expenses and other fees are also generally higher than for securities traded in the U.S. This may cause the Fund to incur higher portfolio transaction costs than domestic equity funds. Fluctuations in exchanges rates may also affect the earning power and asset value of the foreign entity issuing a security, even on denominated in U.S. dollars. Dividend and interest payments may be repatriated based on the exchange rate at the time of disbursement, and restrictions on capital flows may be imposed.

*<u>Developing and Emerging Markets</u>*. Emerging and developing markets abroad may offer special opportunities for investing, but may have greater risks than more developed foreign markets, such as those in Europe, Canada, Australia, New Zealand and Japan. There may be even less liquidity in their securities markets, and settlements of purchases and sales of securities may be subject to additional delays. They are subject to greater risks of limitations on the repatriation of income and profits because of currency restrictions imposed by local governments. Those countries may also be subject to the risk of greater political and economic instability, which can greatly affect the volatility of prices of securities in those countries.

Investing in emerging market securities imposes risks different from, or greater than, risks of investing in foreign developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales and future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. Dollar. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Additional risks of emerging markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. Shareholder claims and legal remedies that are common in the United States may be difficult or impossible to pursue in many emerging market countries. In addition, due to jurisdictional limitations, matters of comity and various other factors, U.S. authorities may be limited in their ability to bring enforcement actions against non-U.S. companies and non-U.S. persons in certain emerging market countries. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions.

*<u>Asia-Pacific Countries</u>*. In addition to the risks associated with foreign and emerging markets, the developing market Asia-Pacific countries in which the Fund may invest are subject to certain additional or specific risks. The Fund may make substantial investments in Asia-Pacific countries. In the Asia-Pacific markets, there is a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries. Many of these markets also may be affected by developments with respect to more established markets in the region, such as Japan and Hong Kong. Brokers in developing market Asia-Pacific countries typically are fewer in number and less well-capitalized than brokers in the United States. These factors, combined with the U.S. regulatory requirements for open-end investment companies and the restrictions on foreign investment, result in potentially fewer investment opportunities for the Fund and may have an adverse impact on the Fund's investment performance.

Many of the developing market Asia-Pacific countries may be subject to a greater degree of economic, political and social instability than is the case in the United States and Western European countries. Such instability may result from, among other things: (i) authoritarian governments or military involvement in political and economic decision-making, including changes in government through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; and/or (v) ethnic, religious and racial disaffection. In addition, the governments of many of such countries, such as Indonesia, have a heavy role in regulating and supervising the economy.

An additional risk common to most such countries is that the economy is heavily export-oriented and, accordingly, is dependent upon international trade. The existence of overburdened infrastructure and obsolete financial systems also present risks in certain countries, as do environmental problems. Certain economies also depend to a significant degree upon exports

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of primary commodities and, therefore, are vulnerable to changes in commodity prices that, in turn, may be affected by a variety of factors. The legal systems in certain developing market Asia-Pacific countries also may have an adverse impact on the Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholder's investment, the notion of limited liability is less clear in certain emerging market Asia-Pacific countries. Similarly, the rights of investors in developing market Asia-Pacific companies may be more limited than those of shareholders of U.S. corporations. It may be difficult or impossible to obtain and/or enforce a judgment in a developing market Asia-Pacific country.

Governments of many developing market Asia-Pacific countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In certain cases, the government owns or controls many companies, including the largest in the country. Accordingly, government actions in the future could have a significant effect on economic conditions in developing market Asia-Pacific countries, which could affect private sector companies and the Fund itself, as well as the value of securities in the Fund's portfolio. In addition, economic statistics of developing market Asia-Pacific countries may be less reliable than economic statistics of more developed nations.

It is possible that developing market Asia-Pacific issuers may not be subject to the same accounting, auditing and financial reporting standards as U.S. companies. Inflation accounting rules in some developing market Asia-Pacific countries require companies that keep accounting records in the local currency, for both tax and accounting purposes, to restate certain assets and liabilities on the company's balance sheet in order to express items in terms of currency of constant purchasing power. Inflation accounting may indirectly generate losses or profits for certain developing market Asia-Pacific companies. In addition, satisfactory custodial services for investment securities may not be available in some developing Asia-Pacific countries, which may result in the Fund incurring additional costs and delays in providing transportation and custody services for such securities outside such countries.

Certain developing Asia-Pacific countries are especially large debtors to commercial banks and foreign governments. Fund management may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular developing Asia-Pacific country. The Fund may invest in countries in which foreign investors, including management of the Fund, have had no or limited prior experience.

*<u>Brazil</u>*. Investing in Brazil involves certain considerations not typically associated with investing in the United States. Additional considerations include: (i) investment and repatriation controls, which could affect the Fund's ability to operate, and to qualify for the favorable tax treatment afforded to RICs for U.S. federal income tax purposes; (ii) fluctuations in the rate of exchange between the Brazilian Real and the U.S. Dollar; (iii) the generally greater price volatility and lesser liquidity that characterize Brazilian securities markets, as compared with U.S. markets; (iv) the effect that balance of trade could have on Brazilian economic stability and the Brazilian government's economic policy; (v) potentially high rates of inflation, a rising unemployment rate, and a high level of debt, each of which may hinder economic growth; (vi) governmental involvement in and influence on the private sector; (vii) Brazilian accounting, auditing and financial standards and requirements, which differ from those in the United States; (viii) political and other considerations, including changes in applicable Brazilian tax laws; and (ix) restrictions on investments by foreigners. In addition, commodities, such as oil, gas and minerals, represent a significant percentage of Brazil's exports and, therefore, its economy is particularly sensitive to fluctuations in commodity prices. Additionally, an investment in Brazil is subject to certain risks stemming from political and economic corruption.

*<u>China</u>*. Investing in China involves special considerations not typically associated with investing in countries with more democratic governments or more established economies or currency markets. These risks include: (i) the risk of nationalization or expropriation of assets or confiscatory taxation; (ii) greater governmental involvement in and control over the economy, interest rates and currency exchange rates; (iii) controls on foreign investment and limitations on repatriation of invested capital; (iv) greater social, economic and political uncertainty ; (v) dependency on exports and the corresponding importance of international trade; (vi) currency exchange rate fluctuations; (vii) differences in, or lack of, auditing and financial reporting standards that may result in unavailability of material information about issuers and restrictions on issuers' ability to access the U.S. capital markets; and (viii) the risk that certain companies, including those in which the Fund may invest, may have dealings with countries subject to sanctions or embargoes imposed by the U.S. government or identified as state sponsors of terrorism.

For over three decades, the Chinese government has been reforming economic and market practice and has been providing a larger sphere for private ownership of property. While currently contributing to growth and prosperity, the government could technically decide not to continue to support these economic reform programs and return to the completely centrally planned economy that existed prior to 1978. There is also a greater risk in China than in many other countries of currency fluctuations, currency non-convertibility, interest rate fluctuations and higher rates of inflation as a result of internal social unrest or conflicts with other countries. China is an emerging market and demonstrates significantly higher volatility from time to time in comparison to developed markets. The government of China maintains strict currency controls in support of economic, trade and political objectives and regularly intervenes in the currency market. The government's actions in this respect may not be transparent or predictable. As a result, the value of the Yuan (or renminbi), and the value of securities designed to provide exposure to the Yuan, can change quickly and arbitrarily. Furthermore, it is difficult for foreign investors to directly access money market securities in China because of investment and trading restrictions. Chinese law also prohibits direct foreign investments in certain issuers in certain industries. Chinese companies listed on U.S. exchanges often use variable interest entities ("VIEs") in their structure. Instead of directly owning the equity securities of a Chinese operating

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company, in a VIE structure, a non-U.S. shell company (often organized in the Cayman Islands) that is listed and traded on a U.S. exchange enters into service contracts and other contracts with the Chinese operating company which provide the foreign shell company with exposure to the Chinese company. Although the U.S. listed shell company has no equity ownership of the Chinese operating company, the contractual arrangements provide the U.S. listed shell company economic exposure to the Chinese operating company and permit the U.S. listed shell company to consolidate the Chinese operating company into its financial statements. VIE structures are subject to legal and regulatory uncertainties and risks. Intervention by the Chinese government with respect to VIE structures or the non-enforcement of VIE-related contractual rights could significantly affect a Chinese operating company's business, the enforceability of the U.S. listed shell company's contractual arrangements with the Chinese operating company and the value of the U.S. listed stock. Intervention by the Chinese government could include nationalization of the Chinese operating company, confiscation of its assets, restrictions on operations and/or constraints on the use of VIE structures. In addition, because the Chinese operating company is not owned, directly or indirectly, by the U.S. listed shell company, the U.S. listed shell company cannot control the Chinese operating company and must rely on the Chinese operating company to perform its contractual obligations in order for the U.S. listed company to receive economic benefits. In addition, PRC companies listed on U.S. exchanges, including ADRs and companies that rely on VIE structures, may be delisted if they do not meet U.S. accounting standards and auditor oversight requirements. Delisting could significantly decrease the liquidity and value of the securities of these companies, decrease the ability of a Fund to invest in such securities and increase the cost of the Fund if it is required to seek alternative markets in which to invest in such securities.

While the economy of China has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Reduction in spending on Chinese products and services, the institution of additional tariffs or other trade barriers, including as a result of heightened trade tensions between China and the United States, or a downturn in any of the economies of China's key trading partners may have an adverse impact on the Chinese economy. Actions like these may have unanticipated and disruptive effects on the Chinese economy. Any such response that targets Chinese financial markets or securities exchanges could interfere with orderly trading, delay settlement or cause market disruptions. These and other factors may decrease the value and liquidity of the Fund's investments. The Chinese economy may experience a significant slowdown as a result of, among other things, a deterioration of global demand for Chinese exports, as well as contraction in spending on domestic goods by Chinese consumers. In addition, China may experience substantial rates of inflation or economic recessions, which would have a negative effect on its economy and securities market.

Hong Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative Region of the PRC under the principle of "one country, two systems." Although China is obligated to maintain the current capitalist economic and social system of Hong Kong through June 30, 2047, the continuation of economic and social freedoms enjoyed in Hong Kong is dependent on the government of China. Since 1997, there have been tensions between the Chinese government and many people in Hong Kong regarding China's perceived tightening of control over Hong Kong's semi-autonomous liberal political, economic, legal, and social framework. Recent protests may prompt the Chinese and Hong Kong governments to rapidly address Hong Kong's future relationship with mainland China, which remains unresolved. Due to the interconnected nature of the Hong Kong and Chinese economies, this instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets.

There has been increased attention to Chinese companies from the U.S. government and U.S. regulators, including the Department of the Treasury ("DOT") and its Office of Foreign Assets Control ("OFAC"). In a series of actions between November 2020 and June 2021, the DOT prohibited investment by U.S. investors in the publicly traded securities of certain companies tied to the Chinese military or China's surveillance technology sector. The prohibited companies were described in the executive orders as "Chinese Military Industrial Complex Companies," and the restrictions on investing in such companies was interpreted by OFAC to extend to instruments that are derivative of, or designed to provide investment exposure to, these companies, including diversified investment companies. More recently, the DOT issued regulations which will prohibit or require notification of investments by certain U.S. persons in certain sub-sets of national security technologies and products including semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems in or related to "countries of concern," defined as China including Hong Kong and Macau. These regulations are in effect as of January 2, 2025. Although it cannot be fully known at this time, these rules may significantly reduce the liquidity of such investments, force the Fund to sell certain positions at inopportune times or unfavorable prices and restrict future investments by the Fund. Audits performed by PCAOB-registered accounting firms in mainland China and Hong Kong may be less reliable than those performed by firms subject to PCAOB inspection. Accordingly, information about the Chinese securities in which the Fund invests may be less reliable or complete. Under amendments to the Sarbanes-Oxley Act enacted in December 2020, which requires that the PCAOB be permitted to inspect the accounting firm of a U.S.-listed Chinese issuer, Chinese companies with securities listed on U.S. exchanges may be delisted if the PCAOB is unable to inspect the accounting firm.

Recently, there have been intensified concerns about trade tariffs and a potential trade war between China and the United States. Future tariffs imposed by China and the United States on the other country's products, or other escalating actions, may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China's export industry with a potentially negative impact to the Fund.

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For decades, a state of hostility has existed between Taiwan and the PRC. Beijing has long deemed Taiwan a part of the "one China" and has made a nationalist cause of recovering it. This situation poses a threat to Taiwan's economy and could negatively affect its stock market. In addition, China could be affected by military events on the Korean peninsula or internal instability within North Korea. These situations may cause uncertainty in the Chinese market and may adversely affect performance of the Chinese economy.

Foreign investors had historically been unable to participate in the PRC securities market. However, in late 2002, Investment Regulations promulgated by the China Securities Regulatory Commission ("CSRC") came into effect, which were replaced by the updated Investment Regulations (i.e., "Measures for the Administration of the Securities Investments of Qualified Foreign Institutional Investors in the PRC"), which came into effect on September 1, 2006, that provided a legal framework for certain Qualified Foreign Institutional Investors ("QFIIs") to invest in PRC securities and certain other securities historically not eligible for investment by non-Chinese investors, through quotas granted by China's State Administration of Foreign Exchange ("SAFE") to those QFIIs which have been approved by the CSRC. The RMB QFII ("RQFII") program was instituted in December 2011 and is substantially similar to the QFII program, but provides for greater flexibility in repatriating assets. In 2020, the PRC government eliminated QFII and RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer be subject to quotas when investing in PRC securities (but will remain subject to foreign shareholder limits), and merged the two programs into the Qualified Foreign Investor regime ("QFI").

China A-shares are equity securities of companies based in mainland China that trade on Chinese stock exchanges such as the Shanghai Stock Exchange ("SSE") and the Shenzhen Stock Exchange ("SZSE") ("A-shares"). The ability of the Fund to invest in China A-Shares is dependent, in part, on the availability of A-Shares either through the trading and clearing facilities of a participating exchange located outside of mainland China ("Stock Connect Programs") which currently include the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Shanghai-London Stock Connect, and China-Japan Stock Connect, and/or through a QFI license. Thus, the Fund's investment in A-Shares may be limited by the daily A-Shares quota limitation and by the amount of A-Shares available through the Stock Connect Programs.

The Stock Connect Programs are subject to daily and aggregate quota limitations, and an investor cannot purchase and sell the same security on the same trading day, which may restrict the Fund's ability to invest in A-Shares through the Stock Connect Programs and to enter into or exit trades on a timely basis. The Shanghai and Shenzhen markets may be open at a time when the participating exchanges located outside of mainland China are not active, with the result that prices of A-Shares may fluctuate at times when the Fund is unable to add to or exit a position. The mainland Chinese and Hong Kong regulators launched an enhanced trading calendar for Stock Connect to allow Stock Connect trading on all the days which are trading days in both mainland Chinese and Hong Kong markets, even when the corresponding settlement days would be public holidays. Only certain A-Shares are eligible to be accessed through the Stock Connect Programs. Such securities may lose their eligibility at any time, in which case they may no longer be able to be purchased or sold through the Stock Connect Programs. Because the Stock Connect Programs are still evolving, the actual effect on the market for trading A-Shares with the introduction of large numbers of foreign investors is still relatively unknown. In addition, there is no assurance that the necessary systems required to operate the Stock Connect Programs will function properly or will continue to be adapted to changes and developments in both markets. In the event that the relevant systems do not function properly, trading through the Stock Connect Programs could be disrupted. The Stock Connect Programs are subject to regulations promulgated by regulatory authorities for both exchanges and further regulations or restrictions, such as limitations on redemptions or suspension of trading, may adversely impact the Stock Connect Programs, if the authorities believe it necessary to assure orderly markets or for other reasons. There is no guarantee that the participating exchanges will continue to support the Stock Connect Programs in the future. Each of the foregoing could restrict the Fund from selling its investments, adversely affect the value of its holdings and negatively affect the Fund's ability to meet shareholder redemptions.

*<u>Europe</u>.* Investing in European countries may impose economic and political risks associated with Europe in general and the specific European countries in which it invests. The economies and markets of European countries are often closely connected and interdependent, and events in one European country can have an adverse impact on other European countries. The Fund makes investments in securities of issuers that are domiciled in, or have significant operations in, member countries of the Economic and Monetary Union of the European Union (the "EU"), which requires member countries to comply with restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls, each of which may significantly affect every country in Europe. Decreasing imports or exports, changes in governmental or EU regulations on trade, changes in the exchange rate of the euro (the common currency of certain EU countries), the default or threat of default by an EU member country on its sovereign debt, and/or an economic recession in an EU member country may have a significant adverse effect on the economies of EU member countries and their trading partners, including some or all of the emerging markets materials sector countries. Although certain European countries do not use the euro, many of these countries are obliged to meet the criteria for joining the euro zone. Consequently, these countries must comply with many of the restrictions noted above. The European financial markets have experienced volatility and adverse trends in recent years due to concerns about economic downturns or rising government debt levels in several European countries, including , but not limited to, Austria, Belgium, Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. In order to prevent further economic deterioration, certain countries, without prior warning, can institute "capital controls." Countries may use these controls to restrict volatile movements of capital entering and exiting their country. Such controls may negatively affect the Fund's

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investments. A default or debt restructuring by any European country would adversely impact holders of that country's debt and sellers of credit default swaps linked to that country's creditworthiness, which may be located in countries other than those listed above. In addition, the credit ratings of certain European countries were recently downgraded. These downgrades may result in further deterioration of investor confidence. These events have adversely affected the value and exchange rate of the euro and may continue to significantly affect the economies of every country in Europe, including countries that do not use the euro and non-EU member countries. Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not produce the desired results, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and other entities of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition, one or more countries may abandon the euro and/or withdraw from the EU. The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching and could adversely impact the value of investments in the region.

In a referendum held on June 23, 2016, the United Kingdom (the "UK") resolved to leave the EU (referred to as "Brexit"). On January 31, 2020, the UK officially withdrew from the EU pursuant to a withdrawal agreement, providing for a transition period in which the UK negotiated and finalized a trade deal with the EU, the EU-UK Trade and Cooperation Agreement (the "Trade Agreement"). As a result, since January 1, 2021, the United Kingdom is no longer part of the EU customs union and single market, nor is it subject to EU policies and international agreements. The Trade Agreement, among other things, provides for zero tariffs and zero quotas on all goods that comply with appropriate rules of origin and establishes the treatment and level of access the United Kingdom and EU have agreed to grant each other's service suppliers and investors. The Trade Agreement also covers digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, social security coordination, law enforcement and judicial cooperation in criminal matters, thematic cooperation and participation in EU programs. Even with the Trade Agreement in place, the UK's withdrawal from the EU may create new barriers to trade in goods and services and to cross-border mobility and exchanges.

The UK has one of the largest economies in Europe, and member countries of the EU are substantial trading partners of the UK. The City of London's economy is dominated by financial services and uncertainty remains regarding the treatment of cross-border trade in financial services. While the Trade Agreement includes certain provisions to support cross-border trade in financial services, it is not comprehensively addressed in the Trade Agreement and the parties continue to discuss 'equivalence' rights to allow market access for cross-border financial services. In March 2021, the EU and the UK reached a memorandum of understanding, establishing a framework for voluntary regulatory cooperation on financial services. Without access to the EU single market, certain financial services in the UK may move outside of the UK as a result of its withdrawal from the EU. In addition, financial services firms in the UK may need to move staff and comply with two separate sets of rules or lose business to financial services firms in the EU. Furthermore, the withdrawal from the EU creates the potential for decreased trade, the possibility of capital outflows, devaluation of the pound sterling, the cost of higher corporate bond spreads due to continued uncertainty, and the risk that all the above could damage business and consumer spending as well as foreign direct investment. As a result of the withdrawal from the EU, the British economy and its currency may be negatively impacted by changes to its economic and political relations with the EU. Additional member countries seeking to withdraw from the EU would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties.

Brexit may also have a destabilizing impact on the EU to the extent that other member states similarly seek to withdraw from the EU. Any further exits from the EU would likely cause additional market disruptions globally and introduce new legal and regulatory uncertainties.

Russia's increasing international assertiveness could negatively impact EU economic activity. The effect on the economies of EU countries of the Russia/Ukraine war and Russia's response to sanctions imposed by the US and other countries are impossible to predict, but have been and could continue to be significant.

*<u>India</u>*. Investments in India involve special considerations not typically associated with investing in countries with more established economies or currency markets. Political, religious, and border disputes persist in India. India has recently experienced and may continue to experience civil unrest and hostilities with certain of its neighboring countries, including Pakistan, and the Indian government has confronted separatist movements in several Indian states, including Kashmir. Government control over the economy, currency fluctuations or blockage, and the risk of nationalization or expropriation of assets offer higher potential losses. Governmental actions could have a negative effect on the economic conditions in India, which could adversely affect the value and liquidity of investments made by the Fund. The securities markets in India are comparatively underdeveloped with some exceptions and consist of a small number of listed companies with small market capitalization, greater price volatility and substantially less liquidity than companies in more developed markets. The limited liquidity of the Indian securities market may also affect the Fund's ability to acquire or dispose of securities at the price or time that it desires or the Fund's ability to track the Index.

The Indian government exercises significant influence over many aspects of the economy, and the number of public sector enterprises in India is substantial. While the Indian government has implemented economic structural reform with the objectives of liberalizing India's exchange and trade policies, reducing the fiscal deficit, controlling inflation, promoting a

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sound monetary policy, reforming the financial sector, and placing greater reliance on market mechanisms to direct economic activity, there can be no assurance that these policies will continue or that the economic recovery will be sustained.

Global factors and foreign actions may inhibit the flow of foreign capital on which India is dependent to sustain its growth. In addition, the Reserve Bank of India has imposed limits on foreign ownership of Indian companies, which may decrease the liquidity of the Fund's portfolio and result in extreme volatility in the prices of Indian securities. In November 2016, the Indian government eliminated certain large denomination cash notes as legal tender, causing uncertainty in certain financial markets. These factors, coupled with the lack of extensive accounting, auditing and financial reporting standards and practices, as applicable in the United States, may increase the risk of loss for the Fund.

Securities laws in India are relatively new and unsettled and, as a result, there is a risk of significant and unpredictable change in laws governing foreign investment, securities regulation, title to securities and shareholder rights. Foreign investors in particular may be adversely affected by new or amended laws and regulations. Certain Indian regulatory approvals, including approvals from the Securities and Exchange Board of India, the central government and the tax authorities (to the extent that tax benefits need to be utilized), may be required before the Fund can make investments in Indian companies. Foreign investors in India still face burdensome taxes on investments in income producing securities.

While the Indian economy has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Technology and software sectors represent a significant portion of the total capitalization of the Indian securities markets. The value of these companies will generally fluctuate in response to technological and regulatory developments, and, as a result, the Fund's holdings are expected to experience correlated fluctuations. Natural disasters, such as tsunamis, flooding or droughts, could occur in India or surrounding areas and could negatively affect the Indian economy. Agriculture occupies a prominent position in the Indian economy, therefore, it may be negatively affected by adverse weather conditions and the effects of global climate change. These and other factors may decrease the value and liquidity of the Fund's investments.

*<u>Italy</u>.* Investment in Italian issuers involves risks that are specific to Italy, including, regulatory, political, currency, and economic risks. Italy's economy is dependent upon external trade with other economies—specifically Germany, France and other Western European developed countries. As a result, Italy is dependent on the economies of these other countries and any change in the price or demand for Italy's exports may have an adverse impact on its economy. Interest rates on Italy's debt may rise to levels that may make it difficult for it to service high debt levels without significant financial help from the EU and could potentially lead to default. Recently, the Italian economy has experienced volatility due to concerns about economic downturn and rising government debt levels. Italy has been warned by the Economic and Monetary Union of the EU to reduce its public spending and debt and actions by Italy to cut spending or increase taxes in response could have significant adverse effects on the Italian economy. These events have adversely impacted the Italian economy, causing credit agencies to lower Italy's sovereign debt rating in the past, and could decrease outside investment in Italian companies. High amounts of debt and public spending may stifle Italian economic growth or cause prolonged periods of recession.

*<u>Japan</u>*. Japanese investments may be significantly affected by events influencing Japan's economy and changes in the exchange rate between the Japanese yen and the U.S. Dollar. Japan's economy fell into a long recession in the 1990s. After a few years of mild recovery in the mid-2000s, Japan's economy fell into another recession as a result of the recent global economic crisis. In recent years, Japan's government has approved fiscal stimulus packages in order to stimulate its slowing economy, which has been negatively affected by decreased demand from China and by recent political conflicts with South Korea. Japan is heavily dependent on exports and foreign oil and may be adversely affected by higher commodity prices, trade tariffs, protectionist measures, competition from emerging economies, and the economic conditions of its trading partners, such as China. Furthermore, Japan is located in a seismically active area, and in 2011 experienced an earthquake and a tsunami that significantly affected important elements of its infrastructure and resulted in a nuclear crisis. The risks of natural disaster of varying degrees, such as earthquakes and tsunamis, and the resulting damage, continue to exist. Japan's economic prospects may be affected by the political and military situations of its near neighbors, notably North and South Korea, China, and Russia. In addition, the Japanese economic growth rate could be impacted by Bank of Japan monetary policies, rising interest rates, tax increases, budget deficits, consumer confidence and volatility in the Japanese yen. In the longer term, Japan will have to address the effects of an aging population, such as a shrinking workforce and higher welfare costs. These demographic shifts and fundamental structural changes to the labor markets may negatively impact Japan's economic competitiveness.

*<u>South Korea</u>*. South Korean investments may be significantly affected by events influencing its economy, which is heavily dependent on exports and the demand for certain finished goods. South Korea's main industries include electronics, automobile production, chemicals, shipbuilding, steel, textiles, clothing, footwear, and food processing. Conditions that weaken demand for such products worldwide or in other Asian countries could have a negative impact on the South Korean economy as a whole. The South Korean economy's reliance on international trade makes it highly sensitive to fluctuations in international commodity prices, currency exchanges rates and government regulation, and vulnerable to downturns of the world economy, particularly with respects to its four largest export markets (the EU, Japan, United States, and China). South Korea has experienced modest economic growth in recent years, but such continued growth may slow due, in part, to the economic slowdown in China and the increased competitive advantage of Japanese exports with the weakened yen. The South Korean economy's long-term challenges include an aging population, inflexible labor market, and overdependence on exports to drive economic growth. Relations between South Korea and North Korea remain tense, as exemplified in periodic acts of

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hostility, and the possibility of serious military engagement still exists. Armed conflict between North Korea and South Korea could have a severe adverse impact on the South Korean economy and its securities markets.

*<u>Latin America</u>*. The economies of certain Latin American countries have experienced high interest rates, economic volatility, inflation, currency devaluations, government defaults, high unemployment rates and political instability which can adversely affect issuers in these countries. In addition, commodities (such as oil, gas and minerals) represent a significant percentage of the region's exports and many economies in this region are particularly sensitive to fluctuations in commodity prices. Adverse economic events in one country may have a significant adverse effect on other countries of this region. The governments of certain countries in Latin America may exercise substantial influence over many aspects of the private sector and may own or control many companies. Future government actions could have a significant effect on the economic conditions in such countries, which could have a negative impact on the securities in which the Fund invests. Diplomatic developments may also adversely affect investments in certain countries in Latin America. Some countries in Latin America may be affected by public corruption and crime, including organized crime. Certain countries in Latin America may be heavily dependent upon international trade and, consequently, have been and may continue to be negatively affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These countries also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. In addition, certain issuers located in countries in Latin America in which the Fund invests may be the subject of sanctions (for example, the U.S. has imposed sanctions on certain Venezuelan individuals, corporate entities and the Venezuelan government) or have dealings with countries subject to sanctions and/or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. An issuer may sustain damage to its reputation if it is identified as an issuer that has dealings with such countries. The Fund may be adversely affected if it invests in such issuers. Certain Latin American countries may also have managed currencies, which are maintained at artificial levels to the U.S. Dollar rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency which, in turn, can have a disruptive and negative effect on foreign investors. Certain Latin American countries also restrict the free conversion of their currency into foreign currencies, including the U.S. Dollar. There is no significant foreign exchange market for many currencies and it would, as a result, be difficult for the Fund to engage in foreign currency transactions designed to protect the value of the Fund's interests in securities denominated in such currencies. Finally, a number of Latin American countries are among the largest debtors of developing countries. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies.

*<u>Mexico</u>*. Investment in Mexican issuers involves risks that are specific to Mexico, including regulatory, political, and economic risks. In the past, Mexico has experienced high interest rates, economic volatility, significant devaluation of its currency (the peso), and high unemployment rates. The Mexican economy is dependent upon external trade with other economies, specifically with the United States and certain Latin American countries. Additionally, a high level of foreign investment in Mexican assets may increase Mexico's exposure to risks associated with changes in international investor sentiment. In 2018, the United States, Mexico and Canada signed and ratified the United States-Mexico-Canada Agreement ("USMCA"), which replaces the current North American Free Trade Agreement among the three countries. The USMCA has facilitated economic and financial integration among the United States, Canada and Mexico; however, any disruption and uncertainty regarding USMCA may have a significant and adverse impact on Mexico's outlook and the value of the Fund's investments in securities economically tied to Mexico.

The Mexican economy is heavily dependent on trade with, and foreign investment from, the U.S. and Canada, which are Mexico's principal trading partners. Any changes in the supply, demand, price or other economic component of Mexico's imports or exports, as well as any reductions in foreign investment from, or changes in the economies of, the U.S. or Canada, may have an adverse impact on the Mexican economy. Because commodities such as oil and gas, minerals and metals represent a large portion of the region's exports, the economies of these countries are particularly sensitive to fluctuations in commodity prices. Mexico's economy has also become increasingly manufacturing-oriented. Because Mexico's top export is automotive vehicles, its economy is strongly tied to the U.S. automotive market, and changes to certain segments in the U.S. market could have an impact on the Mexican economy. The automotive industry and other industrial products can be highly cyclical, and companies in these industries may suffer periodic operating losses. These industries can also be significantly affected by labor relations and fluctuating component prices. The agricultural and mining sectors of Mexico's economy also account for a large portion of its exports, and Mexico is susceptible to fluctuations in the price and demand for agricultural products and natural resources. In addition, Mexico has privatized or has begun the process of privatization of certain entities and industries, and some investors have suffered losses due to the inability of the newly privatized entities to adjust to a competitive environment and changing regulatory standards.

Mexico has been destabilized by local insurrections, social upheavals and drug-related violence. Additionally, violence near border areas, border-related political disputes, and other social upheaval may lead to strained international relations. Mexico has also experienced contentious and very closely decided elections. Changes in political parties and other political events may affect the economy and contribute to additional instability. Recurrence of these or similar conditions may adversely impact the Mexican economy.

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*<u>Russia</u>*. Investing in Russia involves risks and special considerations not typically associated with investing in United States. Since the breakup of the Soviet Union at the end of 1991, Russia has experienced dramatic political, economic, and social change. The political system in Russia is emerging from a long history of extensive state involvement in economic affairs. The country is undergoing a rapid transition from a centrally-controlled command system to a market-oriented, democratic model. As a result, companies in Russia are characterized by a lack of: (i) management with experience of operating in a market economy; (ii) modern technology; and, (iii) a sufficient capital base with which to develop and expand their operations. It is unclear what will be the future effect on Russian companies, if any, of Russia's continued attempts to move toward a more market-oriented economy. Russia's economy has been characterized by high rates of inflation, high rates of unemployment, declining gross domestic product, deficit government spending, and a devalued currency. The economic reform program has involved major disruptions and dislocations in various sectors of the economy, and those problems have been exacerbated by growing liquidity problems. Russia's economy is also heavily reliant on the energy and defense-related sectors, and is therefore susceptible to the risks associated with these industries. The laws and regulations in Russia affecting Western business investment continue to evolve in an unpredictable manner. Russian laws and regulations, particularly those involving taxation, foreign investment and trade, title to property or securities, and transfer of title, which may be applicable to the Fund's activities are relatively new and can change quickly and unpredictably in a manner far more volatile than in the United States or other developed market economies. Although basic commercial laws are in place, they are often unclear or contradictory and subject to varying interpretation, and may at any time be amended, modified, repealed or replaced in a manner adverse to the interest of the Fund.

Russia's invasion of the Ukraine, and corresponding events in late February 2022, have had, and could continue to have, severe adverse effects on regional and global economic markets for securities and commodities. Following Russia's actions, various governments, including the United States, have issued and continue to issue broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on transactions with certain Russian companies, financial institutions, officials and individuals; new investment by US persons in Russian enterprises; restrictions on the ability of US persons to sell securities held through the Russian central securities depository or through certain other financial institutions; the removal by certain countries and the European Union of selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications ("SWIFT"), the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The recent events, including sanctions and the potential for future sanctions, including any impacting Russia's energy sector, and other actions, and Russia's retaliatory responses to those sanctions and actions, may continue to adversely impact the Russian economy and economies of surrounding countries and may result in the continuing or further decline of the value and liquidity of Russian securities, particularly those held by US persons including the Fund and securities of surrounding countries, a continued weakening of currencies in the region and continued exchange closures, and may have other adverse consequences on the economies of countries in the region that could impact the value of investments in the region and impair the ability of the Fund to buy, sell, receive or deliver securities of companies in the region or the Fund's ability to collect interest payments on fixed income securities in the region. For example, exports in Eastern Europe have been disrupted for certain key commodities, pushing commodity prices to record highs, and energy prices in Europe have increased significantly. Moreover, those events have, and could continue to have, an adverse effect on global markets performance and liquidity, thereby negatively affecting the value of the Fund's investments beyond any direct exposure to issuers in the region. The duration of ongoing hostilities and the vast array of sanctions and related events cannot be predicted. Those events present material uncertainty and risk with respect to markets globally and the performance of the Fund and its investments or operations could be negatively impacted.

Hybrid Instruments

The Fund may invest in hybrid instruments. A hybrid instrument is a type of potentially high-risk derivative that combines a traditional stock, bond, or commodity with an option or forward contract. Generally, the principal amount, amount payable upon maturity or redemption, or interest rate of a hybrid is tied (positively or negatively) to the price of some commodity, currency or securities index or another interest rate or some other economic factor (each a "benchmark"). The interest rate or (unlike most fixed income securities) the principal amount payable at maturity of a hybrid security may be increased or decreased, depending on changes in the value of the benchmark. A hybrid could be, for example, a bond issued by an oil company that pays a small base level of interest, in addition to interest that accrues when oil prices exceed a certain predetermined level. Such a hybrid instrument would be a combination of a bond and a call option on oil.

Hybrids can be used as an efficient means of pursuing a variety of investment goals, including currency hedging, and increased total return. Hybrids may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. Dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating

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rate of interest. The purchase of hybrids also exposes the Fund to the credit risk of the issuer of the hybrids. These risks may cause significant fluctuations in the NAV of the Fund.

Certain issuers of structured products such as hybrid instruments may be deemed to be investment companies as defined in the 1940 Act. As a result, the Fund's investment in these products may be subject to limits applicable to investments in investment companies and may be subject to restrictions contained in the 1940 Act.

Illiquid Investments and Restricted Securities

The Fund may purchase and hold illiquid investments. The term "illiquid investments" for this purpose means any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund will not acquire illiquid securities if, as a result, such securities would comprise more than 15% of the value of the Fund's net assets. Rafferty, subject to oversight by the Board of Trustees, has the ultimate authority to determine, to the extent permissible under the federal securities laws, which securities are liquid or illiquid for purposes of this 15% limitation under the Fund's liquidity risk management program, adopted pursuant to Rule 22e-4 under the 1940 Act. Illiquid securities will be priced at fair value as determined in good faith under procedures adopted by the Board of Trustees. If, through the appreciation of illiquid securities or the depreciation of liquid securities, the Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid securities, including restricted securities which are not readily marketable, Rafferty will report such occurrence to the Board of Trustees and take such steps as are deemed advisable to protect liquidity in accordance with the Fund's liquidity risk management program.

The Fund may not be able to sell illiquid investments when Rafferty considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were liquid. In addition, the sale of illiquid investments may require more time and result in higher dealer discounts and other selling expenses than does the sale of investments that are not illiquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and investment in illiquid investments may have an adverse impact on NAV.

Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers. Institutional markets for restricted securities that have developed as a result of Rule 144A provide both readily ascertainable values for certain restricted securities and the ability to liquidate an investment to satisfy share redemption orders. This policy does not include restricted securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"), which the Trust's Board of Trustees ("Board" or "Trustees"), or Rafferty, under Board-approved guidelines, has determined are liquid. The Fund currently does not anticipate investing in such restricted securities. However, to the extent that the Fund does invest in such restricted securities, an insufficient number of qualified institutional buyers interested in purchasing Rule 144A-eligible securities held by the Fund could adversely affect the marketability of such portfolio securities, and the Fund may be unable to dispose of such securities promptly or at reasonable prices.

Indexed Securities

The Fund may purchase indexed securities, which are securities, the value of which varies positively or negatively in relation to the value of other securities, securities indices or other financial indicators, consistent with its investment objective. Indexed securities may be debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Recent issuers of indexed securities have included banks, corporations and certain U.S. government agencies.

The performance of indexed securities depends to a great extent on the performance of the security or other instrument to which they are indexed and also may be influenced by interest rate changes in the United States and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Indexed securities may be more volatile than the underlying instruments. Certain indexed securities that are not traded on an established market may be deemed illiquid. See "Illiquid Investments and Restricted Securities" above.

Interest Rate Risk

Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, have historically utilized the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. LIBOR was discontinued as a benchmark rate but synthetic values of U.S. dollar LIBOR tenors were published using the unrepresentative methodology of the U.S. LIBOR Act ("synthetic-U.S. dollar LIBOR") until September 30, 2024.

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Synthetic U.S. dollar LIBOR will be calculated using the same methodology used in the LIBOR Act. Synthetic U.S. dollar LIBOR cannot be used for cleared derivatives, but could be used in untransitioned legacy contracts unless they contain fallback language addressing LIBOR that has become "unrepresentative." There is a risk that any of these synthetic U.S. dollar LIBOR maturities may cease to be published before these dates.

Also in 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is a broad measure of the cost of overnight borrowings secured by Treasury Department securities, as an appropriate replacement for U.S. dollar LIBOR.

The Federal Reserve Bank of New York began publishing SOFR in April, 2018, with the expectation that it could be used on a voluntary basis in new instruments and for new transactions under existing instruments. However, SOFR is fundamentally different from LIBOR. It is a secured, nearly risk-free rate, while LIBOR is an unsecured rate that includes an element of bank credit risk. Also, while term SOFR for various maturities has been adopted by some parties and for some types of transactions, SOFR is strictly an overnight rate, while LIBOR historically has been published for various maturities, ranging from overnight to one year. Thus, LIBOR may be expected to be higher than SOFR, and the spread between the two is likely to widen in times of market stress. Certain existing contracts provide for a spread adjustment when transitioning to SOFR from LIBOR, but there is no assurance that it will provide adequate compensation. Term SOFR rates for various maturities, may not be available, recommended, or operationally feasible at the applicable benchmark replacement date.

Various financial industry groups have implemented the transition from LIBOR to SOFR or another new benchmark, but there are obstacles to converting certain longer-term securities and transactions. The transition process might lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. It also could lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur particularly with respect to synthetic values of LIBOR or could occur throughout the transition period.

Junk Bonds

The Fund may invest in lower-rated debt securities, including securities in the lowest credit rating category, of any maturity, otherwise known as "junk bonds."

Junk bonds generally offer a higher current yield than that available for higher-grade issues. However, lower-rated securities involve higher risks, in that they are especially subject to adverse changes in general economic conditions and in the industries in which the issuers are engaged, to changes in the financial condition of the issuers and to price fluctuations in response to changes in interest rates. During periods of economic downturn or rising interest rates, highly leveraged issuers may experience financial stress that could adversely affect their ability to make payments of interest and principal and increase the possibility of default. In addition, the market for lower-rated debt securities has expanded rapidly in recent years, and its growth paralleled a long economic expansion. At times in recent years, the prices of many lower-rated debt securities declined substantially, reflecting an expectation that many issuers of such securities might experience financial difficulties. As a result, the yields on lower-rated debt securities rose dramatically, but such higher yields did not reflect the value of the income stream that holders of such securities expected, but rather, the risk that holders of such securities could lose a substantial portion of their value as a result of the issuers' financial restructuring or default. There can be no assurance that such declines will not recur.

The market for lower-rated debt issues generally is thinner and less active than that for higher quality securities, which may limit the Fund's ability to sell such securities at fair value in response to changes in the economy or financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the values and liquidity of lower-rated securities, especially in a thinly traded market. Changes by recognized rating services in their rating of a fixed-income security may affect the value of these investments. The Fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Rafferty will monitor the investment to determine whether continued investment in the security will assist in meeting the Fund's investment objective.

Mortgage-Backed Securities

The Fund may invest in mortgage-backed securities. A mortgage-backed security is a type of pass-through security, which is a security representing pooled debt obligations repackaged as interests that pass income through an intermediary to investors. In the case of mortgage-backed securities, the ownership interest is in a pool of mortgage loans.

Mortgage-backed securities are most commonly issued or guaranteed by the Government National Mortgage Association ("Ginnie Mae<sup>®</sup>" or "GNMA"), Federal National Mortgage Association ("Fannie Mae<sup>®</sup>" or "FNMA") or Federal Home Loan Mortgage Corporation ("Freddie Mac<sup>®</sup>" or "FHLMC"), but may also be issued or guaranteed by other private issuers. GNMA is a government-owned corporation that is an agency of the U.S. Department of Housing and Urban Development. It guarantees, with the full faith and credit of the United States, full and timely payment of all monthly principal and interest on its

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mortgage-backed securities. FNMA is a publicly owned, government-sponsored corporation that mostly packages mortgages backed by the Federal Housing Administration, but also sells some non-governmentally backed mortgages. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest only by FNMA. FHLMC is a publicly chartered agency that buys qualifying residential mortgages from lenders, re-packages them and provides certain guarantees. Pass-through securities issued by FHLMC are guaranteed as to timely payment of principal and interest only by FHLMC.

The Federal Housing Finance Agency ("FHFA") mandated that Fannie Mae and Freddie Mac cease issuing their own mortgage-backed securities and begin issuing "Uniform Mortgage-Backed Securities" or "UMBS" in 2019. Each UMBS has a 55-day remittance cycle and can be used as collateral in either a Fannie Mae or Freddie Mac security or held for investment. Mortgage-backed securities issued by private issuers, whether or not such obligations are subject to guarantees by the private issuer, may entail greater risk than obligations directly guaranteed by the U.S. government. The average life of a mortgage-backed security is likely to be substantially less than the original maturity of the mortgage pools underlying the securities. Prepayments of principal by mortgagors and mortgage foreclosures will usually result in the return of the greater part of principal invested far in advance of the maturity of the mortgages in the pool.

Collateralized mortgage obligations ("CMOs") are debt obligations collateralized by mortgage loans or mortgage pass-through securities (collateral collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-through securities are interests in a trust composed of Mortgage Assets and all references in this section to CMOs include multi-class pass-through securities. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of the premium if any has been paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal and interest payments on the Mortgage Assets may be allocated among the various classes of CMOs in several ways. Typically, payments of principal, including any prepayments, on the underlying mortgages are applied to the classes in the order of their respective stated maturities or final distribution dates, so that no payment of principal is made on CMOs of a class until all CMOs of other classes having earlier stated maturities or final distribution dates have been paid in full.

Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage securities. The Fund will only invest in SMBS issued by Ginnie Mae, which are obligations backed by the full faith and credit of the U.S. government. SMBS are usually structured with two or more classes that receive different proportions of the interest and principal distributions from a pool of Mortgage Assets. The Fund will only invest in SMBS whose Mortgage Assets are U.S. government obligations. A common type of SMBS will be structured so that one class receives some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities. The market value of any class which consists primarily, or entirely, of principal payments generally is unusually volatile in response to changes in interest rates.

Investment in mortgage-backed securities poses several risks, including among others, prepayment, market and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions. Market risk reflects the risk that the price of a security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and the Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold. Credit risk reflects the risk that the Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. government-sponsored entities are guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the "pass-through" payments may, at times, be difficult.

Municipal Obligations

The Fund may invest in municipal obligations. Municipal securities are fixed-income securities issued by states, counties, cities and other political subdivisions and authorities. Although most municipal securities are exempt from federal income tax, municipalities also may issue taxable securities. Tax exempt securities are generally classified by their source of payment. In addition to the usual risks associated with investing for income, the value of municipal obligations can be affected by changes in the actual or perceived credit quality of the issuers. The credit quality of a municipal obligation can be affected by, among other factors: a) the financial condition of the issuer or guarantor; b) the issuer's future borrowing plans and sources of revenue; c) the economic feasibility of the revenue bond project or general borrowing purpose; d) political or

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economic developments in the region or jurisdiction where the security is issued; and e) the liquidity of the security. Because municipal obligations are generally traded OTC, the liquidity of a particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal issues can be enhanced by demand features, which enable the Fund to demand payment from the issuer or a financial intermediary on short notice.

Futures Contracts, Options, and Other Derivative Strategies

Generally, derivatives are financial instruments whose value depends on, or is derived from, the value of one or more underlying assets, reference rates, or indices or other market factors ("reference assets") and may relate to stocks, bonds, interest rates, credit, currencies, commodities, digital assets or related indices. Derivative instruments can provide an efficient means to gain long or short exposure to the value of a reference asset without actually owning or selling the instrument. Examples of derivative instruments include futures contracts, swap agreements, options, options on futures contracts and forward currency contracts.

The Fund may enter into derivatives instruments which may include futures contracts, forward contracts, options on currencies, commodities, indices, or futures contracts and swaps which provide long and short exposure to reference assets. Derivatives may be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund's losses may be greater if it invests in derivatives than if it invests in non-derivative instruments. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligations.

The use of derivative instruments is subject to applicable regulations of the SEC, the several exchanges upon which they are traded and the CFTC. In addition, the Fund's ability to use derivative instruments will be limited by tax considerations. See "Dividends, Other Distributions and Taxes."

Under current CFTC regulations, if the Fund uses commodity interests (such as futures contracts, options on futures contracts and swaps) other than for bona fide hedging purposes (as defined by the CFTC) the aggregate initial margin and premiums required to establish these positions (after taking into account unrealized profits and unrealized losses on any such positions and excluding the amount by which options that are "in-the-money" at the time of purchase) may not exceed 5% of the Fund's NAV, or alternatively, the aggregate net notional value of those positions, as determined at the time the most recent position was established, may not exceed 100% of the fund's NAV (after taking into account unrealized profits and unrealized losses on any such positions). Accordingly, the Fund has registered as a commodity pool, and the Adviser has registered as a commodity pool operator with the National Futures Association.

The Fund is subject to the risk that a change in U.S. law and related regulations will impact the way the Fund operates, increase the particular costs of the Fund's operation and/or change the competitive landscape. In this regard, any further amendment to the Commodity Exchange Act or its related regulations that subject the Fund to additional regulation may have adverse impacts on the Fund's operations and expenses. Rule 18f-4 under the 1940 Act, which governs the use of derivatives by registered investment companies, imposes limits on the amount of derivatives a fund could enter into and eliminated the asset segregation framework previously used by funds to comply with Section 18 of the 1940 Act, and requires funds whose use of derivatives is more than a limited specified exposure to establish and maintain a derivatives risk management program and appoint a derivatives risk manager. The Fund is in compliance with the requirements of Rule 18f-4.

In addition to the instruments, strategies and risks described below and in the Prospectus, Rafferty may discover additional derivative instruments and other similar or related techniques. These new opportunities may become available as Rafferty develops new techniques, as regulatory authorities broaden the range of permitted transactions and as new derivative instruments or other techniques are developed. Rafferty may utilize these instruments or other similar or related techniques to the extent that they are consistent with the Fund's investment objective and permitted by the Fund's investment limitations and applicable regulatory authorities. The Fund's Prospectus or this SAI will be supplemented to the extent that new products or techniques involve materially different risks than those described below or in the Prospectus.

*Special Risks*. The use of derivative instruments involves special considerations and risks, certain of which are described below. Risks pertaining to particular derivative instruments are described in the sections that follow.

(1) Options and futures prices can diverge from the prices of their underlying instruments. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect or no correlation also may result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, and from imposition of daily price fluctuation limits or trading halts.

(2) As described below, the Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in Financial Instruments involving obligations to third parties (*e.g.*, Financial Instruments other than purchased options). If the Fund were unable to close out its positions in such Financial Instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. These requirements might impair the Fund's ability to sell a portfolio security or make an investment when it would otherwise

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be favorable to do so or require that the Fund sell a portfolio security at a disadvantageous time. The Fund's ability to close out a position in a Financial Instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction (the "counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any position can be closed out at a time and price that is favorable to the Fund.

(3) Losses may arise due to unanticipated market price movements, lack of a liquid secondary market for any particular instrument at a particular time or due to losses from premiums paid by the Fund on options transactions.

*<u>Cover</u>*. Transactions using derivative instruments, other than purchased options, expose the Fund to an obligation to another party. The Fund may not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities or other options or futures contracts or (2) cash and liquid assets with a value, marked-to-market daily, sufficient to cover its potential obligations to the extent not covered as provided in (1) above. The Fund will comply with contractual requirements regarding cover for these instruments and will, if the requirements so require, set aside cash or liquid assets in an account with its custodian, U.S. Bank, N.A. ("Custodian"), in the prescribed amount as determined daily.

Assets used as cover or held in an account cannot be sold while the position in the corresponding derivative instrument is open, unless they are replaced with other appropriate assets. As a result, the commitment of a large portion of the Fund's assets to cover or accounts could impede portfolio management or the Fund's ability to meet redemption requests or other current obligations.

*<u>Futures Contracts</u>*. The Fund may use certain options (traded on an exchange or OTC), futures contracts (sometimes referred to as "futures") and options on futures contracts as a substitute for a comparable market position in the underlying security or index, to attempt to hedge or limit the exposure of the Fund's position, to create a synthetic money market position, for certain tax-related purposes or to effect closing transactions.

Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference instrument, such as a specific security, currency or commodity, at a specified price at a specified later date. A "sale" of a futures contract means the acquisition of a contractual obligation to deliver the underlying reference instrument called for by the contract at a specified price on a specified date. A "purchase" of a futures contract means the acquisition of a contractual obligation to acquire the underlying reference instrument called for by the contract at a specified price on a specified date. The purchase or sale of a futures contract will allow the Fund to increase or decrease its exposure to the underlying reference instrument without having to buy the actual instrument.

The underlying reference instruments to which futures contracts may relate include non-U.S. currencies, interest rates, stock and bond indices and debt securities, including U.S. government debt obligations. In most cases the contractual obligation under a futures contract may be offset, or "closed out," before the settlement date so that the parties do not have to make or take delivery. The closing out of a contractual obligation is usually accomplished by buying or selling, as the case may be, an identical, offsetting futures contract. This transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the underlying instrument or asset. If the original position entered into is a long position (futures contract purchased), there will be a gain (loss) if the offsetting sell transaction is carried out at a higher (lower) price, inclusive of commissions. If the original position entered into is a short position (futures contract sold) there will be a gain (loss) if the offsetting buy transaction is carried out at a lower (higher) price, inclusive of commissions.

Certain futures contracts are cash-settled, meaning the futures contract obligates the seller to deliver (and purchaser to accept) an amount of cash equal to a specific dollar amount multiplied by the difference between the final settlement price of a specific futures contract and the price at which the agreement is made. No physical delivery of the underlying asset is made.

Whether the Fund realizes a gain/loss from futures activities depends generally upon the movements in the underlying reference asset (generally a commodity, currency, security or index). The extent of the Fund's loss from an unhedged short position in a futures contract is potentially unlimited, and investors may lose the amount that they invest plus any profits recognized on their investment.

Futures contracts may be bought and sold on U.S. and non-U.S. exchanges. Futures contracts in the U.S. have been designed by exchanges that have been designated "contract markets" by the CFTC and must be executed through a futures commission merchant ("FCM"), which is a brokerage firm that is a member of the relevant contract market. Each exchange guarantees performance of the contracts as between the clearing members of the exchange, thereby reducing the risk of counterparty default. Because all transactions in the futures market are made, offset, or fulfilled by an FCM through a clearinghouse associated with the exchange on which the contracts are traded, the Fund will incur brokerage fees when it buys or sells futures contracts. The Fund generally buys and sells futures contracts only on contract markets (including exchanges or boards of trade) where there appears to be an active market for the futures contracts, but there is no assurance that an active market will exist for any particular contract or at any particular time. An active market makes it more likely that futures contracts will be liquid and bought and sold at competitive market prices. In addition, many of the futures contracts available may be relatively new instruments without a significant trading history. As a result, there can be no assurance that an active market will develop or continue to exist.

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When the Fund enters into a futures contract, it must deliver to an account controlled by the FCM (that has been selected by the Fund), an amount referred to as "initial margin" that is typically calculated as an amount equal to the volatility in market value of a contract over a fixed period. Initial margin requirements are determined by the respective exchanges on which the futures contracts are traded and the FCM. Thereafter, a "variation margin" amount may be required to be paid by the Fund or received by the Fund in accordance with margin controls set for such accounts, depending upon changes in the marked-to-market value of the futures contract. The account is marked-to-market daily and the variation margin is monitored by the Fund's investment manager and custodian on a daily basis. When the futures contract is closed out, if the Fund has a loss equal to, or greater than, the margin amount, the margin amount is paid to the FCM along with any loss in excess of the margin amount. If the Fund has a loss of less than the margin amount, the excess margin is returned to the Fund. If the Fund has a gain, the full margin amount and the amount of the gain is paid to the Fund. Some futures contracts provide for the delivery of securities that are different than those that are specified in the contract. For a futures contract for delivery of debt securities, on the settlement date of the contract, adjustments to the contract can be made to recognize differences in value arising from the delivery of debt securities with a different interest rate from that of the particular debt securities that were specified in the contract. In some cases, securities called for by a futures contract may not have been issued when the contract was written.

*Risks of Futures Contracts.* The Fund's use of futures contracts is subject to the risks associated with derivative instruments generally. The Fund may not be able to properly effect its strategy when a liquid market is unavailable for the futures contract the Fund wishes to close, which may at times occur. If the Fund were unable to liquidate a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, the Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

A purchase or sale of a futures contract may result in losses to the Fund in excess of the amount that the Fund delivered as initial margin. Because of the relatively low margin deposits required, futures trading involves a high degree of leverage; as a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, or gain, to the Fund. In addition, if the Fund has insufficient cash to meet daily variation margin requirements or close out a futures position, it may have to sell securities from its portfolio at a time when it may be disadvantageous to do so. Adverse market movements could cause the Fund to experience substantial losses on an investment in a futures contract. There is a risk of loss by the Fund of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Fund has an open position in a futures contract. The assets of the Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, the Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty.

The difference (called the "spread") between prices in the cash market for the purchase and sale of the underlying reference instrument and the prices in the futures market is subject to fluctuations and distortions due to differences in the nature of those two markets. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions that could distort the normal pricing spread between the cash and futures markets. Second, the liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery of the underlying instrument. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, resulting in pricing distortion. Third, from the point of view of speculators, the margin deposit requirements that apply in the futures market are less onerous than similar margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. When such distortions occur, a correct forecast of general trends in the price of an underlying reference instrument by the investment manager may still not necessarily result in a profitable transaction.

Futures contracts that are traded on non-U.S. exchanges may not be as liquid as those purchased on CFTC-designated contract markets. In addition, non-U.S. futures contracts may be subject to varied regulatory oversight. The price of any non-U.S. futures contract and, therefore, the potential profit and loss thereon, may be affected by any change in the non-U.S. exchange rate between the time a particular order is placed and the time it is liquidated, offset or exercised.

The CFTC and the various exchanges have established limits referred to as "speculative position limits" on the maximum net long or net short position that any person, such as the Fund, may hold or control in a particular futures contract. Trading limits are also imposed on the maximum number of contracts that any person may trade on a particular trading day. An exchange may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The regulation of futures, as well as other derivatives, is a rapidly changing area of law.

Futures exchanges may also limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. This daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements

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during a particular trading day and does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.

*Risks Associated with Commodity Futures Contracts*. There are several additional risks associated with transactions in commodity futures contracts.

Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while the Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.

In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for the Fund. If the nature of hedgers and speculators in futures markets has shifted when it is time for the Fund to reinvest the proceeds of a maturing contract in a new futures contract, the Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.

The commodities which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices and commodity-linked instruments, including futures contracts, than on traditional securities. Certain commodities are also subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment risks which subject the Fund's investments to greater volatility than investments in traditional securities.

*<u>Forward Contracts</u>*. The Fund may enter into equity, equity index or interest rate forward contracts for purposes of attempting to gain exposure to an index or group of securities without actually purchasing these securities, or to hedge a position. Forward contracts are two-party contracts pursuant to which one party agrees to pay the counterparty a fixed price for an agreed upon amount of commodities, securities, or the cash value of the commodities, securities or the securities index, at an agreed upon date. Because they are two-party contracts and may have terms greater than seven days, forward contracts may be considered to be illiquid for the Fund's illiquid investment limitations. The Fund will not enter into any forward contract unless Rafferty believes that the other party to the transaction is creditworthy. The Fund bears the risk of loss of the amount expected to be received under a forward contract in the event of the default or bankruptcy of a counterparty. If such a default occurs, the Fund will have contractual remedies pursuant to the forward contract, but such remedies may be subject to bankruptcy and insolvency laws which could affect the Fund's rights as a creditor.

*<u>Options</u>*. The value of an option position will reflect, among other things, the current market value of the underlying investment, the time remaining until expiration, the relationship of the exercise price to the market price of the underlying investment and general market conditions. Options that expire unexercised have no value. Options currently are traded on the Chicago Board Options Exchange<sup>®</sup> and other options exchanges, as well as the OTC markets.

By buying a call option on a security, the Fund has the right, in return for the premium paid, to buy the security underlying the option at the exercise price. By writing (selling) a call option and receiving a premium, the Fund becomes obligated during the term of the option to deliver securities underlying the option at the exercise price if the option is exercised. By buying a put option, the Fund has the right, in return for the premium, to sell the security underlying the option at the exercise price. By writing a put option, the Fund becomes obligated during the term of the option to purchase the securities underlying the option at the exercise price.

Because options premiums paid or received by the Fund are small in relation to the market value of the investments underlying the options, buying and selling put and call options can be more speculative than investing directly in securities.

The Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, the Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, the Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Fund to realize profits or limit losses on an option position prior to its exercise or expiration.

*Risks of Options on Currencies and Securities*. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded

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option transaction. In contrast, OTC options are contracts between the Fund and its counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when the Fund purchases an OTC option, it relies on the counterparty from which it purchased the option to make or take delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premium paid by the Fund as well as the loss of any expected benefit of the transaction.

The Fund's ability to establish and close out positions in exchange-traded options depends on the existence of a liquid market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. There can be no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the counterparty, the Fund might be unable to close out an OTC option position at any time prior to its expiration.

If the Fund were unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by the Fund could cause material losses because the Fund would be unable to sell the investment used as cover for the written option until the option expires or is exercised.

*<u>Options on Indices</u>*. An index fluctuates with changes in the market values of the securities included in the index. Options on indices give the holder the right to receive an amount of cash upon exercise of the option. Receipt of this cash amount will depend upon the closing level of the index upon which the option is based being greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. Some stock index options are based on a broad market index that includes more than nine constituents or on a narrower index which is generally considered to include only nine or fewer constituents.

Each of the exchanges has established limitations governing the maximum number of call or put options on the same index that may be bought or written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). Under these limitations, option positions of all investment companies advised by Rafferty are combined for purposes of these limits. Pursuant to these limitations, an exchange may order the liquidation of positions and may impose other sanctions or restrictions. These position limits may restrict the number of listed options that the Fund may buy or sell.

Puts and calls on indices are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question rather than on price movements in individual securities or futures contracts. When the Fund writes a call on an index, it receives a premium and agrees that, prior to the expiration date, the purchaser of the call, upon exercise of the call, will receive from the Fund an amount of cash if the closing level of the index upon which the call is based is greater than the exercise price of the call. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call multiplied by a specific factor ("multiplier"), which determines the total value for each point of such difference. When the Fund buys a call on an index, it pays a premium and has the same rights to such call as are indicated above. When the Fund buys a put on an index, it pays a premium and has the right, prior to the expiration date, to require the seller of the put, upon the Fund's exercise of the put, to deliver to the Fund an amount of cash if the closing level of the index upon which the put is based is less than the exercise price of the put, which amount of cash is determined by the multiplier, as described above for calls. When the Fund writes a put on an index, it receives a premium and the purchaser of the put has the right, prior to the expiration date, to require the Fund to deliver to it an amount of cash equal to the difference between the closing level of the index and the exercise price times the multiplier if the closing level is less than the exercise price.

*Risks of Options on Indices*. If the Fund has purchased an index option and exercises it before the closing index value for that day is available, it runs the risk that the level of the index may subsequently change. If such a change causes the exercised option to fall out-of-the-money, the Fund will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer.

*<u>OTC Options</u>*. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of OTC options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows the Fund great flexibility to tailor the option to its needs, OTC options generally involve greater risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded.

*<u>Options on Futures Contracts</u>*. When the Fund writes an option on a futures contract, it becomes obligated, in return for the premium paid, to assume a position in the futures contract at a specified exercise price at any time during the term of the option. If the Fund writes a call, it assumes a short futures position. If it writes a put, it assumes a long futures position. When the Fund purchases an option on a futures contract, it acquires the right in return for the premium it pays to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put).

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Whether the Fund realizes a gain or loss from futures activities depends upon movements in the underlying security or index. The extent of the Fund's loss from an unhedged short position from writing unhedged call options on futures contracts is potentially unlimited. The Fund only purchases and sells options on futures contracts that are traded on a U.S. exchange or board of trade.

Purchasers and sellers of options on futures can enter into offsetting closing transactions, similar to closing transactions in options, by selling or purchasing, respectively, an instrument identical to the instrument purchased or sold. Positions in options on futures contracts may be closed only on an exchange or board of trade that provides a secondary market. However, there can be no assurance that a liquid secondary market will exist for a particular contract at a particular time. In such event, it may not be possible to close a futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of an option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.

If the Fund were unable to liquidate an option on a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

*Risks of Options on Futures Contracts*. The ordinary spreads between prices in the cash and futures markets (including the options on futures markets), due to differences in the natures of those markets, are subject to the following factors, which may create distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions, which could distort the normal relationships between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions.

*<u>Combined Positions</u>*. The Fund may purchase and write options in combination with each other. For example, the Fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.

Other Investment Companies

The Fund may invest in the securities of other investment companies, including open- and closed-end funds and ETFs. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear the Fund's proportionate share of the fees and expenses of the other investment company, in addition to the fees and expenses Fund shareholders bear in connection with the Fund's own operations.

The Fund intends to limit its investments in securities issued by other investment companies in accordance with the 1940 Act and the rules promulgated thereunder. Section 12(d)(1) of the 1940 Act precludes the Fund from acquiring (i) more than 3% of the total outstanding shares of another investment company; (ii) shares of another investment company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (iii) shares of another registered investment company and all other investment companies having an aggregate value in excess of 10% of the value of the total assets of the Fund. In addition, the Fund is subject to Section 12(d)(1)(C), which provides that the Fund may not acquire shares of a closed-end fund if, immediately after such acquisition, the Fund and other investment companies having the same adviser as the Fund would hold more than 10% of the closed-end fund's total outstanding voting stock.

Section 12(d)(1)(F) of the 1940 Act provides that the provisions of paragraph 12(d)(1)(A) and (B) shall not apply to securities of an unaffiliated investment company purchased or otherwise acquired by the Fund if (i) immediately after such purchase or acquisition not more than 3% of the total outstanding shares of such investment company is owned by the Fund and all affiliated persons of the Fund; and (ii) the Fund has not offered or sold, and is not proposing to offer or sell its shares through a principal underwriter or otherwise at a public or offering price that includes a sales load of more than 1 1/2%. If the Fund invests in unaffiliated investment companies pursuant to Section 12(d)(1)(F), it must comply with the following voting restrictions: when the Fund exercises voting rights, by proxy or otherwise, with respect to unaffiliated investment companies owned by the Fund, the Fund will either seek instruction from the Fund's shareholders with regard to the voting of all proxies and vote in accordance with such instructions, or vote the shares held by the Fund in the same proportion as

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the vote of all other holders of such security. In addition, an unaffiliated investment company purchased by the Fund pursuant to Section 12(d)(1)(F) shall not be required to redeem its shares in an amount exceeding 1% of such investment company's total outstanding shares in any period of less than thirty days.

To the extent that the Fund invests in open-end or closed-end investment companies that invest primarily in the securities of companies located outside the United States, see the risks related to foreign securities set forth above.

Rule 12d1-4 allows a fund or ETF to acquire the securities of another fund in excess of the limitations imposed by Section 12 of the 1940 Act without obtaining an exemptive order from the SEC subject to certain limitations and conditions. Prior to a fund acquiring securities of another fund that exceed the limits of Section 12(d)(1) of the 1940 Act, the acquiring fund must enter into a Fund of Funds Agreement with the acquired fund. Rule 12d1-4 outlines the requirements of the Fund of Funds Agreements and specifies the responsibilities of Fund management related to "fund of funds" arrangements. Rule 12d1-4 was effective as of January 19, 2021 and its requirements have been implemented by the Funds that will be part of a fund of funds arrangement.

*<u>Exchange-Traded Products</u>*. The Fund may invest in exchange traded products ("ETPs"), which include ETFs, partnerships, commodity pools or trusts that are bought and sold on a securities exchange. ETPs trade like stocks on a securities exchange at market price rather than NAV and, as a result, ETP shares may trade at a price greater than NAV (premium) or less than NAV (discount). The Fund may also invest in exchange-traded notes ("ETNs"), which are structured debt securities, whereby the issuer of the ETN promises to pay ETN holders the return on an index or market segment over a certain period of time and then return the principal of the investment at maturity. Whereas ETPs' liabilities are secured by their portfolio securities, ETNs' liabilities are unsecured general obligations of the issuer. Therefore, ETNs are subject to the credit risk of the issuer of the ETN, which is different than other ETPs. The value of an ETN security should also be expected to fluctuate with the credit rating of the issuer. Most ETPs and ETNs are designed to track a particular market segment or index, although an ETP or ETN may be actively managed. ETPs and ETNs share expenses associated with their operation, typically including advisory fees and other management expenses. When the Fund invests in an ETP or ETN, in addition to directly bearing expenses associated with its own operations, it will bear its pro rata portion of the ETP's or ETN's expenses. ETPs and ETNs trade like stocks on a securities exchange at market prices rather than NAV and as a result ETP or ETN shares may trade at a price greater than NAV (premium) or less than NAV (discount). The risks of owning an ETP or ETN generally reflect the risks of owning the underlying securities the ETP or ETN is designed to track, although lack of liquidity in an ETP or ETN could result in it being more volatile than the underlying portfolio of securities. In addition, because of ETP or ETN expenses, compared to owning the underlying securities directly, it may be more costly to own an ETP or ETN.

Additionally, the Fund may invest in swap agreements referencing ETFs. If the Fund invests in ETFs or swap agreements referencing ETFs, the underlying ETFs may not necessarily track the same index as the Fund.

*<u>Money Market Funds</u>*. Money market funds are open-end registered investment companies that historically have traded at a stable $1.00 per share price. However, money market funds that do not meet the definition of a "retail money market fund" or "government money market fund" under the 1940 Act are required to transact at a floating NAV per share (*i.e.*, in a manner similar to how all other non-money market mutual funds transact), instead of at a $1.00 stable share price. Money market funds may also impose liquidity fees and redemption gates for use in times of market stress. If a Fund invests in a money market fund with a floating NAV, the impact on the trading and value of the money market instruments may negatively affect the Fund's return potential.

Repurchase Agreements

The Fund may enter into repurchase agreements with banks 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. Repurchase agreements generally are for a short period of time, usually less than a week. Under a repurchase agreement, the Fund purchases a U.S. government security and simultaneously agrees to sell the security back to the seller at a mutually agreed-upon future price and date, normally one day or a few days later. The resale price is greater than the purchase price, reflecting an agreed-upon market interest rate during the Fund's holding period. While the maturities of the underlying securities in repurchase agreement transactions may be more than one year, the term of each repurchase agreement always will be less than one year. Repurchase agreements with a maturity of more than seven days are considered to be illiquid investments. The Fund may not enter into such a repurchase agreement if, as a result, more than 15% of the value of its net assets would then be invested in such repurchase agreements and other illiquid investments. See "Illiquid Investments and Restricted Securities" above.

The Fund will always receive, as collateral, securities whose market value, including accrued interest, at all times will be at least equal to 100% of the dollar amount invested by the Fund in each repurchase agreement. In the event of default or bankruptcy by the seller, the Fund will liquidate those securities (whose market value, including accrued interest, must be at least 100% of the amount invested by the Fund) held under the applicable repurchase agreement, which securities constitute collateral for the seller's obligation to repurchase the security. If the seller defaults, the Fund might incur a loss if the value of the collateral securing the repurchase agreement declines and might incur disposition costs in connection with liquidating

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the collateral. In addition, if bankruptcy or similar proceedings are commenced with respect to the seller of the security, realization upon the collateral by the Fund may be delayed or limited.

Reverse Repurchase Agreements

The Fund may borrow by entering into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Under a reverse repurchase agreement, the Fund sells securities and agrees to repurchase them at a mutually agreed to price. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with an approved custodian containing liquid high-grade securities, marked-to-market daily, having a value not less than the repurchase price (including accrued interest). Reverse repurchase agreements involve the risk that the market value of securities retained in lieu of sale by the Fund may decline below the price of the securities the Fund has sold but is obliged to repurchase. If the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities. During that time, the Fund's use of the proceeds of the reverse repurchase agreement effectively may be restricted. Reverse repurchase agreements create leverage, a speculative factor, and are considered borrowings for the purpose of the Fund's limitation on borrowing.

Short Sales

The Fund may engage in short sale transactions under which the Fund sells a security it does not own. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender amounts equal to any dividends that accrue during the period of the loan. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet the margin requirements, until the short position is closed out. The Fund will also incur transactions costs when conducting short sales.

Until the Fund closes its short position or replaces the borrowed stock, the Fund will: (1) maintain an account containing cash or liquid assets at such a level that (a) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the stock sold short and (b) the amount deposited in the account plus the amount deposited with the broker as collateral will not be less than the market value of the stock at the time the stock was sold short; or (2) otherwise cover the Fund's short position.

The Fund will incur a loss as a result of a short sales or short exposure to reference assets utilizing derivatives if the price of the security or reference asset increases between the date of the short sale or exposure and the date on which the Fund replaces the borrowed security or terminates the derivatives providing short exposure. The Fund will realize a gain if the price of a security or reference asset declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss will be increased, by the amount of the premium, dividends or interest the Fund may be required to pay, if any, in connection with a short sale or derivatives that provide short exposure.

Swap Agreements

The Fund may enter into swap agreements and other derivatives to obtain long exposure to an underlying asset without actually purchasing such asset. Swap agreements are generally two-party contracts entered into primarily by institutional investors for periods ranging from a day to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," *i.e.*, the return on, or increase/decrease, in value of a particular dollar amount invested in a security or "basket" of securities representing a particular index or an ETF representing a particular index or group of securities.

The Fund may enter into swaps to invest in a market without owning or taking physical custody of securities. For example, in one common type of total return swap, the Fund's counterparty will agree to pay the Fund the rate at which the specified asset or indicator (*e.g.*, security, an ETF, or securities comprising a benchmark index, plus the dividends or interest that would have been received on those assets) increased in value multiplied by the relevant notional amount of the swap. The Fund will agree to pay to the counterparty an interest fee (based on the notional amount) and the rate at which, the specified asset or indicator would decreased in value multiplied by the notional amount of the swap, plus, in certain instances, commissions or trading spreads on the notional amount.

As a result, the swap has a similar economic effect as if the Fund were to invest in the assets underlying the swap in an amount equal to the notional amount of the swap. The return to the Fund on such swap should be the gain or loss on the notional amount plus dividends or interest on the assets less the interest paid by the Fund on the notional amount. However,

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unlike cash investments in the underlying assets, the Fund will not be an owner of the underlying assets and will not have voting or similar rights in respect of such assets.

As a trading technique, Rafferty may substitute physical securities with a swap having investment characteristics substantially similar to the underlying securities. The Fund may also enter into swaps that provide the opposite return of its benchmark or a security. Their operations are similar to that of the swaps discussed above except that the counterparty pays interest to the Fund on the notional amount outstanding and that dividends or interest on the underlying instruments 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 often netted with any unrealized gain or loss to determine the value of the swap.

The use of swaps is a highly specialized activity which involves investment techniques and risks in addition to, and in some cases different from, those associated with ordinary portfolio securities transactions. The primary risks associated with the use of swaps are mispricing or improper valuation, imperfect correlation between movements in the notional amount and the price of the underlying investments, and the inability of the counterparties or clearing organization to perform. If a counterparty's creditworthiness for an over-the-counter swap declines, the value of the swap would likely decline. Moreover, there is no guarantee that the Fund could eliminate its exposure under an outstanding swap by entering into an offsetting swap with the same or another party. In addition, the Fund may use a combination of swaps on the Index and/or swaps on an ETF that is designed to track the performance of the Index. The performance of an ETF may deviate from the performance of the Index due to embedded costs and other factors. Thus, to the extent the Fund invests in swaps that use an ETF as the reference asset, the Fund may be subject to greater correlation risk and may not achieve as high a degree of correlation with the Index as it would if the Fund used only swaps on the Index.Rafferty, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Fund's transactions in swaps.

<u>Common Types of Swaps</u>

The Fund may enter into any of several types of swaps, including:

*Total Return Swaps.* Total return swaps may be used either as economically similar substitutes for owning the reference asset specified in the swap, such as the securities that comprise a given market index, particular securities or commodities, or other assets or indicators. They also may be used as a means of obtaining exposure in markets where the reference asset is unavailable or it may otherwise be impossible or impracticable for the Fund to own that asset. "Total return" refers to the payment (or receipt) of the total return on the underlying reference asset, which is then exchanged for the receipt (or payment) of an interest rate. Total return swaps provide the Fund with the additional flexibility of gaining exposure to a market or sector index by using the most cost-effective vehicle available.

*Interest Rate Swaps.* Interest rate swaps, in their most basic form, involve the exchange by the Fund with another party of their respective commitments to pay or receive interest. For example, the Fund might exchange its right to receive certain floating rate payments in exchange for another party's right to receive fixed rate payments. Interest rate swaps can take a variety of other forms, such as agreements to pay the net differences between two different interest indexes or rates. Despite their differences in form, the function of interest rate swaps is generally the same: to increase or decrease the Fund's exposure to long- or short-term interest rates. For example, the Fund may enter into an interest rate swap to preserve a return or spread on a particular investment or a portion of its portfolio or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date.

*Other Financial Instruments*. Other forms of swaps that the Fund may enter into include: interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor," and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.

<u>Mechanics of Swaps</u>

*Payments*. Most swaps entered into by the Fund calculate and settle the obligations of the parties to the agreement on a "net basis" with a single payment. Consequently, a Fund's current obligations (or rights) under a swap will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). Other swaps may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of the reference entity. The Fund's current obligations under most swaps (*e.g.*, total return swaps, equity/index swaps, interest rate swaps) will be accrued daily (offset against any amounts owed to the Fund by the counterparty to the swap) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating or earmarking cash or other assets determined to be liquid. However, typically no payments will be made until the settlement date. The net amount of the excess, if any, of the Fund's obligations over its entitlements with respect to a swap agreement entered into on a net basis will be accrued daily and an amount of cash or liquid asset having an aggregate NAV at least equal to the accrued excess will be maintained in an account with the Custodian that satisfies the 1940 Act. The Fund also will establish and maintain such accounts with

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respect to its total obligations under any swaps that are not entered into on a net basis. Obligations under swap agreements so covered will not be construed to be "senior securities" for purposes of the Fund's investment restriction concerning senior securities.

*Counterparty Credit Risk*. The Fund will not enter into any uncleared swap (*i.e.*, not cleared by a central counterparty) unless Rafferty believes that the other party to the transaction is creditworthy. The counterparty to an uncleared swap will typically be a major global financial institution. The Fund bears the risk of loss of the amount expected to be received under a swap in the event of the default or bankruptcy of a swap counterparty. If such a default occurs, the Fund will have contractual remedies pursuant to the swaps, but such remedies may be subject to bankruptcy and insolvency laws that could affect the Fund's rights as a creditor. The counterparty risk for cleared swaps is generally lower than for uncleared over-the-counter swaps because, in a cleared swap, a clearing organization becomes substituted for each counterparty to a cleared swap. The clearing organization takes on the obligations of each side of the swap and the Fund would only be exposed to the clearing organization for performance of financial obligations. However, there can be no assurance that the clearing organization, or its members, will satisfy its obligations to the Fund. Upon entering into a cleared swap, the Fund may be required to deposit with its futures commission merchant an amount of cash or cash equivalents equal to a small percentage of the notional amount (this amount is subject to change by the clearing organization that clears the trade). This amount is in the nature of a performance bond or good faith deposit on the cleared swap and is returned to the Fund upon termination of the swap, assuming all contractual obligations have been satisfied. Subsequent payments to and from the broker will be made daily as the price of the swap fluctuates, making the long and short position in the swap contract more or less valuable, a process known as "marking-to-market." The premium (discount) payments are built into the daily price of the swap and thus are amortized through the subsequent payments. The subsequent payment also includes the daily portion of the periodic payment stream.

