June 30, 2010

Direxion to Reverse Split Four Leveraged ETFs

The shares of each ETF will be offered to shareholders on a split-adjusted basis on July 8, 2010.

In a move to protect shareholders, Boston-based Direxion Shares is planning a 1-for-5 reverse share split on four of its leveraged bear ETFs.

The funds are as follows:

--Direxion Daily Energy Bear 3x Shares (NYSEArca: ERY)
--Direxion Daily Real Estate Bear 3x Shares (NYSEArca: DRV)
--Direxion Daily Small Cap Bear 3x Shares (NYSEArca: TZA)
--Direxion Daily Technology Bear 3x Shares (NYSEArca: TYP)

Shareholders of record of the above ETFs on July 7, 2010, will participate in the reverse splits.

Inverse performing or bear ETFs are designed to increase in value when their underlying benchmarks decline.

As a result of the reverse splits, every five shares of each ETF will be exchanged for one share of the applicable ETF. The number of each ETF's issued and outstanding shares will decrease by approximately 80%, and the ETF's per share NAV will increase 5-fold at the opening of the markets on July 8, 2010.

The shares of each ETF will be offered on a split-adjusted basis on July 8, 2010. The total market value of the shares outstanding will not be affected as a result of this reverse split, except with respect to the redemption of fractional shares, as discussed below.

Here's a hypothetical example of how a 1-for-5 reverse split works:

An investor with 100 pre-split shares valued at $5 per share would have a $500 investment. Post-split, the investor would have 20 shares valued at $25 per share and a $500 investment.

Put another way, the 1-for-5 reverse split is neither a gain nor a loss for the investor. In this example, the investor has fewer shares at a higher share price but the investment's total value remains unchanged.

Currently, all of Direxion's ETFs use 300 percent daily leverage, meaning they attempt to triple the daily return or inverse return of their indexes. At the end of May, Direxion Shares managed $5.57 billion in assets.

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