U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 {X}
Pre-Effective Amendment No. __
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Post-Effective Amendment No. __
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 {X}
Amendment No. __
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(Check appropriate box or boxes)
HUSSMAN INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
3525 Ellicott Mills Drive, Suite B
Ellicott City, Maryland 21043
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (410) 750-3900
John F. Splain
Ultimus Fund Solutions, LLC
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: July 1, 2000
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date ) 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(b)
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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PROSPECTUS
____________, 2000
HUSSMAN STRATEGIC GROWTH FUND
FOR INVESTORS SEEKING LONG-TERM CAPITAL APPRECIATION,
WITH ADDED EMPHASIS ON CAPITAL PRESERVATION IN
UNFAVORABLE MARKET CONDITIONS
This Prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records. Although these securities
have been registered with the Securities and Exchange Commission, the Commission
has not approved or disapproved them for investment merit and has not passed on
the accuracy or adequacy of the information in this Prospectus. Anyone who
informs you otherwise is committing a criminal offense.
[logo] Hussman Investment Trust
For information or assistance in opening an account, please call Toll-Free
1-800-xxx-xxxx.
TABLE OF CONTENTS
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Risk/Return Summary............................................ x
Fees and Expenses.............................................. x
Investment Objective, Principal Strategies
and Related Risks............................................ x
Fund Management................................................ x
How the Fund Values Its Shares................................. x
How to Buy Shares.............................................. x
How to Redeem Shares........................................... x
Shareholder Services........................................... x
Dividends, Distributions and Taxes............................. x
For More Information........................................... x
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RISK/RETURN SUMMARY
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WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The HUSSMAN STRATEGIC GROWTH FUND seeks to provide long-term capital
appreciation, with added emphasis on capital preservation during unfavorable
market conditions.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Fund is designed for investors who want to participate in the stock market
while still being protected during unfavorable market climates. The Fund's
portfolio will typically be fully invested in common stocks favored by Hussman
Econometrics Advisors, Inc., the Fund's investment manager, although modest cash
balances may occasionally arise due to the day-to-day management of the
portfolio. As the market climate becomes unfavorable in the view of the
investment manager, the Fund will attempt to neutralize the market risk of the
portfolio by writing covered call options on securities within the portfolio, by
establishing short futures positions on one or more market indices closely
correlated with the Fund's portfolio, and/or by buying or selling options on
such market indices. The choice of indices used for hedging will vary based on
the securities held by the Fund from time to time, and the liquidity of futures
and options on such indices. The Russell 2000 Index, representing roughly
two-thirds of the actively traded stocks in the United States, has historically
been most closely correlated with Hussman's stock selection approach.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The principal risks of the Fund are the risks generally associated with
investing in stocks. Stock market movements will affect the Fund's share price
on a daily basis. Significant declines are possible both in the overall stock
market and in the specific securities held by the Fund. The market value of
common stocks can fluctuate significantly, reflecting such things as the
business performance of the issuing company, investors' perceptions of the
company or the overall stock market and general economic conditions.
The success of the Fund's investment strategy depends largely on the portfolio
manager's skill in assessing the potential of the securities in which the Fund
invests. Also, because the Fund's investment position at any given time will
range from aggressive to defensive depending on Hussman's current view of the
overall climate of the stock market, a significant factor affecting the Fund's
performance will be Hussman's ability through its proprietary models to identify
market conditions which are favorable or unfavorable. For example, if the Fund
has taken a defensive posture by hedging its portfolio, and stock prices advance
unexpectedly, the return to investors may be significantly lower than if the
portfolio had not been hedged. Alternatively, if the Fund has not hedged its
positions in a climate which has historically been favorable for stocks, an
unanticipated market decline may result in a negative return to investors.
It is not anticipated that the Fund will establish significant "net short"
positions. The techniques which will be used by the Fund in order to hedge its
portfolio are generally considered by Hussman to be conservative strategies but
involve certain risks. For example, a hedge might not actually correlate well to
the movements of the Fund's stock investments and may have unexpected or
undesired results, such as a loss or a reduction in gains.
The Fund is permitted to borrow money, or leverage, to buy additional securities
or to meet cash needs in the event of unanticipated redemptions. Although it is
not anticipated that the Fund will significantly leverage its portfolio under
normal market conditions, there may be circumstances, including unusually
favorable market conditions, under which the Fund could borrow in amounts up to
one-third of the value of its total assets. While borrowings are outstanding,
the Fund's share price could be subject to greater fluctuation and may decrease
more quickly than if the Fund had not borrowed.
Shares of the Fund will rise and fall in value and there is a risk that you
could lose money by investing in the Fund. There can be no assurance that the
Fund will achieve its investment objective.
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FEES AND EXPENSES
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This table describes the fees and expenses that you will pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
Sales Charge Imposed on Purchases None
Contingent Deferred Sales Charge None
Sales Charge Imposed on Reinvested Dividends None
Redemption Fee (as a percentage of the amount redeemed) x.x%
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fees 1.50%
Distribution (12b-1) Fees None
Other Expenses * 1.98%
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Total Annual Fund Operating Expenses 3.48%
Waivers and/or Expense Reimbursements ** 1.48%
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Net Expenses 2.00%
(*) Other Expenses are based on estimated expenses for the current fiscal year.
(**) Hussman has contractually agreed to waive a portion of its advisory fees or
reimburse a portion of the Fund's operating expenses so that the Fund's net
expenses do not exceed 2.00% until at least December 31, 2001.
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. It 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
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$203 $627
INVESTMENT OBJECTIVE, PRINCIPAL STRATEGIES AND RELATED RISKS
================================================================================
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation, with added emphasis on
capital preservation during unfavorable market conditions.
PORTFOLIO MANAGEMENT PROCESS
SECURITY SELECTION
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Individual stocks are chosen from the universe of all stocks traded on the New
York Stock Exchange, the American Stock Exchange, and the NASDAQ System.
Hussman's investment process involves the quantitative analysis of a company's
fundamentals - revenues, earnings, cash-flows, dividends, and balance sheet
information - coupled with a statistical analysis of the company's stock price
behavior. The price of a stock is driven both by fundamentals, and by the
"valuation multiple" applied to those fundamentals. For example, the price of a
share of stock may be identically written as the product of earnings and the
price/earnings multiple. The valuation multiple is determined by investors in
aggregate, increasing on upward revisions or "surprises" in expected future
growth, and declining when buyers demand a higher long-term rate of
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return as compensation for bearing risk. Capital appreciation requires either
growth in fundamentals, expansion in valuation multiples, or both.
Accordingly, Hussman's selection model generally seeks securities which are
expected to enjoy one or more of the following: 1) long-term growth in
fundamentals such as revenues, earnings, cash flows and dividends, 2) upward
revisions in expected future growth rates, and 3) downward revisions in the
long-term rate of return required by investors. To this end, Hussman believes
that the information contained in earnings, balance sheets and annual reports
represents only a fraction of what is known about a given stock. The price
behavior and trading volume of a stock may reveal additional information
regarding what other traders know. For example, positive earnings surprises are
generally followed and preceded by price strength. In addition to using
fundamental research, Hussman relies on statistical methods to infer as much
information as possible from the behavior of individual stock prices. THE FOCUS
IS TO BUY SECURITIES OF QUALITY COMPANIES EXHIBITING ATTRACTIVE RISK-ADJUSTED
VALUATION, AS WELL AS PRICE-VOLUME BEHAVIOR WHICH CONVEYS FAVORABLE INFORMATION
ABOUT FUTURE EARNINGS SURPRISES.
MARKET CLIMATE
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Unlike many investment managers, Hussman believes it is also critical to
explicitly attempt to limit the risk of major capital loss in high-risk market
conditions. During periods Hussman perceives as involving high-risk market
conditions, the Fund's portfolio will be hedged by using stock index futures,
options on stock indices or options on individual securities. Under extremely
negative market conditions, the Fund's portfolio may be fully hedged, or "market
neutral."
Hussman has developed a set of statistical models which combine "valuation" and
"trend uniformity" to define investment conditions. Applying these models, each
unique combination of valuation and trend uniformity produces a specific "Market
Climate", with its own average historical characteristics of expected return and
risk. The intent of the Fund is not to "predict" market direction. All of the
Market Climates defined by Hussman may experience short-term returns which are
both positive and negative. Rather, the intent of the Fund is to accept those
investment risks which are likely to be compensated by high returns on average,
while attempting to systematically avoid those risks which have historically not
been compensated.
Valuation (fundamental analysis) focuses on the relationship of today's price to
the expected stream of income or cash flows earned by a security over time.
Favorable valuation signifies the likelihood of growth in earnings, revenues,
dividends or distributable cash flows above consensus estimates, expected
increases in the ratio of prices to these "fundamentals", or both.
Trend Uniformity (technical analysis) focuses on the current market action of
prices, interest rates, and factors which drive prices toward or away from "fair
value." Favorable trend uniformity signifies a lack of significant divergences
in the internal action of the market, as measured by the proportion of
individual securities and industry groups participating in a bullish trend.
Hussman believes that the strongest returns will emerge when both valuations and
trend uniformity are extremely favorable. In historical data, much of the lowest
risk, highest return performance of the stock market has been associated with
these conditions. Even so, it is often difficult for investors to be aggressive
in this Market Climate, since prices are generally depressed and the economy is
often in the midst of a recession. This is an environment from which bull
markets frequently begin.
Hussman believes that the most severe market losses will emerge when both
valuations and trend uniformity are unfavorable. The historical frequency of
such negative Market Climates is quite low, occurring about 20% of the time. But
when both valuations and trend uniformity have been unfavorable, stocks have
historically generated poor returns, on average. Even so, it is often difficult
for investors to be defensive in this climate, since prices are generally near
all-time highs and the economy is often in the midst of a boom. This is an
environment from which bear markets frequently begin.
Here are the average characteristics of the basic Market Climates defined by
Hussman, based on historical market data, and the general investing approaches
for the Fund which correspond to those climates:
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<TABLE>
<CAPTION>
TREND UNIFORMITY
FAVORABLE UNFAVORABLE
--------------------------------------- --------------------------------------
<S> <C> <C>
Very High Expected Return Average Expected Return
Relatively Low Risk of Loss Considerable Risk of Loss
Modest Volatility Very High Volatility
V FAVORABLE
A Emphasize aggressive opportunities Increase market exposure on declines.
L for capital appreciation
U
A --------------------------------------- --------------------------------------
T Above Average Expected Return Negative Expected Return
I Modest Risk of Loss Extreme Risk of Loss
O Modest Volatility High Volatility
N UNFAVORABLE
Maintain a generally constructive Emphasize preservation of capital
market position
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</TABLE>
INVESTMENT PRACTICES AND RISKS
A brief description of certain investment techniques that the Fund may employ is
provided below. Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. While Hussman tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased, and
by using hedging techniques when considered appropriate, adverse changes in
overall market prices and the prices of investments held by the Fund can occur
at any time and there is no assurance that the Fund will achieve its investment
objective. When you redeem your Fund shares, they may be worth more or less than
what you paid for them.
o STOCK INVESTMENT RISKS. Because the Fund normally invests most, or a
substantial portion, of its assets in common stocks, the value of the
Fund's portfolio will be affected by changes in the stock markets. At
times, the stock markets can be volatile, and stock prices can change
drastically. This market risk will affect the Fund's share price,
which will fluctuate as the values of the Fund's investment securities
and other assets change. Not all stock prices change uniformly or at
the same time, and not all stock markets move in the same direction at
the same time. Other factors can affect a particular stock's prices
(for example, poor earnings reports by an issuer, loss of major
customers, major litigation against an issuer, or changes in
government regulations affecting an industry). Not all of these
factors can be predicted.
o HEDGING INSTRUMENTS. The Fund may sell futures contracts on
broad-based stock indices, and may purchase and sell put and call
options on such indices. The Fund may also write covered call options
on specific securities which the Fund owns. These are all referred to
as hedging instruments. The term "hedging" refers to the practice of
attempting to offset a potential loss in one position by establishing
an opposite position in another investment.
A stock index futures contract is an agreement to take or make
delivery of an amount of cash based on the difference between the
value of the index at the beginning and at the end of the contract
period. An option on a stock index gives the purchaser of the option
the right to receive from the seller cash equal to the difference
between the closing price of the index and the exercise price of the
option.
Hedging instruments can be volatile and involve considerable risks.
The use of hedging instruments requires special skills and knowledge
of investment techniques that are different than what is normally
required for purchasing and selling securities. If Hussman uses a
hedging instrument at the wrong time or judges market conditions
incorrectly, or if the hedging instrument does not perform as
expected, hedging strategies may significantly reduce the Fund's
return. The Fund could also experience losses if the indices
underlying its futures and options positions are not closely
correlated with its other investments, or if the Fund is unable to
close out a position because the market for the option or future
becomes illiquid.
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o BORROWING MONEY. The Fund is permitted to leverage, that is, borrow
money, to buy additional securities or to meet cash needs in the event
of unanticipated redemptions. Although it is not anticipated that the
Fund will significantly leverage its portfolio under normal market
conditions, there may be circumstances under which the Fund could
borrow in amounts up to one-third of the value of its total assets.
For example, implementation of the Fund's hedging strategies may
involve the making of margin deposits or the payment of premiums, and
the Fund may borrow money if hedging strategies are implemented when
the Fund is fully invested.
The risk of borrowing money is that the cost of borrowing money to
leverage will exceed the returns for the securities purchased with the
borrowed money, or that the securities purchased may actually go down
in value. Thus, the Fund's share price could be subject to greater
fluctuation and may decrease more quickly than if the Fund had not
borrowed.
o PORTFOLIO TURNOVER. The Fund's trading in some stocks may be
relatively short-term, meaning that the Fund may buy a security and
sell it a short while later to take advantage of current gains, if it
is believed that an alternative investment may provide greater future
growth. This activity may create higher transaction costs due to
commissions and other expenses. In addition, a high level of
short-term trading may increase the amount of taxable distributions to
shareholders at the end of the year.
FUND MANAGEMENT
================================================================================
THE INVESTMENT ADVISER
Hussman Econometrics Advisors, Inc. ("Hussman"), 3525 Ellicott Mills Drive,
Ellicott City, Maryland 21043, serves as the investment adviser to the Fund.
Hussman is a registered investment adviser that manages more than $25 million in
assets. Hussman is also the publisher of the Hussman Econometrics Newsletter, a
monthly newsletter which provides an overall view of market conditions from a
technical, monetary and fundamental standpoint and recommends portfolios of
stocks and mutual funds. John P. Hussman, Ph.D. (Economics, Stanford University,
1992) is the Chairman, President and controlling shareholder of Hussman. Dr.
Hussman also serves as the President and portfolio manager of the Fund. From
1992 until 1999, he was an Adjunct Professor of Economics and International
Finance at the University of Michigan. His academic research has focused on
financial market efficiency and information economics. Subject to the Fund's
investment objectives and strategies, Dr. Hussman makes the day-to-day
investment decisions and continuously reviews, supervises and administers the
Fund's investment program.
For its services, the Fund pays Hussman an investment advisory fee at the annual
rate of 1.5% of the Fund's average daily net assets, less any fee waivers and
expense reimbursements. Because the management approach required by the Fund
differs significantly from a passively unhedged strategy, the investment
advisory fee paid by the Fund is higher than that paid by most other mutual
funds.
THE ADMINISTRATOR
Ultimus Fund Solutions, LLC ("Ultimus"), 135 Merchant Street, Suite 230,
Cincinnati, Ohio 45246, serves as the Fund's administrator, transfer agent and
fund accounting agent. Management and administrative services of Ultimus include
(i) providing office space, equipment and officers and clerical personnel to the
Fund, (ii) obtaining valuations, calculating net asset values and performing
other accounting, tax and financial services, (iii) recordkeeping, (iv)
regulatory, compliance and reporting services, (v) processing shareholder
account transactions and disbursing dividends and distributions, and (vi)
supervising custodial and other third party services.