*Termination and Default Risk*. Swap agreements do not involve the delivery of securities or other underlying assets. Accordingly, if a swap is entered into on a net basis, if the other party to a swap agreement defaults, the Fund's risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any.

<u>Swap Regulation</u>

In recent years, regulators across the globe, including the CFTC and the U.S. banking regulators, have adopted collateral requirements applicable to uncleared swaps. While the Fund is not directly subject to these requirements, where the Fund's counterparty is subject to the requirements, uncleared swaps between the Fund and that counterparty are required to be marked-to-market on a daily basis, and collateral is required to be exchanged to account for any changes in the value of such swaps above certain agreed upon thresholds. The rules impose a number of requirements as to these exchanges of collateral, including as to the timing of transfers, the type of collateral (and valuations for such collateral) and other matters that may be different than what the Fund would agree with its counterparty in the absence of such regulation. In all events, where the Fund is required to post collateral to its swap counterparty, such collateral will be posted to an independent bank custodian, where access to the collateral by the swap counterparty will generally not be permitted unless the Fund is in default on its obligations to the swap counterparty.

In addition to the marked-to-market collateral requirements, regulators have adopted "initial" collateral requirements applicable to uncleared swaps. Where applicable, these rules require parties to an uncleared swap to post, to a custodian that is independent from the parties to the swap, collateral (in addition to any marked-to-market collateral noted above) in an amount that is either (i) specified in a schedule in the rules or (ii) calculated by the regulated party in accordance with a model that has been approved by that party's regulator(s). The initial collateral rules only apply to the swap trading relationships of Funds with average aggregate notional amounts that exceed $8 billion. If the Fund is subject to an initial margin obligation, these rules may impose significant costs on the Fund's ability to engage in uncleared swaps and, as such, could adversely affect Rafferty's ability to manage the Fund, may impair the Fund's ability to achieve its investment objective and/or may result in reduced returns to the Fund's investors.

*Comprehensive swaps regulation.* The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and related regulatory developments have imposed comprehensive new regulatory requirements on swaps and swap market participants. The regulatory framework includes: (1) registration and regulation of swap dealers; (2) requiring central clearing and execution of standardized swaps; (3) imposing collateral requirements on swap transactions; (4) regulating and monitoring swap transactions through position limits and large trader reporting requirements; and (5) imposing recordkeeping and centralized and public reporting requirements, on an anonymous basis, for most swaps. The CFTC is responsible for the regulation of most swaps. The SEC has jurisdiction over a small segment of the market referred to as "security-based swaps," which includes swaps on single securities or credits, or narrow-based indices of securities or credits.

*Uncleared swaps.* In an uncleared swap, the swap counterparty is typically a brokerage firm, bank or other financial institution. The Fund customarily enters into uncleared swaps based on the standard terms and conditions of an International Swaps and Derivatives Association ("ISDA") Master Agreement. ISDA is a voluntary industry association of participants in the OTC derivatives markets that has developed standardized contracts used by such participants that have agreed to be bound by such standardized contracts. In the event that one party to a swap transaction defaults and the transaction is terminated prior to its scheduled termination date, one of the parties may be required to make an early termination payment to the

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counterparty. An early termination payment may be payable by either the defaulting or non-defaulting party, depending upon which of them is "in-the-money" with respect to the swap at the time of its termination. Early termination payments may be calculated in various ways, but are intended to approximate the amount the "in-the-money" party would have to pay to replace the swap as of the date of its termination. During the term of an uncleared swap, the Fund will be required to pledge to the swap counterparty, from time to time, an amount of cash and/or other assets equal to the total net amount (if any) that would be payable by the Fund to the counterparty if all outstanding swaps between the parties were terminated on the date in question, including any early termination payments. Periodically, changes in the amount pledged are made to recognize changes in value of the contract resulting from, among other things, interest on the notional value of the contract, market value changes in the underlying investment, and/or dividends paid by the issuer of the underlying instrument. Likewise, the counterparty will be required to pledge cash or other assets to cover its obligations to the Fund. However, the amount pledged may not always be equal to or more than the amount due to the other party. Therefore, if a counterparty defaults in its obligations to the Fund, the amount pledged by the counterparty and available to the Fund may not be sufficient to cover all the amounts due to the Fund and the Fund may sustain a loss. Rules requiring initial collateral to be posted by certain market participants for uncleared swaps have been adopted. If the Fund is deemed to have material swaps exposure under applicable swap regulations, it will be required to post initial collateral in addition to marked-to-market collateral.

*Cleared swaps.* Certain standardized swaps are subject to mandatory central clearing and exchange-trading. The Dodd-Frank Act and implementing rules will ultimately require the clearing and exchange-trading of many swaps. Mandatory exchange-trading and clearing will occur on a phased-in basis based on the type of market participant, CFTC approval of contracts for central clearing and public trading facilities making such cleared swaps available to trade. To date, the CFTC has designated only certain of the most common types of credit default index swaps and interest rate swaps as subject to mandatory clearing and certain public trading facilities have made certain of those cleared swaps available to trade, additional categories of swaps may in the future be designated as subject to mandatory clearing and trade execution requirements. Central clearing is intended to reduce counterparty credit risk and increase liquidity, but central clearing does not eliminate these risks and may involve additional costs and risks not involved with uncleared swaps. For more information, see "Risks of cleared swaps" below.

In a cleared swap, the Fund's ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank or other financial institution. Cleared swaps are submitted for clearing through each party's FCM, which must be a member of the clearinghouse that serves as the central counterparty. Transactions executed on a swap execution facility may increase market transparency and liquidity but may require the Fund to incur increased expenses to access the same types of swaps that it has used in the past. When the Fund enters into a cleared swap, it must deliver to the central counterparty (via the FCM) initial collateral. The initial collateral requirements are determined by the central counterparty, and are typically calculated as an amount equal to the volatility in market value of the cleared swap over a fixed period, but an FCM may require additional collateral above the amount required by the central counterparty. During the term of the swap agreement, an additional collateral amount may also be required to be paid by the Fund or may be received by the Fund in accordance with collateral controls set for such accounts. If the value of the Fund's cleared swap declines, the Fund will be required to make additional payments to the FCM to settle the change in value. Conversely, if the market value of the Fund's position increases, the FCM will post additional amounts to the Fund's account. At the conclusion of the term of the swap agreement, if the Fund has a loss equal to or greater than the collateral amount, the collateral amount is paid to the FCM along with any loss in excess of the collateral amount. If the Fund has a loss of less than the collateral amount, the excess collateral is returned to the Fund. If the Fund has a gain, the full collateral amount and the amount of the gain is paid to the Fund.

*Risks of swaps generally.* The use of swap transactions is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Whether the Fund will be successful in using swap agreements to achieve its investment goal depends on the ability of the Adviser to correctly predict which types of investments are likely to produce greater returns. If the Adviser, in using swap agreements, is incorrect in its forecasts of market values, interest rates, inflation, currency exchange rates or other applicable factors, the investment performance of the Fund will be less than its performance would have been if it had not used the swap agreements. The risk of loss to the Fund for swap transactions that are entered into on a net basis depends on which party is obligated to pay the net amount to the other party. If the counterparty is obligated to pay the net amount to the Fund, the risk of loss to the Fund is loss of the entire amount that the Fund is entitled to receive. If the Fund is obligated to pay the net amount, the Fund's risk of loss is generally limited to that net amount. If the swap agreement involves the exchange of the entire principal value of a security, the entire principal value of that security is subject to the risk that the other party to the swap will default on its contractual delivery obligations. In addition, the Fund's risk of loss also includes any collateral at risk in the event of default by the counterparty (in an uncleared swap) or the central counterparty or FCM (in a cleared swap), plus any transaction costs.

Because bilateral swap agreements are structured as two-party contracts and may have terms of greater than seven days, these swaps may be considered to be illiquid and, therefore, subject to the Fund's limitation on investments in illiquid securities. If a swap transaction is particularly large or if the relevant market is illiquid, the Fund may not be able to establish or liquidate a position at an advantageous time or price, which may result in significant losses. Participants in the swap

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markets are not required to make continuous markets in the swap contracts they trade. Participants could refuse to quote prices for swap contracts or quote prices with an unusually wide spread between the price at which they are prepared to buy and the price at which they are prepared to sell. Some swap agreements entail complex terms and may require a greater degree of subjectivity in their valuation. However, the swap markets have grown substantially in recent years, with a large number of financial institutions acting both as principals and agents, utilizing standardized swap documentation. As a result, the swap markets have become increasingly liquid. In addition, central clearing and the trading of cleared swaps on public facilities are intended to increase liquidity.

Rafferty, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Fund's swap transactions. Rules adopted under the Dodd-Frank Act require centralized reporting of detailed information about many swaps, whether cleared or uncleared. This information is available to regulators and also, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data is intended to result in greater market transparency. This may be beneficial to funds that use swaps in their trading strategies. However, public reporting imposes additional recordkeeping burdens on these funds, and the safeguards established to protect anonymity may not provide protection of the Fund's identity as intended. Certain IRS positions may limit the Fund's ability to use swap agreements in a desired tax strategy. It is possible that developments in the swap markets and/or the laws relating to swap agreements, including potential government regulation, could adversely affect the Fund's ability to benefit from using swap agreements, or could have adverse tax consequences. For more information about potentially changing regulation, see "Developing government regulation of derivatives" below.

*Risks of uncleared swaps.* Uncleared swaps are typically executed bilaterally with a swap dealer rather than traded on exchanges. As a result, swap participants may not be as protected as participants on organized exchanges. Performance of a swap agreement is the responsibility only of the swap counterparty and not of any exchange or clearinghouse. As a result, the Fund is subject to the risk that a counterparty will be unable or will refuse to perform under such agreement, including because of the counterparty's bankruptcy or insolvency. The Fund risks the loss of the accrued but unpaid amounts under a swap agreement, which could be substantial, in the event of a default, insolvency or bankruptcy by a swap counterparty. In such an event, the Fund will have contractual remedies pursuant to the swap agreements, but bankruptcy and insolvency laws could affect the Fund's rights as a creditor. If the counterparty's creditworthiness declines, the value of a swap agreement would likely decline, potentially resulting in losses. The Adviser will only approve a swap agreement counterparty for the Fund if the Adviser deems the counterparty to be creditworthy. However, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited.

*Risks of cleared swaps.* As noted above, under recent financial reforms, certain types of swaps are, and others eventually are expected to be, required to be cleared through a central counterparty, which may affect counterparty risk and other risks faced by the Fund.

Central clearing is designed to reduce counterparty credit risk and increase liquidity compared to uncleared swaps because central clearing interposes the central clearinghouse as the counterparty to each participant's swap, but it does not eliminate those risks completely and may involve additional costs and risks not involved with uncleared swaps. There is also a risk of loss by the Fund of the initial and variation collateral deposits in the event of bankruptcy of the FCM with which the Fund has an open position, or the central counterparty in a swap contract. The assets of the Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and collateral segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, the Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty. Credit risk of cleared swap participants is concentrated in a few clearinghouses, and the consequences of insolvency of a clearinghouse are not clear.

With cleared swaps, the Fund may not be able to obtain terms as favorable as it would be able to negotiate for a bilateral, uncleared swap. In addition, an FCM may unilaterally amend the terms of its agreement with the Fund, which may include the imposition of position limits or additional collateral requirements with respect to the Fund's investment in certain types of swaps. Central counterparties and FCMs can require termination of existing cleared swap transactions upon the occurrence of certain events, and can also require increases in collateral above the amount that is required at the initiation of the swap agreement. Currently, depending on a number of factors, the collateral required under the rules of the clearinghouse and FCM may be in excess of the collateral required to be posted by the Fund to support its obligations under a similar uncleared swap.

Finally, the Fund is subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, the Fund may be required to break the trade and make an early termination payment to the executing broker.

*Developing government regulation of derivatives.* The regulation of cleared and uncleared swaps, as well as other derivatives, is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for

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example, the implementation or reduction of speculative position limits, the implementation of higher collateral requirements, the establishment of daily price limits and the suspension of trading. It is not possible to predict fully the effects of current or future regulation. However, it is possible that developments in government regulation of various types of derivative instruments, such as speculative position limits on certain types of derivatives, or limits or restrictions on the counterparties with which the Fund engages in derivative transactions, may limit or prevent the Fund from using or limit the Fund's use of these instruments effectively as a part of its investment strategy, and could adversely affect the Fund's ability to achieve its investment goal(s). The Adviser will continue to monitor developments in the area, particularly to the extent regulatory changes affect the Fund's ability to enter into desired swap agreements. New requirements, even if not directly applicable to the Fund, may increase the cost of the Fund's investments and cost of doing business.

Unrated Debt Securities

The Fund may also invest in unrated debt securities. Unrated debt, while not necessarily lower in quality than rated securities, may not have as broad a market. Because of the size and perceived demand for the issue, among other factors, certain issuers may decide not to pay the cost of getting a rating for their bonds. The creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on the security, will be analyzed to determine whether to purchase unrated bonds.

U.S. Government Securities

The Fund may invest in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities ("U.S. government securities") in pursuit of its investment objective, in order to deposit such securities as initial or variation margin, as "cover" for the investment techniques it employs, as part of a cash reserve or for liquidity purposes.

U.S. government securities are high-quality instruments issued or guaranteed as to principal or interest by the U.S. Treasury Department ("U.S. Treasury") or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are backed by the right of the issuer to borrow from the U.S. Treasury; others are backed by discretionary authority of the U.S. government to purchase the agencies' obligations; while others are supported only by the credit of the instrumentality. In the case of securities not backed by the full faith and credit of the United States, the investor must look principally to the agency issuing or guaranteeing the obligation for ultimate repayment.

Yields on short-, intermediate- and long-term U.S. government securities are dependent on a variety of factors, including the general conditions of the money and bond markets, the size of a particular offering and the maturity of the obligation. Debt securities with longer maturities tend to produce higher capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market value of U.S. government securities generally varies inversely with changes in the market interest rates. An increase in interest rates, therefore, generally would reduce the market value of the Fund's portfolio investments in U.S. government securities, while a decline in interest rates generally would increase the market value of the Fund's portfolio investments in these securities. U.S. government securities include U.S. Treasury obligations, which includes U.S. Treasury Bills (which mature within one year of the date they are issued), U.S. Treasury Notes (which have maturities of one to ten years) and U.S. Treasury Bonds (which generally have maturities of more than 10 years). All such U.S. Treasury obligations are backed by the full faith and credit of the United States.

U.S. government securities also include obligations issued by U.S. government agencies and instrumentalities ("GSEs") that are backed by the full faith and credit of the U.S. government (such as securities issued or guaranteed by the Federal Housing Administration, Ginnie Mae<sup>®</sup>, the Export-Import Bank of the United States, the General Services Administration and the Maritime Administration and certain securities issued by the Small Business Administration).

Also, U.S. government securities include securities that are guaranteed by U.S. government-sponsored entities that are not backed by the full faith and credit of the U.S. government (such as Fannie Mae, Freddie Mac, or the Federal Home Loan Banks). These U.S. government-sponsored entities, although chartered and sponsored by the U.S. Congress, are not guaranteed, nor insured, by the U.S. government. They are supported only by the credit of the issuing agency, instrumentality or corporation.

Since 2008, Fannie Mae and Freddie Mac have been in conservatorship and have received significant capital support through U.S. Treasury preferred stock purchases, as well as U.S. Treasury and Federal Reserve purchases of their mortgage backed securities ("MBS"). The FHFA and the U.S. Treasury (through its agreement to purchase Fannie Mae and Freddie Mac preferred stock) have imposed strict limits on the size of their mortgage portfolios. The MBS purchase programs ended in 2010 but the U.S. Treasury has continued its support for the entities' capital as necessary to prevent a negative net worth and other governmental entities have provided significant support to Fannie Mae and Freddie Mac. There is no guarantee, however, that they will continue to do so. Accordingly, no assurance can be given that Fannie Mae and Freddie Mac will remain successful in meeting their obligations with respect to the debt and MBSs that they issue.

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In addition, the problems faced by Fannie Mae and Freddie Mac, resulting in their being placed into federal conservatorship and receiving significant U.S. government support, have sparked serious debate among federal policy makers regarding the continued role of the U.S. government in providing liquidity for mortgage loans. Discussions among policymakers have continued as to whether Fannie Mae and Freddie Mac should be nationalized, privatized, restructured, or eliminated altogether. Fannie Mae and Freddie Mac have been the subject of several legal actions and investigations related to certain accounting, disclosure, or corporate governance matters, which (along with any resulting financial restatements) may continue to have an adverse effect on the guaranteeing entities.

U.S. Government Sponsored Enterprises

U.S. government sponsored enterprises ("GSE") securities are securities issued by the U.S. government or its agencies or instrumentalities. Some obligations issued by GSEs are supported by the discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality and others only by the credit of the agency or instrumentality. Those securities bear fixed, floating or variable rates of interest. Interest may fluctuate based on generally recognized reference rates or the relationship of rates. While the U.S. government currently provides financial support to such GSEs or instrumentalities, no assurance can be given that it will always do so, since it is not so obligated by law.

Certain U.S. government debt securities, such as securities of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury. Others, such as securities issued by Fannie Mae<sup>®</sup> and Freddie Mac<sup>®</sup>, are supported only by the credit of the corporation. In the case of securities not backed by the full faith and credit of the United States, a fund must look principally to the agency issuing or guaranteeing the obligation in the event the agency or instrumentality does not meet its commitments. The U.S. government may choose not to provide financial support to GSEs or instrumentalities if it is not legally obligated to do so. A fund will invest in securities of such instrumentalities only when Rafferty is satisfied that the credit risk with respect to any such instrumentality is comparatively minimal.

When-Issued Securities

The Fund may enter into firm commitment agreements for the purchase of securities on a specified future date. The Fund may purchase, for example, new issues of fixed-income instruments on a when-issued basis, whereby the payment obligation, or yield to maturity, or coupon rate on the instruments may not be fixed at the time of transaction. The Fund will not purchase securities on a when-issued basis if, as a result, more than 15% of its net assets would be so invested. If the Fund enters into a firm commitment agreement, liability for the purchase price and the rights and risks of ownership of the security accrue to the Fund at the time it becomes obligated to purchase such security, although delivery and payment occur at a later date. Accordingly, if the market price of the security should decline, the effect of such an agreement would be to obligate the Fund to purchase the security at a price above the current market price on the date of delivery and payment.

Zero-Coupon, Payment-In-Kind and Strip Securities

The Fund may invest in zero-coupon, payment-in-kind and strip securities of any rating or maturity. Zero-coupon securities make no periodic interest payment but are sold at a deep discount from their face value, otherwise known as "original issue discount" or "OID." The buyer earns a rate of return determined by the gradual appreciation of the security, which is redeemed at face value on a specified maturity date. The OID varies depending on the time remaining until maturity, as well as market interest rates, liquidity of the security, and the issuer's perceived credit quality. If the issuer defaults, the Fund may not receive any return on its investment. Because zero-coupon securities bear no interest and compound semi-annually at the rate fixed at the time of issuance, their value generally is more volatile than the value of other fixed-income securities. Since zero-coupon security holders do not receive interest payments, when interest rates rise, zero-coupon securities fall more dramatically in value than securities paying interest on a current basis. When interest rates fall, zero-coupon securities rise more rapidly in value because the securities reflect a fixed rate of return. Payment-in-kind securities allow the issuer, at its option, to make current interest payments either in cash or in additional debt obligations of the issuer. Both zero-coupon securities and payment-in-kind securities allow an issuer to avoid the need to generate cash to meet current interest payments.

An investment in zero-coupon securities and delayed interest securities (which do not make interest payments until after a specified time) may cause the Fund to recognize income and be required to make distributions thereof to shareholders before it receives any cash payments on its investment. Moreover, even though payment-in-kind securities do not pay current interest in cash, the Fund nonetheless is required to accrue interest income on these investments and to distribute the interest income at least annually to shareholders. See "Dividends, Other Distributions and Taxes – Income from Zero Coupon and Payment-in-Kind Securities." Thus, the Fund could be required at times to liquidate other investments to satisfy distribution requirements.

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The Fund may also invest in strips, which are debt securities whose interest coupons are taken out and traded separately after the securities are issued but otherwise are comparable to zero-coupon securities. Like zero-coupon securities and payment-in-kind securities, strips are generally more sensitive to interest rate fluctuations than interest paying securities of comparable term and quality.

Other Investment Risks and Practices

*<u>Borrowing</u>*. The Fund may borrow money for investment purposes, which is a form of leveraging. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Leverage will magnify changes in the Fund's NAV and on the Fund's investments. Although the principal of such borrowings will be fixed, the Fund's assets may change in value during the time the borrowing is outstanding. Leverage also creates interest expenses for the Fund. To the extent the income derived from securities purchased with borrowed funds exceeds the interest the Fund will have to pay, that Fund's net income will be greater than it would be if leverage were not used. Conversely, if the income from the assets obtained with borrowed funds is not sufficient to cover the cost of leveraging, the net income of the Fund will be less than it would be if leverage were not used, and therefore the amount available for shareholders will be reduced.

The Fund may borrow money to facilitate management of the Fund's portfolio by enabling the Fund to meet redemption requests when the liquidation of portfolio instruments would be inconvenient or disadvantageous. Such borrowing is not for investment purposes and will be repaid by the borrowing Fund promptly.

As required by the 1940 Act, the Fund must maintain continuous asset coverage (total assets, including assets acquired with borrowed funds, less liabilities exclusive of borrowings) of 300% of all amounts borrowed. If at any time the value of the required asset coverage declines as a result of market fluctuations or other reasons, the Fund may be required to sell some of its portfolio investments within three days to reduce the amount of its borrowings and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell portfolio instruments at that time.

*<u>Portfolio Turnover</u>*. The Trust anticipates that the Fund's annual portfolio turnover may vary year to year. The Fund's portfolio turnover rate is calculated by the value of the securities purchased or securities sold, excluding all securities whose terms-to-maturity at the time of acquisition were less than 397 days, divided by the average monthly value of such securities owned during the year. Based on this calculation, instruments with remaining terms-to-maturity of less than 397 days are excluded from the portfolio turnover rate. Such instruments generally would include futures contracts and options, since such contracts generally have remaining terms-to-maturity of less than 397 days. In any given period, all of the Fund's investments may have remaining terms-to-maturity of less than 397 days; in that case, the portfolio turnover rate for that period would be equal to zero. However, the Fund's portfolio turnover rate calculated with all securities whose terms-to-maturity were less than 397 days is anticipated to be unusually high.

High portfolio turnover involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales also may result in adverse tax consequences to a Fund's shareholders resulting from its distributions of increased net capital gains, if any, recognized as a result of the sales. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund's performance.

For the fiscal year ended August 31, 2025, the portfolio turnover for the Fund decreased significantly from the fiscal year ended August 31, 2024 as a result of a [decrease in transactions of the underlying securities and decrease in swap transactions].

Securities Lending

The Fund may lend portfolio securities to certain borrowers that Rafferty determines to be creditworthy. The borrowers provide collateral that is maintained in an amount at least equal to the current market value of the securities loaned, marked to market daily. Borrowers continuously secure their obligations to return securities on loan from the Fund by depositing any combination of short-term U.S. government securities and cash as collateral with the Fund. No securities loan will be made on behalf of the Fund if, as a result, the aggregate value of all securities loaned by the Fund exceeds one-third of the value of the Fund's total assets (including the value of the collateral received) or such lower limit as set by Rafferty or the Board. The Fund may terminate a loan at any time and obtain the return of the securities loaned. The Fund receives, by way of substitute payment, the value of any interest or cash or non-cash distributions paid on the loaned securities that it would have received if the securities were not on loan. Any gain or loss in the market price of the borrowed securities that occurs during the term of the loan inures to the lending Fund and that Fund's shareholders.

With respect to loans that are collateralized by cash, the borrower may be entitled to receive a fee based on the amount of cash collateral. The Fund is typically compensated by the difference between the amount earned on the reinvestment of cash collateral and the fee paid to the borrower. In the case of collateral other than cash, the Fund is typically compensated by a fee paid by the borrower equal to a percentage of the market value of the loaned securities. A Fund may also receive

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such fees on "special" loans that are cash-collateralized. Any cash collateral may be reinvested in money market funds. Such money market fund shares will not be subject to a sales load, redemption fee, distribution fee or service fee. However, such investments are subject to investment risk.

Securities lending involves exposure to certain risks, including operational risk (*i.e.*, the risk of losses resulting from problems in the settlement and accounting process), "gap" risk (*i.e.*, the risk of a mismatch between the return of cash collateral reinvestments and the fees the Fund has agreed to pay a borrower), and credit, legal, counterparty and market risk. If a securities lending counterparty were to default, the Fund would be subject to the risk of a possible delay in receiving collateral or in recovering the loaned securities, or to a possible loss of rights in the collateral. In the event a borrower does not return the Fund's securities as agreed, the Fund could experience losses if the proceeds received from liquidating the collateral do not at least equal the value of the loaned security at the time the collateral is liquidated, plus the transaction costs incurred in purchasing replacement securities. This event could trigger adverse tax consequences for the Fund. The Fund could lose money if its investment of cash collateral declines in value over the period of the loan. Substitute payments for dividends received by the Fund while its securities are loaned out will not be considered qualified dividend income.

Correlation and Tracking Risk

Several factors may affect the Fund's ability to obtain its monthly leveraged investment objective. Among these factors are: (1) Fund expenses, including brokerage expenses and commissions and financing costs related to derivatives (which may be increased by high portfolio turnover) and other transactions costs and fees; (2) less than all of the securities in the Index being held by the Fund and securities not included in the Index being held by the Fund; (3) an imperfect correlation between the performance of instruments held by the Fund, such as other investment companies, including ETFs, swap agreements, futures contracts and options, and the performance of the underlying securities in the cash market comprising the Index; (4) bid-ask spreads (the effect of which may be increased by portfolio turnover); (5) the Fund holding instruments that are illiquid or the market for which becomes disrupted; (6) the need to conform the Fund's portfolio holdings to comply with that Fund's investment restrictions or policies, or regulatory or tax law requirements; (7) income items, valuation methodologies and accounting standards; (8) significant purchase and redemption activity by shareholders; and (9) market movements that run counter to the leveraged Fund's investments (which will cause divergence between the Fund and the Index over time due to the mathematical effects of leveraging).

There can be no guarantee that the Fund will achieve a high degree of correlation with its leveraged investment objective relative to the Index. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. Activities surrounding index reconstitutions and other index repositioning events may hinder the Fund's ability to meet its calendar month leveraged investment objective.

The Fund may not have investment exposure to all securities in the Index, or its weighting of investment exposure to such stocks or industries may be different from that of the Index. In addition, the Fund may invest in securities or financial instruments not included in the Index. The Fund may take or refrain from taking positions in order to improve tax efficiency or comply with regulatory restrictions, either of which may negatively affect the Fund's leveraged correlation with the Index. The Fund may be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Additionally, securities in the Index may trade on markets that may not be open on the same day as the Fund, which may cause a difference between the performance of the Fund and the Index.

Because the Index may include instruments that trade on a different market than the Fund, the Fund's return may vary from the leveraged performance of the Index because different markets may close before the Exchange opens or may not be open for business on the same calendar days as the Fund. Additionally, due to differences in trading hours between these different markets, and because the value of the Index may be determined using prices obtained at times other than the Fund's NAV calculation time, correlation to the Index may be measured by comparing the Fund's monthly return to the inverse of a multiple of the calendar month performance of the Index or by comparing the monthly change in the Fund's NAV per share to leveraged calendar month performance of one or more U.S. ETFs that reflect the values of the securities underlying the Index as of the Fund's NAV calculation time. It is important to note that correlation to these ETFs may vary from the correlation to the Index due to embedded costs and other factors.

Any of these factors individually or in combination with other factors could decrease the correlation between the monthly leveraged performance of the Fund and the Index and may hinder the Fund's ability to meet its investment objective.

Leverage

The Fund intends regularly to use leveraged investment techniques in pursuing its investment objectives. Utilization of leverage involves special risks and should be considered to be speculative. Leverage exists when the Fund achieves the right to a return on a capital base that exceeds the amount of the Fund's net assets. Leverage creates the potential for greater gains to shareholders of the Fund during favorable market conditions and the risk of magnified losses during adverse market conditions. Leverage is likely to cause higher volatility of the NAV of the Fund's Shares. Leverage may involve the creation

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of a liability that does not entail any interest costs or the creation of a liability that requires the Fund to pay interest which would decrease the Fund's total return to shareholders. If the Fund achieves its investment objective, during adverse market conditions, shareholders should experience a loss greater than they would have incurred had the Fund not been leveraged.

**Special Note Regarding the Correlation Risks of the Fund**. As discussed in the Prospectus, the Fund is "leveraged" meaning it has an investment objective to match 125% of the performance of the Index in a calendar month. The Fund is subject to all of the correlation risks described in the Prospectus. In addition, there is a special form of correlation risk that derives from the Fund's use of leverage, which is that for periods greater than one calendar month, the use of leverage tends to cause the performance of the Fund to be either greater than, or less than, 125% of the Index.

The Fund's return for periods longer than one month is primarily a function of the following:

a) the Index performance;

b) the Index volatility;

c) financing rates associated with leverage;

d) other fund expenses;

e) dividends paid by companies in the Index; and

f) period of time.

The performance for the Fund can be estimated given any set of assumptions for the factors described above. Illustrated below is the impact of two factors, the Index volatility and the Index performance, on the Fund. Underlying index volatility is a statistical measure of the magnitude of fluctuations in the returns of the index and is calculated as the standard deviation of the natural logarithms of one plus the index return (calculated daily), multiplied by the square root of the number of trading days per year (assumed to be 252). The illustration estimates Fund returns for a number of combinations of the Index performance and the Index volatility over a one year period and assumes: a) no dividends paid; b) no fund expenses; and c) borrowing/lending rates (to obtain leverage) of zero percent. If fund expenses were included, the Fund's performance would be lower than shown.

As shown below, the Fund would be expected to lose 3.9% if the Index provided no return over a one year period during which the Index experienced annualized volatility of 25%. If the Index's annualized volatility were to rise to 75%, the hypothetical loss for a one-year period for the Fund widens to approximately 21.9%.

At higher ranges of volatility, there is a chance of a significant loss of value in the Fund. For instance, if the Index's annualized volatility is 100%, the Fund would be expected to lose approximately 30.9% of its value, even if the cumulative return of the Index for the year was 0%. The volatility of ETFs or instruments that reflect the value of the Index, such as swaps, may differ from the volatility of the Index.

In the table below, areas shaded green represent those scenarios where the Fund with the investment objective described will outperform (*i.e.*, return more than) 125% of the performance of the Index; conversely, areas shaded red represent those scenarios where the Fund will underperform (*i.e.*, return less than) 125% of the performance of the Index.

The table below is intended to underscore the fact that the Fund is designed as a short-term trading vehicle for investors who intend to actively monitor and manage their portfolios. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For additional information regarding correlation and volatility risk for the Fund, see "Effects of Compounding and Market Volatility Risk" in the Prospectus.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One Year**<br> **Index**<br>| **125%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-75%** | -70.4% | -71.9% | -76.2% | -80.7% | -84.9% |
| **-50%** | **-63%** | -59.7% | -61.5% | -66.5% | -72.5% | -77.6% |
| **-40%** | **-50%** | -48.6% | -50.7% | -56.5% | -63.3% | -69.8% |
| **-30%** | **-38%** | -37.0% | -39.4% | -45.7% | -53.0% | -60.5% |
| **-20%** | **-25%** | -25.1% | -27.7% | -35.1% | -42.7% | -50.6% |
| **-10%** | **-13%** | -13.0% | -16.0% | -24.0% | -32.4% | -40.7% |
| **0%** | **0%** | -0.7% | -3.9% | -12.6% | -21.9% | -30.9% |
| **10%** | **13%** | 11.9% | 8.3% | -1.1% | -11.87% | -20.6% |
| **20%** | **25%** | 24.5% | 20.6% | 10.3% | -0.7% | -9.3% |
| **30%** | **38%** | 37.3% | 33.0% | 21.9% | 10.4% | 1.9% |
| **40%** | **50%** | 50.2% | 45.4% | 33.3% | 21.7% | 11.2% |
| **50%** | **63%** | 63.2% | 57.9% | 44.8% | 33.1% | 22.0% |
| **60%** | **75%** | 76.2% | 70.3% | 56.2% | 42.60% | 33.4% |

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The foregoing table is intended to isolate the effect of the Index volatility and the Index performance on the return of the Fund. The Fund's actual returns may be significantly greater or less than the returns shown above as a result of any of factors discussed above or under "Effects of Compounding and Market Volatility Risk" in the Prospectus.

Investment Restrictions

The Trust, on behalf of the Fund, has adopted the following investment policies which are fundamental policies that may not be changed without the affirmative vote of a majority of the outstanding voting securities of the Fund. As defined by the 1940 Act, a "vote of a majority of the outstanding voting securities of the Fund" means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares present at a shareholders' meeting, if more than 50% of the outstanding shares are represented at the meeting in person or by proxy.

For purposes of the following limitations, all percentage limitations apply immediately after a purchase or initial investment. Except with respect to borrowing money, if a percentage limitation is adhered to at the time of the investment, a later increase or decrease in the percentage resulting from any change in value or net assets will not result in a violation of such restrictions. If at any time the Fund's borrowings exceed its limitations due to a decline in net assets, such borrowings will be reduced within three days (not including Sundays and holidays), or such longer period as may be permitted by the 1940 Act, to the extent necessary to comply with the one-third limitation.

**The Fund shall not**:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Lend any security or make any other loan if, as a result, more than 33 1/3% of the value of the Fund's total assets would be lent to other parties, except (1) through the purchase of a portion of an issue of debt securities in accordance with the Fund's investment objective, policies and limitations; or (2) by engaging in repurchase agreements with respect to portfolio securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Underwrite securities of any other issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Purchase, hold, or deal in real estate or oil and gas interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Pledge, mortgage, or hypothecate the Fund's assets, except (1) to the extent necessary to secure permitted borrowings; (2) in connection with the purchase of securities on a forward-commitment or delayed-delivery basis or the sale of securities on a delayed-delivery basis; and (3) in connection with options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Invest in physical commodities, except that the Fund may purchase and sell foreign currency, options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed-delivery basis, and other financial instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Issue any "senior security" (as such term is defined in Section 18(f) of the 1940 Act) (including the amount of senior securities issued by excluding liabilities and indebtedness not constituting senior securities), except (1) that the Fund may issue senior securities in connection with transactions in options, futures, options on futures and forward contracts, swaps, caps, floors, collars and other similar investments; (2) as otherwise permitted herein and in Limitation 4 above and 7 below; and (3) the Fund may make short sales of securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Borrow money, except (1) to the extent permitted under the 1940 Act (which currently limits borrowing to no more than 33 1/3% of the value of the Fund's total assets; (2) as a temporary measure and then only in amounts not to exceed 5% of the value of the Fund's total assets; (3) to enter into reverse repurchase agreements; or (4) to lend portfolio securities. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments shall not constitute borrowing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Invest more than 25% of the value of its net assets in the securities of issuers in any single industry, provided that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.

The Fund has adopted the following investment policy that enables it to invest in another investment company or series thereof that has substantially similar investment objectives and policies:

Notwithstanding any other limitation, the Fund may invest all of its investable assets in an open-end management investment company with substantially the same investment objectives, policies and limitations as the Fund. For this purpose, "all of the Fund's investable assets" means that the only investment securities that will be held by the Fund will be the Fund's interest in the investment company.

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Portfolio Transactions and Brokerage

Subject to the general supervision by the Trustees, Rafferty is responsible for decisions to buy and sell securities and derivatives for the Fund, the selection of broker-dealers to effect the transactions, and the negotiation of brokerage commissions, if any. Rafferty expects that the Fund may execute brokerage or other agency transactions through registered broker-dealers, for a commission, in conformity with the 1940 Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder.

When selecting a broker or dealer to execute portfolio transactions, Rafferty considers many factors, including the rate of commission or the size of the broker-dealer's "spread," the size and difficulty of the order, the nature of the market for the security, operational capabilities of the broker-dealer and the research, statistical and economic data furnished by the broker-dealer to Rafferty.

In effecting portfolio transactions for the Fund, Rafferty seeks to receive the closing prices of securities that are in line with those of the securities included in the Index and seeks to execute trades of such securities at the commission rates reasonably available. With respect to agency transactions, Rafferty may execute trades at a higher rate of commission if reasonable in relation to brokerage and research services provided to the Fund or Rafferty. Such services may include the following: information as to the availability of securities for purchase or sale; statistical or factual information or opinions pertaining to investment; wire services; and appraisals or evaluations of portfolio securities. During the last fiscal year, no Fund directed its brokerage commissions to a broker because of research provided.

The Fund believes that the requirement to always seek the lowest possible commission cost could impede effective portfolio management and preclude the Fund and Rafferty from obtaining a high quality of brokerage and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, Rafferty relies upon its experience and knowledge regarding commissions generally charged by various brokers and on its judgment in evaluating the brokerage and research services received from the broker effecting the transaction. In addition to commission rates, when selecting a broker for a particular transaction, Rafferty considers the following factors, among others: the broker's availability, willingness to commit capital, reputation and integrity, facilities reliability, access to research, execution capacity and responsiveness.

For purchases and sales of derivatives (*i.e.*, financial instruments whose value is derived from the value of an underlying asset, interest rate or index), Rafferty evaluates counterparties on the following factors: reputation and financial strength; execution prices, commission costs, ability to handle complex orders; ability to provide prompt and full execution; accuracy of reports and confirmation provided; reliability; type and quality of research provided; financing and other associated costs related to the transaction; and whether the total cost or proceeds in each transaction is the most favorable under the circumstances.

Rafferty may use research and services provided to it by brokers in servicing the Fund; however, not all such services may be used by Rafferty in connection with the Fund. While the receipt of such information and services is useful in varying degrees and may reduce the amount of research or services otherwise provided to the Fund by Rafferty, the receipt of such information and these services does not reduce the investment advisory fee paid by the Fund.

Purchases and sales of U.S. government securities normally are transacted through issuers, underwriters or major dealers in U.S. government securities acting as principals. Such transactions are made on a net basis and do not involve payment of brokerage commissions. The cost of securities purchased from an underwriter usually includes a commission paid by the issuer to the underwriters; transactions with dealers normally reflect the spread between bid and asked prices.

Aggregate brokerage commissions paid by the Fund for the fiscal periods shown are set forth in the table below:

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| | |
|:---|:---|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $28403 |
| Year Ended August 31, 2024 | $26116 |
| Year Ended August 31, 2023 | $14750 |

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The brokerage commissions for the Fund have increased due to increasing average net assets.

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Portfolio Holdings Information

The Trust maintains portfolio holdings disclosure policies that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the Fund's portfolio investments to ensure that such disclosure is in the best interests of the Fund's shareholders. In adopting the policies, the Board considered actual and potential material conflicts that could arise between the interest of Fund shareholders, the Adviser, the Fund's distributor, or any other affiliated person of the Fund. Disclosure of the Fund's complete holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the holdings report on Form N-PORT. These reports are available, free of charge, on the EDGAR database on the SEC's website at www.sec.gov.

From time to time, rating and ranking organizations such as Standard & Poor's<sup>®</sup> and Morningstar<sup>®</sup>, Inc. may request complete portfolio holdings information in connection with rating the Fund. Similarly, pension plan sponsors, consultants and/or other financial institutions may request a complete list of portfolio holdings in order to assess the risks of the Fund's portfolio along with related performance attribution statistics. The Trust believes that these third parties have legitimate objectives in requesting such portfolio holdings information. To prevent such parties from potentially misusing the complete portfolio holdings information, the Fund will generally only disclose such information as of the end of the most recent calendar quarter, with a lag of approximately 60 days. In addition, the Fund's Chief Compliance Officer ("CCO") may grant exceptions to permit additional disclosure of the complete portfolio holdings information at differing times and with differing lag times to rating agencies and to the parties noted above, provided that (1) the recipient is subject to a confidentiality agreement; (2) the recipient will utilize the information to reach certain conclusions about the investment management characteristics of the Fund and will not use the information to facilitate or assist in any investment program; and (3) the recipient will not provide access to third parties to this information. The CCO shall report any disclosures made pursuant to this exception to the Board.

In addition, the Fund's service providers, such as custodian, administrator, transfer agent, distributor, legal counsel and independent registered public accounting firm may receive portfolio holdings information in connection with their services to the Fund. In no event shall the Adviser, any affiliates or employees, or the Fund receive any direct or indirect compensation in connection with the disclosure of information about the Fund's portfolio holdings.

In the event a portfolio holdings disclosure to be made pursuant to the policies presents a conflict of interest between the Fund's shareholders and the Adviser, the Fund's distributor and their affiliates or employees and any affiliated person of the Fund, the disclosure will not be made unless a majority of the Board members who are not "interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees") approves such disclosure.

Management of the Trust

**The Board of Trustees**

The Trust is governed by its Board of Trustees (the "Board"). The Board is responsible for and oversees the overall management and operations of the Trust and the Fund, which includes the general oversight and review of the Fund's investment activities, in accordance with federal law and the law of the Commonwealth of Massachusetts, as well as the stated policies of the Fund. The Board oversees the Trust's officers and service providers, including Rafferty, which is responsible for the management of the day-to-day operations of the Fund based on policies and agreements reviewed and approved by the Board. In carrying out these responsibilities, the Board regularly interacts with and receives reports from senior personnel of service providers, including personnel from Rafferty. The Board also is assisted by the Trust's independent auditor (who reports directly to the Trust's Audit Committee), independent counsel and other professionals as appropriate.

**Risk Oversight**

Consistent with its responsibility for oversight of the Trust and the Fund, the Board oversees the management of risks relating to the administration and operation of the Trust and the Fund. Rafferty, as part of its responsibilities for the day-to-day operations of the Fund, is responsible for day-to-day risk management for the Fund. The Board, in the exercise of its reasonable business judgment performs its risk management oversight directly and, as to certain matters, through its committees (described below) and through the Board members who are not "interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees"). The following provides an overview of the principal, but not all, aspects of the Board's oversight of risk management for the Trust and the Fund.

The Board has adopted, and periodically reviews, policies and procedures designed to address risks to the Trust and the Fund. In addition, under the general oversight of the Board, Rafferty and other service providers to the Fund have themselves adopted a variety of policies, procedures and controls designed to address particular risks to the Fund. Different processes, procedures and controls are employed with respect to different types of risks.

The Board also oversees risk management for the Trust and the Fund through review of regular reports, presentations and other information from officers of the Trust and other persons. The Trust's CCO and senior officers of Rafferty regularly

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report to the Board on a range of matters, including those relating to risk management. The Board also regularly receives reports from Rafferty and U.S. Bancorp Fund Services, LLC ("USBFS") with respect to the Fund's investments. In addition to regular reports from these parties, the Board also receives reports regarding other service providers to the Trust, either directly or through Rafferty, USBFS or the CCO, on a periodic or regular basis. At least annually, the Board receives a report from the CCO regarding the effectiveness of the Fund's compliance program. Also, the Board receives regular reports, presentations and other information from Rafferty, including in connection with the Board's consideration of the renewal of each of the Trust's agreements with Rafferty and the Trust's distribution plan under Rule 12b-1 under the 1940 Act.

The CCO reports regularly to the Board on Fund valuation matters. The Audit Committee receives regular reports from the Trust's independent registered public accounting firm on internal control and financial reporting matters. On at least a quarterly basis, the Independent Trustees meet with the CCO to discuss matters relating to the Fund's compliance program.

**Board Structure and Related Matters**

Independent Trustees constitute at least two-thirds of the Board. The Trustees discharge their responsibilities collectively as a Board, as well as through Board committees, each of which operates pursuant to a charter approved by the Board that delineates the specific responsibilities of that committee. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee and the Qualified Legal Compliance Committee. For example, the Audit Committee is responsible for specific matters related to oversight of the Fund's independent auditors, subject to approval of the Audit Committee's recommendations by the Board. The members and responsibilities of each Board committee are summarized below.

The Board periodically evaluates its structure and composition as well as various aspects of its operations. The Chairman of the Board is not an Independent Trustee and the Board has chosen not to have a lead Independent Trustee. However, the Board believes that its leadership structure, including its Independent Trustees and Board committees, is appropriate for the Trust in light of, among other factors, the asset size and nature of the Fund, the number of funds overseen by the Board, the arrangements for the conduct of the Fund's operations, the number of Trustees, and the Board's responsibilities. On an annual basis, the Board conducts a self-evaluation that considers, among other matters, whether the Board and its committees are functioning effectively and whether, given the size and composition of the Board and each of its committees, the Trustees are able to oversee effectively the number of funds in the complex.

The Trust is part of the Direxion Family of Investment Companies, which is comprised of the 8 separate series within the Trust and 250 separate series within the Direxion Shares ETF Trust. The same persons who constitute the Board also constitute the Board of Trustees of the Direxion Shares ETF Trust.

The Board holds four regularly scheduled meetings each year and the Independent Trustees hold one additional meeting in connection with the annual contract renewals. The Board may hold special meetings, as needed, to address matters arising between regular meetings. During a portion of each meeting, the Independent Trustees meet outside of management's presence. The Independent Trustees may hold special meetings, as needed.

The Trustees of the Trust are identified in the tables below, which provide information regarding their age, business address and principal occupation during the past five years including any affiliation with Rafferty, the length of service to the Trust, and the position, if any, that they hold on the board of directors of companies other than the Trust as of the date of this SAI. Each of the Trustees of the Trust also serve on the Board of the Direxion Shares ETF Trust, the other registered investment company in the Direxion complex. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022.

**Interested Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Daniel D. O'Neill<sup>(1)</sup> <br>Age: 57<br>| &nbsp;&nbsp; Chairman of the <br> Board of Trustees<br>| &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, April 2021 – <br> September 2022; <br> Managing <br> Director, Rafferty <br> Asset <br> Management, <br> LLC, January 1999 <br> – January 2019.<br>| 258 | None. |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(3)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Angela Brickl<sup>(2)</sup> <br>Age: 49<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; President, Rafferty <br> Asset <br> Management, LLC <br> since September <br> 2022; Chief <br> Operating Officer, <br> Rafferty Asset <br> Management, LLC <br> May 2021 – <br> September 2022; <br> General Counsel, <br> Rafferty Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| 258 | None. |

---

**Independent Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(4)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| David L. Driscoll<br> Age: 56 <br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Board Member, <br> Algorithmic <br> Research and <br> Trading, since <br> 2022; Board <br> Advisor, University <br> Common Real <br> Estate, since 2012; <br> Member, Kendrick <br> LLC, since 2006; <br> Partner, King <br> Associates, LLP, <br> since 2004; <br> Principal, Grey <br> Oaks LLP, since <br> 2003.<br>| 258 | None. |
| Kathleen M. Berkery<br> Age: 58<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2019<br>| &nbsp;&nbsp; Chief Financial <br> Officer, Metro <br> Physical Therapy, <br> LLC, since 2023; <br> Chief Financial <br> Officer, Student <br> Sponsor Partners, <br> 2021 - 2023; <br> Senior Manager- <br> Trusts & Estates, <br> Rynkar, Vail & <br> Barrett, LLC, 2018 <br> - 2021.<br>| 258 | None. |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(4)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Carlyle Peake<br> Age: 54<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Head of US & <br> LATAM Debt <br> Syndicate, BBVA <br> Securities, Inc., <br> since 2011.<br>| 258 | None. |
| Mary Jo Collins<br> Age: 69<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Managing <br> Director, B. Riley <br> Financial, March <br> – December <br> 2022; Managing <br> Director, Imperial <br> Capital LLC, from <br> 2020-2022; <br> Director, Royal <br> Bank of Canada, <br> 2014-2020.<br>| 258 | None. |
| Bradley Kurtzman<br> Age: 52<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2025<br>| &nbsp;&nbsp; Partner, <br> Squarepoint <br> Capital, since May <br> 2019; Managing <br> Director, Deutsche <br> Bank 2012-2019.<br>| 258 | None. |

---

<sup>(1)</sup>

Mr. O'Neill is affiliated with Rafferty because he owns a beneficial interest in Rafferty.

<sup>(2)</sup>

Ms. Brickl is affiliated with Rafferty because she serves as an officer of Rafferty.

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

In addition to the information set forth in the tables above and other relevant qualifications, experience, attributes or skills applicable to a particular Trustee, the following provides further information about the qualifications and experience of each Trustee.

Daniel D. O'Neill: Mr. O'Neill has extensive experience in the investment management business. Mr. O'Neill was the Managing Director of Rafferty from 1999 through January 2019 and Chief Executive Officer at Rafferty from April 2021 through September 2022.

Angela Brickl: Ms. Brickl has extensive experience in the investment management business, including serving as Chief Operating Officer from April 2021 to September 2022 and since November 2024, and President of Rafferty from September 2022 to November 2024. Ms. Brickl also serves as Rafferty's General Counsel and served as Chief Compliance Officer from 2012 through March 2023.

David L. Driscoll: Mr. Driscoll has extensive experience with risk assessment and strategic planning as a partner and manager of various real estate partnerships and companies.

Kathleen M. Berkery: Ms. Berkery has extensive experience with estate planning, estate administration, fiduciary income taxation, financial planning, finance, as well as business sales and development, and marketing.

Carlyle Peake: Mr. Peake has extensive global capital markets experience, as well as experience with client relations and sales of securities by issuers and investors and valuing, structuring, and negotiating complex debt issues for corporate and sovereign entities.

Mary Jo Collins: Ms. Collins has extensive experience evaluating credit risk of investment grade securities, including corporate bonds, preferred stocks, and hybrid securities, as well as managing relationships with retail and institutional investors.

Bradley M. Kurtzman: Mr. Kurtzman has extensive expertise in the management of large portfolios various asset classes (equities, rates, credit commodities) with a particular focus on the use of derivatives which includes trading, analytics, market risk management, and operational efficiency.

**Board Committees**

The Trust has an Audit Committee, consisting of each Independent Trustee. The primary responsibilities of the Trust's Audit Committee are set forth in its charter, which include making recommendations to the Board as to the engagement or discharge of the Trust's independent registered public accounting firm (including the audit fees charged by the auditors), supervising investigations into matters relating to audit matters, reviewing with the independent registered public accounting firm

------

of the results of audits, and addressing any other matters regarding audits. The Audit Committee met three times during the Trust's most recent fiscal year.

The Trust also has a Nominating and Governance Committee, consisting of each Independent Trustee. The primary responsibilities of the Nominating and Governance Committee are to make recommendations to the Board on issues related to the composition and operation of the Board, and communicate with management on those issues. The Nominating and Governance Committee also evaluates and nominates Board member candidates. In evaluating Board member candidates, the Nominating and Governance Committee considers the extent to which potential candidates possess sufficiently diverse skill sets and diversity characteristics that would contribute to the Board's overall effectiveness. The Nominating and Governance Committee will consider nominees recommended by shareholders. Such recommendations should be in writing and addressed to the Fund with attention to the Nominating and Governance Committee Chair. The recommendations must include the following preliminary information regarding the nominee: (1) name; (2) date of birth; (3) education; (4) business professional or other relevant experience and areas of expertise; (5) current business, professional or other relevant experience and areas of expertise; (6) current business and home addresses and contact information; (7) other board positions or prior experience; and (8) any knowledge and experience relating to investment companies and investment company governance. The Nominating and Governance Committee met three times during the Trust's most recent fiscal year.

The Trust has a Qualified Legal Compliance Committee, consisting of each Independent Trustee. The primary responsibility of the Trust's Qualified Legal Compliance Committee is to receive, review and take appropriate action with respect to any report made or referred to the Committee by an attorney of evidence of a material violation of applicable U.S. federal or state securities law, material breach of a fiduciary duty under U.S. federal or state law or a similar material violation by the Trust or by any officer, director, employee or agent of the Trust. The Audit Committee serves as the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee did not meet during the Trust's most recent fiscal year.

**Principal Officers of the Trust**

The officers of the Trust conduct and supervise its daily business. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of the date of this SAI, the officers of the Trust, their ages, their business address and their principal occupations during the past five years are as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Douglas Yones<br> Age: 50<br>| &nbsp;&nbsp; Chief Executive <br> Officer<br>| Since 2024 | &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, since 2024; <br> Head of Exchange <br> Traded Products, <br> NYSE, until 2024.<br>| N/A | N/A |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Angela Brickl<sup>(1)</sup> <br>Age: 49<br>| &nbsp;&nbsp; Chief Operating <br> Officer<br> General Counsel<br>| &nbsp;&nbsp; Since 2024<br> Since 2022<br>| &nbsp;&nbsp; Chief Operating <br> Officer, Rafferty <br> Asset <br> Management, LLC <br> May 2021 – <br> September 2022 <br> and since <br> November 2024; <br> President, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2022– November <br> 2024; General <br> Counsel, Rafferty <br> Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| N/A | N/A |
| Todd Sherman<br> Age: 44<br>| &nbsp;&nbsp; Chief Compliance <br> Officer<br>| Since 2023 | &nbsp;&nbsp; Chief Risk Officer, <br> Rafferty Asset <br> Management, <br> LLC, since 2018; <br> SVP Head of Risk, <br> 2012–2018.<br>| N/A | N/A |
| Patrick J. Rudnick<br> Age: 52<br>| &nbsp;&nbsp; Principal Executive<br> Officer <br>| Since 2018 | &nbsp;&nbsp; Senior Vice <br> President, Rafferty <br> Asset <br> Management, <br> LLC, since March <br> 2013.<br>| N/A | N/A |
| Corey Noltner<br> Age: 36<br>| &nbsp;&nbsp; Principal Financial <br> Officer<br>| Since 2021 | &nbsp;&nbsp; Senior Business <br> Analyst, Rafferty <br> Asset <br> Management, <br> LLC, since October <br> 2015.<br>| N/A | N/A |
| Alyssa Sherman<br> Age: 36<br>| Secretary | Since 2022 | &nbsp;&nbsp; Assistant General <br> Counsel, Rafferty <br> Asset <br> Management, <br> LLC, since April <br> 2021; Associate, <br> K&L Gates LLP, <br> September 2015 <br> – March 2021.<br>| N/A | N/A |

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<sup>(1)</sup>

Ms. Brickl serves on the Board of Trustees of the Direxion Funds and Direxion Shares ETF Trust.

<sup>(2)</sup>

Pursuant to the Trust's By-laws, each officer shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, removal or resignation. Officers serve at the pleasure of the Board of Trustees and may be removed at any time with or without cause.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

The following table shows the amount of equity securities owned in the Direxion Family of Investment Companies by the Trustees as of the calendar year ended December 31, 2024:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Dollar Range of Equity** <br> **Securities Owned:**<br>| **Interested Trustees:** | **Interested Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** |
|  | &nbsp;&nbsp; **Daniel D.** <br> **O'Neill**<br>| &nbsp;&nbsp; **Angela**<br> **Brickl**<br>| &nbsp;&nbsp; **David L.** <br> **Driscoll**<br>| &nbsp;&nbsp; **Kathleen** <br> **M.**<br> **Berkery**<br>| &nbsp;&nbsp; **Carlyle**<br> **Peake**<br>| &nbsp;&nbsp; **Mary Jo**<br> **Collins**<br>| &nbsp;&nbsp; **Bradley**<br> **Kurtzman**<br>|
| &nbsp;&nbsp; Direxion Monthly <br> NASDAQ-100<sup>®</sup> Bull <br> 1.25X Fund<br>| $0 | $0 | $0 | $0 | $0 | $0 |  |
| &nbsp;&nbsp; Aggregate Dollar <br> Range of Equity <br> Securities in the <br> Direxion Family of <br> Investment <br> Companies<sup>(1)</sup> <br>| &nbsp;&nbsp; $10000 - <br> $50000<br>| $0 | &nbsp;&nbsp; $1 -<br> $10000<br>| $0 | $0 | $0 | &nbsp;&nbsp; Over <br> $100.000<br>|

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<sup>(1)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

The Trust's Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law. However, they are not protected against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office.

No officer, director or employee of Rafferty receives any compensation from the Fund for acting as a Trustee or officer of the Trust. The following table shows the compensation earned by each Trustee for the Trust's fiscal year ended August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Name of Person,** <br> **Position**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the** <br> **Trust**<sup>(1)</sup> <br>| **Pension or** <br> **Retirement Benefits** <br> **Accrued As Part of** <br> **the Trust's** <br> **Expenses**<br>| &nbsp;&nbsp; **Estimated** <br> **Annual Benefits** <br> **Upon Retirement**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the Direxion** <br> **Family of** <br> **Investment** <br> **Companies Paid** <br> **to the Trustees**<sup>(2)</sup> <br>|
| **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** |
| Daniel D. O'Neill  | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| Angela Brickl | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** |
| David L. Driscoll | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Kathleen M. Berkery | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Mary Jo Collins | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Carlyle Peake | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Bradley Kurtzman | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |

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<sup>(1)</sup>

Trustee compensation is allocated across the operational Funds of the Trust based on the proportion of the Fund's net assets to the total net assets of the operational Funds of the Trust.

<sup>(2)</sup>

For the fiscal year ended August 31, 2025, Trustees' fees and expenses in the amount of $112,500 were incurred by the Trust.

Principal Shareholders, Control Persons and Management Ownership

A principal shareholder is any person who owns of record or beneficially 5% or more of the outstanding shares of the Fund. A control person is a shareholder that owns beneficially or through controlled companies more than 25% of the voting securities of a company or acknowledges the existence of control. Shareholders owning voting securities in excess of 25% may determine the outcome of any matter affecting and voted on by shareholders of the Fund.

As of December 1, 2025, the following shareholders were considered to be either a principal shareholder or control person of the Funds:

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**Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund** 

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **Jurisdiction** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>| DE | 81.89% | Record |
| National Financial Services LLC<br> 499 Washington Boulevard<br> Jersey City, NJ 07310-2010<br>| N/A | N/A | 12.47% | Record |

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In addition, as of December 1, 2025, the Trustees and Officers as a group did not own any of the outstanding shares of the Fund.

Investment Adviser

Rafferty, 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022, provides investment advice to the Fund. Rafferty was organized as a New York limited liability company in June 1997. Michael Rafferty and Kathleen Rafferty Hay control Rafferty through their ownership in Rafferty Holdings, LLC and Daniel D. O'Neill controls Rafferty through his ownership in Minakian Partners, LLC.

Under an Investment Advisory Agreement ("Advisory Agreement") between Rafferty and the Trust, on behalf of the Fund, Rafferty provides a continuous investment program for the Fund's assets in accordance with its investment objectives, policies and limitations, and oversees the day-to-day operations of the Fund, subject to the supervision of the Trustees. Rafferty shall not be liable to the Trust or any Fund for anything done or omitted by it, except acts or omissions involving willful misfeasance, bad faith, negligence or reckless disregard of the duties imposed upon it by its agreement with the Trust or for any losses that may be sustained in the purchase, holding or sale of any security. Rafferty bears all costs associated with providing these advisory services and the expenses of the Trustees who are affiliated with or interested persons of Rafferty. The Trust bears all other expenses that are not assumed by Rafferty as described in the Prospectus. The Trust also is liable for nonrecurring expenses as may arise, including litigation to which the Fund may be a party. The Trust also may have an obligation to indemnify its Trustees and officers with respect to any such litigation.

The Advisory Agreement was initially approved by the Trustees (including all Independent Trustees) and Rafferty, as sole shareholder of the Fund in compliance with the 1940 Act. After an initial approval period of two years, the Advisory Agreement is renewable with respect to the Fund, so long as its continuance is approved at least annually (1) by the vote, cast at a meeting called for that purpose, of a majority of the Independent Trustees of the Trust; and (2) by the majority vote of either the full Board or the vote of a majority of the outstanding shares of the Fund. The Advisory Agreement automatically terminates on assignment and is terminable upon a 60-day written notice either by the Trust or Rafferty.

Pursuant to the Advisory Agreement, the Fund pays Rafferty a fee at an annualized rate based on a percentage of its average daily net assets of 0.75%.

Although the Fund is responsible for its own operating expenses, Rafferty has entered into an Operating Expense Limitation Agreement with the Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its investment advisory fees and management services fees and/or reimburse the Fund for Other Expenses (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses) through September 1, 2027 to the extent that the Fund's Total Annual Fund Operating Expenses exceed 1.15% of the Fund's average daily net assets.

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees upon notice to the Adviser and without the approval of Fund shareholders.

The table below shows the advisory fees incurred by each of the Fund, the amount of fees waived and/or reimbursed by Rafferty, and the total amount of fees paid to Rafferty by each of the Fund for the last three fiscal years ended August 31.

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| | | | |
|:---|:---|:---|:---|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund** | **Advisory fee accrued** | **Fees waived and**<br> **expenses absorbed by**<br> **Adviser**<br>| &nbsp;&nbsp; **Total fees paid to**<br> **(waived by)**<br> **Adviser**<br>|
| Year Ended August 31, 2025 | $57083 | &nbsp;&nbsp; $93931 | $(36848) |
| Year Ended August 31, 2024<sup>(1)</sup> <br>| $75452 | &nbsp;&nbsp; $73753 | $11860 |
| Year Ended August 31, 2023 | $32366 | &nbsp;&nbsp; $47888 | $(15522) |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

(1) For the fiscal year ended August 31, 2024, the Adviser recouped previously waived expenses in the amount of $10,161.

Pursuant to the Management Services Agreement, Rafferty provides certain administrative services to the Fund, including as follows: coordinating and implementing the Trust's contractual obligations with the Fund's other service providers; monitoring, overseeing and reviewing the performance of such service providers to ensure adherence to applicable contractual obligations; preparing or coordinating reports and presentations to the Board of Trustees by such service providers as requested, or deemed necessary pursuant to regulatory requirements; providing certain financial reporting services, compliance and risk management services. Effective November 1, 2024, for these services, the Trust pays to Rafferty a fee at the annual rate of 0.05% on the first $25 billion of aggregate average daily net assets of the Trust and the Direxion Shares ETF Trust, 0.0475% on aggregate average daily net assets between $25 billion and $50 billion and 0.045% on aggregate average daily net assets above $50 billion. This Management Services Fee may be waived under the Operating Expense Limitation Agreement that Rafferty has entered into with the Fund. This arrangement may be terminated at any time with the consent of the Board.

The tables below show the Management Services Fees paid by the Fund as of the fiscal years ended August 31:

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| | |
|:---|:---|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.25X Fund** | **Fees Paid** |
| Year Ended August 31, 2025\* | $3370 |
| Year Ended August 31, 2024 | $2468 |
| Year Ended August 31, 2023 | $1069 |

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\*The fees for the most recent fiscal year are higher than previous years due to an increase in the fee rate paid by the Fund due to the expanded list of services provided under the Management Services Agreement by Rafferty thereunder.

Pursuant to Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Trust, Rafferty and the Fund's distributor have adopted Codes of Ethics. These codes permit portfolio managers and other access persons of the Fund to invest in securities that may be owned by the Fund, subject to certain restrictions.

Portfolio Managers

Paul Brigandi and Tony Ng are jointly and primarily responsible for the day-to-day management of the Fund. An investment trading team of Rafferty employees assists Mr. Brigandi and Mr. Ng in the day-to-day management of the Fund subject to their primary responsibility and oversight. The Portfolio Managers work with the investment trading team to decide the target allocation of the Fund's investments and, on a day-to-day basis, an individual portfolio trader executes transactions for the Fund consistent with the target allocation. The members of the investment trading team rotate periodically among the various series of the Trust, including the Fund, so that no single individual is assigned to a specific Fund for extended periods of time.

In addition to the Fund, Mr. Brigandi and Mr. Ng manage the following other accounts as of August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Accounts** | &nbsp;&nbsp; **Total Number** <br> **of Accounts**<br>| **Total Assets**<br> **(In Billions)**<br>| &nbsp;&nbsp; **Total Number of** <br> **Accounts with** <br> **Performance** <br> **Based Fees**<br>| &nbsp;&nbsp; **Total Assets** <br> **of Accounts** <br> **with Performance** <br> **Based Fees**<br>|
| Registered Investment Companies | 122 | &nbsp;&nbsp; $52.1 | 0 | $0 |
| Other Pooled Investment Vehicles | 0 | &nbsp;&nbsp; $0 | 0 | $0 |
| Other Accounts | 0 | &nbsp;&nbsp; $0 | 0 | $0 |

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Rafferty manages other registered investment companies with investment objectives similar to those of the Fund, but does not manage any other pooled investment vehicles or other accounts. Two or more funds advised by Rafferty may invest in the same securities but the nature of each investment (long or short) may be opposite and in different proportions. Rafferty ordinarily executes transactions for the Fund "market-on-close," in which funds purchasing or selling the same security receive the same closing price.

Rafferty has not identified any additional material conflicts between the Fund and other accounts managed by the investment team. However, other actual or apparent conflicts of interest may arise in connection with the day-to-day management of the Fund and other accounts. The management of the Fund and other accounts may result in unequal time and attention being devoted to the Fund and other accounts. Rafferty's management fees for the services it provides to other accounts varies and may be higher or lower than the advisory fees it receives from the Fund. This could create potential conflicts of interest in which the portfolio manager may appear to favor one investment vehicle over another resulting in an account paying higher fees or one investment vehicle out performing another.

The compensation to the investment team, which includes the Portfolio Managers, is paid by Rafferty. Their compensation primarily consists of a fixed base salary and a bonus. The investment team's salary is reviewed annually and increases are

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determined by factors such as performance and seniority. Bonuses are determined by the individual performance of an employee including factors such as attention to detail, process, and efficiency, and are impacted by the overall performance of the firm. The investment team's salary and bonus are not based on the Fund's performance and as a result, no benchmarks are used. Along with all other employees of Rafferty, the investment team may participate in the firm's 401(k) retirement plan where Rafferty may make matching contributions up to a defined percentage of their salary.

Mr. Brigandi and Mr. Ng did not own any shares of the Fund as of August 31, 2025.

Proxy Voting Policies and Procedures

The Board has adopted policies and procedures with respect to voting proxies (the "Proxy Policy") related to portfolio securities of the Fund. Pursuant to these policies and procedures the Board of the Trust has delegated responsibility for voting such proxies to the Adviser, subject to the Board's continuing oversight.

The Proxy Policy is intended to protect shareholder interests and comply with applicable state and federal corporate and securities laws. It applies to any voting rights with respect to securities held in accounts of the Fund. To assist the Adviser in its responsibility for voting proxies and administering the overall proxy voting process, the Adviser has retained Institutional Shareholder Services ("ISS") as an expert in the proxy voting and corporate governance area. ISS is a subsidiary of Vestar Capital Partners VI, L.P.; a leading U.S. middle market private equity firm. The services provided by ISS include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. ISS issues monthly reports which are reviewed by the Adviser to assure proxies are being voted properly. The Adviser and ISS also perform checks on a quarterly basis to match the voting activity with available shareholder meeting information. ISS' management meets on a regular basis to discuss its approach to new developments and amendments to existing proxy voting guidelines (the "Guidelines"). Information on such developments and amendments are then provided to the Adviser.

The Guidelines are maintained and implemented by ISS and are an extensive list of common proxy voting issues with recommended voting actions based on the overall goal of achieving maximum shareholder value and protection of shareholder interests and rights. Generally, proxies are voted in accordance with the voting recommendations contained in the Guidelines. If necessary, the Adviser will be consulted by ISS on non-routine issues. Proxy issues and factors considered when resolving proxy issues in the Guidelines include, but are not limited to:

● Election of Directors – considering all factors such as director qualifications, term of office and age limits.

● Proxy Contests – considering factors such as voting nominees in contested elections and reimbursement of expenses.

● Election of Auditors – considering factors such as independence and reputation of the auditing firm.

● Proxy Contest Defenses – considering factors such as board structure and cumulative voting.

● Tender Offer Defenses – considering factors such as poison pills (stock purchase rights plans) and fair price provisions.

● Miscellaneous Governance Issues – considering factors such as confidential voting and equal access.

● Capital Structure – considering factors such as common stock authorization and stock distributions.

● Executive and Director Compensation – considering factors such as performance goals and employee stock purchase plans.

● State of Incorporation – considering factors such as state takeover statutes and voting on reincorporation proposals.

● Mergers and Corporate Restructuring – considering factors such as spin-offs and asset sales.

● Mutual Fund Proxy Voting – considering factors such as election of directors and proxy contests.

● Social and Corporate Responsibility Issues – considering factors such as social, environmental, and labor issues.

A full description of the Guidelines and voting policy is maintain by the Adviser, and a complete copy of the Guidelines is available without charge, upon request by calling the Adviser at (800) 851-0511.

<u>Conflicts of Interest</u>

From time to time, proxy issues may pose a material conflict of interest between the Fund's shareholders and the Adviser, the Distributor or any affiliates thereof. Due to the limited nature of the Adviser's activities (*e.g.*, no underwriting business, no publicly-traded affiliates, no investment banking activities, and no research recommendations), conflicts of interest are likely to be infrequent. Nevertheless, it is the duty of the Adviser to monitor potential conflicts of interest. In the event a conflict of interest arises, the Adviser will be responsible for voting the proxy, will communicate how the proxy should be voted to ISS, and will confirm ISS voted the proxy consistent with the Adviser's direction.

<u>Proxy Voting Recordkeeping</u> 

The Adviser, with the assistance of ISS, maintains for a period of at least five years, a record of each proxy statement received and materials that were considered when the proxy was voted during the calendar year. Information on how the Fund voted proxies relating to portfolio securities for the 12-month (or shorter) period ended June 30 is available without charge, upon request, by calling the Adviser at (800) 851-0511, by visiting <u>direxion.com</u> or on the SEC's website at <u>http://www.sec.gov</u>.

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Fund Administrator, Fund Accountant, Transfer Agent and Custodian

U.S. Bancorp Fund Services, LLC ("Administrator"), 615 East Michigan Street, Milwaukee, Wisconsin 53202, provides administrative, fund accounting and transfer agent services to the Fund. U.S. Bank, N.A., Custody Operations, 1555 N. River Center Drive, Suite 302, Milwaukee, Wisconsin, 53202, an affiliate of the Administrator, provides custodian services to the Fund.

Effective November 1, 2025, the Trust entered into an Amended and Restated Fund Servicing Agreement, pursuant to which the Administrator provides the Trust with certain administrative, accounting and transfer agency services. As compensation for these services, the Trust pays the Administrator a fee based on the Trust's total average daily net assets. The Administrator is also entitled to certain out-of-pocket expenses.

Prior to November 1, 2025, pursuant to an Administration Servicing Agreement between the Trust and the Administrator, and a Fund Accounting Servicing Agreement between the Trust and the Administrator, the Administrator provided the Trust with administrative and certain management services (other than investment advisory services), as well as accounting services, including portfolio accounting services, tax accounting services and financial reporting services. As compensation for these services, the Trust paid the Administrator a fee based on the Trust's total average daily net assets. The Administrator was also entitled to certain out-of-pocket expenses. Beginning November 1, 2024, the Adviser assumed payment of a portion of the Trust's fees. Effective November 1, 2025, the Administrator discontinued providing certain management (*e.g*. officer) services and tax accounting services to the Trust.

U.S. Bank N.A. ("Custodian") serves as the custodian of the Fund's assets. The Custodian holds and administers the assets in the Fund's portfolio. Prior to November 1, the Trust and Custodian were parties to a Custody Agreement. Effective November 1, 2025, the Custodian and Trust entered into an Amended and Restated Custody Agreement (together, the "Custody Agreements"). Pursuant to both Custody Agreements, the Custodian receives an annual fee based on the Trust's total average daily net assets. The Custodian also is entitled to certain out-of-pocket expenses.

In addition, U.S. Bank N.A. and/or its affiliates may receive revenue from certain broker-dealers that are paid Rule 12b-1 or similar fees from funds in which the Fund's invests. In recognition of this revenue, the Custodian and/or its affiliates have credited the Trust and may further credit the Trust in the future for fees otherwise payable by the Fund. The amount of fees paid by the Trust pursuant to the Agreements noted above, for the fiscal years indicated, is set forth in the table below.

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| | |
|:---|:---|
|  | **Fees paid to the Administrator**  |
| Year Ended August 31, 2025\* | $14089 |
| Year Ended August 31, 2024 | $79423 |
| Year Ended August 31, 2023 | $65323 |

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\*The fees for the most recent fiscal year are lower than in previous years due to a decrease in the fee rate paid by the Funds under the Amended and Restated Fund Servicing Agreement, due to the more limited scope of services provided.

Distributor

ALPS Distributors, Inc., located at 1290 Broadway, Suite 1000, Denver, Colorado 80203, serves as the distributor ("Distributor") in connection with the continuous offering of the Fund's shares. The Distributor is a broker-dealer registered with the SEC under the Exchange Act and a member of the Financial Industry Regulatory Authority. The Distributor and participating dealers with whom it has entered into dealer agreements offer shares of the Fund as agents on a best-efforts basis and are not obligated to sell any specific number of shares.

Distribution Plan and Service Fees

Rule 12b-1 under the 1940 Act, as amended (the "Rule"), provides that an investment company may bear expenses of distributing its shares only pursuant to a plan adopted in accordance with the Rule. The Trustees have adopted a Rule 12b-1 Investor Class Plan of Distribution (the "Investor Class Plan") for shares of the Fund pursuant to which the Fund may pay certain expenses incurred in the distribution of its shares and the servicing and maintenance of existing shareholder accounts. The Distributor, as the Fund's principal underwriter, and Rafferty may have a direct or indirect financial interest in the Investor Class Plan or any related agreement.

Pursuant to the Investor Class Plan, the Fund may pay up to 1.00% of the shares' average daily net assets. The Board has authorized the Fund to pay 0.25% of the Fund's average daily net assets.

Under an agreement with the Fund, your financial advisor may provide services, as described in the Prospectus, and as described above, and receive Rule 12b-1 fees from the Fund.

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The Investor Class Plan was approved by the Trustees and the Independent Trustees of the Fund. In approving the Investor Class Plan, the Trustees determined that there is a reasonable likelihood that the Investor Class Plan will benefit the Fund and its shareholders. The Trustees will review quarterly and annually a written report provided by the Treasurer of the amounts expended under the Investor Class Plan and the purpose for which such expenditures were made.

The Investor Class Plan permits payments to be made by the Fund to the Distributor or other third parties for expenditures incurred in connection with the distribution of Fund shares to investors. The Distributor or other third parties are authorized to engage in advertising, the preparation and distribution of sales literature and other promotional activities on behalf of the Fund. In addition, the Investor Class Plan authorizes payments by the Fund to the Distributor or other third parties for the cost related to selling or servicing efforts, preparing, printing and distributing Fund prospectuses, statements of additional information, and shareholder reports to investors.

The tables below show the amount of Rule 12b-1 fees incurred and the allocation of such fees by the Funds for the fiscal year ended August 31, 2025.

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| | |
|:---|:---|
| **Fund (Investor Class)** | **12b-1 Fees** <br> **Incurred**<br>|
| &nbsp;&nbsp; Direxion Monthly NASDAQ-100<sup>®</sup> <br> Bull 1.25X Fund<br>| $19028 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Fund (Investor** <br> **Class)**<br>| &nbsp;&nbsp; **Advertising** <br> **and** <br> **Marketing**<br>| **Printing**<br> **and** <br> **Postage**<br>| &nbsp;&nbsp; **Payment to** <br> **Distributor**<br>| &nbsp;&nbsp; **Payment to**<br> **Dealers**<br>| &nbsp;&nbsp; **Compensation to** <br> **Sales Personnel**<br>| &nbsp;&nbsp; **Interest,**<br> **Carrying,** <br> **or Other** <br> **Financing** <br> **Charges**<br>| &nbsp;&nbsp; **Other Marketing** <br> **Expenses**<br>|
| &nbsp;&nbsp; Direxion Monthly <br> NASDAQ-100<sup>®</sup> Bull <br> 1.25X Fund<br>| $0 | &nbsp;&nbsp; $0 | $76 | $18952 | $0 | $0 | $0 |

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Independent Registered Public Accounting Firm

Ernst & Young LLP ("EY"), 700 Nicollet Mall, Suite 500, Minneapolis, Minnesota, 55402, is the independent registered public accounting firm for the Trust. The Financial Statements of the Fund for the fiscal period ended August 31, 2025, audited by EY, have been included in reliance on their report given on their authority as experts in accounting and auditing.

Legal Counsel

The Trust has selected K&L Gates LLP, 1601 K Street, N.W., Washington, DC 20006, as its legal counsel.

Determination of Net Asset Value

A fund's share price is known as its NAV. The Fund's share price is calculated as of the close of regular trading on the NYSE, usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition to these holidays, the Bond Market is not open on Columbus Day and Veterans' Day. The NYSE may close early on the business day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

Share price is calculated by dividing the Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." The Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations.

An equity security listed or traded on an exchange, domestic or foreign, is valued at its last sales price on the principal exchange prior to Valuation Time. Exchange-traded Funds are valued at the last sales price prior to the Valuation Time. Securities primarily traded on the NASDAQ Global Market<sup>®</sup> ("NASDAQ<sup>®</sup>") for which market quotations are readily available shall be valued using the NASDAQ<sup>®</sup> Official Closing Price ("NOCP") provided by NASDAQ<sup>®</sup> each Business Day. The NOCP is the most recently reported price as of 4:00:02 p.m. Eastern Time, unless that price is outside the range of the "inside" bid

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and asked price in that case, NASDAQ<sup>®</sup> will adjust the price to equal the inside bid or asked price, whichever is closer. Over-the counter securities are valued at the last sales price in the over-the-counter market.

Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time.

Exchange-traded options and options on futures are valued at the composite price using the National Best Bid and Offer quotes ("NBBO"). NBBO consists of the highest bid price and lowest asked price across any of the exchanges on which an option is quoted, thus providing a view across the entire U.S. options marketplace. Specifically, composite pricing looks at the last trades on exchanges where the options are traded. If there are no trades for the option on a given business day, the composite option pricing calculates the mean of the highest bid price and lowest ask price across the exchanges where the option is traded. Non-exchange traded options are valued at the mean between the last bid and asked quotations.

Dividend income and other distributions are recorded on the ex-distribution date.

Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies as described below.

For purposes of calculating its daily NAV, the Fund typically reflects changes in its holdings of portfolio securities on the first business day following a portfolio trade (commonly known as "T+1 accounting"). However, the Fund is permitted to include same day trades when calculating its NAV (commonly referred to as "trade date accounting") on days when the Fund receives substantial redemptions. Such redemptions can result in an adverse impact on the Fund's NAV when there is a disparity between the trade price and the closing price of the security. Thus, the Fund's use of trade date accounting is likely to lessen the impact of substantial redemptions on the Fund's NAV.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that the Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as the Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

Redemptions

**Redemption In-Kind**

The Trust has filed a notice of election under Rule 18f-1 of the 1940 Act, which obligates the Fund to redeem shares for any shareholder for cash during any 90-day period up to $250,000 or 1% of the Fund's NAV, whichever is less. Any redemption beyond this amount also will be in cash unless the Trustees determine that further cash payments will have a material adverse effect on remaining shareholders. In such a case, the Fund will pay all or a portion of the remainder of the redemption in portfolio instruments, valued in the same way as the Fund determines NAV. The portfolio instruments will be selected in a manner that the Trustees deem fair and equitable. To the extent that the Fund redeems its shares in this manner, the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and the possibility of a lack of a liquid market for those securities. Shareholders who receive futures contracts

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or options on futures contracts in connection with a redemption in-kind may be responsible for making any margin payments due on those contracts.

**Redemptions by Telephone**

Shareholders may redeem shares of the Fund by telephone. When acting on verbal instructions believed to be genuine, the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees are not liable for any loss resulting from a fraudulent telephone transaction request and the investor will bear the risk of loss. In acting upon telephone instructions, these parties use procedures that are reasonably designed to ensure that such instructions are genuine, such as (1) obtaining some or all of the following information: account number, name(s) and social security number(s) registered to the account, and personal identification; (2) recording all telephone transactions; and (3) sending written confirmation of each transaction to the registered owner. To the extent that the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees do not employ such procedures, some or all of them may be liable for losses due to unauthorized or fraudulent transactions.

**Receiving Payment**

Payment of redemption proceeds typically will be made within one business day, but at least within seven days, following the Fund's receipt of your request (if received in good order as described below) for redemption. For investments that have been made by check or ACH, payment on redemption requests may be delayed until the transfer agent is reasonably satisfied that the purchase payment has been collected by the Trust (which may require up to 10 calendar days). To avoid redemption delays, purchases should be made by direct wire transfer.

A redemption request will be considered to be received in "good order" if:

● The dollar amount or number of shares and the class of shares to be redeemed and shareholder account number have been indicated;

● Any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account;

● Any written request is accompanied by certificates representing the shares that have been issued, if any, and the certificates have been endorsed for transfer exactly as the name or names appear on the certificates or an accompanying stock power has been attached; and

● The signatures on any written redemption request in excess of $100,000 or more and on any certificates for shares (or an accompanying stock power) have been guaranteed by a national bank, a state bank that is insured by the FDIC, a trust company or by any member firm of the New York, American, Boston, Chicago, Pacific or Philadelphia Stock Exchanges. Signature guarantees also will be accepted from savings banks and certain other financial institutions that are deemed acceptable by USBFS, as transfer agent, under its current signature guarantee program.

The right of redemption may be suspended or the date of payment postponed for any period during which (1) the NYSE is closed (other than customary weekend or holiday closings); (2) trading on the NYSE is restricted; (3) situations where an emergency exists as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets or disposal of the Fund's securities is not reasonably practicable; or (4) the SEC has issued an order for the protection of the Fund's shareholders.

**Anti-Money Laundering**

The Fund is required to comply with various federal anti-money laundering laws and regulations. Consequently, the Fund may be required to "freeze" the account of a shareholder if the shareholder appears to be involved in suspicious activity or if certain account information matches information on government lists of known terrorists or other suspicious persons, or the Fund may be required to transfer the account or proceeds of the account to a government agency. In addition, pursuant to the Fund's Customer Identification Program, the Fund's transfer agent will complete a thorough review of all new opening account applications and will not transact business with any person or entity whose identity cannot be adequately verified.

Exchange Privilege

An exchange is effected through the redemption of the shares tendered for exchange and the purchase of shares being acquired at their respective NAVs as next determined following receipt by the Fund whose shares are being exchanged of (1) proper instructions and all necessary supporting documents; or (2) a telephone request for such exchange in accordance with the procedures set forth in the Prospectus and below. Telephone requests for an exchange received by the Fund before 4:00 p.m. Eastern Time will be effected at the close of regular trading on that day. Requests for an exchange received after the close of regular trading will be effected on the NYSE's next trading day. Due to the volume of calls or other unusual circumstances, telephone exchanges may be difficult to implement during certain time periods.

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The Trust reserves the right to reject any order to acquire its shares through exchange or otherwise to restrict or terminate the exchange privilege at any time. In addition, the Trust may terminate this exchange privilege upon 60 days' notice.

Shareholder and Other Information

Each share of the Fund gives the shareholder one vote in matters submitted to shareholders for a vote. Each share of the Fund has equal voting rights, except that, in matters affecting only a particular series, only shares of that series are entitled to vote. Share voting rights are not cumulative, and shares have no preemptive or conversion rights. Shares are not transferable. As a Massachusetts business trust, the Trust is not required to hold annual shareholder meetings. Shareholder approval will be sought only for certain changes in a Trust's or the Fund's operation and for the election of Trustees under certain circumstances. Trustees may be removed by the Trustees or by shareholders at a special meeting. A special meeting of shareholders shall be called by the Trustees upon the written request of shareholders owning at least 10% of a Trust's outstanding shares.

Dividends, Other Distributions and Taxes

The Tax Cuts and Jobs Act ("TCJA") made significant changes to the Code's rules for taxation of individuals and corporations, generally effective for taxable years beginning after December 31, 2017. Many of the changes applicable to individuals were made permanent by the One Big Beautiful Bill Act ("OBBBA"). The TCJA , as extended by OBBBA, made only minor changes to the RIC rules in the Code, but the changes affected shareholders and the Fund, including various investments that the Fund may make. Potential investors are urged to consult their own tax advisors for more detailed information.

**Dividends and other Distributions**

As stated in the Prospectus, the Fund declares and distributes dividends to its shareholders from its net investment income at least annually; for these purposes, net investment income includes dividends, accrued interest, and accretion of OID and market discount, less amortization of market premium and estimated expenses, and is calculated immediately prior to the determination of the Fund's NAV per share. The Fund also distributes its net short-term capital gain, if any, annually but may make more frequent distributions thereof if necessary to avoid income or excise taxes. The Fund may realize net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) and thus anticipates making annual distributions thereof. The Trustees may revise this distribution policy, or postpone the payment of distributions, if the Fund has or anticipates any large unexpected expense, loss, or fluctuation in net assets that, in the Trustees' opinion, might have a significant adverse effect on its shareholders.

**Taxes**

*<u>Taxation of Shareholders</u>*. Dividends (including distributions of the excess of net short-term capital gain over net long-term capital loss ("short-term gain")) the Fund distributes, if any, are taxable to its shareholders as ordinary income (at rates up to 37% for individuals), except to the extent they constitute "qualified dividend income" ("QDI") (as further described in the Prospectus), regardless of whether the dividends are reinvested in Fund shares or received in cash. Distributions of the Fund's net capital gain, if any, are taxable to its shareholders as long-term capital gains, regardless of how long they have held their Fund shares and whether the distributions are reinvested in Fund shares or received in cash.

A shareholder's redemption of Fund shares may result in a taxable gain, depending on whether the redemption proceeds are more or less than the shareholder's adjusted basis in the shares. An exchange of Fund shares for shares of another fund advised by Rafferty generally will have similar consequences. If Fund shares are redeemed at a loss after being held for six months or less, the loss will be treated as long-term, instead of short-term, capital loss to the extent of any capital gain distributions received on those shares. Investors also should be aware that if shares are purchased shortly before the record date for any dividend or capital gain distribution, the shareholder will pay full price for the shares and receive some portion of the purchase price back as a taxable distribution (with the tax consequences described in the Prospectus.)

*<u>Regulated Investment Company Status</u>*. The Fund is treated as a separate entity for federal tax purposes and intends to continue to qualify for treatment as a RIC. If the Fund so qualifies and satisfies the Distribution Requirement (defined below) for a taxable year, it will not be subject to federal income tax on the part of its investment company taxable income (generally consisting of net investment income, net short-term capital gain, and net gains and losses from certain foreign currency transactions, all determined without regard to any deduction for dividends paid) and net capital gain it distributes to its shareholders for that year.

To qualify for treatment as a RIC, the Fund must distribute to its shareholders for each taxable year at least the sum of 90% of its investment company taxable income ("Distribution Requirement") and 90% of its net exempt interest income and must meet several additional requirements. These requirements include the following: (1) the Fund must derive at least 90% of its gross income each taxable year from (a) dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from options,

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futures, or forward contracts) derived with respect to its business of investing in securities or those currencies, and (b) net income from an interest in a "qualified publicly traded partnership" ("QPTP") ("Income Requirement"); and (2) at the close of each quarter of the Fund's taxable year, (a) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities, with those other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets and that does not represent more than 10% of the issuer's outstanding voting securities (equity securities of QPTPs being considered voting securities for these purposes), and (b) not more than 25% of the value of its total assets may be invested in (i) securities (other than U.S. government securities or the securities of other RICs) of any one issuer, (ii) securities (other than securities of other RICs) of two or more issuers the Fund controls that are determined to be engaged in the same, similar, or related trades or businesses, or (iii) securities of one or more QPTPs (collectively, "Diversification Requirements"). The Internal Revenue Service ("IRS") has ruled that income from a derivative contract on a commodity index generally is not qualifying income ("Qualifying Income") for purposes of the Income Requirement.

Although the Fund intends to continue to satisfy all the foregoing requirements, there is no assurance that the Fund will be able to do so. The investment by the Fund primarily in options and futures positions entails some risk that it might fail to satisfy one or both of the Diversification Requirements. There is some uncertainty regarding the valuation of such positions for purposes of those requirements; accordingly, it is possible that the method of valuation the Fund uses, pursuant to which it would expect to be treated as satisfying the Diversification Requirements, would not be accepted in an audit by the IRS, which might apply a different method resulting in disqualification of the Fund.

If the Fund failed to qualify for treatment as a RIC for any taxable year, (1) it would be taxed on the full amount of its taxable income, including net capital gain, for that year at corporate income tax rates (up to 21%), (2) it would not be able to deduct for the distributions it makes to its shareholders, and (3) the shareholders would treat all those distributions, including distributions of net capital gain, as dividends -- that is, ordinary income, except for the part of those dividends that is QDI, which is subject to a maximum federal income tax rate of 20% for individuals -- to the extent of the Fund's earnings and profits; those dividends would be eligible for the dividends-received deduction available to corporations under certain circumstances. In addition, the Fund would be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying for RIC treatment. However, the Regulated Investment Company Modernization Act of 2010 provides certain savings provisions that enable a RIC to cure a failure to satisfy any of the Income and Diversification Requirements as long as the failure "is due to reasonable cause and not due to willful neglect" and the RIC pays a deductible tax calculated in accordance with those provisions and meets certain other requirements.

*<u>Excise Tax</u>*. The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gain net income for the one-year period ending on October 31 of that year, plus certain other amounts.

*<u>Income from Foreign Securities</u>*. Dividends and interest the Fund receives, and gains it realizes, on foreign securities may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield and/or total return on its securities. Tax conventions between certain countries and the United States may reduce or eliminate these foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors.

Gains or losses (1) from the disposition of foreign currencies, including forward currency contracts, (2) on the disposition of each foreign-currency-denominated debt security that are attributable to fluctuations in the value of the foreign currency between the dates of acquisition and disposition of the security, and (3) that are attributable to fluctuations in exchange rates that occur between the time the Fund accrues dividends, interest, or other receivables, or expenses or other liabilities, denominated in a foreign currency and the time the Fund actually collects the receivables or pays the liabilities, generally will be treated as ordinary income or loss. These gains or losses will increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders.

The Fund may invest in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in general, meets either of the following tests for a taxable year: (1) at least 75% of its gross income for the taxable year is passive; or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, the Fund will be subject to federal income tax on a portion of any "excess distribution" it receives on the stock of a PFIC or of any gain on its disposition of the stock (collectively, "PFIC income"), plus interest thereon, even if the Fund distributes the PFIC income as a dividend to its shareholders. The balance of the PFIC income will be included in the Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders. Fund distributions thereof will not be eligible for the 20% maximum federal income tax rate on individuals' QDI.

If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified electing fund" ("QEF"), then, in lieu of the foregoing tax and interest obligation, the Fund would be required to include in income each taxable year its pro rata share of the QEF's annual ordinary earnings and net capital gain — which the Fund probably would have to distribute to satisfy the Distribution Requirement and avoid imposition of the Excise Tax —even if the Fund did not receive those earnings and

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gain from the QEF. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof.

The Fund may elect to "mark to market" its stock in any PFIC. "Marking-to-market," in this context, means including in gross income each taxable year (and treating as ordinary income) the excess, if any, of the fair market value of the PFIC's stock over the Fund's adjusted basis therein as of the end of that year. Pursuant to the election, the Fund also would be allowed to deduct (as an ordinary, not a capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains with respect to that stock the Fund included in income for prior taxable years under the election. The Fund's adjusted basis in each PFIC's stock with respect to which it makes this election would be adjusted to reflect the amounts of income included and deductions taken thereunder.

*<u>Derivatives Strategies</u>*. The use of derivatives strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward contracts, involves complex rules that will determine for income tax purposes the amount, character and timing of recognition of the gains and losses the Fund realizes in connection therewith. Gains from the disposition of foreign currencies (except certain gains therefrom that may be excluded by future regulations), and gains from options, futures, and forward contracts the Fund derives with respect to its business of investing in securities or foreign currencies, will be treated as Qualifying Income. The Fund will monitor its transactions, make appropriate tax elections and make appropriate entries in its books and records when it acquires any foreign currency, option, futures contract, forward contract or hedged investment to mitigate the effect of these rules, seek to prevent its disqualification as a RIC and minimize the imposition of federal income and excise taxes.

Some futures contracts, foreign currency contracts that are traded in the interbank market, and "nonequity options" (*i.e.*, certain listed options, such as those on a "broad-based" securities index) — except any "securities futures contract" that is not a "dealer securities futures contract" (both as defined in the Code) and any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement — in which the Fund may invest may be subject to Code section 1256 (collectively "section 1256 contracts"). Section 1256 contracts that the Fund holds at the end of its taxable year must be "marked-to-market" (that is, treated as having been sold at that time for their fair market value) for federal income tax purposes, with the result that unrealized gains or losses will be treated as though they were realized. Sixty percent of any net gain or loss recognized on these deemed sales, and 60% of any net realized gain or loss from any actual sales of section 1256 contracts, will be treated as long-term capital gain or loss, and the balance will be treated as short-term capital gain or loss. These rules may operate to increase the amount that the Fund must distribute to satisfy the Distribution Requirement (*i.e.*, with respect to the portion treated as short-term capital gain), which will be taxable to its shareholders as ordinary income when distributed to them, and to increase the net capital gain the Fund recognizes, without in either case increasing the cash available to it. The Fund may elect not to have the foregoing rules apply to any "mixed straddle" (that is, a straddle, which the Fund clearly identifies in accordance with applicable regulations, at least one (but not all) of the positions of which are section 1256 contracts), although doing so may have the effect of increasing the relative proportion of short-term capital gain (taxable as ordinary income) and thus increasing the amount of dividends it must distribute. Section 1256 contracts also may be marked-to-market for purposes of the Excise Tax.

Code section 1092 (dealing with straddles) also may affect the taxation of options, futures and forward contracts in which the Fund may invest. That section defines a "straddle" as offsetting positions with respect to actively traded personal property; for these purposes, options, futures and forward contracts are positions in personal property. Under that section, any loss from the disposition of a position in a straddle may be deducted only to the extent the loss exceeds the unrecognized gain on the offsetting position(s) of the straddle. In addition, these rules may postpone the recognition of loss that otherwise would be recognized under the marked-to-market rules discussed above. The regulations under section 1092 also provide certain "wash sale" rules, which apply to transactions where a position is sold at a loss and a new offsetting position is acquired within a prescribed period, and "short sale" rules applicable to straddles. If the Fund makes certain elections, the amount, character and timing of recognition of gains and losses from the affected straddle positions would be determined under rules that vary according to the elections made. Because only a few of the regulations implementing the straddle rules have been promulgated, the tax consequences to the Fund of straddle transactions are not entirely clear.

If a call option written by the Fund lapses (*i.e.*, terminates without being exercised), the amount of the premium it received for the option will be short-term capital gain. If the Fund enters into a closing purchase transaction with respect to a written call option, it will have a short-term capital gain or loss based on the difference between the premium it received for the option it wrote and the premium it pays for the option it buys. If such an option is exercised and the Fund thus sells the securities or futures contract subject to the option, the premium the Fund received will be added to the exercise price to determine the gain or loss on the sale. If a call option purchased by the Fund lapses, it will realize short-term or long-term capital loss, depending on its holding period for the security or futures contract subject thereto. If the Fund exercises a purchased call option, the premium it paid for the option will be added to the basis in the subject securities or futures contract.

*<u>Income from Zero-Coupon and Payment-in-Kind Securities</u>*. The Fund may acquire zero-coupon or other securities (such as strips and delayed interest securities) issued with OID. As a holder of those securities, the Fund must include in its gross

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income the OID that accrues on the securities during the taxable year, even if it receives no corresponding payment on them during the year. Similarly, the Fund must include in its gross income securities it receives as "interest" on payment-in-kind securities. With respect to "market discount bonds" (*i.e.*, bonds purchased at a price less than their issue price plus the portion of OID previously accrued thereon), the Fund may elect to accrue and include in income taxable each year a portion of the bonds' market discount. Because the Fund annually must distribute substantially all of its investment company taxable income, including any accrued OID, market discount, and other non-cash income, to satisfy the Distribution Requirement and avoid imposition of the Excise Tax, the Fund may be required in a particular year to distribute as a dividend an amount that is greater than the total amount of cash it actually receives. Those distributions will be made from the Fund's cash assets or from the proceeds of sales of portfolio securities, if necessary. The Fund may realize capital gains or losses from those sales, which would increase or decrease its investment company taxable income and/or net capital gain.

*<u>Constructive Sales</u>*. If the Fund has an "appreciated financial position" -- generally, an interest (including an interest through an option, futures or forward contract, or short sale) with respect to any stock, debt instrument (other than "straight debt"), or partnership interest the fair market value of which exceeds its adjusted basis -- and enters into a "constructive sale" of the position, the Fund will be treated as having made an actual sale thereof, with the result that it will recognize gain at that time. A constructive sale generally consists of a short sale, an offsetting notional principal contract, or a futures or forward contract the Fund or a related person enters into with respect to the same or substantially identical property. In addition, if the appreciated financial position is itself a short sale or such a contract, acquisition of the underlying property or substantially identical property will be deemed a constructive sale. The foregoing will not apply, however, to the Fund's transaction during any taxable year that otherwise would be treated as a constructive sale if the transaction is closed within 30 days after the end of that year and the Fund holds the appreciated financial position unhedged for 60 days after that closing (*i.e.*, at no time during that 60-day period is the Fund's risk of loss regarding that position reduced by reason of certain specified transactions with respect to substantially identical or related property, such as having an option to sell, being contractually obligated to sell, making a short sale, or granting an option to buy substantially identical stock or securities).

\* \* \* \* \*

The foregoing is only a general summary of some of the important federal income and excise tax considerations generally affecting the Funds. No attempt is made to present a complete explanation of the federal tax treatment of the Funds' activities, and this discussion is not intended as a substitute for careful tax planning. Accordingly, potential investors are urged to consult their own tax advisers for more detailed information and for information regarding any state, local, or foreign taxes applicable to a Fund and to distributions therefrom.

*<u>Capital Loss Carryforwards</u>*. As of August 31, 2025, the Fund had $278,601 of Unlimited Short-Term capital loss carryforwards and no Unlimited Long-Term capital loss carryforwards. The Fund did not utilize any capital loss carryforwards for the fiscal year ended August 31, 2025. $926 of capital losses for the Fund are subject to the annual limitation in accordance with Sections 381-384 of the Internal Revenue Code.

Pursuant to the Regulated Investment Company Modernization Act of 2010, capital losses sustained in taxable years beginning after December 22, 2010, will not expire and may be carried over without limitation.

Financial Statements

The Fund's financial statements for the fiscal year ended August 31, 2025, are incorporated herein by reference from the Fund's Annual Financial Statements and Additional Information dated August 31, 2025.

To receive a copy of the Prospectus or Annual or Semi-Annual Financial Statements and Additional Information, without charge, write to or call the Trust at the contact information listed below:

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| | |
|:---|:---|
| Write to: | Direxion Funds |
|  | 535 Madison Avenue<br> 37<sup>th</sup> Floor<br>|
|  | New York, New York 10022 |
| Call: | (800) 851-0511 |
| By Internet: | www.direxion.com |

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**APPENDIX A**

**Description of Corporate Bond Ratings**

Moody's Investors Service and S&P Global Ratings are two prominent independent rating agencies that rate the quality of bonds. Following are expanded explanations of the ratings shown in the Prospectus and this SAI.

***Moody's Investors Service – Global Long-Term Ratings***

Ratings assigned on Moody's global long-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Moody's defines credit risk as the risk that an entity may not meet its contractual financial obligations as they come due and any estimated financial loss in the event of default or impairment. The contractual financial obligations addressed by Moody's ratings are those that call for, without regard to enforceability, the payment of an ascertainable amount, which may vary based upon standard sources of variation (e.g., floating interest rates), by an ascertainable date. Moody's rating addresses the issuer's ability to obtain cash sufficient to service the obligation, and its willingness to pay. Moody's ratings do not address non-standard sources of variation in the amount of the principal obligation (e.g., equity indexed), absent an express statement to the contrary in a press release accompanying an initial rating. Long-term ratings are assigned to issuers or obligations with an original maturity of eleven months or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment. Moody's issues ratings at the issuer level and instrument level. Typically, ratings are made publicly available although private and unpublished ratings may also be assigned.

**Aaa**: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa**: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A**: Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa**: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba**: Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B**: Obligations rated B are considered speculative and are subject to high credit risk.

**Caa**: Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca**: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C**: Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.\*

\* By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

***Moody's Investors Service – National Scale Long-Term Ratings***

Moody's long-term National Scale Ratings (NSRs) are opinions of the relative creditworthiness of issuers and financial obligations within a particular country. NSRs are not designed to be compared among countries; rather, they address relative credit risk within a given country. Moody's assigns national scale ratings in certain local capital markets in which investors have found the global rating scale provides inadequate differentiation among credits or is inconsistent with a rating scale already in common use in the country. In each specific country, the last two characters of the rating indicate the country in which the issuer is located or the financial obligation was issued (*e.g.*, Aaa.ke for Kenya).

**Aaa.n**: Issuers or issues rated Aaa.n demonstrate the strongest creditworthiness relative to other domestic issuers and issuances.

**Aa.n**: Issuers or issues rated Aa.n demonstrate very strong creditworthiness relative to other domestic issuers and issuances.

**A.n**: Issuers or issues rated A.n present above-average creditworthiness relative to other domestic issuers and issuances.

**Baa.n**: Issuers or issues rated Baa.n represent average creditworthiness relative to other domestic issuers and issuances.

**Ba.n**: Issuers or issues rated Ba.n demonstrate below-average creditworthiness relative to other domestic issuers and issuances.

**B.n**: Issuers or issues rated B.n demonstrate weak creditworthiness relative to other domestic issuers and issuances.

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**Caa.n**: Issuers or issues rated Caa.n demonstrate very weak creditworthiness relative to other domestic issuers and issuances.

**Ca.n**: Issuers or issues rated Ca.n demonstrate extremely weak creditworthiness relative to other domestic issuers and issuances.

**C.n**: Issuers or issues rated C.n demonstrate the weakest creditworthiness relative to other domestic issuers and issuances.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

***S&P Global Ratings – Long-Term Issue Credit Ratings\****

An S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&P Global Ratings' view of the obligor's capacity and willingness to meet its financial commitments as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. Issue credit ratings can be either long-term or short-term. Short-term issue credit ratings are generally assigned to those obligations considered short-term in the relevant market, typically with an original maturity of no more than 365 days. Short-term issue credit ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. We would typically assign a long-term issue credit rating to an obligation with an original maturity of greater than 365 days. However, the ratings we assign to certain instruments may diverge from these guidelines based on market practices.

Issue credit ratings are based, in varying degrees, on S&P Global Ratings' analysis of the following considerations:

● The likelihood of payment--the capacity and willingness of the obligor to meet its financial commitments on an obligation in accordance with the terms of the obligation;

● The nature and provisions of the financial obligation, and the promise we impute; and

● The protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

An issue rating is an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

**AAA**: An obligation rated 'AAA' has the highest rating assigned by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is extremely strong.

**AA**: An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitments on the obligation is very strong.

**A**: An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitments on the obligation is still strong.

**BBB**: An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor's capacity to meet its financial commitments on the obligation.

**BB; B; CCC; CC; and C**: Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposure to adverse conditions.

**BB**: An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor's inadequate capacity to meet its financial commitments on the obligation.

**B**: An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments on the obligation.

**CCC**: An obligation rated 'CCC' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.

**CC**: An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.

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**C**: An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared with obligations that are rated higher.

**D**: An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within the next five business days in the absence of a stated grace period or within the earlier of the stated grace period or the next 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

\*Ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.

***Moody's Investors Service – Municipal Short Term Debt and Demand Obligation Ratings***

We use the global short-term Prime rating scale for commercial paper issued by US municipalities and nonprofits. These commercial paper programs may be backed by external letters of credit or liquidity facilities, or by an issuer's self-liquidity.

For other short-term municipal obligations, we use one of two other short-term rating scales, the Municipal Investment Grade (MIG) and Variable Municipal Investment Grade (VMIG) scales discussed below.

We use the MIG scale for US municipal cash flow notes, bond anticipation notes and certain other short-term obligations, which typically mature in three years or less.

**MIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2**: This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3**: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG**: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

For variable rate demand obligations (VRDOs), Moody's assigns both a long-term rating and a short-term payment obligation rating. The long-term rating addresses the issuer's ability to meet scheduled principal and interest payments. The short-term payment obligation rating addresses the ability of the issuer or the liquidity provider to meet any purchase price payment obligation resulting from optional tenders ("on demand") and/or mandatory tenders of the VRDO. The short-term payment obligation rating uses the VMIG scale. Transitions of VMIG ratings with conditional liquidity support differ from transitions of Prime ratings reflecting the risk that external liquidity support will terminate if the issuer's long-term rating drops below investment grade.

For VRDOs, we typically assign a VMIG rating if the frequency of the payment obligation is less than every three years. If the frequency of the payment obligation is less than three years, but the obligation is payable only with remarketing proceeds, the VMIG short-term rating is not assigned and it is denoted as "NR."

Industrial development bonds in the US where the obligor is a corporate may carry a VMIG rating that reflects Moody's view of the relative likelihood of default and loss. In these cases, liquidity assessment is based on the liquidity of the corporate obligor.

**VMIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 2**: This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 3**: This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections.

**SG**: This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have a sufficiently strong short-term rating or may lack the structural or legal protections.

***S&P Global Ratings – Municipal Short-Term Note Ratings***

An S&P Global Ratings U.S. municipal note rating reflects S&P Global Ratings opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P Global Ratings analysis will review the following considerations:

● Amortization schedule--the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

● Source of payment--the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

**SP-1**: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2**: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3**: Speculative capacity to pay principal and interest.

**D**: 'D' is assigned upon failure to pay the note when due, completion of a distressed debt restructuring, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.

***Moody's Investors Service – Global Short Term Rating Scale***

Ratings assigned on Moody's global short-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.

**P-1:** Ratings of Prime-1 reflect a superior ability to repay short-term obligations.

**P-2:** Ratings of Prime-2 reflect a strong ability to repay short-term obligations.

**P-3:** Ratings of Prime-3 reflect an acceptable ability to repay short-term obligations.

**NP:** Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

***S&P Global Ratings –Short-Term Issue Credit Ratings***

**A-1**: A short-term obligation rated 'A-1' is rated in the highest category by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitments on these obligations is extremely strong.

**A-2**: A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory.

**A-3**: A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.

**B**: A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial commitments.

**C**: A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.

**D**: A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example, due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, 'AAA/A-1+' or 'A-1+/A-1'). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, 'SP-1+/A-1+').

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Direxion Funds

Statement of Additional Information

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

535 Madison Avenue, 37<sup>th</sup> Floor New York, New York 10022 (800) 851-0511

www.direxion.com

The Direxion Funds (the "Trust") is an investment company that offers shares of a variety of mutual funds to the public. This Statement of Additional Information ("SAI") relates to the Investor Class Shares of the Funds listed below.

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| | |
|:---|:---|
| Bull Funds | Bear Fund |
| Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund (DXSLX) |  |
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund (DXQLX) |  |
| Direxion Monthly Small Cap Bull 1.75X Fund (DXRLX) |  |
| Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund (DXKLX) | Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund (DXKSX) |

---

Investor Class

**The funds offered in this SAI (each a "Fund" and collectively the "Funds") seek *calendar month leveraged* investment results and are riskier than most mutual funds because the Funds seek 1.75 times the calendar month performance of a respective underlying index. The Funds with "Bull" in their names attempt to provide calendar month investment results that correspond to 1.75 times the calendar month performance of an underlying index and are collectively referred to as the "Bull Funds." The Fund with "Bear" in its name attempts to provide calendar month investment results that correspond to 1.75 times the inverse (or opposite) of the performance of an underlying index, a result that is the opposite of most mutual funds, and is referred to as the "Bear Fund."** 

**The Funds are not suitable for all investors. The Funds are designed to be utilized only by sophisticated investors, such as traders and active investors employing dynamic strategies. Investors in the Funds should:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**

**understand the risks associated with the use of leverage,**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**

**understand the consequences of seeking calendar month leveraged investment results,**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**

**for the Bear Fund, understand the risk of shorting, and**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**

**intend to actively monitor and manage their investments.**

**Investors who do not understand the Funds or do not intend to actively manage and monitor their investments should not buy the Funds.**

**There is no assurance that any Fund will achieve its investment objective and an investment in a Fund could lose money. No single Fund is a complete investment program.**

**An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than 175% (for a Bull Fund) or -175% (for the Bear Fund) exposure to the underlying index from that point until the end of the month. The actual exposure is a function of the performance of the underlying index from the end of the prior calendar month to an investor's purchase date. If a Fund's shares are held for a period other than a calendar month, the Fund's performance is likely to deviate from 175% (for a Bull Fund) or -175% (for the Bear Fund) of the underlying index's performance for the period the Fund is held. This deviation will increase with higher underlying index volatility and longer holding periods.**

This SAI, dated December 29, 2025, is not a prospectus. It should be read in conjunction with the Funds' prospectus dated December 29, 2025 ("Prospectus"). This SAI is incorporated by reference into the Prospectus. In other words, it is legally part of the Prospectus. To receive a copy of the Prospectus, without charge, write or call the Trust at the address or telephone number listed above.

December 29, 2025

------

**Table of Contents** 

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| | |
|:---|:---|
|  | Page |
| [The Direxion Funds](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_1) | 1  |
| [Classification of the Funds](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_1) | 1  |
| [Investment Policies and Techniques](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_1) | 1  |
| [Asset-Backed Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_1) | 1  |
| [Bank Obligations](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_2) | 2  |
| [Caps, Floors and Collars](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_2) | 2  |
| [Corporate Debt Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_2) | 2  |
| [Cybersecurity Risk](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_3) | 3  |
| [Depositary Receipts](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_3) | 3  |
| [Equity Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_4) | 4  |
| [Foreign Currencies](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_4) | 4  |
| [Foreign Currency Exchange-Related Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_6) | 6  |
| [Foreign Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_7) | 7  |
| [Hybrid Instruments](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_15) | 15  |
| [Illiquid Investments and Restricted Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_16) | 16  |
| [Indexed Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_16) | 16  |
| [Interest Rate Risk](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_16) | 16  |
| [Junk Bonds](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_17) | 17  |
| [Mortgage-Backed Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_17) | 17  |
| [Municipal Obligations](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_18) | 18  |
| [Futures Contracts, Options, and Other Derivative Strategies](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_19) | 19  |
| [Other Investment Companies](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_24) | 24  |
| [Repurchase Agreements](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_25) | 25  |
| [Reverse Repurchase Agreements](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_26) | 26  |
| [Short Sales](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_26) | 26  |
| [Swap Agreements](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_26) | 26  |
| [Unrated Debt Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_31) | 31  |
| [U.S. Government Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_31) | 31  |
| [U.S. Government Sponsored Enterprises](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_32) | 32  |
| [When-Issued Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_32) | 32  |
| [Zero-Coupon, Payment-In-Kind and Strip Securities](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_32) | 32  |
| [Other Investment Risks and Practices](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_33) | 33  |
| [Securities Lending](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_33) | 33  |
| [Correlation and Tracking Risk](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_34) | 34  |
| [Leverage](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_34) | 34  |
| [Investment Restrictions](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_36) | 36  |
| [Portfolio Transactions and Brokerage](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_38) | 38  |
| [Portfolio Holdings Information](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_39) | 39  |
| [Management of the Trust](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_40) | 40  |
| [The Board of Trustees](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_40) | 40  |
| [Risk Oversight](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_40) | 40  |
| [Board Structure and Related Matters](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_40) | 40  |
| [Board Committees](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_43) | 43  |
| [Principal Officers of the Trust](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_43) | 43  |

---

i

------

---

| | |
|:---|:---|
|  | Page |
| [Principal Shareholders, Control Persons and Management Ownership](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_46) | 46  |
| [Investment Adviser](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_47) | 47  |
| [Portfolio Managers](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_49) | 49  |
| [Proxy Voting Policies and Procedures](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_50) | 50  |
| [Fund Administrator, Fund Accountant, Transfer Agent and Custodian](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_51) | 51  |
| [Distributor](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_51) | 51  |
| [Distribution Plan and Service Fees](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_52) | 52  |
| [Independent Registered Public Accounting Firm](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_53) | 53  |
| [Legal Counsel](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_53) | 53  |
| [Determination of Net Asset Value](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_53) | 53  |
| [Redemptions](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_54) | 54  |
| [Redemption In-Kind](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_54) | 54  |
| [Redemptions by Telephone](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_54) | 54  |
| [Receiving Payment](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_54) | 54  |
| [Anti-Money Laundering](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_55) | 55  |
| [Exchange Privilege](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_55) | 55  |
| [Shareholder and Other Information](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_55) | 55  |
| [Dividends, Other Distributions and Taxes](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_55) | 55  |
| [Dividends and other Distributions](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_55) | 55  |
| [Taxes](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_56) | 56  |
| [Financial Statements](#xx_a7a9f3e4-ecdb-4b88-a5dd-c8dff4cbac83_59) | 59  |
| [APPENDIX A](#xx_e19e6d91-7feb-4950-b271-50378e334207_1) | A-1 |

---

ii

------

The Direxion Funds

The Trust is a Massachusetts business trust organized on June 6, 1997 and is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of 8 separate series.

There is no assurance that each Fund will achieve its investment objectives and an investment in a Fund could lose money. The Funds are not a complete investment program. Each Fund offers Investor Class shares. Investor Class shares are designed for sale directly to investors without a sales charge. The Investor Class of each Fund are subject to fees under Rule 12b-1.

Classification of the Funds

Each Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. This means it has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers or in financial instruments with a single counterparty or a few counterparties. This may increase a Fund's volatility and increase the risk that a Fund's performance will decline based on the performance of a single issuer or the credit of a single counterparty, and a Fund may be more susceptible to any single economic, political or regulatory occurrence than a diversified company.

Investment Policies and Techniques

Each Fund seeks investment results that correspond to the performance of an underlying index, before fees and expenses, as follows:

---

| | |
|:---|:---|
| **Fund** | **Monthly Leveraged**<br> **Investment Objective**<br>|
| Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund<br> S&P 500<sup>®</sup> Index | &nbsp;&nbsp; 175% |
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund<br> NASDAQ-100<sup>®</sup> Index | &nbsp;&nbsp; 175% |
| Direxion Monthly Small Cap Bull 1.75X Fund<br> Russell 2000<sup>®</sup> Index | &nbsp;&nbsp; 175% |
| Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | &nbsp;&nbsp; 175% |
| Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund | &nbsp;&nbsp; -175% |

---

Each Fund's investment objective is a non-fundamental policy of the Fund that may be changed by the Board without shareholder approval.

Subject to the limitations described in the "Investment Restrictions" section, each Fund may engage in the investment strategies discussed below.

**Defensive Policy**. Generally, each Fund pursues its investment objective regardless of market conditions and does not take defensive positions.

Asset-Backed Securities

A Fund may invest in asset-backed securities of any rating or maturity. Asset-backed securities are securities issued by trusts and special purpose entities that are backed by pools of assets, such as automobile and credit-card receivables and home equity loans, which pass through the payments on the underlying obligations to the security holders (less servicing fees paid to the originator or fees for any credit enhancement). Typically, the originator of the loan or accounts receivable paper transfers it to a specially created trust, which repackages it as securities with a minimum denomination and a specific term. The securities are then privately placed or publicly offered. Examples include certificates for automobile receivables and so-called plastic bonds, backed by credit card receivables.

The value of an asset-backed security is affected by, among other things, changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans and the financial institution providing any credit enhancement. Payments of principal and interest passed through to holders of asset-backed securities are frequently supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or by having a priority to certain of the borrower's other assets. The degree of credit enhancement varies, and generally applies to only a portion of the asset-backed security's par value. Value is also affected if any credit enhancement has been exhausted.

------

Bank Obligations

*<u>Money Market Instruments</u>*. A Fund may invest in bankers' acceptances, certificates of deposit, demand and time deposits, savings shares and commercial paper of domestic banks and savings and loans that have assets of at least $1 billion and capital, surplus, and undivided profits of over $100 million as of the close of their most recent fiscal year, or instruments that are insured by the Bank Insurance Fund or the Savings Institution Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). A Fund also may invest in high quality, short-term, corporate debt obligations, including variable rate demand notes, having terms-to-maturity of less than 397 days. Because there is no secondary trading market in demand notes, the inability of the issuer to make required payments could impact adversely a Fund's ability to resell when it deems advisable to do so.

A Fund may invest in foreign money market instruments, which typically involve more risk than investing in U.S. money market instruments. See "Foreign Securities" below. These risks include, among others, higher brokerage commissions, less public information, and less liquid markets in which to sell and meet large shareholder redemption requests.

*<u>Bankers' Acceptances</u>*. Bankers' acceptances generally are negotiable instruments (time drafts) drawn to finance the export, import, domestic shipment or storage of goods. They are termed "accepted" when a bank writes on the draft its agreement to pay it at maturity, using the word "accepted." The bank is, in effect, unconditionally guaranteeing to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset, or it may be sold in the secondary market at the going rate of interest for a specified maturity.

*<u>Certificates of Deposit ("CDs")</u>*. The FDIC is an agency of the U.S. government that insures the deposits of certain banks and savings and loan associations up to $250,000 per deposit. The interest on such deposits may not be insured to the extent this limit is exceeded. Current federal regulations also permit such institutions to issue insured negotiable CDs in amounts of $250,000 or more without regard to the interest rate ceilings on other deposits. To remain fully insured, these investments must be limited to $250,000 per insured bank or savings and loan association.

*<u>Commercial Paper</u>*. Commercial paper includes notes, drafts or similar instruments payable on demand or having a maturity at the time of issuance not exceeding nine months, exclusive of days of grace or any renewal thereof. A Fund may invest in commercial paper rated A-l or A-2 by Standard & Poor's<sup>®</sup> Ratings Services ("S&P<sup>®</sup>") or Prime-1 or Prime-2 by Moody's Investors Service<sup>®</sup>, Inc. ("Moody's"), and in other lower quality commercial paper.

In March 2023, the shut-down of certain financial institutions raised economic concerns over disruption in the U.S. banking system. There can be no certainty that the actions taken by the U.S. government to strengthen public confidence in the U.S. banking system will be effective in mitigating the effects of financial institution failures on the economy and restoring public confidence in the U.S. banking system.

Caps, Floors and Collars

A Fund may enter into caps, floors and collars relating to securities, interest rates or currencies. In a cap or floor, the buyer pays a premium (which is generally, but not always, a single up-front amount) for the right to receive payments from the other party if, on specified payment dates, the applicable rate, index or asset is greater than (in the case of a cap) or less than (in the case of a floor) an agreed level, for the period involved and the applicable notional amount. A collar is a combination instrument in which the same party buys a cap and sells a floor. Depending upon the terms of the cap and floor comprising the collar, the premiums will partially, or entirely, offset each other. The notional amount of a cap, collar or floor is used to calculate payments, but is not itself exchanged. A Fund may be both a buyer and seller of these instruments. In addition, a Fund may engage in combinations of put and call options on securities (also commonly known as collars), which may involve physical delivery of securities. Like swaps, caps, floors and collars are very flexible products. The terms of the transactions entered by the Funds may vary from the typical examples described here.

Corporate Debt Securities

A Fund may invest in investment grade corporate debt securities of any rating or maturity. Investment grade corporate bonds are those rated BBB or better by S&P<sup>®</sup> or Baa or better by Moody's. Securities rated BBB by S&P<sup>®</sup> are considered investment grade, but Moody's considers securities rated Baa to have speculative characteristics. See Appendix A for a description of corporate bond ratings. A Fund may also invest in unrated securities.

Corporate debt securities are fixed-income securities issued by businesses to finance their operations, although corporate debt instruments may also include bank loans to companies. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their maturities and secured or un-secured status. Commercial paper has the shortest term and is usually unsecured.

------

The broad category of corporate debt securities includes debt issued by domestic or foreign companies of all kinds, including those with small-, mid- and large-capitalizations. Corporate debt may be rated investment-grade or below investment-grade and may carry variable or floating rates of interest.

Because of the wide range of types and maturities of corporate debt securities, as well as the range of creditworthiness of its issuers, corporate debt securities have widely varying potentials for return and risk profiles. For example, commercial paper issued by a large established domestic corporation that is rated investment grade may have a modest return on principal, but carries relatively limited risk. On the other hand, a long-term corporate note issued by a small foreign corporation from an emerging market country that has not been rated may have the potential for relatively large returns on principal, but carries a relatively high degree of risk.

Corporate debt securities carry both credit risk and interest rate risk. Credit risk is the risk that a Fund could lose money if the issuer of a corporate debt security is unable to pay interest or repay principal when it is due. Some corporate debt securities that are rated below investment grade are generally considered speculative because they present a greater risk of loss, including default, than higher-quality debt securities. The credit risk of a particular issuer's debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of higher-ranking senior securities may receive amounts otherwise payable to the holders of more junior securities. Interest rate risk is the risk that the value of certain corporate debt securities will tend to fall when interest rates rise. In general, corporate debt securities with longer terms tend to fall more in value when interest rates rise than corporate debt securities with shorter terms.

Cybersecurity Risk

The Funds may be susceptible to operational risks through breaches in cybersecurity. A cybersecurity incident may refer to either intentional or unintentional events that allow an unauthorized party to gain access to fund assets, investor data, or proprietary information, or cause a Fund or a service provider to suffer data corruption or lose operational functionality. A cybersecurity incident could, among other things, result in the loss or theft of investor data or funds, employees being unable to access electronic systems ("denial of services"), loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or remediation costs associated with system repairs. Any of these results could have a substantial impact on the Funds. For example, if a cybersecurity incident results in a denial of service, employees could be unable to access electronic systems to perform critical duties for the Funds, such as trading, NAV calculation, shareholder accounting or fulfillment of Fund share purchases and redemptions. Cybersecurity incidents could cause a Fund, Rafferty Asset Management, LLC ("Rafferty" or "Adviser") or any of its service providers to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures, or financial loss of a significant magnitude. They may also cause a Fund to violate applicable privacy and other laws. The Funds' Adviser and service providers have established risk management program and systems that seek to reduce the risks associated with cybersecurity, as well as business continuity plans in the event there is a cybersecurity breach. However, there is no guarantee that such efforts will succeed, especially since a Fund does not directly control the cybersecurity systems of the issuers of securities in which each Fund invests or the Funds' third party service providers (including the Funds' transfer agent and custodian).

Depositary Receipts

To the extent a Fund invests in stocks of foreign corporations, a Fund's investment in such stocks may also be in the form of depositary receipts or other securities convertible into securities of foreign issuers. Depository receipts are receipts, typically issued by a financial institution, with evidence of underlying securities issued by a non-U.S. issuer. Types of depositary receipts include American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs"). Depository receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted.

ADRs are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. Investments in ADRs have certain advantages over direct investment in the underlying foreign securities because: (i) ADRs are U.S. dollar-denominated investments that are easily transferable and for which market quotations are readily available, and (ii) issuers whose securities are represented by ADRs are generally subject to auditing, accounting and financial reporting standards similar to those applied to domestic issuers. By investing in ADRs rather than directly in the stock of foreign issuers outside the U.S. a Fund may avoid certain risks related to investing in foreign securities in non-U.S. markets, however, ADRs do not eliminate all risks inherent in investing in the securities of foreign issuers.

EDRs are receipts issued in Europe that evidence a similar ownership arrangement. GDRs are receipts issued throughout the world that evidence a similar arrangement. Generally, ADRs, in registered form, are designed for use in the U.S. securities

------

markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world.

Depositary receipts may be purchased through "sponsored" or "unsponsored" facilities, in which a Fund may invest. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may establish an unsponsored facility without participation by the issuer of the depositary security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts of the deposited securities.

Fund investments in depositary receipts, which include ADRs, GDRs and EDRs, are deemed to be investments in foreign securities for purposes of a Fund's investment strategy.

Equity Securities

*<u>Common Stocks</u>*. A Fund may invest in common stocks. Common stocks represent the residual ownership interest in the issuer and are entitled to the income and increase in the value of the assets and business of the entity after all of its obligations and preferred stock are satisfied. Common stocks generally have voting rights. Common stocks fluctuate in price in response to many factors including historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.

*<u>Convertible Securities</u>*. A Fund may invest in convertible securities that may be considered high yield securities. Convertible securities include corporate bonds, notes and preferred stock that can be converted into or exchanged for a prescribed amount of common stock of the same or a different issue within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or dividends paid on preferred stock until the convertible stock matures or is redeemed, converted or exchanged. While no securities investment is without some risk, investments in convertible securities generally entail less risk than the issuer's common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed income security. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. While convertible securities generally offer lower interest or dividend yields than nonconvertible debt securities of similar quality, they do enable the investor to benefit from increases in the market price of the underlying common stock. When investing in convertible securities, a Fund may invest in the lowest credit rating category.

*<u>Preferred Stock</u>*. A Fund may invest in preferred stock. A preferred stock blends the characteristics of a bond and common stock. It can offer the higher yield of a bond and has priority over common stock in equity ownership, but does not have the seniority of a bond and its participation in the issuer's growth may be limited. Preferred stock has preference over common stock in the receipt of dividends and in any residual assets after payment to creditors if the issuer is dissolved. Although the dividend is set at a fixed annual rate, in some circumstances it can be changed or omitted by the issuer. When investing in preferred stocks, a Fund may invest in the lowest credit rating category.

*<u>Warrants and Rights</u>*. A Fund may purchase warrants and rights, which are instruments that permit a Fund to acquire, by subscription, the capital stock of a corporation at a set price, regardless of the market price for such stock. Warrants may be either perpetual or of limited duration, but they usually do not have voting rights or pay dividends. The market price of warrants is usually significantly less than the current price of the underlying stock. Thus, there is a greater risk that warrants might drop in value at a faster rate than the underlying stock.

Foreign Currencies

A Fund may invest directly and indirectly in foreign currencies. Investments in foreign currencies are subject to numerous risks not least being the fluctuation of foreign currency exchange rates with respect to the U.S. Dollar. Exchange rates fluctuate for a number of reasons.

*<u>Inflation</u>*. Exchange rates change to reflect changes in a currency's buying power. Different countries experience different inflation rates due to different monetary and fiscal policies, different product and labor market conditions, and a host of other factors.

*<u>Trade Deficits</u>*. Countries with trade deficits tend to experience a depreciating currency. Inflation may be the cause of a trade deficit, making a country's goods more expensive and less competitive and so reducing demand for its currency.

*<u>Interest Rates</u>*. High interest rates may raise currency values in the short term by making such currencies more attractive to investors. However, since high interest rates are often the result of high inflation, long-term results may be the opposite.

*<u>Budget Deficits and Low Savings Rates</u>*. Countries that run large budget deficits and save little of their national income tend to suffer a depreciating currency because they are forced to borrow abroad to finance their deficits. Payments of

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interest on this debt can inundate the currency markets with the currency of the debtor nation. Budget deficits also can indirectly contribute to currency depreciation if a government chooses inflationary measures to cope with its deficits and debt.

*<u>Political Factors</u>*. Political instability in a country can cause a currency to depreciate. Demand for a certain currency may fall if a country appears a less desirable place in which to invest and do business.

*<u>Government Control</u>*. Through their own buying and selling of currencies, the world's central banks sometimes manipulate exchange rate movements. In addition, governments occasionally issue statements to influence people's expectations about the direction of exchange rates, or they may instigate policies with an exchange rate target as the goal.

The value of a Fund's investments is calculated in U.S. Dollars each day that the New York Stock Exchange ("NYSE") is open for business. As a result, to the extent that a Fund's assets are invested in instruments denominated in foreign currencies and the currencies appreciate relative to the U.S. Dollar, a Fund's NAV per share as expressed in U.S. Dollars (and, therefore, the value of your investment) should increase. If the U.S. Dollar appreciates relative to the other currencies, the opposite should occur.

The currency-related gains and losses experienced by a Fund will be based on changes in the value of portfolio securities attributable to currency fluctuations only in relation to the original purchase price of such securities as stated in U.S. Dollars. Gains or losses on shares of a Fund will be based on changes attributable to fluctuations in the NAV of such shares, expressed in U.S. Dollars, in relation to the original U.S. Dollar purchase price of the shares. The amount of appreciation or depreciation in a Fund's assets also will be affected by the net investment income generated by the money market instruments in which each Fund invests and by changes in the value of the securities that are unrelated to changes in currency exchange rates.

A Fund may incur currency exchange costs when it sells instruments denominated in one currency and buys instruments denominated in another.

*<u>Currency Transactions</u>*. A Fund conducts currency exchange transactions on a spot basis. Currency transactions made on a spot basis are for cash at the spot rate prevailing in the currency exchange market for buying or selling currency. A Fund also enters into forward currency contracts. See "Futures Contracts, Options, and Other Derivative Strategies" section below. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into on the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A currency forward contract will tend to reduce or eliminate exposure to the currency that is sold, and increase exposure to the currency that is purchased, similar to when a fund sells a security denominated in one currency and purchases a security denominated in another currency. For example, a Fund may enter into a forward contract when it owns a security that is denominated in a non-U.S. currency and desires to "lock in" the U.S. dollar value of the security.

A Fund may invest in a combination of forward currency contracts and U.S. Dollar-denominated market instruments in an attempt to obtain an investment result that is substantially the same as a direct investment in a foreign currency-denominated instrument. This investment technique creates a "synthetic" position in the particular foreign-currency instrument whose performance the Adviser is trying to duplicate. For example, the combination of U.S. Dollar-denominated instruments with "long" forward currency exchange contracts creates a position economically equivalent to a money market instrument denominated in the foreign currency itself. Such combined positions are sometimes necessary when the money market in a particular foreign currency is small or relatively illiquid.

A Fund may invest in forward currency contracts to hedge either specific transactions (transaction hedging) or portfolio positions (position hedging). Transaction hedging is the purchase or sale of forward currency contracts with respect to specific receivables or payables of a Fund in connection with the purchase and sale of portfolio securities. Position hedging is the sale of a forward currency contract on a particular currency with respect to portfolio positions denominated or quoted in that currency.

A Fund may use forward currency contracts for position hedging if consistent with its policy of trying to expose its net assets to foreign currencies. A Fund is not required to enter into forward currency contracts for hedging purposes and it is possible that a Fund may not be able to hedge against a currency devaluation that is so generally anticipated that a Fund is unable to contract to sell the currency at a price above the devaluation level it anticipates. It also is possible, under certain circumstances, that a Fund may have to limit its currency transactions to qualify as a "regulated investment company" ("RIC") under Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended ("Code"). See "Dividends, Other Distributions and Taxes."

Each Fund currently does not intend to enter into a forward currency contract with a term of more than one year, or to engage in position hedging with respect to the currency of a particular country to more than the aggregate market value (at the time the hedging transaction is entered into) of its portfolio securities denominated in (or quoted in or currently convertible into or directly related through the use of forward currency contracts in conjunction with money market instruments to) that particular currency.

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Under definitions adopted by the Commodity Futures Trading Commission ("CFTC") and SEC, non-deliverable forwards are considered swaps, and therefore are included in the definition of "commodity interests." Although non-deliverable forwards have historically been traded in the over-the-counter ("OTC") market, as swaps they may in the future be required to be centrally cleared and traded on public facilities. For more information on central clearing and trading of cleared swaps, see "Cleared swaps," "Risks of cleared swaps," "Comprehensive swaps regulation" and "Developing government regulation of derivatives." Currency forwards that qualify as deliverable forwards are not regulated as swaps for most purposes, and are not included in the definition of "commodity interests." However these forwards are subject to some requirements applicable to swaps, including reporting to swap data repositories, documentation requirements, and business conduct rules applicable to swap dealers. CFTC regulation of currency forwards, especially non-deliverable forwards, may restrict a Fund's ability to use these instruments in the manner described above or subject the investment manager to CFTC registration and regulation as a commodity pool operator ("CPO").

At or before the maturity of a forward currency contract, a Fund may either sell a portfolio security and make delivery of the currency, or retain the security and terminate its contractual obligation to deliver the currency by buying an "offsetting" contract obligating it to buy, on the same maturity date, the same amount of the currency. If a Fund engages in an offsetting transaction, it may later enter into a new forward currency contract to sell the currency.

If a Fund engages in an offsetting transaction, it will incur a gain or loss to the extent that there has been movement in forward currency contract prices. If forward prices go down during the period between the date a Fund enters into a forward currency contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, a Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. If forward prices go up, a Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell.

Since a Fund invests in money market instruments denominated in foreign currencies, it may hold foreign currencies pending investment or conversion into U.S. Dollars. Although a Fund values its assets daily in U.S. Dollars, it does not convert its holdings of foreign currencies into U.S. Dollars on a daily basis. A Fund will convert its holdings from time to time, however, and incur the costs of currency conversion. Foreign exchange dealers do not charge a fee for conversion, but they do realize a profit based on the difference between the prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, and offer to buy the currency at a lower rate if a Fund tries to resell the currency to the dealer.

*<u>Risks of currency forward contracts</u>.* Should exchange rates move in an unexpected manner, a Fund may not achieve the anticipated benefits of the transaction, or it may realize losses. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised, including because of the counterparty's bankruptcy or insolvency. While a Fund uses only counterparties that meet its credit quality standards, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited. Currency forward contracts may limit potential gain from a positive change in the relationship between the U.S. Dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for a Fund than if it had not engaged in such contracts. Moreover, there may be an imperfect correlation between a Fund's portfolio holdings of securities denominated in a particular currency and the currencies bought or sold in the forward contracts entered into by a Fund. This imperfect correlation may cause a Fund to sustain losses that will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.

*<u>Foreign Currency Options</u>*. A Fund may invest in foreign currency-denominated securities and may buy or sell put and call options on foreign currencies. A Fund may buy or sell put and call options on foreign currencies either on exchanges or in the OTC market. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a foreign currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits which may limit the ability of a Fund to reduce foreign currency risk using such options. OTC options differ from traded options in that they are two-party contracts with price and other terms negotiated between buyer and seller, and generally do not have as much market liquidity as exchange-traded options.

Foreign Currency Exchange-Related Securities

*<u>Foreign Currency Warrants</u>*. Foreign currency warrants such as Currency Exchange Warrants<sup>SM</sup> ("CEWs<sup>SM</sup>") are warrants which entitle the holder to receive from their issuer an amount of cash (generally, for warrants issued in the United States, in U.S. Dollars) which is calculated pursuant to a predetermined formula and based on the exchange rate between a specified foreign currency and the U.S. Dollar as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time. Foreign currency warrants have been issued in connection with U.S. Dollar-denominated debt offerings by major corporate issuers in an attempt to reduce the foreign currency exchange risk which, from the point of view of prospective purchasers of the securities, is inherent in the international fixed-income marketplace. Foreign currency warrants may attempt to reduce the foreign exchange risk assumed by purchasers of a security

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by, for example, providing for a supplemental payment in the event that the U.S. Dollar depreciates against the value of a major foreign currency such as the Japanese yen or the Euro. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (*e.g.*, unless the U.S. Dollar appreciates or depreciates against the particular foreign currency to which the warrant is linked or indexed). Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges. Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. In the case of any exercise of warrants, there may be a time delay between the time a holder of warrants gives instructions to exercise and the time the exchange rate relating to exercise is determined, during which time the exchange rate could change significantly, thereby affecting both the market and cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be suspended permanently, which would result in the loss of any remaining "time value" of the warrants (*i.e.*, the difference between the current market value and the exercise value of the warrants), and, in the case the warrants were "out-of-the-money," in a total loss of the purchase price of the warrants.

Warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the Options Clearing Corporation ("OCC"). Unlike foreign currency options issued by OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants is generally considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving significantly larger amounts of foreign currencies. Foreign currency warrants are subject to significant foreign exchange risk, including risks arising from complex political or economic factors.

*<u>Principal Exchange Rate Linked Securities</u>*. Principal exchange rate linked securities ("PERLs<sup>SM</sup>") are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the U.S. Dollar and a particular foreign currency at or about that time. The return on "standard" principal exchange rate linked securities is enhanced if the foreign currency to which the security is linked appreciates against the U.S. Dollar, and is adversely affected by increases in the foreign exchange value of the U.S. Dollar; "reverse" principal exchange rate linked securities are like the "standard" securities, except that their return is enhanced by increases in the value of the U.S. Dollar and adversely impacted by increases in the value of foreign currency. Interest payments on the securities are generally made in U.S. Dollars at rates that reflect the degree of foreign currency risk assumed or given up by the purchaser of the notes (*i.e.*, at relatively higher interest rates if the purchaser has assumed some of the foreign exchange risk, or relatively lower interest rates if the issuer has assumed some of the foreign exchange risk, based on the expectations of the current market). Principal exchange rate linked securities may in limited cases be subject to acceleration of maturity (generally, not without the consent of the holders of the securities), which may have an adverse impact on the value of the principal payment to be made at maturity.

*<u>Performance Indexed Paper</u>*. Performance indexed paper ("PIPs<sup>SM</sup>") is U.S. Dollar-denominated commercial paper the yield of which is linked to certain foreign exchange rate movements. The yield to the investor on performance indexed paper is established at maturity as a function of spot exchange rates between the U.S. Dollar and a designated currency as of or about that time (generally, the index maturity two days prior to maturity). The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on U.S. Dollar-denominated commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.

Foreign Securities

A Fund may have both direct and indirect exposure to foreign securities through investments in publicly traded securities such as stocks and bonds, stock index futures contracts, options on stock index futures contracts and options on securities and on stock indices to foreign securities. In most cases, the best available market for foreign securities will be on exchanges or in over-the-counter ("OTC") markets located outside the United States.

Investing in foreign securities carries political and economic risks distinct from those associated with investing in the United States. Non-U.S. securities may be subject to currency risks or to foreign government taxes. There may be less information publicly available about a non-U.S. issuer than about a U.S. issuer, and a foreign issuer may or may not be subject uniform accounting, auditing and financial reporting standards and practices comparable to those in the U.S. Other risks of investing in such securities include political or economic instability in the country involved, the difficulty of predicting international trade patterns and the possibility of the imposition of exchange controls. The prices of such securities may be more volatile than those of U.S. securities. There maybe also be the possibility of expropriation of assets or nationalization, imposition of withholding taxes on dividend or interest payments, difficulty obtaining and enforcing judgments against foreign entities

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or diplomatic developments which could affect investment in these countries. Losses and other expenses may be incurred in converting currencies in connection with purchases and sales of foreign securities.

Non-U.S. stock markets may not be as developed or efficient as, and may be more volatile than, those in the U.S. While the volume of shares traded on non-U.S. stock markets generally has been growing, such markets usually have substantially less volume than U.S. markets. Therefore, a Fund's investment in non-U.S. equity securities may be less liquid and subject to more rapid and erratic price movements than comparable securities listed for trading on U.S. exchanges. Non-U.S. equity securities may trade at price/earnings multiples higher than comparable U.S. securities and such levels may not be sustainable. There may be less government supervision and regulation of foreign stock exchanges, brokers, banks and listed companies abroad than in the U.S. Moreover, settlement practices for transactions in foreign markets may differ from those in U.S. markets. Such differences may include delays beyond periods customary in the U.S. and practices, such as delivery of securities prior to receipt of payment, that increase the likelihood of a failed settlement, which can result in losses to a Fund. The value of non-U.S. investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Foreign brokerage commissions, custodial expenses and other fees are also generally higher than for securities traded in the U.S. This may cause a Fund to incur higher portfolio transaction costs than domestic equity funds. Fluctuations in exchanges rates may also affect the earning power and asset value of the foreign entity issuing a security, even on denominated in U.S. dollars. Dividend and interest payments may be repatriated based on the exchange rate at the time of disbursement, and restrictions on capital flows may be imposed.

*<u>Developing and Emerging Markets</u>*. Emerging and developing markets abroad may offer special opportunities for investing, but may have greater risks than more developed foreign markets, such as those in Europe, Canada, Australia, New Zealand and Japan. There may be even less liquidity in their securities markets, and settlements of purchases and sales of securities may be subject to additional delays. They are subject to greater risks of limitations on the repatriation of income and profits because of currency restrictions imposed by local governments. Those countries may also be subject to the risk of greater political and economic instability, which can greatly affect the volatility of prices of securities in those countries.

Investing in emerging market securities imposes risks different from, or greater than, risks of investing in foreign developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales and future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. Dollar. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Additional risks of emerging markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. Shareholder claims and legal remedies that are common in the United States may be difficult or impossible to pursue in many emerging market countries. In addition, due to jurisdictional limitations, matters of comity and various other factors, U.S. authorities may be limited in their ability to bring enforcement actions against non-U.S. companies and non-U.S. persons in certain emerging market countries. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions.

*<u>Asia-Pacific Countries</u>*. In addition to the risks associated with foreign and emerging markets, the developing market Asia-Pacific countries in which a Fund may invest are subject to certain additional or specific risks. A Fund may make substantial investments in Asia-Pacific countries. In the Asia-Pacific markets, there is a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries. Many of these markets also may be affected by developments with respect to more established markets in the region, such as Japan and Hong Kong. Brokers in developing market Asia-Pacific countries typically are fewer in number and less well-capitalized than brokers in the United States. These factors, combined with the U.S. regulatory requirements for open-end investment companies and the restrictions on foreign investment, result in potentially fewer investment opportunities for a Fund and may have an adverse impact on a Fund's investment performance.

Many of the developing market Asia-Pacific countries may be subject to a greater degree of economic, political and social instability than is the case in the United States and Western European countries. Such instability may result from, among other things: (i) authoritarian governments or military involvement in political and economic decision-making, including changes in government through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; and/or (v) ethnic, religious and racial disaffection. In addition, the governments of many of such countries, such as Indonesia, have a heavy role in regulating and supervising the economy.

An additional risk common to most such countries is that the economy is heavily export-oriented and, accordingly, is dependent upon international trade. The existence of overburdened infrastructure and obsolete financial systems also present risks in certain countries, as do environmental problems. Certain economies also depend to a significant degree upon exports

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of primary commodities and, therefore, are vulnerable to changes in commodity prices that, in turn, may be affected by a variety of factors. The legal systems in certain developing market Asia-Pacific countries also may have an adverse impact on a Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholder's investment, the notion of limited liability is less clear in certain emerging market Asia-Pacific countries. Similarly, the rights of investors in developing market Asia-Pacific companies may be more limited than those of shareholders of U.S. corporations. It may be difficult or impossible to obtain and/or enforce a judgment in a developing market Asia-Pacific country.

Governments of many developing market Asia-Pacific countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In certain cases, the government owns or controls many companies, including the largest in the country. Accordingly, government actions in the future could have a significant effect on economic conditions in developing market Asia-Pacific countries, which could affect private sector companies and a Fund itself, as well as the value of securities in a Fund's portfolio. In addition, economic statistics of developing market Asia-Pacific countries may be less reliable than economic statistics of more developed nations.

It is possible that developing market Asia-Pacific issuers may not be subject to the same accounting, auditing and financial reporting standards as U.S. companies. Inflation accounting rules in some developing market Asia-Pacific countries require companies that keep accounting records in the local currency, for both tax and accounting purposes, to restate certain assets and liabilities on the company's balance sheet in order to express items in terms of currency of constant purchasing power. Inflation accounting may indirectly generate losses or profits for certain developing market Asia-Pacific companies. In addition, satisfactory custodial services for investment securities may not be available in some developing Asia-Pacific countries, which may result in a Fund incurring additional costs and delays in providing transportation and custody services for such securities outside such countries.

Certain developing Asia-Pacific countries are especially large debtors to commercial banks and foreign governments. Fund management may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular developing Asia-Pacific country. A Fund may invest in countries in which foreign investors, including management of the Fund, have had no or limited prior experience.

*<u>Brazil</u>*. Investing in Brazil involves certain considerations not typically associated with investing in the United States. Additional considerations include: (i) investment and repatriation controls, which could affect a Fund's ability to operate, and to qualify for the favorable tax treatment afforded to RICs for U.S. federal income tax purposes; (ii) fluctuations in the rate of exchange between the Brazilian Real and the U.S. Dollar; (iii) the generally greater price volatility and lesser liquidity that characterize Brazilian securities markets, as compared with U.S. markets; (iv) the effect that balance of trade could have on Brazilian economic stability and the Brazilian government's economic policy; (v) potentially high rates of inflation, a rising unemployment rate, and a high level of debt, each of which may hinder economic growth; (vi) governmental involvement in and influence on the private sector; (vii) Brazilian accounting, auditing and financial standards and requirements, which differ from those in the United States; (viii) political and other considerations, including changes in applicable Brazilian tax laws; and (ix) restrictions on investments by foreigners. In addition, commodities, such as oil, gas and minerals, represent a significant percentage of Brazil's exports and, therefore, its economy is particularly sensitive to fluctuations in commodity prices. Additionally, an investment in Brazil is subject to certain risks stemming from political and economic corruption.

*<u>China</u>*. Investing in China involves special considerations not typically associated with investing in countries with more democratic governments or more established economies or currency markets. These risks include: (i) the risk of nationalization or expropriation of assets or confiscatory taxation; (ii) greater governmental involvement in and control over the economy, interest rates and currency exchange rates; (iii) controls on foreign investment and limitations on repatriation of invested capital; (iv) greater social, economic and political uncertainty ; (v) dependency on exports and the corresponding importance of international trade; (vi) currency exchange rate fluctuations; (vii) differences in, or lack of, auditing and financial reporting standards that may result in unavailability of material information about issuers and restrictions on issuers' ability to access the U.S. capital markets; and (viii) the risk that certain companies, including those in which the Fund may invest, may have dealings with countries subject to sanctions or embargoes imposed by the U.S. government or identified as state sponsors of terrorism.

For over three decades, the Chinese government has been reforming economic and market practice and has been providing a larger sphere for private ownership of property. While currently contributing to growth and prosperity, the government could technically decide not to continue to support these economic reform programs and return to the completely centrally planned economy that existed prior to 1978. There is also a greater risk in China than in many other countries of currency fluctuations, currency non-convertibility, interest rate fluctuations and higher rates of inflation as a result of internal social unrest or conflicts with other countries. China is an emerging market and demonstrates significantly higher volatility from time to time in comparison to developed markets. The government of China maintains strict currency controls in support of economic, trade and political objectives and regularly intervenes in the currency market. The government's actions in this respect may not be transparent or predictable. As a result, the value of the Yuan (or renminbi), and the value of securities designed to provide exposure to the Yuan, can change quickly and arbitrarily. Furthermore, it is difficult for foreign investors to directly access money market securities in China because of investment and trading restrictions. Chinese law also prohibits direct foreign investments in certain issuers in certain industries. Chinese companies listed on U.S. exchanges often use variable interest entities ("VIEs") in their structure. Instead of directly owning the equity securities of a Chinese operating

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company, in a VIE structure, a non-U.S. shell company (often organized in the Cayman Islands) that is listed and traded on a U.S. exchange enters into service contracts and other contracts with the Chinese operating company which provide the foreign shell company with exposure to the Chinese company. Although the U.S. listed shell company has no equity ownership of the Chinese operating company, the contractual arrangements provide the U.S. listed shell company economic exposure to the Chinese operating company and permit the U.S. listed shell company to consolidate the Chinese operating company into its financial statements. VIE structures are subject to legal and regulatory uncertainties and risks. Intervention by the Chinese government with respect to VIE structures or the non-enforcement of VIE-related contractual rights could significantly affect a Chinese operating company's business, the enforceability of the U.S. listed shell company's contractual arrangements with the Chinese operating company and the value of the U.S. listed stock. Intervention by the Chinese government could include nationalization of the Chinese operating company, confiscation of its assets, restrictions on operations and/or constraints on the use of VIE structures. In addition, because the Chinese operating company is not owned, directly or indirectly, by the U.S. listed shell company, the U.S. listed shell company cannot control the Chinese operating company and must rely on the Chinese operating company to perform its contractual obligations in order for the U.S. listed company to receive economic benefits. In addition, PRC companies listed on U.S. exchanges, including ADRs and companies that rely on VIE structures, may be delisted if they do not meet U.S. accounting standards and auditor oversight requirements. Delisting could significantly decrease the liquidity and value of the securities of these companies, decrease the ability of a Fund to invest in such securities and increase the cost of the Fund if it is required to seek alternative markets in which to invest in such securities.

While the economy of China has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Reduction in spending on Chinese products and services, the institution of additional tariffs or other trade barriers, including as a result of heightened trade tensions between China and the United States, or a downturn in any of the economies of China's key trading partners may have an adverse impact on the Chinese economy. Actions like these may have unanticipated and disruptive effects on the Chinese economy. Any such response that targets Chinese financial markets or securities exchanges could interfere with orderly trading, delay settlement or cause market disruptions. These and other factors may decrease the value and liquidity of a Fund's investments. The Chinese economy may experience a significant slowdown as a result of, among other things, a deterioration of global demand for Chinese exports, as well as contraction in spending on domestic goods by Chinese consumers. In addition, China may experience substantial rates of inflation or economic recessions, which would have a negative effect on its economy and securities market.

Hong Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative Region of the PRC under the principle of "one country, two systems." Although China is obligated to maintain the current capitalist economic and social system of Hong Kong through June 30, 2047, the continuation of economic and social freedoms enjoyed in Hong Kong is dependent on the government of China. Since 1997, there have been tensions between the Chinese government and many people in Hong Kong regarding China's perceived tightening of control over Hong Kong's semi-autonomous liberal political, economic, legal, and social framework. Recent protests may prompt the Chinese and Hong Kong governments to rapidly address Hong Kong's future relationship with mainland China, which remains unresolved. Due to the interconnected nature of the Hong Kong and Chinese economies, this instability in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets.

There has been increased attention to Chinese companies from the U.S. government and U.S. regulators, including the Department of the Treasury ("DOT") and its Office of Foreign Assets Control ("OFAC"). In a series of actions between November 2020 and June 2021, the DOT prohibited investment by U.S. investors in the publicly traded securities of certain companies tied to the Chinese military or China's surveillance technology sector. The prohibited companies were described in the executive orders as "Chinese Military Industrial Complex Companies," and the restrictions on investing in such companies was interpreted by OFAC to extend to instruments that are derivative of, or designed to provide investment exposure to, these companies, including diversified investment companies. More recently, the DOT issued regulations which will prohibit or require notification of investments by certain U.S. persons in certain sub-sets of national security technologies and products including semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems in or related to "countries of concern," defined as China including Hong Kong and Macau. These regulations are in effect as of January 2, 2025. Although it cannot be fully known at this time, these rules may significantly reduce the liquidity of such investments, force a Fund to sell certain positions at inopportune times or unfavorable prices and restrict future investments by a Fund. Audits performed by PCAOB-registered accounting firms in mainland China and Hong Kong may be less reliable than those performed by firms subject to PCAOB inspection. Accordingly, information about the Chinese securities in which a Fund invests may be less reliable or complete. Under amendments to the Sarbanes-Oxley Act enacted in December 2020, which requires that the PCAOB be permitted to inspect the accounting firm of a U.S.-listed Chinese issuer, Chinese companies with securities listed on U.S. exchanges may be delisted if the PCAOB is unable to inspect the accounting firm.

Recently, there have been intensified concerns about trade tariffs and a potential trade war between China and the United States. Future tariffs imposed by China and the United States on the other country's products, or other escalating actions, may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China's export industry with a potentially negative impact to a Fund.

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For decades, a state of hostility has existed between Taiwan and the PRC. Beijing has long deemed Taiwan a part of the "one China" and has made a nationalist cause of recovering it. This situation poses a threat to Taiwan's economy and could negatively affect its stock market. In addition, China could be affected by military events on the Korean peninsula or internal instability within North Korea. These situations may cause uncertainty in the Chinese market and may adversely affect performance of the Chinese economy.

Foreign investors had historically been unable to participate in the PRC securities market. However, in late 2002, Investment Regulations promulgated by the China Securities Regulatory Commission ("CSRC") came into effect, which were replaced by the updated Investment Regulations (i.e., "Measures for the Administration of the Securities Investments of Qualified Foreign Institutional Investors in the PRC"), which came into effect on September 1, 2006, that provided a legal framework for certain Qualified Foreign Institutional Investors ("QFIIs") to invest in PRC securities and certain other securities historically not eligible for investment by non-Chinese investors, through quotas granted by China's State Administration of Foreign Exchange ("SAFE") to those QFIIs which have been approved by the CSRC. The RMB QFII ("RQFII") program was instituted in December 2011 and is substantially similar to the QFII program, but provides for greater flexibility in repatriating assets. In 2020, the PRC government eliminated QFII and RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer be subject to quotas when investing in PRC securities (but will remain subject to foreign shareholder limits), and merged the two programs into the Qualified Foreign Investor regime ("QFI").

China A-shares are equity securities of companies based in mainland China that trade on Chinese stock exchanges such as the Shanghai Stock Exchange ("SSE") and the Shenzhen Stock Exchange ("SZSE") ("A-shares"). The ability of a Fund to invest in China A-Shares is dependent, in part, on the availability of A-Shares either through the trading and clearing facilities of a participating exchange located outside of mainland China ("Stock Connect Programs") which currently include the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Shanghai-London Stock Connect, and China-Japan Stock Connect, and/or through a QFI license. Thus, the Fund's investment in A-Shares may be limited by the daily A-Shares quota limitation and by the amount of A-Shares available through the Stock Connect Programs.

The Stock Connect Programs are subject to daily and aggregate quota limitations, and an investor cannot purchase and sell the same security on the same trading day, which may restrict a Fund's ability to invest in A-Shares through the Stock Connect Programs and to enter into or exit trades on a timely basis. The Shanghai and Shenzhen markets may be open at a time when the participating exchanges located outside of mainland China are not active, with the result that prices of A-Shares may fluctuate at times when a Fund is unable to add to or exit a position. The mainland Chinese and Hong Kong regulators launched an enhanced trading calendar for Stock Connect to allow Stock Connect trading on all the days which are trading days in both mainland Chinese and Hong Kong markets, even when the corresponding settlement days would be public holidays. Only certain A-Shares are eligible to be accessed through the Stock Connect Programs. Such securities may lose their eligibility at any time, in which case they may no longer be able to be purchased or sold through the Stock Connect Programs. Because the Stock Connect Programs are still evolving, the actual effect on the market for trading A-Shares with the introduction of large numbers of foreign investors is still relatively unknown. In addition, there is no assurance that the necessary systems required to operate the Stock Connect Programs will function properly or will continue to be adapted to changes and developments in both markets. In the event that the relevant systems do not function properly, trading through the Stock Connect Programs could be disrupted. The Stock Connect Programs are subject to regulations promulgated by regulatory authorities for both exchanges and further regulations or restrictions, such as limitations on redemptions or suspension of trading, may adversely impact the Stock Connect Programs, if the authorities believe it necessary to assure orderly markets or for other reasons. There is no guarantee that the participating exchanges will continue to support the Stock Connect Programs in the future. Each of the foregoing could restrict a Fund from selling its investments, adversely affect the value of its holdings and negatively affect a Fund's ability to meet shareholder redemptions.