The Statement of Additional Information has more detailed information about
Hussman and other service providers to the Fund.
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HOW THE FUND VALUES ITS SHARES
================================================================================
The net asset value ("NAV") of the Fund's shares is calculated at the close of
regular trading on the New York Stock Exchange (generally 4:00 p.m., Eastern
time) on each day that the Exchange is open for business. To calculate NAV, the
Fund's assets are valued and totaled, liabilities are subtracted, and the
balance is divided by the number of shares outstanding. The Fund values its
portfolio securities at their current market value determined on the basis of
market quotations, or, if market quotations are not readily available, at their
fair value as determined under procedures adopted by the Fund's Board of
Trustees.
Your order to purchase or redeem shares is priced at the next NAV calculated
after your order is received in proper form by the Fund. Redemptions of Fund
shares may be subject to a redemption fee (see "How to Redeem Shares" for
details).
HOW TO BUY SHARES
================================================================================
Shares of the Fund are sold every day the New York Stock Exchange is open for
business, at the Fund's NAV per share next calculated after receipt of the
purchase order in proper form. The Fund reserves the right to reject any
purchase request. Investors who purchase and redeem shares through a broker or
other financial intermediary may be charged a fee by such broker or
intermediary.
MINIMUM INVESTMENT
The minimum initial investment in the Fund is $1,000, except an IRA or a gift to
minors, for which the minimum initial investment is $500. The minimum investment
may also be waived or reduced for certain other types of retirement accounts,
gifts to minors, and direct deposit accounts. See "Shareholder Services."
OPENING AN ACCOUNT
An account may be opened by mail or bank wire, as follows:
BY MAIL. To open a new account by mail:
o Complete and sign the account application.
o Enclose a check payable to the Fund.
o Mail the application and the check to the Fund's transfer agent,
Ultimus Fund Solutions, LLC (the "Transfer Agent") at the following
address:
Hussman Investment Trust
c/o Ultimus Fund Solutions, LLC
P.O. Box _____
Cincinnati, Ohio _______
BY WIRE. To open a new account by wire, call the Transfer Agent at
1-800-xxx-xxxx. A representative will assist you in obtaining an
account application by telecopy (or mail), which must be completed,
signed and telecopied (or mailed) to the Transfer Agent before payment
by wire may be made. Then, request your financial institution to wire
immediately available funds to:
FIRSTAR Bank, N.A.
ABA # 04-20000-13
Attention: Hussman Strategic Growth Fund
Credit Account # XXXXXXX
Account Name _________________
For Account # _________________
The order is considered received when FIRSTAR Bank, N.A., the Trust's
custodian (the "Custodian") receives payment by wire. However, the
completed account application must be mailed to the Transfer Agent on
the same day the wire payment is made. See "Opening an Account - by
Mail" above. The Trust will not permit redemptions
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until the Transfer Agent receives the application in proper form. Your
financial institution may charge a fee for wiring funds.
SUBSEQUENT INVESTMENTS
Once an account is open, additional purchases of Fund shares may be made at any
time in minimum amounts of $100, except for an IRA, which must be in amounts of
at least $50. Additional purchases may be made:
o By sending a check, made payable to the Fund, to Hussman Investment
Trust, c/o Ultimus Fund Solutions, LLC, P.O. Box ____, Cincinnati,
Ohio ______. The Trust will charge a $15 fee against a shareholder's
account for any check returned for insufficient funds. The shareholder
also will be responsible for any losses suffered by the Trust as a
result.
o By wire to the Fund account as described under "Opening an Account -
By Wire." Shareholders should call the Transfer Agent at
1-800-xxx-xxxx before wiring funds.
o By electronic funds transfer from a financial institution through the
Automated Clearing House ("ACH"), as described below.
o By telephone order, as described below.
BY AUTOMATED CLEARING HOUSE (ACH). Once an account is open, shares may be
purchased or redeemed through ACH in minimum amounts of $100. ACH is the
electronic transfer of funds directly between an account with a financial
institution and the Fund. In order to use the ACH service, the ACH
Authorization section of the account application must be completed. For
existing accounts, an ACH Authorization Form may be obtained by calling the
Transfer Agent at 1-800-xxx-xxxx. Allow at least two weeks for preparation
before using ACH. To order a purchase or redemption by ACH, call the
Transfer Agent at 1-800-xxx-xxxx. There are no charges for ACH transactions
imposed by the Fund or the Transfer Agent. ACH share purchase transactions
are completed when payment is received, approximately two business days
following the placement of the transfer order.
ACH may be used to make direct deposits into a Fund account of part or all
of recurring payments made to a shareholder by his or her employer
(corporate, federal, military, or other) or by the Social Security
Administration.
BY TELEPHONE ORDER. Once an account is open, shares may be purchased at a
certain day's price by calling the Transfer Agent at 1-800-xxx-xxxx before
the close of regular trading on the New York Stock Exchange (generally 4:00
p.m., Eastern time) on that day. Orders must be for $1,000 or more and may
not be for an amount greater than twice the value of the existing account
at the time the order is placed. Payment by check or wire must be received
within three business days after the order is placed, or the order will be
cancelled and the shareholder will be responsible for any resulting loss to
the Fund. Payment of telephone orders by check may not be mailed to the
Transfer Agent's P.O. Box address, but must be mailed to the Transfer Agent
at Ultimus Fund Solutions, LLC, 135 Merchant Street, Suite 230, Cincinnati,
Ohio 45246. Payment must be accompanied by the order number given at the
time the order is placed. A written confirmation with complete purchase
information will be sent to the shareholder of record shortly after payment
is received.
HOW TO REDEEM SHARES
================================================================================
Shares of the Fund may be redeemed on any day on which the Fund computes its net
asset value. Shares are redeemed at their net asset value next determined after
the Transfer Agent receives the redemption request in proper form. Redemption
requests may be made by mail or by telephone.
BY MAIL. A shareholder may redeem shares by mailing a written request to
Hussman Investment Trust, c/o Ultimus Fund Solutions, LLC, P.O. Box
_______, Cincinnati, Ohio ______. Written requests must state the
shareholder's name, the name of the Fund, the account number and the shares
or dollar amount to be redeemed and be signed exactly as the shares are
registered.
SIGNATURES. Shareholders requesting a redemption of $5,000 or more, or a
redemption of any amount payable to a person other than the shareholder of
record or to be sent to an address other than that on record with the
Trust, must have all signatures on written redemption requests guaranteed.
The Transfer Agent will accept signatures guaranteed by a financial
institution whose deposits are insured by the FDIC; a member of the New
York, American, Boston, Midwest, or Pacific Stock Exchange; or any other
"eligible guarantor institution," as defined in the Securities Exchange Act
of 1934. The Transfer Agent will not accept signature guarantees by a
notary public.
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The Transfer Agent has adopted standards for accepting signature guarantees
from the above institutions. The Trust may elect in the future to limit
eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its Transfer Agent reserve the
right to amend these standards at any time without notice.
Redemption requests by corporate and fiduciary shareholders must be
accompanied by appropriate documentation establishing the authority of the
person seeking to act on behalf of the account. Forms of resolutions and
other documentation to assist in compliance with the Transfer Agent's
procedures may be obtained by calling the Transfer Agent.
BY TELEPHONE. You may also redeem shares by telephone by calling the
Transfer Agent at 1-800-xxx-xxxx. In order to make redemption requests by
telephone, the Telephone Privileges section of the account application must
be completed. For existing accounts, a Telephone Privileges form may be
obtained by calling the Transfer Agent at 1-800-xxx-xxxx.
Telephone redemptions may be requested only if the proceeds are to be
issued to the shareholder of record and mailed to the address on record
with the Fund. Upon request, proceeds of $100 or more may be transferred by
ACH, and proceeds of $1,000 or more may be transferred by wire, in either
case to the account stated on the account application. Shareholders will be
charged for outgoing wires.
Telephone privileges and account designations may be changed by sending the
Transfer Agent a written request with all signatures guaranteed as
described above.
The Transfer Agent requires personal identification before accepting any
redemption request by telephone, and telephone redemption instructions may
be recorded. If reasonable procedures are followed by the Transfer Agent,
neither the Transfer Agent nor the Fund will be liable for losses due to
unauthorized or fraudulent telephone instructions. In the event of drastic
economic or market changes, a shareholder may experience difficulty in
redeeming shares by telephone. If such a case should occur, redemption by
mail should be considered.
RECEIVING PAYMENT
The Trust normally makes payment for all shares redeemed within seven days after
receipt by the Transfer Agent of a redemption request in proper form. Under
unusual circumstances as provided by the rules of the Securities and Exchange
Commission, the Fund may suspend the right of redemption or delay payment of
redemptions for more than seven days. A requested wire of redemption proceeds
normally will be effected the following business day, but in no event more than
three business days, after receipt of the redemption request in proper form.
However, when shares are purchased by check or through ACH, the proceeds from
the redemption of those shares may not be paid until the purchase check or ACH
transfer has been converted to federal funds, which could take up to 15 calendar
days.
REDEMPTION FEE
A redemption fee of __% payable to the Fund is imposed on any redemption of
shares within one year of the date of purchase. No redemption fee will be
imposed to the extent that the net asset value of the shares redeemed does not
exceed (i) the current net asset value of shares acquired through reinvestment
of dividends or capital gain distributions, plus (ii) any increase in the net
asset value of an investor's shares above the dollar amount of all of the
investor's payments for the purchase of shares held by the investor at the time
of redemption. If the aggregate value of shares redeemed has declined below
their original cost as a result of the Fund's performance, the applicable
redemption fee will be applied to the then-current net asset value rather than
the purchase price.
In determining whether a redemption fee is applicable to a particular
redemption, the calculation will be made in a manner that results in the lowest
possible fee. It will be assumed that the redemption is made first from amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then, from amounts representing any increase in net asset value
of shares above the total amount of payments for the purchase of such shares;
then, from amounts representing shares purchased more than one year prior to
redemption; and finally, from amounts representing the cost of shares purchased
within one year prior to the redemption.
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<PAGE>
MINIMUM ACCOUNT BALANCE
Due to the high cost of maintaining accounts with low balances, the Trust may
involuntarily redeem shares in any account, and pay the proceeds to the
shareholder, if the account balance falls below a required minimum value of
$1,000 ($500 for IRA accounts or gifts to minors) due to shareholder
redemptions. This requirement does not apply, however, if the balance falls
below the minimum because of a decline in the Fund's net asset value per share.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement. The Transfer Agent may charge shareholders an administrative fee to
cover the cost of maintaining and properly servicing lost accounts with balances
below the required minimums.
REDEMPTION IN KIND
The Fund reserves the right to make payment for a redemption in securities
rather than cash, which is known as a "redemption in kind." This would be done
only under extraordinary circumstances and if the Fund deems it advisable for
the benefit of all shareholders, such as a very large redemption that could
affect Fund operations (for example, more than 1% of the Fund's net assets). A
redemption in kind will consist of securities equal in market value to your
shares. When you convert these securities to cash, you will pay brokerage
charges.
SHAREHOLDER SERVICES
================================================================================
Each time shares are purchased or redeemed, a statement will be mailed showing
the details of the transaction and the number and value of shares owned after
the transaction. Share certificates are not issued. Financial reports showing
investments, income and expenses of the Fund are mailed to shareholders
semi-annually. After the end of each year, shareholders receive a statement of
all their transactions for the year.
The Trust provides a number of plans and services to meet the special needs of
certain investors, including (1) an automatic investment plan, (2) a payroll
deduction plan, (3) a systematic withdrawal plan to provide monthly payments,
(4) retirement plans such as IRA and 403(b), and (5) corporate pension and
profit sharing plans, including a 401(k) plan. Brochures describing these plans
and related charges and account applications are available from the Transfer
Agent by calling 1-800-xxx-xxxx.
DIVIDENDS, DISTRIBUTIONS AND TAXES
================================================================================
Income dividends and net capital gain distributions, if any, are normally
declared and paid annually in December. Your distributions of dividends and
capital gains will be automatically reinvested in additional shares of the Fund
unless you elect to receive them in cash. The Fund's distributions of income and
capital gains, whether received in cash or reinvested in additional shares, will
be subject to federal income tax.
Income dividends and short-term capital gains distributions are generally taxed
as ordinary income. Distributions of capital gains are generally taxed as
long-term capital gains, regardless of how long you have held your Fund shares.
When you sell Fund shares, you generally realize a gain or loss. Except for
tax-deferred accounts, any gain on a sale of Fund shares will be subject to
federal income tax.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes.
Federal law requires the Fund to withhold taxes on distributions paid to
shareholders who fail to provide a social security number or taxpayer
identification number or fail to certify that such number is correct. Foreign
shareholders may be subject to special withholding requirements.
Because everyone's tax situation is unique, you should consult your tax
professional about federal, state and local tax consequences of an investment in
the Fund.
-10-
<PAGE>
FOR MORE INFORMATION
================================================================================
In addition to the information contained in the Prospectus, the following
documents are available free upon request:
o ANNUAL AND SEMIANNUAL REPORTS
The Fund will publish annual and semiannual reports to shareholders
that contain detailed information on the Fund's investments. The
annual report will contain a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during the last fiscal year.
o STATE OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the Fund. It is
incorporated by reference and is legally considered a part of this
Prospectus.
You may request copies of these publications and other information, without
charge, or make inquiries to the Fund by calling
TOLL FREE 1-800-XXX-XXXX
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
Information about the operation of the Public Reference Room can be obtained by
calling the Commission at 1-900-SEC-0330. Reports and other information about
the Fund are available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by writing to the Securities and Exchange
Commission, Public Reference Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-xxxx
INVESTMENT ADVISER
Hussman Econometrics Advisors, Inc.
3525 Ellicott Mills Drive, Suite B
Ellicott City, Maryland 21043
ADMINISTRATOR/TRANSFER AGENT
Ultimus Fund Solutions, LLC
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45201
INDEPENDENT ACCOUNTANTS
--------------------------
--------------------------
--------------------------
LEGAL COUNSEL
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
[logo] Hussman Investment Trust
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<PAGE>
HUSSMAN STRATEGIC GROWTH FUND
An Investment Portfolio of
HUSSMAN INVESTMENT TRUST
Statement of Additional Information
______________, 2000
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus for Hussman Investment Trust dated
___________, 2000, which may be supplemented from time to time. This Statement
of Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained without charge, upon
request, by writing Hussmann Investment Trust at 135 Merchant Street, Suite 230,
Cincinnati, Ohio 45246, or by calling toll free 1-XXX-XXX-XXXX.
TABLE OF CONTENTS
FUND OBJECTIVE, INVESTMENTS, STRATEGIES AND RISKS ........................ 2
NET ASSET VALUE .......................................................... 7
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ........................... 8
SPECIAL SHAREHOLDER SERVICES ............................................. 9
MANAGEMENT OF THE TRUST .................................................. 10
INVESTMENT ADVISER ....................................................... 11
PORTFOLIO TRANSACTIONS ................................................... 12
OTHER SERVICE PROVIDERS .................................................. 14
GENERAL INFORMATION ...................................................... 16
ADDITIONAL TAX INFORMATION ............................................... 18
PERFORMANCE INFORMATION .................................................. 18
FINANCIAL STATEMENTS ..................................................... 22
1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
HUSSMAN INVESTMENT TRUST
------------------------
Hussman Investment Trust (the "Trust") is an open-end management investment
company which currently offers one diversified investment portfolio, the Hussman
Strategic Growth Fund (the "Fund"). The Trust was organized and its Agreement
and Declaration of Trust was filed with the State of Ohio on ___________, 2000.
FUND OBJECTIVE, INVESTMENTS, STRATEGIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's objective is to provide long-term capital appreciation, with
added emphasis on capital preservation during unfavorable market conditions.
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS, STRATEGIES AND RISKS
Information contained in this Statement of Additional Information expands
upon information contained in the Fund Prospectus. No investment in shares of
the Fund should be made without first reading the Prospectus.