*<u>Europe</u>.* Investing in European countries may impose economic and political risks associated with Europe in general and the specific European countries in which it invests. The economies and markets of European countries are often closely connected and interdependent, and events in one European country can have an adverse impact on other European countries. A Fund makes investments in securities of issuers that are domiciled in, or have significant operations in, member countries of the Economic and Monetary Union of the European Union (the "EU"), which requires member countries to comply with restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls, each of which may significantly affect every country in Europe. Decreasing imports or exports, changes in governmental or EU regulations on trade, changes in the exchange rate of the euro (the common currency of certain EU countries), the default or threat of default by an EU member country on its sovereign debt, and/or an economic recession in an EU member country may have a significant adverse effect on the economies of EU member countries and their trading partners, including some or all of the emerging markets materials sector countries. Although certain European countries do not use the euro, many of these countries are obliged to meet the criteria for joining the euro zone. Consequently, these countries must comply with many of the restrictions noted above. The European financial markets have experienced volatility and adverse trends in recent years due to concerns about economic downturns or rising government debt levels in several European countries, including , but not limited to, Austria, Belgium, Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. In order to prevent further economic deterioration, certain countries, without prior warning, can institute "capital controls." Countries may use these controls to restrict volatile movements of capital entering and exiting their country. Such controls may negatively affect a Fund's

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investments. A default or debt restructuring by any European country would adversely impact holders of that country's debt and sellers of credit default swaps linked to that country's creditworthiness, which may be located in countries other than those listed above. In addition, the credit ratings of certain European countries were recently downgraded. These downgrades may result in further deterioration of investor confidence. These events have adversely affected the value and exchange rate of the euro and may continue to significantly affect the economies of every country in Europe, including countries that do not use the euro and non-EU member countries. Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not produce the desired results, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and other entities of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition, one or more countries may abandon the euro and/or withdraw from the EU. The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching and could adversely impact the value of investments in the region.

In a referendum held on June 23, 2016, the United Kingdom (the "UK") resolved to leave the EU (referred to as "Brexit"). On January 31, 2020, the UK officially withdrew from the EU pursuant to a withdrawal agreement, providing for a transition period in which the UK negotiated and finalized a trade deal with the EU, the EU-UK Trade and Cooperation Agreement (the "Trade Agreement"). As a result, since January 1, 2021, the United Kingdom is no longer part of the EU customs union and single market, nor is it subject to EU policies and international agreements. The Trade Agreement, among other things, provides for zero tariffs and zero quotas on all goods that comply with appropriate rules of origin and establishes the treatment and level of access the United Kingdom and EU have agreed to grant each other's service suppliers and investors. The Trade Agreement also covers digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, social security coordination, law enforcement and judicial cooperation in criminal matters, thematic cooperation and participation in EU programs. Even with the Trade Agreement in place, the UK's withdrawal from the EU may create new barriers to trade in goods and services and to cross-border mobility and exchanges.

The UK has one of the largest economies in Europe, and member countries of the EU are substantial trading partners of the UK. The City of London's economy is dominated by financial services and uncertainty remains regarding the treatment of cross-border trade in financial services. While the Trade Agreement includes certain provisions to support cross-border trade in financial services, it is not comprehensively addressed in the Trade Agreement and the parties continue to discuss 'equivalence' rights to allow market access for cross-border financial services. In March 2021, the EU and the UK reached a memorandum of understanding, establishing a framework for voluntary regulatory cooperation on financial services. Without access to the EU single market, certain financial services in the UK may move outside of the UK as a result of its withdrawal from the EU. In addition, financial services firms in the UK may need to move staff and comply with two separate sets of rules or lose business to financial services firms in the EU. Furthermore, the withdrawal from the EU creates the potential for decreased trade, the possibility of capital outflows, devaluation of the pound sterling, the cost of higher corporate bond spreads due to continued uncertainty, and the risk that all the above could damage business and consumer spending as well as foreign direct investment. As a result of the withdrawal from the EU, the British economy and its currency may be negatively impacted by changes to its economic and political relations with the EU. Additional member countries seeking to withdraw from the EU would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties.

Brexit may also have a destabilizing impact on the EU to the extent that other member states similarly seek to withdraw from the EU. Any further exits from the EU would likely cause additional market disruptions globally and introduce new legal and regulatory uncertainties.

Russia's increasing international assertiveness could negatively impact EU economic activity. The effect on the economies of EU countries of the Russia/Ukraine war and Russia's response to sanctions imposed by the US and other countries are impossible to predict, but have been and could continue to be significant.

*<u>India</u>*. Investments in India involve special considerations not typically associated with investing in countries with more established economies or currency markets. Political, religious, and border disputes persist in India. India has recently experienced and may continue to experience civil unrest and hostilities with certain of its neighboring countries, including Pakistan, and the Indian government has confronted separatist movements in several Indian states, including Kashmir. Government control over the economy, currency fluctuations or blockage, and the risk of nationalization or expropriation of assets offer higher potential losses. Governmental actions could have a negative effect on the economic conditions in India, which could adversely affect the value and liquidity of investments made by a Fund. The securities markets in India are comparatively underdeveloped with some exceptions and consist of a small number of listed companies with small market capitalization, greater price volatility and substantially less liquidity than companies in more developed markets. The limited liquidity of the Indian securities market may also affect a Fund's ability to acquire or dispose of securities at the price or time that it desires or the Fund's ability to track its underlying index.

The Indian government exercises significant influence over many aspects of the economy, and the number of public sector enterprises in India is substantial. While the Indian government has implemented economic structural reform with the objectives of liberalizing India's exchange and trade policies, reducing the fiscal deficit, controlling inflation, promoting a

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sound monetary policy, reforming the financial sector, and placing greater reliance on market mechanisms to direct economic activity, there can be no assurance that these policies will continue or that the economic recovery will be sustained.

Global factors and foreign actions may inhibit the flow of foreign capital on which India is dependent to sustain its growth. In addition, the Reserve Bank of India has imposed limits on foreign ownership of Indian companies, which may decrease the liquidity of a Fund's portfolio and result in extreme volatility in the prices of Indian securities. In November 2016, the Indian government eliminated certain large denomination cash notes as legal tender, causing uncertainty in certain financial markets. These factors, coupled with the lack of extensive accounting, auditing and financial reporting standards and practices, as applicable in the United States, may increase the risk of loss for a Fund.

Securities laws in India are relatively new and unsettled and, as a result, there is a risk of significant and unpredictable change in laws governing foreign investment, securities regulation, title to securities and shareholder rights. Foreign investors in particular may be adversely affected by new or amended laws and regulations. Certain Indian regulatory approvals, including approvals from the Securities and Exchange Board of India, the central government and the tax authorities (to the extent that tax benefits need to be utilized), may be required before a Fund can make investments in Indian companies. Foreign investors in India still face burdensome taxes on investments in income producing securities.

While the Indian economy has enjoyed substantial economic growth in recent years, there can be no guarantee this growth will continue. Technology and software sectors represent a significant portion of the total capitalization of the Indian securities markets. The value of these companies will generally fluctuate in response to technological and regulatory developments, and, as a result, a Fund's holdings are expected to experience correlated fluctuations. Natural disasters, such as tsunamis, flooding or droughts, could occur in India or surrounding areas and could negatively affect the Indian economy. Agriculture occupies a prominent position in the Indian economy, therefore, it may be negatively affected by adverse weather conditions and the effects of global climate change. These and other factors may decrease the value and liquidity of a Fund's investments.

*<u>Italy</u>.* Investment in Italian issuers involves risks that are specific to Italy, including, regulatory, political, currency, and economic risks. Italy's economy is dependent upon external trade with other economies—specifically Germany, France and other Western European developed countries. As a result, Italy is dependent on the economies of these other countries and any change in the price or demand for Italy's exports may have an adverse impact on its economy. Interest rates on Italy's debt may rise to levels that may make it difficult for it to service high debt levels without significant financial help from the EU and could potentially lead to default. Recently, the Italian economy has experienced volatility due to concerns about economic downturn and rising government debt levels. Italy has been warned by the Economic and Monetary Union of the EU to reduce its public spending and debt and actions by Italy to cut spending or increase taxes in response could have significant adverse effects on the Italian economy. These events have adversely impacted the Italian economy, causing credit agencies to lower Italy's sovereign debt rating in the past, and could decrease outside investment in Italian companies. High amounts of debt and public spending may stifle Italian economic growth or cause prolonged periods of recession.

*<u>Japan</u>*. Japanese investments may be significantly affected by events influencing Japan's economy and changes in the exchange rate between the Japanese yen and the U.S. Dollar. Japan's economy fell into a long recession in the 1990s. After a few years of mild recovery in the mid-2000s, Japan's economy fell into another recession as a result of the recent global economic crisis. In recent years, Japan's government has approved fiscal stimulus packages in order to stimulate its slowing economy, which has been negatively affected by decreased demand from China and by recent political conflicts with South Korea. Japan is heavily dependent on exports and foreign oil and may be adversely affected by higher commodity prices, trade tariffs, protectionist measures, competition from emerging economies, and the economic conditions of its trading partners, such as China. Furthermore, Japan is located in a seismically active area, and in 2011 experienced an earthquake and a tsunami that significantly affected important elements of its infrastructure and resulted in a nuclear crisis. The risks of natural disaster of varying degrees, such as earthquakes and tsunamis, and the resulting damage, continue to exist. Japan's economic prospects may be affected by the political and military situations of its near neighbors, notably North and South Korea, China, and Russia. In addition, the Japanese economic growth rate could be impacted by Bank of Japan monetary policies, rising interest rates, tax increases, budget deficits, consumer confidence and volatility in the Japanese yen. In the longer term, Japan will have to address the effects of an aging population, such as a shrinking workforce and higher welfare costs. These demographic shifts and fundamental structural changes to the labor markets may negatively impact Japan's economic competitiveness.

*<u>South Korea</u>*. South Korean investments may be significantly affected by events influencing its economy, which is heavily dependent on exports and the demand for certain finished goods. South Korea's main industries include electronics, automobile production, chemicals, shipbuilding, steel, textiles, clothing, footwear, and food processing. Conditions that weaken demand for such products worldwide or in other Asian countries could have a negative impact on the South Korean economy as a whole. The South Korean economy's reliance on international trade makes it highly sensitive to fluctuations in international commodity prices, currency exchanges rates and government regulation, and vulnerable to downturns of the world economy, particularly with respects to its four largest export markets (the EU, Japan, United States, and China). South Korea has experienced modest economic growth in recent years, but such continued growth may slow due, in part, to the economic slowdown in China and the increased competitive advantage of Japanese exports with the weakened yen. The South Korean economy's long-term challenges include an aging population, inflexible labor market, and overdependence on exports to drive economic growth. Relations between South Korea and North Korea remain tense, as exemplified in periodic acts of

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hostility, and the possibility of serious military engagement still exists. Armed conflict between North Korea and South Korea could have a severe adverse impact on the South Korean economy and its securities markets.

*<u>Latin America</u>*. The economies of certain Latin American countries have experienced high interest rates, economic volatility, inflation, currency devaluations, government defaults, high unemployment rates and political instability which can adversely affect issuers in these countries. In addition, commodities (such as oil, gas and minerals) represent a significant percentage of the region's exports and many economies in this region are particularly sensitive to fluctuations in commodity prices. Adverse economic events in one country may have a significant adverse effect on other countries of this region. The governments of certain countries in Latin America may exercise substantial influence over many aspects of the private sector and may own or control many companies. Future government actions could have a significant effect on the economic conditions in such countries, which could have a negative impact on the securities in which a Fund invests. Diplomatic developments may also adversely affect investments in certain countries in Latin America. Some countries in Latin America may be affected by public corruption and crime, including organized crime. Certain countries in Latin America may be heavily dependent upon international trade and, consequently, have been and may continue to be negatively affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These countries also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. In addition, certain issuers located in countries in Latin America in which a Fund invests may be the subject of sanctions (for example, the U.S. has imposed sanctions on certain Venezuelan individuals, corporate entities and the Venezuelan government) or have dealings with countries subject to sanctions and/or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. An issuer may sustain damage to its reputation if it is identified as an issuer that has dealings with such countries. A Fund may be adversely affected if it invests in such issuers. Certain Latin American countries may also have managed currencies, which are maintained at artificial levels to the U.S. Dollar rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency which, in turn, can have a disruptive and negative effect on foreign investors. Certain Latin American countries also restrict the free conversion of their currency into foreign currencies, including the U.S. Dollar. There is no significant foreign exchange market for many currencies and it would, as a result, be difficult for the Fund to engage in foreign currency transactions designed to protect the value of the Fund's interests in securities denominated in such currencies. Finally, a number of Latin American countries are among the largest debtors of developing countries. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies.

*<u>Mexico</u>*. Investment in Mexican issuers involves risks that are specific to Mexico, including regulatory, political, and economic risks. In the past, Mexico has experienced high interest rates, economic volatility, significant devaluation of its currency (the peso), and high unemployment rates. The Mexican economy is dependent upon external trade with other economies, specifically with the United States and certain Latin American countries. Additionally, a high level of foreign investment in Mexican assets may increase Mexico's exposure to risks associated with changes in international investor sentiment. In 2018, the United States, Mexico and Canada signed and ratified the United States-Mexico-Canada Agreement ("USMCA"), which replaces the current North American Free Trade Agreement among the three countries. The USMCA has facilitated economic and financial integration among the United States, Canada and Mexico; however, any disruption and uncertainty regarding USMCA may have a significant and adverse impact on Mexico's outlook and the value of a Fund's investments in securities economically tied to Mexico.

The Mexican economy is heavily dependent on trade with, and foreign investment from, the U.S. and Canada, which are Mexico's principal trading partners. Any changes in the supply, demand, price or other economic component of Mexico's imports or exports, as well as any reductions in foreign investment from, or changes in the economies of, the U.S. or Canada, may have an adverse impact on the Mexican economy. Because commodities such as oil and gas, minerals and metals represent a large portion of the region's exports, the economies of these countries are particularly sensitive to fluctuations in commodity prices. Mexico's economy has also become increasingly manufacturing-oriented. Because Mexico's top export is automotive vehicles, its economy is strongly tied to the U.S. automotive market, and changes to certain segments in the U.S. market could have an impact on the Mexican economy. The automotive industry and other industrial products can be highly cyclical, and companies in these industries may suffer periodic operating losses. These industries can also be significantly affected by labor relations and fluctuating component prices. The agricultural and mining sectors of Mexico's economy also account for a large portion of its exports, and Mexico is susceptible to fluctuations in the price and demand for agricultural products and natural resources. In addition, Mexico has privatized or has begun the process of privatization of certain entities and industries, and some investors have suffered losses due to the inability of the newly privatized entities to adjust to a competitive environment and changing regulatory standards.

Mexico has been destabilized by local insurrections, social upheavals and drug-related violence. Additionally, violence near border areas, border-related political disputes, and other social upheaval may lead to strained international relations. Mexico has also experienced contentious and very closely decided elections. Changes in political parties and other political events may affect the economy and contribute to additional instability. Recurrence of these or similar conditions may adversely impact the Mexican economy.

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*<u>Russia</u>*. Investing in Russia involves risks and special considerations not typically associated with investing in United States. Since the breakup of the Soviet Union at the end of 1991, Russia has experienced dramatic political, economic, and social change. The political system in Russia is emerging from a long history of extensive state involvement in economic affairs. The country is undergoing a rapid transition from a centrally-controlled command system to a market-oriented, democratic model. As a result, companies in Russia are characterized by a lack of: (i) management with experience of operating in a market economy; (ii) modern technology; and, (iii) a sufficient capital base with which to develop and expand their operations. It is unclear what will be the future effect on Russian companies, if any, of Russia's continued attempts to move toward a more market-oriented economy. Russia's economy has been characterized by high rates of inflation, high rates of unemployment, declining gross domestic product, deficit government spending, and a devalued currency. The economic reform program has involved major disruptions and dislocations in various sectors of the economy, and those problems have been exacerbated by growing liquidity problems. Russia's economy is also heavily reliant on the energy and defense-related sectors, and is therefore susceptible to the risks associated with these industries. The laws and regulations in Russia affecting Western business investment continue to evolve in an unpredictable manner. Russian laws and regulations, particularly those involving taxation, foreign investment and trade, title to property or securities, and transfer of title, which may be applicable to a Fund's activities are relatively new and can change quickly and unpredictably in a manner far more volatile than in the United States or other developed market economies. Although basic commercial laws are in place, they are often unclear or contradictory and subject to varying interpretation, and may at any time be amended, modified, repealed or replaced in a manner adverse to the interest of the Funds.

Russia's invasion of the Ukraine, and corresponding events in late February 2022, have had, and could continue to have, severe adverse effects on regional and global economic markets for securities and commodities. Following Russia's actions, various governments, including the United States, have issued and continue to issue broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on transactions with certain Russian companies, financial institutions, officials and individuals; new investment by US persons in Russian enterprises; restrictions on the ability of US persons to sell securities held through the Russian central securities depository or through certain other financial institutions; the removal by certain countries and the European Union of selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications ("SWIFT"), the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The recent events, including sanctions and the potential for future sanctions, including any impacting Russia's energy sector, and other actions, and Russia's retaliatory responses to those sanctions and actions, may continue to adversely impact the Russian economy and economies of surrounding countries and may result in the continuing or further decline of the value and liquidity of Russian securities, particularly those held by US persons including a Fund and securities of surrounding countries, a continued weakening of currencies in the region and continued exchange closures, and may have other adverse consequences on the economies of countries in the region that could impact the value of investments in the region and impair the ability of a Fund to buy, sell, receive or deliver securities of companies in the region or a Fund's ability to collect interest payments on fixed income securities in the region. For example, exports in Eastern Europe have been disrupted for certain key commodities, pushing commodity prices to record highs, and energy prices in Europe have increased significantly. Moreover, those events have, and could continue to have, an adverse effect on global markets performance and liquidity, thereby negatively affecting the value of a Fund's investments beyond any direct exposure to issuers in the region. The duration of ongoing hostilities and the vast array of sanctions and related events cannot be predicted. Those events present material uncertainty and risk with respect to markets globally and the performance of a Fund and its investments or operations could be negatively impacted.

Hybrid Instruments

A Fund may invest in hybrid instruments. A hybrid instrument is a type of potentially high-risk derivative that combines a traditional stock, bond, or commodity with an option or forward contract. Generally, the principal amount, amount payable upon maturity or redemption, or interest rate of a hybrid is tied (positively or negatively) to the price of some commodity, currency or securities index or another interest rate or some other economic factor (each a "benchmark"). The interest rate or (unlike most fixed income securities) the principal amount payable at maturity of a hybrid security may be increased or decreased, depending on changes in the value of the benchmark. A hybrid could be, for example, a bond issued by an oil company that pays a small base level of interest, in addition to interest that accrues when oil prices exceed a certain predetermined level. Such a hybrid instrument would be a combination of a bond and a call option on oil.

Hybrids can be used as an efficient means of pursuing a variety of investment goals, including currency hedging, and increased total return. Hybrids may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. Dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating

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rate of interest. The purchase of hybrids also exposes a Fund to the credit risk of the issuer of the hybrids. These risks may cause significant fluctuations in the NAV of a Fund.

Certain issuers of structured products such as hybrid instruments may be deemed to be investment companies as defined in the 1940 Act. As a result, a Fund's investment in these products may be subject to limits applicable to investments in investment companies and may be subject to restrictions contained in the 1940 Act.

Illiquid Investments and Restricted Securities

Each Fund may purchase and hold illiquid investments. The term "illiquid investments" for this purpose means any investment that a Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. A Fund will not acquire illiquid securities if, as a result, such securities would comprise more than 15% of the value of the Fund's net assets. Rafferty, subject to oversight by the Board of Trustees, has the ultimate authority to determine, to the extent permissible under the federal securities laws, which securities are liquid or illiquid for purposes of this 15% limitation under a Fund's liquidity risk management program, adopted pursuant to Rule 22e-4 under the 1940 Act. Illiquid securities will be priced at fair value as determined in good faith under procedures adopted by the Board of Trustees. If, through the appreciation of illiquid securities or the depreciation of liquid securities, a Fund should be in a position where more than 15% of the value of its net assets are invested in illiquid securities, including restricted securities which are not readily marketable, Rafferty will report such occurrence to the Board of Trustees and take such steps as are deemed advisable to protect liquidity in accordance with a Fund's liquidity risk management program.

A Fund may not be able to sell illiquid investments when Rafferty considers it desirable to do so or may have to sell such investments at a price that is lower than the price that could be obtained if the investments were liquid. In addition, the sale of illiquid investments may require more time and result in higher dealer discounts and other selling expenses than does the sale of investments that are not illiquid. Illiquid investments also may be more difficult to value due to the unavailability of reliable market quotations for such investments, and investment in illiquid investments may have an adverse impact on NAV.

Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers. Institutional markets for restricted securities that have developed as a result of Rule 144A provide both readily ascertainable values for certain restricted securities and the ability to liquidate an investment to satisfy share redemption orders. This policy does not include restricted securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"), which the Trust's Board of Trustees ("Board" or "Trustees"), or Rafferty, under Board-approved guidelines, has determined are liquid. Each Fund currently does not anticipate investing in such restricted securities. However, to the extent that a Fund does invest in such restricted securities, an insufficient number of qualified institutional buyers interested in purchasing Rule 144A-eligible securities held by a Fund could adversely affect the marketability of such portfolio securities, and a Fund may be unable to dispose of such securities promptly or at reasonable prices.

Indexed Securities

A Fund may purchase indexed securities, which are securities, the value of which varies positively or negatively in relation to the value of other securities, securities indices or other financial indicators, consistent with its investment objective. Indexed securities may be debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Recent issuers of indexed securities have included banks, corporations and certain U.S. government agencies.

The performance of indexed securities depends to a great extent on the performance of the security or other instrument to which they are indexed and also may be influenced by interest rate changes in the United States and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Indexed securities may be more volatile than the underlying instruments. Certain indexed securities that are not traded on an established market may be deemed illiquid. See "Illiquid Investments and Restricted Securities" above.

Interest Rate Risk

Many debt securities, derivatives and other financial instruments, including some of a Fund's investments, have historically utilized the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. LIBOR was discontinued as a benchmark rate but synthetic values of U.S. dollar LIBOR tenors were published using the unrepresentative methodology of the U.S. LIBOR Act ("synthetic-U.S. dollar LIBOR") until September 30, 2024.

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Synthetic U.S. dollar LIBOR will be calculated using the same methodology used in the LIBOR Act. Synthetic U.S. dollar LIBOR cannot be used for cleared derivatives, but could be used in untransitioned legacy contracts unless they contain fallback language addressing LIBOR that has become "unrepresentative." There is a risk that any of these synthetic U.S. dollar LIBOR maturities may cease to be published before these dates.

Also in 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is a broad measure of the cost of overnight borrowings secured by Treasury Department securities, as an appropriate replacement for U.S. dollar LIBOR.

The Federal Reserve Bank of New York began publishing SOFR in April, 2018, with the expectation that it could be used on a voluntary basis in new instruments and for new transactions under existing instruments. However, SOFR is fundamentally different from LIBOR. It is a secured, nearly risk-free rate, while LIBOR is an unsecured rate that includes an element of bank credit risk. Also, while term SOFR for various maturities has been adopted by some parties and for some types of transactions, SOFR is strictly an overnight rate, while LIBOR historically has been published for various maturities, ranging from overnight to one year. Thus, LIBOR may be expected to be higher than SOFR, and the spread between the two is likely to widen in times of market stress. Certain existing contracts provide for a spread adjustment when transitioning to SOFR from LIBOR, but there is no assurance that it will provide adequate compensation. Term SOFR rates for various maturities, may not be available, recommended, or operationally feasible at the applicable benchmark replacement date.

Various financial industry groups have implemented the transition from LIBOR to SOFR or another new benchmark, but there are obstacles to converting certain longer-term securities and transactions. The transition process might lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. It also could lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur particularly with respect to synthetic values of LIBOR or could occur throughout the transition period.

Junk Bonds

A Fund may invest in lower-rated debt securities, including securities in the lowest credit rating category, of any maturity, otherwise known as "junk bonds."

Junk bonds generally offer a higher current yield than that available for higher-grade issues. However, lower-rated securities involve higher risks, in that they are especially subject to adverse changes in general economic conditions and in the industries in which the issuers are engaged, to changes in the financial condition of the issuers and to price fluctuations in response to changes in interest rates. During periods of economic downturn or rising interest rates, highly leveraged issuers may experience financial stress that could adversely affect their ability to make payments of interest and principal and increase the possibility of default. In addition, the market for lower-rated debt securities has expanded rapidly in recent years, and its growth paralleled a long economic expansion. At times in recent years, the prices of many lower-rated debt securities declined substantially, reflecting an expectation that many issuers of such securities might experience financial difficulties. As a result, the yields on lower-rated debt securities rose dramatically, but such higher yields did not reflect the value of the income stream that holders of such securities expected, but rather, the risk that holders of such securities could lose a substantial portion of their value as a result of the issuers' financial restructuring or default. There can be no assurance that such declines will not recur.

The market for lower-rated debt issues generally is thinner and less active than that for higher quality securities, which may limit a Fund's ability to sell such securities at fair value in response to changes in the economy or financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the values and liquidity of lower-rated securities, especially in a thinly traded market. Changes by recognized rating services in their rating of a fixed-income security may affect the value of these investments. A Fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Rafferty will monitor the investment to determine whether continued investment in the security will assist in meeting a Fund's investment objective.

Mortgage-Backed Securities

A Fund may invest in mortgage-backed securities. A mortgage-backed security is a type of pass-through security, which is a security representing pooled debt obligations repackaged as interests that pass income through an intermediary to investors. In the case of mortgage-backed securities, the ownership interest is in a pool of mortgage loans.

Mortgage-backed securities are most commonly issued or guaranteed by the Government National Mortgage Association ("Ginnie Mae<sup>®</sup>" or "GNMA"), Federal National Mortgage Association ("Fannie Mae<sup>®</sup>" or "FNMA") or Federal Home Loan Mortgage Corporation ("Freddie Mac<sup>®</sup>" or "FHLMC"), but may also be issued or guaranteed by other private issuers. GNMA is a government-owned corporation that is an agency of the U.S. Department of Housing and Urban Development. It guarantees, with the full faith and credit of the United States, full and timely payment of all monthly principal and interest on its

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mortgage-backed securities. FNMA is a publicly owned, government-sponsored corporation that mostly packages mortgages backed by the Federal Housing Administration, but also sells some non-governmentally backed mortgages. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest only by FNMA. FHLMC is a publicly chartered agency that buys qualifying residential mortgages from lenders, re-packages them and provides certain guarantees. Pass-through securities issued by FHLMC are guaranteed as to timely payment of principal and interest only by FHLMC.

The Federal Housing Finance Agency ("FHFA") mandated that Fannie Mae and Freddie Mac cease issuing their own mortgage-backed securities and begin issuing "Uniform Mortgage-Backed Securities" or "UMBS" in 2019. Each UMBS has a 55-day remittance cycle and can be used as collateral in either a Fannie Mae or Freddie Mac security or held for investment. Mortgage-backed securities issued by private issuers, whether or not such obligations are subject to guarantees by the private issuer, may entail greater risk than obligations directly guaranteed by the U.S. government. The average life of a mortgage-backed security is likely to be substantially less than the original maturity of the mortgage pools underlying the securities. Prepayments of principal by mortgagors and mortgage foreclosures will usually result in the return of the greater part of principal invested far in advance of the maturity of the mortgages in the pool.

Collateralized mortgage obligations ("CMOs") are debt obligations collateralized by mortgage loans or mortgage pass-through securities (collateral collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-through securities are interests in a trust composed of Mortgage Assets and all references in this section to CMOs include multi-class pass-through securities. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of the premium if any has been paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal and interest payments on the Mortgage Assets may be allocated among the various classes of CMOs in several ways. Typically, payments of principal, including any prepayments, on the underlying mortgages are applied to the classes in the order of their respective stated maturities or final distribution dates, so that no payment of principal is made on CMOs of a class until all CMOs of other classes having earlier stated maturities or final distribution dates have been paid in full.

Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage securities. A Fund will only invest in SMBS issued by Ginnie Mae, which are obligations backed by the full faith and credit of the U.S. government. SMBS are usually structured with two or more classes that receive different proportions of the interest and principal distributions from a pool of Mortgage Assets. A Fund will only invest in SMBS whose Mortgage Assets are U.S. government obligations. A common type of SMBS will be structured so that one class receives some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, each Fund may fail to fully recoup its initial investment in these securities. The market value of any class which consists primarily, or entirely, of principal payments generally is unusually volatile in response to changes in interest rates.

Investment in mortgage-backed securities poses several risks, including among others, prepayment, market and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions. Market risk reflects the risk that the price of a security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and a Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold. Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. government-sponsored entities are guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the "pass-through" payments may, at times, be difficult.

Municipal Obligations

A Fund may invest in municipal obligations. Municipal securities are fixed-income securities issued by states, counties, cities and other political subdivisions and authorities. Although most municipal securities are exempt from federal income tax, municipalities also may issue taxable securities. Tax exempt securities are generally classified by their source of payment. In addition to the usual risks associated with investing for income, the value of municipal obligations can be affected by changes in the actual or perceived credit quality of the issuers. The credit quality of a municipal obligation can be affected by, among other factors: a) the financial condition of the issuer or guarantor; b) the issuer's future borrowing plans and sources of revenue; c) the economic feasibility of the revenue bond project or general borrowing purpose; d) political or

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economic developments in the region or jurisdiction where the security is issued; and e) the liquidity of the security. Because municipal obligations are generally traded OTC, the liquidity of a particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal issues can be enhanced by demand features, which enable a Fund to demand payment from the issuer or a financial intermediary on short notice.

Futures Contracts, Options, and Other Derivative Strategies

Generally, derivatives are financial instruments whose value depends on, or is derived from, the value of one or more underlying assets, reference rates, or indices or other market factors ("reference assets") and may relate to stocks, bonds, interest rates, credit, currencies, commodities, digital assets or related indices. Derivative instruments can provide an efficient means to gain long or short exposure to the value of a reference asset without actually owning or selling the instrument. Examples of derivative instruments include futures contracts, swap agreements, options, options on futures contracts and forward currency contracts.

Each Fund may enter into derivatives instruments which may include futures contracts, forward contracts, options on currencies, commodities, indices, or futures contracts and swaps which provide long and short exposure to reference assets. Derivatives may be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus a Fund's losses may be greater if it invests in derivatives than if it invests in non-derivative instruments. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligations.

The use of derivative instruments is subject to applicable regulations of the SEC, the several exchanges upon which they are traded and the CFTC. In addition, a Fund's ability to use derivative instruments will be limited by tax considerations. See "Dividends, Other Distributions and Taxes."

Under current CFTC regulations, if a Fund uses commodity interests (such as futures contracts, options on futures contracts and swaps) other than for bona fide hedging purposes (as defined by the CFTC) the aggregate initial margin and premiums required to establish these positions (after taking into account unrealized profits and unrealized losses on any such positions and excluding the amount by which options that are "in-the-money" at the time of purchase) may not exceed 5% of a Fund's NAV, or alternatively, the aggregate net notional value of those positions, as determined at the time the most recent position was established, may not exceed 100% of the fund's NAV (after taking into account unrealized profits and unrealized losses on any such positions). Accordingly, each Fund has registered as a commodity pool, and the Adviser has registered as a commodity pool operator, with the National Futures Association.

Each Fund is subject to the risk that a change in U.S. law and related regulations will impact the way a Fund operates, increase the particular costs of a Fund's operation and/or change the competitive landscape. In this regard, any further amendment to the Commodity Exchange Act or its related regulations that subject a Fund to additional regulation may have adverse impacts on a Fund's operations and expenses. Rule 18f-4 under the 1940 Act, which governs the use of derivatives by registered investment companies, imposes limits on the amount of derivatives a fund could enter into and eliminated the asset segregation framework previously used by funds to comply with Section 18 of the 1940 Act, and requires funds whose use of derivatives is more than a limited specified exposure to establish and maintain a derivatives risk management program and appoint a derivatives risk manager. Each Fund is in compliance with the requirements of Rule 18f-4.

In addition to the instruments, strategies and risks described below and in the Prospectus, Rafferty may discover additional derivative instruments and other similar or related techniques. These new opportunities may become available as Rafferty develops new techniques, as regulatory authorities broaden the range of permitted transactions and as new derivative instruments or other techniques are developed. Rafferty may utilize these instruments or other similar or related techniques to the extent that they are consistent with a Fund's investment objective and permitted by a Fund's investment limitations and applicable regulatory authorities. A Fund's Prospectus or this SAI will be supplemented to the extent that new products or techniques involve materially different risks than those described below or in the Prospectus.

*Special Risks*. The use of derivative instruments involves special considerations and risks, certain of which are described below. Risks pertaining to particular derivative instruments are described in the sections that follow.

(1) Options and futures prices can diverge from the prices of their underlying instruments. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect or no correlation also may result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, and from imposition of daily price fluctuation limits or trading halts.

(2) As described below, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in Financial Instruments involving obligations to third parties (*e.g.*, Financial Instruments other than purchased options). If a Fund were unable to close out its positions in such Financial Instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. These requirements might impair a Fund's ability to sell a portfolio security or make an investment when it would otherwise

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be favorable to do so or require that a Fund sell a portfolio security at a disadvantageous time. A Fund's ability to close out a position in a Financial Instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction (the "counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any position can be closed out at a time and price that is favorable to a Fund.

(3) Losses may arise due to unanticipated market price movements, lack of a liquid secondary market for any particular instrument at a particular time or due to losses from premiums paid by a Fund on options transactions.

*<u>Cover</u>*. Transactions using derivative instruments, other than purchased options, expose a Fund to an obligation to another party. A Fund may not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities or other options or futures contracts or (2) cash and liquid assets with a value, marked-to-market daily, sufficient to cover its potential obligations to the extent not covered as provided in (1) above. Each Fund will comply with contractual requirements regarding cover for these instruments and will, if the requirements so require, set aside cash or liquid assets in an account with its custodian, U.S. Bank, N.A. ("Custodian"), in the prescribed amount as determined daily.

Assets used as cover or held in an account cannot be sold while the position in the corresponding derivative instrument is open, unless they are replaced with other appropriate assets. As a result, the commitment of a large portion of a Fund's assets to cover or accounts could impede portfolio management or a Fund's ability to meet redemption requests or other current obligations.

*<u>Futures Contracts</u>*. A Fund may use certain options (traded on an exchange or OTC), futures contracts (sometimes referred to as "futures") and options on futures contracts as a substitute for a comparable market position in the underlying security or index, to attempt to hedge or limit the exposure of a Fund's position, to create a synthetic money market position, for certain tax-related purposes or to effect closing transactions.

Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference instrument, such as a specific security, currency or commodity, at a specified price at a specified later date. A "sale" of a futures contract means the acquisition of a contractual obligation to deliver the underlying reference instrument called for by the contract at a specified price on a specified date. A "purchase" of a futures contract means the acquisition of a contractual obligation to acquire the underlying reference instrument called for by the contract at a specified price on a specified date. The purchase or sale of a futures contract will allow a Fund to increase or decrease its exposure to the underlying reference instrument without having to buy the actual instrument.

The underlying reference instruments to which futures contracts may relate include non-U.S. currencies, interest rates, stock and bond indices and debt securities, including U.S. government debt obligations. In most cases the contractual obligation under a futures contract may be offset, or "closed out," before the settlement date so that the parties do not have to make or take delivery. The closing out of a contractual obligation is usually accomplished by buying or selling, as the case may be, an identical, offsetting futures contract. This transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the underlying instrument or asset. If the original position entered into is a long position (futures contract purchased), there will be a gain (loss) if the offsetting sell transaction is carried out at a higher (lower) price, inclusive of commissions. If the original position entered into is a short position (futures contract sold) there will be a gain (loss) if the offsetting buy transaction is carried out at a lower (higher) price, inclusive of commissions.

Certain futures contracts are cash-settled, meaning the futures contract obligates the seller to deliver (and purchaser to accept) an amount of cash equal to a specific dollar amount multiplied by the difference between the final settlement price of a specific futures contract and the price at which the agreement is made. No physical delivery of the underlying asset is made.

Whether a Fund realizes a gain/loss from futures activities depends generally upon the movements in the underlying reference asset (generally a commodity, currency, security or index). The extent of a Fund's loss from an unhedged short position in a futures contract is potentially unlimited, and investors may lose the amount that they invest plus any profits recognized on their investment.

Futures contracts may be bought and sold on U.S. and non-U.S. exchanges. Futures contracts in the U.S. have been designed by exchanges that have been designated "contract markets" by the CFTC and must be executed through a futures commission merchant ("FCM"), which is a brokerage firm that is a member of the relevant contract market. Each exchange guarantees performance of the contracts as between the clearing members of the exchange, thereby reducing the risk of counterparty default. Because all transactions in the futures market are made, offset, or fulfilled by an FCM through a clearinghouse associated with the exchange on which the contracts are traded, a Fund will incur brokerage fees when it buys or sells futures contracts. A Fund generally buys and sells futures contracts only on contract markets (including exchanges or boards of trade) where there appears to be an active market for the futures contracts, but there is no assurance that an active market will exist for any particular contract or at any particular time. An active market makes it more likely that futures contracts will be liquid and bought and sold at competitive market prices. In addition, many of the futures contracts available may be relatively new instruments without a significant trading history. As a result, there can be no assurance that an active market will develop or continue to exist.

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When a Fund enters into a futures contract, it must deliver to an account controlled by the FCM (that has been selected by the Fund), an amount referred to as "initial margin" that is typically calculated as an amount equal to the volatility in market value of a contract over a fixed period. Initial margin requirements are determined by the respective exchanges on which the futures contracts are traded and the FCM. Thereafter, a "variation margin" amount may be required to be paid by a Fund or received by a Fund in accordance with margin controls set for such accounts, depending upon changes in the marked-to-market value of the futures contract. The account is marked-to-market daily and the variation margin is monitored by a Fund's investment manager and custodian on a daily basis. When the futures contract is closed out, if a Fund has a loss equal to, or greater than, the margin amount, the margin amount is paid to the FCM along with any loss in excess of the margin amount. If a Fund has a loss of less than the margin amount, the excess margin is returned to a Fund. If a Fund has a gain, the full margin amount and the amount of the gain is paid to the Fund. Some futures contracts provide for the delivery of securities that are different than those that are specified in the contract. For a futures contract for delivery of debt securities, on the settlement date of the contract, adjustments to the contract can be made to recognize differences in value arising from the delivery of debt securities with a different interest rate from that of the particular debt securities that were specified in the contract. In some cases, securities called for by a futures contract may not have been issued when the contract was written.

*Risks of Futures Contracts.* A Fund's use of futures contracts is subject to the risks associated with derivative instruments generally. A Fund may not be able to properly effect its strategy when a liquid market is unavailable for the futures contract the Fund wishes to close, which may at times occur. If a Fund were unable to liquidate a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. A Fund would continue to be subject to market risk with respect to the position. In addition, a Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

A purchase or sale of a futures contract may result in losses to a Fund in excess of the amount that the Fund delivered as initial margin. Because of the relatively low margin deposits required, futures trading involves a high degree of leverage; as a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, or gain, to a Fund. In addition, if a Fund has insufficient cash to meet daily variation margin requirements or close out a futures position, it may have to sell securities from its portfolio at a time when it may be disadvantageous to do so. Adverse market movements could cause a Fund to experience substantial losses on an investment in a futures contract. There is a risk of loss by a Fund of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Fund has an open position in a futures contract. The assets of a Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, a Fund is also subject to the risk that the FCM could use a Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty.

The difference (called the "spread") between prices in the cash market for the purchase and sale of the underlying reference instrument and the prices in the futures market is subject to fluctuations and distortions due to differences in the nature of those two markets. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions that could distort the normal pricing spread between the cash and futures markets. Second, the liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery of the underlying instrument. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, resulting in pricing distortion. Third, from the point of view of speculators, the margin deposit requirements that apply in the futures market are less onerous than similar margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. When such distortions occur, a correct forecast of general trends in the price of an underlying reference instrument by the investment manager may still not necessarily result in a profitable transaction.

Futures contracts that are traded on non-U.S. exchanges may not be as liquid as those purchased on CFTC-designated contract markets. In addition, non-U.S. futures contracts may be subject to varied regulatory oversight. The price of any non-U.S. futures contract and, therefore, the potential profit and loss thereon, may be affected by any change in the non-U.S. exchange rate between the time a particular order is placed and the time it is liquidated, offset or exercised.

The CFTC and the various exchanges have established limits referred to as "speculative position limits" on the maximum net long or net short position that any person, such as a Fund, may hold or control in a particular futures contract. Trading limits are also imposed on the maximum number of contracts that any person may trade on a particular trading day. An exchange may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The regulation of futures, as well as other derivatives, is a rapidly changing area of law.

Futures exchanges may also limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. This daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements

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during a particular trading day and does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.

*Risks Associated with Commodity Futures Contracts*. There are several additional risks associated with transactions in commodity futures contracts.

Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while a Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.

In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for a Fund. If the nature of hedgers and speculators in futures markets has shifted when it is time for a Fund to reinvest the proceeds of a maturing contract in a new futures contract, the Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.

The commodities which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices and commodity-linked instruments, including futures contracts, than on traditional securities. Certain commodities are also subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment risks which subject a Fund's investments to greater volatility than investments in traditional securities.

*<u>Forward Contracts</u>*. Each Fund may enter into equity, equity index or interest rate forward contracts for purposes of attempting to gain exposure to an index or group of securities without actually purchasing these securities, or to hedge a position. Forward contracts are two-party contracts pursuant to which one party agrees to pay the counterparty a fixed price for an agreed upon amount of commodities, securities, or the cash value of the commodities, securities or the securities index, at an agreed upon date. Because they are two-party contracts and may have terms greater than seven days, forward contracts may be considered to be illiquid for a Fund's illiquid investment limitations. A Fund will not enter into any forward contract unless Rafferty believes that the other party to the transaction is creditworthy. A Fund bears the risk of loss of the amount expected to be received under a forward contract in the event of the default or bankruptcy of a counterparty. If such a default occurs, a Fund will have contractual remedies pursuant to the forward contract, but such remedies may be subject to bankruptcy and insolvency laws which could affect the Fund's rights as a creditor.

*<u>Options</u>*. The value of an option position will reflect, among other things, the current market value of the underlying investment, the time remaining until expiration, the relationship of the exercise price to the market price of the underlying investment and general market conditions. Options that expire unexercised have no value. Options currently are traded on the Chicago Board Options Exchange<sup>®</sup> and other options exchanges, as well as the OTC markets.

By buying a call option on a security, a Fund has the right, in return for the premium paid, to buy the security underlying the option at the exercise price. By writing (selling) a call option and receiving a premium, a Fund becomes obligated during the term of the option to deliver securities underlying the option at the exercise price if the option is exercised. By buying a put option, a Fund has the right, in return for the premium, to sell the security underlying the option at the exercise price. By writing a put option, a Fund becomes obligated during the term of the option to purchase the securities underlying the option at the exercise price.

Because options premiums paid or received by a Fund are small in relation to the market value of the investments underlying the options, buying and selling put and call options can be more speculative than investing directly in securities.

A Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, a Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, a Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit a Fund to realize profits or limit losses on an option position prior to its exercise or expiration.

*Risks of Options on Currencies and Securities*. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded

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option transaction. In contrast, OTC options are contracts between a Fund and its counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when a Fund purchases an OTC option, it relies on the counterparty from which it purchased the option to make or take delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premium paid by a Fund as well as the loss of any expected benefit of the transaction.

A Fund's ability to establish and close out positions in exchange-traded options depends on the existence of a liquid market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. There can be no assurance that a Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the counterparty, a Fund might be unable to close out an OTC option position at any time prior to its expiration.

If a Fund were unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by a Fund could cause material losses because a Fund would be unable to sell the investment used as cover for the written option until the option expires or is exercised.

*<u>Options on Indices</u>*. An index fluctuates with changes in the market values of the securities included in the index. Options on indices give the holder the right to receive an amount of cash upon exercise of the option. Receipt of this cash amount will depend upon the closing level of the index upon which the option is based being greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. Some stock index options are based on a broad market index that includes more than nine constituents or on a narrower index which is generally considered to include only nine or fewer constituents.

Each of the exchanges has established limitations governing the maximum number of call or put options on the same index that may be bought or written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). Under these limitations, option positions of all investment companies advised by Rafferty are combined for purposes of these limits. Pursuant to these limitations, an exchange may order the liquidation of positions and may impose other sanctions or restrictions. These position limits may restrict the number of listed options that a Fund may buy or sell.

Puts and calls on indices are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question rather than on price movements in individual securities or futures contracts. When a Fund writes a call on an index, it receives a premium and agrees that, prior to the expiration date, the purchaser of the call, upon exercise of the call, will receive from a Fund an amount of cash if the closing level of the index upon which the call is based is greater than the exercise price of the call. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call multiplied by a specific factor ("multiplier"), which determines the total value for each point of such difference. When a Fund buys a call on an index, it pays a premium and has the same rights to such call as are indicated above. When a Fund buys a put on an index, it pays a premium and has the right, prior to the expiration date, to require the seller of the put, upon a Fund's exercise of the put, to deliver to a Fund an amount of cash if the closing level of the index upon which the put is based is less than the exercise price of the put, which amount of cash is determined by the multiplier, as described above for calls. When a Fund writes a put on an index, it receives a premium and the purchaser of the put has the right, prior to the expiration date, to require a Fund to deliver to it an amount of cash equal to the difference between the closing level of the index and the exercise price times the multiplier if the closing level is less than the exercise price.

*Risks of Options on Indices*. If a Fund has purchased an index option and exercises it before the closing index value for that day is available, it runs the risk that the level of the index may subsequently change. If such a change causes the exercised option to fall out-of-the-money, a Fund will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer.

*<u>OTC Options</u>*. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of OTC options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows a Fund great flexibility to tailor the option to its needs, OTC options generally involve greater risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded.

*<u>Options on Futures Contracts</u>*. When a Fund writes an option on a futures contract, it becomes obligated, in return for the premium paid, to assume a position in the futures contract at a specified exercise price at any time during the term of the option. If a Fund writes a call, it assumes a short futures position. If it writes a put, it assumes a long futures position. When a Fund purchases an option on a futures contract, it acquires the right in return for the premium it pays to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put).

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Whether a Fund realizes a gain or loss from futures activities depends upon movements in the underlying security or index. The extent of a Fund's loss from an unhedged short position from writing unhedged call options on futures contracts is potentially unlimited. A Fund only purchases and sells options on futures contracts that are traded on a U.S. exchange or board of trade.

Purchasers and sellers of options on futures can enter into offsetting closing transactions, similar to closing transactions in options, by selling or purchasing, respectively, an instrument identical to the instrument purchased or sold. Positions in options on futures contracts may be closed only on an exchange or board of trade that provides a secondary market. However, there can be no assurance that a liquid secondary market will exist for a particular contract at a particular time. In such event, it may not be possible to close a futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of an option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.

If a Fund were unable to liquidate an option on a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. A Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, a Fund would continue to be required to make daily variation margin payments and might be required to maintain cash or liquid assets in an account.

*Risks of Options on Futures Contracts*. The ordinary spreads between prices in the cash and futures markets (including the options on futures markets), due to differences in the natures of those markets, are subject to the following factors, which may create distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions, which could distort the normal relationships between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions.

*<u>Combined Positions</u>*. A Fund may purchase and write options in combination with each other. For example, a Fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.

Other Investment Companies

Each Fund may invest in the securities of other investment companies, including open- and closed-end funds and exchange-traded funds ("ETFs"). Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund's proportionate share of the fees and expenses of the other investment company, in addition to the fees and expenses Fund shareholders bear in connection with a Fund's own operations.

Each Fund intends to limit its investments in securities issued by other investment companies in accordance with the 1940 Act and the rules promulgated thereunder. Section 12(d)(1) of the 1940 Act precludes a Fund from acquiring (i) more than 3% of the total outstanding shares of another investment company; (ii) shares of another investment company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (iii) shares of another registered investment company and all other investment companies having an aggregate value in excess of 10% of the value of the total assets of the Fund. In addition, the Fund is subject to Section 12(d)(1)(C), which provides that the Fund may not acquire shares of a closed-end fund if, immediately after such acquisition, the Fund and other investment companies having the same adviser as the Fund would hold more than 10% of the closed-end fund's total outstanding voting stock.

Section 12(d)(1)(F) of the 1940 Act provides that the provisions of paragraph 12(d)(1)(A) and (B) shall not apply to securities of an unaffiliated investment company purchased or otherwise acquired by a Fund if (i) immediately after such purchase or acquisition not more than 3% of the total outstanding shares of such investment company is owned by the Fund and all affiliated persons of the Fund; and (ii) the Fund has not offered or sold, and is not proposing to offer or sell its shares through a principal underwriter or otherwise at a public or offering price that includes a sales load of more than 1 1/2%. If a Fund invests in unaffiliated investment companies pursuant to Section 12(d)(1)(F), it must comply with the following voting restrictions: when the Fund exercises voting rights, by proxy or otherwise, with respect to unaffiliated investment companies owned by the Fund, the Fund will either seek instruction from the Funds' shareholders with regard to the voting

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of all proxies and vote in accordance with such instructions, or vote the shares held by a Fund in the same proportion as the vote of all other holders of such security. In addition, an unaffiliated investment company purchased by a Fund pursuant to Section 12(d)(1)(F) shall not be required to redeem its shares in an amount exceeding 1% of such investment company's total outstanding shares in any period of less than thirty days.

To the extent that a Fund invests in open-end or closed-end investment companies that invest primarily in the securities of companies located outside the United States, see the risks related to foreign securities set forth above.

Rule 12d1-4 allows a fund or ETF to acquire the securities of another fund in excess of the limitations imposed by Section 12 of the 1940 Act without obtaining an exemptive order from the SEC subject to certain limitations and conditions. Prior to a fund acquiring securities of another fund that exceed the limits of Section 12(d)(1) of the 1940 Act, the acquiring fund must enter into a Fund of Funds Agreement with the acquired fund. Rule 12d1-4 outlines the requirements of the Fund of Funds Agreements and specifies the responsibilities of Fund management related to "fund of funds" arrangements. Rule 12d1-4 was effective as of January 19, 2021 and its requirements have been implemented by the Funds that will be part of a fund of funds arrangement.

*<u>Exchange-Traded Products</u>*. Each Fund may invest in exchange traded products ("ETPs"), which include ETFs, partnerships, commodity pools or trusts that are bought and sold on a securities exchange. ETPs trade like stocks on a securities exchange at market price rather than NAV and, as a result, ETP shares may trade at a price greater than NAV (premium) or less than NAV (discount). A Fund may also invest in exchange-traded notes ("ETNs"), which are structured debt securities, whereby the issuer of the ETN promises to pay ETN holders the return on an index or market segment over a certain period of time and then return the principal of the investment at maturity. Whereas ETPs' liabilities are secured by their portfolio securities, ETNs' liabilities are unsecured general obligations of the issuer. Therefore, ETNs are subject to the credit risk of the issuer of the ETN, which is different than other ETPs. The value of an ETN security should also be expected to fluctuate with the credit rating of the issuer. Most ETPs and ETNs are designed to track a particular market segment or index, although an ETP or ETN may be actively managed. ETPs and ETNs share expenses associated with their operation, typically including advisory fees and other management expenses. When a Fund invests in an ETP or ETN, in addition to directly bearing expenses associated with its own operations, it will bear its pro rata portion of the ETP's or ETN's expenses. ETPs and ETNs trade like stocks on a securities exchange at market prices rather than NAV and as a result ETP or ETN shares may trade at a price greater than NAV (premium) or less than NAV (discount). The risks of owning an ETP or ETN generally reflect the risks of owning the underlying securities the ETP or ETN is designed to track, although lack of liquidity in an ETP or ETN could result in it being more volatile than the underlying portfolio of securities. In addition, because of ETP or ETN expenses, compared to owning the underlying securities directly, it may be more costly to own an ETP or ETN.

Additionally, a Fund may invest in swap agreements referencing ETFs. If a Fund invests in ETFs or swap agreements referencing ETFs, the underlying ETFs may not necessarily track the same index as a Fund.

*<u>Money Market Funds</u>*. Money market funds are open-end registered investment companies that historically have traded at a stable $1.00 per share price. However, money market funds that do not meet the definition of a "retail money market fund" or "government money market fund" under the 1940 Act are required to transact at a floating NAV per share (*i.e.*, in a manner similar to how all other non-money market mutual funds transact), instead of at a $1.00 stable share price. Money market funds may also impose liquidity fees and redemption gates for use in times of market stress. If a Fund invests in a money market fund with a floating NAV, the impact on the trading and value of the money market instruments may negatively affect the Fund's return potential.

Repurchase Agreements

A Fund may enter into repurchase agreements with banks 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. Repurchase agreements generally are for a short period of time, usually less than a week. Under a repurchase agreement, a Fund purchases a U.S. government security and simultaneously agrees to sell the security back to the seller at a mutually agreed-upon future price and date, normally one day or a few days later. The resale price is greater than the purchase price, reflecting an agreed-upon market interest rate during a Fund's holding period. While the maturities of the underlying securities in repurchase agreement transactions may be more than one year, the term of each repurchase agreement always will be less than one year. Repurchase agreements with a maturity of more than seven days are considered to be illiquid investments. A Fund may not enter into such a repurchase agreement if, as a result, more than 15% of the value of its net assets would then be invested in such repurchase agreements and other illiquid investments. See "Illiquid Investments and Restricted Securities" above.

A Fund will always receive, as collateral, securities whose market value, including accrued interest, at all times will be at least equal to 100% of the dollar amount invested by a Fund in each repurchase agreement. In the event of default or bankruptcy by the seller, a Fund will liquidate those securities (whose market value, including accrued interest, must be at least 100% of the amount invested by a Fund) held under the applicable repurchase agreement, which securities constitute collateral for the seller's obligation to repurchase the security. If the seller defaults, a Fund might incur a loss if the value

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of the collateral securing the repurchase agreement declines and might incur disposition costs in connection with liquidating the collateral. In addition, if bankruptcy or similar proceedings are commenced with respect to the seller of the security, realization upon the collateral by a Fund may be delayed or limited.

Reverse Repurchase Agreements

A Fund may borrow by entering into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Under a reverse repurchase agreement, a Fund sells securities and agrees to repurchase them at a mutually agreed to price. At the time a Fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with an approved custodian containing liquid high-grade securities, marked-to-market daily, having a value not less than the repurchase price (including accrued interest). Reverse repurchase agreements involve the risk that the market value of securities retained in lieu of sale by a Fund may decline below the price of the securities a Fund has sold but is obliged to repurchase. If the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce a Fund's obligation to repurchase the securities. During that time, a Fund's use of the proceeds of the reverse repurchase agreement effectively may be restricted. Reverse repurchase agreements create leverage, a speculative factor, and are considered borrowings for the purpose of a Fund's limitation on borrowing.

Short Sales

A Fund may engage in short sale transactions under which a Fund sells a security it does not own. To complete such a transaction, a Fund must borrow the security to make delivery to the buyer. A Fund then is obligated to replace the security borrowed by purchasing the security at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by a Fund. Until the security is replaced, a Fund is required to pay to the lender amounts equal to any dividends that accrue during the period of the loan. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet the margin requirements, until the short position is closed out. A Fund will also incur transactions costs when conducting short sales.

Until a Fund closes its short position or replaces the borrowed stock, a Fund will: (1) maintain an account containing cash or liquid assets at such a level that (a) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the stock sold short and (b) the amount deposited in the account plus the amount deposited with the broker as collateral will not be less than the market value of the stock at the time the stock was sold short; or (2) otherwise cover a Fund's short position.

A Fund will incur a loss as a result of a short sales or short exposure to reference assets utilizing derivatives if the price of the security or reference asset increases between the date of the short sale or exposure and the date on which a Fund replaces the borrowed security or terminates the derivatives providing short exposure. A Fund will realize a gain if the price of a security or reference asset declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss will be increased, by the amount of the premium, dividends or interest a Fund may be required to pay, if any, in connection with a short sale or derivatives that provide short exposure.

Swap Agreements

A Fund may enter into swap agreements and other derivatives to obtain long and/or short exposure to an underlying asset without actually purchasing such asset. Swap agreements are generally two-party contracts entered into primarily by institutional investors for periods ranging from a day to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," *i.e.*, the return on, or increase/decrease, in value of a particular dollar amount invested in a security or "basket" of securities representing a particular index or an ETF representing a particular index or group of securities.

Each Fund may enter into swaps to invest in a market without owning or taking physical custody of securities. For example, in one common type of total return swap, a Fund's counterparty will agree to pay the Fund the rate at which the specified asset or indicator (*e.g.*, security, an ETF, or securities comprising a benchmark index, plus the dividends or interest that would have been received on those assets) increased in value multiplied by the relevant notional amount of the swap. A Fund will agree to pay to the counterparty an interest fee (based on the notional amount) and the rate at which, the specified asset or indicator would decreased in value multiplied by the notional amount of the swap, plus, in certain instances, commissions or trading spreads on the notional amount.

As a result, the swap has a similar economic effect as if a Fund were to invest in the assets underlying the swap in an amount equal to the notional amount of the swap. The return to the Fund on such swap should be the gain or loss on the notional

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amount plus dividends or interest on the assets less the interest paid by a Fund on the notional amount. However, unlike cash investments in the underlying assets, a Fund will not be an owner of the underlying assets and will not have voting or similar rights in respect of such assets.

As a trading technique, Rafferty may substitute physical securities with a swap having investment characteristics substantially similar to the underlying securities. A Fund may also enter into swaps that provide the opposite return of their benchmark or a security. Their operations are similar to that of the swaps discussed above except that the counterparty pays interest to each Fund on the notional amount outstanding and that dividends or interest on the underlying instruments reduce the value of the swap, plus, in certain instances, each Fund will agree to pay to the counterparty commissions or trading spreads on the notional amount. These amounts are often netted with any unrealized gain or loss to determine the value of the swap.

The use of swaps is a highly specialized activity which involves investment techniques and risks in addition to, and in some cases different from, those associated with ordinary portfolio securities transactions. The primary risks associated with the use of swaps are mispricing or improper valuation, imperfect correlation between movements in the notional amount and the price of the underlying investments, and the inability of the counterparties or clearing organization to perform. If a counterparty's creditworthiness for an over-the-counter swap declines, the value of the swap would likely decline. Moreover, there is no guarantee that a Fund could eliminate its exposure under an outstanding swap by entering into an offsetting swap with the same or another party. In addition, a Fund may use a combination of swaps on its underlying index and/or swaps on an ETF that is designed to track the performance of that underlying index. The performance of an ETF may deviate from the performance of its underlying index due to embedded costs and other factors. Thus, to the extent a Fund invests in swaps that use an ETF as the reference asset, the Fund may be subject to greater correlation risk and may not achieve as high a degree of leveraged or inverse leveraged correlation with its underlying index as it would if a Fund used only swaps on the underlying index. Rafferty, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of a Fund's transactions in swaps.

<u>Common Types of Swaps</u>

A Fund may enter into any of several types of swaps, including:

*Total Return Swaps.* Total return swaps may be used either as economically similar substitutes for owning the reference asset specified in the swap, such as the securities that comprise a given market index, particular securities or commodities, or other assets or indicators. They also may be used as a means of obtaining exposure in markets where the reference asset is unavailable or it may otherwise be impossible or impracticable for a Fund to own that asset. "Total return" refers to the payment (or receipt) of the total return on the underlying reference asset, which is then exchanged for the receipt (or payment) of an interest rate. Total return swaps provide a Fund with the additional flexibility of gaining exposure to a market or sector index by using the most cost-effective vehicle available.

*Interest Rate Swaps.* Interest rate swaps, in their most basic form, involve the exchange by a Fund with another party of their respective commitments to pay or receive interest. For example, a Fund might exchange its right to receive certain floating rate payments in exchange for another party's right to receive fixed rate payments. Interest rate swaps can take a variety of other forms, such as agreements to pay the net differences between two different interest indexes or rates. Despite their differences in form, the function of interest rate swaps is generally the same: to increase or decrease a Fund's exposure to long- or short-term interest rates. For example, a Fund may enter into an interest rate swap to preserve a return or spread on a particular investment or a portion of its portfolio or to protect against any increase in the price of securities a Fund anticipates purchasing at a later date.

*Other Financial Instruments*. Other forms of swaps that a Fund may enter into include: interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor," and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.

<u>Mechanics of Swaps</u>

*Payments*. Most swaps entered into by a Fund calculate and settle the obligations of the parties to the agreement on a "net basis" with a single payment. Consequently, a Fund's current obligations (or rights) under a swap will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). Other swaps may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of the reference entity. A Fund's current obligations under most swaps (*e.g.*, total return swaps, equity/index swaps, interest rate swaps) will be accrued daily (offset against any amounts owed to a Fund by the counterparty to the swap) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating or earmarking cash or other assets determined to be liquid. However, typically no payments will be made until the settlement date. The net amount of the excess, if any, of a Fund's obligations over its entitlements with respect to a swap agreement entered into on a net basis will be accrued daily and an amount of cash or liquid asset having an aggregate NAV at least equal to the accrued excess will be maintained in an

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account with the Custodian that satisfies the 1940 Act. A Fund also will establish and maintain such accounts with respect to its total obligations under any swaps that are not entered into on a net basis. Obligations under swap agreements so covered will not be construed to be "senior securities" for purposes of a Fund's investment restriction concerning senior securities.

*Counterparty Credit Risk*. A Fund will not enter into any uncleared swap (*i.e.*, not cleared by a central counterparty) unless Rafferty believes that the other party to the transaction is creditworthy. The counterparty to an uncleared swap will typically be a major global financial institution. A Fund bears the risk of loss of the amount expected to be received under a swap in the event of the default or bankruptcy of a swap counterparty. If such a default occurs, a Fund will have contractual remedies pursuant to the swaps, but such remedies may be subject to bankruptcy and insolvency laws that could affect the Fund's rights as a creditor. The counterparty risk for cleared swaps is generally lower than for uncleared over-the-counter swaps because, in a cleared swap, a clearing organization becomes substituted for each counterparty to a cleared swap. The clearing organization takes on the obligations of each side of the swap and a Fund would only be exposed to the clearing organization for performance of financial obligations. However, there can be no assurance that the clearing organization, or its members, will satisfy its obligations to a Fund. Upon entering into a cleared swap, a Fund may be required to deposit with its futures commission merchant an amount of cash or cash equivalents equal to a small percentage of the notional amount (this amount is subject to change by the clearing organization that clears the trade). This amount is in the nature of a performance bond or good faith deposit on the cleared swap and is returned to a Fund upon termination of the swap, assuming all contractual obligations have been satisfied. Subsequent payments to and from the broker will be made daily as the price of the swap fluctuates, making the long and short position in the swap contract more or less valuable, a process known as "marking-to-market." The premium (discount) payments are built into the daily price of the swap and thus are amortized through the subsequent payments. The subsequent payment also includes the daily portion of the periodic payment stream.

*Termination and Default Risk*. Swap agreements do not involve the delivery of securities or other underlying assets. Accordingly, if a swap is entered into on a net basis, if the other party to a swap agreement defaults, a Fund's risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any.

<u>Swap Regulation</u>

In recent years, regulators across the globe, including the CFTC and the U.S. banking regulators, have adopted collateral requirements applicable to uncleared swaps. While a Fund is not directly subject to these requirements, where a Fund's counterparty is subject to the requirements, uncleared swaps between a Fund and that counterparty are required to be marked-to-market on a daily basis, and collateral is required to be exchanged to account for any changes in the value of such swaps above certain agreed upon thresholds. The rules impose a number of requirements as to these exchanges of collateral, including as to the timing of transfers, the type of collateral (and valuations for such collateral) and other matters that may be different than what a Fund would agree with its counterparty in the absence of such regulation. In all events, where a Fund is required to post collateral to its swap counterparty, such collateral will be posted to an independent bank custodian, where access to the collateral by the swap counterparty will generally not be permitted unless a Fund is in default on its obligations to the swap counterparty.

In addition to the marked-to-market collateral requirements, regulators have adopted "initial" collateral requirements applicable to uncleared swaps. Where applicable, these rules require parties to an uncleared swap to post, to a custodian that is independent from the parties to the swap, collateral (in addition to any marked-to-market collateral noted above) in an amount that is either (i) specified in a schedule in the rules or (ii) calculated by the regulated party in accordance with a model that has been approved by that party's regulator(s). The initial collateral rules only apply to the swap trading relationships of Funds with average aggregate notional amounts that exceed $8 billion. If the Fund is subject to an initial margin obligation, these rules may impose significant costs on a Fund's ability to engage in uncleared swaps and, as such, could adversely affect Rafferty's ability to manage a Fund, may impair a Fund's ability to achieve its investment objective and/or may result in reduced returns to a Fund's investors.

*Comprehensive swaps regulation.* The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and related regulatory developments have imposed comprehensive new regulatory requirements on swaps and swap market participants. The regulatory framework includes: (1) registration and regulation of swap dealers; (2) requiring central clearing and execution of standardized swaps; (3) imposing collateral requirements on swap transactions; (4) regulating and monitoring swap transactions through position limits and large trader reporting requirements; and (5) imposing recordkeeping and centralized and public reporting requirements, on an anonymous basis, for most swaps. The CFTC is responsible for the regulation of most swaps. The SEC has jurisdiction over a small segment of the market referred to as "security-based swaps," which includes swaps on single securities or credits, or narrow-based indices of securities or credits.

*Uncleared swaps.* In an uncleared swap, the swap counterparty is typically a brokerage firm, bank or other financial institution. A Fund customarily enters into uncleared swaps based on the standard terms and conditions of an International Swaps and Derivatives Association ("ISDA") Master Agreement. ISDA is a voluntary industry association of participants in the OTC derivatives markets that has developed standardized contracts used by such participants that have agreed to be bound by such standardized contracts. In the event that one party to a swap transaction defaults and the transaction is terminated

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prior to its scheduled termination date, one of the parties may be required to make an early termination payment to the counterparty. An early termination payment may be payable by either the defaulting or non-defaulting party, depending upon which of them is "in-the-money" with respect to the swap at the time of its termination. Early termination payments may be calculated in various ways, but are intended to approximate the amount the "in-the-money" party would have to pay to replace the swap as of the date of its termination. During the term of an uncleared swap, a Fund will be required to pledge to the swap counterparty, from time to time, an amount of cash and/or other assets equal to the total net amount (if any) that would be payable by a Fund to the counterparty if all outstanding swaps between the parties were terminated on the date in question, including any early termination payments. Periodically, changes in the amount pledged are made to recognize changes in value of the contract resulting from, among other things, interest on the notional value of the contract, market value changes in the underlying investment, and/or dividends paid by the issuer of the underlying instrument. Likewise, the counterparty will be required to pledge cash or other assets to cover its obligations to a Fund. However, the amount pledged may not always be equal to or more than the amount due to the other party. Therefore, if a counterparty defaults in its obligations to a Fund, the amount pledged by the counterparty and available to a Fund may not be sufficient to cover all the amounts due to a Fund and the Fund may sustain a loss. Rules requiring initial collateral to be posted by certain market participants for uncleared swaps have been adopted. If a Fund is deemed to have material swaps exposure under applicable swap regulations, it will be required to post initial collateral in addition to marked-to-market collateral.

*Cleared swaps.* Certain standardized swaps are subject to mandatory central clearing and exchange-trading. The Dodd-Frank Act and implementing rules will ultimately require the clearing and exchange-trading of many swaps. Mandatory exchange-trading and clearing will occur on a phased-in basis based on the type of market participant, CFTC approval of contracts for central clearing and public trading facilities making such cleared swaps available to trade. To date, the CFTC has designated only certain of the most common types of credit default index swaps and interest rate swaps as subject to mandatory clearing and certain public trading facilities have made certain of those cleared swaps available to trade, additional categories of swaps may in the future be designated as subject to mandatory clearing and trade execution requirements. Central clearing is intended to reduce counterparty credit risk and increase liquidity, but central clearing does not eliminate these risks and may involve additional costs and risks not involved with uncleared swaps. For more information, see "Risks of cleared swaps" below.

In a cleared swap, a Fund's ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank or other financial institution. Cleared swaps are submitted for clearing through each party's FCM, which must be a member of the clearinghouse that serves as the central counterparty. Transactions executed on a swap execution facility may increase market transparency and liquidity but may require a Fund to incur increased expenses to access the same types of swaps that it has used in the past. When a Fund enters into a cleared swap, it must deliver to the central counterparty (via the FCM) initial collateral. The initial collateral requirements are determined by the central counterparty, and are typically calculated as an amount equal to the volatility in market value of the cleared swap over a fixed period, but an FCM may require additional collateral above the amount required by the central counterparty. During the term of the swap agreement, an additional collateral amount may also be required to be paid by a Fund or may be received by a Fund in accordance with collateral controls set for such accounts. If the value of the Fund's cleared swap declines, the Fund will be required to make additional payments to the FCM to settle the change in value. Conversely, if the market value of a Fund's position increases, the FCM will post additional amounts to the Fund's account. At the conclusion of the term of the swap agreement, if a Fund has a loss equal to or greater than the collateral amount, the collateral amount is paid to the FCM along with any loss in excess of the collateral amount. If a Fund has a loss of less than the collateral amount, the excess collateral is returned to a Fund. If a Fund has a gain, the full collateral amount and the amount of the gain is paid to a Fund.

*Risks of swaps generally.* The use of swap transactions is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Whether a Fund will be successful in using swap agreements to achieve its investment goal depends on the ability of the Adviser to correctly predict which types of investments are likely to produce greater returns. If the Adviser, in using swap agreements, is incorrect in its forecasts of market values, interest rates, inflation, currency exchange rates or other applicable factors, the investment performance of a Fund will be less than its performance would have been if it had not used the swap agreements. The risk of loss to a Fund for swap transactions that are entered into on a net basis depends on which party is obligated to pay the net amount to the other party. If the counterparty is obligated to pay the net amount to a Fund, the risk of loss to the Fund is loss of the entire amount that the Fund is entitled to receive. If a Fund is obligated to pay the net amount, the Fund's risk of loss is generally limited to that net amount. If the swap agreement involves the exchange of the entire principal value of a security, the entire principal value of that security is subject to the risk that the other party to the swap will default on its contractual delivery obligations. In addition, a Fund's risk of loss also includes any collateral at risk in the event of default by the counterparty (in an uncleared swap) or the central counterparty or FCM (in a cleared swap), plus any transaction costs.

Because bilateral swap agreements are structured as two-party contracts and may have terms of greater than seven days, these swaps may be considered to be illiquid and, therefore, subject to a Fund's limitation on investments in illiquid securities. If a swap transaction is particularly large or if the relevant market is illiquid, a Fund may not be able to establish or liquidate a position at an advantageous time or price, which may result in significant losses. Participants in the swap markets are

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not required to make continuous markets in the swap contracts they trade. Participants could refuse to quote prices for swap contracts or quote prices with an unusually wide spread between the price at which they are prepared to buy and the price at which they are prepared to sell. Some swap agreements entail complex terms and may require a greater degree of subjectivity in their valuation. However, the swap markets have grown substantially in recent years, with a large number of financial institutions acting both as principals and agents, utilizing standardized swap documentation. As a result, the swap markets have become increasingly liquid. In addition, central clearing and the trading of cleared swaps on public facilities are intended to increase liquidity.

Rafferty, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of a Fund's swap transactions. Rules adopted under the Dodd-Frank Act require centralized reporting of detailed information about many swaps, whether cleared or uncleared. This information is available to regulators and also, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data is intended to result in greater market transparency. This may be beneficial to funds that use swaps in their trading strategies. However, public reporting imposes additional recordkeeping burdens on these funds, and the safeguards established to protect anonymity may not provide protection of a Fund's identity as intended. Certain IRS positions may limit a Fund's ability to use swap agreements in a desired tax strategy. It is possible that developments in the swap markets and/or the laws relating to swap agreements, including potential government regulation, could adversely affect the Fund's ability to benefit from using swap agreements, or could have adverse tax consequences. For more information about potentially changing regulation, see "Developing government regulation of derivatives" below.

*Risks of uncleared swaps.* Uncleared swaps are typically executed bilaterally with a swap dealer rather than traded on exchanges. As a result, swap participants may not be as protected as participants on organized exchanges. Performance of a swap agreement is the responsibility only of the swap counterparty and not of any exchange or clearinghouse. As a result, a Fund is subject to the risk that a counterparty will be unable or will refuse to perform under such agreement, including because of the counterparty's bankruptcy or insolvency. A Fund risks the loss of the accrued but unpaid amounts under a swap agreement, which could be substantial, in the event of a default, insolvency or bankruptcy by a swap counterparty. In such an event, a Fund will have contractual remedies pursuant to the swap agreements, but bankruptcy and insolvency laws could affect the Fund's rights as a creditor. If the counterparty's creditworthiness declines, the value of a swap agreement would likely decline, potentially resulting in losses. The Adviser will only approve a swap agreement counterparty for a Fund if the Adviser deems the counterparty to be creditworthy. However, in unusual or extreme market conditions, a counterparty's creditworthiness and ability to perform may deteriorate rapidly, and the availability of suitable replacement counterparties may become limited.

*Risks of cleared swaps.* As noted above, under recent financial reforms, certain types of swaps are, and others eventually are expected to be, required to be cleared through a central counterparty, which may affect counterparty risk and other risks faced by a Fund.

Central clearing is designed to reduce counterparty credit risk and increase liquidity compared to uncleared swaps because central clearing interposes the central clearinghouse as the counterparty to each participant's swap, but it does not eliminate those risks completely and may involve additional costs and risks not involved with uncleared swaps. There is also a risk of loss by a Fund of the initial and variation collateral deposits in the event of bankruptcy of the FCM with which a Fund has an open position, or the central counterparty in a swap contract. The assets of a Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because a Fund might be limited to recovering only a pro rata share of all available funds and collateral segregated on behalf of an FCM's customers. If the FCM does not provide accurate reporting, a Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty. Credit risk of cleared swap participants is concentrated in a few clearinghouses, and the consequences of insolvency of a clearinghouse are not clear.

With cleared swaps, a Fund may not be able to obtain terms as favorable as it would be able to negotiate for a bilateral, uncleared swap. In addition, an FCM may unilaterally amend the terms of its agreement with the Fund, which may include the imposition of position limits or additional collateral requirements with respect to a Fund's investment in certain types of swaps. Central counterparties and FCMs can require termination of existing cleared swap transactions upon the occurrence of certain events, and can also require increases in collateral above the amount that is required at the initiation of the swap agreement. Currently, depending on a number of factors, the collateral required under the rules of the clearinghouse and FCM may be in excess of the collateral required to be posted by a Fund to support its obligations under a similar uncleared swap.

Finally, a Fund is subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, a Fund may be required to break the trade and make an early termination payment to the executing broker.

*Developing government regulation of derivatives.* The regulation of cleared and uncleared swaps, as well as other derivatives, is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for

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example, the implementation or reduction of speculative position limits, the implementation of higher collateral requirements, the establishment of daily price limits and the suspension of trading. It is not possible to predict fully the effects of current or future regulation. However, it is possible that developments in government regulation of various types of derivative instruments, such as speculative position limits on certain types of derivatives, or limits or restrictions on the counterparties with which a Fund engages in derivative transactions, may limit or prevent the Fund from using or limit the Fund's use of these instruments effectively as a part of its investment strategy, and could adversely affect the Fund's ability to achieve its investment goal(s). The Adviser will continue to monitor developments in the area, particularly to the extent regulatory changes affect a Fund's ability to enter into desired swap agreements. New requirements, even if not directly applicable to a Fund, may increase the cost of a Fund's investments and cost of doing business.

Unrated Debt Securities

A Fund may also invest in unrated debt securities. Unrated debt, while not necessarily lower in quality than rated securities, may not have as broad a market. Because of the size and perceived demand for the issue, among other factors, certain issuers may decide not to pay the cost of getting a rating for their bonds. The creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on the security, will be analyzed to determine whether to purchase unrated bonds.

U.S. Government Securities

A Fund may invest in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities ("U.S. government securities") in pursuit of its investment objective, in order to deposit such securities as initial or variation margin, as "cover" for the investment techniques it employs, as part of a cash reserve or for liquidity purposes.

U.S. government securities are high-quality instruments issued or guaranteed as to principal or interest by the U.S. Treasury Department ("U.S. Treasury") or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are backed by the right of the issuer to borrow from the U.S. Treasury; others are backed by discretionary authority of the U.S. government to purchase the agencies' obligations; while others are supported only by the credit of the instrumentality. In the case of securities not backed by the full faith and credit of the United States, the investor must look principally to the agency issuing or guaranteeing the obligation for ultimate repayment.