OPTIONS TRADING
The Fund may write covered call options on securities. A call option gives
the purchaser of the option the right to buy, and the writer the obligation to
sell, the underlying security at the stated exercise price at any time prior to
the expiration of the option, regardless of the market price of the security.
The premium paid to the writer is consideration for undertaking the obligations
under the option contract.
When the Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the average of the
closing bid and asked prices. If an option expires on the stipulated expiration
date or if the Fund enters into a closing purchase transaction, it will realize
a gain (or a loss if the cost of a closing purchase transaction exceeds the net
premium received when the option is sold) and the deferred credit related to
such option will be eliminated. If an option is exercised, the Fund may deliver
the underlying security in the open market. In either event, the proceeds of the
sale
2
<PAGE>
will be increased by the net premium originally received and the Fund will
realize a gain or loss.
In order to close out a call option it has written, the Fund will enter
into a "closing purchase transaction" (the purchase of a call option on the same
security with the same exercise price and expiration date as the call option
which the Fund previously has written). When a portfolio security subject to a
call option is sold, the Fund will effect a closing purchase transaction to
close out an existing call option on that security. If the Fund is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. In addition, upon the exercise of a call option by the
option holder, the Fund will forego the potential benefit represented by market
depreciation over the exercise price.
The Fund also may purchase or sell index options. Index options (or options
on securities indices) are similar in many respects to options on securities
except that an index option gives the holder the right to receive, upon
exercise, cash instead of securities, if the closing level of the securities
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option.
Because index options are settled in cash, a call writer cannot determine
the amount of its settlement obligations in advance and, unlike call writing on
specific securities, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities. The
Fund may be required to provide an initial margin to cover index options that
would require it to pay cash upon exercise.
STOCK INDEX FUTURES CONTRACTS
The Fund may purchase and sell futures contracts traded on an exchange or
board of trade. Futures contracts obligate the Fund, at maturity, to take or
make delivery of the cash value of a securities index. The Fund may sell a
futures contract in order to offset an expected decrease in the value of its
portfolio positions that might otherwise result from a market decline. The Fund
may do so either to hedge the value of its securities portfolio as a whole, or
to protect against declines occurring prior to sales of securities in the value
of the securities to be sold.
The risks related to the use of futures contracts include: (i) the
correlation between movements in the market price of the portfolio investments
(held or intended for purchase) being hedged and in the price of the futures
contract may be imperfect; (ii) possible lack of a liquid secondary market for
closing out futures positions; (iii) the need for additional portfolio
management skills and techniques; (iv) losses due to
3
<PAGE>
unanticipated market movements; and (v) a purchaser's inability to predict
correctly the direction of securities prices, interest rates and other economic
factors. Successful use of futures is subject to the ability correctly to
predict movements in the direction of the market. For example, if the Fund uses
futures contracts as a hedge against the possibility of a decline in the market
adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit of the increased value of
its securities that it has hedged because the Fund will have approximately equal
offsetting losses in its future positions. The risk of loss in trading futures
contracts in some strategies can be substantial, due both to the low margin
deposits required, and the extremely high degree of leverage involved in future
pricing. As a result, a relatively small price movement in a futures contract
may result in immediate and substantial loss or gain to the investor. Thus, a
purchase or sale of a futures contract may result in losses or gains in excess
of the amount invested in the contract.
BORROWING MONEY
Borrowing involves the use of "leverage," which subjects the Fund to
special risks and may involve speculative investment techniques. Leverage exists
when the Fund achieves the right to a return on a capital base that exceeds the
amount of the assets the Fund has to invest. Leverage creates the risk of
magnified capital losses which occur when losses affect an asset base, enlarged
by borrowings or the creation of liabilities, that exceeds the equity base of
the Fund. Borrowing involves the creation of a liability that requires the Fund
to pay interest.
The risks of leverage include a higher volatility of the net asset value of
the Fund's shares and the relatively greater effect on the net asset value of
the shares caused by favorable to adverse market movements or changes in the
cost of cash obtained by leveraging and the return obtained from investing the
cash. So long as the Fund is able to realize a net return on its investment
portfolio that is higher than interest expense incurred, leverage will result in
higher current net investment income being realized by the Fund than if the Fund
were not leveraged. On the other hand, changes in securities prices could cause
the relationship between the cost of leveraging and the return to change so that
rates involved in the leveraging arrangement may substantially increase relative
to the return on the securities in which the proceeds of the leveraging have
been invested. To the extent that the interest expense involved in leveraging
approaches the net return on the Fund's investment portfolio, the benefit of
leveraging will be reduced, and, if the interest expense on borrowings were to
exceed the net return to shareholders, the Fund's use of leverage would result
in a lower rate of return than if the Fund were not leveraged. Similarly, the
effect of leverage in a declining market could be a greater decrease in net
asset value per share than if the Fund were not leveraged. In an extreme case,
if the Fund's current investment
4
<PAGE>
income were not sufficient to meet the interest expense of leveraging, it could
be necessary for the Fund to liquidate certain of its investments at an
inappropriate time. The use of leverage may be considered speculative.
MONEY MARKET MUTUAL FUNDS
The Fund may invest up to 5% of the value of its total assets in the
securities of any one money market mutual fund, provided that no more than 10%
of the Fund's total assets may be invested in the securities of money market
mutual funds in the aggregate. The Fund may incur additional expenses due to the
duplication of expenses as a result of investing in securities of other
unaffiliated money market mutual funds.
COMMERCIAL PAPER
Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than 9
months and fixed rates of return.
The Fund may invest in commercial paper rated in any rating category or not
rated by a Nationally Recognized Statistical Rating Organization ("NRSRO"). In
general, investment in lower-rated instruments is more risky than investment in
instruments in higher-rated categories.
ILLIQUID SECURITIES
The Fund will limit its investments in illiquid securities to no more than
15% of its net assets. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), (ii) over-the-counter options and assets used to cover over-the-counter
options, and (iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, the
Fund may not be able to realize their full value upon sale. The Adviser will
monitor the liquidity of the Fund investments in illiquid securities. Rule 144A
securities will not be treated as "illiquid" for purposes of this limit on
investments in accordance with procedures assumed by the Trust's Board of
Trustees.
The Fund, if it invests in securities for which there is no ready market,
may not be able to readily sell such securities. Such securities are unlike
securities that are traded in the open market and can be expected to be sold
immediately if the market is adequate. The sale price of illiquid securities may
be lower or higher than the Adviser's most recent estimate of their fair
5
<PAGE>
market value. Generally, less public information is available about the issuers
of such securities than about companies whose securities are traded on an
exchange.
REPURCHASE AGREEMENTS
Securities held by the Fund may be subject to repurchase agreements. Under
the terms of a repurchase agreement, the Fund acquires securities from member
banks of the Federal Deposit Insurance Corporation and registered broker-dealers
which the Adviser deems creditworthy, subject to the seller's agreement to
repurchase such securities at a mutually agreed upon date and price. The
repurchase price generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller under a
repurchase agreement maintains at all times the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). If the seller defaults on its repurchase obligations or
becomes insolvent, the Fund suffers a loss to the extent that the proceeds from
the sale of the underlying portfolio securities were less than the repurchase
price under the agreement, or to the extent that the disposition of the
securities by the Fund were delayed pending court action. Additionally, there is
no controlling legal precedent confirming that the Fund would be entitled, as
against the claim by the seller or its receiver or trustee in bankruptcy, to
retain the underlying securities, although the Trustees of the Trust believe
that, under the regular procedures normally in effect for the custody of the
Fund's securities subject to repurchase agreements, and under federal laws, a
court of competent jurisdiction would rule in favor of the Trust if presented
with the question. Securities subject to repurchase agreements are held by the
Fund's Custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by the Fund under the Investment Company Act of 1940 (the "1940 Act").
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may, from time to time,
lend its portfolio securities to broker-dealers, banks or institutional
borrowers of securities. The Fund must receive 100% collateral in the form of
cash or U.S. government securities. This collateral must be valued daily by the
Adviser and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination by the Fund
or the borrower at any time. While the Fund does not have the right to vote
securities on loan, it intends to terminate the loan and regain the right to
vote if that is considered important with respect to the investment. In the
event the borrower defaults in its
6
<PAGE>
obligation to the Fund, the Fund bears the risk of delay in the recovery of its
portfolio securities and the risk of loss of rights in the collateral. The Fund
will only enter into loan arrangements with broker-dealers, banks or other
institutions which the Adviser has determined are creditworthy under guidelines
established by the Trustees.
INVESTMENT RESTRICTIONS
The Fund's investment objective may be changed without a vote of the
holders of a majority of the Fund's outstanding shares. In addition, the Fund is
subject to the following investment restrictions, which may be changed by the
Trustees without the vote of shareholders.
The Fund may not:
1. Purchase securities which would cause 25% or more of the value of its
total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities
in the same industry.
2. Borrow money, issue senior securities or mortgage, pledge or
hypothecate its assets if such borrowings or other transactions would
exceed more than 33 1/3% of the value of its total assets and except
to the extent permitted under the 1940 Act or the rules, regulations
or interpretations thereof.
3. Underwrite securities of other issuers.
4. Purchase securities of companies for the purpose of exercising
control.
5. Purchase or sell real estate or commodities.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Fund is calculated by dividing the
lesser of the Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the securities. The portfolio turnover rates for
the Fund may vary greatly from year to year as well as within a particular year,
and may also be affected by cash requirements for redemption of shares or
implementation of hedging strategies. High portfolio turnover rates will
generally result in higher transaction costs to the Fund, including brokerage
commissions, and may result in additional tax consequences to the Fund's
shareholders.
NET ASSET VALUE
The net asset value of the Fund is determined and the shares of the Fund
are priced as of the close of trading on each day on
7
<PAGE>
which the New York Stock Exchange (the "NYSE") is open for trading. Currently,
the NYSE will not be open in observance of the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
VALUATION OF THE FUND
If the principal market for a security held by the Fund is a securities
exchange, the security will be priced or valued at the closing sales price on
that exchange on the day of computation. If there have been no sales during the
day, it will be priced at the last bid quotation. If the principal market for a
portfolio security is not a securities exchange, it will be valued at its latest
bid quotation in the principal market in which it traded.
All other assets and securities, including securities for which market
quotations are not readily available, will be valued at their fair value as
determined in good faith under the general supervision of and pursuant to
procedures approved by, the Trustees of the Trust.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are sold on a continuous basis. Shares of the Fund are
sold and redeemed at their net asset value as next determined after receipt of
the purchase or redemption order.
The Fund may suspend the right of redemption or postpone the date of
payment for shares during a period when: (a) trading on the NYSE is restricted
by applicable rules and regulations of the Securities and Exchange Commission
(the "SEC") (b) the NYSE is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted these suspensions; or (d) an
emergency exists as a result of which: (i) disposal by the Fund of securities
owned by it is not reasonably practicable, or (ii) it is not reasonably
practicable for the Fund to determine the fair market value of its net assets.
The Fund has committed to pay in cash all redemption requests by a
shareholder of record, limited in amount during any 90-day period up to the
lesser of $250,000 or 1% of the value of the Fund's net assets at the beginning
of such period. Such commitment is irrevocable without the prior approval of the
Securities and Exchange Commission. In the case of requests for redemption in
excess of such amount, the Board of Trustees reserves the right to make payments
in whole or in part in securities or other assets of the Fund. In this event,
the securities would be valued in the same manner as the Fund's net asset value
is determined. If the recipient sold such securities, brokerage charges would be
incurred.
8
<PAGE>
SPECIAL SHAREHOLDER SERVICES
As noted in the Prospectus, the Fund offers the following shareholder
services:
REGULAR ACCOUNT. The regular account allows for voluntary investments to be
made at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables investors
to make regular monthly or bi-monthly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the checking account for
the amount specified ($50 minimum) which will be automatically invested in
shares at the public offering price on or about the fifteenth and/or the last
business day of the month. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing to the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of
$5,000 or more may establish a Systematic Withdrawal Plan. A shareholder may
receive monthly or quarterly payments, in amounts of not less than $50 per
payment, by authorizing the Fund to redeem the necessary number of shares
periodically (each month, or quarterly in the months of March, June, September
and December). Payments may be made directly to an investor's account with a
commercial bank or other depository institution via an Automated Clearing House
("ACH") transaction.
Instructions for establishing this service are included in the Application
contained in the Prospectus or are available by calling the Fund. Payment may
also be made by check made payable to the designated recipient and mailed within
7 days of the valuation date. If the designated recipient is other than the
registered shareholder, the signature of each shareholder must be guaranteed on
the application (see "How to Redeem Shares" in the Prospectus). A corporation
(or partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed.
9
<PAGE>
No redemption fees are charged to shareholders under this plan except for
potential deferred sales charges. The Prospectus contains additional information
and limitations relating to the use of a Systematic Withdrawal Plan. Costs in
conjunction with the administration of the plan are borne by the Fund. Investors
should be aware that such systematic withdrawals may deplete or use up entirely
their initial investment and may result in realized long-term or short-term
capital gains or losses. The Systematic Withdrawal Plan may be terminated at any
time by the Fund upon sixty days' written notice or by an investor upon written
notice to the Fund. Applications and further details may be obtained by calling
the Fund at 1-800-XXX-XXXX, or by writing to:
Hussman Investment Trust
c/o Ultimus Fund Solutions, LLC
P.O. Box _____
Cincinnati, Ohio _______
Transfer of Registration. To transfer shares to another owner, send a
written request to the Transfer Agent at the address shown herein. Your request
should include the following: (1) the Fund name and existing account
registration; (2) signature(s) of the registered owner(s) exactly as the
signature(s) appear(s) on the account registrations; (3) the new account
registration, address, social security or taxpayer identification number and how
dividends and capital gains are to be distributed; (4) signature guarantees (see
"How to Redeem Shares" in the Prospectus); and (5) any additional documents
which are required for transfer by corporations, administrators, executors,
trustees, guardians, etc. If you have any questions about transferring shares,
call or write the Transfer Agent.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Overall responsibility for management of the Trust rests with its Trustees,
who are elected by the Fund's shareholders. The initial Trustees were elected by
the Adviser as the initial shareholder of the Trust. The Trustees elect the
officers of the Trust to actively supervise its day-to-day operations. Certain
officers of the Trust also may serve as a Trustee.
The Trust will be managed by the Trustees in accordance with the laws of
the State of Ohio governing business trusts. There are currently five Trustees,
three of whom are not "interested persons" of the Trust within the meaning of
that term under the 1940 Act. The disinterested Trustees receive compensation
for their services as a Trustee and attendance at meetings of the Trustees.
Officers of the Trust receive no compensation from the Trust for performing the
duties of their offices.
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<PAGE>
The Trustees and officers of the Trust, their addresses and their principal
occupations during the past five (5) years are as follows:
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH THE PRINCIPAL OCCUPATIONS
ADDRESS TRUST DURING PAST 5 YEARS
AND OTHER AFFILIATIONS
<S> <C> <C>
John P. Hussman* President and Chairman, President and
3525 Ellicott Mills Drive Trustee Treasurer of Hussman
Ellicott City, Maryland 21043 Econometrics Advisors, Inc.;
Age 37 Professor of Economics and
International Finance at the
University of Michigan
School of Business
Administration from 1992
until 1999.
[insert remaining Trustees]
Robert G. Dorsey Vice President Managing Director of
135 Merchant Street, Suite 230 Ultimus Fund Solutions, LLC;
Cincinnati, Ohio 45246 prior to March 1999,
Age 43 President of Countrywide Fund
Services, Inc. (mutual fund
services company).
Mark J. Seger Treasurer Managing Director of
135 Merchant Street, Suite 230 Ultimus Fund Solutions, LLC;
Cincinnati, Ohio 45246 prior to March 1999, First
Age 38 Vice President of Countrywide
Fund Services, Inc.
John F. Splain Secretary Managing Director of
135 Merchant Street, Suite 230 Ultimus Fund Solutions, LLC;
Cincinnati, Ohio 45246 prior to March 1999, First
Age 43 Vice President and Secretary
of Countrywide Fund Services,
Inc. and affiliated companies.
</TABLE>
* "Interested Person" of the Trust, as defined in the 1940 Act.
Each Trustee who is not an affiliated person of the Adviser receives an
annual fee of $ _________ for services as a Trustee to the Trust, plus a per
meeting fee of $______ for each meeting attended. Trustees are reimbursed for
expenses incurred in attending such meetings.
INVESTMENT ADVISER
Hussman Econometrics Advisors, Inc. (the "Adviser"), 3525 Ellicott Mills
Drive, Ellicott City, Maryland 21043, serves as investment adviser to the Fund
under an investment advisory agreement dated as of ________________, 2000 (the
"Advisory Agreement"). The Adviser, founded in 19___, is a registered
11
<PAGE>
investment adviser that manages approximately $ 25 million in assets. Subject to
the Fund's investment objective and policies approved by the Trustees of the
Trust, the Adviser makes the day-to-day investment decisions and continuously
reviews, supervises and administers the Fund's investment program.
For its advisory services, the Fund pays the Adviser a monthly advisory fee
equal to the annual rate of 1.5%, less any fee waivers and reimbursements, of
the average daily net assets of the Fund. The Adviser has contractually agreed
to waive a portion of its advisory fees or reimburse a portion of the Fund's
operating expenses so that the Fund's net expenses do not exeed 2% until at
least December 31, 2001.
Pursuant to the Advisory Agreement, the Adviser will pay all expenses
(including as applicable, the compensation of any subadvisers directly appointed
by it) incurred by it in connection with its activities under the Advisory
Agreement other than the cost of securities (including brokerage commissions)
purchased for the Fund.
Unless sooner terminated, the Advisory Agreement shall continue in effect
for a period of two years, and thereafter, shall continue for successive
one-year periods if continuance is approved at least annually (i) by the
Trustees or by vote of a majority of the outstanding voting securities of the
Fund and (ii) by vote of a majority of the Trustees who are not parties to the
Advisory Agreement, or interested persons (as defined in the 1940 Act) of any of
these parties, cast in person at a meeting called for this purpose. The Advisory
Agreement is terminable at any time on 60 days' prior written notice without
penalty by the Trustees, by vote of a majority of outstanding shares of the
Fund, or by the Adviser. The Agreement also terminates automatically in the
event of its assignment, as defined in the 1940 Act.
The Advisory Agreement provides that the Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of its duties, except a loss suffered by the
Fund resulting from a breach of fiduciary duty with respect to the Adviser's
receipt of compensation for services, a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser in the performance of
its duties, or from reckless disregard of its duties and obligations thereunder.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, the Adviser determines, subject to the
general supervision of the Trustees of the Trust and in accordance with the
Fund's objective, policies and restrictions, which securities are to be
purchased and sold by the Fund and which brokers are eligible to execute the
Fund's portfolio transactions.
12
<PAGE>
Purchases and sales of portfolio securities that are debt securities
usually are principal transactions in which portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers, serving as market makers may include the spread between
the bid and asked prices. Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers. With respect to the
over-the-counter market, the Trust, where possible will deal directly with the
dealers who make a market in the securities involved except under those
circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to various brokers
and dealers is determined by the Adviser in its best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, brokers and dealers who provide investment research to
the Adviser may receive orders for transactions on behalf of the Fund.
Information so received is in addition to and not in lieu of services required
to be performed by the Adviser and does not reduce the fees payable to the
Adviser by the Fund. Such information may be useful to the Adviser in serving
both the Fund and other clients and, conversely supplemental information
obtained by the placement of business of other clients may be useful to the
Adviser in carrying out its obligations to the Fund.
While the Adviser generally seeks competitive commissions, the Fund may not
necessarily pay the lowest commission available on each brokerage transaction
for the reasons discussed above.
Investment decisions for the Fund are made independently from those made
for other portfolios, investment companies or accounts managed by the Adviser.
Any other portfolio, investment company or account may also invest in the
securities in which the Fund invests. When a purchase or sale of the same
security is made at substantially the same time on behalf of the Fund and
another portfolio, investment company or account, the transaction will be
averaged as to price and available investments will be allocated as to amount in
a manner which the Adviser believes to be equitable to the Fund and such other
portfolio, investment company, or account. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained by the Fund. To the extent permitted by law, the
Adviser may aggregate the securities to be sold or purchased for the Fund with
those to be sold or purchased for other portfolios, investment companies, or
accounts in order to obtain best execution.
13
<PAGE>
OTHER SERVICE PROVIDERS
ADMINISTRATOR, FUND ACCOUNTANT AND TRANSFER AGENT
Ultimus Fund Solutions, LLC ("Ultimus"), 135 Merchant Street, Suite 230,
Cincinnati, Ohio 45246, serves as the Administrator, Fund Accountant and
Transfer Agent to the Trust pursuant to service agreements dated as of
______________, 2000 (the "Service Agreements").
As Administrator, Ultimus assists in supervising all operations of the Fund
(other than those performed by the Adviser under the Advisory Agreement).
Ultimus has agreed to perform or arrange for the performance of the following
services (under the Service Agreements, Ultimus may delegate all or any part of
its responsibilities thereunder):
-- prepares and assembles reports required to be sent to the Fund's
shareholders and arranges for the printing and dissemination of such
reports;
-- assembles reports required to be filed with the SEC and files such
completed reports with the SEC;
-- arranges for the dissemination to shareholders of the Fund's proxy
materials and oversees the tabulation of proxies by the Transfer
Agent;
-- reviews the provision of dividend disbursing services to the Fund;
-- calculates, or arranges for the calculation of, the NAV of the Fund's
shares;
-- determines the amounts available for distribution as dividends and
distributions to be paid by the Fund to its shareholders; prepares and
arranges for the printing of dividend notices to shareholders; and
provides the Fund's Transfer Agent and Custodian with such information
as is required for them to effect the payment of dividends and
distributions;
-- prepares and files the Fund's federal income and excise tax returns
and the Fund's state and local tax returns;
-- monitors compliance of the Fund's operation with the 1940 Act and with
its investment policies and limitations;
-- provides accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be
required by Section 31(a) of the 1940 Act and the rules and
regulations thereunder);and
14
<PAGE>
-- makes such reports and recommendations to the Trust's Board of
Trustees as the Board reasonably requests or deems appropriate.
As Fund Accountant, Ultimus maintains the accounting books and records for
the Fund, including journals containing an itemized daily record of all
purchases and sales of portfolio securities, all receipts and disbursements of
cash and all other debits and credits, general and auxiliary ledgers reflecting
all asset, liability, reserve, capital, income and expense accounts, including
interest accrued and interest received, and other required separate ledger
accounts. The Fund Accountant also maintains a monthly trial balance of all
ledger accounts; performs certain accounting services for the Fund, including
calculation of the net asset value per share, calculation of the dividend and
capital gain distributions, reconciles cash movements with the Custodian,
verifies and reconciles with the Custodian all daily trade activities; provides
certain reports; obtains dealer quotations, prices from pricing services, matrix
prices or "fair value" computations on all portfolio securities in order to mark
the portfolio to the market; and prepares an interim balance sheet, statement of
income and expense, and statement of changes in net assets for the Fund.
As Transfer Agent, Ultimus performs the following services in connection
with the Fund's shareholders of record: maintains shareholder records for each
of the Fund's shareholders of record; processes shareholder purchase and
redemption orders; processes transfers and exchanges of shares of the Fund on
the shareholder files and records; processes dividend payments and
reinvestments; and assists in the mailing of shareholder reports and proxy
solicitation materials.
Ultimus receives a fee from the Fund for its services as Administrator,
Fund Accountant and Transfer Agent, and expenses assumed pursuant to the Service
Agreements. The fee payable to Ultimus as Administrator is calculated daily and
paid monthly, at the annual rate of 0.15% of the combined average daily net
assets of the Fund up to $50 million; 0.125% of such assets between $50 million
and $100 million; 0.10% of such assets between $100 million and $250 million;
0.075% of such assets between $250 million and $500 million; and 0.05% of such
assets over $500 million; subject, however, to a minimum fee of $2,000 per
month. The fee payable by the Fund to Ultimus as Fund Accountant is $2,500 per
month plus an asset based fee at the annual rate of 0.01% of the Fund's average
daily net assets up to $500 million and 0.005% of such assets over $500 million.
The fee payable by the Fund to Ultimus as Transfer Agent is $1,500 per month
plus a per account fee at the annual rate of $15 per account.
Unless sooner terminated as provided therein, the Service Agreements
between the Trust and Ultimus will continue in effect until _____________, 2002.
The Service Agreements thereafter,
15
<PAGE>
unless otherwise terminated as provided in the Service Agreements, shall be
renewed automatically for successive one-year periods.
The Service Agreements provide that Ultimus shall not be liable for any
error of judgment or mistake of law or any loss suffered by the Trust in
connection with the matters to which the Service Agreements relate, except a
loss from willful misfeasance, bad faith or negligence in the performance of its
duties, or from the reckless disregard by Ultimus of its obligations and duties
thereunder.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, serves as
Custodian to the Trust pursuant to a Custody Agreement dated as of
______________, 2000. The Custodian's responsibilities include safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on the Fund's investments.
INDEPENDENT AUDITORS
The Trust has selected ______________________, (address), to serve as
independent auditors for the Trust and to audit the financial statements of the
Trust for its first fiscal period ending _____________, 2001.
TRUST COUNSEL
The Trust has selected Sullivan & Worcester LLP, 1025 Connecticut Avenue
N.W., Washington D.C. 20036, to serve as counsel for the Trust.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Trust is an unincorporated business trust organized under Ohio law on
__________, 2000. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments. In the event of a liquidation or dissolution of the
Trust or an individual series, such as the Fund, shareholders of a particular
series would be entitled to receive the assets available for distribution
belonging to such series. Shareholders of a series are entitled to participate
equally in the net distributable assets of the particular series involved on
liquidation, based on the number of shares of the series that are held by each
shareholder. If any assets, income, earnings, proceeds, funds or payments are
not readily identifiable as belonging to any particular series, the Trustees
shall allocate
16
<PAGE>
them among any one or more series as they, in their sole discretion, deem fair
and equitable.
Shares of the Fund, when issued, are fully paid and non-assessable. Shares
have no subscription, preemptive or conversion rights. Shares do not have
cumulative voting rights. Shareholders are entitled to one vote for each full
share held and a fractional vote for each fractional share held. Shareholders of
all series of the Trust, including the Fund, will vote together and not
separately, except as otherwise required by law or when the Board of Trustees
determines that the matter to be voted upon affects only the interests of the
shareholders of a particular series. Rule 18f-2 under the 1940 Act provides that
any matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series affected by the matter. A series is
affected by a matter unless it is clear that the interests of each series in the
matter are substantially identical or that the matter does not affect any
interest of the series. Under rule 18f-2 of the 1940 Act, the approval of an
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a series only if approved by a
majority of the outstanding shares of such series. However, the Rule also
provides that the ratification of the appointment of independent accountants and
the election of Trustees may be effectively acted upon by shareholders of the
Trust voting together, without regard to a particular series.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees of the Trust will not
be liable in any event in connection with the affairs of the Trust, except as
such liability may arise from his or her own bad faith, willful misfeasance,
gross negligence or reckless disregard of duties. It also provides that all
third parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
CODE OF ETHICS
The Trust and the Adviser have each adopted a Code of Ethics which
prohibits its affiliated personnel from engaging in personal investment
activities which compete with or attempt to take advantage of the Fund's planned
portfolio transactions. Each of these parties maintains careful monitoring of
compliance with their Codes of Ethics.
17
<PAGE>
ADDITIONAL TAX INFORMATION
The Fund intends to qualify as a regulated investment company, or "RIC",
under the Internal Revenue Code of 1986, as amended (the "Code"). Qualification
generally will relieve the Fund of liability for federal income taxes to the
extent their earnings are distributed in accordance with the Code. Depending on
the extent of each Fund's activities in states and localities in which its
offices are maintained, in which its agents or independent contractors are
located, or in which it is otherwise deemed to be conducting business, the Fund
may be subject to the tax laws of these states or localities. If for any taxable
year the Fund does not qualify for the special tax treatment afforded regulated
investment companies, all of its taxable income will be subject to a federal tax
at regular corporate rates (without any deduction for distributions to its
shareholders). In such event, dividend distributions would be taxable to
shareholders to the extent of earnings and profits, and would be eligible for
the dividends-received deduction for corporations. To qualify as a RIC, the Fund
must comply with certain distribution, diversification, source of income and
other applicable requirements.
Information set forth in the Prospectus and this SAI which relates to
federal taxation is only a summary of some of the important federal tax
considerations generally affecting shareholders. No attempt has been made to
present a detailed explanation of the federal income tax treatment of the Fund
or its shareholders and this description is not intended as a substitute for
federal tax planning. Accordingly, potential shareholders of the Fund are urged
to consult their tax advisers with specific reference to their own tax
situation. In addition, the tax discussion in the Prospectus and this SAI is
based on tax laws and regulations which are in effect on the date of the
Prospectus and this SAI; these laws and regulations may be changed by
legislative or administrative action.
PERFORMANCE INFORMATION
From time to time performance information for the Fund showing its average
annual total return and aggregate total return may be presented in
advertisements, sales literature and shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return of the Fund will be calculated for the
most recent 1, 5 and 10 year periods or, if the Fund has not been in existence
for any such period, for the period since the Fund began operations. Average
annual total return is measured by comparing the value of an investment in the
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly to average annual total return
18
<PAGE>
except that the return figure is aggregated over the relevant period instead of
annualized.
Total return is a function of the type and quality of instruments held in
the portfolio, levels of operation expenses and changes in market conditions.
Consequently, total return will fluctuate and is not necessarily representative
of future results. Any fees charged by financial intermediaries with respect to
customer accounts for investing in shares of the Fund will not be included in
performance calculations. These fees, if charged, will reduce the actual
performance from that quoted. If the Adviser voluntarily waives all or a part of
its fees, the total return of the Fund will be higher than it would otherwise be
in the absence of such voluntary waiver.
CALCULATION OF TOTAL RETURN
Average annual total return is a measure of the change in value of the
investment in the Fund over the period covered, which assumes any dividends or
capital gains distributions are reinvested in the Fund immediately rather than
paid to the investor in cash. Average annual total return will be calculated by:
(1) adding to the total number of shares purchased by a hypothetical $1,000
investment in the Fund and all additional shares which would have been purchased
if all dividends and distributions paid or distributed during the period had
immediately been reinvested, (2) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of shares owned at the end of the period by the net asset value per
share on the last trading day of the period, (3) assuming redemption at the end
of the period, and (4) dividing this account value for the hypothetical investor
by the initial $1,000 investment and annualizing the result.
CALCULATION OF YIELD
From time to time, the Fund may advertise its yield. A yield quotation is
based on a 30-day (or one month) period and is computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
6
Yield = 2[(a-b/cd + 1) - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the last day of the period
19
<PAGE>
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day prior
to the start of the 30-day (or one month) period for which yield is being
calculated, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest).
PERFORMANCE COMPARISONS
Investors may judge the performance of the Fund by comparing the
performance to other mutual funds with comparable investment objectives and
policies through various mutual fund or market indices such as those prepared by
Dow Jones & Co., Inc., Standard & Poor's Corporation, Lehman Brothers, Inc.,
Morgan Stanley Capital International and Frank Russell Company, as well as data
prepared by Lipper, Inc. and Morningstar, Inc., widely recognized independent
services which monitor the performance of mutual funds, and the Consumer Price
Index. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, Pensions & Investments, and USA Today. In addition to performance
information, general information about the Fund that appears in a publication
such as those mentioned above, may be included in advertisements and in reports
to shareholders.