Yields on short-, intermediate- and long-term U.S. government securities are dependent on a variety of factors, including the general conditions of the money and bond markets, the size of a particular offering and the maturity of the obligation. Debt securities with longer maturities tend to produce higher capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market value of U.S. government securities generally varies inversely with changes in the market interest rates. An increase in interest rates, therefore, generally would reduce the market value of a Fund's portfolio investments in U.S. government securities, while a decline in interest rates generally would increase the market value of a Fund's portfolio investments in these securities. U.S. government securities include U.S. Treasury obligations, which includes U.S. Treasury Bills (which mature within one year of the date they are issued), U.S. Treasury Notes (which have maturities of one to ten years) and U.S. Treasury Bonds (which generally have maturities of more than 10 years). All such U.S. Treasury obligations are backed by the full faith and credit of the United States.

U.S. government securities also include obligations issued by U.S. government agencies and instrumentalities ("GSEs") that are backed by the full faith and credit of the U.S. government (such as securities issued or guaranteed by the Federal Housing Administration, Ginnie Mae<sup>®</sup>, the Export-Import Bank of the United States, the General Services Administration and the Maritime Administration and certain securities issued by the Small Business Administration).

Also, U.S. government securities include securities that are guaranteed by U.S. government-sponsored entities that are not backed by the full faith and credit of the U.S. government (such as Fannie Mae, Freddie Mac, or the Federal Home Loan Banks). These U.S. government-sponsored entities, although chartered and sponsored by the U.S. Congress, are not guaranteed, nor insured, by the U.S. government. They are supported only by the credit of the issuing agency, instrumentality or corporation.

Since 2008, Fannie Mae and Freddie Mac have been in conservatorship and have received significant capital support through U.S. Treasury preferred stock purchases, as well as U.S. Treasury and Federal Reserve purchases of their mortgage backed securities ("MBS"). The FHFA and the U.S. Treasury (through its agreement to purchase Fannie Mae and Freddie Mac preferred stock) have imposed strict limits on the size of their mortgage portfolios. The MBS purchase programs ended in 2010 but the U.S. Treasury has continued its support for the entities' capital as necessary to prevent a negative net worth and other governmental entities have provided significant support to Fannie Mae and Freddie Mac. There is no guarantee, however, that they will continue to do so. Accordingly, no assurance can be given that Fannie Mae and Freddie Mac will remain successful in meeting their obligations with respect to the debt and MBSs that they issue.

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In addition, the problems faced by Fannie Mae and Freddie Mac, resulting in their being placed into federal conservatorship and receiving significant U.S. government support, have sparked serious debate among federal policy makers regarding the continued role of the U.S. government in providing liquidity for mortgage loans. Discussions among policymakers have continued as to whether Fannie Mae and Freddie Mac should be nationalized, privatized, restructured, or eliminated altogether. Fannie Mae and Freddie Mac have been the subject of several legal actions and investigations related to certain accounting, disclosure, or corporate governance matters, which (along with any resulting financial restatements) may continue to have an adverse effect on the guaranteeing entities.

U.S. Government Sponsored Enterprises

U.S. government sponsored enterprises ("GSE") securities are securities issued by the U.S. government or its agencies or instrumentalities. Some obligations issued by GSEs are supported by the discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality and others only by the credit of the agency or instrumentality. Those securities bear fixed, floating or variable rates of interest. Interest may fluctuate based on generally recognized reference rates or the relationship of rates. While the U.S. government currently provides financial support to such GSEs or instrumentalities, no assurance can be given that it will always do so, since it is not so obligated by law.

Certain U.S. government debt securities, such as securities of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury. Others, such as securities issued by Fannie Mae<sup>®</sup> and Freddie Mac<sup>®</sup>, are supported only by the credit of the corporation. In the case of securities not backed by the full faith and credit of the United States, a fund must look principally to the agency issuing or guaranteeing the obligation in the event the agency or instrumentality does not meet its commitments. The U.S. government may choose not to provide financial support to GSEs or instrumentalities if it is not legally obligated to do so. A fund will invest in securities of such instrumentalities only when Rafferty is satisfied that the credit risk with respect to any such instrumentality is comparatively minimal.

When-Issued Securities

A Fund may enter into firm commitment agreements for the purchase of securities on a specified future date. A Fund may purchase, for example, new issues of fixed-income instruments on a when-issued basis, whereby the payment obligation, or yield to maturity, or coupon rate on the instruments may not be fixed at the time of transaction. A Fund will not purchase securities on a when-issued basis if, as a result, more than 15% of its net assets would be so invested. If a Fund enters into a firm commitment agreement, liability for the purchase price and the rights and risks of ownership of the security accrue to a Fund at the time it becomes obligated to purchase such security, although delivery and payment occur at a later date. Accordingly, if the market price of the security should decline, the effect of such an agreement would be to obligate a Fund to purchase the security at a price above the current market price on the date of delivery and payment.

Zero-Coupon, Payment-In-Kind and Strip Securities

A Fund may invest in zero-coupon, payment-in-kind and strip securities of any rating or maturity. Zero-coupon securities make no periodic interest payment but are sold at a deep discount from their face value, otherwise known as "original issue discount" or "OID." The buyer earns a rate of return determined by the gradual appreciation of the security, which is redeemed at face value on a specified maturity date. The OID varies depending on the time remaining until maturity, as well as market interest rates, liquidity of the security, and the issuer's perceived credit quality. If the issuer defaults, a Fund may not receive any return on its investment. Because zero-coupon securities bear no interest and compound semi-annually at the rate fixed at the time of issuance, their value generally is more volatile than the value of other fixed-income securities. Since zero-coupon security holders do not receive interest payments, when interest rates rise, zero-coupon securities fall more dramatically in value than securities paying interest on a current basis. When interest rates fall, zero-coupon securities rise more rapidly in value because the securities reflect a fixed rate of return. Payment-in-kind securities allow the issuer, at its option, to make current interest payments either in cash or in additional debt obligations of the issuer. Both zero-coupon securities and payment-in-kind securities allow an issuer to avoid the need to generate cash to meet current interest payments.

An investment in zero-coupon securities and delayed interest securities (which do not make interest payments until after a specified time) may cause a Fund to recognize income and be required to make distributions thereof to shareholders before it receives any cash payments on its investment. Moreover, even though payment-in-kind securities do not pay current interest in cash, a Fund nonetheless is required to accrue interest income on these investments and to distribute the interest income at least annually to shareholders. See "Dividends, Other Distributions and Taxes – Income from Zero Coupon and Payment-in-Kind Securities." Thus, a Fund could be required at times to liquidate other investments to satisfy distribution requirements.

A Fund may also invest in strips, which are debt securities whose interest coupons are taken out and traded separately after the securities are issued but otherwise are comparable to zero-coupon securities. Like zero-coupon securities and

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payment-in-kind securities, strips are generally more sensitive to interest rate fluctuations than interest paying securities of comparable term and quality.

Other Investment Risks and Practices

*<u>Borrowing</u>*. A Fund may borrow money for investment purposes, which is a form of leveraging. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Leverage will magnify changes in a Fund's NAV and on a Fund's investments. Although the principal of such borrowings will be fixed, a Fund's assets may change in value during the time the borrowing is outstanding. Leverage also creates interest expenses for a Fund. To the extent the income derived from securities purchased with borrowed funds exceeds the interest a Fund will have to pay, that Fund's net income will be greater than it would be if leverage were not used. Conversely, if the income from the assets obtained with borrowed funds is not sufficient to cover the cost of leveraging, the net income of a Fund will be less than it would be if leverage were not used, and therefore the amount available for shareholders will be reduced.

A Fund may borrow money to facilitate management of a Fund's portfolio by enabling a Fund to meet redemption requests when the liquidation of portfolio instruments would be inconvenient or disadvantageous. Such borrowing is not for investment purposes and will be repaid by the borrowing Fund promptly.

As required by the 1940 Act, a Fund must maintain continuous asset coverage (total assets, including assets acquired with borrowed funds, less liabilities exclusive of borrowings) of 300% of all amounts borrowed. If at any time the value of the required asset coverage declines as a result of market fluctuations or other reasons, a Fund may be required to sell some of its portfolio investments within three days to reduce the amount of its borrowings and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell portfolio instruments at that time.

*<u>Portfolio Turnover</u>*. The Trust anticipates that each Fund's annual portfolio turnover may vary year to year. A Fund's portfolio turnover rate is calculated by the value of the securities purchased or securities sold, excluding all securities whose terms-to-maturity at the time of acquisition were less than 397 days, divided by the average monthly value of such securities owned during the year. Based on this calculation, instruments with remaining terms-to-maturity of less than 397 days are excluded from the portfolio turnover rate. Such instruments generally would include futures contracts and options, since such contracts generally have remaining terms-to-maturity of less than 397 days. In any given period, all of a Fund's investments may have remaining terms-to-maturity of less than 397 days; in that case, the portfolio turnover rate for that period would be equal to zero. However, each Fund's portfolio turnover rate calculated with all securities whose terms-to-maturity were less than 397 days is anticipated to be unusually high.

High portfolio turnover involves correspondingly greater expenses to a Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales also may result in adverse tax consequences to a Fund's shareholders resulting from its distributions of increased net capital gains, if any, recognized as a result of the sales. The trading costs and tax effects associated with portfolio turnover may adversely affect a Fund's performance.

For the fiscal year ended August 31, 2025, the Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund's portfolio turnover decreased significantly from the portfolio turnover for the fiscal year ended August 31, 2024 as a result of a decrease in transactions of the underlying securities and decrease in swap transactions which are not considered for purposes of calculating portfolio turnover.

Securities Lending

Each Fund may lend portfolio securities to certain borrowers that Rafferty determines to be creditworthy. The borrowers provide collateral that is maintained in an amount at least equal to the current market value of the securities loaned, marked to market daily. Borrowers continuously secure their obligations to return securities on loan from a Fund by depositing any combination of short-term U.S. government securities and cash as collateral with a Fund. No securities loan will be made on behalf of a Fund if, as a result, the aggregate value of all securities loaned by a Fund exceeds one-third of the value of the Fund's total assets (including the value of the collateral received) or such lower limit as set by Rafferty or the Board. A Fund may terminate a loan at any time and obtain the return of the securities loaned. Each Fund receives, by way of substitute payment, the value of any interest or cash or non-cash distributions paid on the loaned securities that it would have received if the securities were not on loan. Any gain or loss in the market price of the borrowed securities that occurs during the term of the loan inures to the lending Fund and that Fund's shareholders.

With respect to loans that are collateralized by cash, the borrower may be entitled to receive a fee based on the amount of cash collateral. A Fund is typically compensated by the difference between the amount earned on the reinvestment of cash collateral and the fee paid to the borrower. In the case of collateral other than cash, a Fund is typically compensated by a fee paid by the borrower equal to a percentage of the market value of the loaned securities. A Fund may also receive

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such fees on "special" loans that are cash-collateralized. Any cash collateral may be reinvested in money market funds. Such money market fund shares will not be subject to a sales load, redemption fee, distribution fee or service fee. However, such investments are subject to investment risk.

Securities lending involves exposure to certain risks, including operational risk (*i.e.*, the risk of losses resulting from problems in the settlement and accounting process), "gap" risk (*i.e.*, the risk of a mismatch between the return of cash collateral reinvestments and the fees a Fund has agreed to pay a borrower), and credit, legal, counterparty and market risk. If a securities lending counterparty were to default, a Fund would be subject to the risk of a possible delay in receiving collateral or in recovering the loaned securities, or to a possible loss of rights in the collateral. In the event a borrower does not return a Fund's securities as agreed, the Fund could experience losses if the proceeds received from liquidating the collateral do not at least equal the value of the loaned security at the time the collateral is liquidated, plus the transaction costs incurred in purchasing replacement securities. This event could trigger adverse tax consequences for a Fund. A Fund could lose money if its investment of cash collateral declines in value over the period of the loan. Substitute payments for dividends received by a Fund while its securities are loaned out will not be considered qualified dividend income.

Correlation and Tracking Risk

Several factors may affect a Fund's ability to obtain its monthly leveraged or inverse leveraged investment objective. Among these factors are: (1) Fund expenses, including brokerage expenses and commissions and financing costs related to derivatives (which may be increased by high portfolio turnover) and other transactions costs and fees; (2) less than all of the securities in the underlying index being held by a Fund and securities not included in the underlying index being held by a Fund; (3) an imperfect correlation between the performance of instruments held by a Fund, such as other investment companies, including ETFs, swap agreements, futures contracts and options, and the performance of the underlying securities in the cash market comprising an underlying index; (4) bid-ask spreads (the effect of which may be increased by portfolio turnover); (5) a Fund holding instruments that are illiquid or the market for which becomes disrupted; (6) the need to conform a Fund's portfolio holdings to comply with that Fund's investment restrictions or policies, or regulatory or tax law requirements; (7) income items, valuation methodologies and accounting standards; (8) significant purchase and redemption activity by shareholders; and (9) market movements that run counter to a leveraged Fund's investments (which will cause divergence between a Fund and its underlying index over time due to the mathematical effects of leveraging).

There can be no guarantee that a Fund will achieve a high degree of correlation with its leveraged or inverse leveraged investment objective relative to its underlying index. Failure to achieve a high degree of correlation may prevent a Fund from achieving its investment objective. Activities surrounding index reconstitutions and other index repositioning events may hinder a Fund's ability to meet its calendar month leveraged or inverse leveraged investment objective.

A Fund may not have investment exposure to all securities in its underlying index, or its weighting of investment exposure to such stocks or industries may be different from that of its underlying index. In addition, a Fund may invest in securities or financial instruments not included in its underlying index. A Fund may take or refrain from taking positions in order to improve tax efficiency or comply with regulatory restrictions, either of which may negatively affect a Fund's leveraged or inverse leveraged correlation with its underlying index. A Fund may be subject to large movements of assets into and out of a Fund, potentially resulting in a Fund being over- or under-exposed to its underlying index. Additionally, securities in a Fund's underlying index may trade on markets that may not be open on the same day as a Fund, which may cause a difference between the performance of a Fund and its underlying index.

Because an underlying index may include instruments that trade on a different market than a Fund, a Fund's return may vary from the leveraged or inverse leveraged performance of an underlying index because different markets may close before the Exchange opens or may not be open for business on the same calendar days as a Fund. Additionally, due to differences in trading hours between these different markets, and because the value of the underlying index may be determined using prices obtained at times other than a Fund's NAV calculation time, correlation to the underlying index may be measured by comparing the Fund's monthly return to the inverse of a multiple of the calendar month performance of an underlying index or by comparing the monthly change in a Fund's NAV per share to leveraged or inverse leveraged calendar month performance of one or more U.S. ETFs that reflect the values of the securities underlying an underlying index as of a Fund's NAV calculation time. It is important to note that correlation to these ETFs may vary from the correlation to an underlying index due to embedded costs and other factors.

Any of these factors individually or in combination with other factors could decrease the correlation between the monthly leveraged or inverse leveraged performance of a Fund and its underlying index and may hinder a Fund's ability to meet its investment objective.

Leverage

Each Fund intends regularly to use leveraged investment techniques in pursuing its investment objectives. Utilization of leverage involves special risks and should be considered to be speculative. Leverage exists when a Fund achieves the right

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to a return on a capital base that exceeds the amount of the Fund's net assets. Leverage creates the potential for greater gains to shareholders of a Fund during favorable market conditions and the risk of magnified losses during adverse market conditions. Leverage is likely to cause higher volatility of the NAV of each Fund's Shares. Leverage may involve the creation of a liability that does not entail any interest costs or the creation of a liability that requires a Fund to pay interest which would decrease the Fund's total return to shareholders. If each Fund achieves its investment objective, during adverse market conditions, shareholders should experience a loss greater than they would have incurred had a Fund not been leveraged.

**Special Note Regarding the Correlation Risks of the Funds**. As discussed in the Prospectus, each Fund is "leveraged" meaning it has an investment objective to match 175% or -175% of the performance of its underlying index in a calendar month. Each Fund is subject to all of the correlation risks described in the Prospectus. In addition, there is a special form of correlation risk that derives from each Fund's use of leverage, which is that for periods greater than one calendar month, the use of leverage tends to cause the performance of a Fund to be either greater than, or less than, 175% or -175% of the performance of its underlying index.

A Fund's return for periods longer than one monthly is primarily a function of the following:

a) underlying index performance;

b) underlying index volatility;

c) financing rates associated with leverage;

d) other fund expenses;

e) dividends paid by companies in the underlying index; and

f) period of time.

The performance for a Fund can be estimated given any set of assumptions for the factors described above. Illustrated below is the impact of two factors, underlying index volatility and underlying index performance, on a Fund. Underlying index volatility is a statistical measure of the magnitude of fluctuations in the returns of the index and is calculated as the standard deviation of the natural logarithms of one plus the index return (calculated daily), multiplied by the square root of the number of trading days per year (assumed to be 252). The illustration estimates Fund returns for a number of combinations of underlying index performance and underlying index volatility over a one year period and assumes: a) no dividends paid; b) no fund expenses; and c) borrowing/lending rates (to obtain leverage) of zero percent. If fund expenses were included, a Fund's performance would be lower than shown.

As shown below, a Bull Fund would be expected to lose 4.0% and a Bear Fund would be expected to lose 14% if the underlying index provided no return over a one year period during which the underlying index experienced annualized volatility of 25%. If the underlying index's annualized volatility were to rise to 75%, the hypothetical loss for a one year period widens to approximately 30.9% for a Bull Fund and 74.2% for a Bear Fund. At higher ranges of volatility, there is a chance of a significant loss of value even if the underlying index is flat. For instance, if the underlying index's annualized volatility is 100%, it is likely that a Bull Fund would lose 48.1% of its value, and a Bear Fund would lose approximately 91% of its value, even if the underlying index's cumulative return for the year was only 0%. The volatility of exchange traded securities or instruments that reflect the value of an underlying index may differ from the volatility of an underlying index.

In the tables below, areas shaded green represent those scenarios where a Fund with the investment objective described will outperform (*i.e.*, return more than) the underlying index's performance times the stated multiple in the Fund's investment objective; conversely areas shaded red represent those scenarios where the Fund will underperform (*i.e.*, return less than) the underlying index's performance times the stated multiple in the Fund's investment objective.

The tables below are intended to underscore the fact that the Funds are designed as short-term trading vehicles for investors who intend to actively monitor and manage their portfolios. They are not intended to be used by, and are not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For additional information regarding correlation and volatility risk for the Funds, see "Effects of Compounding and Market Volatility Risk" in the Prospectus.

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**Bull Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| &nbsp;&nbsp; **175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **-105%** | -80.0% | -80.7% | -82.9% | -86.1% | -89.6% |
| **-50%** | **-87.5%** | -70.5% | -71.5% | -74.8% | -79.4% | -84.6% |
| **-40%** | **-70%** | -59.4% | -60.7% | -65.3% | -71.7% | -78.8% |
| **-30%** | **-52.5%** | -46.8% | -48.6% | -54.5% | -63.0% | -72.2% |
| **-20%** | **-35%** | -32.8% | -35.0% | -42.6% | -53.2% | -64.9% |
| **-10%** | **-17.5%** | -17.4% | -20.2% | -29.4% | -42.5% | -56.9% |
| **0%** | **0%** | -0.7% | -4.0% | -15.1% | -30.9% | -48.1% |
| **10%** | **17.5%** | 17.4% | 13.4% | 0.3% | -18.3% | -38.7% |
| **20%** | **35%** | 36.7% | 32.1% | 16.8% | -4.9% | -28.6% |
| **30%** | **52.5%** | 57.2% | 51.9% | 34.3% | 9.4% | -17.9% |
| **40%** | **70%** | 79.0% | 72.9% | 52.9% | 24.6% | -6.5% |
| **50%** | **87.5%** | 102.0% | 95.1% | 72.5% | 40.6% | 5.5% |
| **60%** | **105%** | 126.1% | 118.5% | 93.2% | 57.4% | 18.1% |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**Bear Fund** 

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **One**<br> **Year**<br> **Index**<br>| **-175%**<br> **One**<br> **Year**<br> **Index**<br>| **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** | **Volatility Rate** |
| **Return** | **Simple Return** | **10%** | **25%** | **50%** | **75%** | **100%** |
| **-60%** | **105%** | 385.2% | 327.6% | 172.4% | 28.4% | -55.2% |
| **-50%** | **87.5%** | 228.4% | 189.4% | 84.3% | -13.1% | -69.7% |
| **-40%** | **70%** | 138.7% | 110.3% | 34.0% | -36.8% | -78.0% |
| **-30%** | **52.5%** | 82.2% | 60.6% | 2.3% | -51.8% | -83.2% |
| **-20%** | **35%** | 44.3% | 27.1% | -19.0% | -61.8% | -86.7% |
| **-10%** | **17.5%** | 17.4% | 3.5% | -34.1% | -68.9% | -89.2% |
| **0%** | **0%** | -2.4% | -14.0% | -45.2% | -74.2% | -91.0% |
| **10%** | **-17.5%** | -17.4% | -27.2% | -53.6% | -78.1% | -92.4% |
| **20%** | **-35%** | -29.0% | -37.5% | -60.2% | -81.2% | -93.4% |
| **30%** | **-52.5%** | -38.3% | -45.6% | -65.4% | -83.7% | -94.3% |
| **40%** | **-70%** | -45.8% | -52.3% | -69.6% | -85.7% | -95.0% |
| **50%** | **-87.5%** | -52.0% | -57.7% | -73.0% | -87.3% | -95.6% |
| **60%** | **-105%** | -57.1% | -62.2% | -75.9% | -88.7% | -96.0% |

---

The foregoing tables are intended to isolate the effect of underlying index volatility and underlying index performance on the return of a Fund. A Fund's actual returns may be significantly greater or less than the returns shown above as a result of any of factors discussed above or under "Effects of Compounding and Market Volatility Risk" in the Prospectus.

Investment Restrictions

The Trust, on behalf of each Fund, has adopted the following investment policies which are fundamental policies that may not be changed without the affirmative vote of a majority of the outstanding voting securities of the Fund. As defined by the 1940 Act, a "vote of a majority of the outstanding voting securities of the Fund" means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares present at a shareholders' meeting, if more than 50% of the outstanding shares are represented at the meeting in person or by proxy.

For purposes of the following limitations, all percentage limitations apply immediately after a purchase or initial investment. Except with respect to borrowing money, if a percentage limitation is adhered to at the time of the investment, a later increase or decrease in the percentage resulting from any change in value or net assets will not result in a violation of such restrictions. If at any time a Fund's borrowings exceed its limitations due to a decline in net assets, such borrowings will be reduced within three days (not including Sundays and holidays), or such longer period as may be permitted by the 1940 Act, to the extent necessary to comply with the one-third limitation.

------

**A Fund shall not:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Lend any security or make any other loan if, as a result, more than 33 1/3% of the value of a Fund's total assets would be lent to other parties, except (1) through the purchase of a portion of an issue of debt securities in accordance with a Fund's investment objective, policies and limitations; or (2) by engaging in repurchase agreements with respect to portfolio securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Underwrite securities of any other issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Purchase, hold, or deal in real estate or oil and gas interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Pledge, mortgage, or hypothecate a Fund's assets, except (1) to the extent necessary to secure permitted borrowings; (2) in connection with the purchase of securities on a forward-commitment or delayed-delivery basis or the sale of securities on a delayed-delivery basis; and (3) in connection with options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Invest in physical commodities, except that a Fund may purchase and sell foreign currency, options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed-delivery basis, and other financial instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Issue any "senior security" (as such term is defined in Section 18(f) of the 1940 Act) (including the amount of senior securities issued by excluding liabilities and indebtedness not constituting senior securities), except (1) that a Fund may issue senior securities in connection with transactions in options, futures, options on futures and forward contracts, swaps, caps, floors, collars and other similar investments; (2) as otherwise permitted herein and in Limitation 4 above and 7 below; and (3) each Fund, except the Direxion Monthly Small Cap Bull 1.75X Fund, may make short sales of securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Borrowing

**Each Fund, except the Direxion Monthly Small Cap Bull 1.75X Fund, the Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund, and the Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund, has adopted the following investment limitation:**

A Fund shall not:

Borrow money, except (1) to the extent permitted under the 1940 Act (which currently limits borrowing to no more than 33 1/3% of the value of the Fund's total assets); (2) to enter into reverse repurchase agreements; or (3) to lend portfolio securities. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments shall not constitute borrowing.

**The Direxion Monthly Small Cap Bull 1.75X Fund, the Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund, and the Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund have each adopted the following investment limitation:**

A Fund shall not:

Borrow money, except (1) to the extent permitted under the 1940 Act (which currently limits borrowing to no more than 33 1/3% of the value of each Fund's total assets; (2) as a temporary measure and then only in amounts not to exceed 5% of the value of each Fund's total assets; (3) to enter into reverse repurchase agreements; or (4) to lend portfolio securities. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments shall not constitute borrowing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Short Sales

**The Direxion Monthly Small Cap Bull 1.75X Fund has adopted the following investment limitation:**

A Fund shall not:

Make short sales of portfolio securities or purchase any portfolio securities on margin but may make short sales "against the box," obtain such short-term credits as are necessary for the clearance of transactions, and make margin payments in connection with options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other financial instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. 25% Limitation

**Each Fund has adopted the following investment limitation:**

A Fund shall not:

Invest more than 25% of the value of its net assets in the securities of issuers in any single industry, provided that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.

Each Fund has adopted the following investment policy that enables it to invest in another investment company or series thereof that has substantially similar investment objectives and policies:

------

Notwithstanding any other limitation, a Fund may invest all of its investable assets in an open-end management investment company with substantially the same investment objectives, policies and limitations as a Fund. For this purpose, "all of a Fund's investable assets" means that the only investment securities that will be held by the Fund will be the Fund's interest in the investment company.

Portfolio Transactions and Brokerage

Subject to the general supervision by the Trustees, Rafferty is responsible for decisions to buy and sell securities and derivatives for each Fund, the selection of broker-dealers to effect the transactions, and the negotiation of brokerage commissions, if any. Rafferty expects that a Fund may execute brokerage or other agency transactions through registered broker-dealers, for a commission, in conformity with the 1940 Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder.

When selecting a broker or dealer to execute portfolio transactions, Rafferty considers many factors, including the rate of commission or the size of the broker-dealer's "spread," the size and difficulty of the order, the nature of the market for the security, operational capabilities of the broker-dealer and the research, statistical and economic data furnished by the broker-dealer to Rafferty.

In effecting portfolio transactions for a Fund, Rafferty seeks to receive the closing prices of securities that are in line with those of the securities included in a Fund's underlying index and seeks to execute trades of such securities at the commission rates reasonably available. With respect to agency transactions, Rafferty may execute trades at a higher rate of commission if reasonable in relation to brokerage and research services provided to a Fund or Rafferty. Such services may include the following: information as to the availability of securities for purchase or sale; statistical or factual information or opinions pertaining to investment; wire services; and appraisals or evaluations of portfolio securities. During the last fiscal year, no Fund directed its brokerage commissions to a broker because of research provided.

Each Fund believes that the requirement to always seek the lowest possible commission cost could impede effective portfolio management and preclude a Fund and Rafferty from obtaining a high quality of brokerage and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, Rafferty relies upon its experience and knowledge regarding commissions generally charged by various brokers and on its judgment in evaluating the brokerage and research services received from the broker effecting the transaction. In addition to commission rates, when selecting a broker for a particular transaction, Rafferty considers the following factors, among others: the broker's availability, willingness to commit capital, reputation and integrity, facilities reliability, access to research, execution capacity and responsiveness.

For purchases and sales of derivatives (*i.e.*, financial instruments whose value is derived from the value of an underlying asset, interest rate or index), Rafferty evaluates counterparties on the following factors: reputation and financial strength; execution prices, commission costs, ability to handle complex orders; ability to provide prompt and full execution; accuracy of reports and confirmation provided; reliability; type and quality of research provided; financing and other associated costs related to the transaction; and whether the total cost or proceeds in each transaction is the most favorable under the circumstances.

Rafferty may use research and services provided to it by brokers in servicing a Fund; however, not all such services may be used by Rafferty in connection with a Fund. While the receipt of such information and services is useful in varying degrees and may reduce the amount of research or services otherwise provided to a Fund by Rafferty, the receipt of such information and these services does not reduce the investment advisory fee paid by a Fund.

Purchases and sales of U.S. government securities normally are transacted through issuers, underwriters or major dealers in U.S. government securities acting as principals. Such transactions are made on a net basis and do not involve payment of brokerage commissions. The cost of securities purchased from an underwriter usually includes a commission paid by the issuer to the underwriters; transactions with dealers normally reflect the spread between bid and asked prices.

For each Fund, brokerage fees paid may change significantly from year to year due to Fund asset inflows and outflows stemming from market timing activities. As discussed in the Prospectus, Rafferty expects a significant portion of the assets of the Funds to come from professional money managers and investors who use a Fund as part of "asset allocation" and "market timing" investment strategies. If a large number of investors purchase or sell a Fund, the Fund will need to reposition its portfolio and incur related brokerage fees. Depending on frequency and magnitude of these portfolio transactions, over the course of a year the total impact on brokerage fees paid can vary greatly from year to year. Additionally, the Funds will invest significantly in over-the-counter financial instruments with negotiated terms. These financial instruments often include a provision that requires the Funds to close out its position during periods of higher market volatility. In such instances, a Fund would then reinvest in similar financial instruments in order to continue to seek its investment objective. As a result, depending on the market volatility that a Fund has experienced in the course of a year, the resulting brokerage commissions could vary significantly.

Aggregate brokerage commissions paid by each Fund for the periods shown are set forth in the tables below.

------

---

| | |
|:---|:---|
| **Direxion Monthly S&P 500**<sup>®</sup> **Bull 1.75X Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $59821 |
| Year Ended August 31, 2024 | $69085 |
| Year Ended August 31, 2023 | $78132 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.75X Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $93018 |
| Year Ended August 31, 2024 | $124509 |
| Year Ended August 31, 2023 | $110989 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| **Direxion Monthly Small Cap Bull 1.75X Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $11457 |
| Year Ended August 31, 2024 | $17568 |
| Year Ended August 31, 2023 | $21919 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| **Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $27746 |
| Year Ended August 31, 2024 | $32141 |
| Year Ended August 31, 2023 | $34331 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| **Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund** | **Brokerage Fees Paid** |
| Year Ended August 31, 2025 | $6577 |
| Year Ended August 31, 2024 | $12721 |
| Year Ended August 31, 2023 | $10560 |

---

For the fiscal years presented, the brokerage commissions for the Funds have generally decreased as a result of lower volatility in assets.

Portfolio Holdings Information

The Trust maintains portfolio holdings disclosure policies that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding a Fund's portfolio investments to ensure that such disclosure is in the best interests of a Fund's shareholders. In adopting the policies, the Board considered actual and potential material conflicts that could arise between the interest of Fund shareholders, the Adviser, the Funds' distributor, or any other affiliated person of a Fund. Disclosure of the Funds' complete holdings is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the holdings report on Form N-PORT. These reports are available, free of charge, on the EDGAR database on the SEC's website at www.sec.gov.

From time to time, rating and ranking organizations such as Standard & Poor's<sup>®</sup> and Morningstar<sup>®</sup>, Inc. may request complete portfolio holdings information in connection with rating a Fund. Similarly, pension plan sponsors, consultants and/or other financial institutions may request a complete list of portfolio holdings in order to assess the risks of the Funds' portfolio along with related performance attribution statistics. The Trust believes that these third parties have legitimate objectives in requesting such portfolio holdings information. To prevent such parties from potentially misusing the complete portfolio holdings information, a Fund will generally only disclose such information as of the end of the most recent calendar quarter, with a lag of approximately 60 days. In addition, the Funds' Chief Compliance Officer ("CCO") may grant exceptions to permit additional disclosure of the complete portfolio holdings information at differing times and with differing lag times to rating agencies and to the parties noted above, provided that (1) the recipient is subject to a confidentiality agreement; (2) the recipient will utilize the information to reach certain conclusions about the investment management characteristics of a Fund and will not use the information to facilitate or assist in any investment program; and (3) the recipient will not provide access to third parties to this information. The CCO shall report any disclosures made pursuant to this exception to the Board.

In addition, the Funds' service providers, such as custodian, administrator, transfer agent, distributor, legal counsel and independent registered public accounting firm may receive portfolio holdings information in connection with their services to a Fund. In no event shall the Adviser, any affiliates or employees, or a Fund receive any direct or indirect compensation in connection with the disclosure of information about the Funds' portfolio holdings.

In the event a portfolio holdings disclosure to be made pursuant to the policies presents a conflict of interest between the Funds' shareholders and the Adviser, the Funds' distributor and their affiliates or employees and any affiliated person of

------

a Fund, the disclosure will not be made unless a majority of the Board members who are not "interested persons" of the Funds as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees") approves such disclosure.

Management of the Trust

**The Board of Trustees**

The Trust is governed by its Board of Trustees (the "Board"). The Board is responsible for and oversees the overall management and operations of the Trust and the Funds, which includes the general oversight and review of the Funds' investment activities, in accordance with federal law and the law of the Commonwealth of Massachusetts, as well as the stated policies of the Funds. The Board oversees the Trust's officers and service providers, including Rafferty, which is responsible for the management of the day-to-day operations of the Funds based on policies and agreements reviewed and approved by the Board. In carrying out these responsibilities, the Board regularly interacts with and receives reports from senior personnel of service providers, including personnel from Rafferty. The Board also is assisted by the Trust's independent auditor (who reports directly to the Trust's Audit Committee), independent counsel and other professionals as appropriate.

**Risk Oversight**

Consistent with its responsibility for oversight of the Trust and the Funds, the Board oversees the management of risks relating to the administration and operation of the Trust and the Funds. Rafferty, as part of its responsibilities for the day-to-day operations of the Funds, is responsible for day-to-day risk management for the Funds. The Board, in the exercise of its reasonable business judgment performs its risk management oversight directly and, as to certain matters, through its committees (described below) and through the Board members who are not "interested persons" of the Funds as defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees"). The following provides an overview of the principal, but not all, aspects of the Board's oversight of risk management for the Trust and the Funds.

The Board has adopted, and periodically reviews, policies and procedures designed to address risks to the Trust and the Funds. In addition, under the general oversight of the Board, Rafferty and other service providers to the Funds have themselves adopted a variety of policies, procedures and controls designed to address particular risks to the Funds. Different processes, procedures and controls are employed with respect to different types of risks.

The Board also oversees risk management for the Trust and the Funds through review of regular reports, presentations and other information from officers of the Trust and other persons. The Trust's CCO and senior officers of Rafferty regularly report to the Board on a range of matters, including those relating to risk management. The Board also regularly receives reports from Rafferty and U.S. Bancorp Fund Services, LLC ("USBFS") with respect to the Funds' investments. In addition to regular reports from these parties, the Board also receives reports regarding other service providers to the Trust, either directly or through Rafferty, USBFS or the CCO, on a periodic or regular basis. At least annually, the Board receives a report from the CCO regarding the effectiveness of the Funds' compliance program. Also, the Board receives regular reports, presentations and other information from Rafferty, including in connection with the Board's consideration of the renewal of each of the Trust's agreements with Rafferty and the Trust's distribution plan under Rule 12b-1 under the 1940 Act.

The CCO reports regularly to the Board on Fund valuation matters. The Audit Committee receives regular reports from the Trust's independent registered public accounting firm on internal control and financial reporting matters. On at least a quarterly basis, the Independent Trustees meet with the CCO to discuss matters relating to the Funds' compliance program.

**Board Structure and Related Matters**

Independent Trustees constitute at least two-thirds of the Board. The Trustees discharge their responsibilities collectively as a Board, as well as through Board committees, each of which operates pursuant to a charter approved by the Board that delineates the specific responsibilities of that committee. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee and the Qualified Legal Compliance Committee. For example, the Audit Committee is responsible for specific matters related to oversight of the Funds' independent auditors, subject to approval of the Audit Committee's recommendations by the Board. The members and responsibilities of each Board committee are summarized below.

The Board periodically evaluates its structure and composition as well as various aspects of its operations. The Chairman of the Board is not an Independent Trustee and the Board has chosen not to have a lead Independent Trustee. However, the Board believes that its leadership structure, including its Independent Trustees and Board committees, is appropriate for the Trust in light of, among other factors, the asset size and nature of the Funds, the number of funds overseen by the Board, the arrangements for the conduct of the Funds' operations, the number of Trustees, and the Board's responsibilities. On an annual basis, the Board conducts a self-evaluation that considers, among other matters, whether the Board and its committees are functioning effectively and whether, given the size and composition of the Board and each of its committees, the Trustees are able to oversee effectively the number of funds in the complex.

------

The Trust is part of the Direxion Family of Investment Companies, which is comprised of the 8 separate series within the Trust and 250 separate series within the Direxion Shares ETF Trust. The same persons who constitute the Board also constitute the Board of Trustees of the Direxion Shares ETF Trust.

The Board holds four regularly scheduled meetings each year and the Independent Trustees hold one additional meeting in connection with the annual contract renewals. The Board may hold special meetings, as needed, to address matters arising between regular meetings. During a portion of each meeting, the Independent Trustees meet outside of management's presence. The Independent Trustees may hold special meetings, as needed.

The Trustees of the Trust are identified in the tables below, which provide information regarding their age, business address and principal occupation during the past five years including any affiliation with Rafferty, the length of service to the Trust, and the position, if any, that they hold on the board of directors of companies other than the Trust as of the date of this SAI. Each of the Trustees of the Trust also serve on the Board of the Direxion Shares ETF Trust, the other registered investment company in the Direxion complex. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022.

**Interested Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Daniel D. O'Neill<sup>(1)</sup> <br>Age: 57<br>| &nbsp;&nbsp; Chairman of the <br> Board of Trustees<br>| &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, April 2021 – <br> September 2022; <br> Managing <br> Director, Rafferty <br> Asset <br> Management, <br> LLC, January 1999 <br> – January 2019.<br>| 258 | None. |
| Angela Brickl<sup>(2)</sup> <br>Age: 49<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; President, Rafferty <br> Asset <br> Management, LLC <br> since September <br> 2022; Chief <br> Operating Officer, <br> Rafferty Asset <br> Management, LLC <br> May 2021 – <br> September 2022; <br> General Counsel, <br> Rafferty Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| 258 | None. |

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------

**Independent Trustees** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Age** | &nbsp;&nbsp; **Position(s) Held** <br> **with Fund**<br>| &nbsp;&nbsp; **Term of Office** <br> **and Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During Past Five** <br> **Years**<br>| &nbsp;&nbsp; **# of Portfolios in** <br> **Direxion Family of** <br> **Investment** <br> **Companies** <br> **Overseen by** <br> **Trustee**<sup>(4)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| David L. Driscoll<br> Age: 56 <br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; <br> Since 2014<br>| &nbsp;&nbsp; Board Member, <br> Algorithmic <br> Research and <br> Trading, since <br> 2022; Board <br> Advisor, University <br> Common Real <br> Estate, since 2012; <br> Member, Kendrick <br> LLC, since 2006; <br> Partner, King <br> Associates, LLP, <br> since 2004; <br> Principal, Grey <br> Oaks LLP, since <br> 2003.<br>| 258 | None. |
| Kathleen M. Berkery<br> Age: 58<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2019<br>| &nbsp;&nbsp; Chief Financial <br> Officer, Metro <br> Physical Therapy, <br> LLC, since 2023; <br> Chief Financial <br> Officer, Student <br> Sponsor Partners, <br> 2021 - 2023; <br> Senior Manager- <br> Trusts & Estates, <br> Rynkar, Vail & <br> Barrett, LLC, 2018 <br> - 2021.<br>| 258 | None. |
| Carlyle Peake<br> Age: 54<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Head of US & <br> LATAM Debt <br> Syndicate, BBVA <br> Securities, Inc., <br> since 2011.<br>| 258 | None. |
| Mary Jo Collins<br> Age: 69<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2022<br>| &nbsp;&nbsp; Managing <br> Director, B. Riley <br> Financial, March <br> – December <br> 2022; Managing <br> Director, Imperial <br> Capital LLC, from <br> 2020-2022; <br> Director, Royal <br> Bank of Canada, <br> 2014-2020.<br>| 258 | None. |
| Bradley Kurtzman<br> Age: 52<br>| Trustee | &nbsp;&nbsp; Lifetime of Trust <br> until removal or <br> resignation; Since <br> 2025<br>| &nbsp;&nbsp; Partner, <br> Squarepoint <br> Capital, since May <br> 2019; Managing <br> Director, Deutsche <br> Bank 2012-2019.<br>| 258 | None. |

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<sup>(1)</sup>

Mr. O'Neill is affiliated with Rafferty because he owns a beneficial interest in Rafferty.

<sup>(2)</sup>

Ms. Brickl is affiliated with Rafferty because she serves as an officer of Rafferty.

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

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In addition to the information set forth in the tables above and other relevant qualifications, experience, attributes or skills applicable to a particular Trustee, the following provides further information about the qualifications and experience of each Trustee.

Daniel D. O'Neill: Mr. O'Neill has extensive experience in the investment management business. Mr. O'Neill was the Managing Director of Rafferty from 1999 through January 2019 and Chief Executive Officer at Rafferty from April 2021 through September 2022.

Angela Brickl: Ms. Brickl has extensive experience in the investment management business, including serving as Chief Operating Officer from April 2021 to September 2022 and since November 2024, and President of Rafferty from September 2022 to November 2024. Ms. Brickl also serves as Rafferty's General Counsel and served as Chief Compliance Officer from 2012 through March 2023.

David L. Driscoll: Mr. Driscoll has extensive experience with risk assessment and strategic planning as a partner and manager of various real estate partnerships and companies.

Kathleen M. Berkery: Ms. Berkery has extensive experience with estate planning, estate administration, fiduciary income taxation, financial planning, finance, as well as business sales and development, and marketing.

Carlyle Peake: Mr. Peake has extensive global capital markets experience, as well as experience with client relations and sales of securities by issuers and investors and valuing, structuring, and negotiating complex debt issues for corporate and sovereign entities.

Mary Jo Collins: Ms. Collins has extensive experience evaluating credit risk of investment grade securities, including corporate bonds, preferred stocks, and hybrid securities, as well as managing relationships with retail and institutional investors.

Bradley M. Kurtzman: Mr. Kurtzman has extensive expertise in the management of large portfolios various asset classes (equities, rates, credit commodities) with a particular focus on the use of derivatives which includes trading, analytics, market risk management, and operational efficiency.

**Board Committees**

The Trust has an Audit Committee, consisting of each Independent Trustee. The primary responsibilities of the Trust's Audit Committee are set forth in its charter, which include making recommendations to the Board as to the engagement or discharge of the Trust's independent registered public accounting firm (including the audit fees charged by the auditors), supervising investigations into matters relating to audit matters, reviewing with the independent registered public accounting firm of the results of audits, and addressing any other matters regarding audits. The Audit Committee met three times during the Trust's most recent fiscal year.

The Trust also has a Nominating and Governance Committee, consisting of each Independent Trustee. The primary responsibilities of the Nominating and Governance Committee are to make recommendations to the Board on issues related to the composition and operation of the Board, and communicate with management on those issues. The Nominating and Governance Committee also evaluates and nominates Board member candidates. In evaluating Board member candidates, the Nominating and Governance Committee considers the extent to which potential candidates possess sufficiently diverse skill sets and diversity characteristics that would contribute to the Board's overall effectiveness. The Nominating and Governance Committee will consider nominees recommended by shareholders. Such recommendations should be in writing and addressed to a Fund with attention to the Nominating and Governance Committee Chair. The recommendations must include the following preliminary information regarding the nominee: (1) name; (2) date of birth; (3) education; (4) business professional or other relevant experience and areas of expertise; (5) current business, professional or other relevant experience and areas of expertise; (6) current business and home addresses and contact information; (7) other board positions or prior experience; and (8) any knowledge and experience relating to investment companies and investment company governance. The Nominating and Governance Committee met three times during the Trust's most recent fiscal year.

The Trust has a Qualified Legal Compliance Committee, consisting of each Independent Trustee. The primary responsibility of the Trust's Qualified Legal Compliance Committee is to receive, review and take appropriate action with respect to any report made or referred to the Committee by an attorney of evidence of a material violation of applicable U.S. federal or state securities law, material breach of a fiduciary duty under U.S. federal or state law or a similar material violation by the Trust or by any officer, director, employee or agent of the Trust. The Audit Committee serves as the Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee did not meet during the Trust's most recent fiscal year.

**Principal Officers of the Trust**

The officers of the Trust conduct and supervise its daily business. Unless otherwise noted, an individual's business address is 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022. As of the date of this SAI, the officers of the Trust, their ages, their business address and their principal occupations during the past five years are as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup> <br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Douglas Yones<br> Age: 50<br>| &nbsp;&nbsp; Chief Executive <br> Officer<br>| Since 2024 | &nbsp;&nbsp; Chief Executive <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, since 2024; <br> Head of Exchange <br> Traded Products, <br> NYSE, until 2024.<br>| N/A | N/A |
| Angela Brickl<sup>(1)</sup> <br>Age: 49<br>| &nbsp;&nbsp; Chief Operating <br> Officer<br> General Counsel<br>| &nbsp;&nbsp; Since 2024<br> Since 2022<br>| &nbsp;&nbsp; Chief Operating <br> Officer, Rafferty <br> Asset <br> Management, LLC <br> May 2021 – <br> September 2022 <br> and since <br> November 2024; <br> President, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2022– November <br> 2024; General <br> Counsel, Rafferty <br> Asset <br> Management LLC, <br> since October <br> 2010; Chief <br> Compliance <br> Officer, Rafferty <br> Asset <br> Management, <br> LLC, September <br> 2012– March <br> 2023.<br>| N/A | N/A |
| Todd Sherman<br> Age: 44<br>| &nbsp;&nbsp; Chief Compliance <br> Officer<br>| Since 2023 | &nbsp;&nbsp; Chief Risk Officer, <br> Rafferty Asset <br> Management, <br> LLC, since 2018; <br> SVP Head of Risk, <br> 2012–2018.<br>| N/A | N/A |
| Patrick J. Rudnick<br> Age: 52<br>| &nbsp;&nbsp; Principal Executive<br> Officer <br>| Since 2018 | &nbsp;&nbsp; Senior Vice <br> President, Rafferty <br> Asset <br> Management, <br> LLC, since March <br> 2013.<br>| N/A | N/A |
| Corey Noltner<br> Age: 36<br>| &nbsp;&nbsp; Principal Financial <br> Officer<br>| Since 2021 | &nbsp;&nbsp; Senior Business <br> Analyst, Rafferty <br> Asset <br> Management, <br> LLC, since October <br> 2015.<br>| N/A | N/A |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address** <br> **and Age**<br>| &nbsp;&nbsp; **Position(s)** <br> **Held with** <br> **Fund**<br>| &nbsp;&nbsp; **Term of** <br> **Office**<sup>(2)</sup> **and** <br> **Length of** <br> **Time Served**<br>| &nbsp;&nbsp; **Principal** <br> **Occupation(s)** <br> **During** <br> **Past Five Years**<br>| &nbsp;&nbsp; **# of**<br> **Portfolios** <br> **in the** <br> **Direxion** <br> **Family of** <br> **Investment** <br> **Companies** <br> **Overseen** <br> **by Trustee**<sup>(3)</sup><br>| &nbsp;&nbsp; **Other** <br> **Trusteeships/** <br> **Directorships Held** <br> **by Trustee During** <br> **Past Five Years**<br>|
| Alyssa Sherman<br> Age: 36<br>| Secretary | Since 2022 | &nbsp;&nbsp; Assistant General <br> Counsel, Rafferty <br> Asset <br> Management, <br> LLC, since April <br> 2021; Associate, <br> K&L Gates LLP, <br> September 2015 <br> – March 2021.<br>| N/A | N/A |

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<sup>(1)</sup>

Ms. Brickl serves on the Board of Trustees of the Direxion Funds and Direxion Shares ETF Trust.

<sup>(2)</sup>

Pursuant to the Trust's By-laws, each officer shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, removal or resignation. Officers serve at the pleasure of the Board of Trustees and may be removed at any time with or without cause.

<sup>(3)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

The following table shows the amount of equity securities owned in each of the Funds and the Direxion Family of Investment Companies by the Trustees as of the calendar year ended December 31, 2024:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Dollar Range of Equity** <br> **Securities Owned:**<br>| **Interested Trustees:** | **Interested Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** | **Independent Trustees:** |
|  | &nbsp;&nbsp; **Daniel D.** <br> **O'Neill**<br>| &nbsp;&nbsp; **Angela**<br> **Brickl**<br>| &nbsp;&nbsp; **David L.** <br> **Driscoll**<br>| &nbsp;&nbsp; **Kathleen** <br> **M.**<br> **Berkery**<br>| &nbsp;&nbsp; **Carlyle**<br> **Peake**<br>| &nbsp;&nbsp; **Mary Jo**<br> **Collins**<br>| &nbsp;&nbsp; **Bradley**<br> **Kurtzman**<br>|
| &nbsp;&nbsp; Direxion Monthly S&P <br> 500<sup>®</sup> Bull 1.75X Fund<br>| $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly <br> NASDAQ-100<sup>®</sup> Bull <br> 1.75X Shares<br>| $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly <br> Small Cap Bull 1.75X <br> Fund<br>| $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly 7-10 <br> Year Treasury Bull <br> 1.75X Shares<br>| $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly 7-10 <br> Year Treasury Bear <br> 1.75X Shares<br>| $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| &nbsp;&nbsp; Aggregate Dollar <br> Range of Equity <br> Securities in the <br> Direxion Family of <br> Investment <br> Companies<sup>(1)</sup> <br>| &nbsp;&nbsp; $10000 - <br> $50000<br>| $0 | &nbsp;&nbsp; $1 - <br> $10000<br>| $0 | $0 | $0 | &nbsp;&nbsp; Over <br> $100,000<br>|

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<sup>(1)</sup>

The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this SAI, offers for sale to the public 123 of the 250 funds registered with the SEC and the Direxion Funds which, as of the date of this SAI, offers for sale to the public 8 funds registered with the SEC.

The Trust's Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law. However, they are not protected against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office.

No officer, director or employee of Rafferty receives any compensation from the Funds for acting as a Trustee or officer of the Trust. The following table shows the compensation earned by each Trustee for the Trust's fiscal year ended August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; **Name of Person,** <br> **Position**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the** <br> **Trust**<sup>(1)</sup> <br>| **Pension or** <br> **Retirement Benefits** <br> **Accrued As Part of** <br> **the Trust's** <br> **Expenses**<br>| &nbsp;&nbsp; **Estimated** <br> **Annual Benefits** <br> **Upon Retirement**<br>| &nbsp;&nbsp; **Aggregate** <br> **Compensation** <br> **From the Direxion** <br> **Family of** <br> **Investment** <br> **Companies Paid** <br> **to the Trustees**<sup>(2)</sup> <br>|
| **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** | **Interested Trustee** |
| Daniel D. O'Neill  | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| Angela Brickl | $0 | &nbsp;&nbsp; $0 | $0 | $0 |
| **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** | **Independent Trustees** |
| David L. Driscoll | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Kathleen M. Berkery | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Mary Jo Collins | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Carlyle Peake | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |
| Bradley Kurtzman | $22500 | &nbsp;&nbsp; $0 | $0 | $225000 |

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<sup>(1)</sup>

Trustee compensation is allocated across the operational Funds of the Trust based on the proportion of the Fund's net assets to the total net assets of the operational Funds of the Trust.

<sup>(2)</sup>

For the fiscal year ended August 31, 2025, Trustees' fees and expenses in the amount of $112,500 were incurred by the Trust.

Principal Shareholders, Control Persons and Management Ownership

A principal shareholder is any person who owns of record or beneficially 5% or more of the outstanding shares of a Fund. A control person is a shareholder that owns beneficially or through controlled companies more than 25% of the voting securities of a company or acknowledges the existence of control. Shareholders owning voting securities in excess of 25% may determine the outcome of any matter affecting and voted on by shareholders of a Fund.

As of December 1, 2025, the following shareholders were considered to be either a principal shareholder or control person of the Funds:

**Direxion Monthly S&P 500**<sup>®</sup> **Bull 1.75X Fund** 

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **Jurisdiction** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>| DE | 75.41% | Record |
| National Financial Services LLC<br> 499 Washington Boulevard<br> Jersey City, NJ 07310-2010<br>| N/A | N/A | 14.85% | Record |

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**Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.75X Fund** 

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **Jurisdiction** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>| DE | 55.14% | Record |
| National Financial Services LLC<br> 499 Washington Boulevard<br> Jersey City, NJ 07310-2010<br>| &nbsp;&nbsp; Fidelity Global <br> Brokerage Group, <br> Inc.<br>| DE | 29.05% | Record |
| Morgan Stanley Smith Barney LLC<br> 2000 Westchester Avenue<br> Purchase, NY 10577-2539<br>| N/A | N/A | 8.95% | Record |

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**Direxion Monthly Small Cap Bull 1.75X Fund** 

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **Jurisdiction** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>| DE | 54.39% | Record |
| National Financial Services LLC<br> 499 Washington Boulevard<br> Jersey City, NJ 07310-2010<br>| N/A | N/A | 27.42% | Record |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **Jurisdiction** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| Pershing LLC<br> PO Box 2052<br> Jersey City, NJ 07303-2052<br>| N/A | N/A | 8.31% | Record |

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**Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund** 

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| | | | |
|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>DE | 90.65% | Record |

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**Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund** 

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| | | | |
|:---|:---|:---|:---|
| **Name and Address** | **Parent Company** | **% Ownership** | &nbsp;&nbsp; **Type of**<br> **Ownership**<br>|
| National Financial Services LLC<br> 499 Washington Boulevard<br> Jersey City, NJ 07310-2010<br>| &nbsp;&nbsp; Fidelity Global <br> Brokerage Group, <br> Inc.<br>DE | 65.41% | Record |
| Charles Schwab & Co Inc.<br> 211 Main Street<br> San Francisco, CA 94105-1905<br>| &nbsp;&nbsp; The Charles <br> Schwab <br> Corporation<br>DE | 28.26% | Record |

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In addition, as of December 1, 2025, the Trustees and Officers as a group did not own any of the outstanding shares of each Fund.

Investment Adviser

Rafferty, 535 Madison Avenue, 37<sup>th</sup> Floor, New York, New York 10022, provides investment advice to the Funds. Rafferty was organized as a New York limited liability company in June 1997. Michael Rafferty and Kathleen Rafferty Hay control Rafferty through their ownership in Rafferty Holdings, LLC and Daniel D. O'Neill controls Rafferty through his ownership in Minakian Partners, LLC.

Under an Investment Advisory Agreement ("Advisory Agreement") between Rafferty and the Trust, on behalf of each Fund, Rafferty provides a continuous investment program for each Fund's assets in accordance with its investment objectives, policies and limitations, and oversees the day-to-day operations of each Fund, subject to the supervision of the Trustees. Rafferty shall not be liable to the Trust or any Fund for anything done or omitted by it, except acts or omissions involving willful misfeasance, bad faith, negligence or reckless disregard of the duties imposed upon it by its agreement with the Trust or for any losses that may be sustained in the purchase, holding or sale of any security. Rafferty bears all costs associated with providing these advisory services and the expenses of the Trustees who are affiliated with or interested persons of Rafferty. The Trust bears all other expenses that are not assumed by Rafferty as described in the Prospectus. The Trust also is liable for nonrecurring expenses as may arise, including litigation to which a Fund may be a party. The Trust also may have an obligation to indemnify its Trustees and officers with respect to any such litigation.

The Advisory Agreement was initially approved by the Trustees (including all Independent Trustees) and Rafferty, as sole shareholder of each Fund in compliance with the 1940 Act. After an initial approval period of two years, the Advisory Agreement is renewable with respect to each Fund, so long as its continuance is approved at least annually (1) by the vote, cast at a meeting called for that purpose, of a majority of the Independent Trustees of the Trust; and (2) by the majority vote of either the full Board or the vote of a majority of the outstanding shares of a Fund. The Advisory Agreement automatically terminates on assignment and is terminable upon a 60-day written notice either by the Trust or Rafferty.

Pursuant to the Advisory Agreement, each Fund pays Rafferty a fee at an annualized rate based on a percentage of its average daily net assets of 0.75%.

Although each Fund is responsible for its own operating expenses, Rafferty has entered into an Operating Expense Limitation Agreement with each Fund. Under this Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its investment advisory fees and management services fees and/or reimburse each Fund for Other Expenses (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses) through September 1, 2027 to the extent that each Fund's Total Annual Fund Operating Expenses exceed 1.35% of each Fund's average daily net assets.

Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation

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and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement may be terminated or revised at any time with the consent of the Board of Trustees upon notice to the Adviser and without the approval of Fund shareholders.

The tables below show the advisory fees incurred by each of the Funds, the amount of fees waived and/or reimbursed by Rafferty, and the total amount of fees paid to Rafferty by each of the Funds for the last three fiscal years ended August 31.

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| | | | |
|:---|:---|:---|:---|
| **Direxion Monthly S&P 500**<sup>®</sup> **Bull 1.75X Fund** | **Advisory fee accrued** | **Fees waived and**<br> **expenses absorbed by**<br> **Adviser**<br>| &nbsp;&nbsp; **Total fees paid to**<br> **(waived by)**<br> **Adviser**<br>|
| Year Ended August 31, 2025<sup>(1)</sup> <br>| $860625 | &nbsp;&nbsp; $6377 | $882269 |
| Year Ended August 31, 2024<sup>(2)</sup> <br>| $795565 | &nbsp;&nbsp; $11184 | $815547 |
| Year Ended August 31, 2023<sup>(3)</sup> <br>| $582133 | &nbsp;&nbsp; $83997 | $515397 |

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(1) For the fiscal year ended August 31, 2025, the Adviser recouped previously waived expenses in the amount of $28,021.

(2) For the fiscal year ended August 31, 2024, the Adviser recouped previously waived expenses in the amount of $31,166.

(3) For the fiscal year ended August 31, 2023, the Adviser recouped previously waived expenses in the amount of $17,261.

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| | | | |
|:---|:---|:---|:---|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.75X Fund** | **Advisory fee accrued** | **Fees waived and**<br> **expenses absorbed by**<br> **Adviser**<br>| &nbsp;&nbsp; **Total fees paid to**<br> **(waived by)**<br> **Adviser**<br>|
| Year Ended August 31, 2025<sup>(1)</sup> <br>| $3529979 | &nbsp;&nbsp; $6466 | $3553113 |
| Year Ended August 31, 2024<sup>(2)</sup> <br>| $3049715 | &nbsp;&nbsp; $27107 | $3102324 |
| Year Ended August 31, 2023<sup>(3)</sup> <br>| $2069752 | &nbsp;&nbsp; $118394 | $2002386 |

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(1) For the fiscal year ended August 31, 2025, the Adviser recouped previously waived expenses in the amount of $29,600.

(2) For the fiscal year ended August 31, 2024, the Adviser recouped previously waived expenses in the amount of $79,716.

(3) For the fiscal year ended August 31, 2023, the Adviser recouped previously waived expenses in the amount of $51,028.

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| | | | |
|:---|:---|:---|:---|
| **Direxion Monthly Small Cap Bull 1.75X Fund** | **Advisory fee accrued** | **Fees waived and**<br> **expenses absorbed by**<br> **Adviser**<br>| &nbsp;&nbsp; **Total fees paid to**<br> **(waived by)**<br> **Adviser**<br>|
| Year Ended August 31, 2025 | $87139 | &nbsp;&nbsp; $42457 | $44682 |
| Year Ended August 31, 2024<sup>(1)</sup> <br>| $87982 | &nbsp;&nbsp; $30359 | $68836 |
| Year Ended August 31, 2023<sup>(2)</sup> <br>| $71495 | &nbsp;&nbsp; $35917 | $36003 |

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(1) For the fiscal year ended August 31, 2024, the Adviser recouped previously waived expenses in the amount of $11,213.

(2) For the fiscal year ended August 31, 2023, the Adviser recouped previously waived expenses in the amount of $425.

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| | | | |
|:---|:---|:---|:---|
| **Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund** | **Advisory fee accrued** | **Fees waived and**<br> **expenses absorbed by**<br> **Adviser**<br>| &nbsp;&nbsp; **Total fees paid to**<br> **(waived by)**<br> **Adviser**<br>|
| Year Ended August 31, 2025<sup>(1)</sup> <br>| $73558 | &nbsp;&nbsp; $38330 | $41115 |
| Year Ended August 31, 2024<sup>(2)</sup> <br>| $72728 | &nbsp;&nbsp; $34429 | $45772 |
| Year Ended August 31, 2023 | $84745 | &nbsp;&nbsp; $40584 | $44161 |

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(1) For the fiscal year ended August 31, 2025, the Adviser recouped previously waived expenses in the amount of $5,887.

(2) For the fiscal year ended August 31, 2024, the Adviser recouped previously waived expenses in the amount of $7,473.

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| | | | |
|:---|:---|:---|:---|
| **Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund** | **Advisory fee accrued** | **Fees waived and**<br> **expenses absorbed by**<br> **Adviser**<br>| &nbsp;&nbsp; **Total fees paid to**<br> **(waived by)**<br> **Adviser**<br>|
| Year Ended August 31, 2025<sup>(1)</sup> <br>| $24492 | &nbsp;&nbsp; $43274 | $(14430) |
| Year Ended August 31, 2024<sup>(2)</sup> <br>| $39042 | &nbsp;&nbsp; $50354 | $16623 |
| Year Ended August 31, 2023 | $44157 | &nbsp;&nbsp; $43617 | $540 |

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(1) For the fiscal year ended August 31, 2025, the Adviser recouped previously waived expenses in the amount of $4,352.

(2) For the fiscal year ended August 31, 2024, the Adviser recouped previously waived expenses in the amount of $27,935.

Pursuant to the Management Services Agreement, Rafferty provides certain administrative services to the Funds, including as follows: coordinating and implementing the Trust's contractual obligations with the Funds' other service providers; monitoring, overseeing and reviewing the performance of such service providers to ensure adherence to applicable contractual obligations; preparing or coordinating reports and presentations to the Board of Trustees by such service providers as requested, or deemed necessary pursuant to regulatory requirements; providing certain financial reporting services, compliance and risk

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management services. Effective November 1, 2024, for these services, the Trust pays to Rafferty a fee at the annual rate of 0.05% on the first $25 billion of aggregate average daily net assets of the Trust and the Direxion Shares ETF Trust, 0.0475% on aggregate average daily net assets between $25 billion and $50 billion and 0.045% on aggregate average daily net assets above $50 billion. This Management Services Fee may be waived under the Operating Expense Limitation Agreement that Rafferty has entered into with each Fund. This arrangement may be terminated at any time with consent of the Board.

The tables below show the Management Services Fees paid by each Fund as of the fiscal years ended August 31:

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| | |
|:---|:---|
| **Direxion Monthly S&P 500**<sup>®</sup> **Bull 1.75X Fund** | **Management Fees Paid** |
| Year Ended August 31, 2025\* | $51006 |
| Year Ended August 31, 2024 | $26018 |
| Year Ended August 31, 2023 | $19253 |

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| | |
|:---|:---|
| **Direxion Monthly NASDAQ-100**<sup>®</sup> **Bull 1.75X Fund** | **Management Fees Paid** |
| Year Ended August 31, 2025\* | $210872 |
| Year Ended August 31, 2024 | $99750 |
| Year Ended August 31, 2023 | $68433 |

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| | |
|:---|:---|
| **Direxion Monthly Small Cap Bull 1.75X Fund** | **Management Fees Paid** |
| Year Ended August 31, 2025\* | $5107 |
| Year Ended August 31, 2024 | $2878 |
| Year Ended August 31, 2023 | $2364 |

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| | |
|:---|:---|
| **Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund** | **Management Fees Paid** |
| Year Ended August 31, 2025\* | $3782 |
| Year Ended August 31, 2024 | $2380 |
| Year Ended August 31, 2023 | $2802 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | |
|:---|:---|
| **Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund** | **Management Fees Paid** |
| Year Ended August 31, 2025\* | $2037 |
| Year Ended August 31, 2024 | $1278 |
| Year Ended August 31, 2023 | $1458 |

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\*The fees for the most recent fiscal year are higher than previous years due to an increase in the fee rate paid by the Funds due to the expanded list of services provided under the Management Services Agreement by Rafferty thereunder.

Pursuant to Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Trust, Rafferty and the Funds' distributor have adopted Codes of Ethics. These codes permit portfolio managers and other access persons of a Fund to invest in securities that may be owned by a Fund, subject to certain restrictions.

Portfolio Managers

Paul Brigandi and Tony Ng are jointly and primarily responsible for the day-to-day management of the Funds. An investment trading team of Rafferty employees assists Mr. Brigandi and Mr. Ng in the day-to-day management of the Funds subject to their primary responsibility and oversight. The Portfolio Managers work with the investment trading team to decide the target allocation of each Fund's investments and, on a day-to-day basis, an individual portfolio trader executes transactions for the Funds consistent with the target allocation. The members of the investment trading team rotate periodically among the various series of the Trust, including the Funds, so that no single individual is assigned to a specific Fund for extended periods of time.

In addition to the Funds, Mr. Brigandi and Mr. Ng manage the following other accounts as of August 31, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Accounts** | &nbsp;&nbsp; **Total Number** <br> **of Accounts**<br>| **Total Assets**<br> **(In Billions)**<br>| &nbsp;&nbsp; **Total Number of** <br> **Accounts with** <br> **Performance** <br> **Based Fees**<br>| &nbsp;&nbsp; **Total Assets** <br> **of Accounts** <br> **with Performance** <br> **Based Fees**<br>|
| Registered Investment Companies | 122 | &nbsp;&nbsp; $52.1 | 0 | $0 |
| Other Pooled Investment Vehicles | 0 | &nbsp;&nbsp; $0 | 0 | $0 |
| Other Accounts | 0 | &nbsp;&nbsp; $0 | 0 | $0 |

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Rafferty manages other registered investment companies with investment objectives similar to those of the Funds, but does not manage any other pooled investment vehicles or other accounts. Two or more funds advised by Rafferty may invest in the same securities but the nature of each investment (long or short) may be opposite and in different proportions. Rafferty ordinarily executes transactions for a Fund "market-on-close," in which funds purchasing or selling the same security receive the same closing price.

Rafferty has not identified any additional material conflicts between a Fund and other accounts managed by the investment team. However, other actual or apparent conflicts of interest may arise in connection with the day-to-day management of a Fund and other accounts. The management of a Fund and other accounts may result in unequal time and attention being devoted to a Fund and other accounts. Rafferty's management fees for the services it provides to other accounts varies and may be higher or lower than the advisory fees it receives from a Fund. This could create potential conflicts of interest in which the portfolio manager may appear to favor one investment vehicle over another resulting in an account paying higher fees or one investment vehicle out performing another.

The compensation to the investment team, which includes the Portfolio Managers, is paid by Rafferty. Their compensation primarily consists of a fixed base salary and a bonus. The investment team's salary is reviewed annually and increases are determined by factors such as performance and seniority. Bonuses are determined by the individual performance of an employee including factors such as attention to detail, process, and efficiency, and are impacted by the overall performance of the firm. The investment team's salary and bonus are not based on a Fund's performance and as a result, no benchmarks are used. Along with all other employees of Rafferty, the investment team may participate in the firm's 401(k) retirement plan where Rafferty may make matching contributions up to a defined percentage of their salary.

Mr. Brigandi and Mr. Ng did not own any shares of the Funds as of August 31, 2025.

Proxy Voting Policies and Procedures

The Board has adopted policies and procedures with respect to voting proxies (the "Proxy Policy") related to portfolio securities of the Funds. Pursuant to these policies and procedures the Board of the Trust has delegated responsibility for voting such proxies to the Adviser, subject to the Board's continuing oversight.

The Proxy Policy is intended to protect shareholder interests and comply with applicable state and federal corporate and securities laws. It applies to any voting rights with respect to securities held in accounts of the Funds. To assist the Adviser in its responsibility for voting proxies and administering the overall proxy voting process, the Adviser has retained Institutional Shareholder Services ("ISS") as an expert in the proxy voting and corporate governance area. ISS is a subsidiary of Vestar Capital Partners VI, L.P.; a leading U.S. middle market private equity firm. The services provided by ISS include in-depth research, global issuer analysis, and voting recommendations as well as vote execution, reporting and record keeping. ISS issues monthly reports which are reviewed by the Adviser to assure proxies are being voted properly. The Adviser and ISS also perform checks on a quarterly basis to match the voting activity with available shareholder meeting information. ISS' management meets on a regular basis to discuss its approach to new developments and amendments to existing proxy voting guidelines (the "Guidelines"). Information on such developments and amendments are then provided to the Adviser.

The Guidelines are maintained and implemented by ISS and are an extensive list of common proxy voting issues with recommended voting actions based on the overall goal of achieving maximum shareholder value and protection of shareholder interests and rights. Generally, proxies are voted in accordance with the voting recommendations contained in the Guidelines. If necessary, the Adviser will be consulted by ISS on non-routine issues. Proxy issues and factors considered when resolving proxy issues in the Guidelines include, but are not limited to:

● Election of Directors – considering all factors such as director qualifications, term of office and age limits.

● Proxy Contests – considering factors such as voting nominees in contested elections and reimbursement of expenses.

● Election of Auditors – considering factors such as independence and reputation of the auditing firm.

● Proxy Contest Defenses – considering factors such as board structure and cumulative voting.

● Tender Offer Defenses – considering factors such as poison pills (stock purchase rights plans) and fair price provisions.

● Miscellaneous Governance Issues – considering factors such as confidential voting and equal access.

● Capital Structure – considering factors such as common stock authorization and stock distributions.

● Executive and Director Compensation – considering factors such as performance goals and employee stock purchase plans.

● State of Incorporation – considering factors such as state takeover statutes and voting on reincorporation proposals.

● Mergers and Corporate Restructuring – considering factors such as spin-offs and asset sales.

● Mutual Fund Proxy Voting – considering factors such as election of directors and proxy contests.

● Social and Corporate Responsibility Issues – considering factors such as social, environmental, and labor issues.

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A full description of the Guidelines and voting policy is maintain by the Adviser, and a complete copy of the Guidelines is available without charge, upon request by calling the Adviser at (800) 851-0511.

<u>Conflicts of Interest</u>

From time to time, proxy issues may pose a material conflict of interest between the Funds' shareholders and the Adviser, the Distributor or any affiliates thereof. Due to the limited nature of the Adviser's activities (*e.g.*, no underwriting business, no publicly-traded affiliates, no investment banking activities, and no research recommendations), conflicts of interest are likely to be infrequent. Nevertheless, it is the duty of the Adviser to monitor potential conflicts of interest. In the event a conflict of interest arises, the Adviser will be responsible for voting the proxy, will communicate how the proxy should be voted to ISS, and will confirm ISS voted the proxy consistent with the Adviser's direction.

<u>Proxy Voting Recordkeeping</u> 

The Adviser, with the assistance of ISS, maintains for a period of at least five years, a record of each proxy statement received and materials that were considered when the proxy was voted during the calendar year. Information on how the Funds voted proxies relating to portfolio securities for the 12-month (or shorter) period ended June 30 is available without charge, upon request, by calling the Adviser at (800) 851-0511, by visiting <u>direxion.com</u> or on the SEC's website at <u>http://www.sec.gov</u>.

Fund Administrator, Fund Accountant, Transfer Agent and Custodian

U.S. Bancorp Fund Services, LLC ("Administrator"), 615 East Michigan Street, Milwaukee, Wisconsin 53202, provides administrative, fund accounting and transfer agent services to the Funds. U.S. Bank, N.A., Custody Operations, 1555 N. River Center Drive, Suite 302, Milwaukee, Wisconsin, 53202, an affiliate of the Administrator, provides custodian services to the Funds.

Effective November 1, 2025, the Trust entered into an Amended and Restated Fund Servicing Agreement, pursuant to which the Administrator provides the Trust with certain administrative, accounting and transfer agency services. As compensation for these services, the Trust pays the Administrator a fee based on the Trust's total average daily net assets. The Administrator is also entitled to certain out-of-pocket expenses.

Prior to November 1, 2025, pursuant to an Administration Servicing Agreement between the Trust and the Administrator, and a Fund Accounting Servicing Agreement between the Trust and the Administrator, the Administrator provided the Trust with administrative and certain management services (other than investment advisory services), as well as accounting services, including portfolio accounting services, tax accounting services and financial reporting services. As compensation for these services, the Trust paid the Administrator a fee based on the Trust's total average daily net assets. The Administrator was also entitled to certain out-of-pocket expenses. Beginning November 1, 2024, the Adviser assumed payment of a portion of the Trust's fees. Effective November 1, 2025, the Administrator discontinued providing certain management (*e.g*. officer) services and tax accounting services to the Trust.

U.S. Bank N.A. ("Custodian") serves as the custodian of each Fund's assets. The Custodian holds and administers the assets in each Fund's portfolio. Prior to November 1, the Trust and Custodian were parties to a Custody Agreement. Effective November 1, 2025, the Custodian and Trust entered into an Amended and Restated Custody Agreement (together, the "Custody Agreements"). Pursuant to both Custody Agreements, the Custodian receives an annual fee based on the Trust's total average daily net assets. The Custodian also is entitled to certain out-of-pocket expenses.

In addition, U.S. Bank N.A. and/or its affiliates may receive revenue from certain broker-dealers that are paid Rule 12b-1 or similar fees from funds in which each Fund's invests. In recognition of this revenue, the Custodian and/or its affiliates have credited the Trust and may further credit the Trust in the future for fees otherwise payable by the Funds. The amount of fees paid by the Trust pursuant to the Agreements noted above, for the fiscal years indicated, is set forth in the table below.

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| | |
|:---|:---|
|  | **Fees paid to the Administrator**  |
| Year Ended August 31, 2025\* | $14089 |
| Year Ended August 31, 2024 | $79423 |
| Year Ended August 31, 2023 | $65323 |

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\*The fees for the most recent fiscal year are lower than in previous years due to a decrease in the fee rate paid by the Funds under the Amended and Restated Fund Servicing Agreement, due to the more limited scope of services provided.

Distributor

ALPS Distributors, Inc., located at 1290 Broadway, Suite 1000, Denver, Colorado 80203, serves as the distributor ("Distributor") in connection with the continuous offering of each Fund's shares. The Distributor is a broker-dealer registered with the SEC under the Exchange Act and a member of the Financial Industry Regulatory Authority. The Distributor and participating

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dealers with whom it has entered into dealer agreements offer shares of each Fund as agents on a best-efforts basis and are not obligated to sell any specific number of shares.

Distribution Plan and Service Fees

Rule 12b-1 under the 1940 Act, as amended (the "Rule"), provides that an investment company may bear expenses of distributing its shares only pursuant to a plan adopted in accordance with the Rule. The Trustees have adopted a Rule 12b-1 Investor Class Plan of Distribution (the "Investor Class Plan") for shares of each Fund pursuant to which each Fund may pay certain expenses incurred in the distribution of its shares and the servicing and maintenance of existing shareholder accounts. The Distributor, as the Funds' principal underwriter, and Rafferty may have a direct or indirect financial interest in the Investor Class Plan or any related agreement.

Pursuant to the Investor Class Plan, each Fund may pay up to 1.00% of the shares' average daily net assets. The Board has authorized each Fund to pay 0.25% of the Fund's average daily net assets.

Under an agreement with the Funds, your financial advisor may provide services, as described in the Prospectus, and as described above, and receive Rule 12b-1 fees from the Funds.

The Investor Class Plan was approved by the Trustees and the Independent Trustees of the Funds. In approving the Investor Class Plan, the Trustees determined that there is a reasonable likelihood that the Investor Class Plan will benefit each Fund and its shareholders. The Trustees will review quarterly and annually a written report provided by the Treasurer of the amounts expended under the Investor Class Plan and the purpose for which such expenditures were made.

The Investor Class Plan permits payments to be made by each Fund to the Distributor or other third parties for expenditures incurred in connection with the distribution of Fund shares to investors. The Distributor or other third parties are authorized to engage in advertising, the preparation and distribution of sales literature and other promotional activities on behalf of the Funds. In addition, the Investor Class Plan authorizes payments by the Funds to the Distributor or other third parties for the cost related to selling or servicing efforts, preparing, printing and distributing Fund prospectuses, statements of additional information, and shareholder reports to investors.

The tables below show the amount of Rule 12b-1 fees incurred and the allocation of such fees by each Fund for the fiscal period ended August 31, 2025.