From time to time, the Fund (or the Adviser) may include the following
types of information in advertisements, supplemental sales literature and
reports to shareholders: (1) discussions of general economic or financial
principles (such as the effects of compounding and the benefits of dollar-cost
averaging); (2) discussions of general economic trends; (3) presentations of
statistical data to supplement these discussions; (4)descriptions of past or
anticipated portfolio holdings for the Fund; (5) descriptions of investment
strategies for the Fund; (6) descriptions or comparisons of various savings and
investment policies (including, but not limited to, insured bank products,
annuities, qualified retirement plans and individual stocks and bonds), which
may or may not include the Fund; (7) comparisons of investment products
(including the Fund) with relevant market or industry indices or other
appropriate benchmarks; and (8) discussions of fund rankings or ratings by
recognized rating organizations. The Fund may also include calculations, such as
hypothetical compounding examples which describe hypothetical investment results
in such communications. These performance examples will be based on an expressed
set of assumptions and are not indicative of the performance of the Fund.
Morningstar, Inc., Chicago, Illinois, rates mutual funds on a one- to
five-star rating scale with five stars representing the
20
<PAGE>
highest rating. Such ratings are based on a fund's historical risk/reward ratio
as determined by Morningstar, Inc. relative to other funds in that fund's
investment objective category or class. The one- to five-star ratings represent
the following ratings by Morningstar, Inc. respectively: Lowest, Below Average,
Neutral, Above Average and Highest.
21
<PAGE>
HUSSMAN INVESTMENT TRUST
PART C. OTHER INFORMATION
-----------------
Item 23. EXHIBITS
- -------- --------
(a) Agreement and Declaration of Trust
(b) Bylaws
(c) Incorporated by reference to Agreement and Declaration of Trust and
Bylaws
(d) Form of Investment Advisory Agreement with Hussman Econometrics
Advisors, Inc.
(e) Inapplicable
(f) Inapplicable
(g) Form of Custody Agreement with Firstar Bank, N.A.
(h) (i) Form of Expense Limitation Agreement with Hussman Econometrics
Advisors, Inc.
(ii) Form of Administration Agreement with Ultimus Fund Solutions, LLC
(iii)Form of Transfer Agent and Shareholder Services Agreement with
Ultimus Fund Solutions, LLC
(iv) Form of Fund Accounting Agreement with Ultimus Fund Solutions,
LLC
(i) Opinion of Counsel*
(j) Consent of Independent Public Accountants*
(k) Inapplicable
(l) Form of Initial Capital Agreement
(m) Inapplicable
(n) Financial Data Schedule*
(o) Inapplicable
(p) (i) Code of Ethics
(ii) Code of Ethics of Hussman Econometrics Advisors, Inc.
<PAGE>
- --------------------------------------
* To be filed by amendment.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- ------- -------------------------------------------------------------
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. INDEMNIFICATION
- -------- ---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
"Section 6.4 Indemnification of Trustees, Officers, etc. Subject to
and except as otherwise provided in the Securities Act of 1933, as
amended, and the 1940 Act, the Trust shall indemnify each of its
Trustees and officers, including persons who serve at the Trust's
request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered Person") against all
liabilities, including but not limited to amounts paid in satisfaction
of judgments, in compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before
any court or administrative or legislative body, in which such Covered
Person my be or may have been involved as a party or otherwise or with
which such person may be or may have been threatened, while in office
or thereafter, by reason of being or having been such a Trustee or
officer, director or trustee, and except that no Covered Person shall
be indemnified against any liability to the Trust or its Shareholders
to which such Covered Person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office.
Section 6.5 Advances of Expenses. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a
proceeding to the full extent permitted by the Securities Act of 1933,
as amended, the 1940 Act, and Ohio Revised Code Chapter 1707, as
amended. In the event any of these laws conflict with Ohio Revised
Code Section 1701.13(E), as amended, these laws, and not Ohio Revised
Code Section 1701.13(E), shall govern.
Section 6.6 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VI shall not be exclusive of
or affect any other rights to which any such Covered Person my be
entitled. As used in this Article VI, "Covered Person" shall include
such person's heirs, executors and administrators. Nothing contained
in this article shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability insurance on
behalf of any such person."
<PAGE>
The Investment Advisory Agreement with Hussman Econometrics Advisors,
Inc. ("Hussman") provides that Hussman shall not be liable for any
mistake of judgment or in any event whatsoever, except for lack of
good faith; provided, however, that nothing therein shall be construed
to protect Hussman against any liability to the Registrant by reason
of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties under the Agreement.
Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
- -------- --------------------------------------------------------
Hussman is a registered investment adviser that manages more than $25
million in assets. Hussman is also the publisher of the Hussman
Econometrics Newsletter, a monthly newsletter which provides an
overall view of market conditions from a technical, monetary and
fundamental standpoint and recommends portfolios of stocks and mutual
funds.
The directors and officers of Hussman and any other business
profession, vocation or employment of a substantial nature engaged in
at any time during the past two years:
John P. Hussman - President, Treasurer and a director of Hussman;
Adjunct Professor of Economics/International Finance at University of
Michigan from 1992 until 1999.
Item 27. PRINCIPAL UNDERWRITERS
- -------- ----------------------
(a) Inapplicable
(b) Inapplicable
(c) Inapplicable
Item 28. LOCATION OF ACCOUNTS AND RECORDS
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at the
principal executive offices of its administrator, Ultimus Fund
Solutions, LLC, 135 Merchant Street, Suite 230, Cincinnati, Ohio
45246, or its investment adviser, Hussman Econometrics Advisors, Inc.,
3525 Ellicott Mills Drive, Ellicott City, Maryland 21043. Certain
records, including records relating to the physical possession of
Registrant's securities, may be maintained at the offices of
Registrant's custodian, Firstar Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45202.
Item 29. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
- ------- -------------------------------------------------
Inapplicable
Item 30. UNDERTAKINGS
- -------- ------------
Inapplicable
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Ellicott City and State of Maryland, on the 21st day
of April, 2000.
HUSSMAN INVESTMENT TRUST
By: /s/ John P. Hussman
-------------------
John P.Hussman
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ John P. Hussman Trustee and April 21, 2000
- ------------------- President
John P. Hussman
/s/ Mark J. Seger Treasurer April 21, 2000
- -----------------
Mark J. Seger
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Agreement and Declaration of Trust
(b) Bylaws
(c) Incorporated by reference to Agreement and Declaration of Trust and
Bylaws
(d) Form of Investment Advisory Agreement
(e) Inapplicable
(f) Inapplicable
(g) Form of Custody Agreement with Firstar Bank, N.A.
(h) (i) Form of Expense Limitation Agreement with Hussman Econometrics
Advisors, Inc.
(ii) Form of Administration Agreement with Ultimus Fund Solutions, LLC
(iii)Form of Transfer Agent and Shareholder Services Agreement with
Ultimus Fund Solutions, LLC
(iv) Form of Accounting Agreement with Ultimus Fund Solutions, LLC
(i) Opinion of Counsel*
(j) Consent of Independent Public Accountants*
(k) Inapplicable
(l) Form of Initial Capital Agreement
(m) Inapplicable
(n) Financial Data Schedule*
(o) Inapplicable
(p) (i) Code of Ethics
(ii) Code of Ethics of Hussman Econometrics Advisors, Inc.
- ----------------------------------------
* To be filed by amendment.
HUSSMAN INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
MARCH 20, 2000
<PAGE>
HUSSMAN INVESTMENT TRUST
------------------------
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
PAGE
----
ARTICLE I. NAME AND DEFINITIONS............................................1
- ---------- --------------------
Section 1.1 Name............................................................1
Section 1.2 Definitions.....................................................1
(a) "Trust"................................................1
(b) "Trustees".............................................1
(c) "Shares"...............................................1
(d) "Series"...............................................2
(e) "Shareholder"..........................................2
(f) "1940 Act".............................................2
(g) "Commission"...........................................2
(h) "Declaration of Trust".................................2
(i) "Bylaws"...............................................2
ARTICLE II. PURPOSE OF TRUST................................................2
- ---------- ----------------
ARTICLE III. THE TRUSTEES....................................................3
- ------------ ------------
Section 3.1 Number, Designation, Election, Term, etc........................3
(a) Initial Trustees.......................................3
(b) Number.................................................3
(c) Term...................................................3
(d) Resignation and Retirement.............................3
(e) Removal................................................4
(f) Vacancies..............................................4
(g) Effect of Death, Resignation, etc......................4
(h) No Accounting..........................................5
Section 3.2 Powers of the Trustees..........................................5
(a) Investments............................................6
(b) Disposition of Assets..................................6
(c) Ownership Powers.......................................6
(d) Subscription...........................................6
(e) Form of Holding........................................6
(f) Reorganization, etc....................................6
(g) Voting Trusts, etc.....................................7
(h) Compromise.............................................7
(i) Partnerships, etc......................................7
- i -
<PAGE>
(j) Borrowing and Security.................................7
(k) Guarantees, etc........................................7
(l) Insurance..............................................7
Section 3.3 Certain Contracts...............................................8
(a) Advisory...............................................9
(b) Administration.........................................9
(c) Distribution...........................................9
(d) Custodian and Depository...............................9
(e) Transfer and Dividend Disbursing Agency................9
(f) Shareholder Servicing..................................9
(g) Legal, Accounting, Taxes and Other....................10
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees....................................................11
Section 3.5 Ownership of Assets of the Trust...............................11
ARTICLE IV. SHARES.........................................................11
- ---------- ------
Section 4.1 Description of Shares..........................................11
Section 4.2 Establishment and Designation of Series........................13
(a) Assets Belonging to Series............................13
(b) Liabilities Belonging to Series.......................14
(c) Dividends.............................................15
(d) Liquidation...........................................16
(e) Voting................................................16
(f) Redemption by Shareholder.............................17
(g) Redemption by Trust...................................17
(h) Net Asset Value.......................................18
(i) Transfer..............................................18
(j) Equality..............................................18
(k) Fractions.............................................19
(l) Conversion Rights.....................................19
Section 4.3 Ownership of Shares............................................19
Section 4.4 Investments in the Trust.......................................19
Section 4.5 No Preemptive Rights...........................................19
Section 4.6 Status of Shares and Limitation of Personal
Liability......................................................19
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ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS.......................20
- --------- ----------------------------------------
Section 5.1 Voting Powers..................................................20
Section 5.2 Meetings.......................................................21
Section 5.3 Record Dates...................................................21
Section 5.4 Quorum and Required Vote.......................................22
Section 5.5 Action by Written Consent......................................22
Section 5.6 Inspection of Records..........................................22
Section 5.7 Additional Provisions..........................................22
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION.......................23
- ---------- ----------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice.................................................23
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety..............................................23
Section 6.3 Indemnification of Shareholders................................24
Section 6.4 Indemnification of Trustees, Officers, etc.....................24
Section 6.5 Advances of Expenses...........................................25
Section 6.6 Indemnification Not Exclusive, etc.............................25
Section 6.7 Liability of Third Persons Dealing with
Trustees.......................................................25
ARTICLE VII. MISCELLANEOUS..................................................26
- ----------- -------------
Section 7.1 Duration and Termination of Trust..............................26
Section 7.2 Reorganization.................................................26
Section 7.3 Amendments.....................................................27
Section 7.4 Filing of Copies; References; Headings.........................27
Section 7.5 Applicable Law.................................................28
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HUSSMAN INVESTMENT TRUST
------------------------
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
AGREEMENT AND DECLARATION OF TRUST made this 20th day of March, 2000, by
the Trustees hereunder, and by the holders of Shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, this Trust is being formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of an Ohio business trust in accordance with the provisions
hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
SECTION 1.1 NAME. This Trust shall be known as "Hussman Investment Trust"
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
SECTION 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The "Trust" refers to the Ohio business trust established by this
Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or elected
in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust or any
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Series of the Trust (as the context may require) shall be divided from
time to time;
(d) "Series" refers to Series of Shares established and designated under
or in accordance with the provisions of Article IV;
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(g) "Commission" shall have the meaning given it in the 1940 Act;
(h) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time; and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended from time to
time.
ARTICLE II
----------
PURPOSE OF TRUST
----------------
The purpose of the Trust is to operate as an investment company, to offer
Shareholders one or more investment programs primarily in securities and debt
instruments and to engage in any and all lawful acts or activities for which
business trusts may be formed under Chapter 1746.01 through 1746.99 of the Ohio
Revised Code. Until the Trustees determine otherwise, the Trust will maintain an
office within Ohio located at 135 Merchant Street, Suite 230, Cincinnati, Ohio
45246.
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ARTICLE III
-----------
THE TRUSTEES
------------
SECTION 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) INITIAL TRUSTEES. Upon execution of this Declaration of Trust or a
counterpart hereof or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof, John P. Hussman shall
become a Trustee hereof.
(b) NUMBER. The Trustees serving as such, whether named above or hereafter
becoming a Trustee, may increase or decrease the number of Trustees to
a number other than the number theretofore determined. No decrease in
the number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a Trustee
pursuant to subsection (e) of this Section 3.1.
(c) TERM. Each Trustee shall serve as a Trustee during the lifetime of the
Trust and until its termination as hereinafter provided or until such
Trustee sooner dies, resigns, retires or is removed. The Trustees may
elect their own successors and may, pursuant to Section 3.1(f) hereof,
appoint Trustees to fill vacancies; provided that, immediately after
filling a vacancy, at least two-thirds of the Trustees then holding
office shall have been elected to such office by the Shareholders at
an annual or special meeting. If at any time less than a majority of
the Trustees then holding office were so elected, the Trustees shall
forthwith cause to be held as promptly as possible, and in any event
within 60 days, a meeting of Shareholders for the purpose of electing
Trustees to fill any existing vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or retire
as a Trustee, by written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later
date as is specified in such instrument.
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(e) REMOVAL. Any Trustee may be removed with or without cause at any time:
(i) by written instrument, signed by at least two-thirds of the number
of Trustees prior to such removal, specifying the date upon which such
removal shall become effective, (ii) by vote of the Shareholders
holding not less than two-thirds of the Shares then outstanding, cast
in person or by proxy at any meeting called for the purpose, or (iii)
by a declaration in writing signed by Shareholders holding not less
than two-thirds of the Shares then outstanding and filed with the
Trust's Custodian.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation, the death, resignation,
retirement, removal or incapacity of any of the Trustees or resulting
from an increase in the number of Trustees by the Trustees, may (but
so long as there are at least three remaining Trustees, need not
unless required by the 1940 Act) be filled either by a majority of the
remaining Trustees through the appointment in writing of such other
person as such remaining Trustees in their discretion shall determine
(unless a shareholder election is required by the 1940 Act) or by the
election by the Shareholders, at a meeting called for the purpose, of
a person to fill such vacancy, and such appointment or election shall
be effective upon the written acceptance of the person named therein
to serve as a Trustee and agreement by such person to be bound by the
provisions of this Declaration of Trust, except that any such
appointment or election in anticipation of a vacancy to occur by
reason of retirement, resignation, or increase in number of Trustees
to be effective at a later date shall become effective only at or
after the effective date of said retirement, resignation, or increase
in number of Trustees. As soon as any Trustee so appointed or elected
shall have accepted such appointment or election and shall have agreed
in writing to be bound by this Declaration of Trust and the
appointment or election is effective, the Trust estate shall vest in
the new Trustee, together with the continuing Trustees, without any
further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation, retirement,
removal, or incapacity of the Trustees, or any one of them, shall not
operate to
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annul or terminate the Trust or to revoke or terminate any existing
agency or contract created or entered into pursuant to the terms of
this Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person
ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person)
shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
SECTION 3.2 POWERS OF THE TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such Bylaws do not reserve that
right to the Shareholders; they may as they consider appropriate elect and
remove officers and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing; they may appoint
from their own number, and terminate, any one or more committees consisting of
two or more Trustees, including without implied limitation an executive
committee, which may, when the Trustees are not in session and subject to the
1940 Act, exercise some or all of the power and authority of the Trustees as the
Trustees may determine; in accordance with Section 3.3 they may employ one or
more advisers, administrators, depositories and custodians and may authorize any
depository or custodian to employ subcustodians or agents and to deposit all or
any part of such assets in a system or systems for the central handling of
securities and debt instruments, retain transfer, dividend, accounting or
Shareholder servicing agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more distributors, principal
underwriters or otherwise, set record dates or times for the determination of
Shareholders or various of them with respect to various matters; they may
compensate or provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the Trust
or the Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and to
any employee, adviser, administrator, distributor,
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<PAGE>
principal underwriter, depository, custodian, transfer and dividend disbursing
agent, or any other agent or consultant of the Trust such authority, powers,
functions and duties as they consider desirable or appropriate for the conduct
of the business and affairs of the Trust, including without implied limitation
the power and authority to act in the name of the Trust and of the Trustees, to
sign documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority:
(a) INVESTMENTS. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being
bound or limited by any present or future law or custom in regard to
investments by trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments
or property; and to execute and deliver proxies or powers of attorney
to such person or persons as the Trustees shall deem proper, granting
to such person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees shall deem
proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or
debt instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or property in
a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust
or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer,
any security or
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<PAGE>
debt instrument of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect
to any security or debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities or
debt instruments in acting through a committee, depository, voting
trustee or otherwise, and in that connection to deposit any security
or debt instrument with, or transfer any security or debt instrument
to, any such committee, depository or trustee, and to delegate to them
such power and authority with relation to any security or debt
instrument (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depository
or trustee as the Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including
but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising
in connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure
any of or all such obligations; and
(l) INSURANCE. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and
principal on its portfolio
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<PAGE>
investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal
underwriters, or independent contractors, or any thereof (or any
person connected therewith), of the Trust individually against all
claims and liabilities of every nature arising by reason of holding,
being or having held any such office or position, or by reason of any
action alleged to have been taken or omitted by any such person in any
such capacity, including any action taken or omitted that may be
determined to constitute negligence; provided, however, that insurance
which protects the Trustees and officers against liabilities rising
from action involving willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of their
offices may not be purchased.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the Bylaws, any action to be taken by the Trustees may
be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Ohio, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office (or such larger
or different number as may be required by the 1940 Act or other applicable law).
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals ("Contracting
Party") to provide for the performance and assumption of some or all of the
following services, duties and responsibilities to, for or of the Trust and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in
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addition to those set forth below as the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Series of
Shares of the Trust (as that phrase is defined in subsection (a) of
Section 4.2), to manage such investments and assets, make investment
decisions with respect thereto, and to place purchase and sale orders
for portfolio transactions relating to such investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the Trustees and
in conformity with any policies of the Trustees with respect to the
operations of the Trust, to supervise all or any part of the
operations of the Trust, and to provide all or any part of the
administrative and clerical personnel, office space and office
equipment and services appropriate for the efficient administration
and operations of the Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust, to be principal
underwriter of such Shares, and/or to act as agent of the Trust in the
sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and accounting records in
connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or
the instructions of any particular Shareholder to reinvest any such
dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect
to Shareholders and their Shares, and similar matters; and
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(g) LEGAL, ACCOUNTING, TAXES AND OTHER. To handle all or any part of the
legal, accounting, tax or other responsibilities, whether with respect
to the Trust's properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or its Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (i) on the part of any Trustee or
officer of the Trust either (1) the material facts as to such relationship or
interest have been disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in good faith
reasonably justified by such facts by a majority of such Trustees not having any
such relationship or interest (even though such unrelated or
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disinterested Trustees are less than a quorum of all of the Trustees), or (2)
the specific contract involved is fair to the Trust as of the time it is
authorized, approved or ratified by the Trustees or by the Shareholders.
SECTION 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
that may be established and designated pursuant to Article IV, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, Shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
SECTION 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
----------
SHARES
------
SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value, but the Trustees shall have
the authority from time to time to divide the Shares into two or more Series of
Shares, as they deem necessary or desirable, to establish and designate such
Series, and to fix and determine the relative rights and preferences as between
the different Series of Shares as to right of redemption and the price, terms
and manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Series shall have
separate voting rights or no voting
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rights. Except as aforesaid all Shares of the different Series shall be
identical.
The Shares of each Series may be issued or reissued from time to time in
one or more classes ("Classes"), as determined by the Board of Trustees pursuant
to resolution. Each Class shall be appropriately designated, prior to the
issuance of any shares thereof, by some distinguishing letter, number or title.
All Shares within a Class shall be alike in every particular. All Shares of each
Series shall be of equal rank and have the same powers, preferences and rights,
and shall be subject to the same qualifications, limitations and restrictions
without distinction between the shares of different Classes thereof, except with
respect to such differences among such Classes, as the Board of Trustees shall
from time to time determine to be necessary or desirable, including differences
in the rate or rates of dividends or distributions. The Board of Trustees may
from time to time increase the number of Shares allocated to any Class already
created by providing that any unissued Shares of the applicable Series shall
constitute part of such Class, or may decrease the number of Shares allocated to
any Class already created by providing that any unissued Shares previously
assigned to such Class shall no longer constitute part thereof. The Board of
Trustees is hereby empowered to classify or reclassify from time to time any
unissued Shares of each Series by fixing or altering the terms thereof and by
assigning such unissued shares to an existing or newly created Class.
Notwithstanding anything to the contrary in this paragraph the Board of Trustees
is hereby empowered (i) to redesignate any issued Shares of any Series by
assigning a distinguishing letter, number or title to such shares and (ii) to
reclassify all or any part of the issued Shares of any Series to make them part
of an existing or newly created Class. The number of authorized Shares and the
number of Shares of each Series that may be issued is unlimited, and the
Trustees may issue Shares of any Series for such consideration and on such terms
as they may determine (or for no consideration if pursuant to a Share dividend
or split-up), all without action or approval of the Shareholders. All Shares
when so issued on the terms determined by the Trustees shall be fully paid and
non-assessable (but may be subject to mandatory contribution back to the Trust
as provided in subsection (g) of Section 4.2). The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series into one or more Series that may be established and designated from
time to time. The Trustees may hold as treasury Shares (of the same or some
other Series), reissue for such consideration and on such terms as they may
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determine, or cancel, at their discretion from time to time, any Shares of any
Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
5.3.
The establishment and designation of any Series of Shares in addition to
that established and designated in Section 4.2, or of any Class of Shares, shall
be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Series or Class, or as otherwise provided in such
instrument. At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated the Trustees may by an
instrument executed by a majority of their number abolish that Series or Class
and the establishment and designation thereof. Each instrument referred to in
this paragraph shall have the status of an amendment to this Declaration of
Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Series of the Trust to the same extent as if such person were not a
Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
SECTION 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting the
authority of the Trustees set forth in Section 4.1 to establish and designate
any further Series, the Trustees hereby establish and designate one Series of
Shares: "Hussman Strategic Growth Fund". The Shares of this Series and any
Shares of any further Series that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Series or Class at the time of establishing and
designating the same) have the following relative rights and preferences:
(a) ASSETS BELONGING TO SERIES. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all
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income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably
belong to that Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds, in whatever form the
same may be, together with any General Items allocated to that Series
as provided in the following sentence, are herein referred to as
"assets belonging to" that Series. In the event that there are any
assets, incomes, earnings, profits, and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any
particular Series (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the Series
established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to a particular Series shall belong
to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all
purposes.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust
in respect of that Series and all expenses, costs, charges and
reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of
the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities,
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expenses, costs, charges and reserves allocated and so charged to a
Series are herein referred to as "liabilities belonging to" that
Series. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the
holders of all Series for all purposes.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the holders of Shares of that Series, from such of
the estimated income and capital gains, accrued or realized, from the
assets belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series.
All dividends and distributions on Shares of a particular Series shall
be distributed pro rata to the holders of that Series in proportion to
the number of Shares of that Series held by such holders at the date
and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no
dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or
procedure, and except that if Classes have been established for any
Series, the rate of dividends or distributions may vary among such
Classes pursuant to resolution, which may be a standing resolution, of
the Board of Trustees. Such dividends and distributions may be made in
cash or Shares or a combination thereof as determined by the Trustees
or pursuant to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the mode of the making of
such dividend or distribution to that Shareholder. Any such dividend
or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with subsection (h) of Section
4.2.
The Trust intends to qualify each Series as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended, or any
successor or
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comparable statute thereto, and regulations promulgated thereunder.
Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books of the
Trust, the Board of Trustees shall have the power, in its sole
discretion, to distribute in any fiscal year as dividends, including
dividends designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of the Board of
Trustees, to enable each Series to qualify as a regulated investment
company and to avoid liability of the Series for federal income tax in
respect of that year. However, nothing in the foregoing shall limit
the authority of the Board of Trustees to make distributions greater
than or less than the amount necessary to qualify as a regulated
investment company and to avoid liability of each Series for such tax.
(d) LIQUIDATION. In event of the liquidation or dissolution of the Trust,
the Shareholders of each Series that has been established and
designated shall be entitled to receive, as a Series, when and as
declared by the Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series. The assets so
distributable to the Shareholders of any particular Series shall be
distributed among such Shareholders in proportion to the number of
Shares of that Series held by them and recorded on the books of the
Trust. The liquidation of any particular Series may be authorized by
vote of a majority of the Trustees then in office subject to the
approval of a majority of the outstanding voting Shares of that
Series, as defined in the 1940 Act.
(e) VOTING. All shares of all Series shall have "equal voting rights" as
such term is defined in the Investment Company Act of 1940 and except
as otherwise provided by that Act or rules, regulations or orders
promulgated thereunder. On each matter submitted to a vote of the
Shareholders, all Shares of all Series shall vote as a single class
("Single Class Voting"); provided, however, that (a) as to any matter
with respect to which a separate vote of any Series is required by the
1940 Act or rules and regulations promulgated thereunder, or would be
required under the Ohio General Corporation Law if the Trust were an
Ohio corporation, such requirements as to a separate vote by
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that Series shall apply in lieu of Single Class Voting as described
above; (b) in the event that the separate vote requirements referred
to in (a) above apply with respect to one or more Series, then,
subject to (c) below, the Shares of all other Series shall vote as a
single class; and (c) as to any matter which does not affect the
interest of a particular Series, only the holders of Shares of the one
or more affected Series shall be entitled to vote.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Series shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of that Series at a
redemption price equal to the net asset value per Share of that Series
next determined in accordance with subsection (h) of this Section 4.2
after the Shares are properly tendered for redemption. Payment of the
redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may make payment wholly or partly in securities
or other assets belonging to the Series of which the Shares being
redeemed are part at the value of such securities or assets used in
such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of
any Series to require the Trust to redeem Shares of that Series during
any period or at any time when and to the extent permissible under the
1940 Act, and such redemption is conditioned upon the Trust having
funds or property legally available therefor.
(g) REDEMPTION BY TRUST. Each Share of each Series that has been
established and designated is subject to redemption by the Trust at
the redemption price which would be applicable if such Share was then
being redeemed by the Shareholder pursuant to subsection (f) of this
Section 4.2: (a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to all or any of the holders of the Shares, or any Series
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thereof, of the Trust, or (b) upon such other conditions as may from
time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust with respect to maintenance of
Shareholder accounts of a minimum amount. Upon such redemption the
holders of the Shares so redeemed shall have no further right with
respect thereto other than to receive payment of such redemption
price.
(h) NET ASSET VALUE. The net asset value per Share of any Series shall be
the quotient obtained by dividing the value of the net assets of that
Series (being the value of the assets belonging to that Series less
the liabilities belonging to that Series) by the total number of
Shares of that Series outstanding, all determined in accordance with
the methods and procedures, including without limitation those with
respect to rounding, established by the Trustees from time to time.
(i) TRANSFER. All Shares of each particular Series shall be transferable,
but transfers of Shares of a particular Series will be recorded on the
Share transfer records of the Trust applicable to that Series only at
such times as Shareholders shall have the right to require the Trust
to redeem Shares of that Series and at such other times as may be
permitted by the Trustees.
(j) EQUALITY. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to that Series), and each Share
of any particular Series shall be equal to each other Share of that
Series; but the provisions of this sentence shall not restrict any
distinctions permissible under subsection (c) of this Section 4.2 that
may exist with respect to dividends and distributions on Shares of the
same Series. The Trustees may from time to time divide or combine the
Shares of any particular Series into a greater or lesser number of
Shares of that Series without thereby changing the proportionate
beneficial interest in the assets belonging to that Series or in any
way affecting the rights of Shares of any other Series.
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(k) FRACTIONS. Any fractional Share of any Series or Class, if any such
fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Series or Class,
including with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Series shall have the right to convert said
Shares into Shares of one or more other Series of Shares in accordance
with such requirements and procedures as may be established by the
Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Series that has been
established and designated. No certificates certifying the ownership of Shares
need be issued except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for the issuance
of Share certificates, the use of facsimile signatures, the transfer of Shares
and similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders and as to the number of Shares of each Series and Class held
from time to time by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments
in the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Shares that conform to such authorized terms and to reject any purchase orders
for Shares whether or not conforming to such authorized terms.
SECTION 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
SECTION 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving
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only the rights provided in this instrument. Every Shareholder by virtue of
having become a Shareholder shall be held to have expressly assented and agreed
to the terms hereof and to have become a party hereto. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the Trust nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders as partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholder, nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
ARTICLE V
---------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
SECTION 5.1 VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in Section 3.3
as to which Shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust or any Series to the extent
and as provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 7.3, (v) to
the same extent as the stockholders of an Ohio business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, this Declaration of Trust, the
Bylaws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of any Trustee or Trustees.
Shares may be voted in person or by proxy. A proxy
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with respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or the Bylaws to be taken by Shareholders.
SECTION 5.2 MEETINGS. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series) of Shareholders may
be called by the Trustees from time to time for the purpose of taking action
upon any matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary or
desirable. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder at the Shareholder's address as it appears on the
records of the Trust. The Trustees shall promptly call and give notice of a
meeting of Shareholders for the purpose of voting upon removal of any Trustee of
the Trust when requested to do so in writing by Shareholders holding not less
than 10% of the Shares then outstanding. If the Trustees shall fail to call or
give notice of any meeting of Shareholders (including a meeting involving only
the holders of Shares of one or more but less than all Series) for a period of
30 days after written application by Shareholders holding at least 25% of the
Shares then outstanding requesting a meeting be called for any other purpose
requiring action by the Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 25% of the Shares then outstanding may call and
give notice of such meeting, and thereupon the meeting shall be held in the
manner provided for herein in case of call thereof by the Trustees.
SECTION 5.3 RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who
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was a Shareholder at the date and time so fixed shall be entitled to vote at
such meeting or any adjournment thereof or (subject to any provisions
permissible under subsection (c) of Section 4.2 with respect to dividends or
distributions on Shares that have not been ordered and/or paid for by the time
or times established by the Trustees under the applicable dividend or
distribution program or procedure then in effect) to be treated as a Shareholder
of record for purposes of such other action, even though he has since that date
and time disposed of his Shares, and no Shareholder becoming such after that
date and time shall be so entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes of such other
action.
SECTION 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present, shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the Bylaws.
SECTION 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted stockholders of
an Ohio corporation under the Ohio General Corporation Law.
SECTION 5.7 ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
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ARTICLE VI
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LIMITATION OF LIABILITY; INDEMNIFICATION
----------------------------------------
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Trust for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Every note, bond, contract, instrument, certificate
or undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only by or for the
Trust or the Trustees and not personally. Nothing in this Declaration of Trust
shall protect any Trustee or officer against any liability to the Trust or the
Shareholders to which such Trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee or of such
officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of the State of Ohio and
shall recite to the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustees or Trustee or as officers or officer and not
individually and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
SECTION 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor or principal underwriter,
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custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties. Nothing stated herein is intended to detract from
the protection accorded to Trustees by Ohio Revised Code Sections 1746.08 and
1701.59, as amended from time to time.