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| | |
|:---|:---|
| **Fund (Investor Class)** | **12b-1 Fees** <br> **Incurred**<br>|
| &nbsp;&nbsp; Direxion Monthly NASDAQ-100<sup>®</sup> <br> Bull 1.75X Fund<br>| $1176660  |
| &nbsp;&nbsp; Direxion Monthly S&P 500<sup>®</sup> Bull <br> 1.75X Fund<br>| $286875  |
| &nbsp;&nbsp; Direxion Monthly Small Cap Bull <br> 1.75X Fund<br>| $29046 |
| &nbsp;&nbsp; Direxion Monthly 7-10 Year <br> Treasury Bull 1.75X Fund<br>| $24519  |
| &nbsp;&nbsp; Direxion Monthly 7-10 Year <br> Treasury Bear 1.75X Fund<br>| $8164 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Fund (Investor Class)** | &nbsp;&nbsp; **Advertising** <br> **and** <br> **Marketing**<br>| **Printing**<br> **and** <br> **Postage**<br>| &nbsp;&nbsp; **Payment to** <br> **Distributor**<br>| &nbsp;&nbsp; **Payment to**<br> **Dealers**<br>| &nbsp;&nbsp; **Compensation** <br> **to Sales** <br> **Personnel**<br>| &nbsp;&nbsp; **Interest,** <br> **Carrying,**<br> **or Other**<br> **Financing**<br> **Charges**<br>| &nbsp;&nbsp; **Other** <br> **Marketing** <br> **Expenses**<br>|
| &nbsp;&nbsp; Direxion Monthly NASDAQ-<br> 100<sup>®</sup> Bull 1.75X Fund<br>| $0 | &nbsp;&nbsp; $0 | $4822  | $1171838  | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly S&P 500<sup>®</sup> <br> Bull 1.75X Fund<br>| $0 | &nbsp;&nbsp; $0 | $1169  | $285706  | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly Small Cap <br> Bull 1.75X Fund<br>| $0 | &nbsp;&nbsp; $0 | $124  | $28922  | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly 7-10 Year <br> Treasury Bull 1.75X Fund<br>| $0 | &nbsp;&nbsp; $0 | $103 | $24416  | $0 | $0 | $0 |
| &nbsp;&nbsp; Direxion Monthly 7-10 Year <br> Treasury Bear 1.75X Fund<br>| $0 | &nbsp;&nbsp; $0 | $34 | $8130  | $0 | $0 | $0 |

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Independent Registered Public Accounting Firm

Ernst & Young LLP ("EY"), 700 Nicollet Mall, Suite 500, Minneapolis, Minnesota, 55402, is the independent registered public accounting firm for the Trust. The Financial Statements of the Funds for the fiscal period ended August 31, 2025, audited by EY, have been included in reliance on their report given on their authority as experts in accounting and auditing.

Legal Counsel

The Trust has selected K&L Gates LLP, 1601 K Street, N.W., Washington, DC 20006, as its legal counsel.

Determination of Net Asset Value

A fund's share price is known as its NAV. Each Fund's share price is calculated as of the close of regular trading on the NYSE, usually 4:00 p.m. Eastern Time ("Valuation Time"), each day the NYSE is open for business ("Business Day"). The NYSE is open for business Monday through Friday, except in observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition to these holidays, the Bond Market is not open on Columbus Day and Veterans' Day. The NYSE may close early on the business day before each of these holidays and on the day after Thanksgiving Day. NYSE holiday schedules are subject to change without notice.

Share price is calculated by dividing a Fund's net assets by its shares outstanding. Portfolio securities and other assets are valued chiefly by market prices from the primary market in which they are traded. Under Rule 2a-5 under the 1940 Act, a market quotation is readily available when that "quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable." Each Fund uses the following methods to price securities or assets held in its portfolio with readily available market quotations.

An equity security listed or traded on an exchange, domestic or foreign, is valued at its last sales price on the principal exchange prior to Valuation Time. Exchange-traded Funds are valued at the last sales price prior to the Valuation Time. Securities primarily traded on the NASDAQ Global Market<sup>®</sup> ("NASDAQ<sup>®</sup>") for which market quotations are readily available shall be valued using the NASDAQ<sup>®</sup> Official Closing Price ("NOCP") provided by NASDAQ<sup>®</sup> each Business Day. The NOCP is the most recently reported price as of 4:00:02 p.m. Eastern Time, unless that price is outside the range of the "inside" bid and asked price in that case, NASDAQ<sup>®</sup> will adjust the price to equal the inside bid or asked price, whichever is closer. Over-the counter securities are valued at the last sales price in the over-the-counter market.

Futures contracts are valued at (1) the settlement prices established each day on the exchange on which they are traded if the settlement price reflects trading prior to the Valuation Time, (2) at the last sales price prior to the Valuation Time if the settlement prices established by the exchange reflects trading after Valuation Time, or (3) at the last sales price of the exchange prior to the Valuation Time.

Exchange-traded options and options on futures are valued at the composite price using the National Best Bid and Offer quotes ("NBBO"). NBBO consists of the highest bid price and lowest asked price across any of the exchanges on which an option is quoted, thus providing a view across the entire U.S. options marketplace. Specifically, composite pricing looks at the last trades on exchanges where the options are traded. If there are no trades for the option on a given business day, the composite option pricing calculates the mean of the highest bid price and lowest ask price across the exchanges where the option is traded. Non-exchange traded options are valued at the mean between the last bid and asked quotations.

Dividend income and other distributions are recorded on the ex-distribution date.

Securities and other assets for which market quotations are unavailable or unreliable are valued at fair value estimates as determined by the Adviser pursuant to its fair valuation policies as described below.

For purposes of calculating its daily NAV, each Fund typically reflects changes in its holdings of portfolio securities on the first business day following a portfolio trade (commonly known as "T+1 accounting"). However, each Fund is permitted to include same day trades when calculating its NAV (commonly referred to as "trade date accounting") on days when each Fund receives substantial redemptions. Such redemptions can result in an adverse impact on each Fund's NAV when there is a disparity between the trade price and the closing price of the security. Thus, each Fund's use of trade date accounting is likely to lessen the impact of substantial redemptions on each Fund's NAV.

**Fair Value Pricing.** When a market quotation is not readily available or is unreliable, the Trust's Board of Trustees (the "Board") is responsible for determining in good faith the fair value of the portfolio security or other asset. Pursuant to Rule 2a-5, the Board designated the responsibility for fair valuation to the Adviser as its valuation designee ("Valuation Designee"). Fair value determinations are made in good faith in accordance with procedures adopted by the Adviser and approved by

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the Board, which set forth the methodologies by which a portfolio security or other asset will be fair valued. The Adviser may utilize fair valuation services of a pricing service to obtain a fair value for certain portfolio securities or other assets as well.

An investment that relies on Level 2 or Level 3 inputs according to ASC 820, such as swap agreements, is required to be fair valued as such investments do not have readily available market quotations by definition. Swap agreements are valued based on the closing value of the underlying reference instrument. Additionally, the Adviser will fair value a portfolio security or other asset if there is not a readily available market quotation, which may occur in the following situations: (1) to the extent that a Fund holds foreign securities, when foreign markets close before the NYSE opens or may not be open for business on the same calendar days as a Fund; (2) if there has been a significant event in the markets that makes the price of a portfolio security or asset unreliable; (3) if there is a lack of an active market, such as the market for certain preferred securities or for corporate bonds; and (4) if trading in a security is limited during the trading day and a limited number of quotes are available or If trading in a security is halted during a trading day and does not resume prior to the closing of the exchange or other market.

Fair valuation determinations of portfolio securities or other assets introduce an element of subjectivity to pricing of such portfolio securities or other assets. As a result, the price of a security or other asset determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser compares the market quotation to the fair value price to evaluate the effectiveness of the Adviser's fair valuation procedures.

Redemptions

**Redemption In-Kind**

The Trust has filed a notice of election under Rule 18f-1 of the 1940 Act, which obligates a Fund to redeem shares for any shareholder for cash during any 90-day period up to $250,000 or 1% of a Fund's NAV, whichever is less. Any redemption beyond this amount also will be in cash unless the Trustees determine that further cash payments will have a material adverse effect on remaining shareholders. In such a case, a Fund will pay all or a portion of the remainder of the redemption in portfolio instruments, valued in the same way as a Fund determines NAV. The portfolio instruments will be selected in a manner that the Trustees deem fair and equitable. To the extent that a Fund redeems its shares in this manner, the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and the possibility of a lack of a liquid market for those securities. Shareholders who receive futures contracts or options on futures contracts in connection with a redemption in-kind may be responsible for making any margin payments due on those contracts.

**Redemptions by Telephone**

Shareholders may redeem shares of a Fund by telephone. When acting on verbal instructions believed to be genuine, the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees are not liable for any loss resulting from a fraudulent telephone transaction request and the investor will bear the risk of loss. In acting upon telephone instructions, these parties use procedures that are reasonably designed to ensure that such instructions are genuine, such as (1) obtaining some or all of the following information: account number, name(s) and social security number(s) registered to the account, and personal identification; (2) recording all telephone transactions; and (3) sending written confirmation of each transaction to the registered owner. To the extent that the Trust, Rafferty, transfer agent and their trustees, directors, officers and employees do not employ such procedures, some or all of them may be liable for losses due to unauthorized or fraudulent transactions.

**Receiving Payment**

Payment of redemption proceeds typically will be made within one business day, but at least within seven days, following a Fund's receipt of your request (if received in good order as described below) for redemption. For investments that have been made by check or ACH, payment on redemption requests may be delayed until the transfer agent is reasonably satisfied that the purchase payment has been collected by the Trust (which may require up to 10 calendar days). To avoid redemption delays, purchases should be made by direct wire transfer.

A redemption request will be considered to be received in "good order" if:

● The dollar amount or number of shares and the class of shares to be redeemed and shareholder account number have been indicated;

● Any written request is signed by a shareholder and by all co-owners of the account with exactly the same name or names used in establishing the account;

● Any written request is accompanied by certificates representing the shares that have been issued, if any, and the certificates

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have been endorsed for transfer exactly as the name or names appear on the certificates or an accompanying stock power has been attached; and

● The signatures on any written redemption request in excess of $100,000 or more and on any certificates for shares (or an accompanying stock power) have been guaranteed by a national bank, a state bank that is insured by the FDIC, a trust company or by any member firm of the New York, American, Boston, Chicago, Pacific or Philadelphia Stock Exchanges. Signature guarantees also will be accepted from savings banks and certain other financial institutions that are deemed acceptable by USBFS, as transfer agent, under its current signature guarantee program.

The right of redemption may be suspended or the date of payment postponed for any period during which (1) the NYSE is closed (other than customary weekend or holiday closings); (2) trading on the NYSE is restricted; (3) situations where an emergency exists as a result of which it is not reasonably practicable for a Fund to fairly determine the value of its net assets or disposal of a Fund's securities is not reasonably practicable; or (4) the SEC has issued an order for the protection of a Fund's shareholders.

**Anti-Money Laundering**

A Fund is required to comply with various federal anti-money laundering laws and regulations. Consequently, a Fund may be required to "freeze" the account of a shareholder if the shareholder appears to be involved in suspicious activity or if certain account information matches information on government lists of known terrorists or other suspicious persons, or a Fund may be required to transfer the account or proceeds of the account to a government agency. In addition, pursuant to a Fund's Customer Identification Program, a Fund's transfer agent will complete a thorough review of all new opening account applications and will not transact business with any person or entity whose identity cannot be adequately verified.

Exchange Privilege

An exchange is effected through the redemption of the shares tendered for exchange and the purchase of shares being acquired at their respective NAVs as next determined following receipt by a Fund whose shares are being exchanged of (1) proper instructions and all necessary supporting documents; or (2) a telephone request for such exchange in accordance with the procedures set forth in the Prospectus and below. Telephone requests for an exchange received by a Fund before 4:00 p.m. Eastern Time will be effected at the close of regular trading on that day. Requests for an exchange received after the close of regular trading will be effected on the NYSE's next trading day. Due to the volume of calls or other unusual circumstances, telephone exchanges may be difficult to implement during certain time periods.

The Trust reserves the right to reject any order to acquire its shares through exchange or otherwise to restrict or terminate the exchange privilege at any time. In addition, the Trust may terminate this exchange privilege upon 60 days' notice.

Shareholder and Other Information

Each share of a Fund gives the shareholder one vote in matters submitted to shareholders for a vote. Each share of a Fund has equal voting rights, except that, in matters affecting only a particular series, only shares of that series are entitled to vote. Share voting rights are not cumulative, and shares have no preemptive or conversion rights. Shares are not transferable. As a Massachusetts business trust, the Trust is not required to hold annual shareholder meetings. Shareholder approval will be sought only for certain changes in a Trust's or the Funds' operation and for the election of Trustees under certain circumstances. Trustees may be removed by the Trustees or by shareholders at a special meeting. A special meeting of shareholders shall be called by the Trustees upon the written request of shareholders owning at least 10% of a Trust's outstanding shares.

Dividends, Other Distributions and Taxes

The Tax Cuts and Jobs Act ("TCJA") made significant changes to the Code's rules for taxation of individuals and corporations, generally effective for taxable years beginning after December 31, 2017. Many of the changes applicable to individuals were made permanent by the One Big Beautiful Bill Act ("OBBBA"). The TCJA , as extended by OBBBA, made only minor changes to the RIC rules in the Code, but the changes affected shareholders and a Fund, including various investments that a Fund may make. Potential investors are urged to consult their own tax advisors for more detailed information.

**Dividends and other Distributions**

As stated in the Prospectus, each Fund declares and distributes dividends to its shareholders from its net investment income at least annually; for these purposes, net investment income includes dividends, accrued interest, and accretion of OID and market discount, less amortization of market premium and estimated expenses, and is calculated immediately prior to the determination of a Fund's NAV per share. Each Fund also distributes its net short-term capital gain, if any, annually but

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may make more frequent distributions thereof if necessary to avoid income or excise taxes. Each Fund may realize net capital gain (*i.e.*, the excess of net long-term capital gain over net short-term capital loss) and thus anticipates making annual distributions thereof. The Trustees may revise this distribution policy, or postpone the payment of distributions, if a Fund has or anticipates any large unexpected expense, loss, or fluctuation in net assets that, in the Trustees' opinion, might have a significant adverse effect on its shareholders.

**Taxes**

*<u>Taxation of Shareholders</u>*. Dividends (including distributions of the excess of net short-term capital gain over net long-term capital loss ("short-term gain")) a Fund distributes, if any, are taxable to its shareholders as ordinary income (at rates up to 37% for individuals), except to the extent they constitute "qualified dividend income" ("QDI") (as further described in the Prospectus), regardless of whether the dividends are reinvested in Fund shares or received in cash. Distributions of a Fund's net capital gain, if any, are taxable to its shareholders as long-term capital gains, regardless of how long they have held their Fund shares and whether the distributions are reinvested in Fund shares or received in cash.

A shareholder's redemption of Fund shares may result in a taxable gain, depending on whether the redemption proceeds are more or less than the shareholder's adjusted basis in the shares. An exchange of Fund shares for shares of another fund advised by Rafferty generally will have similar consequences. If Fund shares are redeemed at a loss after being held for six months or less, the loss will be treated as long-term, instead of short-term, capital loss to the extent of any capital gain distributions received on those shares. Investors also should be aware that if shares are purchased shortly before the record date for any dividend or capital gain distribution, the shareholder will pay full price for the shares and receive some portion of the purchase price back as a taxable distribution (with the tax consequences described in the Prospectus.)

*<u>Regulated Investment Company Status</u>*. Each Fund is treated as a separate entity for federal tax purposes and intends to continue to qualify for treatment as a RIC. If a Fund so qualifies and satisfies the Distribution Requirement (defined below) for a taxable year, it will not be subject to federal income tax on the part of its investment company taxable income (generally consisting of net investment income, net short-term capital gain, and net gains and losses from certain foreign currency transactions, all determined without regard to any deduction for dividends paid) and net capital gain it distributes to its shareholders for that year.

To qualify for treatment as a RIC, a Fund must distribute to its shareholders for each taxable year at least the sum of 90% of its investment company taxable income ("Distribution Requirement") and 90% of its net exempt interest income and must meet several additional requirements. These requirements include the following: (1) a Fund must derive at least 90% of its gross income each taxable year from (a) dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from options, futures, or forward contracts) derived with respect to its business of investing in securities or those currencies, and (b) net income from an interest in a "qualified publicly traded partnership" ("QPTP") ("Income Requirement"); and (2) at the close of each quarter of a Fund's taxable year, (a) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities, with those other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a Fund's total assets and that does not represent more than 10% of the issuer's outstanding voting securities (equity securities of QPTPs being considered voting securities for these purposes), and (b) not more than 25% of the value of its total assets may be invested in (i) securities (other than U.S. government securities or the securities of other RICs) of any one issuer, (ii) securities (other than securities of other RICs) of two or more issuers a Fund controls that are determined to be engaged in the same, similar, or related trades or businesses, or (iii) securities of one or more QPTPs (collectively, "Diversification Requirements"). The Internal Revenue Service ("IRS") has ruled that income from a derivative contract on a commodity index generally is not qualifying income ("Qualifying Income") for purposes of the Income Requirement.

Although a Fund intends to continue to satisfy all the foregoing requirements, there is no assurance that a Fund will be able to do so. The investment by a Fund primarily in options and futures positions entails some risk that it might fail to satisfy one or both of the Diversification Requirements. There is some uncertainty regarding the valuation of such positions for purposes of those requirements; accordingly, it is possible that the method of valuation a Fund uses, pursuant to which it would expect to be treated as satisfying the Diversification Requirements, would not be accepted in an audit by the IRS, which might apply a different method resulting in disqualification of a Fund.

If a Fund failed to qualify for treatment as a RIC for any taxable year, (1) it would be taxed on the full amount of its taxable income, including net capital gain, for that year at corporate income tax rates (up to 21%), (2) it would not be able to deduct for the distributions it makes to its shareholders, and (3) the shareholders would treat all those distributions, including distributions of net capital gain, as dividends -- that is, ordinary income, except for the part of those dividends that is QDI, which is subject to a maximum federal income tax rate of 20% for individuals -- to the extent of a Fund's earnings and profits; those dividends would be eligible for the dividends-received deduction available to corporations under certain circumstances. In addition, a Fund would be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying for RIC treatment. However, the Regulated Investment Company Modernization Act of 2010 provides certain savings provisions that enable a RIC to cure a failure to satisfy any of the Income

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and Diversification Requirements as long as the failure "is due to reasonable cause and not due to willful neglect" and the RIC pays a deductible tax calculated in accordance with those provisions and meets certain other requirements.

*<u>Excise Tax</u>*. A Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gain net income for the one-year period ending on October 31 of that year, plus certain other amounts.

*<u>Income from Foreign Securities</u>*. Dividends and interest a Fund receives, and gains it realizes, on foreign securities may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield and/or total return on its securities. Tax conventions between certain countries and the United States may reduce or eliminate these foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors.

Gains or losses (1) from the disposition of foreign currencies, including forward currency contracts, (2) on the disposition of each foreign-currency-denominated debt security that are attributable to fluctuations in the value of the foreign currency between the dates of acquisition and disposition of the security, and (3) that are attributable to fluctuations in exchange rates that occur between the time a Fund accrues dividends, interest, or other receivables, or expenses or other liabilities, denominated in a foreign currency and the time a Fund actually collects the receivables or pays the liabilities, generally will be treated as ordinary income or loss. These gains or losses will increase or decrease the amount of a Fund's investment company taxable income to be distributed to its shareholders.

A Fund may invest in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in general, meets either of the following tests for a taxable year: (1) at least 75% of its gross income for the taxable year is passive; or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, a Fund will be subject to federal income tax on a portion of any "excess distribution" it receives on the stock of a PFIC or of any gain on its disposition of the stock (collectively, "PFIC income"), plus interest thereon, even if a Fund distributes the PFIC income as a dividend to its shareholders. The balance of the PFIC income will be included in a Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders. Fund distributions thereof will not be eligible for the 20% maximum federal income tax rate on individuals' QDI.

If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified electing fund" ("QEF"), then, in lieu of the foregoing tax and interest obligation, a Fund would be required to include in income each taxable year its pro rata share of the QEF's annual ordinary earnings and net capital gain — which a Fund probably would have to distribute to satisfy the Distribution Requirement and avoid imposition of the Excise Tax —even if a Fund did not receive those earnings and gain from the QEF. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof.

A Fund may elect to "mark to market" its stock in any PFIC. "Marking-to-market," in this context, means including in gross income each taxable year (and treating as ordinary income) the excess, if any, of the fair market value of the PFIC's stock over a Fund's adjusted basis therein as of the end of that year. Pursuant to the election, a Fund also would be allowed to deduct (as an ordinary, not a capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains with respect to that stock a Fund included in income for prior taxable years under the election. A Fund's adjusted basis in each PFIC's stock with respect to which it makes this election would be adjusted to reflect the amounts of income included and deductions taken thereunder.

*<u>Derivatives Strategies</u>*. The use of derivatives strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward contracts, involves complex rules that will determine for income tax purposes the amount, character and timing of recognition of the gains and losses a Fund realizes in connection therewith. Gains from the disposition of foreign currencies (except certain gains therefrom that may be excluded by future regulations), and gains from options, futures, and forward contracts a Fund derives with respect to its business of investing in securities or foreign currencies, will be treated as Qualifying Income. A Fund will monitor its transactions, make appropriate tax elections and make appropriate entries in its books and records when it acquires any foreign currency, option, futures contract, forward contract or hedged investment to mitigate the effect of these rules, seek to prevent its disqualification as a RIC and minimize the imposition of federal income and excise taxes.

Some futures contracts, foreign currency contracts that are traded in the interbank market, and "nonequity options" (*i.e.*, certain listed options, such as those on a "broad-based" securities index) — except any "securities futures contract" that is not a "dealer securities futures contract" (both as defined in the Code) and any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement — in which a Fund may invest may be subject to Code section 1256 (collectively "section 1256 contracts"). Section 1256 contracts that a Fund holds at the end of its taxable year must be "marked-to-market" (that is, treated as having been sold at that time for their fair market value) for federal income tax purposes, with the result that unrealized gains or losses will be treated as though they were realized. Sixty percent of any net gain or loss recognized on these deemed sales, and 60% of any net realized gain or loss from any actual sales of section 1256 contracts, will be treated as long-term capital gain or loss, and the balance will be treated as short-term capital gain or loss. These rules may operate to increase the amount that a Fund must distribute to satisfy the Distribution Requirement (*i.e.*, with respect to the portion

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treated as short-term capital gain), which will be taxable to its shareholders as ordinary income when distributed to them, and to increase the net capital gain a Fund recognizes, without in either case increasing the cash available to it. A Fund may elect not to have the foregoing rules apply to any "mixed straddle" (that is, a straddle, which a Fund clearly identifies in accordance with applicable regulations, at least one (but not all) of the positions of which are section 1256 contracts), although doing so may have the effect of increasing the relative proportion of short-term capital gain (taxable as ordinary income) and thus increasing the amount of dividends it must distribute. Section 1256 contracts also may be marked-to-market for purposes of the Excise Tax.

Code section 1092 (dealing with straddles) also may affect the taxation of options, futures and forward contracts in which a Fund may invest. That section defines a "straddle" as offsetting positions with respect to actively traded personal property; for these purposes, options, futures and forward contracts are positions in personal property. Under that section, any loss from the disposition of a position in a straddle may be deducted only to the extent the loss exceeds the unrecognized gain on the offsetting position(s) of the straddle. In addition, these rules may postpone the recognition of loss that otherwise would be recognized under the marked-to-market rules discussed above. The regulations under section 1092 also provide certain "wash sale" rules, which apply to transactions where a position is sold at a loss and a new offsetting position is acquired within a prescribed period, and "short sale" rules applicable to straddles. If a Fund makes certain elections, the amount, character and timing of recognition of gains and losses from the affected straddle positions would be determined under rules that vary according to the elections made. Because only a few of the regulations implementing the straddle rules have been promulgated, the tax consequences to a Fund of straddle transactions are not entirely clear.

If a call option written by a Fund lapses (*i.e.*, terminates without being exercised), the amount of the premium it received for the option will be short-term capital gain. If a Fund enters into a closing purchase transaction with respect to a written call option, it will have a short-term capital gain or loss based on the difference between the premium it received for the option it wrote and the premium it pays for the option it buys. If such an option is exercised and a Fund thus sells the securities or futures contract subject to the option, the premium a Fund received will be added to the exercise price to determine the gain or loss on the sale. If a call option purchased by a Fund lapses, it will realize short-term or long-term capital loss, depending on its holding period for the security or futures contract subject thereto. If a Fund exercises a purchased call option, the premium it paid for the option will be added to the basis in the subject securities or futures contract.

*<u>Income from Zero-Coupon and Payment-in-Kind Securities</u>*. A Fund may acquire zero-coupon or other securities (such as strips and delayed interest securities) issued with OID. As a holder of those securities, a Fund must include in its gross income the OID that accrues on the securities during the taxable year, even if it receives no corresponding payment on them during the year. Similarly, a Fund must include in its gross income securities it receives as "interest" on payment-in-kind securities. With respect to "market discount bonds" (*i.e.*, bonds purchased at a price less than their issue price plus the portion of OID previously accrued thereon), a Fund may elect to accrue and include in income taxable each year a portion of the bonds' market discount. Because a Fund annually must distribute substantially all of its investment company taxable income, including any accrued OID, market discount, and other non-cash income, to satisfy the Distribution Requirement and avoid imposition of the Excise Tax, a Fund may be required in a particular year to distribute as a dividend an amount that is greater than the total amount of cash it actually receives. Those distributions will be made from a Fund's cash assets or from the proceeds of sales of portfolio securities, if necessary. A Fund may realize capital gains or losses from those sales, which would increase or decrease its investment company taxable income and/or net capital gain.

*<u>Constructive Sales</u>*. If a Fund has an "appreciated financial position" -- generally, an interest (including an interest through an option, futures or forward contract, or short sale) with respect to any stock, debt instrument (other than "straight debt"), or partnership interest the fair market value of which exceeds its adjusted basis -- and enters into a "constructive sale" of the position, a Fund will be treated as having made an actual sale thereof, with the result that it will recognize gain at that time. A constructive sale generally consists of a short sale, an offsetting notional principal contract, or a futures or forward contract a Fund or a related person enters into with respect to the same or substantially identical property. In addition, if the appreciated financial position is itself a short sale or such a contract, acquisition of the underlying property or substantially identical property will be deemed a constructive sale. The foregoing will not apply, however, to a Fund's transaction during any taxable year that otherwise would be treated as a constructive sale if the transaction is closed within 30 days after the end of that year and a Fund holds the appreciated financial position unhedged for 60 days after that closing (*i.e.*, at no time during that 60-day period is a Fund's risk of loss regarding that position reduced by reason of certain specified transactions with respect to substantially identical or related property, such as having an option to sell, being contractually obligated to sell, making a short sale, or granting an option to buy substantially identical stock or securities).

\* \* \* \* \*

The foregoing is only a general summary of some of the important federal income and excise tax considerations generally affecting the Funds. No attempt is made to present a complete explanation of the federal tax treatment of the Funds' activities, and this discussion is not intended as a substitute for careful tax planning. Accordingly, potential investors are urged to consult their own tax advisers for more detailed information and for information regarding any state, local, or foreign taxes applicable to a Fund and to distributions therefrom.

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*<u>Capital Loss Carryforwards</u>*. As of August 31, 2025, the following Funds had capital loss carryforwards in the respective amounts, as shown below:

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| | | |
|:---|:---|:---|
|  | **Unlimited** <br> **Short-Term**<br>| **Unlimited** <br> **Long-Term**<br>|
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund | &nbsp;&nbsp; $— | &nbsp;&nbsp; $— |
| Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund | &nbsp;&nbsp; $— | &nbsp;&nbsp; $— |
| Direxion Monthly Small Cap Bull 1.75X Fund | &nbsp;&nbsp; $8866251 | &nbsp;&nbsp; $277408 |
| Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | &nbsp;&nbsp; $7012620 | &nbsp;&nbsp; $314654 |
| Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund | &nbsp;&nbsp; $18516264 | &nbsp;&nbsp; $— |

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To the extent a Fund listed above realizes future net capital gains in any taxable year included in the preceding table to which it has available capital loss carryforwards, those gains will be wholly or partly offset by those carryforward(s).

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| | |
|:---|:---|
| **Capital Loss Carryforwards Utilized:**  | **Taxable Year Ended** <br> **8/31/2025**<br>|
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund | &nbsp;&nbsp; $9101717 |

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Pursuant to the Regulated Investment Company Modernization Act of 2010, capital losses sustained in taxable years beginning after December 22, 2010, will not expire and may be carried over without limitation (in the case of each Fund in the preceding tables, after it uses the capital loss carryforwards that expire).

Financial Statements

The Funds' financial statements for the fiscal year ended August 31, 2025, are incorporated herein by reference from the Funds' Annual Financial Statements and Additional Information dated August 31, 2025.

To receive a copy of the Prospectus or Annual or Semi-Annual Financial Statements and Additional Information, without charge, write to or call the Trust at the contact information listed below:

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| | |
|:---|:---|
| Write to: | Direxion Funds |
|  | 535 Madison Avenue<br> 37<sup>th</sup> Floor<br>|
|  | New York, New York 10022 |
| Call: | (800) 851-0511 |
| By Internet: | www.direxion.com |

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**APPENDIX A**

**Description of Corporate Bond Ratings**

Moody's Investors Service and S&P Global Ratings are two prominent independent rating agencies that rate the quality of bonds. Following are expanded explanations of the ratings shown in the Prospectus and this SAI.

***Moody's Investors Service – Global Long-Term Ratings***

Ratings assigned on Moody's global long-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Moody's defines credit risk as the risk that an entity may not meet its contractual financial obligations as they come due and any estimated financial loss in the event of default or impairment. The contractual financial obligations addressed by Moody's ratings are those that call for, without regard to enforceability, the payment of an ascertainable amount, which may vary based upon standard sources of variation (e.g., floating interest rates), by an ascertainable date. Moody's rating addresses the issuer's ability to obtain cash sufficient to service the obligation, and its willingness to pay. Moody's ratings do not address non-standard sources of variation in the amount of the principal obligation (e.g., equity indexed), absent an express statement to the contrary in a press release accompanying an initial rating. Long-term ratings are assigned to issuers or obligations with an original maturity of eleven months or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment. Moody's issues ratings at the issuer level and instrument level. Typically, ratings are made publicly available although private and unpublished ratings may also be assigned.

**Aaa**: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa**: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A**: Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa**: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba**: Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B**: Obligations rated B are considered speculative and are subject to high credit risk.

**Caa**: Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca**: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C**: Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.\*

\* By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

***Moody's Investors Service – National Scale Long-Term Ratings***

Moody's long-term National Scale Ratings (NSRs) are opinions of the relative creditworthiness of issuers and financial obligations within a particular country. NSRs are not designed to be compared among countries; rather, they address relative credit risk within a given country. Moody's assigns national scale ratings in certain local capital markets in which investors have found the global rating scale provides inadequate differentiation among credits or is inconsistent with a rating scale already in common use in the country. In each specific country, the last two characters of the rating indicate the country in which the issuer is located or the financial obligation was issued (*e.g.*, Aaa.ke for Kenya).

**Aaa.n**: Issuers or issues rated Aaa.n demonstrate the strongest creditworthiness relative to other domestic issuers and issuances.

**Aa.n**: Issuers or issues rated Aa.n demonstrate very strong creditworthiness relative to other domestic issuers and issuances.

**A.n**: Issuers or issues rated A.n present above-average creditworthiness relative to other domestic issuers and issuances.

**Baa.n**: Issuers or issues rated Baa.n represent average creditworthiness relative to other domestic issuers and issuances.

**Ba.n**: Issuers or issues rated Ba.n demonstrate below-average creditworthiness relative to other domestic issuers and issuances.

**B.n**: Issuers or issues rated B.n demonstrate weak creditworthiness relative to other domestic issuers and issuances.

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**Caa.n**: Issuers or issues rated Caa.n demonstrate very weak creditworthiness relative to other domestic issuers and issuances.

**Ca.n**: Issuers or issues rated Ca.n demonstrate extremely weak creditworthiness relative to other domestic issuers and issuances.

**C.n**: Issuers or issues rated C.n demonstrate the weakest creditworthiness relative to other domestic issuers and issuances.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

***S&P Global Ratings – Long-Term Issue Credit Ratings\****

An S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&P Global Ratings' view of the obligor's capacity and willingness to meet its financial commitments as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. Issue credit ratings can be either long-term or short-term. Short-term issue credit ratings are generally assigned to those obligations considered short-term in the relevant market, typically with an original maturity of no more than 365 days. Short-term issue credit ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. We would typically assign a long-term issue credit rating to an obligation with an original maturity of greater than 365 days. However, the ratings we assign to certain instruments may diverge from these guidelines based on market practices.

Issue credit ratings are based, in varying degrees, on S&P Global Ratings' analysis of the following considerations:

● The likelihood of payment--the capacity and willingness of the obligor to meet its financial commitments on an obligation in accordance with the terms of the obligation;

● The nature and provisions of the financial obligation, and the promise we impute; and

● The protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

An issue rating is an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

**AAA**: An obligation rated 'AAA' has the highest rating assigned by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is extremely strong.

**AA**: An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitments on the obligation is very strong.

**A**: An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitments on the obligation is still strong.

**BBB**: An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor's capacity to meet its financial commitments on the obligation.

**BB; B; CCC; CC; and C**: Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposure to adverse conditions.

**BB**: An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor's inadequate capacity to meet its financial commitments on the obligation.

**B**: An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments on the obligation.

**CCC**: An obligation rated 'CCC' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.

**CC**: An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.

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**C**: An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared with obligations that are rated higher.

**D**: An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within the next five business days in the absence of a stated grace period or within the earlier of the stated grace period or the next 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

\*Ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.

***Moody's Investors Service – Municipal Short Term Debt and Demand Obligation Ratings***

We use the global short-term Prime rating scale for commercial paper issued by US municipalities and nonprofits. These commercial paper programs may be backed by external letters of credit or liquidity facilities, or by an issuer's self-liquidity.

For other short-term municipal obligations, we use one of two other short-term rating scales, the Municipal Investment Grade (MIG) and Variable Municipal Investment Grade (VMIG) scales discussed below.

We use the MIG scale for US municipal cash flow notes, bond anticipation notes and certain other short-term obligations, which typically mature in three years or less.

**MIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2**: This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3**: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG**: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

For variable rate demand obligations (VRDOs), Moody's assigns both a long-term rating and a short-term payment obligation rating. The long-term rating addresses the issuer's ability to meet scheduled principal and interest payments. The short-term payment obligation rating addresses the ability of the issuer or the liquidity provider to meet any purchase price payment obligation resulting from optional tenders ("on demand") and/or mandatory tenders of the VRDO. The short-term payment obligation rating uses the VMIG scale. Transitions of VMIG ratings with conditional liquidity support differ from transitions of Prime ratings reflecting the risk that external liquidity support will terminate if the issuer's long-term rating drops below investment grade.

For VRDOs, we typically assign a VMIG rating if the frequency of the payment obligation is less than every three years. If the frequency of the payment obligation is less than three years, but the obligation is payable only with remarketing proceeds, the VMIG short-term rating is not assigned and it is denoted as "NR."

Industrial development bonds in the US where the obligor is a corporate may carry a VMIG rating that reflects Moody's view of the relative likelihood of default and loss. In these cases, liquidity assessment is based on the liquidity of the corporate obligor.

**VMIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 2**: This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections.

**VMIG 3**: This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections.

**SG**: This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have a sufficiently strong short-term rating or may lack the structural or legal protections.

***S&P Global Ratings – Municipal Short-Term Note Ratings***

An S&P Global Ratings U.S. municipal note rating reflects S&P Global Ratings opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P Global Ratings analysis will review the following considerations:

● Amortization schedule--the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

● Source of payment--the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

**SP-1**: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2**: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3**: Speculative capacity to pay principal and interest.

**D**: 'D' is assigned upon failure to pay the note when due, completion of a distressed debt restructuring, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.

***Moody's Investors Service – Global Short Term Rating Scale***

Ratings assigned on Moody's global short-term rating scale are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.

**P-1:** Ratings of Prime-1 reflect a superior ability to repay short-term obligations.

**P-2:** Ratings of Prime-2 reflect a strong ability to repay short-term obligations.

**P-3:** Ratings of Prime-3 reflect an acceptable ability to repay short-term obligations.

**NP:** Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

***S&P Global Ratings –Short-Term Issue Credit Ratings***

**A-1**: A short-term obligation rated 'A-1' is rated in the highest category by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitments on these obligations is extremely strong.

**A-2**: A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory.

**A-3**: A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.

**B**: A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial commitments.

**C**: A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.

**D**: A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example, due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, 'AAA/A-1+' or 'A-1+/A-1'). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, 'SP-1+/A-1+').

------

**DIREXION FUNDS**

**PART C**

**OTHER INFORMATION**

**Item 28. Exhibits** 

---

| | |
|:---|:---|
| (a) | &nbsp;&nbsp; [<u>Amended and Restated Declaration of Trust dated May 18, 2015 is herein incorporated by reference</u>](https://www.sec.gov/Archives/edgar/data/1040587/000110465915042017/a15-8279_1ex99da.htm)<br> [<u>from the Post-Effective Amendment No. 160 to the Trust's Registration Statement filed with the SEC</u>](https://www.sec.gov/Archives/edgar/data/1040587/000110465915042017/a15-8279_1ex99da.htm)<br> [<u>on May 29, 2015.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000110465915042017/a15-8279_1ex99da.htm)<br>|
| (b) | &nbsp;&nbsp; [<u>Amended and Restated By-Laws dated February 14, 2019 is herein incorporated by reference from</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312519051867/d696951dex99b.htm)<br> [<u>the Post-Effective Amendment No. 197 to the Trust's Registration Statement filed with the SEC on</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312519051867/d696951dex99b.htm)<br> [<u>February 26, 2019</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312519051867/d696951dex99b.htm).<br>|
| (c) | Instrument Defining Rights of Security Holders – None. |
| (d)<br> (i)(A) | &nbsp;&nbsp; [<u>Amended and Restated Investment Advisory Agreement between the Trust and Rafferty Asset</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99dia.htm)<br> [<u>Management, LLC ("RAM") is herein incorporated by reference from the Post-Effective Amendment</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99dia.htm)<br> [<u>No. 201 to the Trust's Registration Statement filed with the SEC on December 22, 2020.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99dia.htm)<br>|
| (i)(B) | &nbsp;&nbsp; [<u>Novation to the Amended and Restated Investment Advisory Agreement between the Trust and</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99dib.htm)<br> [<u>RAM is herein incorporated by reference from Post-Effective Amendment No. 206 to the Trust's</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99dib.htm)<br> [<u>Registration Statement filed with the SEC on December 21, 2023</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99dib.htm).<br>|
| (i)(C) | [<u>Schedule A of the Amended and Restated Investment Advisory Agreement</u> <u>–</u> <u>filed herewith</u>](d58398dex99dic.htm). |
| (ii)(A) | &nbsp;&nbsp; [<u>Amended and Restated Subadvisory Agreement between Hilton Capital Management, LLC ("Hilton")</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99diia.htm)<br> [<u>and RAM is herein incorporated by reference from the Post-Effective Amendment No. 201 to the</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99diia.htm)<br> [<u>Trust's Registration Statement filed with the SEC on December 22, 2020.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99diia.htm)<br>|
| (ii)(B) | &nbsp;&nbsp; [<u>Novation to the Amended and Restated Subadvisory Agreement between Hilton and RAM is herein</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99diib.htm)<br> [<u>incorporated by reference from Post-Effective Amendment No. 206 to the Trust's Registration</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99diib.htm)<br> [<u>Statement filed with the SEC on December 21, 2023</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99diib.htm).<br>|
| (ii)(C) | [<u>Schedule A to the Amended and Restated Subadvisory Agreement</u> <u>–</u> <u>filed herewith</u>](d58398dex99diic.htm). |
| (e)<br> (i)(A) | &nbsp;&nbsp; [<u>Distribution Agreement between the Trust and ALPS Distributors, Inc. ("ALPS") is herein</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99eia.htm)<br> [<u>incorporated by reference from the Post-Effective Amendment No. 207 to the Trust's Registration</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99eia.htm)<br> [<u>Statement filed with the SEC on December 23, 2024</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99eia.htm).<br>|
| (i)(B) | [<u>Amendment to Schedule A of the Distribution Agreement</u> <u>–</u> <u>filed herewith</u>](d58398dex99eib.htm). |
| (i)(C) | &nbsp;&nbsp; [<u>Schedule B of the Distribution Agreement is herein incorporated by reference from the Post-</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99eic.htm)<br> [<u>Effective Amendment No. 207 to the Trust's Registration Statement filed with the SEC on</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99eic.htm)<br> [<u>December 23, 2024</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99eic.htm).<br>|
| (ii) | &nbsp;&nbsp; [<u>Form of Dealer Agreement is herein incorporated by reference from Post-Effective Amendment No.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000089843299001069/0000898432-99-001069.txt)<br> [<u>5 to the Trust's Registration Statement filed with the SEC on November 17, 1999.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000089843299001069/0000898432-99-001069.txt)<br>|
| (f) | Bonus or Profit Sharing Contracts – None. |
| (g)<br> (i) | [<u>Amended and Restated Custody Agreement dated November 1, 2025</u> <u>–</u> <u>filed herewith</u>](d58398dex99gi.htm). |
| (h)<br> (i)(A) | &nbsp;&nbsp; [<u>Transfer Agent Servicing Agreement dated February 24, 2010 is herein incorporated by reference</u>](https://www.sec.gov/Archives/edgar/data/1040587/000095012310082307/c59366bpexv99whwiwa.htm)<br> [<u>from Post-Effective Amendment No. 104 to the Trust's Registration Statement filed with the SEC on</u>](https://www.sec.gov/Archives/edgar/data/1040587/000095012310082307/c59366bpexv99whwiwa.htm)<br> [<u>August 30, 2010.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000095012310082307/c59366bpexv99whwiwa.htm)<br>|
| (i)(B) | &nbsp;&nbsp; [<u>Fourth Amendment to the Transfer Agent Servicing Agreement is herein incorporated by reference</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99hib.htm)<br> [<u>from the Post-Effective Amendment No. 201 to the Trust's Registration Statement filed with the SEC</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99hib.htm)<br> [<u>on December 22, 2020.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312520324640/d161587dex99hib.htm)<br>|
| (ii) | [<u>Amended and Restated Fund Servicing Agreement dated November 1, 2025</u> <u>–</u> <u>filed herewith</u>](d58398dex99hii.htm). |
| (iv)(A) | &nbsp;&nbsp; [<u>Amended and Restated Operating Expense Limitation Agreement between the Trust and RAM is</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518356539/d679133dex99hv.htm)<br> [<u>herein incorporated by reference from Post-Effective Amendment No. 195 to the Trust's Registration</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518356539/d679133dex99hv.htm)<br> [<u>Statement filed with the SEC on December 21, 2018</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518356539/d679133dex99hv.htm).<br>|
| (iv)(B) | &nbsp;&nbsp; [<u>Novation to the Operating Expense Limitation Agreement between the Trust and RAM is herein</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99hivb.htm)<br> [<u>incorporated by reference from Post-Effective Amendment No. 206 to the Trust's Registration</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99hivb.htm)<br> [<u>Statement filed with the SEC on December 21, 2023</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99hivb.htm).<br>|

---

------

---

| | |
|:---|:---|
| (iv)(C) | &nbsp;&nbsp; [<u>Amendment to Schedule A of the Amended and Restated Operating Expense Limitation Agreement</u>](d58398dex99hivc.htm)<br> [<u>–</u> <u>filed herewith</u>](d58398dex99hivc.htm).<br>|
| (v)(A) | &nbsp;&nbsp; [<u>Operating Expense Limitation Agreement between the Trust and Hilton is herein incorporated by</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312521365073/d269631dex99hva.htm)<br> [<u>reference from the Post-Effective Amendment No. 202 to the Trust's Registration Statement filed</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312521365073/d269631dex99hva.htm)<br> [<u>with the SEC on December 22, 2021.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312521365073/d269631dex99hva.htm)<br>|
| (v)(B) | &nbsp;&nbsp; [<u>Amendment to Schedule A of the Operating Expense Limitation Agreement between the Trust and</u>](d58398dex99hvb.htm)<br> [<u>Hilton</u> <u>–</u> <u>filed herewith</u>](d58398dex99hvb.htm).<br>|
| (vi)(A) | &nbsp;&nbsp; [<u>Management Services Agreement between the Trust and RAM is herein incorporated by reference</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312517376743/d511243dex99hvii.htm)<br> [<u>from Post-Effective Amendment No. 184 to the Trust's Registration Statement filed with the SEC on</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312517376743/d511243dex99hvii.htm)<br> [<u>December 21, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312517376743/d511243dex99hvii.htm)<br>|
| (vi)(B) | &nbsp;&nbsp; [<u>Novation to Management Services Agreement between the Trust and RAM is herein incorporated by</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99hvib.htm)<br> [<u>reference from Post-Effective Amendment No. 206 to the Trust's Registration Statement filed with</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99hvib.htm)<br> [<u>the SEC on December 21, 2023</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99hvib.htm).<br>|
| (vi)(C) | [<u>Amendment to Schedule A of the Management Services Agreement</u> <u>–</u> <u>filed herewith</u>](d58398dex99hvic.htm). |
| (vi)(D) | &nbsp;&nbsp; [<u>Amendment to Schedule B of the Management Services Agreement is herein incorporated by</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99hvid.htm)<br> [<u>reference from the Post-Effective Amendment No. 207 to the Trust's Registration Statement filed</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99hvid.htm)<br> [<u>with the SEC on December 23, 2024</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99hvid.htm).<br>|
| (i) | [<u>Opinion and consent of counsel</u> <u>–</u> <u>filed herewith</u>](d58398dex99i.htm). |
| (j)<br> (i) | [<u>Consent of Independent Registered Public Accounting Firm</u> <u>–</u> <u>filed herewith</u>](d58398dex99ji.htm). |
| (ii) | [<u>Power of Attorney and Certified Resolutions</u> <u>–</u> <u>filed herewith</u>](d58398dex99jii.htm). |
| (k) | Omitted Financial Statements – None. |
| (l) | &nbsp;&nbsp; Letter of Investment Intent dated September 2, 1997 filed with Pre-Effective Amendment No. 1 to <br> the Trust's Registration Statement on September 18, 1997.<br>|
| (m)<br> (i)(A) | &nbsp;&nbsp; [<u>Investor Class Distribution Plan pursuant to Rule 12b-1 dated November 10, 2006 is herein</u>](https://www.sec.gov/Archives/edgar/data/1040587/000089418906003178/investdistplan.htm)<br> [<u>incorporated by reference from Post-Effective Amendment No. 67 to the Trust's Registration</u>](https://www.sec.gov/Archives/edgar/data/1040587/000089418906003178/investdistplan.htm)<br> [<u>Statement filed with the SEC on December 22, 2006.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000089418906003178/investdistplan.htm)<br>|
| (i)(B) | [<u>Amendment to Schedule A of the Investor Class Plan pursuant to Rule 12b-1</u> <u>–</u> <u>filed herewith</u>](d58398dex99mib.htm). |
| (ii)(A) | &nbsp;&nbsp; [<u>Class A Shares Distribution Plan pursuant to Rule 12b-1 is herein incorporated by reference from</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312512034613/d282451dex99miii.htm)<br> [<u>Post-Effective Amendment No. 121 to the Trust's Registration Statement filed with the SEC on</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312512034613/d282451dex99miii.htm)<br> [<u>February 1, 2012.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312512034613/d282451dex99miii.htm)<br>|
| (ii)(B) | &nbsp;&nbsp; [<u>Amendment to Schedule A of the Class A Shares Distribution Plan pursuant to Rule 12b-1 is herein</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518209594/d663372dex99miib.htm)<br> [<u>incorporated by reference from Post-Effective Amendment No. 193 to the Trust's Registration</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518209594/d663372dex99miib.htm)<br> [<u>Statement filed with the SEC on June 29, 2018.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518209594/d663372dex99miib.htm)<br>|
| (iii)(A) | &nbsp;&nbsp; [<u>Class C Shares Distribution Plan pursuant to Rule 12b-1 is herein incorporated by reference from</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312512034613/d282451dex99miv.htm)<br> [<u>Post-Effective Amendment No. 121 to the Trust's Registration Statement filed with the SEC on</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312512034613/d282451dex99miv.htm)<br> [<u>February 1, 2012.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312512034613/d282451dex99miv.htm)<br>|
| (iii)(B) | &nbsp;&nbsp; [<u>Amendment to Schedule A of the Class C Shares Distributions Plan pursuant to Rule 12b-1 is herein</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518209594/d663372dex99miiib.htm)<br> [<u>incorporated by reference from Post-Effective Amendment No. 193 to the Trust's Registration</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518209594/d663372dex99miiib.htm)<br> [<u>Statement filed with the SEC on June 29, 2018.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312518209594/d663372dex99miiib.htm)<br>|
| (n)<br> (i)(A) | &nbsp;&nbsp; [<u>Amended and Restated Multiple Class Plan pursuant to Rule 18f-3 is herein incorporated by</u>](https://www.sec.gov/Archives/edgar/data/1040587/000110465915025546/a15-8279_1ex99dnia.htm)<br> [<u>reference from Post-Effective Amendment No. 159 to the Trust's Registration Statement filed with</u>](https://www.sec.gov/Archives/edgar/data/1040587/000110465915025546/a15-8279_1ex99dnia.htm)<br> [<u>the SEC on April 2, 2015.</u>](https://www.sec.gov/Archives/edgar/data/1040587/000110465915025546/a15-8279_1ex99dnia.htm)<br>|
| (i)(B) | [<u>Amendment to Schedule A of the Amended and Restated Multiple Class Plan</u> <u>–</u> <u>filed herewith</u>](d58398dex99nib.htm). |
| (o) | Reserved. |
| (p)<br> (i) | &nbsp;&nbsp; [<u>Code of Ethics of the Direxion Shares ETF Trust, Direxion Funds, and Rafferty Asset Management, LLC</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99pi.htm)<br> [<u>is herein incorporated by reference from the Post-Effective Amendment No. 207 to the Trust's</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99pi.htm)<br> [<u>Registration Statement filed with the SEC on December 23, 2024</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312524284373/d919659dex99pi.htm).<br>|
| (ii) | &nbsp;&nbsp; [<u>Code of Ethics of Hilton is herein incorporated by reference from Post-Effective Amendment No. 206</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99pii.htm)<br> [<u>to the Trust's Registration Statement filed with the SEC on December 21, 2023</u>](https://www.sec.gov/Archives/edgar/data/1040587/000119312523301302/d676541dex99pii.htm).<br>|
| 101.INS | XBRL Instance |

---

------

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| | |
|:---|:---|
| 101.SCH | XBRL Taxonomy Extension Schema |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase |
| 101.LAB | XBRL Taxonomy Extension Labels Linkbase |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase |

---

**Item 29. Persons Controlled by or Under Common Control with Registrant**

None.

**Item 30. Indemnification**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the exceptions and limitations contained in paragraph (b) below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) every person who is, or has been, a Trustee or officer of the Trust (hereinafter referred to as a "Covered Person") shall be indemnified by the Trust and/or by the appropriate Series to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a Covered Person and against amounts paid or incurred by him or her in the settlement thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened while a Covered Person is in office or thereafter, and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) No indemnification shall be provided hereunder to a Covered Person:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office or (B) not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Trust; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) in the event of a settlement, unless there has been a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither Interested Persons of the Trust nor parties to the matter based upon a review of readily available facts (as opposed to a full trial type inquiry or full investigation); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial type inquiry); provided, however, that any Shareholder may, by appropriate legal proceedings, challenge any such determination by the Trustees, or by independent legal counsel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such Trustee or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel, other than Trustees and officers, and other persons may be entitled by contract or otherwise under law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Expenses in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in paragraph (a) of this Section 2 may be paid by the Trust from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him or her to the Trust if it is ultimately determined that he or she is not entitled to indemnification under this Section 2; provided, however, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) such Covered Person shall have provided appropriate security for such undertaking,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Trust is insured against losses arising out of any such advance payments, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) either a majority of the Trustees who are neither interested persons of the Trust nor parties to the matter, or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a trial type inquiry or full investigation), that there is reason to believe that such Covered Person will be found entitled to indemnification under this Section 2.

According to Article XII, Section 1 of the Declaration of Trust, the Trust is a trust and not a partnership. Trustees are not liable personally to any person extending credit to, contracting with or having any claim against the Trust, a particular Series or the Trustees. A Trustee, however, is not protected from liability due to willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.

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Article XII, Section 2 provides that, subject to the provisions of Section 1 of Article XII and to Article XI, the Trustees are not liable for errors of judgment or mistakes of fact or law, or for any act or omission in accordance with advice of counsel or other experts or for failing to follow such advice.

Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

**Item 31. Business and Other Connections of Investment Adviser**

Rafferty Asset Management, LLC (the "Adviser"), 1301 Avenue of the Americas (6th Avenue), 28th Floor, New York, New York 10019, offers investment advisory services. Information as to the officers and directors of the Adviser is included in its current Form ADV filed with the SEC (Registration Number 801-54679).

Hilton Capital Management, LLC, 1010 Franklin Avenue, Garden City, New York 11530, offers investment advisory services. Information as to the officers and directors of Hilton is included in its current Form ADV filed with the SEC (Registration Number 801-60776).

**Item 32. Principal Underwriter**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) ALPS Distributors, Inc. (the "Distributor") serves as principal underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended: 1290 Funds, 1WS Credit Income Fund, abrdn ETFs, Accordant ODCE Index Fund, Alpha Alternative Assets Fund, ALPS Series Trust, Alternative Credit Income Fund, Apollo Diversified Credit Fund, Apollo Diversified Real Estate Fund, AQR Funds, Axonic Alternative Income Fund, Axonic Funds, BBH Trust, Bluerock High Income Institutional Credit Fund, Bluerock Total Income+ Real Estate Fund, Brandes Investment Trust, Bridge Builder Trust, Cambria ETF Trust, Centre Funds, CION Ares Diversified Credit Fund, Columbia ETF Trust, Columbia ETF Trust I, Columbia ETF Trust II, CRM Mutual Fund Trust, DBX ETF Trust, ETF Series Solutions (Vident Series), Financial Investors Trust, Firsthand Funds, Flat Rock Core Income Fund, Flat Rock Opportunity Fund, FS Credit Income Fund, FS Energy Total Return Fund, FS Multi-Alternative Income Fund, FS Series Trust, FS MVP Private Markets Fund, Goehring & Rozencwajg Investment Funds, Goldman Sachs ETF Trust, Goldman Sachs ETF Trust II, Graniteshares ETF Trust, Hartford Funds Exchange-Traded Trust, Heartland Group, Inc., IndexIQ Active ETF Trust, IndexIQ ETF Trust, Investment Managers Series Trust II (AXS-Advised Funds), Janus Detroit Street Trust, Lattice Strategies Trust, Litman Gregory Funds Trust, Manager Directed Portfolios (Spyglass Growth Fund), Meridian Fund, Inc., Natixis ETF Trust, Natixis ETF Trust II, Opportunistic Credit Interval Fund, PRIMECAP Odyssey Funds, Principal Exchange-Traded Funds, RiverNorth Funds RiverNorth Opportunities Fund, Inc., RiverNorth/DoubleLine Strategic Opportunity Fund, Inc., RiverNorth Opportunistic Municipal Income Fund, Inc., RiverNorth Managed Duration Municipal Income Fund, Inc., RiverNorth Flexible Municipal Income Fund, Inc., RiverNorth Capital and Income Fund, Inc., RiverNorth Flexible Municipal Income Fund II, Inc., RiverNorth Managed Duration Municipal Income Fund II, Inc., SPDR Dow Jones Industrial Average ETF Trust, SPDR S&P 500 ETF Trust, SPDR S&P MidCap 400 ETF Trust, Sprott Funds Trust, Stone Ridge Trust, Stone Ridge Trust II, Stone Ridge Trust IV, Stone Ridge Trust V, Stone Ridge Trust VIII, The Arbitrage Funds, Themes ETF Trust, Thrivent ETF Trust, USCF ETF Trust, Valkyrie ETF Trust II, Wasatch Funds, WesMark Funds, Wilmington Funds, X-Square Balanced Fund, and the X-Square Series Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The following are the Officers and Manager of the Distributor, the Registrant's underwriter. The Distributor's main business address is 1290 Broadway, Suite 1000, Denver, Colorado 80203.

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| | | | |
|:---|:---|:---|:---|
| **Name** | &nbsp;&nbsp; **Position with** <br> **Underwriter**<br>| **Business Address** | &nbsp;&nbsp; **Positions with** <br> **Fund**<br>|
| Stephen J. Kyllo | &nbsp;&nbsp; President, Chief <br> Operating Officer, <br> Director, Chief <br> Compliance <br> Officer<br>| &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |
| Brian Schell | &nbsp;&nbsp; Vice President & <br> Treasurer<br>| &nbsp;&nbsp; 100 South Wacker <br> Drive, 19th Floor, <br> Chicago, IL 60606<br>|  |
| Eric Parsons | &nbsp;&nbsp; Vice President, <br> Controller and <br> Assistant <br> Treasurer<br>| &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |

---

------

---

| | | | |
|:---|:---|:---|:---|
| **Name** | &nbsp;&nbsp; **Position with** <br> **Underwriter**<br>| **Business Address** | &nbsp;&nbsp; **Positions with** <br> **Fund**<br>|
| Jason White | Secretary | &nbsp;&nbsp; 4 Times Square, <br> New York, NY <br> 10036<br>|  |
| Richard C. Noyes | &nbsp;&nbsp; Senior Vice <br> President, General <br> Counsel, Assistant <br> Secretary<br>| &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |
| Eric Theroff | Assistant Secretary | &nbsp;&nbsp; 1055 Broadway <br> Boulevard, Kansas <br> City, MO 64105<br>|  |
| Adam Girard | Tax Officer | &nbsp;&nbsp; 80 Lamberton <br> Road, Windsor, CT <br> 06095<br>|  |
| Liza Price | &nbsp;&nbsp; Vice President, <br> Managing <br> Counsel<br>| &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |
| Jed Stahl | &nbsp;&nbsp; Vice President, <br> Managing <br> Counsel<br>| &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |
| Terence Digan | Vice President | &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |
| James Stegall | Vice President | &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |
| Gary Ross | &nbsp;&nbsp; Senior Vice <br> President<br>| &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |
| Hilary Quinn | Vice President | &nbsp;&nbsp; 1290 Broadway, <br> Suite 1000, <br> Denver, Colorado <br> 80203<br>|  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Not applicable.

**Item 33. Location of Accounts and Records**

The books and records required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, (the "1940 Act") are maintained in the physical possession of the Trust's investment adviser, subadviser, administrator, custodian, subcustodian, or transfer agent.

**Item 34. Management Services**

Not applicable.

**Item 35. Undertakings**

Not applicable.

------

**SIGNATURES**

Pursuant to the requirements of the Securities Act of 1933, as amended, (the "Securities Act") and the 1940 Act, the Registrant certifies that this Post-Effective Amendment No. 208 to its Registration Statement meets all the requirements for effectiveness pursuant to Rule 485(b) of the Securities Act, and the Registrant has duly caused this Post-Effective Amendment No. 208 to its Registration Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and the State of New York on December 23, 2025.

---

| | |
|:---|:---|
| **DIREXION FUNDS** | **DIREXION FUNDS** |
| By: | /s/ Patrick J. Rudnick\* |
|  | Patrick J. Rudnick |
|  | Principal Executive Officer |

---

Pursuant to the requirements of the Securities Act, this Post-Effective Amendment No. 208 to its Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| Signature | Title | Date |
| /s/ Daniel D. O'Neill\* | Chairman of the Board | December 23, 2025 |
| Daniel D. O'Neill |  |  |
| /s/ Angela Brickl | Trustee | December 23, 2025 |
| Angela Brickl |  |  |
| /s/ David L. Driscoll\* | Trustee | December 23, 2025 |
| David L. Driscoll |  |  |
| /s/ Kathleen M. Berkery\* | Trustee | December 23, 2025 |
| Kathleen M. Berkery |  |  |
| /s/ Mary Jo Collins\* | Trustee | December 23, 2025 |
| Mary Jo Collins |  |  |
| /s/ Carlyle Peake\* | Trustee | December 23, 2025 |
| Carlyle Peake |  |  |
| /s/ Bradley Kurtzman\* | Trustee | December 23, 2025 |
| Bradley Kurtzman |  |  |
| /s/ Patrick J. Rudnick\* | Principal Executive Officer | December 23, 2025 |
| Patrick J. Rudnick |  |  |
| /s/ Corey Noltner\* | Principal Financial Officer | December 23, 2025 |
| Corey Noltner |  |  |
| \*By: /s/ Angela Brickl |  |  |

---

Attorney-In-Fact pursuant to the Power of Attorney filed herewith as Exhibit (j)(ii).

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## Ex-99.(D)(I)(C)

**Schedule A** 

**to the Amended and Restated Investment Advisory Agreement** 

**between the Direxion Funds and Rafferty Asset Management, LLC** 

Pursuant to section 1 of the Investment Advisory Agreement (the "Agreement") between Direxion Funds (the "Trust") and Rafferty Asset Management, LLC ("Rafferty"), the Trust hereby appoints Rafferty to manage the investment and reinvestment of the Funds of the Trust listed below. As compensation for such services, the Trust shall pay to Rafferty pursuant to section 7 of the Agreement a fee, computed daily and paid monthly, at the following annual rates as percentages of each Fund's average daily net assets:

---

| | |
|:---|:---|
| **Funds of the Trust** | **Advisory Fee as a**<br> **% of Average**<br> **Daily Net Assets**<br> **Under**<br> **Management** |
|  **For each Fund listed below:** | **0.75%** |
|  Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund |  |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund |  |
|  Direxion Monthly Small Cap Bull 1.75X Fund |  |
|  Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund |  |
|  Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund |  |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund |  |
|  Direxion Monthly High Yield Bull 1.2X Fund |  |
|  **For each Fund listed below:** |  |
|  Hilton Tactical Income Fund | **0.79%** |

---

Last Revised: August 20, 2025

## Ex-99.(D)(Ii)(C)

**SCHEDULE A** 

TO THE

**SUBADVISORY AGREEMENT** 

BETWEEN

**RAFFERTY ASSET MANAGEMENT, LLC** 

AND

**HILTON CAPITAL MANAGEMENT** 

As compensation pursuant to Section 2 of the Subadvisory Agreement between Rafferty Asset Management, LLC (the "Adviser") and Hilton Capital Management, LLC (the "Subadviser"), the Adviser shall pay the Subadviser a subadvisory fee, computed and paid monthly, at the following annual percentage rate of the average daily net assets under management by the Subadviser:

0.59%

Dated: August 20, 2025

## Ex-99.(E)(I)(B)

**APPENDIX A** 

**<u>LIST OF FUNDS</u>**

Hilton Tactical Income Fund

Monthly NASDAQ-100 Bull 1.25X Fund

Monthly NASDAQ-100 Bull 1.75X Fund

Monthly S&P 500 Bull 1.75X Fund

Monthly Small Cap Bull 1.75X Fund

Monthly 7-10 Year Treasury Bull 1.75X Fund

Monthly 7-10 Year Treasury Bear 1.75X Fund

Monthly High Yield Bull 1.2X Fund

Dated: August 20, 2025

## Ex-99.(G)(I)

**AMENDED AND RESTATED** 

**CUSTODY AGREEMENT** 

THIS AMENDED AND RESTATED CUSTODY AGREEMENT is made and entered into as of the last date on the signature page and effective as of November 1, 2025 (the "Effective Date"), by and between **DIREXION FUNDS,** a Massachusetts business trust (the "Trust"), and **U.S. BANK NATIONAL ASSOCIATION**, a national banking association organized and existing under the laws of the United States of America with its principal place of business at Minneapolis, Minnesota (the "Custodian").

WHEREAS, the parties have entered into a Custody Agreement dated as of March 17, 2010, as amended (the "Original Agreement");

WHEREAS, the parties desire to amend and restate the terms of the Original Agreement with the terms of this Agreement;

WHEREAS, this Agreement shall supersede and replace the Original Agreement in its entirety as of the Effective Date;

WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company;

WHEREAS, the Custodian is a bank having the qualifications prescribed in Section 26(a)(1) of the 1940 Act; and

WHEREAS, the Trust desires to retain the Custodian to act as custodian of the cash and securities of each series of the Trust listed on <u>Exhibit A</u> hereto (as amended from time to time) (each a "Fund" and collectively, the "Funds"); and

WHEREAS, the Board of Trustees (as defined below has delegated to the Custodian the responsibilities set forth in Rule 17f-5(c) under the 1940 Act and the Custodian is willing to undertake the responsibilities and serve as the foreign custody manager for the Trust.

NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

**ARTICLE I** 

**CERTAIN DEFINITIONS** 

Whenever used in this Agreement, the following words and phrases shall have the meanings set forth below unless the context otherwise requires:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.01 <u>"Authorized Person"</u> means any Officer or person who has been designated as such by written notice delivered to the Custodian by the Trust, or if the Trust has notified the Custodian in writing that it has an authorized investment manager or other agent, delivered to

------

the Custodian by the Trust's investment advisor or other agent. Such Officer or person shall continue to be an Authorized Person until such time as the Custodian receives Written Instructions from the Trust or the Trust's investment advisor or other agent that any such person is no longer an Authorized Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.02 <u>"Board of Trustees"</u> shall mean the trustees from time to time serving under the Trust's declaration of trust, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.03 <u>"Book-Entry System"</u> shall mean a federal book-entry system as provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry regulations of federal agencies as are substantially in the form of such Subpart O.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.04 <u>"Business Day"</u> shall mean any day recognized as a settlement day by The New York Stock Exchange, Inc. and any other day for which the Trust computes the net asset value of Shares of the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.05 <u>"Eligible Foreign Custodian"</u> has the meaning set forth in Rule 17f-5(a)(1), including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.06 <u>"Eligible Securities Depository"</u> shall mean a system for the central handling of securities as that term is defined in Rule 17f-4 and 17f-7 under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.07 <u>"FINRA"</u> shall mean the Financial Industry Regulatory Authority, Inc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.08 <u>"Foreign Securities"</u> means any investments of the Fund (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect such Fund's transactions in such investments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.09 <u>"Fund Custody Account"</u> shall mean any of the accounts in the name of the Trust, which is provided for in Section 3.02 below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 <u>"IRS"</u> shall mean the Internal Revenue Service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 <u>"Officer"</u> shall mean the Chairman, President, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 <u>"SEC"</u> shall mean the U.S. Securities and Exchange Commission.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 <u>"Securities"</u> shall include, without limitation, common and preferred stocks, bonds, call options, put options, debentures, notes, bank certificates of deposit, bankers' acceptances, mortgage-backed securities or other obligations, and any certificates, receipts,

------

warrants or other instruments or documents representing rights to receive, purchase or subscribe for the same, or evidencing or representing any other rights or interests therein, or any similar property or assets that the Custodian or its agents have the facilities to clear and service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 <u>"Securities Depository"</u> shall mean The Depository Trust Company and any other clearing agency registered with the SEC under Section 17A of the Securities Exchange Act of 1934, as amended (the "1934 Act"), which acts as a system for the central handling of Securities where all Securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 <u>"Shares"</u> shall mean, with respect to the Fund, the shares of beneficial interest issued by the Trust on account of the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16 <u>"Sub-Custodian"</u> shall mean and include (i) any branch of a "U.S. bank," as that term is defined in Rule 17f-5 under the 1940 Act, and (ii) any "Eligible Foreign Custodian", as that term is defined in Rule 17f-5 under the 1940 Act, having a contract with the Custodian which the Custodian has determined will provide reasonable care of assets of the Fund based on the standards specified in Section 3.03 below. Such contract shall be in writing and shall include provisions that provide: (i) for indemnification or insurance arrangements (or any combination of the foregoing) such that the Fund will be adequately protected against the risk of loss of assets held in accordance with such contract; (ii) that the Foreign Securities will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the Sub-Custodian or its creditors except a claim of payment for their safe custody or administration, in the case of cash deposits, liens or rights in favor of creditors of the Sub-Custodian arising under bankruptcy, insolvency, or similar laws; (iii) that beneficial ownership for the Foreign Securities will be freely transferable without the payment of money or value other than for safe custody or administration; (iv) that adequate records will be maintained identifying the assets as belonging to the Fund or as being held by a third party for the benefit of the Fund; (v) that the Fund's independent public accountants will be given access to those records or confirmation of the contents of those records; and (vi) that the Fund will receive periodic reports with respect to the safekeeping of the Fund's assets, including, but not limited to, notification of any transfer to or from the Fund's account or a third party account containing assets held for the benefit of the Fund. Such contract may contain, in lieu of any or all of the provisions specified in (i)-(vi) above, such other provisions that the Custodian determines will provide, in their entirety, the same or a greater level of care and protection for Fund assets as the specified provisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17 <u>"Written Instructions"</u> shall mean (i) written communications received by the Custodian and signed by an Authorized Person, (ii) communications by facsimile or Internet electronic e-mail or any other such system from one or more persons reasonably believed by the Custodian to be an Authorized Person, or (iii) communications between electronic devices.

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**ARTICLE II.** 

**APPOINTMENT OF CUSTODIAN** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.01 <u>Appointment</u>. The Trust hereby appoints the Custodian as custodian of all Securities and cash owned by or in the possession of the Fund at any time during the period of this Agreement, on the terms and conditions set forth in this Agreement, and the Custodian hereby accepts such appointment and agrees to perform the services and duties set forth in this Agreement. The Trust hereby delegates to the Custodian, subject to Rule 17f-5(b), the responsibilities with respect to the Fund's Foreign Securities, and the Custodian hereby accepts such delegation as foreign custody manager with respect to the Fund. The services and duties of the Custodian shall be confined to those matters expressly set forth herein, and no implied duties are assumed by or may be asserted against the Custodian hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.02 <u>Documents to be Furnished</u>. The following documents, including any amendments thereto, will be provided contemporaneously with the execution of the Agreement to the Custodian by the Trust:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) A copy of the Trust's declaration of trust, certified by the Secretary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) A copy of the Trust's bylaws, certified by the Secretary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) A copy of the resolution of the Board of Trustees of the Trust appointing the Custodian, certified by the
Secretary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) A copy of the current prospectus of the Fund (the "Prospectus");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) A certification of the Chairman or the President and the Secretary of the Trust setting forth the names and
signatures of the current Officers of the Trust and other Authorized Persons; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) An executed authorization required by the Shareholder Communications Act of 1985, attached hereto as <u>Exhibit C</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.03 <u>Notice of Appointment of Transfer Agent</u>. The Trust agrees to notify the Custodian in writing of the appointment, termination or change in appointment of any transfer agent of the Trust, except if the Trust appoints an affiliate of the Custodian to serve as transfer agent of the Trust, the Custodian hereby waives the Trust's obligation to provide such written notice.