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Trust estate to be held harmless from and indemnified against
all loss and expense arising from such liability.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to and
except as otherwise provided in the Securities Act of 1933, as amended, and the
1940 Act, the Trust shall indemnify each of its Trustees and officers, including
persons who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person") against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or
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other proceeding, whether civil or criminal, before any court or administrative
or legislative body, in which such Covered Person may be or may have been
involved as a party or otherwise or with which such person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Trustee or officer, director or trustee, and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys' fees
or other expenses incurred by a Covered Person in defending a proceeding to the
full extent permitted by the Securities Act of 1933, as amended, the 1940 Act,
and Ohio Revised Code Chapter 1707, as amended. In the event any of these laws
conflict with Ohio Revised Code Section 1701.13(E), as amended, these laws, and
not Ohio Revised Code Section 1701.13(E), shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators. Nothing contained in this article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
SECTION 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
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ARTICLE VII
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MISCELLANEOUS
-------------
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote of a majority of the outstanding voting Shares, as
defined in the 1940 Act, of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
SECTION 7.2 REORGANIZATION. The Trustees may sell, convey and transfer the
assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of that Series. Following such transfer, the Trustees shall distribute
such cash, shares or other securities (giving due effect to the assets and
liabilities belonging to and any other differences among the various Series the
assets belonging to which have so been transferred) among the Shareholders of
the Series the assets belonging to which have been so transferred; and if all of
the assets of the Trust have been so transferred, the Trust shall be terminated.
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SECTION 7.3 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees), when authorized so to do
by the vote in accordance with subsection (e) of Section 4.2 of Shareholders
holding a majority of the Shares entitled to vote, except that amendments either
(a) establishing and designating any new Series of Shares not established and
designated in Section 4.2, or any Class or (b) having the purpose of changing
the name of the Trust or the name of any Shares theretofore established and
designated or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision hereof which is internally
inconsistent with any other provision hereof or which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment companies, shall not
require authorization by Shareholder vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer of the Trust
to the effect that such amendment has been duly adopted.
SECTION 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of the State of Ohio, as well as any other governmental office where
such filing may from time to time be required, but the failure to make any such
filing shall not impair the effectiveness of this instrument or any such
amendment. Anyone dealing with the Trust may rely on a certificate by an officer
of the Trust as to whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in connection
with the Trust hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the
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Trust to be a copy of this instrument or of any such amendments. In this
instrument and in any such amendment, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder" shall be deemed to refer to
this instrument as a whole as the same may be amended or affected by any such
amendments. The masculine gender shall include the feminine and neuter genders.
Headings are placed herein for convenience of reference only and shall not be
taken as a part hereof or control or affect the meaning, construction or effect
of this instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
SECTION 7.5 APPLICABLE LAW. This Declaration of Trust is created under and
is to be governed by and construed and administered according to the laws of the
State of Ohio, including the Ohio General Corporation Law as the same may be
amended from time to time, but the reference to said Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in connection
with an entity organized in corporate form. The Trust shall be of the type
referred to in Section 1746.01 of the Ohio Revised Code, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand for himself
and his assigns, as of the day and year first above written.
---------------------
John P. Hussman
STATE OF MARYLAND )
) ss:
COUNTY OF HOWARD )
Before me, a Notary Public in and for said county and state, personally
appeared the above named John P. Hussman, who acknowledged that he did sign the
foregoing instrument and that the same is his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on this 20th day of March, 2000.
---------------------
Notary Public
My Commission Expires:
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BYLAWS
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OF
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HUSSMAN INVESTMENT TRUST
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ARTICLE 1
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AGREEMENT AND DECLARATION OF TRUST AND OFFICES
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1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Hussman Investment Trust, the Ohio business trust
established by the Declaration of Trust (the "Trust").
1.2 OFFICES. The Trust may maintain one or more other offices, including
its principal office, in or outside of Ohio, in such cities as the Trustees may
determine from time to time. Unless the Trustees otherwise determine, at least
one office of the Trust shall be located in Cincinnati, Ohio.
ARTICLE 2
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MEETINGS OF TRUSTEES
--------------------
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees. A regular meeting of the
Trustees may be held without call or notice immediately after and at the same
place as any meeting of the shareholders.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
President or the Treasurer or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary or an Assistant Secretary or by the
officer or the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special meeting
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address
-1-
<PAGE>
or to give notice to him or her in person or by telephone at least twenty-four
hours before the meeting. Notice of a meeting need not be given to any Trustee
if a written waiver of notice, executed by him or her before or after the
meeting, is filed with the records of the meeting, or to any Trustee who attends
the meeting without protesting, prior thereto or at its commencement, the lack
of notice to him or her. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees then
in office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting except as
otherwise provided by the Investment Company Act of 1940.
2.6 ACTION BY CONSENT. Any action required or permitted to be taken at any
meeting of the Trustees or any committee thereof may be taken without a meeting,
if a written consent of such action is signed by a majority of the Trustees then
in office or a majority of the members of such committee, as the case may be,
and such written consent is filed with the minutes of the proceedings of the
Trustees or such committee.
ARTICLE 3
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OFFICERS
--------
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The President of the Trust shall be a Trustee and
may but need not be a shareholder; and any other officer may be but none need be
a Trustee or shareholder. Any two or more offices may be held by the same
person.
3.2 ELECTION. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees. Other officers, if any, may
-2-
<PAGE>
be elected or appointed by the Trustees at any time. Vacancies in any office may
be filled at any time.
3.3 TENURE. The President, the Treasurer and the Secretary shall hold
office for one year and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these Bylaws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as an Ohio business
corporation and such other duties and powers as the Trustees may from time to
time designate.
3.5 PRESIDENT. Unless the Trustees otherwise provide, the President, or in
the absence of the President, any other Trustee chosen by the Trustees, shall
preside at all meetings of the shareholders and of the Trustees. The President
shall be the chief executive officer of the Trust.
3.6 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.7 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly
-3-
<PAGE>
provided in a written agreement with the Trust, no Trustee or officer resigning
and no officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on account
of such removal.
ARTICLE 4
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COMMITTEES
----------
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these Bylaws may not be delegated. Except as
the Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these Bylaws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
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REPORTS
-------
5.1 GENERAL. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
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FISCAL YEAR
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6.1 GENERAL. The fiscal year of the Trust shall be fixed, and shall be
subject to change by the Trustees.
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<PAGE>
ARTICLE 7
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SEAL
----
7.1 GENERAL. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Ohio", together with the name of the
Trust and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
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EXECUTION OF PAPERS
-------------------
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, the Secretary or the Treasurer and need not
bear the seal of the Trust, but shall state the substance of or make reference
to the provisions of Section 6.1 of the Declaration of Trust.
ARTICLE 9
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ISSUANCE OF SHARE CERTIFICATES
------------------------------
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates.
In that event, each shareholder shall be entitled to a certificate stating the
number of shares owned by him, in such form as shall be prescribed from time to
time by the Trustees. Such certificate shall be signed by the President and by
the Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such
-5-
<PAGE>
certificate shall cease to be such officer before such certificate is issued, it
may be issued by the Trust with the same effect as if he were such officer at
the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or the
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. In the event certificates have
been issued, a pledgee of shares transferred as collateral security shall be
entitled to a new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as collateral security,
and the name of the pledgor shall be stated thereon, who alone shall be liable
as a shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
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CUSTODIAN
---------
10.1 GENERAL. The Trust shall at all times employ a bank or trust company
having a capital, surplus and undivided profits of at least Five Hundred
Thousand ($500,000) Dollars as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 11
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DEALINGS WITH TRUSTEES AND OFFICERS
-----------------------------------
11.1 GENERAL. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of shares of the Trust to the same extent as if he were not a
Trustee, officer or agent; and the Trustees may accept subscriptions to shares
or repurchase shares from any firm or company in which he is interested.
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<PAGE>
ARTICLE 12
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SHAREHOLDERS
------------
12.1 MEETINGS. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees, whenever election of a Trustee or Trustees by
shareholders is required by the provisions of Section 16(a) of the Investment
Company Act of 1940 for that purpose or whenever otherwise required pursuant to
the Declaration of Trust. Any meeting shall be held on such day and at such time
as the President or the Trustees may fix in the notice of the meeting.
12.2 RECORD DATES. For the purpose of determining the shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix a time, which shall be not more than 60 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case, only shareholders of record on such record date shall have
such right, notwithstanding any transfer of shares on the books of the Trust
after the record date; or without fixing such record date the Trustees may for
any such purposes close the register or transfer books for all or any part of
such period.
ARTICLE 13
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AMENDMENTS TO THE BYLAWS
------------------------
13.1 GENERAL. These Bylaws may be amended or repealed, in whole or in part,
by a majority of the Trustees then in office at any meeting of the Trustees, or
by one or more writings signed by such a majority.
-7-
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made as of the __ day of _______, 2000 by and between Hussman
Econometrics Advisors, Inc. (the "Investment Adviser"), a Maryland corporation,
and Hussman Investment Trust (the "Trust"), an Ohio business trust.
WHEREAS, the Trust is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"), and
is currently authorized to issue separate series of shares, each having its own
investment objective, policies and restrictions, all as more fully described in
the prospectus and the statement of additional information constituting parts of
the Trust's Registration Statement on Form N-1A filed the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, and the Act (the "Registration Statement"); and
WHEREAS, the Trust proposes to engage in the business of investing and
reinvesting the assets of each of its series in securities ("the portfolio
assets") of the type and in accordance with the limitations specified in the
Trust's Agreement and Declaration of Trust and Registration Statement, and any
representations made in its prospectus and statement of additional information,
all in such manner and to such extent as may from time to time be authorized by
the Trustees; and
WHEREAS, the Trustees of the Trust have authorized and established the Hussman
Strategic Growth Fund (the "Fund") as a series of the Trust, and wish to employ
the Investment Adviser to manage the investment and reinvestment of the Fund's
portfolio assets as above specified and, without limiting the generality of the
foregoing, to provide management and other services specified below and
acknowledges that it has received prior to entering into this Agreement a copy
of Form ADV-Part II as filed by the Investment Adviser with the Commission.
NOW, THEREFORE, the parties agree as follows:
1. The Trust hereby appoints the Investment Adviser to supervise and
direct the investments of and for the Fund and as the Fund's agent and
attorney-in-fact with full discretionary and exclusive power and
authority to establish, maintain and trade in brokerage accounts for
and in the name of the Fund and to buy, sell and trade in all stocks,
bonds and other assets of the Fund.
2. Unless advised by the Trustees of the Trust of an objection, the
Investment Adviser may direct that a portion of the brokerage
commissions that may be generated by the Fund be applied to payment
for brokerage and research services. Brokerage and research services
furnished by brokers may include, but are not limited to, written
information and analyses concerning specific securities, companies or
sectors; market, financial and economic studies and forecasts as well
as discussions with research personnel; financial publications; and
statistic and pricing services utilized in the investment
<PAGE>
management process. Brokerage and research services obtained by the
use of commissions arising from the Fund's portfolio transactions may
be used by the Investment Adviser it its other investment activities.
In selecting brokers and negotiating commission rates, the Investment
Adviser will take into account the financial stability and reputation
of brokerage firms and the brokerage, execution and research services
provided by such brokers. The benefits which the Fund may receive from
such services may not be in direct proportion to the commissions
generated by the Fund. The Trust acknowledges that since commission
rates are generally negotiable, selecting brokers on the basis of
considerations which are not limited to applicable commission rates
may result in higher transaction costs that would otherwise by
obtainable.
3. The Investment Adviser, when in its sole discretion deems it to be in
the best interest of the Fund, will bunch orders for the Fund with
orders for the same security for other accounts managed by the
Investment Adviser or its affiliates. In such instances, the Fund will
be charged the average price per unit for the security in such
transactions. Complete records of such transactions will be maintained
by the Investment Adviser and will be made available to the Trust upon
request.
4. The Investment Adviser shall report to the Board of Trustees at each
meeting thereof all changes in the portfolio assets since the prior
report, and will also keep the Trustees in touch with important
developments affecting the portfolio assets and on the Investment
Adviser's own initiative will furnish the Trustees from time to time
with such information as the Investment Adviser may believe
appropriate for this purpose, whether concerning the individual
issuers whose securities are included in the portfolio assets, the
industries in which they engage, or the conditions prevailing in the
economy generally. The Investment Adviser will also furnish the
Trustees with such statistical and analytical information with respect
to the portfolio assets as the Investment Adviser may believe
appropriate or as the Trustees reasonably may request. In making such
purchases and sales of the portfolio assets, the Investment Adviser
will bear in mind the policies set from time to time by the Board of
Trustees as well as the limitations imposed by the Trust's Agreement
and Declaration of Trust, and in the Trust's Registration Statement,
in each case as amended from time to time, the limitations in the Act
and of the Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies and the investment objective, policies
and practices, including restrictions applicable to the Fund's
portfolio.
5. The Investment Adviser shall not be liable for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided
that nothing herein shall be deemed to protect, or purport to protect,
the Investment Adviser against any liability to the Fund or to its
security holders to which the Investment Adviser would otherwise be
subject by reason of willful
<PAGE>
misfeasance, bad faith or gross negligence in the performance of its
duties hereunder, or by reason of the Investment Adviser's reckless
disregard of its obligations and duties hereunder. It is understood
that the Investment Adviser performs various investment advisory and
managerial services for others, and the Trust agrees that the
Investment Adviser may give advice and take action in the performance
of its duties with respect to others which may differ from advice
given or action taken with respect to the Fund. Nothing contained
herein shall in any way constitute a waiver or limitation of any
rights which the Fund's shareholders may have under common law, or any
federal or state securities laws.
6. This Agreement shall become effective on the date hereof and shall
remain in effect for two years and continue in effect thereafter only
so long as its continuance is specifically approved at least annually
by the Board of Trustees or by a vote of a majority of the outstanding
voting securities (as defined in the Act) of the Fund, and, in either
case, by a vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the Trust's Trustees who are
not parties to this Agreement or interested persons, as defined in the
Act, of any party to this Agreement (other than as Trustees of the
Trust), and provided further, however, that if the continuation of
this Agreement is not approved, the Investment Adviser may continue to
render to the Fund the services described herein in the manner and to
the extent permitted by the Act and the rules and regulations
thereunder. Upon the effectiveness of this Agreement, it shall
supersede all previous agreements between the parties covering the
subject matter hereof. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Fund, or
by a vote of the Board of Trustees on 60 days' written notice to the
Investment Adviser, or by the Investment Adviser on 60 days' written
notice to the Trust.
7. This Agreement shall not be amended unless such amendment is approved
by vote, cast in person at a meeting called for the purpose of voting
on such approval, of a majority of the Trust's Trustees who are not
parties to this Agreement or interested persons, as defined in the
Act, of any party to this Agreement (other than as Trustees of the
Trust), and, if required by law, by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Fund.
Shareholders of the Fund not affected by any such amendment shall have
no right to participate in any such vote.
8. This Agreement may not be assigned by the Investment Adviser and shall
terminate automatically in the event of any assignment by the
Investment Adviser. The term "assignment" as used in this paragraph
shall have the meaning ascribed thereto by the Act and any regulations
or interpretations of the Commission thereunder.
<PAGE>
9. If the Investment Adviser ceases to act as investment adviser to the
Fund, or, in any event, if the Investment Adviser so requests in
writing, the Trust agrees to take all necessary action to change the
names of the Trust and the Fund to a name not including the term
"Hussman." The Investment Adviser may from time to time make available
without charge to the Trust for its use such marks or symbols owned by
the Investment Adviser, including marks or symbols containing the term
"Hussman" or any variation thereof, as the Investment Adviser may
consider appropriate. Any such marks or symbols so made available will
remain the Investment Adviser's property and it shall have the right,
upon notice in writing, to require the Trust to cease the use of such
mark or symbol at any time.