**ARTICLE III.** 

**CUSTODY OF CASH AND SECURITIES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.01 <u>Segregation</u>. All Securities and non-cash property held by the Custodian for the account of the Fund (other than Securities maintained in a Securities Depository, Eligible Securities Depository or Book-Entry System) shall be physically segregated from other

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Securities and non-cash property in the possession of the Custodian (including the Securities and non-cash property of the other series of the Trust, if applicable) and shall be identified as subject to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.02 <u>Fund</u><u> </u><u>Custody</u><u> </u><u>Accounts</u>. As to each Fund, the Custodian shall open and maintain in its trust department a custody account in the name of the Trust coupled with the name of the Fund, subject only to draft or order of the Custodian, in which the Custodian shall enter and carry all Securities, cash and other assets of such Fund which are delivered to it.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.03 <u>Appointment</u><u> </u><u>of</u> <u>Agents</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In its discretion, the Custodian may appoint one or more Sub-Custodians to establish and maintain arrangements with (i) Eligible Securities Depositories or (ii) Eligible Foreign Custodians that are members of the Sub-Custodian's network to hold Securities and cash of
the Fund and to carry out such other provisions of this Agreement as it may determine; provided, however, that the appointment of any such agents and maintenance of any Securities and cash of the Fund shall be at the Custodian's expense and
shall not relieve the Custodian of any of its obligations or liabilities under this Agreement. The Custodian shall be liable for the actions of any Sub-Custodians (regardless of whether assets are maintained
in the custody of a Sub-Custodian, a member of its network or an Eligible Securities Depository) appointed by it as if such actions had been done by the Custodian.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If, after the initial appointment of Sub-Custodians by the Board of
Trustees in connection with this Agreement, the Custodian wishes to appoint other Sub-Custodians to hold property of the Fund, it will so notify the Trust and make the necessary determinations as to any such
new Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In performing its delegated responsibilities as foreign custody manager to place or maintain the Fund's
assets with a Sub-Custodian, the Custodian will determine that the Fund's assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the
Fund's assets will be held by that Sub-Custodian, after considering all factors relevant to safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule 17f-5(c)(2) under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) At the end of each calendar quarter after the date of this Agreement, the Custodian shall provide written
reports notifying the Board of Trustees of the withdrawal or placement of the Securities and cash of the Fund with a Sub-Custodian and of any material changes in the Fund's arrangements. Such reports
shall include an analysis of the custody risks associated with maintaining assets with any Eligible Securities Depositories. The Custodian shall promptly take such steps as may be required to withdraw assets of the Fund from any
Sub-

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Custodian arrangement that has ceased to meet the requirements of Rule 17f-5 or Rule 17f-7 under the 1940 Act, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) With respect to its responsibilities under this Section 3.03, the Custodian hereby warrants to the Trust
that it agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of property of the Fund. The Custodian further warrants that the Fund's assets will be subject to reasonable care if
maintained with a Sub-Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation: (i) the Sub-Custodian's practices, procedures, and internal controls for certificated securities (if applicable), its method of keeping custodial records, and its security and data protection practices;
(ii) whether the Sub-Custodian has the requisite financial strength to provide reasonable care for Fund assets; (iii) the Sub-Custodian's general
reputation and standing and, in the case of a Securities Depository, the Securities Depository's operating history and number of participants; and (iv) whether the Fund will have jurisdiction over and be able to enforce judgments against
the Sub-Custodian, such as by virtue of the existence of any offices of the Sub-Custodian in the United States or the Sub-Custodian's consent to service of process in the United States.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) The Custodian shall establish a system or ensure that its Sub-Custodian has established a system to monitor on a continuing basis (i) the appropriateness of maintaining the Fund's assets with a Sub-Custodian or Eligible Foreign Custodians who are members of a Sub-Custodian's network; (ii) the performance of the contract governing the Fund's arrangements with such Sub-Custodian or Eligible Foreign Custodian's
members of a Sub-Custodian's network; and (iii) the custody risks of maintaining assets with an Eligible Securities Depository. The Custodian must promptly notify the Fund or its investment adviser
of any material change in these risks.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The Custodian shall use commercially reasonable efforts to collect all income and other payments with respect
to Foreign Securities to which the Fund shall be entitled and shall credit such income, as collected, to the Trust. In the event that extraordinary measures are required to collect such income, the Trust and Custodian shall consult as to the
measurers and as to the compensation and expenses of the Custodian relating to such measures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.04 <u>Delivery</u><u> </u><u>of</u><u> </u><u>Assets</u><u> </u><u>to</u><u> </u><u>Custodian</u>. The Trust shall deliver, or cause to be delivered, to the Custodian all of the Fund's Securities, cash and other investment assets, including (i) all payments of income, payments of principal and capital distributions received by the Fund with respect to such Securities, cash or other assets owned by the Fund at any time during the period of this Agreement, and (ii) all cash received by the Fund for the issuance of Shares. The Custodian shall not be responsible for such Securities, cash or other assets until actually received by it.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.05 <u>Securities Depositories and Book-Entry Systems</u>. The Custodian may deposit and/or maintain Securities of the Fund in a Securities Depository or in a Book-Entry System, subject to the following provisions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Custodian, on an on-going basis, shall deposit in a Securities
Depository or Book-Entry System all Securities eligible for deposit therein and shall make use of such Securities Depository or Book-Entry System to the extent possible and practical in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of collateral consisting of Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Securities of the Fund kept in a Book-Entry System or Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-Entry System or Securities Depository which includes only assets held by the Custodian as a fiduciary, custodian or otherwise for customers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The records of the Custodian with respect to Securities of the Fund maintained in a Book-Entry System or
Securities Depository shall, by book-entry, identify such Securities as belonging to the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If Securities purchased by the Fund are to be held in a Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i) receipt of advice from the Book-Entry System or Securities Depository that such Securities have been transferred to the Depository Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the account of the Fund. If Securities sold by the Fund are held in a Book-Entry System or Securities Depository, the Custodian shall transfer such Securities upon (i) receipt of advice from the
Book-Entry System or Securities Depository that payment for such Securities has been transferred to the Depository Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the
Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Custodian shall provide the Trust with copies of any report (obtained by the Custodian from a Book-Entry
System or Securities Depository in which Securities of the Fund are kept) on the internal accounting controls and procedures for safeguarding Securities deposited in such Book-Entry System or Securities Depository.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Notwithstanding anything to the contrary in this Agreement, the Custodian shall be liable to the Trust for any
loss or damage to the Fund resulting from (i) the use of a Book-Entry System or Securities Depository by reason of any negligence or willful misconduct on the part of the Custodian or any Sub-Custodian, or (ii) failure of the Custodian or any Sub-Custodian to enforce effectively such rights as it may have against a Book-Entry System or Securities Depository. At its election, the Trust shall be subrogated
to the rights of the Custodian with respect to any claim against a Book-Entry System or Securities Depository or any other

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person from any loss or damage to the Fund arising from the use of such Book-Entry System or Securities Depository, if and to the extent that the Fund has not been made whole for any such loss or damage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) With respect to its responsibilities under this Section 3.05 and pursuant to Rule 17f-4 under the 1940 Act, the Custodian hereby warrants to the Trust that it agrees to (i) exercise due care in accordance with reasonable commercial standards in discharging its duty as a securities
intermediary to obtain and thereafter maintain such assets, (ii) provide, promptly upon request by the Trust, such reports as are available concerning the Custodian's internal accounting controls and financial strength, and
(iii) require any Sub-Custodian to exercise due care in accordance with reasonable commercial standards in discharging its duty as a securities intermediary to obtain and thereafter maintain assets
corresponding to the security entitlements of its entitlement holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.06 <u>Disbursement</u> <u>of</u><u> </u><u>Moneys</u><u> </u><u>from</u><u> </u><u>Fund</u><u> </u><u>Custody</u><u> </u><u>Account</u>. Upon receipt of Written Instructions, the Custodian shall disburse moneys from the Fund Custody Account but only in the following cases:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) For the purchase of Securities for the Fund but only in accordance with Section 4.01 of this Agreement and only
(i) in the case of Securities (other than options on Securities, futures contracts and options on futures contracts), against the delivery to the Custodian (or any Sub-Custodian) of such Securities
registered as provided in Section 3.09 below or in proper form for transfer, or if the purchase of such Securities is effected through a Book-Entry System or Securities Depository, in accordance with the conditions set forth in
Section 3.05 above; (ii) in the case of options on Securities, against delivery to the Custodian (or any Sub-Custodian) of such receipts as are required by the customs prevailing among dealers in
such options; (iii) in the case of futures contracts and options on futures contracts, against delivery to the Custodian (or any Sub-Custodian) of evidence of title thereto in favor of the Fund or any
nominee referred to in Section 3.09 below; and (iv) in the case of repurchase or reverse repurchase agreements entered into between the Trust and a bank that is a member of the Federal Reserve System or between the Trust and a primary dealer in
U.S. Government securities, against delivery of the purchased Securities either in certificate form or through an entry crediting the Custodian's account at a Book-Entry System or Securities Depository with such Securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In connection with the conversion, exchange or surrender, as set forth in Section 3.07(f) below, of
Securities owned by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) For the payment of any dividends or capital gain distributions declared by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In payment of the redemption price of Shares as provided in Section 5.01 below;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) For the payment of any expense or liability incurred by the Fund, including, but not limited to, the following
payments for the account of the Fund: interest; taxes; administration, investment advisory, accounting, auditing, transfer agent, custodian, trustee and legal fees; and other operating expenses of the Fund; in all cases, whether or not such expenses
are to be in whole or in part capitalized or treated as deferred expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) For transfer in accordance with the provisions of any agreement among the Trust, the Custodian and a
broker-dealer registered under the 1934 Act and a member of FINRA, relating to compliance with rules of the Options Clearing Corporation and of any registered national securities exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) For transfer in accordance with the provisions of any agreement among the Trust, the Custodian and a futures
commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any contract market (or any similar organization or organizations) regarding account deposits
in connection with transactions by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) For the funding of any uncertificated time deposit or other interest-bearing account with any banking
institution (including the Custodian), which deposit or account has a term of one year or less; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) For any other proper purpose, but only upon receipt, in addition to Written Instructions, declaring such
purpose to be a proper trust purpose, and naming the person or persons to whom such payment is to be made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.07 <u>Delivery of Securities from Fund Custody Account</u>. Upon receipt of Written Instructions, the Custodian shall release and deliver, or cause the Sub-Custodian to release and deliver, Securities from the Fund Custody Account but only in the following cases:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon the sale of Securities for the account of the Fund but only against receipt of payment therefor in cash,
by certified or cashiers check or bank credit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the case of a sale effected through a Book-Entry System or Securities Depository, in accordance with the
provisions of Section 3.05 above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) To an offeror's depository agent in connection with tender or other similar offers for Securities of the
Fund; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) To the issuer thereof or its agent (i) for transfer into the name of the Fund, the Custodian or any Sub-Custodian, or any nominee or nominees of any of the foregoing, or (ii) for exchange for a different number of certificates or other evidence representing the same aggregate face amount or number of units;

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provided that, in any such case, the new Securities are to be delivered to the Custodian;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) To the broker selling the Securities, for examination in accordance with the "street delivery"
custom;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or
readjustment of the issuer of such Securities, or pursuant to provisions for conversion contained in such Securities, or pursuant to any deposit agreement, including surrender or receipt of underlying Securities in connection with the issuance or
cancellation of depository receipts; provided that, in any such case, the new Securities and cash, if any, are to be delivered to the Custodian;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Upon receipt of payment therefor pursuant to any repurchase or reverse repurchase agreement entered into by the
Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) In the case of warrants, rights or similar Securities, upon the exercise thereof, provided that, in any such
case, the new Securities and cash, if any, are to be delivered to the Custodian;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) For delivery in connection with any loans of Securities of the Fund, but only against receipt of such
collateral as the Trust shall have specified to the Custodian in Written Instructions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the
Trust, but only against receipt by the Custodian of the amounts borrowed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) Pursuant to any authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of
the Trust;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) For delivery in accordance with the provisions of any agreement among the Trust, the Custodian and a
broker-dealer registered under the 1934 Act and a member of FINRA, relating to compliance with the rules of the Options Clearing Corporation and of any registered national securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) For delivery in accordance with the provisions of any agreement among the Trust, the Custodian and a futures
commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any contract market (or any similar organization or organizations) regarding account deposits
in connection with transactions by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) For any other proper corporate purpose, but only upon receipt , in addition to Written Instructions, specifying
the Securities to be delivered, declaring such

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purpose to be a proper trust purpose, and naming the person or persons to whom delivery of such Securities shall be made; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with
market custom; provided that in any such case the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the
Custodian's own negligence or willful misconduct.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.08 <u>Actions</u><u> </u><u>Not</u> <u>Requiring</u><u> </u><u>Written</u><u> </u><u>Instructions</u>. Unless otherwise instructed by the Trust, the Custodian shall with respect to all Securities held for the Fund:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to Section 9.04 below, collect on a timely basis all income and other payments to which the Fund
is entitled either by law or pursuant to custom in the securities business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Present for payment and, subject to Section 9.04 below, collect on a timely basis the amount payable upon
all Securities that may mature or be called, redeemed, or retired, or otherwise become payable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Surrender interim receipts or Securities in temporary form for Securities in definitive form;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Execute, as custodian, any necessary declarations or certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing authority now or hereafter in effect, and prepare and submit reports to the IRS and the Trust at such time, in such manner and containing such information as is prescribed by the IRS;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Hold for the Fund, either directly or, with respect to Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar Securities issued with respect to Securities of the Fund; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) In general, and except as otherwise directed in Written Instructions, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with Securities and other assets of the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Important information related to ADR</u> <u>'</u> <u>s and Preferential Tax Treatment:</u> With respect
to any ADRs the Fund may purchase and own and which the Custodian custodies, the Fund understands that the holding of American Depository Receipts (" <u>ADRs</u> ") may require the disclosure of beneficial ownership information (Name,
Address, TIN/SSN, Share amount) by the Custodian to vendors, sub-custodians, or local tax authorities in foreign jurisdictions to avoid tax penalties and obtain the most preferential tax treatment for the
Fund. The Trust and the Fund acknowledge and consent to any and all disclosures or releases of beneficial

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information, described above, by the Custodian to any third parties relating to ADRs and release, hold harmless, and indemnify the Custodian from any liability for doing so.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.09 <u>Registration and Transfer of Securities</u>. All Securities held for the Fund that are issued or issuable only in bearer form shall be held by the Custodian in that form, provided that any such Securities shall be held in a Book-Entry System if eligible therefor. All other Securities held for the Fund may be registered in the name of the Fund, the Custodian, a Sub-Custodian or any nominee thereof, or in the name of a Book-Entry System, Securities Depository or any nominee of either thereof. The records of the Custodian with respect to the Trust's Foreign Securities that are maintained with a Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers shall identify those securities as belonging to the Fund. The Trust shall furnish to the Custodian appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of any of the nominees referred to above or in the name of a Book-Entry System or Securities Depository, any Securities registered in the name of the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 <u>Records</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Custodian shall maintain complete and accurate records with respect to Securities, cash or other property
held for the Fund, including (i) journals or other records of original entry containing an itemized daily record in detail of all receipts and deliveries of Securities and all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession, (C) monies and Securities borrowed and monies and Securities loaned (together with a record of the collateral therefor and substitutions of such
collateral), (D) dividends and interest received, and (E) dividends receivable and interest receivable; (iii) canceled checks and bank records related thereto; and (iv) all records relating to its activities and obligations under this
Agreement. The Custodian shall keep such other books and records of the Fund as the Trust shall reasonably request, or as may be required by the 1940 Act, including, but not limited to, Section 31 of the 1940 Act and Rule 31a-2 promulgated thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All such books and records maintained by the Custodian shall (i) be maintained in a form acceptable to the
Trust and in compliance with the rules and regulations of the SEC, (ii) be the property of the Trust and at all times during the regular business hours of the Custodian be made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the SEC, and (iii) if required to be maintained by Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rules 31a-1 and 31a-2 under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11 <u>Fund Reports by Custodian</u>. The Custodian shall furnish the Trust with a daily activity statement and a summary of all transfers to or from each Fund Custody Account on the day following such transfers. At least monthly, the Custodian shall furnish the Trust with

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a detailed statement of the Securities and moneys held by the Custodian and the Sub-Custodians for the Fund under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.12 <u>Other Reports by Custodian</u>. As the Trust may reasonably request from time to time, the Custodian shall provide the Trust with reports on the internal accounting controls and procedures for safeguarding Securities which are employed by the Custodian or any Sub-Custodian.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.13 <u>Proxies and Other Materials</u>. The Custodian shall cause all proxies relating to Securities which are not registered in the name of the Fund to be promptly executed by the registered holder of such Securities, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Trust such proxies, all proxy soliciting materials and all notices relating to such Securities. With respect to the foreign Securities, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Trust acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Trust to exercise shareholder rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.14 <u>Information on Corporate Actions</u>. The Custodian shall promptly deliver to the Trust all information received by the Custodian and pertaining to Securities being held by the Fund with respect to optional tender or exchange offers, calls for redemption or purchase, or expiration of rights. If the Trust desires to take action with respect to any tender offer, exchange offer or other similar transaction, the Trust shall notify the Custodian at least three Business Days prior to the date on which the Custodian is to take such action. The Trust will provide or cause to be provided to the Custodian all relevant information for any Security which has unique put/option provisions at least three Business Days prior to the beginning date of the tender period.

**ARTICLE IV.** 

**PURCHASE AND SALE OF INVESTMENTS OF THE FUND** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.01 <u>Purchase of Securities</u>. Promptly upon each purchase of Securities for the Fund, Written Instructions shall be delivered to the Custodian, specifying (i) the name of the issuer or writer of such Securities, and the title or other description thereof, (ii) the number of shares, principal amount (and accrued interest, if any) or other units purchased, (iii) the date of purchase and settlement, (iv) the purchase price per unit, (v) the total amount payable upon such purchase, and (vi) the name of the person to whom such amount is payable. The Custodian shall upon receipt of such Securities purchased by the Fund pay out of the moneys held for the account of the Fund the total amount specified in such Written Instructions to the person named therein. The Custodian shall not be under any obligation to pay out moneys to cover the cost of a purchase of Securities for the Fund, if in the Fund Custody Account there is insufficient cash available to the Fund for which such purchase was made.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.02 <u>Liability</u><u> </u><u>for</u><u> </u><u>Payment</u> <u>in</u><u> </u><u>Advance</u><u> </u><u>of</u><u> </u><u>Receipt</u><u> </u><u>of</u><u> </u><u>Securities</u><u> </u><u>Purchased</u>. In any and every case where payment for the purchase of Securities for the Fund is made by the Custodian in advance of receipt of the Securities purchased and in the absence of specified Written Instructions to so pay in advance, the Custodian shall be liable to the Fund for such payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.03 <u>Sale of Securities</u>. Promptly upon each sale of Securities by the Fund, Written Instructions shall be delivered to the Custodian, specifying (i) the name of the issuer or writer of such Securities, and the title or other description thereof, (ii) the number of shares, principal amount (and accrued interest, if any), or other units sold, (iii) the date of sale and settlement, (iv) the sale price per unit, (v) the total amount payable upon such sale, and (vi) the person to whom such Securities are to be delivered. Upon receipt of the total amount payable to the Fund as specified in such Written Instructions, the Custodian shall deliver such Securities to the person specified in such Written Instructions. Subject to the foregoing, the Custodian may accept payment in such form as shall be satisfactory to it, and may deliver Securities and arrange for payment in accordance with the customs prevailing among dealers in Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.04 <u>Delivery of Securities Sold</u>. Notwithstanding Section 4.03 above or any other provision of this Agreement, the Custodian, when instructed to deliver Securities against payment, shall be entitled, if in accordance with generally accepted market practice, to deliver such Securities prior to actual receipt of final payment therefor. In any such case, the Fund shall bear the risk that final payment for such Securities may not be made or that such Securities may be returned or otherwise held or disposed of by or through the person to whom they were delivered, and the Custodian shall have no liability for any for the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.05 <u>Payment for Securities Sold</u>. In its sole discretion and from time to time, the Custodian may credit the Fund Custody Account, prior to actual receipt of final payment thereof, with (i) proceeds from the sale of Securities which it has been instructed to deliver against payment, (ii) proceeds from the redemption of Securities or other assets of the Fund, and (iii) income from cash, Securities or other assets of the Fund. Any such credit shall be conditional upon actual receipt by Custodian of final payment and may be reversed if final payment is not actually received in full. The Custodian may, in its sole discretion and from time to time, permit the Fund to use funds so credited to the Fund Custody Account in anticipation of actual receipt of final payment. Any such funds shall be repayable immediately upon demand made by the Custodian at any time prior to the actual receipt of all final payments in anticipation of which funds were credited to the Fund Custody Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.06 <u>Advances</u><u> </u><u>by</u><u> </u><u>Custodian</u><u> </u><u>for</u><u> </u><u>Settlement</u>. The Custodian may, in its sole discretion and from time to time, advance funds to the Trust to facilitate the settlement of the Fund's transactions in the Fund Custody Account. Any such advance shall be repayable immediately upon demand made by Custodian.

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**ARTICLE V.** 

**REDEMPTION OF FUND SHARES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.01 <u>Transfer of Funds</u>. From such funds as may be available for the purpose in the relevant Fund Custody Account, and upon receipt of Written Instructions specifying that the funds are required to redeem Shares of the Fund, the Custodian shall wire each amount specified in such Written Instructions to or through such bank or broker-dealer as the Trust may designate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.02 <u>No</u><u> </u><u>Duty</u><u> </u><u>Regarding</u><u> </u><u>Paying</u><u> </u><u>Banks</u>. Once the Custodian has wired amounts to a bank or broker-dealer pursuant to Section 5.01 above, the Custodian shall not be under any obligation to effect any further payment or distribution by such bank or broker-dealer.

**ARTICLE VI.** 

**SEGREGATED ACCOUNTS** 

Upon receipt of Written Instructions, the Custodian shall establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or Securities, including Securities maintained in a Depository Account:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in accordance with the provisions of any agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of FINRA (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of the Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) for purposes of segregating cash or Securities in connection with securities options purchased or written by
the Fund or in connection with financial futures contracts (or options thereon) purchased or sold by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) which constitute collateral for loans of Securities made by the Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) for purposes of compliance by the Fund with requirements under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in connection with reverse repurchase agreements and when-issued, delayed delivery and firm commitment transactions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) for other proper trust purposes, but only upon receipt of Written Instructions, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be proper trust purposes.

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Each segregated account established under this Article VI shall be established and maintained for the Fund only. All Written Instructions relating to a segregated account shall specify the Fund.

**ARTICLE VII.** 

**COMPENSATION OF CUSTODIAN** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.01 <u>Compensation</u>. The Custodian shall be compensated for providing the services set forth in this Agreement in accordance with the fee schedule set forth on <u>Exhibit B</u> hereto (as amended from time to time). The Custodian shall also be compensated for such miscellaneous expenses (e.g., telecommunication charges, postage and delivery charges, and reproduction charges) as are reasonably incurred by the Custodian in performing its duties hereunder. The Trust shall pay all such fees and reimbursable expenses within 30 calendar days following receipt of the billing notice, except for any fee or expense subject to a good faith dispute. The Trust shall notify the Custodian in writing within 30 calendar days following receipt of each invoice if the Trust is disputing any amounts in good faith. The Trust shall pay such disputed amounts within 10 calendar days of the day on which the parties agree to the amount to be paid. With the exception of any fee or expense the Trust is disputing in good faith as set forth above, unpaid invoices shall accrue a finance charge of 1<sup>1</sup>⁄<sub>2</sub>% per month after the due date. Notwithstanding anything to the contrary, amounts owed by the Trust to the Custodian shall only be paid out of the assets and property of the particular Fund involved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.02 <u>Overdrafts</u>. The Trust is responsible for maintaining an appropriate level of short term cash investments to accommodate cash outflows. The Trust may obtain a formal line of credit for potential overdrafts of its custody account. In the event of an overdraft or in the event the line of credit is insufficient to cover an overdraft, the overdraft amount or the overdraft amount that exceeds the line of credit will be charged in accordance with the fee schedule set forth on <u>Exhibit B</u> hereto (as amended from time to time)

**ARTICLE VIII.** 

**REPRESENTATIONS AND WARRANTIES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.01 <u>Representations</u><u> </u><u>and</u><u> </u><u>Warranties</u><u> </u><u>of</u><u> </u><u>the</u><u> </u><u>Trust</u>. The Trust hereby represents and warrants to the Custodian, which representations and warranties shall be deemed to be continuing throughout the term of this Agreement, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to
carry on its business as now conducted, to enter into this Agreement and to perform its obligations hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) This Agreement has been duly authorized, executed and delivered by the Trust in accordance with all requisite
action and constitutes a valid and legally binding obligation of the Trust, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) It is conducting its business in compliance in all material respects with all applicable laws and regulations,
both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, bylaws or any contract
binding it or affecting its property which would prohibit its execution or performance of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.02 <u>Representations and Warranties of the Custodian</u>. The Custodian hereby represents and warrants to the Trust, which representations and warranties shall be deemed to be continuing throughout the term of this Agreement, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to
carry on its business as now conducted, to enter into this Agreement and to perform its obligations hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) It is a U.S. Bank as defined in section (a)(7) of Rule 17f-5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) This Agreement has been duly authorized, executed and delivered by the Custodian in accordance with all
requisite action and constitutes a valid and legally binding obligation of the Custodian, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) It is conducting its business in compliance in all material respects with all applicable laws and regulations,
both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, bylaws or any contract
binding it or affecting its property which would prohibit its execution or performance of this Agreement.

**ARTICLE IX.** 

**CONCERNING THE CUSTODIAN** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.01 <u>Standard of Care</u>. The Custodian shall exercise reasonable care in the performance of its duties under this Agreement. The Custodian shall not be liable for any error of judgment, mistake of law, shareholder fraud, or for any loss suffered by the Trust in connection with its duties under this Agreement, except a loss arising out of or relating to the Custodian's (or a Sub-Custodian's) refusal or failure to comply with the terms of this Agreement (or any sub-custody agreement) or from its (or a Sub-Custodian's) bad faith, negligence or willful misconduct in the performance of its duties under this Agreement (or any sub-custody agreement). The Custodian shall be entitled to rely on and may act upon advice of counsel on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall promptly notify the Trust of any action taken or omitted by the Custodian pursuant to advice of counsel.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.02 <u>Actual Collection Required</u>. The Custodian shall not be liable for, or considered to be the custodian of, any cash belonging to the Fund or any money represented by a check, draft or other instrument for the payment of money, until the Custodian or its agents actually receive such cash or collect on such instrument.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.03 <u>No Responsibility for Title, etc.</u> So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received or delivered by it pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.04 <u>Limitation on Duty to Collect</u>. Custodian shall not be required to enforce collection, by legal means or otherwise, of any money or property due and payable with respect to Securities held for the Fund if such Securities are in default or payment is not made after due demand or presentation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.05 <u>Reliance Upon Documents and Instructions</u>. The Custodian shall be entitled to rely upon any certificate, notice or other instrument in writing received by it and reasonably believed by it to be genuine. The Custodian shall be entitled to rely upon any Written Instructions actually received by it pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.06 <u>Cooperation</u>. The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Trust to keep the books of account of the Fund and/or compute the value of the assets of the Fund. The Custodian shall take all such reasonable actions as the Trust may from time to time request to enable the Trust to obtain, from year to year, favorable opinions from the Trust's independent accountants with respect to the Custodian's activities hereunder in connection with (i) the preparation of the Trust's reports on Forms N-CEN, N-PORT, N-CSR and any other reports required by the SEC or any future registration statement on Form N-1A, and any other reports required by the SEC or any future registration statement on Form N-1A, and (ii) the fulfillment by the Trust of any other requirements of the SEC.

**ARTICLE X.** 

**INDEMNIFICATION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.01 <u>Indemnification by Trust</u>. The Trust shall indemnify and hold harmless the Custodian, any Sub-Custodian and any nominee thereof (each, an "Indemnified Party" and collectively, the "Indemnified Parties") from and against any and all claims, demands, losses, reasonable expenses and liabilities of any and every nature (including reasonable attorneys' fees) that an Indemnified Party may sustain or incur or that may be asserted against an Indemnified Party by any person arising directly or indirectly (i) from the fact that Securities are registered in the name of any such nominee, (ii) from any action taken or omitted to be taken by the Custodian or such Sub-Custodian (a) at the request or direction of or in reliance on the advice of the Trust, or (b) upon Written Instructions, or (iii) from the performance of its obligations under this Agreement or any sub-custody agreement, provided that neither the Custodian nor any such Sub-Custodian shall be indemnified and held harmless from and against any such claim, demand, loss, expense or liability arising out of or relating to its

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refusal or failure to comply with the terms of this Agreement (or any sub-custody agreement), or from its bad faith, negligence or willful misconduct in the performance of its duties under this Agreement (or any sub-custody agreement). This indemnity shall be a continuing obligation of the Trust, its successors and assigns, notwithstanding the termination of this Agreement. As used in this paragraph, the terms "Custodian" and "Sub-Custodian" shall include their respective directors, officers and employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.02 <u>Indemnification by Custodian</u>. The Custodian shall indemnify and hold harmless the Trust from and against any and all claims, demands, losses, expenses, and liabilities of any and every nature (including reasonable attorneys' fees) that the Trust may sustain or incur or that may be asserted against the Trust by any person arising directly or indirectly out of any action taken or omitted to be taken by an Indemnified Party as a result of the Indemnified Party's refusal or failure to comply with the terms of this Agreement (or any sub-custody agreement), or from its bad faith, negligence or willful misconduct in the performance of its duties under this Agreement (or any sub-custody agreement). This indemnity shall be a continuing obligation of the Custodian, its successors and assigns, notwithstanding the termination of this Agreement. As used in this paragraph, the term "Trust" shall include the Trust's trustees, officers and employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.03 <u>Security</u>. If the Custodian advances cash or Securities to the Fund for any purpose, either at the Trust's request or as otherwise contemplated in this Agreement, or in the event that the Custodian or its nominee incurs, in connection with its performance under this Agreement, any claim, demand, loss, expense or liability (including reasonable attorneys' fees) (except such as may arise from its or its nominee's bad faith, negligence or willful misconduct), then, in any such event, any property at any time held for the account of the Fund shall be security therefor, and should the Fund fail promptly to repay or indemnify the Custodian, the Custodian shall be entitled to utilize available cash of such Fund and to dispose of other assets of such Fund to the extent necessary to obtain reimbursement or indemnification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.04 <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Neither party to this Agreement shall be liable to the other party for consequential, special or punitive
damages under any provision of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The indemnity provisions of this Article shall indefinitely survive the termination and/or assignment of this
Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In order that the indemnification provisions contained in this Article X shall apply, it is understood that if
in any case the indemnitor may be asked to indemnify or hold the indemnitee harmless, the indemnitor shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that the indemnitee
will use all reasonable care to notify the indemnitor promptly concerning any situation that presents or appears likely to present the probability of a claim for indemnification. The indemnitor shall have the option to defend the indemnitee against
any claim that may be the subject of

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this indemnification. In the event that the indemnitor so elects, it will so notify the indemnitee and thereupon the indemnitor shall take over complete defense of the claim, and the indemnitee shall in such situation initiate no further legal or other expenses for which it shall seek indemnification under this Article X. The indemnitee shall in no case confess any claim or make any compromise in any case in which the indemnitor will be asked to indemnify the indemnitee except with the indemnitor's prior written consent.

**ARTICLE XI.** 

**FORCE MAJEURE** 

Neither the Custodian nor the Trust shall be liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; acts of terrorism; sabotage; strikes; epidemics; riots; power failures; computer failure and any such circumstances beyond its reasonable control as may cause interruption, loss or malfunction of utility, transportation, computer (hardware or software) or telephone communication service; accidents; labor disputes; acts of civil or military authority; governmental actions; or inability to obtain labor, material, equipment or transportation; provided, however, that in the event of a failure or delay, the Custodian (i) shall not discriminate against the Fund in favor of any other customer of the Custodian in making computer time and personnel available to input or process the transactions contemplated by this Agreement, and (ii) shall use its best efforts to ameliorate the effects of any such failure or delay.

**ARTICLE XII.** 

**PROPRIETARY AND CONFIDENTIAL INFORMATION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.01 The Custodian agrees on behalf of itself and its directors, officers, and employees to treat confidentially and as proprietary information of the Trust, all records and other information relative to the Trust and prior, present, or potential shareholders of the Trust (and clients of said shareholders), and not to use such records and information for any purpose other than the performance of its responsibilities and duties hereunder, except (i) after prior notification to and approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where the Custodian may be exposed to civil or criminal contempt proceedings for failure to comply, (ii) when requested to divulge such information by duly constituted governmental or regulatory authorities with jurisdiction over the Custodian, although the Custodian will promptly report such disclosure to the Trust if disclosure is permitted by applicable law and regulation, or (iii) when so requested by the Trust. Records and other information which have become known to the public through no wrongful act of the Custodian or any of its employees, agents or representatives, and information that was already in the possession of the Custodian prior to receipt thereof from the Trust or its agent, shall not be subject to this paragraph.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.02 Further, the Custodian will adhere to the privacy policies adopted by the Trust pursuant to Title V of the Gramm-Leach-Bliley Act, as may be modified from time to time. In this regard, the Custodian shall have in place and maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, records and information relating to the Trust and its shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.03 The Trust agrees on behalf of itself and its directors, officers, and employees to treat confidentially and as proprietary information of the Custodian, all non-public information relative to the Custodian (including, without limitation, information regarding the Custodian's pricing, products, services, customers, suppliers, financial statements, processes, know-how, trade secrets, market opportunities, past, present or future research, development or business plans, affairs, operations, systems, computer software in source code and object code form, documentation, techniques, procedures, designs, drawings, specifications, schematics, processes and/or intellectual property), and not to use such information for any purpose other than in connection with the services provided under this Agreement, except (i) after prior notification to and approval in writing by the Custodian, which approval shall not be unreasonably withheld and may not be withheld where the Trust may be exposed to civil or criminal contempt proceedings for failure to comply, (ii) when requested to divulge such information by duly constituted authorities, or (iii) when so requested by the Custodian. Information which has become known to the public through no wrongful act of the Trust or any of its employees, agents or representatives, and information that was already in the possession of the Trust prior to receipt thereof from the Custodian, shall not be subject to this paragraph.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.04 Notwithstanding anything herein to the contrary, (i) the Trust shall be permitted to disclose the identity of the Custodian as a service provider, redacted copies of this Agreement, and such other information as may be required in the Trust's registration or offering documents, or as may otherwise be required by applicable law, rule, or regulation, and (ii) the Custodian shall be permitted to include the name of the Trust in lists of representative clients in due diligence questionnaires, RFP responses, presentations, and other marketing and promotional purposes.

**ARTICLE XIII.** 

**EFFECTIVE PERIOD; TERMINATION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.01 <u>Effective</u><u> </u><u>Period</u>. This Agreement shall become effective as of the Effective Date and will continue in effect for a period of three (3) years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.02 <u>Termination</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Following the initial term, this Agreement shall automatically renew for successive one (1) year terms
unless either party provides written notice at least 90 days prior to the end of the then current term that it will not be renewing the Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to Section 13.03, this Agreement may be terminated by either party (in whole or with respect to
one or more Funds) upon giving 90 days' prior written notice to the other party or such shorter notice period as is mutually agreed upon by the parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Custodian may terminate this Agreement immediately (in whole or with respect to one or more Funds) if the
continued service of such Funds or the Trust would cause the Custodian or any of its affiliates to be in violation of any applicable law, rule, regulation, or order of any governmental, regulatory or judicial authority of competent jurisdiction,
provided that in such event the Custodian shall, to the extent it is legally permitted and able to do so, provide reasonable assistance to transition such Funds or the Trust to a successor service provider.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) This Agreement may be terminated by any party upon the breach of the other party of any material term of this
Agreement if such breach is not cured within 15 days of notice of such breach to the breaching party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Trust may, at any time, immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by regulatory authorities or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.03 <u>Early Termination</u>. In the absence of any material breach of this Agreement, should the Trust elect to terminate this Agreement (in whole or with respect to one or more Funds) prior to the end of the then-current term, the Trust agrees to pay the following fees:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All monthly fees through the life of the Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) All miscellaneous fees associated with converting services to a successor service provider;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) All fees associated with any record retention and/or tax reporting obligations that may not be eliminated due to the conversion to a successor service provider;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) All miscellaneous costs associated with a) through c) above

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.04 <u>Appointment of Successor Custodian</u>. If a successor custodian shall have been appointed by the Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance by the successor custodian, on such specified date of termination (i) deliver directly to the successor custodian all Securities (other than Securities held in a Book-Entry System or Securities Depository) and cash then owned by the Fund and held by the Custodian as custodian, and (ii) transfer any Securities held in a Book-Entry System or Securities Depository to an account of or for the benefit of the Fund at the successor custodian, provided that the Trust shall have paid to the Custodian all fees, expenses and other amounts to the payment or reimbursement of which it shall then be entitled. In addition, the Custodian shall, at the expense of the Trust, transfer to such successor all relevant books, records, correspondence, and other data established or maintained by the Custodian under this Agreement in a form reasonably acceptable to the Trust (if such form

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differs from the form in which the Custodian has maintained the same, the Trust shall pay any expenses associated with transferring the data to such form), and will cooperate in the transfer of such duties and responsibilities, including provision for assistance from the Custodian's personnel in the establishment of books, records, and other data by such successor. Upon such delivery and transfer, the Custodian shall be relieved of all obligations under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.05 <u>Failure to Appoint Successor Custodian</u>. If a successor custodian is not designated by the Trust on or before the date of termination of this Agreement, then the Custodian shall have the right to deliver to a bank or trust company of its own selection, which bank or trust company (i) is a "bank" as defined in the 1940 Act, and (ii) has aggregate capital, surplus and undivided profits as shown on its most recent published report of not less than $25 million, all Securities, cash and other property held by the Custodian under this Agreement and to transfer to an account of or for the Fund at such bank or trust company all Securities of the Fund held in a Book-Entry System or Securities Depository. Upon such delivery and transfer, such bank or trust company shall be the successor custodian under this Agreement and the Custodian shall be relieved of all obligations under this Agreement. In addition, under these circumstances, all books, records and other data of the Trust shall be returned to the Trust.

**ARTICLE XIV.** 

**CLASS ACTIONS** 

The Custodian shall use its best efforts to identify and file claims for the Fund(s) involving any class action litigation that impacts any security the Fund(s) may have held during the class period. The Trust agrees that the Custodian may file such claims on its behalf and understands that it may be waiving and/or releasing certain rights to make claims or otherwise pursue class action defendants who settle their claims. Further, the Trust acknowledges that there is no guarantee these claims will result in any payment or partial payment of potential class action proceeds and that the timing of such payment, if any, is uncertain.

However, the Trust may instruct the Custodian to distribute class action notices and other relevant documentation to the Fund(s) or its designee and, if it so elects, will relieve the Custodian from any and all liability and responsibility for filing class action claims on behalf of the Fund(s).

In the event the Fund(s) are closed, the Custodian shall only file the class action claims upon written instructions by the authorized representative of the closed Fund(s). Any expenses associated with such filing will be assessed against the proceeds received of any class action settlement.

**ARTICLE XV.** 

**MISCELLANEOUS** 

15.01 <u>Compliance</u><u> </u><u>with</u><u> </u><u>Laws</u>. The Trust has and retains primary responsibility for all compliance matters relating to the Fund, including but not limited to compliance with the 1940

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Act, the Internal Revenue Code of 1986, the Sarbanes-Oxley Act of 2002, the USA Patriot Act of 2001 and the policies and limitations of the Fund relating to its portfolio investments as set forth in its prospectus and statement of additional information on Form N-1A. The Custodian's services hereunder shall not relieve the Trust of its responsibilities for assuring such compliance or the Board of Trustee's oversight responsibility with respect thereto. The Trust shall immediately notify the Custodian if there is a material change to the investment strategy of any Fund that deviates from the investment strategy set out in the current prospectus, or if it (or any Fund) becomes subject to any new law, rule, regulation, or order of a governmental or judicial authority of competent jurisdiction, that materially impacts the operations of the Trust or any Fund or the services provided under this Agreement. Further ,the Trust agrees that it complies with any and all applicable local, state, federal, and international data protection laws, and confirms necessary and appropriate consents, disclosures and notices are in place to enable collection and processing of personal data by the Custodian. The Custodian's functions hereunder shall not relieve the Trust of their primary day-to-day responsibility for assuring such compliance.

15.02 <u>Amendment</u>. This Agreement may not be amended or modified in any manner except by written agreement executed by the Custodian and the Trust, and authorized or approved by the Board of Trustees.

15.03 <u>Assignment</u>. This Agreement shall extend to and be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Trust without the written consent of the Custodian, or by the Custodian without the written consent of the Trust accompanied by the authorization or approval of the Board of Trustees.

15.04 <u>Governing Law</u>. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to conflicts of law principles. To the extent that the applicable laws of the State of Minnesota, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control, and nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or order of the SEC thereunder.

15.05 <u>No</u><u> </u><u>Agency</u><u> </u><u>Relationship</u>. Nothing herein contained shall be deemed to authorize or empower either party to act as agent for the other party to this Agreement, or to conduct business in the name, or for the account, of the other party to this Agreement.

15.06 <u>Services Not Exclusive</u>. Nothing in this Agreement shall limit or restrict the Custodian from providing services to other parties that are similar or identical to some or all of the services provided hereunder.

15.07 <u>Invalidity.</u> Any provision of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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In such case, the parties shall in good faith modify or substitute such provision consistent with the original intent of the parties.

15.08 <u>Notices</u>. Any notice required or permitted to be given by either party to the other shall be in writing and shall be deemed to have been given on the date delivered personally or by courier service, or three days after sent by registered or certified mail, postage prepaid, return receipt requested, or on the date sent and confirmed received by facsimile transmission to the other party's address set forth below:

Notice to the Custodian shall be sent to:

U.S. Bank National Association

Lunken Operations Center

CN-OH-L2GL

5065 Wooster Rd

Cincinnati, Ohio 45226

Attn: Global Fund Custody Support Services

Fax: 844.206.1025

Email: Trust.-.Fund.Custody.Conversion.Team@usbank.com

Notice to the Trust shall be sent to:

Direxion Funds

c/o Rafferty Asset Management, LLC

535 Madison Avenue, 37<sup>th</sup> Floor

New York, NY 10022

15.09 <u>Multiple Originals</u>. This Agreement may be executed on two or more counterparts, each of which when so executed shall be deemed an original, but such counterparts shall together constitute but one and the same instrument.

15.10 <u>No Waiver</u>. No failure by either party hereto to exercise, and no delay by such party in exercising, any right hereunder shall operate as a waiver thereof. The exercise by either party hereto of any right hereunder shall not preclude the exercise of any other right, and the remedies provided herein are cumulative and not exclusive of any remedies provided at law or in equity.

15.11 <u>References to Custodian</u>. The Trust shall not circulate any written material that contains any reference to the Custodian without the prior written approval of the Custodian, excepting written material contained in the Prospectus or statement of additional information for the Fund and such other written material as merely identifies the Custodian as custodian for the Fund. The Trust shall submit written material requiring approval to the Custodian in draft form, allowing sufficient time for review by the Custodian and its counsel prior to any deadline for publication.

**SIGNATURES ON NEXT PAGE** 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer on one or more counterparts as of the Effective Date.

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| | |
|:---|:---|
| **DIREXION FUNDS** | **U.S. BANK NATIONAL ASSOCIATION** |
| By: <u>/s/ Patrick Rudnick</u> | By: <u>/s/ Gregory Farley</u> |
| Name: Patrick Rudnick | Name: Greg Farley |
| Title: Principal Executive Officer | Title: Senior Vice President |
| Date: 11/24/2025 | Date: 11/26/2025 |

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**<u>EXHIBIT A</u>**

**Custody Agreement** 

Separate Series of Direxion Funds

<u>Name of Series</u> 

Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund

Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund

Direxion Monthly High Yield Bull 1.2X Fund

Direxion Monthly NASDAQ-100 Bull 1.25X Fund

Direxion Monthly NASDAQ-100 Bull 1.75X Fund

Direxion Monthly S&P 500 Bull 1.75X Fund

Direxion Monthly Small Cap Bull 1.75X Fund

Hilton Tactical Income Fund

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**<u>EXHIBIT B</u>**

**Custody Agreement Fee Schedule** 

Annual fee for Fund Accounting, Custody, and TA based upon average net assets per Fund, subject to an annual complex minimum of $30,000 per fund.

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| | |
|:---|:---|
| First $250 million | 12bps |
| Next $1 billion | 10 bps |
| Next $3 billion | 8bps |
| Next $3 billion | 7bps |
| Balance | 5bps |

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All transaction charges will be waived. Other miscellaneous fees will be waived unless otherwise listed below.

Third Party Securities Lending Fees/Transactions (loan, Return, and Reallocation) per fund:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $9.00 per transaction up to 5,000 transactions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $8.00 per transaction for 5,001 to 10,000 transactions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $7.00 per transaction for 10,001 or more transactions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Minimum monthly transaction fee of $400.00 per fund

Overdrafts will be charged to the account at Prime Interest Rate plus 2, unless a line of credit is in place.

Extraordinary services or additional services/selections made after November 1, 2025, may be provided with agreed-upon costs. Global Custody fees, if any, are extra.

CPI will not apply,

Fees are calculated pro rata and billed monthly, Custody fees will be billed by the Mutual Funds Billing Department.

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Additional Global Sub-Custodial Services Annual Fee Schedule

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Country**<br>| **Safekeeping<br>(BPS)**<br>| **Transaction<br>fee**<br>| **Country**<br>| **Instrument**<br>| **Safekeeping<br>(BPS)**<br>| **Transaction<br>fee**<br>| **Country**<br>| **Instrument**<br>| **Safekeeping<br>(BPS)**<br>| **Transaction<br>fee**<br>|
| &nbsp;&nbsp;&nbsp;&nbsp; Argentina<br> All | 13 | $35 | Hong Kong | All | 2 | $20 | Philippines | All | 5 | $40 |
| &nbsp;&nbsp;&nbsp;&nbsp; Australia<br> All | 1 | $15 | Hungary | All | 22 | $60 | Poland | All | 13 | $25 |
| &nbsp;&nbsp;&nbsp;&nbsp; Austria<br> All | 2 | $20 | Iceland | All | 13 | $45 | Portugal | All | 5.5 | $40 |
| &nbsp;&nbsp;&nbsp;&nbsp; Bahrain<br> All | 44.00 | $115 | India | All | 9 | $85 | Qatar | All | 40 | $115 |
| &nbsp;&nbsp;&nbsp;&nbsp; Bangladesh<br> All | 35 | $120 | Indonesia | All | 6 | $70 | Romania | All | 31 | $80 |
| &nbsp;&nbsp;&nbsp;&nbsp; Belgium<br> All | 1.5 | $25 | Ireland | All | 2 | $15 | Russia | Equities | 33 | $165 |
| &nbsp;&nbsp;&nbsp;&nbsp; Benin<br> All | 44 | $125 | Israel | All | 11 | $30 | Senegal | All | 44 | $125 |
| &nbsp;&nbsp;&nbsp;&nbsp; Bermuda<br> All | 13 | $50 | Italy | All | 2 | $25 | Serbia | All | 55 | $150 |
| &nbsp;&nbsp;&nbsp;&nbsp; Botswana<br> All | 22 | $40 | Ivory Coast | All | 44 | $125 | Singapore | All | 2 | $20 |
| &nbsp;&nbsp;&nbsp;&nbsp; Brazil<br> All | 8 | $20 | Japan | All | 1 | $10 | Slovak Republic | All | 22 | $90 |
| &nbsp;&nbsp;&nbsp;&nbsp; Bulgaria<br> All | 35 | $65 | Jordan | All | 35 | $100 | Slovenia | All | 22 | $90 |
| &nbsp;&nbsp;&nbsp;&nbsp; Burkina Faso<br> All | 44 | $125 | Kazakhstan | All | 53 | $120 | South Africa | All | 2 | $10 |
| &nbsp;&nbsp;&nbsp;&nbsp; Canada<br> All | 1 | $5 | Kenya | All | 26 | $40 | South Korea | All | 5.5 | $10 |
| &nbsp;&nbsp;&nbsp;&nbsp; Cayman<br> Islands\*<br> All | 1 | $10 | Kuwait | All | 35 | $120 | Spain | All | 1 | $15 |
| &nbsp;&nbsp;&nbsp;&nbsp; Channel<br> Islands\*<br> All | 1.5 | $20 | Latvia | Equi<br> ties | 13 | $60 | Sri Lanka | All | 13 | $50 |
| &nbsp;&nbsp;&nbsp;&nbsp; Chile<br> All | 18 | $50 | Lithuania | All | 18 | $40 | Swaziland | All | 26 | $40 |
| &nbsp;&nbsp;&nbsp;&nbsp; China (B share<br> only)<br> All | 11 | $45 | Luxembourg | All | 4 | $20 | Sweden | All | 1 | $25 |
| &nbsp;&nbsp;&nbsp;&nbsp; Colombia<br> All | 35 | $80 | Malaysia | All | 3.5 | $40 | Switzerland | All | 1 | $25 |
| &nbsp;&nbsp;&nbsp;&nbsp; Costa Rica<br> All | 13 | $50 | Mali | All | 44 | $125 | Taiwan | All | 13 | $65 |
| &nbsp;&nbsp;&nbsp;&nbsp; Croatia<br> All | 31 | $55 | Malta | All | 20 | $60 | Thailand | All | 3.5 | $25 |
| &nbsp;&nbsp;&nbsp;&nbsp; Cyprus<br> All | 13 | $50 | Mauritius | All | 26 | $80 | Togo | All | 44 | $125 |
| &nbsp;&nbsp;&nbsp;&nbsp; Czech Republic<br> All | 11 | $25 | Mexico | All | 2 | $10 | Tunisia | All | 35 | $40 |
| &nbsp;&nbsp;&nbsp;&nbsp; Denmark<br> All | 2 | $25 | Morocco | All | 31 | $80 | Turkey | All | 11 | $10 |
| &nbsp;&nbsp;&nbsp;&nbsp; Egypt<br> All | 28 | $65 | Namibia | All | 26 | $40 | UAE | All | 40 | $105 |
| &nbsp;&nbsp;&nbsp;&nbsp; Estonia<br> All | 6 | $20 | Netherlands | All | 2 | $15 | United Kingdom | All | 1 | $5 |
| &nbsp;&nbsp;&nbsp;&nbsp; Euromarkets\*\*<br> All | 1.00 | $5 | New Zealand | All | 2.5 | $25 | Ukraine | All | 21 | $30 |
| &nbsp;&nbsp;&nbsp;&nbsp; Finland<br> All | 2.5 | $25 | Niger | All | 44 | $125 | Uruguay | All | 45 | $55 |
| &nbsp;&nbsp;&nbsp;&nbsp; France<br> All | 1 | $15 | Nigeria | All | 26 | $40 | Vietnam | All | 20 | $85 |
| &nbsp;&nbsp;&nbsp;&nbsp; Germany<br> All | 1 | $15 | Norway | All | 2 | $25 | Zambia | All | 26 | $40 |
| &nbsp;&nbsp;&nbsp;&nbsp; Ghana<br> All | 22 | $40 | Oman | All | 45 | $115 | Zimbabwe | All | 26 | $40 |
| &nbsp;&nbsp;&nbsp;&nbsp; Greece<br> All | 8 | $35 | Pakistan | All | 26 | $80 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Guinea Bissau<br> All | 44 | $125 | Peru | All | 39 | $85 |  |  |  |  |

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Safekeeping and transaction fees are assessed on security and currency transactions.

\* Additional customer documentation and indemnification will be required prior to establishing accounts in these markets.

\*\* Tiered by market value: <$5 billion: 1bp; >$5 billion and <$10 billion: 0.75bps; >$10 billion: 0.50bps.

\*\*\* Euromarkets – Non-Eurobonds: Surcharges vary by local market.

A monthly base fee per fund will apply based on the number of foreign securities held. If no global assets are held within a given month, the monthly base charge will not apply for that month.

1-25 foreign securities -$500; 26-50 foreign securities - $1,000; Over 50 foreign securities - $1,500

Euroclear- Eurobonds only. Eurobonds are held in Euroclear at a standard rate, but other types of securities (Including but not limited to equities, domestic market debt and mutual funds) will be subject to a surcharge. In addition, certain transactions that are delivered within Euroclear or from a Euroclear account to a third party depository or settlement system, will be subject to a surcharge.

For all other markets specified in above grid, surcharges may apply If a security is held outside of the local market.

Miscellaneous Expenses

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Tax reclaims that have been outstanding for more than 6 (six) months with the client will be charged $50 per claim.

Charges Incurred by U.S. Bank, NA directly or through sub-custodians for account opening fees, local taxes, stamp duties or other local duties and assessments, stock exchange fees, foreign exchange transactions, postage and Insurance for shipping, facsimile reporting, extraordinary telecommunications fees, proxy services and other shareholder communications, recurring administration fees, negative interest charges, overdraft charges or other expenses which are unique to a country in which the client or its clients is investing will be passed along as incurred.

A surcharge may be added to certain miscellaneous expenses listed herein to cover handling, servicing and other administrative costs associated with the activities giving rise to such expenses. Also, certain expenses are charged at a predetermined flat rate.

SWIFT reporting and message fees.

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**<u>EXHIBIT C</u>**

**SHAREHOLDER COMMUNICATIONS ACT AUTHORIZATION** 

**DIREXION FUNDS** 

The Shareholder Communications Act of 1985 requires banks and trust companies to make an effort to permit direct communication between a company which issues securities and the shareholder who votes those securities.

Unless you specifically require us to NOT release your name and address to requesting companies, we are required by law to disclose your name and address.

Your "yes" or "no" to disclosure will apply to all U.S. securities Custodian holds for you now and in the future, unless you change your mind and notify us in writing. A "no" election may prevent Custodian from obtaining, on your behalf, the most favorable tax rate for American Depository Receipts (ADRs) held in your account*.*

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| | |
|:---|:---|
| YES | U.S. Bank is authorized to provide the Trust's name, address and security position to requesting companies whose stock is owned by the Trust. |
| NO | U.S. Bank is NOT authorized to provide the Trust's name, address and security position to requesting companies whose stock is owned by the Trust. |

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**DIREXION FUNDS** 

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| |
|:---|
|  By:  |
|  Title:  |
|  Date:  |

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## Ex-99.(H)(Ii)

*EXECUTION VERSION* 

**AMENDED AND RESTATED** 

**FUND SERVICING AGREEMENT** 

This Amended and Restated Fund Servicing Agreement (this "<u>Agreement</u>") is made and entered into as of the last day written on the signature page and effective as of November 1, 2025 (the "<u>Effective Date</u>"), by and between **DIREXION FUNDS**, a Massachusetts business trust (the "<u>Trust</u>") and **U.S. BANCORP FUND SERVICES, LLC** (d/b/a U.S. Bank Global Fund Services), a Wisconsin limited liability company ("<u>USBGFS</u>").

WHEREAS, the parties have entered into a Fund Accounting Servicing Agreement dated as of February 24, 2010, as amended (the "Accounting Agreement"), a Fund Administration Servicing Agreement dated as of February 24, 2010, as amended (the "Administration Agreement"), and a Transfer Agent Servicing Agreement dated as of February 24, 2010, as amended (the "Transfer Agent Agreement" and collectively with the Accounting Agreement and Administration Agreement, the "<u>Original Agreements</u>");

WHEREAS, the parties desire to amend and restate the terms of the Original Agreements with the terms of this Agreement;

WHEREAS, this Agreement shall supersede and replace the Original Agreements in its entirety as of the Effective Date;

WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "<u>1940 Act</u>"), as an open-end management investment company;

WHEREAS, USBGFS is, among other things, in the business of providing administration, accounting, and transfer agency functions for the benefit of its customers; and

WHEREAS, the Trust desires to retain USBGFS to provide certain services, as expressly delineated and limited herein, to each series of the Trust listed on <u>Exhibit A</u> hereto (as amended from time to time) (collectively, the "<u>Funds</u>").

NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;**1. Appointment of USBGFS as Service Provider.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. The Trust hereby appoints USBGFS as a service provider to the Trust on the terms and conditions set forth in
this Agreement, and USBGFS hereby accepts such appointment and agrees to perform the services and duties set forth on <u>Exhibit B</u> (the " <u>Services</u> ") in accordance with the terms and conditions of this Agreement. The services
and duties of USBGFS shall be confined to those matters expressly set forth herein, and no implied duties are assumed by or may be asserted against USBGFS hereunder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. USBGFS shall not be bound by any Trust policies or procedures, or changes thereto, that purport to impose any
additional duties, obligations, or care on USBGFS other than as expressly set forth herein, or that purport to affect in any way the Services or the manner in which they are provided.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The Services set forth herein may not be modified or enlarged by implication or course of dealing between the
Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. USBGFS may use its affiliates to provide any of the Services. Any such affiliate shall be held to the same
standard of care as USBGFS would be under this Agreement, and USBGFS shall be responsible for the provision of such Services to the same extent as if provided by USBGFS. The Trust consents to the use of such affiliates and to USBGFS providing to
such affiliates any information regarding the Trust or its shareholders as may be required to provide such Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. USBGFS reserves the right to make changes from time to time, as it deems advisable, relating to its systems,
programs, rules, operating schedules and equipment, so long as such changes do not adversely affect the Services provided to the Trust under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. The Trust or its agent shall furnish to USBGFS the data necessary to perform the Services described herein at
such times and in such form as mutually agreed upon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. The Trust may from time-to-time request that USBGFS modify its internal operating procedures with respect to the provision of the Services, which request shall be provided in writing by a duly authorized officer of the Trust or by any other person authorized by the Trust to
provide such request. USBGFS is under no obligation to agree to such modifications. If USBGFS agrees to comply with such request, then it shall be entitled to follow such modified operating procedure without further inquiry or diligence, and its
actions or inactions in connection with following such modified operated procedures shall be deemed to be within its standard of care under <u>Section</u> <u>10</u> for all purposes.

&nbsp;&nbsp;&nbsp;&nbsp;**2. Compensation.** 

USBGFS shall be compensated for providing the Services in accordance with the fee schedule set forth on <u>Exhibit C</u> hereto (as amended from time to time). USBGFS shall also be reimbursed for such miscellaneous expenses set forth in <u>Exhibit C</u> hereto as are reasonably incurred by USBGFS in performing its duties hereunder. The Trust shall pay all such fees and reimbursable expenses within thirty (30) calendar days following receipt of the billing notice, except for any fee or expense subject to a good faith dispute. The Trust shall notify USBGFS in writing within thirty (30) calendar days following receipt of each invoice if the Trust is disputing any amounts in good faith. The Trust shall pay such disputed amounts within ten (10) calendar days of the day on which the parties agree to the amount to be paid. With the exception of any fee or expense the Trust is

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disputing in good faith as set forth above, unpaid invoices shall accrue a finance charge of one and one-half percent (1<sup>1</sup>⁄<sub>2</sub>%) per month after the due date. Notwithstanding anything to the contrary, amounts owed by the Trust to USBGFS shall only be paid out of the assets and property of the particular Fund involved.

&nbsp;&nbsp;&nbsp;&nbsp;**3. License of Data; Warranty; Termination of Rights.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. USBGFS has entered into agreements with various data service providers (each, a " <u>Data Provider</u> "), including, without limitation, MSCI index data services (" <u>MSCI</u> "), Standard & Poor's Financial Services LLC (" <u>S&P</u> "), Morningstar, Broadridge, FTSE, ICE, and Confluence
Technologies to provide data services that may include, without limitation, index returns and pricing information (collectively, the " <u>Data</u> ") to facilitate the services provided by USBGFS to each Fund. These Data Providers have
required USBGFS to include certain provisions regarding the use of the Data in this Agreement attached hereto as <u>Exhibit D</u>. The Data is being licensed, not sold, to the Trust. The Trust has a limited license to use the Data only for purposes
necessary for valuing each Fund's assets and making any required reporting relating thereto (the " <u>License</u> "). The Trust does not have any license or right to use the Data for purposes outside the scope of this Agreement
including, but not limited to, resale to other users or for use in creating any type of historical database. The Trust acknowledges and agrees that certain Data Providers may also require the Trust or one or more Funds to enter into an agreement
directly with the Data Provider for the use of that Data Provider's Data. The provisions in <u>Exhibit D</u> shall not have any effect upon the standard of care and liability USBGFS has set forth in <u>Section</u> <u>10</u> of this
Agreement. The Trust acknowledges the proprietary rights that USBGFS and its Data Providers have in the Data.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. THE TRUST HEREBY ACCEPTS THE DATA AS IS, WHERE IS, WITH NO WARRANTIES, EXPRESS OR IMPLIED, AS TO
MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR ANY OTHER MATTER. USBGFS IS NOT RESPONSIBLE FOR ANY OF THE DATA ACCESSED BY THE TRUST OR ANY OF ITS SERVICE PROVIDERS OR AGENTS AND USBGFS ASSUMES NO DUTY TO VERIFY SUCH DATA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. USBGFS may stop supplying some or all Data to the Fund if USBGFS' Data Providers terminate any agreement
to provide Data to USBGFS. Also, USBGFS may stop supplying some or all Data to the Fund if USBGFS reasonably believes that the Fund is using the Data in violation of the License, or breaching its duties of confidentiality provided for hereunder, or
if any of USBGFS' Data Providers demand that the Data be withheld from the Fund. USBGFS will provide notice to the Fund of any termination of provision of Data as soon as reasonably possible.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. The Trust agrees to indemnify and hold harmless USBGFS, its Data Providers, and any other third party involved
in or related to the making or compiling of the Data, their affiliates and subsidiaries and their respective directors, officers,

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employees and agents from and against any claims, losses, damages, liabilities, costs and expenses, including reasonable attorneys' fees and costs, as incurred, arising in and any manner out of the Trust's or any third party's use of, or inability to use, the Data or any breach by the Trust of any provision contained in this Agreement regarding the Data. The immediately preceding sentence shall not have any effect upon the standard of care and liability of USBGFS as set forth in <u>Section</u> <u>10</u> of this Agreement. <br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. USBGFS has entered into agreements with Bloomberg Finance L.P. (" <u>Bloomberg</u> ") to provide data
(the " <u>N-PORT Data</u> ") for use in or in connection with the reporting requirements under Rule 30b1-9, including preparation and filing of Form N-PORT. In connection with the provision of the N-PORT Data, Bloomberg requires the following provisions to be included in the Agreement:

The Trust agrees that it shall (a) comply with all laws, rules and regulations applicable to accessing and using the N-PORT Data, (b) not extract the N-PORT Data from the view-only portal, (c) not use the N-PORT Data for any purpose independent of complying with the requirements of Rule 30b1-9 (which prohibition shall include, for the avoidance of doubt, use in risk reporting or other systems or processes (e.g., systems or processes made available enterprise-wide for the Trust's internal use)), (d) permit audits of its use of the N-PORT Data by Bloomberg, its affiliates or, at the Trust's request, a mutually agreed upon third party auditor (provided that the costs of an audit by a third party shall be borne by the Trust), and (e) exculpate Bloomberg, its affiliates and their respective suppliers from any liability or responsibility of any kind relating to the Trust's receipt or use of the N-PORT Data (including expressly disclaiming all warranties). The Trust further agrees that Bloomberg shall be a third party beneficiary of the Agreement solely with respect to the foregoing provisions (a) – (e).

&nbsp;&nbsp;&nbsp;&nbsp;**4. Lost Shareholder Due Diligence Searches and Servicing.** 

The Trust hereby acknowledges that USBGFS has an arrangement with an outside vendor to conduct lost shareholder searches required by Rule 17Ad-17 under the Securities Exchange Act of 1934, as amended (the "<u>Exchange Act</u>"). Costs associated with such searches will be passed through to the Trust as a miscellaneous expense in accordance with the fee schedule set forth in <u>Exhibit C</u> hereto. If a shareholder remains lost and the shareholder's account unresolved after completion of the mandatory Rule 17Ad-17 search, the Trust hereby authorizes USBGFS to conduct a more in-depth search in order to seek to locate the lost shareholder before the shareholder's assets escheat to the applicable state, to enter into agreements with vendors to conduct such additional searches, and to charge the costs of such additional searches to the account of the lost shareholder. There can be no guarantee that any in-depth search will be successful.

&nbsp;&nbsp;&nbsp;&nbsp;**5. Anti-Money Laundering and Red Flag Identity Theft Prevention Programs.** 

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. The Trust acknowledges that it had an opportunity to review, consider and approve the written procedures
provided by USBGFS describing various processes used by USBGFS which are designed to promote the detection and reporting of potential money laundering activity and identity theft by monitoring certain aspects of shareholder activity as well as
written procedures for verifying a customer's identity (collectively, the " <u>Procedures</u> "). Further, the Trust has determined that the Procedures, as part of the Trust's overall anti-money laundering program and identity
theft prevention program responsibilities, are reasonably designed to help: (i) prevent the Trust from being used for money laundering or the financing of terrorist activities; (ii) prevent identity theft; and (iii) achieve compliance with
the applicable provisions of the Bank Secrecy Act, the USA Patriot Act of 2001, the Fair and Accurate Credit Transactions Act of 2003, and the implementing regulations thereunder (together " <u>AML Rules</u> ").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The Trust hereby instructs and directs USBGFS to implement the Procedures, as applicable, on the Trust's
behalf, as such may be amended from time to time. It is contemplated that these Procedures will be amended from time to time by USBGFS and any such amended Procedures will be provided to the Trust. Should the Trust desire that USBGFS perform
services not provided for in the Procedures, such additional services and the associated cost must be specifically detailed in writing in the attached fee schedule.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The Trust acknowledges and agrees that although it is directing USBGFS to implement the Procedures on its
behalf, USBGFS is implementing the Procedures as a service provider to the Trust and the Trust is and remains ultimately responsible for complying with all applicable laws, rules, and regulations with respect to anti-money laundering, customer
identification, identity theft prevention, economic sanctions, and terrorist financing, whether under the AML Rules, or otherwise, such as, the establishment and adoption by the Trust's board of Trustees (the "Board") of the
Trust's own formal anti-money laundering program and the designation of its own anti-money laundering officer, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. The Trust further acknowledges and agrees that certain portions of the Procedures are applicable to certain
products, entities, structures, or geographies and, accordingly, certain portions of the Procedures may not be implemented with respect to the Trust. The Trust has had the opportunity to discuss the Procedures with USBGFS, and the Trust understands
and agrees which portions of the Procedures may not be implemented on behalf of the Trust. Without limitation of the foregoing, USBGFS shall not be responsible for providing anti-money laundering or customer identification services with respect to
certain intermediary or dealer-controlled customer accounts (i.e., level 0 sub-accounts through the Fund/SERV system operated by the National Securities Clearing Corporation) and other fund client
relationships where there is a sub-transfer agency or similar arrangement between the Trust and the intermediary.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. The Trust hereby directs, and USBGFS acknowledges, that USBGFS shall (i) permit federal regulators access
to such information and records maintained by USBGFS and relating to USBGFS' implementation of the Procedures, on behalf of the Trust, as they may request, and (ii) permit such federal regulators to inspect USBGFS' implementation of
the Procedures on behalf of the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;**6. Pricing of Portfolio Positions.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. For each valuation date, obtain prices from a pricing source as instructed to USBGFS by an individual
authorized by the applicable Fund or its appointed Valuation Designee and apply those prices to the portfolio positions. For those securities where market quotations are not readily available, the Fund's Valuation Designee, or another person
authorized by the Fund or the Valuation Designee, will be responsible to supply USBGFS with valuations. The Fund's appointed Valuation Designee(s) is (are) responsible for the accuracy of the lists supplied to USBGFS of pricing sources and the
list of individuals authorized to designate pricing sources or valuations on behalf of the Valuation Designee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. If one or more of the primary pricing sources for the portfolio positions of the Fund is unavailable when
needed, USBGFS may use an alternative pricing source identified by USBGFS on a temporary basis. In such event the alternative price is subject to the review and approval of the Trust, and the Trust shall promptly notify USBGFS of any desired changes
to such alternative price. USBGFS shall not have any liability for the use of such alternative price so long as it has met its standard of care under <u>Section</u> <u>10</u> with respect to the selection of such alternative pricing
source.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. If the Fund desires to provide a price for a portfolio position that varies from the price provided by the
pricing source, the Fund shall promptly notify and supply USBGFS with the price of any such security on each valuation date. All pricing changes made by the Fund will be in writing and must specifically identify the securities to be changed by
CUSIP, name of security, new price or rate to be applied, and, if applicable, the time period for which the new price(s) is/are effective. In such case USBGFS shall apply the price provided by the Fund without further investigation or verification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. In the event that the Fund at any time receives Data containing price evaluations, rather than market
quotations, for certain securities or certain other data related to such securities, the following provisions will apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. evaluated securities are typically complicated financial instruments. There are many methodologies (including
computer-based analytical modeling and individual security evaluations) available to generate approximations of the market value of such securities, and there is significant professional disagreement about which method is best. No evaluation method
may

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consistently generate approximations that correspond to actual traded prices of the securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. methodologies used to provide the pricing portion of certain Data may rely on evaluations; however, the Trust
acknowledges that there may be errors or defects in the software, databases, or methodologies generating the evaluations that may cause resultant evaluations to be inappropriate for use in certain applications; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. the Trust assumes all responsibility for edit checking, external verification of evaluations, and ultimately
the appropriateness of using Data containing evaluations, regardless of any efforts made by USBGFS and its suppliers in this respect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Neither USBGFS, nor any of its employees, agents or suppliers is acting as the valuation designee within the
meaning of Rule 2a-5 under the 1940 Act in respect of any Fund, and USBGFS shall not have any obligation for making fair value determinations or to investigate or verify the accuracy or appropriateness of any
prices, evaluations, market quotations, or other data or pricing related inputs received from the Trust, the Fund, any of their affiliates, or any pricing service approved by the Board, or fair values obtained from the Board or its valuation
designee. USBGFS may perform certain tests on pricing data received each day, on a limited basis, which may include day over day tolerance breaks, NAV impact price analysis, and stale price testing, based on the availability of data from data
vendors. However, such tests are limited, are not intended or designed to determine whether any price is fair or appropriate, and do not replace the valuation designee's responsibility for the appropriateness of prices used in calculating the
NAV of each Fund. Valuations received from a pricing source employed by the Trust, a Fund, or a Fund's investment adviser, or from calculation models that are based on inputs or data delivered to these sources from individuals associated with
a Fund or the Fund's investment adviser, are not subject to these tests and will be utilized as instructed by the valuation designee. The Trust acknowledges that the same or similar positions held by a Fund may be valued differently by other
customers of USBGFS and that USBGFS is not under any obligation to compare such prices or notify the Trust or the Fund of any such discrepancies. Notwithstanding anything else in this Agreement to the contrary, USBGFS and its affiliates shall not be
responsible or liable for any mistakes, errors, or mispricing, or any losses related thereto, resulting from any inaccurate, inappropriate, or fraudulent prices, evaluations, market quotations, or other data or pricing related inputs received from
the Trust, the Fund, any of their affiliates, or any third-party source.

&nbsp;&nbsp;&nbsp;&nbsp;**7. Changes in Accounting Procedures.** 

USBGFS shall perform its Services in accordance with the accounting practices and procedures of the Trust, provided that any changes to such accounting practices and

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procedures shall only be effective upon the Services following a resolution passed by the Board and receipt of written notice to and acceptance by USBGFS, which shall not be unreasonably withheld, and which may not be withheld when such change is required by applicable laws. USBGFS agrees to implement such changes in a timely fashion.

&nbsp;&nbsp;&nbsp;&nbsp;**8. Representations & Warranties.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. The Trust hereby represents and warrants to USBGFS, which representations and warranties shall be deemed to be
continuing throughout the term of this Agreement, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to
carry on its business as now conducted, to enter into this Agreement and to perform its obligations hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. This Agreement has been duly authorized, executed and delivered by the Trust in accordance with all requisite
action and constitutes a valid and legally binding obligation of the Trust, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. It is conducting its business in compliance in all material respects with all applicable laws and regulations,
both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, bylaws or any contract
binding it or affecting its property which would prohibit its execution or performance of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. A registration statement under the 1940 Act and, if applicable, the Securities Act of 1933, as amended (the
" <u>Securities Act</u> "), will be made effective prior to the effective date of this Agreement and will remain effective during the term of this Agreement, and appropriate state securities law filings will be made prior to the effective
date of this Agreement and will continue to be made during the term of this Agreement as necessary to enable the Trust to make a continuous public offering of its shares; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. All records of the Trust provided to USBGFS by the Trust or by any prior or present service provider of the
Trust are accurate and complete and USBGFS is entitled to rely on all such records in the form provided.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. USBGFS hereby represents and warrants to the Trust, which representations and warranties shall be deemed to be
continuing throughout the term of this Agreement, that:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to
carry on its business as now conducted, to enter into this Agreement and to perform its obligations hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. This Agreement has been duly authorized, executed and delivered by USBGFS in accordance with all requisite
action and constitutes a valid and legally binding obligation of USBGFS, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies
of creditors and secured parties; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. It is conducting its business in compliance in all material respects with all applicable laws and regulations,
both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, bylaws or any contract
binding it or affecting its property which would prohibit its execution or performance of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;**9. Notification of Error.** 

The Trust will notify USBGFS of any discrepancy between USBGFS and the Trust, including, but not limited to, failing to account for a security position in the Fund's portfolio, upon the later to occur of: (i) three (3) business days after receipt of any reports rendered by USBGFS to the Trust; (ii) three (3) business days after discovery of any error or omission not covered in the balancing or control procedure; or (iii) three (3) business days after receiving notice from any shareholder regarding any such discrepancy. Notwithstanding any other provision in this Agreement, USBGFS shall have no liability with respect to any such discrepancy that the Trust does not notify USBGFS of within such time period.

&nbsp;&nbsp;&nbsp;&nbsp;**10. Standard of Care; Indemnification; Limitation of Liability.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. USBGFS shall exercise reasonable care in the performance of its duties under this Agreement. Neither USBGFS nor
any of its affiliates or suppliers shall be liable for any error of judgment; mistake of law; fraud or misconduct by the Trust, any Fund, the adviser or any other service provider to the Trust or a Fund, or any employee of the foregoing; or for any
loss suffered by the Trust, a Fund, or any third party in connection with USBGFS' duties under this Agreement, including losses resulting from mechanical breakdowns or the failure of communication or power supplies beyond USBGFS'
reasonable control, except a loss arising out of or relating to USBGFS' material breach of this agreement or from its bad faith, negligence, or willful misconduct in the performance of its duties under this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Notwithstanding any other provision of this Agreement, if USBGFS has exercised reasonable care in the
performance of its duties under this Agreement, the Trust shall indemnify and hold harmless USBGFS, its affiliates, and its and their officers, directors, managers, employees, and suppliers (the " <u>USBGFS</u> <u>Indemnified Parties</u> ") from and against any and all claims, demands, losses, expenses, and liabilities of any and every nature (including reasonable attorneys' fees) (collectively " <u>Losses</u> ") that any such USBGFS Indemnified
Party may sustain or incur or that may be asserted against a USBGFS Indemnified Party by any person arising out of any action taken or omitted to be taken by it in performing the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction provided to a USBGFS Indemnified Party by any duly authorized officer of the Trust or by any other person authorized by the Trust to provide such instruction, except for any
and all claims, demands, losses, expenses, and liabilities arising out of or relating to USBGFS' material breach of this Agreement or from its bad faith, negligence or willful misconduct in the performance of its duties under this Agreement.
This indemnity shall be a continuing obligation of the Trust, its successors and assigns, notwithstanding the termination of this Agreement. If requested by a USBGFS Indemnified Party, the Trust shall advance (within thirty days of such request) any
and all costs and expenses of such USBGFS Indemnified Party incurred in connection with any Losses or investigating or defending any matter to which such USBGFS Indemnified Party may be entitled to indemnification including, without limitation,
attorneys' and experts' fees. The USBGFS Indemnified Party shall, in connection with any such advancement, agree to an undertaking to repay such advancement if and to the extent that it is ultimately determined by a court of competent
jurisdiction in a final non-appealable judgement that the USBGFS Indemnified Party is not entitled to be indemnified by the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. USBGFS shall indemnify and hold the Trust and its trustees, officers, and employees (collectively the
" <u>Trust Indemnified Parties</u> ") harmless from and against any and all Losses that the Trust may sustain or incur or that may be asserted against the Trust by any person arising out of any action taken or omitted to be taken by USBGFS
as a result of USBGFS' material breach of this Agreement, or from USBGFS' bad faith, negligence, or willful misconduct in the performance of its duties under this Agreement. This indemnity shall be a continuing obligation of USBGFS, its
successors and assigns, notwithstanding the termination of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. In no case shall either party be liable to the other for (i) any special, indirect or consequential
damages, loss of profits or goodwill (even if advised of the possibility of such); (ii) any delay by reason of circumstances beyond its control, including acts of civil or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown, flood or catastrophe, acts of God, insurrection, war, riots, or failure beyond its control of transportation or power supply, or (iii) any claim that arose more than one year prior to the institution of suit therefore.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. In the event of a mechanical breakdown or failure of communication or power supplies beyond its reasonable
control, USBGFS shall take all reasonable steps to minimize service interruptions for any period that such interruption continues. USBGFS will make every reasonable effort to restore any lost or damaged data and correct any errors resulting from
such a breakdown at the expense of USBGFS. USBGFS agrees that it shall, at all times, have reasonable business continuity and disaster contingency plans with appropriate parties, making reasonable provision for emergency use of electrical data
processing equipment to the extent appropriate equipment is available. Representatives of the Trust shall be entitled to inspect USBGFS' premises and operating capabilities at any time during regular business hours of USBGFS, upon reasonable
notice to USBGFS. Moreover, USBGFS shall provide the Trust, at such times as the Trust may reasonably require, copies of reports rendered by independent accountants on the internal controls and procedures of USBGFS relating to the services provided
by USBGFS under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Notwithstanding anything herein to the contrary, USBGFS reserves the right to reprocess and correct
administrative errors at its own expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. In order that the indemnification provisions contained in this section shall apply, it is understood that if in
any case the indemnitor may be asked to indemnify or hold the indemnitee harmless, the indemnitor shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that the indemnitee will
use all reasonable care to notify the indemnitor promptly concerning any situation that presents or appears likely to present the probability of a claim for indemnification. Unless it reserves any rights to deny indemnification, the indemnitor shall
have the option to defend the indemnitee against any claim that may be the subject of this indemnification. In the event that the indemnitor so elects, it will so notify the indemnitee and thereupon the indemnitor shall take over complete defense of
the claim and shall be totally responsible for any liability of the indemnitee, and the indemnitee shall in such situation incur no further legal or other expenses for which it shall seek indemnification under this section. The indemnitee shall in
no case confess any claim or make any compromise in any case in which the indemnitor will be asked to indemnify the indemnitee except with the indemnitor's prior written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. The indemnity and defense provisions set forth in this <u>Section</u> <u>10</u> shall indefinitely
survive the termination and/or assignment of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. If USBGFS is acting in another capacity for the Trust pursuant to a separate agreement, nothing herein shall be
deemed to relieve USBGFS of any of its obligations in such other capacity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. In conjunction with the tax services provided to the Fund by USBGFS hereunder, USBGFS shall not be deemed to
act as an income tax return preparer for any

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purpose including as such term is defined under Section 7701(a)(36) of the IRC, or any successor thereof. Any information provided by USBGFS to a Fund for income tax reporting purposes with respect to any item of income, gain, loss, or credit will be performed solely in USBGFS' administrative capacity. USBGFS shall not be required to determine, and shall not take any position with respect to whether, the reasonable belief standard described in Section 6694 of the IRC has been satisfied with respect to any income tax item. Each Fund, and any appointees thereof, shall have the right to inspect the transaction summaries produced and aggregated by USBGFS, and any supporting documents thereto, in connection with the tax reporting services provided to each Fund by USBGFS. USBGFS shall not be liable for the provision or omission of any tax advice with respect to any information provided by USBGFS to a Fund. The tax information provided by USBGFS shall be pertinent to the data and information made available to USBGFS, and is neither derived from nor construed as tax advice.

&nbsp;&nbsp;&nbsp;&nbsp;**11. Proprietary and Confidential Information.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. USBGFS agrees on behalf of itself and its directors, officers, and employees to treat confidentially and as
proprietary information of the Trust, all records and other information relative to the Trust and prior, present, or potential shareholders of the Trust (and clients of said shareholders), and not to use such records and information for any purpose
other than the performance of its responsibilities and duties hereunder, except (i) after prior notification to and approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where USBGFS may be
exposed to civil or criminal contempt proceedings for failure to comply, (ii) when requested to divulge such information by duly constituted authorities or pursuant to legal process, (iii) to defend a claim brought against USBGFS arising
out of or related to any Services provided hereunder, or (iv) when so requested by the Trust. Records and other information which have become known to the public through no wrongful act of USBGFS or any of its employees, agents or
representatives, and information that was already in the possession of USBGFS prior to receipt thereof from the Trust or its agent, shall not be subject to this paragraph.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. USBGFS shall have in place and maintain physical, electronic and procedural safeguards reasonably designed to
protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, records and information relating to the Trust and its shareholders. USBGFS has implemented and will maintain an effective information security
program reasonably designed to protect information relating to the shareholders of the Trust (such information, " <u>Personal Information</u> "), which program includes sufficient administrative, technical and physical safeguards and
written policies and procedures reasonably designed to (a) ensure the security and confidentiality of such Personal Information; (b) protect against any anticipated threats or hazards to the security or integrity of such Personal
Information, including identity theft; and (c) protect against unauthorized access to or use of such Personal Information that could

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result in substantial harm or inconvenience to the Fund or any shareholder (the "<u>Information Security Program</u>"). The Information Security Program complies and shall comply with reasonable information security practices within the industry (including the encryption of data where necessary or appropriate). Upon written request from the Trust, USBGFS shall provide a written description of its Information Security Program. USBGFS shall provide related reports and information responding to reasonable due diligence requests regarding its compliance with its Information Security Program and shall notify the Trust, expeditiously and without unreasonable delay, in writing of any breach of security, misuse or misappropriation of, or unauthorized access to, (in each case, whether actual or alleged) any information of a Fund (any or all of the foregoing referred to individually and collectively for purposes of this provision as a "<u>Security Breach</u>"). USBGFS shall promptly investigate, remedy and bear the cost of the measures (including notification to any affected parties), if any, to address any Security Breach. USBGFS shall bear the cost of the Security Breach only if USBGFS is determined to be directly responsible for such Security Breach. In addition to, and without limiting the foregoing, USBGFS shall promptly cooperate with the Trust or any of its affiliates' regulators at USBGFS's expense to prevent, investigate, cease or mitigate any Security Breach, including but not limited to investigating, bringing claims or actions and giving information and testimony. Notwithstanding any other provision in this Agreement, the obligations set forth in this paragraph shall survive termination of this Agreement. <br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The Trust agrees on behalf of itself and its trustees, officers, and employees to treat confidentially and as
proprietary information of USBGFS, all non-public information relative to USBGFS (including, without limitation, information regarding USBGFS' pricing, products, services, customers, suppliers, financial
statements, processes, know-how, trade secrets, market opportunities, past, present or future research, development or business plans, affairs, operations, systems, computer software in source code and object
code form, documentation, techniques, procedures, designs, drawings, specifications, schematics, processes and/or intellectual property), and not to use such information for any purpose other than in connection with the services provided under this
Agreement, except (i) after prior notification to and approval in writing by USBGFS, which approval shall not be unreasonably withheld and may not be withheld where the Trust may be exposed to civil or criminal contempt proceedings for failure to
comply, (ii) when requested to divulge such information by duly constituted authorities, or (iii) when so requested by the USBGFS. Information which has become known to the public through no wrongful act of the Trust or any of its employees,
agents or representatives, and information that was already in the possession of the Trust prior to receipt thereof from USBGFS, shall not be subject to this paragraph.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. The Trust shall not make or change any written representations regarding the services provided by or the
responsibilities of USBGFS or its affiliates under this Agreement, whether in the Trust's registration statement, offering documents, marketing or promotional materials, policies, or otherwise, that explicitly or

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implicitly ascribe to USBGFS or its affiliates any duties or responsibilities under this Agreement that are not specifically stated herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Notwithstanding anything herein to the contrary, (i) the Trust shall be permitted to disclose the identity
of USBGFS as a service provider, redacted copies of this Agreement, and such other information as may be required in the Trust's registration or offering documents, or as may otherwise be required by applicable law, rule, or regulation, and
(ii) USBGFS shall be permitted to include the name of the Trust in lists of representative clients in due diligence questionnaires, RFP responses, presentations, and other marketing and promotional purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Nothing in this Agreement is intended to limit a party or any other person from affirmatively reporting to,
initiating communications directly with, or providing information and documents (with the exception of information or documents that are subject to legal or other applicable privilege) to any governmental entity, regulator, or self-regulatory
organization regarding possible violations of law or regulation without prior notice to the disclosing party.

&nbsp;&nbsp;&nbsp;&nbsp;**12. Records.** 

USBGFS shall keep records relating to the services to be performed hereunder in the form and manner, and for such period, as it may deem advisable, but not inconsistent with the rules and regulations of appropriate government authorities, in particular, Section 31 of the 1940 Act and the rules thereunder. USBGFS agrees that records relating to the services to be performed by USBGFS hereunder are the property of the Trust and will be preserved, maintained, and made available in accordance with such applicable sections and rules of the 1940 Act and will be promptly surrendered to the Trust or its designee on and in accordance with its request, provided, however, that the Trust shall bear the reasonable cost of transfer (including, without limitation, costs related to image conversions), and USBGFS may retain such copies of such records in such form as may be required to comply with any applicable law, rule, regulation, or order of any governmental, regulatory, or judicial authority of competent jurisdiction. Notwithstanding anything in this Agreement to the contrary, the Trust acknowledges and agrees that if the Trust elects to use an FTP or other electronic transmission method to communicate trade instructions to USBGFS the Trust shall be responsible for maintaining the Trust's records as they relate to the Trust's review and approval of individuals authorized to place trading instructions as described in Rule 31a-1(b)(10) promulgated under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;**13. Compliance with Laws.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. The Trust has and retains primary responsibility for all compliance matters relating to the Fund, including but
not limited to compliance with the Securities Act; the Exchange Act; the 1940 Act; the Investment Advisers Act of 1940, as amended; the Internal Revenue Code of 1986, as amended (the " <u>Code</u> "); the Sarbanes-Oxley Act of 2002 (the
" <u>SOX Act</u> "); the USA PATRIOT Act of 2001;

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and the policies and limitations of the Trust relating to its portfolio investments as set forth in its Registration Statement. USBGFS' services hereunder shall not relieve the Trust of its responsibilities for assuring such compliance or the Board's oversight responsibility with respect thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The Trust shall immediately notify USBGFS if the investment strategy of any Fund materially changes or deviates
from the investment strategy disclosed in the current Prospectus, or if it (or any Fund) becomes subject to any new law, rule, regulation, or order of a governmental or judicial authority of competent jurisdiction that materially impacts the
operations of the Trust or any Fund or the services provided under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. If, and only to the extent that, the General Data Protection Regulation (EU) 2016/679, as amended
(" <u>GDPR</u> ") or the Cayman Islands Data Protection Law, 2017, as amended (" <u>DPL</u> "), are applicable to USBGFS and the Trust the following provisions shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The parties agree USBGFS is a " <u>Data Processor</u> " under GDPR and DPL, as applicable, in the
performance of its services under this the Agreement. Notwithstanding the foregoing, the parties agree USBGFS is a " <u>Data</u> <u>Controller</u> " under GDPR and DPL, as applicable, solely for the purpose of fulfilling its own pre-contractual AML/KYC new fund client onboarding obligations. In either case, the Trust shall ensure that all necessary and appropriate consents, disclosures and notices, including data subject consents, are in
place to enable the processing of "Personal Data" (as defined by GDPR and DPL) by USBGFS, the transfer of Personal Data to USBGFS, and the transfer of Personal Data by USBGFS to third countries or regulatory organizations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. The parties further agree the Trust is a " <u>Data Controller</u> " under GDPR and DPL, as
applicable. The Trust, either alone or jointly with others, determines or controls the content, use, purpose and means of processing the Personal Data.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. USBGFS shall process the Personal Data: (i) in accordance with instructions of the Trust pursuant to this
Agreement and any authorized persons list executed pursuant thereto, for the purpose of discharging USBGFS' obligations under the Agreement; and (ii) when required by law or regulation, or required or requested by any court or regulator
(each a " <u>Processing Order</u> ") to which USBGFS is subject. In the event USBGFS receives a request to process Personal Data pursuant to any Processing Order, it shall, to the extent legally permissible and reasonably practicable under
the circumstances, notify the Trust prior to processing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. The Trust is solely responsible for developing and implementing its internal policies and procedures with
respect to GDPR and DPL.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. USBGFS shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. ensure that persons handling Personal Data on its behalf are subject to confidentiality obligations similar to
those contained in this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. implement appropriate technical and organizational measures to protect Personal Data including against
unauthorized or unlawful processing and against accidental loss, damage or destruction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. only appoint sub-processors with the prior written consent of the Trust
(standing instructions or general written authorization are sufficient), and only if the sub-processors provide sufficient guarantees in writing to USBGFS that they have implemented appropriate technical and
organizational measures in such a manner that processing will comply with GDPR and DPL, as applicable<sup>1</sup>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. beyond the initial appointment, inform the Trust of any intended material changes concerning the addition or
replacement of sub-processors, thereby giving the Trust the opportunity to object;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. taking into account the nature of the processing, reasonably assist the Trust by appropriate technical and
organizational measures, insofar as possible, to enable the Trust to comply with its obligation to respond to requests for exercising a data subject's rights under GDPR or DPL;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. provide reasonable assistance to the Trust in ensuring their compliance with obligations regarding Personal
Data breaches, data protection impact assessments and prior consultation subject to the nature of the processing and the information reasonably available to USBGFS, and inform the Trust of Personal Data breaches without undue delay;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. at the written direction of the Trust, delete or return all Personal Data to the Trust after the end of the
provision of services under the Agreement relating to processing, and delete existing copies of Personal Data unless applicable law or internal data retention or backup procedures require the storage of such Personal Data; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. make available to the Trust all information reasonably necessary to demonstrate compliance with GDPR or DPL, as
applicable, and

<sup>1</sup> For the avoidance of doubt, USBGFS' affiliates and third party software providers will be used as sub-processors under this Agreement, and the Trust hereby authorizes such use.

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allow for and reasonably cooperate with audits, including inspections, conducted by the Trust or its auditor; and immediately inform the Trust if, in its opinion, the Trust's instructions regarding this subsection infringes on GDPR or DPL. <br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi. Each party shall comply with any other applicable law or regulation which implements GDPR and DPL in relation
to the Personal Data. Nothing in the Agreement shall be construed as preventing either party from taking such other steps as are necessary to comply with GDPR, DPL or any other applicable data protection laws.

&nbsp;&nbsp;&nbsp;&nbsp;**14. Term of Agreement; Amendment.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. This Agreement shall become effective as of the Effective Date and will continue in effect for a period of
three (3) years. Following the initial term, this Agreement shall automatically renew for successive one (1) year terms unless either party provides written notice at least ninety (90) days prior to the end of the then current term
that it will not be renewing the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Subject to <u>Section</u> <u>15</u>, this Agreement may be terminated by either party (in whole or
with respect to one or more Funds) upon giving ninety (90) days' prior written notice to the other party or such shorter notice period as is mutually agreed upon by the parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. USBGFS may terminate this Agreement immediately (in whole or with respect to one or more Funds) if the
continued service of such Funds or the Trust would cause USBGFS or any of its affiliates to be in violation of any applicable law, rule, regulation, or order of any governmental, regulatory or judicial authority of competent jurisdiction, or if the
Funds or the Trust (or any affiliate thereof) commits any act, or becomes involved in any situation or occurrence, tending to bring itself into public disrepute, contempt, scandal, or ridicule, or such that the continued association with the Funds
or the Trust would reflect unfavorably upon USBGFS' reputation, provided that in such event USBGFS shall, to the extent it is legally permitted and able to do so, provide reasonable assistance to transition such Funds or the Trust to a
successor service provider.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. This Agreement shall automatically terminate with respect to any Funds with respect to which the Trust fails to
maintain an effective registration statement under the 1940 Act and, if applicable, the Securities Act, or appropriate state securities law filings as necessary to enable the Trust to make a continuous public offering of its shares with respect to
such Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. This Agreement may be terminated by the non-breaching party upon the
breach of the other party of any material term of this Agreement if such breach is not cured within fifteen (15) days of notice of such breach to the breaching party.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. This Agreement may not be amended or modified in any manner except by written agreement executed by USBGFS and
the Trust and authorized or approved by the Trust's Board.

&nbsp;&nbsp;&nbsp;&nbsp;**15. Early Termination.** 

In the absence of a breach of a material term of this Agreement, should the Trust elect to terminate this Agreement (in whole or with respect to one or more Funds) prior to the end of the then current term, the Trust agrees to pay the following fees with respect to each Fund subject to the termination:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. all fees associated with converting services to a successor service provider;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. all fees associated with any record retention and/or tax reporting obligations that may not be eliminated due
to the conversion to a successor service provider;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. all miscellaneous costs associated with a.-b. above.

&nbsp;&nbsp;&nbsp;&nbsp;**16. Duties in the Event of Termination.** 

In the event that, in connection with termination, a successor to any of USBGFS' duties or responsibilities hereunder is designated by the Trust by written notice to USBGFS, USBGFS will promptly, upon such termination and at the expense of the Fund, transfer to such successor all relevant books, records, correspondence, and other data established or maintained by USBGFS under this Agreement in a form reasonably acceptable to the Trust (if such form differs from the form in which USBGFS has maintained the same, the Trust shall pay any expenses associated with transferring the data to such form), and will cooperate in the transfer of such duties and responsibilities, including provision for assistance from USBGFS' personnel in the establishment of books, records, and other data by such successor. If no such successor is designated, then such books, records and other data shall be returned to the Trust. The Trust shall also pay any fees associated with record retention and/or tax reporting obligations that USBGFS is obligated under applicable law, regulation, or rule to continue following the termination. USBGFS is authorized to destroy such books, records, and other data following termination in accordance with its record retention policy and applicable regulatory requirements if the Trust or its designee do not take possession of such records.

&nbsp;&nbsp;&nbsp;&nbsp;**17. Assignment.** 

This Agreement shall extend to and be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Trust without the written consent of USBGFS, or by USBGFS without the written consent of the Trust accompanied by the authorization or approval of the Trust's Board.

&nbsp;&nbsp;&nbsp;&nbsp;**18. Governing Law.** 

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of law principles. To the extent that the

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applicable laws of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control, and nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or order of the SEC thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;**19. No Agency Relationship.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Nothing herein contained shall be deemed to authorize or empower either party to act as agent for the other
party to this Agreement, or to conduct business in the name, or for the account, of the other party to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The Trust acknowledges that the Board and officers of the Trust are responsible for management of the Trust and
Fund and that USBGFS has no duties or obligations to manage or control the Trust or any Fund. Any duties and obligations of USBGFS are strictly limited to those set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The Trust acknowledges and agrees that if any employee of USBGFS or any of its affiliates serves as a trustee
of the trust such person is serving in their own individual capacity at the pleasure of the shareholders of the Trust and not as a representative or under the direction of USBGFS or any of its affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. The Trust acknowledges and agrees that if any employee of USBGFS or any of its affiliates serves as an officer
of the trust, or in any other similar capacity, such person is engaged in such position at the direction of, and subject to the supervision and oversight of, and removal by, the Board of the Trust, and when such person is acting in such capacity
they are doing so on behalf of the Trust and not as a representative or under the direction of USBGFS or any of its affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;**20. Services Not Exclusive.** 

Nothing in this Agreement shall limit or restrict USBGFS from providing services to other parties that are similar or identical to some or all of the services provided hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;**21. Invalidity.** 

Any provision of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. In such case, the parties shall in good faith modify or substitute such provision consistent with the original intent of the parties.

&nbsp;&nbsp;&nbsp;&nbsp;**22. Regulatory Services.** 

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Nothing in this Agreement shall be deemed to appoint USBGFS or any of its officers, directors or employees as the Trust attorneys, form attorney-client relationships or require the provision of legal advice. No work performed by employees of USBGFS or its affiliates (whether relating to assisting in the preparation or filing of regulatory materials, compliance with applicable laws, rules, or regulations, or otherwise) shall constitute legal advice. The Trust acknowledges that employees of USBGFS and its affiliates who are attorneys do not represent the Trust and rely on outside counsel retained by the Trust to review all services provided by USBGFS and to provide independent judgment on the Trust's behalf. The Trust acknowledges that because no attorney-client relationship exists between the Trust and USBGFS (or any employee of USBGFS or its affiliates), any information provided may not be privileged and may be subject to compulsory disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;**23. Notices.** 

Any notice required or permitted to be given by either party to the other shall be in writing and shall be deemed to have been given on the date delivered personally or by courier service, or three days after sent by registered or certified mail, postage prepaid, return receipt requested, to the other party's address set forth below:

Notice to USBGFS shall be sent to:

U.S. Bank Global Fund Services

777 E. Wisconsin Ave.

Milwaukee, WI 53202

Attn: GFS Contracts

and notice to the Trust shall be sent to:

Direxion Funds

c/o Rafferty Asset Management, LLC

535 Madison Avenue, 37<sup>th</sup> Floor

New York, NY 10022

&nbsp;&nbsp;&nbsp;&nbsp;**24. No Third-Party Rights.** 

Nothing expressed or referred to in this Agreement will be construed to give any third party (including, without limitation, shareholders of any Fund) any legal or equitable right, remedy or claim under or with respect to this Agreement, other than the limited third party rights of the Data Providers as expressly set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;**25. Multiple Originals; Electronic Signatures.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to
be an original, but such counterparts shall together constitute but one and the same instrument.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. This Agreement may be executed by means of electronic signatures, and a signed copy of this Agreement
transmitted by facsimile, email, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original executed copy of this Agreement for all purposes.

**SIGNATURE PAGES FOLLOW** 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer effective as of the Effective Date.

---

| | |
|:---|:---|
| **DIREXION FUNDS** | **U.S. BANK NATIONAL ASSOCIATION** |
| By: <u>/s/ Patrick Rudnick</u> | By: <u>/s/ Gregory Farley</u> |
| Name: Patrick Rudnick | Name: Greg Farley |
| Title: Principal Executive Officer | Title: Senior Vice President |
| Date: 11/24/2025 | Date: 11/26/2025 |

---

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**EXHIBIT A** 

**<u>Funds</u>**

---

| |
|:---|
|  Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund |
|  Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund |
|  Direxion Monthly High Yield Bull 1.2X Fund |
|  Direxion Monthly NASDAQ-100 Bull 1.25X Fund |
|  Direxion Monthly NASDAQ-100 Bull 1.75X Fund |
|  Direxion Monthly S&P 500 Bull 1.75X Fund |
|  Direxion Monthly Small Cap Bull 1.75X Fund |
|  Hilton Tactical Income Fund |

---

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**EXHIBIT B** 

**<u>Services</u>**

**<u>CORE SERVICE LINES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. Fund Administration & Portfolio Compliance Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. General Fund Administration

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Act as a liaison among Fund Service providers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Supply non-investment-related statistical and research data as requested

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Audits/Examinations:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. For the annual Fund audit, prepare appropriate schedules and materials. Provide requested information to the
IRPAF and facilitate the audit process.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. For SEC or other regulatory examinations, provide requested information to the Trust to assist the examination
process.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Pay Fund expenses upon written authorization from the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Compliance Support:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Regulatory Compliance Support

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Provide any sub-certifications reasonably requested by the Trust in
connection with (i) any certification required of the Trust pursuant to the SOX Act or any rules or regulations promulgated by the SEC thereunder, and (ii) the operation of USBGFS' compliance program as it relates to the Trust,
provided the same shall not be deemed to change USBGFS' standard of care as set forth herein or to broaden any duties or obligations of USBGFS set forth here.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. In order to assist the Trust in satisfying the requirements of Rule 38a-1 under the 1940 Act, USBGFS will provide the Trust's Chief Compliance Officer with reasonable access to USBGFS' fund records relating to the services provided by it under this Agreement, and
will provide quarterly compliance reports and related certifications regarding any Material Compliance Matter (as defined in Rule 38a-1) involving USBGFS that affect or could affect the Trust or any Fund.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Blue Sky Compliance Support:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Prepare and file initial registrations and renewals at the Trust's expense with state securities
authorities in specific states/territories or all fifty states and territories (District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands) as instructed by the Trust. USBGFS is not responsible for preparing or filing with the SEC or any
state authority any registrations on Form D.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Establish sales data feeds (at the Trust's expense) from applicable financial intermediaries with
shareholder accounts for the Fund(s) to monitor daily sales activity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Monitor daily sales activity from direct shareholder accounts and intermediary sales data feeds to identify
U.S. jurisdictions necessitating new registrations or additional sales permits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Obtain additional permits at the Trust's expense where appropriate unless the Trust requires approval
prior to obtaining additional permits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Evaluate sales activity for exemptions based on sales to existing shareholders in applicable states. The Trust
is responsible for instructing USBGFS regarding any additional accounts or transactions that may be eligible for an exemption.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. SEC Registration and Reporting Support:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Assist Fund counsel in the preparation and filing of the annual and semiannual shareholder reports and other
filings (e.g., Form N-CSR, Form N-PORT, and Rule 24f-2 notices). As requested by the Trust or any Fund, prepare and file Form N-PX and Form N-RN.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Coordinate the printing, filing and mailing (including delivery to intermediaries who print and mail to their
own clients) of Prospectuses and shareholder reports, and amendments and supplements thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. File the fidelity bond under Rule 17g-1 of the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Assist Fund counsel in preparation of proxy statements, repurchase offers, tender offers and information
statements, as requested by the Funds.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Prepare the tailored shareholder reports.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. While USBGFS shall assist in the preparation and filing of the materials noted above, the Trust acknowledges
and agrees that USBGFS is not ultimately responsible for the content of such materials and shall not be held to be the maker of statements or opinions in any such materials unless USBGFS expressly agrees in a writing to be filed with such materials.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. IRS Compliance Support:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Calculate required annual excise distribution amounts for the review and approval of Fund management and/or its
IRPAF.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Financial Reporting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provide financial data required by the Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepare financial reports for officers, shareholders, tax authorities, performance reporting companies,
the Board, the SEC, and the IRPAF.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Assist the Trust's custodian and fund accountants in the maintenance of the Funds' general
ledger and in the preparation of the Funds' financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Compute the yield, total return, expense ratio and portfolio turnover rate of the Funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepare financial statements subject to review and approval from the Fund and the Fund's auditors,
which include the following items:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Schedule of Investments

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Statement of Assets and Liabilities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Statement of Operations

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Statement of Changes in Net Assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Statement of Cash Flows (if applicable)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Financial Highlights

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Financial data for inclusion in Notes to Financial Statements

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepare broker security transaction summaries in accordance with Rule 31a-1(b)(9).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Tax Reporting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepare for the review of the IRPAF and/or Fund management the federal and state tax returns including
Form 1120 RIC and applicable state returns including any necessary schedules. USBGFS will prepare annual Fund federal and state income tax return filings as authorized by and based on the instructions received by Fund management and/or its IRPAF.
File on a timely basis appropriate federal and state tax returns including Forms 1120/8613, with any necessary schedules.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provide the Fund's management and IRPAF with tax reporting information pertaining to the Funds, as
available to USBGFS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepare Fund financial statement tax disclosures for the review and approval of Fund management and/or
the Funds' IRPAF.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepare and file on behalf of Fund management Form 1099 NEC for payments to disinterested trustees and
other qualifying service providers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Monitor wash sale losses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Calculate Qualified Dividend Income (" <u>QDI</u> ") for qualifying Fund shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Assist in the determination of the taxable/non-taxable nature of
corporate actions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provide reports to assist the Fund with tax loss harvesting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Assist with the determination of whether portfolio holdings will yield bad income.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provide FATCA/FBAR reporting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Respond to IRS and other tax regulatory agency notices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Assist with Passive Foreign Investment Company (PFIC) monitoring.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. If the Trust so elects, USBGFS shall provide additional services that are further described in the fee
schedule on <u>Exhibit C</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;II. Fund Accounting Services

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Portfolio Accounting Services:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Maintain the security master file for each Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Maintain portfolio records on a trade date+1 basis using security trade information communicated from the
Funds' investment adviser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Track and properly reflect corporate actions (e.g., stock splits, dividends, mergers, rights issuances,
spin-offs, etc.) impacting the securities positions held by the Funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. As of the close of business on each day the Funds value their portfolio positions (each, a " <u>Valuation Date</u> "), obtain prices from a pricing source approved by the Board or its valuation designee and apply those prices to the Funds' portfolio positions (also hereinafter referred to as " <u>securities</u> "). For those
securities where market quotations are not readily available, the Board or its valuation designee shall determine fair value. USBGFS shall be entitled to rely on such prices and/or fair valuations without investigation or verification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Identify interest and dividend accrual balances as of each Valuation Date and calculate gross earnings on
investments for each accounting period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Determine gain/loss on security sales and identify them as short-term or long-term; account for periodic
distributions of gains or losses to shareholders and maintain undistributed gain or loss balances as of each Valuation Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. On a daily basis, reconcile cash of the Funds with the Funds' custodian and/or prime brokerage
account(s).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Transmit a copy of the Funds' portfolio valuations to the Funds' investment adviser(s) daily.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Review the impact of current day's activity on a per share basis, and review changes in market value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Expense Accrual and Payment Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. For each Valuation Date, monitor the expense accrual amounts as directed by the Funds as to methodology, rate
or dollar amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Process and record payments for Fund expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Account for Fund expenditures and maintain expense accrual balances at the level of accounting detail, as
agreed upon by USBGFS and the Trust.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Provide expense accrual and payment reporting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. NAV Calculation and Financial Reporting Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Account for Fund share purchases, sales, exchanges, transfers, dividend reinvestments, and other Fund share
activity as reported by the Funds' transfer agent on a timely basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Apply equalization accounting as directed by the Funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Determine net investment income (earnings) for the Funds as of each Valuation Date. Account for periodic
distributions of earnings to shareholders and maintain undistributed net investment income balances as of each Valuation Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Determine the net asset value of the Funds according to the accounting policies and procedures set forth in
each Fund's current Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Calculate per share net asset value, per share net earnings, and other per share amounts reflective of Fund
operations at such time as required by the nature and characteristics of the Funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Communicate to the Funds, at an agreed upon time, the per share net asset value for each Valuation Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Prepare monthly reconciliations of sub-ledger reports to month-end ledger balances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Prepare monthly security transactions listings for each Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Tax Accounting Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Maintain accounting records for the investment portfolio of the Funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Maintain tax lot detail for each Fund's investment portfolio.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Calculate taxable gain/loss on security sales using the tax lot relief method designated by the Funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Provide the necessary financial information to calculate the taxable components of income and capital gains
distributions to support tax reporting to the shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Audit Support Services

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Support reporting to regulatory bodies and financial statement preparation by making the Funds'
accounting records available to the Funds, the SEC, and the Funds' independent registered public accounting firm (" <u>IRPAF</u> "), in each case as requested by a Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Perform its duties hereunder in compliance with all applicable laws and regulations and provide any sub-certifications reasonably requested by the Funds in connection with any certification required of a Fund pursuant to the SOX Act or any rules or regulations promulgated by the SEC thereunder, provided the same
shall not be deemed to change USBGFS' standard of care as set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Cooperate with the Funds' IRPAF and take all reasonable action in the performance of its obligations
under this Agreement to ensure that the necessary information is made available to such IRPAF for the expression of their opinion on the Funds' financial statements, without any qualification as to the scope of their examination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. If the Trust so elects, USBGFS shall provide the Rule 2a-5 supplemental
services described on, and subject to the terms and conditions of, <u>Exhibit F</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. If the Trust so elects, USBGFS shall provide the Rule 18f-4 supplemental services described on, and subject to the terms and conditions of, <u>Exhibit G</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;III. Transfer Agent, Shareholder & Account Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Maintain records of the accounts for each Fund shareholder including the following information: (i) name,
address and United States Tax Identification or Social Security number; (ii) number and class of shares held and number and class of shares for which certificates, if any, have been issued, including certificate numbers and denominations;
(iii) historical information regarding the account of each shareholder, including dividends and distributions paid and the date and price for all transactions on a shareholder's account; (iv) any stop or restraining order placed
against a shareholder's account; (v) any correspondence relating to the current maintenance of a shareholder's account; and (vi) Information with respect to tax withholdings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Receive and process all orders for transactions of shares in accordance with applicable statutes, rules and
regulations under the 1940 Act and other relevant law, and as specified in the Fund's Prospectus and statement of additional information (or similar disclosure documents) as filed from time to time with the SEC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Process purchase and redemption orders with prompt delivery, where appropriate, of payment and supporting
documentation to the shareholder based on the shareholder's or the Fund's custodian instructions, and record the

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appropriate number of shares being held in the appropriate shareholder account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Process redemption requests received in good order and, where relevant, deliver appropriate documentation to
the Fund's custodian. Calculate and impose any redemption or exchange fees as may be applicable under the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Pay proceeds upon receipt from the Fund's custodian, where relevant, in accordance with the instructions
of redeeming shareholders and the terms of the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. Process transfers of shares in accordance with the shareholder's instructions, after receipt of
appropriate documentation from the shareholder as specified in the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. Process exchanges between Funds and/or conversions between shares classes of Funds in accordance with the
procedures described in the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. Prepare and transmit payments, or apply reinvestments for income dividends and capital gains distributions
declared by the Trust with respect to a Fund, after deducting any amount required to be withheld by any applicable laws, rules and regulations and in accordance with shareholder instructions and the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. Serve as the Fund's agent in connection with systematic plans including systematic investment plans,
systematic withdrawal plans, and systematic exchange plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. Maintain and make changes to shareholder records, including account names, addresses and investment or
withdrawal plans (e.g., systematic investment and withdrawal and dividend reinvestment), upon presentation of proper documentation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;K. Handle sales load and multi-class transaction processing, including rights of accumulation and purchases by
letters of intent, in each case in accordance with the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;L. Record the issuance of shares of the Funds and maintain, pursuant to Rule 17Ad-10(e) promulgated under the Exchange Act, a record of the total number of shares of each Fund which are authorized, issued and outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M. Prepare ad-hoc reports as necessary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N. Assist with mailing shareholder reports, Prospectuses and all other communications to shareholders required to
be sent by the 1940 Act and the

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rules and regulations thereunder to all current shareholders of record, at intervals required by applicable law, including the 1940 Act and the rules and regulations thereunder or at the request of the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;O. Collect counts from the record shareholders who are themselves financial intermediaries with clients who are
Fund shareholders of beneficial interest (the " <u>Beneficial Shareholders</u> ") and assist such financial intermediaries to provide an adequate number of Prospectuses, shareholder reports and all other communications to Beneficial
Shareholders required to be sent by applicable law, including the 1940 Act and the rules and regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P. Prepare and file U.S. Treasury Department Forms 1099, 5498 and other appropriate information returns required
with respect to dividends and distributions for all shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Q. Provide shareholder account information upon shareholder or Fund requests and prepare and mail confirmations
and statements of account to shareholders for all purchases, redemptions and other confirmable transactions as agreed upon with the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R. Provide to the Trust, promptly upon request, the Taxpayer Identification Number or other identifying
information of any shareholder that purchased, redeemed, transferred or exchanged shares of the Funds, and the amount and dates of such shareholder purchases, redemptions, transfers, and exchanges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S. Assist in monitoring shareholder transaction activity for the purposes of identifying transaction activity that
may be excessive to the Funds or their shareholders as outlined in the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T. Execute on any directly held investor account with the Transfer Agent any instructions from the Trust to
restrict or prohibit further purchases or exchanges of a Fund's shares by a shareholder of record who has been identified by the Trust as having engaged in transactions of a Fund's shares that violates applicable law or any policies
established by the Trust for the purposes of eliminating or reducing any dilution of the value of the outstanding securities issued by the Funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U. Mail and/or obtain shareholders' certifications under penalties of perjury and pay on a timely basis to
the appropriate federal or state authorities any taxes to be withheld on dividends and distributions paid by a Fund, all as required by applicable federal and state tax laws and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;V. Provide a daily report of the total number of shares of a Fund sold in each state to enable the Trust or its
agent to monitor such sales for blue sky law purposes.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;W. Answer telephone calls and correspondence from Fund shareholders, securities brokers and others relating to
USBGFS' duties hereunder within required time periods established by regulation and agreed-upon service levels (as applicable).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X. Reimburse a Fund each month for all material losses resulting from "as of" processing errors for
which USBGFS is responsible in accordance with USBGFS' "as of" processing guidelines.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Y. Calculate average assets held in shareholder accounts for purposes of paying Rule 12b-1 and/or shareholder servicing fees as directed by a Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Z. Provide service and support to financial intermediaries including trade placements, settlements and
corrections.

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| | |
|:---|:---|
| AA. | After receiving specific written authorization from an officer of the Trust, enter into an agreement on behalf of the Funds that appoints one or more designated financial intermediaries as agents of the Funds for the limited purpose of accepting orders for the purchase, exchange, and/or redemption of shares of the Funds in accordance with the Prospectus and Rule 22c-1 under the 1940 Act.  |

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| | |
|:---|:---|
| BB. | In the event (i) USBGFS directly receives a Legal Process Item (defined immediately below) that has been properly served, (ii) a Fund receives a Legal Process Item that has been properly served and delivers the Legal Process Item to USBGFS, or (iii) a Fund accepts service of a Legal Process Item that has not been properly served and delivers the Legal Process Item to USBGFS, USBGFS will act in accordance with any applicable written instructions or procedures in effect between the Trust and USBGFS. "<u>Legal Process Item</u>" means civil and criminal subpoenas, civil or criminal seizure or restraining orders, IRS and state tax authority civil or criminal notices including notices of lien or levy, writs of execution and other functionally equivalent legal process items directed at USBGFS or a Fund requiring that a particular action or actions be taken with respect to a current or former shareholder of a Fund or a Fund account of such a shareholder. USBGFS may in its reasonable discretion seek to limit or reduce by any reasonable means the scope and coverage of a Legal Process Item and seek extensions of the period to respond.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CC. USBGFS agrees to reasonably cooperate with and assist the Trust with the filing by the Trust or any Fund and/or
its respective officers and auditors of certifications or attestations as required by applicable law and will furnish such certifications and sub-certifications from relevant officers of USBGFS with respect to
the services and recordkeeping performed by USBGFS under this Agreement as the Trust shall reasonably request. USBGFS shall also make available to the Trust on an annual basis a copy of its SOC1 report.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DD. Provide the following administrative services for accounts that are (a) a Traditional, SEP, Roth, SIMPLE,
or other types of individual retirement account within the meaning of Section 408 of the Code, or (b) a " <u>CESA</u>," hereby defined to mean a Coverdell educational savings account within the meaning of Section 530 of the
Code (each, a " <u>Tax Advantaged Account</u> "), in each case only with respect to accounts for which a qualified affiliate of USBGFS is separately serving as the custodian (a " <u>Custodied Account</u> ") and to the extent the
particular administrative service is appropriate under the Code (as hereinafter defined), subject to applicable terms and conditions of the Code, this Agreement, appropriate written procedures, account documentation and a Fund's Prospectus:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Process instructions received in good order regarding contributions, including using contribution payments
actually received to purchase shares of a Fund and keep appropriate records of contributions for tax reporting purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Effect instructions for distributions received in good order and establish and maintain a record of the types
and reasons for distributions (e.g., attainment of age 59-1/2, disability, death, return of excess contributions);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Send blank designation of beneficiary forms to beneficial owners of Custodied Accounts
(" <u>Participants</u> ") and process designation of beneficiary forms completed and received from Participants in good order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Process instructions received in good order for exchanges of Fund shares, rollovers, direct rollovers,
conversions, reconversions, recharacterizations, return of excess contributions and transfers of assets (or the proceeds of liquidated assets) to a successor custodian or successor trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Upon receipt in good order of a notification of the death of a Participant, process transfers and distributions
in accordance with instructions received in good order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Prepare any annual reports or returns required to be prepared and/or filed by a custodian of Tax Advantaged
Accounts, including an annual fair market value report, Forms 1099R and 5498; and file same with the Internal Revenue Service and provide same to the Participant or Participant's beneficiary, as applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Perform applicable federal withholding and send to the Participant or Participant's beneficiary, as
applicable, any required annual notice regarding federal tax withholding; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Upon the receipt of a request to open a Custodied Account, provide appropriate account documentation to open
the Custodied Account and thereafter as necessary to maintain the Custodied Account in compliance with the Code.

The Trust, at the reasonable request of USBGFS and in accordance with all applicable provisions of the Code, shall assist the custodian to the Custodied Accounts to transfer said accounts to a successor custodian meeting all qualifications under the Code.

EE. If the Trust so elects, USBGFS shall provide the Digital Investor, Digital Investor Institutional, Vision Electronic Statement, Chat, and <u>INFORMA</u><sup>TM</sup> services described on, and subject to the terms and conditions of, <u>Exhibit H</u>.

FF. Mutual Fund Profile II Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Duties and Responsibilities of USBGFS for MFP II Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Input and maintain Fund data information into DTCC's MFP II services for the Trust as further described
below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Gather Fund data from the Trust and any other such applicable sources.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Input pertinent data into MFP II, including CUSIP numbers, account minimums, allowable social codes, blue sky
registered states, 12b-1 information, breakpoint linking rules, and other Fund information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Ongoing maintenance of existing data in MFP II, including adds/deletes, as necessary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Annual review of information in MFP II and remediation as needed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Notify the Trust of proposed additions, deletions, or revisions of data to be included in MFP II and release
such data for publication in MFP II after review and authorization by the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Assist the Trust in verifying the accuracy of any of the information entered into MFP II.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Duties and Responsibilities of the Trust for MFP II Services

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. The Trust shall furnish to USBGFS the data necessary to perform the services described herein at such times and
in such form as mutually agreed upon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The Trust shall review all data that USBGFS enters, deletes, or modifies in MFP II. The Trust shall provide
written confirmation to USBGFS that it has reviewed such entry, deletion, or modification, that such data is correct, and that it authorizes USBGFS to release such entry, deletion, or modification in MFP II. The parties acknowledge and agree that
USBGFS will not enter any data into MFP II, or make any deletions or modifications to data in MFP II, without such written authorization.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The Trust acknowledges that USBGFS is not responsible for determining or confirming the accuracy of the
information provided to USBGFS by third parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. USBGFS MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESSED OR IMPLIED, WITH RESPECT TO THE ACCURACY OF FUND DATA
RECEIVED, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OF SUCH INFORMATION OR ITS FITNESS FOR A PARTICULAR PURPOSE.

**<u>ADDITIONAL AND SUPPLEMENTAL SERVICES</u>**

Any additional or supplemental services not listed above may be provided from time to time upon mutual agreement of the parties, subject in all cases to the terms and conditions of this Agreement. Any such additional or supplemental services shall be provided at the fees specified on <u>Exhibit C</u> or at USBGFS' then current standard rates for such services if not specified.

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**EXHIBIT C** 

**<u>Fees</u>**

Annual fee for Fund Administration based upon average assets per Direxion Funds and Direxion Shares ETF Trust, subject to an annual complex minimum of $1,000,000.

Direxion Funds and Direxion Shares ETF Trust together, except as noted\*:

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| | |
|:---|:---|
|  First $2 billion | 2.65 bps |
|  Next $2 billion | 2.4 bps |
|  Next $2 billion | 1.9 bps |
|  Next $2 billion | 1.4 bps |
|  Next $2 billion | 0.9 bps |
|  Balance | 0.85 bps |

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\*US Bancorp Fund Services will subtract from the asset levels any Direxion ETFs that are invested in any other Direxion ETF.

All contracted services, CCO fees, Legal service fees, board book fees, Gainskeeper fees, systems charges, 15c, performance delivery fees, and miscellaneous fees are included, except where noted below.

Extraordinary services or additional services/selections made after November 1, 2025, may be provided with agreed-upon costs.

Fees are calculated pro rata and billed monthly.

CPI will not apply.

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**<u>Fees Continued</u>**

Annual fee for Fund Accounting, Custody, and TA based upon average net assets per Fund, subject to an annual complex minimum of $30,000 per fund.

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| | |
|:---|:---|
|  First $250 million | 12bps |
|  Next $1 billion | 10 bps |
|  Next $3 billion | 8bps |
|  Next $3 billion | 7bps |
|  Balance | 5bps |

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All contracted services, shareholder activity fees, fulfillment charges, systems charges, NSCC charges, selects, telephone/VRU charges. Printing/mailing charges, dealer reclaim fees, file transmission charges, Informa fees, and miscellaneous fees will be waived unless otherwise listed below.

All transaction charges will be waived. Other miscellaneous fees will be waived unless otherwise listed below.

Extraordinary services or additional services/selections made after May 1, 2018, may be provided with agreed-upon costs. Global Custody fees, if any, are extra.

U.S. Bancorp Fund Services will not charge for services provided to third-party money markets provided as a shareholder (Transfer Agent) exchange vehicle but may capture revenue sharing payments in compensation for Transfer Agency services provided.

CPI will not apply,

SERVICE CHARGES TO INVESTORS: Shareholders who are subject to the following fees will be assessed for annual IRA maintenance fees, IRA transfer-to-successor fees, IRA distribution fees, refund of IRA excess contribution fees, outgoing wire fees, telephone exchange fees, returned check fees, stop payment fees, and account history research fees.

Fees are calculated pro rata and billed monthly, Custody fees will be billed by the Mutual Funds Billing Department.

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**EXHIBIT D** 

**<u>Required Provisions of Data Service Providers</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust shall use the Data solely for internal purposes and will not redistribute the Data in any form or
manner to any third party, except as may otherwise be expressly agreed to by the Data Provider.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust will not use or permit anyone else to use the Data in connection with creating, managing, advising,
writing, trading, marketing or promoting any securities or financial instruments or products, including, but not limited to, funds, synthetic or derivative securities (e.g., options, warrants, swaps, and futures), whether listed on an exchange or
traded over the counter or on a private-placement basis or otherwise or to create any indices (custom or otherwise).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust agrees that it shall (a) comply with all laws, rules and regulations applicable to accessing
and using the Data, (b) not use the Data for any purpose independent of those for which it is provided by the Data Provider, and (c) exculpate the Data Provider, its affiliates and their respective suppliers from any liability or
responsibility of any kind relating to the Trust's receipt or use of the Data (including expressly disclaiming all warranties).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust will treat the Data as proprietary to the Data Provider. Further, the Trust shall acknowledge that
the Data Provider is the sole and exclusive owners of the Data and all trade secrets, copyrights, trademarks and other intellectual property rights in or to the Data.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust will not (i) copy any component of the Data, (ii) alter, modify or adapt any component of
the Data, including, but not limited to, translating, decompiling, disassembling, reverse engineering or creating derivative works, or (iii) make any component of the Data available to any other person or organization (including, without
limitation, the Trust's present and future parents, subsidiaries or affiliates) directly or indirectly, for any of the foregoing or for any other use, including, without limitation, by loan, rental, service bureau, external time sharing or
similar arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust shall reproduce on all permitted copies of the Data all copyright, proprietary rights and
restrictive legends appearing on the Data.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust shall assume the entire risk of using the Data and shall agree to hold the Data Providers harmless
from any claims that may arise in connection with any use of the Data by the Trust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust acknowledges that the Data Providers may, in their sole and absolute discretion and at any time,
terminate USBGFS' right to receive and/or use the Data.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The Trust acknowledges and agrees that the Data Providers are third party beneficiaries of the agreements
between the Trust and USBGFS with respect to the provision of the Data, entitled to enforce all provisions of such agreements relating to the Data.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● THE DATA IS PROVIDED TO THE TRUST ON AN "AS IS" BASIS. USBGFS, ITS INFORMATION PROVIDERS, AND ANY
OTHER THIRD PARTY INVOLVED IN OR RELATED TO THE MAKING OR COMPILING OF THE DATA MAKE NO REPRESENTATION OR WARRANTY OF ANY KIND, EITHER EXPRESS OR

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IMPLIED, WITH RESPECT TO THE DATA (OR THE RESULTS TO BE OBTAINED BY THE USE THEREOF). USBGFS, ITS INFORMATION PROVIDERS AND ANY OTHER THIRD PARTY INVOLVED IN OR RELATED TO THE MAKING OR COMPILING OF THE DATA EXPRESSLY DISCLAIM ANY AND ALL IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, COMPLETENESS, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. <br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● THE TRUST ASSUMES THE ENTIRE RISK OF ANY USE THE TRUST MAY MAKE OF THE DATA. IN NO EVENT SHALL USBGFS, ITS
INFORMATION PROVIDERS OR ANY THIRD PARTY INVOLVED IN OR RELATED TO THE MAKING OR COMPILING OF THE DATA, BE LIABLE TO THE TRUST, OR ANY OTHER THIRD PARTY, FOR ANY DIRECT OR INDIRECT DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, LOST
SAVINGS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR THE INABILITY OF THE TRUST TO USE THE DATA, REGARDLESS OF THE FORM OF ACTION, EVEN IF USBGFS, ANY OF ITS INFORMATION PROVIDERS, OR ANY OTHER THIRD PARTY INVOLVED
IN OR RELATED TO THE MAKING OR COMPILING OF THE DATA HAS BEEN ADVISED OF OR OTHERWISE MIGHT HAVE ANTICIPATED THE POSSIBILITY OF SUCH DAMAGES.

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**EXHIBIT E** 

**<u>Digital Board Materials</u>**

**[RESERVED]** 

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**EXHIBIT F** 

**<u>Rule 2a-5 Supplemental Services</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If the Trust elects to receive the Rule 2a-5 Supplemental Services,
USBGFS shall provide the following services to the Funds (the "Rule 2a-5 Supplemental Services"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Price Comparison Report

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The Price Comparison Report is a monthly report showing prices from an alternative source chosen by USBGFS
for certain instruments held by a Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Back-testing and Calibration Report

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The Back-testing and Calibration Report shows (a) the actual buy price for certain instruments held by
a Fund compared to the next price used for such instrument in the Fund's NAV and (b) the actual sale price of certain instruments held by a Fund compared to the prior price used for such instrument in the Fund's NAV.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Adviser Valuation Oversight Report

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The Adviser Valuation Oversight Report is graphic overview of the Fund's assets, the pricing sources
used by the Fund, the types of prices used, and the preliminary fair value leveling utilized for Form NPORT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The availability of the Rule 2a-5 Supplemental Services and the
associated fees are subject to USBGFS' ability to obtain comparison prices from its chosen comparison third-party pricing sources at reasonable cost. The reports provided as part of the Rule 2a-5 Supplemental Services may, in USBGFS' sole discretion, exclude information for instruments for which an alternative comparison price is unavailable or difficult or costly to obtain. In addition, the reports provided may cease to include
instruments that were previously included if alternative prices are no longer available from third-party sources or if the fees for such alternative prices rise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The alternative pricing information provided in the Rule 2a-5 Supplemental Services is intended for comparison purposes only. THE TRUST IS RESPONSIBLE FOR SELECTING THE PRICING SOURCES USED FOR EACH INSTRUMENT HELD BY EACH FUND FOR CALCULATING THE FUND'S NET ASSET VALUE, FOR DETERMINING THE APPROPRIATE
PRICING METHODOLOGIES USED BY EACH FUND, AND FOR DETERMINING THAT THE PRICES USED FOR EACH INSTRUMENT ARE APPROPRIATE. USBGFS shall not have any obligation to verify the accuracy or appropriateness of any prices, evaluations, market quotations, or
other data or pricing related inputs received from the Trust, the Fund, any of their affiliates, or any third-party source. Notwithstanding anything else in this Addendum or the Agreement to

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the contrary, USBGFS and its affiliates shall not be responsible or liable for any mistakes, errors, or mispricing, or any losses related thereto, resulting from any inaccurate, inappropriate, or fraudulent prices, evaluations, market quotations, or other data or pricing related inputs received from the Trust, the Fund, any of their affiliates, or any third-party source. <br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. USBGFS shall only include pricing comparison information in the Rule 2a-5 Supplemental Services from third-party sources. USBGFS shall not be responsible for (i) providing any discretionary or subjective valuation of any instrument, (ii) providing any pricing
information not available from a third-party source, (iii) providing any recommendation or opinion on whether a primary price or a comparison price is appropriate, or (iv) determining the appropriate pricing source for any instrument.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Trust acknowledges that it is responsible for determining the suitability and applicability of the
information obtained through the Rule 2a-5 Supplemental Services. USBGFS MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESSED OR IMPLIED, WITH RESPECT TO THE SUITABILITY AND ACCURACY OF INFORMATION PROVIDED IN
THE RULE 2a-5 SUPPLEMENTAL SERVICES.

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**EXHIBIT G** 

**<u>SEC Derivatives Rule 18f-4 Supplemental Services</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. USBGFS has entered into agreements with Confluence Technologies ("Confluence") to provide data
(the "Confluence Data") and access for the Trust to Confluence's web platform ("Platform") for use in or in connection with the compliance and reporting requirements under the Rule (the "Rule 18f-4 Supplemental Services").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. In connection with the provision of the Confluence Data and access to the Platform, Confluence requires
certain provisions to be included in the Agreement. Accordingly, the Trust agrees that it shall (a) comply with all laws, rules and regulations applicable to accessing and using the Confluence Data and Platform, (b) not use the Confluence
Data for any purpose independent of complying with the requirements of the Rule, (c) exculpate Confluence, its affiliates and their respective suppliers from any liability or responsibility of any kind relating to the Trust's receipt or
use of the Confluence Data (including expressly disclaiming all warranties). The Trust further agrees that Confluence shall be a third-party beneficiary of the Agreement solely with respect to the foregoing provisions (a) – (c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Trust acknowledges that it is responsible for determining the suitability and accuracy of the
information obtained through its access to the Platform. USBGFS MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESSED OR IMPLIED, WITH RESPECT TO THE SUITABILITY AND ACCURACY OF FUND DATA, SYSTEMS, INDUSTRY INFORMATION AND PROCESSES ACCESSED THROUGH THE
PLATFORM.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. In the event of termination of the Rule 18f-4 Supplemental Services,
the Trust shall immediately end its access to the Platform and return all codes, system access mechanisms, programs, manuals and other written information to USBGFS, and shall, to the extent reasonably technically practicable and permitted by
applicable law, destroy or erase all such information on any storage medium, unless such access continues to be permitted pursuant to a separate agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Trust assumes exclusive responsibility for the consequences of any instructions it may give to USBGFS,
for failure to properly access the Platform in the manner prescribed by USBGFS, and for the Trust's failure to supply accurate and complete information to USBGFS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. The Trust must provide USBGFS with such information as is requested by USBGFS or Confluence to assist in
developing the Confluence Data needed for the Trust's obligations under the Rule. The Trust must provide USBGFS with such information as is necessary for USBGFS to provide the Trust with access to the Platform.

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**EXHIBIT H** 

**<u>Digital Investor, Digital Investor Institutional, Vision Electronic Statement Service, Chat</u>** 

**<u>and INFORMA<sup>TM</sup></u>** 

**1.** **Services and Definitions** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Internet Access – Internet access by Shareholders to their account information and investment transaction
capabilities (" <u>Internet Service</u> "). Internet Service is connected directly to the Fund group's web site(s) through a transparent hyperlink. To the extent offered by the Trust, Shareholders can access, among other information,
account information and portfolio holdings within the Funds, view their transaction history, and purchase additional shares through the Automated Clearing House (" <u>ACH</u> ").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. " <u>Informa</u> <sup>TM</sup>" means the system made
available through DST Output, a wholly owned subsidiary of DST Systems, Inc. (" <u>DST</u> ") known as "Informa<sup>TM</sup>"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. " <u>INFORMA Services</u> " means the services that enable DST to make available certain data from
DST's TA2000<sup>®</sup> mutual fund record-keeping systems through the Internet to authorized Users available to consenting end-users (" <u>User</u> ", as defined below) through the systems known as Digital Investor or Digital Investor Institutional (as defined below), whereby certain electronic statements
(" <u>E-Statements</u> ", as further defined below) may be searched, viewed, downloaded and printed. INFORMA Services also include notification to the end-user of the availability of E-Statements and storage of E-Statement documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. " <u>E-Statement</u> " means an electronic version of daily
confirms, monthly, quarterly or annual statements, and shareholder tax statements created with investor transaction data housed on DST's TA2000<sup>®</sup> mutual fund record keeping system, with
images available online via a secure web site.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. " <u>Vision Electronic Statement Services</u> " – Online account access for broker/dealers,
financial planners, and registered investment advisers (" <u>RIAs</u> ").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. " <u>Chat</u> " – A web-based system to permit
Shareholders to engage customer service agents through Internet chat. Services offered through chat are the same as through telephone servicing and include account information, transaction history, account maintenance, purchase, liquidation, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. " <u>Digital Investor</u> " – An internet portal for Shareholder access

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. " <u>Digital Investor Institutional</u> " – An internet portal for Institutional Shareholder
access

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. " <u>Electronic Services</u> " shall consist of those services set out in paragraph A through H
above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. " <u>End User(s)</u> " or " <u>User(s)</u> " means the consenting person(s) to whom
Electronic Services are made available.

**2.** **Duties and Responsibilities of USBGFS** 

USBGFS shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Make the Internet Service available 24 hours a day, 7 days a week, subject to scheduled maintenance and events
outside of USBGFS' reasonable control. Unless an emergency is encountered, no routine maintenance will occur during the hours of 8:00 a.m. to 3:00 p.m. Central Time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Provide installation services for Electronic Services, which shall include review and approval of the
Trust's network requirements, recommending method of establishing (and, as applicable, cooperate with the Fund to implement and maintain) a hypertext link between the Electronic Services site and the Fund's web site(s) and testing the
network connectivity and performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Maintain and support the Electronic Services, which shall include providing error corrections, minor
enhancements and interim upgrades to the Electronic Services that are made generally available to the Electronic Services customers and providing help desk support to provide assistance to the Trust's officers and agents with their use of the
Electronic Services. Maintenance and support, as used herein, shall not include (i) access to or use of any substantial added functionality, new interfaces, new architecture, new platforms, new versions or major development efforts, unless made
generally available by USBGFS to the Electronic Services customers, as determined solely by USBGFS or (ii) maintenance of customized features.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Establish systems to guide, assist and permit End Users (as defined above) who access the Electronic Services
from the Trust's web site(s) to electronically perform inquiries and create and transmit transaction requests to USBGFS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Address and mail, at each applicable Fund's expense, notification and promotional mailings and other
communications provided by the Fund to shareholders regarding the availability of the Electronic Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. Prepare and process new account applications received through the Internet Service from Shareholders determined
by a Fund to be eligible for such services and in connection with such, the Fund agrees to permit the establishment of Shareholder bank account information over the Internet in order to facilitate purchase activity through ACH.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. Provide the End User with a transaction confirmation number for each completed purchase, redemption, or
exchange of the applicable Fund's shares upon completion of the transaction. Transactions are not considered in good order, and will not be processed, until the entry of the trade and proper authorization has been completed. If order entry or
authorization occur after market close the transaction will be posted and receive the Net Asset Value for the next business day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. Informa, Digital Investor, Digital Investor Institutional, Vision, and E-Statement are provided by a third party (" <u>Third Party Electronic Services</u> "). Third Party Electronic Services utilize commercially reasonable encryption and secure transport protocols
intended to prevent fraud and ensure confidentiality of End User accounts and transactions. USBGFS will take commercially standard actions, including periodic scans of Internet interfaces and the Electronic Services, to protect the Internet web
site(s) that provide the Electronic Services and related network(s), against viruses, worms and other data corruption or disabling devices, and unauthorized, fraudulent or illegal use, by using appropriate anti-virus and intrusion detection software
and by adopting such other security procedures as may be necessary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. Inform the Trust promptly of any malfunctions, problems, errors or service interruptions with respect to the
Electronic Services of which USBGFS becomes aware.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. Exercise reasonable efforts to maintain all on-screen disclaimers and
copyright, trademark and service mark notifications, if any, provided by the Trust to USBGFS in writing from time to time, and all "point and click" features of the Electronic Services relating to Shareholder acknowledgment and
acceptance of such disclaimers and notifications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;K. Establish and provide to the Trust written procedures, which may be amended from time to time by USBGFS with
the written consent of the Trust, regarding End User access to the Electronic Services and that are reasonably designed to protect the security and confidentiality of information relating to the Funds and End Users.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;L. Provide the Funds with daily reports of transactions listing all purchases or transfers made by each End User
separately. USBGFS shall also furnish the Funds with monthly reports summarizing shareholder inquiry and transaction activity without listing all transactions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M. Annually engage a third party to audit its internal controls for the Electronic Services and compliance with
all guidelines for the Electronic Services included herein and provide the Trust with a copy of the auditor's report promptly.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N. Maintain its systems and perform its duties and obligations hereunder in accordance with all applicable laws,
rules and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;O. Be responsible for timely and adequately notifying User via e-mail that
the User's E-Statement is available at the appropriate Internet site.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P. Ensure the E-Statement is available for the User on the Fund's
Internet site for a minimum period of twenty-four (24) months after delivery.

**3.** **Duties and Responsibilities of the Trust** 

The Fund or the End User, respectively, assume exclusive responsibility for the consequences of any instructions it may give to USBGFS, its own failure to properly access the Electronic Services in the manner prescribed by USBGFS, and its failure to supply accurate information to USBGFS.

The Trust or a Fund, as applicable, shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Revise and update the applicable Prospectus(es) and other pertinent materials including, without limitation,
the fund's website(s), and obtain all necessary consents and agreements with respect to the Electronic Services (such as user agreements with End Users), to include the appropriate consents, notices and disclosures for Electronic Services,
including disclaimers and information reasonably requested by USBGFS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Be responsible for designing, developing and maintaining one or more web sites for the Funds through which End
Users may access the Electronic Services, including provision of software necessary for access to the Internet, which must be acquired from a third party vendor. Such web sites shall have the functionality necessary to facilitate, implement and
maintain the hypertext links to the Electronic Services and the various inquiry and transaction web pages. The Funds shall provide USBGFS with the name of the host of the Funds' web site server and shall notify USBGFS of any change to the
Funds' web site server host.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Provide USBGFS with such information and/or access to the Funds' web site(s) as is necessary for USBGFS
to provide the Electronic Services to End Users.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Promptly notify USBGFS of any problems or errors with the applicable Electronic Services of which the Trust
becomes aware or any changes in policies or procedures of the Fund requiring changes to the Electronic Services.

**4.** **Additional Representations and Warranties** 

The parties hereby warrant that neither party shall knowingly insert into any interface, other software, or other program provided by such party to the other hereunder, or accessible through the Electronic Services or Funds' web site(s), as the case may be, any "back door," "time bomb," "Trojan Horse," "worm," "drop dead device," "virus" or other

------

computer software code or routines or hardware components designed to disable, damage or impair the operation of any system, program or operation hereunder. For failure to comply with this warranty, the non-complying party shall immediately replace all copies of the affected work product, system or software. All costs incurred with replacement including, but not limited to, cost of media, shipping, deliveries and installation, shall be borne by such party.

**5.** **Proprietary Rights** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Each party acknowledges and agrees that it obtains no rights in or to any of the software, hardware, processes,
trade secrets, proprietary information or distribution and communication networks of the other hereunder. Any software, interfaces or other programs a party provides to the other hereunder shall be used by such receiving party only in accordance
with the provisions of this <u>Exhibit H</u>. Any interfaces, other software or other programs developed by one party shall not be used directly or indirectly by or for the other party or any of its affiliates to connect such receiving party or any
affiliate to any other person, without the first party's prior written approval, which it may give or withhold in its sole discretion. Except in the normal course of business and in conformity with Federal copyright law or with the other
party's consent, neither party nor any of its affiliates shall disclose, use, copy, decompile or reverse engineer any software or other programs provided to such party by the other in connection herewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The Funds' web site(s) and the Electronic Services may contain certain intellectual property, including,
but not limited to, rights in copyrighted works, trademarks and trade dress that is the property of the other party. Each party retains all rights in such intellectual property that may reside on the other party's web site, not including any
intellectual property provided by or otherwise obtained from such other party. To the extent the intellectual property of one party is cached to expedite communication, such party grants to the other a limited, non-exclusive, non-transferable license to such intellectual property for a period of time no longer than that reasonably necessary for the communication. To the extent
that the intellectual property of one party is duplicated within the other party's web site to replicate the "look and feel," "trade dress" or other aspect of the appearance or functionality of the first site, that
party grants to the other a limited, non-exclusive, non-transferable license to such intellectual property for the period during which this <u>Exhibit C</u> is in
effect. This license is limited to the intellectual property needed to replicate the appearance of the first site and does not extend to any other intellectual property owned by the owner of the first site. Each party warrants that it has sufficient
right, title and interest in and to its web site and its intellectual property to enter into these obligations, and that to its knowledge, the license hereby granted to the other party does not and will not infringe on any U.S. patent, copyright or
other proprietary right of a third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Each party agrees that the nonbreaching party would not have an adequate remedy at law in the event of the
other party's breach or threatened breach of its

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obligations under this Section of this <u>Exhibit H</u> and that the nonbreaching party would suffer irreparable injury and damage as a result of any such breach. Accordingly, in the event either party breaches or threatens to breach the obligations set forth in this Section of this <u>Exhibit H</u>, in addition to and not in lieu of any legal or other remedies a party may pursue hereunder or under applicable law, each party hereby consents to the aggrieved party seeking equitable relief (including the issuance of a temporary restraining order, preliminary injunction or permanent injunction) against it by a court of competent jurisdiction, without the necessity of proving actual damages or posting any bond or other security therefor, prohibiting any such breach or threatened breach. In any proceeding upon a motion for such equitable relief, a party's ability to answer in damages shall not be interposed as a defense to the granting of such equitable relief. The provisions of this Section relating to equitable relief shall survive termination of the provision of services set forth in this <u>Exhibit H</u>. <br>

**6.** **Compensation** 

USBGFS shall be compensated for providing the Electronic Services selected by the Trust from time to time in accordance with the fee schedule set forth in <u>Exhibit C</u> (as amended from time to time).

**7.** **Additional Indemnification; Limitation of Liability** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. Subject to <u>Section</u> <u>2</u> of this Exhibit, USBGFS CANNOT AND DOES NOT GUARANTEE
AVAILABILITY OF THE ELECTRONIC SERVICES. Accordingly, USBGFS' sole liability to the Trust, a Fund, or any third party (including End Users) for any claims, notwithstanding the form of such claims (e.g., contract, negligence, or otherwise),
arising out of the delay of or interruption in the Electronic Services to be provided by USBGFS hereunder shall be to use its best efforts to commence or resume the Electronic Services as promptly as is reasonably possible, so long as the delay or
interruption was not the proximate result of USBGFS's gross negligence or willful misconduct.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. USBGFS shall, at its sole cost and expense, defend, indemnify, and hold harmless the Trust, each Fund and their
trustees, officers, agents, and employees from and against any and all claims, demands, losses, expenses and liabilities of any and every nature (including reasonable attorneys' fees) arising out of or relating to any infringement, or claim of
infringement, of any United States patent, trademark, copyright, trade secret, or other proprietary rights based on the use or potential use of the Electronic Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. If an injunction is issued against the Trust or a Fund's use of the Electronic Services by reason of
infringement of a patent, copyright, trademark, or other proprietary rights of a third party, USBGFS shall, at its own option and expense, either (i) procure for the Trust or Fund the right to continue to use the Electronic Services on
substantially the same terms and conditions as specified hereunder, or (ii) after notification to the Trust or Fund, replace or modify the Electronic

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Services so that they become non-infringing, provided that, in the Trust's judgment, such replacement or modification does not materially and adversely affect the performance of the Electronic Services or significantly lessen their utility to the Fund. If in the Trust's judgment, such replacement or modification does materially adversely affect the performance of the Electronic Services or significantly lessen their utility to the Trust or Fund, the Trust may terminate all rights and responsibilities under this <u>Exhibit H</u> immediately on written notice to USBGFS. <br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Because the ability of USBGFS to deliver Electronic Services is dependent upon the Internet and equipment,
software, systems, data and services provided by various telecommunications carriers, equipment manufacturers, firewall providers and encryption system developers and other vendors and third parties, USBGFS shall not be liable for delays or failures
to perform its obligations hereunder to the extent that such delays or failures are attributable to circumstances beyond its reasonable control which interfere with the delivery of the Electronic Services by means of the Internet or any of the
equipment, software and services which support the Internet provided by such third parties. USBGFS shall also not be liable for the actions or omissions of any third party wrongdoers (i.e., hackers not employed by USBGFS or its affiliates) that
cause a disruption of the Electronic Services, unless USBGFS did not exercise reasonable care in following commercial standards to protect the Electronic Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. USBGFS shall not be responsible for the accuracy of input material from End Users nor the resultant output
derived from inaccurate input.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. Certain Electronic Services may permit the Trust or the Fund to provision End Users. If the Trust or the Fund
undertake to provision End Users, the Trust or the Fund, as applicable, shall be solely responsible for providing access to End Users, removing access for End Users, and for maintaining appropriate safeguards over access credentials for End Users.
USBGFS shall not be responsible for any unauthorized or improper use of the Electronic Services by such End Users or by any other person accessing the Electronic Services through the action or inaction of the Trust, the Fund, or such End Users.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. Notwithstanding anything to the contrary contained herein, USBGFS shall not be obligated to ensure or verify
the accuracy or actual receipt, or the transmission, of any data or information contained in any transaction via the Electronic Services or the consummation of any inquiry or transaction request not actually reviewed by USBGFS. USBGFS is entitled to
reasonably presume that all information and transaction requests submitted through the Electronic Services are genuine in the absence of actual information to the contrary. USBGFS will not be liable for any loss, liability, cost or expense for
reasonably following instructions communicated through the Electronic Services, including fraudulent or unauthorized instructions.

------

**8.** **Warranties** 

EXCEPT AS OTHERWISE PROVIDED IN THIS EXHIBIT, THE ELECTRONIC SERVICES ARE PROVIDED BY USBGFS "AS IS" ON AN "AS-AVAILABLE" BASIS WITHOUT WARRANTY OF ANY KIND, AND USBGFS EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE ELECTRONIC SERVICES INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.

**9.** **Duties in the Event of Termination** 

In the event of termination of the services provided pursuant to this <u>Exhibit H</u>, (i) End Users will no longer be able to access the Electronic Services and (ii) the applicable Funds will, to the extent reasonably technically practicable and permitted by applicable law, return all codes, system access mechanisms, programs, manuals and other written information provided to it by USBGFS in connection with the Electronic Services provided hereunder, and shall destroy or erase all such information on any diskettes or other storage medium, except to the extent a Fund is required to keep copies of such records under applicable law.

## Ex-99.(H)(Iv)(C)

**APPENDIX A** 

**Amended and Restated** 

**Operating Expense Limitation Agreement** 

**Direxion Funds** 

Rafferty Asset Management, LLC ("RAM") has contractually agreed to cap all or a portion of its management fee and/or reimburse each Fund listed below for Other Expenses through September 1, 2027, to the extent that a Fund's Total Annual Fund Operating Expenses exceeds a Fund's daily net assets as listed below.

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| | |
|:---|:---|
| **Investor Class Shares** | **Investor Class Shares** |
| **Fund** | **Expense Cap** |
|  Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund | 1.35% |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund | 1.35% |
|  Direxion Monthly Small Cap Bull 1.75X Fund | 1.35% |
|  Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | 1.35% |
|  Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund | 1.35% |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund | 1.15% |
|  Direxion Monthly High Yield Bull 1.2X Fund | 1.35% |

---

Dated: August 20, 2025

## Ex-99.(H)(V)(B)

**APPENDIX A** 

**Amended and Restated** 

**Operating Expense Limitation Agreement** 

**Direxion Funds – Hilton Tactical Income Fund** 

Rafferty Asset Management, LLC ("RAM") has contractually agreed to waive all or a portion of its management fee and/or reimburse the Hilton Tactical Income Fund (the "Fund") for Other Expenses or will cause Hilton Capital Management, LLC to waive all or a portion of its subadvisory fee and/or reimburse the Fund for Other Expenses through September 1, 2027 or for as long as RAM serves as the investment adviser for the Fund, whichever is longer, to the extent that the Fund's Total Annual Fund Operating Expenses exceed the rate, expressed as a percentage of the Fund's average daily net assets, listed below.

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| | |
|:---|:---|
| **Investor Shares** | **Investor Shares** |
| **Fund** | **Expense Cap** |
|  Hilton Tactical Income Fund | 1.12% |
| **Institutional Class Shares** | **Institutional Class Shares** |
| **Fund** | **Expense Cap** |
|  Hilton Tactical Income Fund | 0.87% |

---

Dated: August 20, 2025

## Ex-99.(H)(Vi)(C)

**SCHEDULE A** 

**TO THE MANAGEMENT SERVICES AGREEMENT** 

**BETWEEN DIREXION FUNDS** 

**AND RAFFERTY ASSET MANAGEMENT, LLC** 

Effective November 1, 2024, Rafferty Asset Management, LLC shall be paid according to the annualized fee rate schedule listed in the table below for providing the services listed on Schedule B to the Direxion Funds (the "Trust"). The fee rate is applied to the aggregate average daily net assets of all series of the Trust and all series of the Direxion Shares ETF Trust collectively ("Complex Net Assets").

---

| | |
|:---|:---|
| <u>Complex Net Assets</u> | <u>Annualized Fee</u><br> <u>Rate</u> |
| First $25 billion | 0.05% |
| Over $25 billion to $50 billion | 0.0475% |
| Over $50 billion | 0.045% |

---

Effective November 1, 2024, RAM will pay on behalf of the Trust the fees that are due to U.S. Bancorp Fund Services, LLC ("USBFS") pursuant to the Fund Administration Serving Agreement between the Trust and USBFS.

**Direxion Funds** 

---

| |
|:---|
|  Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund |
|  Direxion Monthly Small Cap Bull 1.75X Fund |
|  Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund |
|  Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund |
|  Direxion Monthly High Yield Bull 1.2X Fund |
|  Hilton Tactical Income Fund |

---

Dated: August 20, 2025

## Ex-99.(I)

---

| | |
|:---|:---|
| ![LOGO](g58398dsp0001.jpg) | **K&L GATES LLP**<br>1601 K STREET, N.W.<br>WASHINGTON, DC 20006<br>T +1 202 778 9000 F +1 202 778 9100 klgates.com |

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December 23, 2025

Direxion Funds

1301 Avenue of the Americas (6th Avenue)

28th Floor

New York, NY 10019

Ladies and Gentlemen:

We have acted as counsel to Direxion Funds, a business trust formed under the laws of the Commonwealth of Massachusetts (the "<u>Trust</u>"), in connection with Post-Effective Amendment No. 208 (the "<u>Post</u><u>-Effective Amendment</u>") to the Trust's registration statement on Form N-1A (File Nos. 333-28697; 811-08243) (the "<u>Registration Statement</u>"), to be filed with the U.S. Securities and Exchange Commission (the "<u>Commission</u>") on or about December 23, 2025, registering an indefinite number of shares of beneficial interest in the series of the Trust listed on Schedule A to this opinion letter (the "<u>Shares</u>") under the Securities Act of 1933, as amended (the "<u>Securities Act</u>").

This opinion letter is being delivered at your request in accordance with the requirements of paragraph 29 of Schedule A of the Securities Act and Item 28(i) of Form N-1A under the Securities Act and the Investment Company Act of 1940, as amended (the "<u>Investment Company Act</u>").

For purposes of this opinion letter, we have examined originals or copies, certified or otherwise identified to our satisfaction, of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the prospectuses and statements of additional information (collectively, the
" <u>Prospectus</u> ") filed as part of the Post-Effective Amendment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the declaration of trust and bylaws of the Trust in effect on the date of this opinion letter; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the resolutions adopted by the trustees of the Trust relating to the Post-Effective Amendment, the
establishment and designation of the Shares of each series, and the authorization for issuance and sale of the Shares.

We also have examined and relied upon certificates of public officials and, as to certain matters of fact that are material to our opinions, we have relied on a certificate of an officer of the Trust. We have not independently established any of the facts on which we have so relied.

For purposes of this opinion letter, we have assumed the accuracy and completeness of each document submitted to us, the genuineness of all signatures on original documents, the authenticity

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![LOGO](g58398dsp0002.jpg)

December 23, 2025

of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified, conformed, or photostatic copies thereof, and the due execution and delivery of all documents where due execution and delivery are prerequisites to the effectiveness thereof. We have further assumed the legal capacity of natural persons, that persons identified to us as officers of the Trust are actually serving in such capacity, and that the representations of officers of the Trust are correct as to matters of fact. We have not independently verified any of these assumptions.

The opinions expressed in this opinion letter are based on the facts in existence and the laws in effect on the date hereof and are limited to the laws of the Commonwealth of Massachusetts and the provisions of the Investment Company Act that are applicable to equity securities issued by registered open-end investment companies. We are not opining on, and we assume no responsibility for, the applicability to or effect on any of the matters covered herein of any other laws.

Based upon and subject to the foregoing, it is our opinion that (1) the Shares to be issued pursuant to the Post-Effective Amendment, when issued and paid for by the purchasers upon the terms described in the Post-Effective Amendment and the Prospectus, will be validly issued, and (2) such purchasers will have no obligation to make any further payments for the purchase of the Shares or contributions to the Trust solely by reason of their ownership of the Shares, except that, as set forth in the Post-Effective Amendment and the Prospectus, shareholders of a Massachusetts business trust may under certain circumstances be held liable for its obligations.

This opinion is rendered solely in connection with the filing of the Post-Effective Amendment and supersedes any previous opinions of this firm in connection with the issuance of Shares. We hereby consent to the filing of this opinion with the Commission in connection with the Post-Effective Amendment and to the reference to this firm's name under the heading "Legal Counsel" in the Prospectus. In giving this consent, we do not thereby admit that we are experts with respect to any part of the Registration Statement or Prospectus within the meaning of the term "expert" as used in Section 11 of the Securities Act or the rules and regulations promulgated thereunder by the Commission, nor do we admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.

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| |
|:---|
| Very truly yours, |
| /s/ K&L Gates LLP |

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Schedule A

------

**<u>SCHEDULE A</u>**

**<u>Investor Class</u>**

Direxion Monthly High Yield Bull 1.2X Fund

Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund

Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund

Direxion Monthly NASDAQ-100<sup>®</sup> Bull 2X Fund

Direxion Monthly Small Cap Bull 1.75X Fund

Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund

Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund

Hilton Tactical Income Fund

**<u>Institutional Class</u>**

Hilton Tactical Income Fund

## Ex-99.(J)(I)

Consent of Independent Registered Public Accounting Firm

We consent to the references to our firm under the captions "Financial Highlights" in the Prospectuses and "Independent Registered Public Accounting Firm" in the Statements of Additional Information, each dated December 29, 2025, and each included in this Post-Effective Amendment No. 208 to the Registration Statement (Form N-1A, File No. 333-28697) of Direxion Funds (the "Registration Statement").

We also consent to the incorporation by reference of our report dated October 24, 2025, with respect to the financial statements and financial highlights of Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund, Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund, Direxion Monthly Small Cap Bull 1.75X Fund, Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund, Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund, Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund, Direxion Monthly High Yield Bull 1.2X Fund and Hilton Tactical Income Fund included in the Annual Report to Shareholders (Form N-CSR) for the year ended August 31, 2025, into this Post-Effective Amendment No. 208 to the Registration Statement (Form N-1A, File No. 333-28697), filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Minneapolis, MN

December 23, 2025

## Ex-99.(J)(Ii)

**POWER OF ATTORNEY** 

Each of the undersigned officers and trustees of the DIREXION FUNDS, a Massachusetts business trust (the "Trust"), hereby nominates, constitutes and appoints Angela Brickl, Patrick Rudnick, or Alyssa Sherman as his or her true and lawful attorney-in-fact and agent, for him or her and on his or her behalf and in his or her name, place and stead in any and all capacities, to make, execute and sign the Trust's registration statement on Form N-1A ("Registration Statement") under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and any and all amendments to such Registration Statement and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of the beneficial interest of the Trust, any such Registration Statement or amendment, and any and all supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Trust and the undersigned officers and trustees itself/themselves might or could do.

IN WITNESS WHEREOF, DIREXION FUNDS has caused this power of attorney to be executed in its name by its Chairman of the Board, and the undersigned officers and trustees have hereunto set their hands and seals at New York, New York on this 12<sup>th</sup> day of February, 2025.

---

| |
|:---|
|  DIREXION FUNDS |
|  By: <u>/s/ Daniel D. O'Neill</u>  |
|  Name: Daniel D. O'Neill, Chairman of the Board |

---

---

| | |
|:---|:---|
|  <u>Signature</u> | <u>Title</u> |
| <u>/s/ Daniel D. O'Neill</u> | Chairman of the Board |
|  Daniel D. O'Neill |  |
| <u>/s/ Angela Brickl</u> | Trustee |
|  Angela Brickl |  |
| <u>/s/ David L. Driscoll</u> | Trustee |
|  David L. Driscoll |  |
| <u>/s/ Kathleen M. Berkery</u> | Trustee |
|  Kathleen M. Berkery |  |
| <u>/s/ Mary Jo Collins</u> | Trustee |
|  Mary Jo Collins |  |
| <u>/s/ Carlyle Peake</u> | Trustee |
|  Carlyle Peake |  |
| <u>/s/ Bradley Kurtzman</u> | Trustee |
|  Bradley Kurtzman |  |
| <u>/s/ Patrick Rudnick</u> | Principal Executive Officer |
|  Patrick Rudnick |  |
| <u>/s/ Corey Noltner</u> | Principal Financial Officer |
|  Corey Noltner |  |

---

------

**VOTED:** that the officer and trustees of the Direxion Funds hereby nominate, constitute and appoint Angela Brickl, Patrick Rudnick, or Alyssa Sherman his or her true and lawful attorney in fact and agent, for his or her and on his or her behalf and in his or her name, place and stead in any and all capacities, to make, execute and sign the Direxion Funds' registration statement on Form N-1A (each, a "Registration Statement") under the Securities Act of 1933, and the Investment Company Act of 1940, and any and all amendments to such Registration Statement of the Direxion Funds, and to file with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of the shares of beneficial interest of the Direxion Funds, any such Registration Statement or amendments, and any and all supplements thereto or to any prospectus or statement of additional information forming a part thereof, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorney full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the Direxion Funds and its officers and trustees itself/themselves might or could do.

---

| |
|:---|
| <u>/s/ Alyssa Sherman</u> |
|  Alyssa Sherman |
|  Secretary of the Trust |
|  Dated: February 12, 2025 |

---

## Ex-99.(M)(I)(B)

**DIREXION FUNDS** 

**INVESTOR CLASS** 

**DISTRIBUTION PLAN** 

**SCHEDULE A** 

The maximum annualized fee rate pursuant to Paragraph 1 of the Direxion Funds Investor Class Distribution Plan shall be as follows:

---

| | |
|:---|:---|
| Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund |  |
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund |  |
| Direxion Monthly Small Cap Bull 1.75X Fund |  |
| Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund |
| Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund |  |
| Direxion Monthly High Yield Bull 1.2X Fund |  |
| Hilton Tactical Income Fund |  |

---

Up to 1.00% of the average daily net assets. The current authorized maximum annualized fee is 0.25% of average daily net assets.

Last Revised: August 20, 2025

## Ex-99.(N)(I)(B)

**DIREXION FUNDS** 

**Schedule A** 

**to the** 

**Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3** 

**<u>Investor Class</u>**

The Investor Class shares of these Funds may be subject to a Rule 12b-1 fee of up to 0.25% and a non-Rule 12b-1 shareholder services fee of up to 0.25%:

---

| | |
|:---|:---|
|  Direxion Monthly S&P 500<sup>®</sup> Bull 1.75X Fund |  |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.75X Fund |  |
|  Direxion Monthly Small Cap Bull 1.75X Fund |  |
|  Direxion Monthly 7-10 Year Treasury Bull 1.75X Fund | Direxion Monthly 7-10 Year Treasury Bear 1.75X Fund |
|  Direxion Monthly NASDAQ-100<sup>®</sup> Bull 1.25X Fund |  |
|  Direxion Monthly High Yield Bull 1.2X Fund |  |
|  Hilton Tactical Income Fund |  |

---

**<u>Service Class</u>**

The Service Class shares of these Funds may be subject to a Rule 12b-1 fee of up to 1.00%:

None

**<u>Institutional Class</u>**

The Institutional Class shares of these Funds are not subject to a Rule 12b-1 fee:

Hilton Tactical Income Fund

Direxion Monthly High Yield Bull 1.2X Fund

**<u>Class A</u>**

The Class A shares of these funds may be subject to a Rule 12b-1 fee of up to 0.25%:

None

**<u>Class C</u>**

The Class C shares of these Funds may be subject to a Rule 12b-1 fee of 1.00%:

None

Last Revised: August 20, 2025