10. The Fund shall pay the Investment Adviser an investment advisory fee
equal to 1.5% per annum of the average daily net assets of the Fund.
The investment advisory fee will be paid monthly. The Investment
Adviser's compensation for the period from the date hereof through the
last day of the month of the effective date hereof will be prorated
based on the proportion that such period bears to the full month. In
the event of any termination of this Agreement, the Investment
Adviser's compensation will be calculated on the basis of a period
ending on the last day on which this Agreement is in effect, subject
to proration based on the number of days elapsed in the current period
as a percentage of the total number of days in such period.
11. Unless otherwise agreed to in writing by the parties, the Fund shall
be responsible and hereby assume the obligation for payment of all of
its expenses, including: (a) payment to the Investment Adviser of the
fee provided for in the foregoing paragraph; (b) custody, transfer and
dividend disbursing expenses; (c) fees of trustees who are not
affiliated persons; (d) legal and auditing expenses; (e) clerical,
accounting and other office costs; (f) the cost of personnel providing
services to the Fund; (g) costs of printing the Fund's prospectuses
and shareholder reports; (h) cost of maintenance of the Fund's
corporate existence; (i) interest charges, taxes, brokerage fees and
commissions; (j) costs of stationery and supplies; (k) expenses and
fees related to registration and filing with the Commission and with
state regulatory authorities; and (l) such promotional, shareholder
servicing and other expenses as may be contemplated by one or more
effective plans pursuant to Rule 12b-1 under the Act or one or more
effective non-Rule 12b-1 shareholder servicing plans, in each case
provided, however, that the Fund's payment of such promotional,
shareholder servicing and other expenses shall be in the amounts, and
in accordance with the procedures, set forth in such plan or plans.
12. Except to the extent necessary to perform the Investment Adviser's
obligations hereunder, nothing herein shall be deemed to limit or
restrict the right of the Investment Adviser or its members, officers
or employees to
<PAGE>
engage in any other business or to devote time and attention to the
management of other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any
other individual or entity.
13. The validity of the Agreement and the rights and liabilities of the
parties hereunder shall be determined in accordance with the laws of
the State of Maryland without regard to its conflict of laws
provisions, provided, however, that nothing herein shall be construed
as being inconsistent with the Act.
14. The Investment Adviser shall promptly notify the Trust of any change
in the ownership or control of the Investment Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day first above written.
HUSSMAN INVESTMENT TRUST
By: __________________________
HUSSMAN ECONOMETICS ADVISORS, INC.
By: __________________________
CUSTODY AGREEMENT
This AGREEMENT, dated as of 2000, by and between HUSSMAN INVESTMENT TRUST
(the "Trust"), a business trust organized under the laws of the State of Ohio,
acting with respect to the Hussman Strategic Growth Fund (the "Fund"), a series
of the Trust operated and administered by the Trust, and FIRSTAR BANK, N.A., a
national banking association (the "Custodian").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust desires that the Fund's Securities and cash be held and
administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Trust and named in Exhibit A hereto or in such
resolutions of the Board Of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
-1-
<PAGE>
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving
under the Trust's Agreement and Declaration of Trust, as from time to time
amended.
1.3 "BOOK-ENTRY SYSTEM" 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.
1.4 "BUSINESS DAY" 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.
1.5 "FUND CUSTODY ACCOUNT" shall mean any of the accounts in the name of
the Fund, which is provided for in Section 3.2 below.
1.6 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.7 "OFFICER" 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.
1.8 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions prior to the end of the
next Business Day. If such Written Instructions confirming Oral Instructions are
not received by the Custodian prior to a transaction, it shall in no way affect
the validity of the transaction or the authorization thereof by the Trust. If
Oral Instructions vary from the Written Instructions which purport to confirm
them, the Custodian shall notify the Trust of such variance but such Oral
Instructions will govern unless the Custodian has not yet acted.
-2-
<PAGE>
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
(provided that Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and 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.
1.11 "SECURITIES" 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 has the facilities to clear and to
service.
1.12 "SHARES" shall mean the units of beneficial interest issued by the
Trust on account of the Fund.
1.13 "SUB-CUSTODIAN" 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, (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 3.3 below. Such contract shall include provisions
that provide: (i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that
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the Fund will be adequately protected against the risk of loss of assets held in
accordance with such contract; (ii) that the Fund's assets 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 Fund's assets 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 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, in their entirety.
1.14 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
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ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and 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.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Trust:
a. A copy of the Agreement and Declaration of Trust of the Trust
certified by the Secretary;
b. A copy of the Bylaws of the Trust certified by the Secretary;
c. A copy of the resolution of the Board of Trustees of the Trust
appointing the Custodian, certified by the Secretary;
d. A copy of the then current Prospectus of the Fund; and
e. A certification of the President and Secretary of the Trust setting
forth the names and signatures of the current Officers of the Trust and
other Authorized Persons.
2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Trust agrees
to notify the Custodian in writing of the appointment, termination or change in
appointment of any Dividend and Transfer Agent of the Fund.
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ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the Custodian
for the account of the Fund (other than Securities maintained in a Securities
Depository or Book-Entry System) shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian (including
the Securities and non-cash property of the other funds) and shall be identified
as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. 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 the
Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. (a) In its discretion, the Custodian may appoint
one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians 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.
(b) If, after the initial approval 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 provide it with information reasonably necessary to determine any such new
Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act, including a
copy of the proposed agreement with such Sub-Custodian. The Trust shall
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at the meeting of the Board of Trustees next following receipt of such notice
and information give a written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) At the end of each calendar quarter, the Custodian shall provide
written reports notifying the Board of Trustees of the placement of the
Securities and cash of the Fund with a particular Sub-Custodian and of any
material changes in the Fund's arrangements. The Custodian shall promptly take
such steps as may be required to withdraw assets of the Fund from any
Sub-Custodian that has ceased to meet the requirements of Rule 17f-5 under the
1940 Act.
(e) With respect to its responsibilities under this Section 3.3, 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, based on the standards
applicable to custodians in the relevant market, if maintained with each
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, including, but not limited to, the physical
protections available for certificated securities (if applicable), the method of
keeping custodial records, and the 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
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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.
(f) The Custodian shall establish a system to monitor the appropriateness
of maintaining the Fund's assets with a particular Sub-Custodian and the
contract governing the Fund's arrangements with such Sub-Custodian.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause to
be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) 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 (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. 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:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Trust shall deliver to the Custodian a
resolution of the Board of Trustees, certified by an Officer, authorizing
and instructing the Custodian on an on-going basis to deposit in such
Securities Depository or Book-Entry System all Securities eligible for
deposit therein and to 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.
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<PAGE>
(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.
(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.
(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.
(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.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to the Fund
resulting (i) from
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the use of a Book-Entry System or Securities Depository by reason of any
negligence or willful misconduct on the part of Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above or any of its or
their employees, or (ii) from failure of Custodian or any such
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
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.
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from the Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in accordance with
Section 4.1 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
appointed pursuant to Section 3.3 above) of such Securities registered as
provided in Section 3.9 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 3.5 above; (ii) in the case of options on Securities, against
delivery to the Custodian (or such Sub-Custodian) of such receipts as are
required by the customs prevailing among dealers in such options; (iii) in
the case
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of futures contracts and options on futures contracts, against delivery to
the Custodian (or such Sub-Custodian) of evidence of title thereto in favor
of the Fund or any nominee referred to in Section 3.9 below; and (iv) in
the case of repurchase or reverse repurchase agreements entered into
between the Trust and a bank which 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;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section 5.1
below;
(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;
(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 the NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national securities exchange (or
of any similar
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<PAGE>
organization or organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
(g) For transfer in accordance with the provision 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;
(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
(i) For any other proper purpose, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from the
Fund Custody Account but only in the following cases:
(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;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section 3.5
above;
(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
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consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Fund, the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above, or of 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; provided
that, in any such case, the new Securities are to be delivered to the
Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or 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;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by the Fund;
(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;
(i) For delivery in connection with any loans of Securities of the Fund,
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but only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(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;
(k) Pursuant to any authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Trust;
(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 the NASD, 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;
(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; or
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for the
Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all income and
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other payments to which the Fund is entitled either by law or pursuant to
custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature or be
called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(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 Internal Revenue Service ("IRS") and to the Trust at
such time, in such manner and containing such information as is prescribed
by the IRS;
(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
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. 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, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any
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of them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. 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 hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of the Fund.
3.10 RECORDS. (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; and
(iii) canceled checks and bank records related thereto. 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.
(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 rules and
regulations of the Securities and Exchange Commission, (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 Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. 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
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day following such transfers. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement of the Securities
and moneys held by the Custodian and the Sub-Custodians for the Fund under this
Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. 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.
3.14 INFORMATION ON CORPORATE ACTIONS. 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 as described
in the Standards of Service Guide attached as Exhibit B. 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 five 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 five Business Days
prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
the Fund,
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Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) 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.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. 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 but in
the absence of specified Written Instructions to so pay in advance, the
Custodian shall be liable to the Fund for such Securities to the same extent as
if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by the Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
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.
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4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 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 of the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. 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.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. 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
-------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the Fund Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of the Fund, the Custodian shall
wire each amount specified in such Proper Instructions to or through such bank
as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper 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,
(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
the NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Trust 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
-20-
<PAGE>
arrangements in connection with transactions by the Fund,
(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,
(c) which constitute collateral for loans of Securities made by the Fund,
(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
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Board of Trustees, certified by an Officer, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for the Fund only.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or the Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any Sub-Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act
-21-
<PAGE>
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. The Custodian shall not be under any obligation
at any time to ascertain whether the Trust or the Fund is in compliance with the
1940 Act, the regulations thereunder, the provisions of the Trust's charter
documents or by-laws, or its investment objectives and policies as then in
effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to a 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.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. 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.
7.4 LIMITATION ON DUTY TO COLLECT. 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.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. 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 Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
-22-
<PAGE>
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 CO-OPERATION. 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 (a) the preparation of the
Trust's reports on Form N-1A and Form N-SAR and any other reports required by
the Securities and Exchange Commission, and (b) the fulfillment by the Trust of
any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION BY TRUST. The Trust shall indemnify and hold harmless
the Custodian and any Sub-Custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such Sub-Custodian, from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the Securities
Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities
and/or banking laws) or claim arising directly or indirectly (a) from the fact
that Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such Sub-Custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a Sub-Custodian appointed
-23-
<PAGE>
pursuant to Section 3.3 above, provided that neither the Custodian nor any such
Sub-Custodian shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the Custodian's or
such Sub-Custodian's negligence, bad faith or willful misconduct.
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and hold
harmless the Trust from and against any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability (including without limitation,
liability arising under the Securities Act of 1933, the 1934 Act, the 1940 Act,
and any state or foreign securities and/or banking laws) or claim arising from
the negligence, bad faith or willful misconduct of the Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 SECURITY. 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 loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith 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 the Fund and to dispose of other assets of the Fund to
the extent necessary to obtain reimbursement or indemnification.
-24-
<PAGE>
ARTICLE IX
----------
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; 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 the Custodian in the event of a failure
or delay (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 X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall
-25-
<PAGE>
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 (a) 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 (b)
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. Upon such delivery and transfer, the Custodian shall be relieved of
all obligations under this Agreement. 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.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or corporation company of its own selection, which (a) is a
"bank" as defined in the 1940 Act and (b) has aggregate capital, surplus and
undivided profits as shown on its then most recent published report of not less
than $25 million, all Securities, cash and other property held by 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.
-26-
<PAGE>
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Fund are set forth in Exhibit C attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the above-mentioned Agreement and
Declaration of Trust.
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name
hereinbelow:
-27-
<PAGE>
TO THE TRUST:
Hussman Investment Trust
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
Telephone: (513) 587-3400
Facsimile: (513) 587-3450
TO CUSTODIAN:
Firstar Bank, N.A.
425 Walnut Street, M.L. CN-WN-06TC
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632_____
Facsimile: (513) 632-3299
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. The Trust shall submit
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
-28-
<PAGE>
14.3 NO WAIVER. 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.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
-29-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: HUSSMAN INVESTMENT TRUST
______________________________ By:___________________________
Secretary Its: President
ATTEST: FIRSTAR BANK, N.A.
______________________________ By:_________________________
Senior Trust Officer Its: Vice President
-30-
<PAGE>
EXHIBIT A
---------
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Accounts.
AUTHORIZED PERSONS SPECIMEN SIGNATURES
President: John P. Hussman ___________________
Secretary: John F. Splain ___________________
Treasurer: Mark J. Seger ___________________
Vice President: Robert G. Dorsey ___________________
Transfer Agent/Fund Accountant
Employees: ___________________
___________________
___________________
___________________
___________________
-31-
<PAGE>
EXHIBIT B
---------
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
STANDARDS OF SERVICE GUIDE
July, 1999
Firstar Bank, N.A. is committed to providing superior quality service to
all customers and their agents at all times. We have compiled this guide as a
tool for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Firstar Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Firstar Bank will make every effort to complete all
processing on a timely basis.
Firstar Bank is a direct participant of the Depository Trust Company, a
direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers
Trust Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Firstar Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET
JOURNAL.
For bond calls and mandatory puts, Firstar Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Firstar Bank will not notify clients of optional put opportunities.
Any securities delivered free to Firstar Bank or its agents must be
received three (3) business days prior to any payment or settlement in order for
the Firstar Bank standards of service to apply.
Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.
The information contained in this Standards of Service Guide is subject to
change. Should any changes be made Firstar Bank will provide you with an
updated copy of its Standards of Service Guide.
-32-
<PAGE>
FIRSTAR BANK SECURITY SETTLEMENT STANDARDS
<TABLE>
<CAPTION>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
<S> <C> <C>
DTC 1:30 P.M. on Settlement Date DTC Participant #2803
Agent Bank ID 27895
Institutional #________________
For Account #____________
Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust
for Firstar Bank, N.A. ABA# 042000013
For Account #_____________
Fed Wireable FNMA & FHLMC 12:30 P.M. on Settlement Date Bk of NYC/Cust
ABA 021000018
A/C Firstar Bank # 117612
For Account #____________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of Cinti/Spec
(Repurchase Agreement Collateral for Firstar Bank, N.A. ABA# 042000013
Only) For Account #_____________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BYORK
(GNMA Book Entry) Firstar Bank / 117612
Physical Securities 9:30 A.M. EST on Settlement Date Bank of New York
(for Deliveries, by 4:00 P.M. on One Wall Street- 3rd Floor - Window A
Settlement Date minus 1) New York, NY 10286
For account of Firstar Bank / Cust #117612
Attn: Donald Hoover
CEDEL/EURO-CLEAR 11:00 A..M. on Settlement Date Cedel a/c 55021
minus 2 FFC: a/c 387000
Firstar Bank / Global Omnibus
Cash Wire Transfer 3:00 P.M. Firstar Bank,N.A. Cinti/Trust
ABA#
Credit Account #
Further Credit to ___________
Account # _______________
</TABLE>
* All times listed are Eastern Standard Time.
-33-
<PAGE>
FIRSTAR BANK PAYMENT STANDARDS
<TABLE>
<CAPTION>
SECURITY TYPE INCOME PRINCIPAL
<S> <C> <C>
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs *
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust Certificates* Payable Date Payable Date
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
</TABLE>
NOTE: If a payable date falls on a weekend or bank holiday, payment will be
made on the immediately following business day.
-34-
<PAGE>
FIRSTAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO FIRSTAR BANK POSTING
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior to 5 business days prior to expiration Upon receipt
and Optional Mergers expiration or receipt of notice
Mandatory Puts with Later of 10 business days prior to 5 business days prior to expiration Upon receipt
Option to Retain expiration or receipt of notice
Class Actions 10 business days prior to expiration date 5 business days prior to expiration Upon receipt
Voluntary Tenders, Later of 10 business days prior to 5 business days prior to expiration Upon receipt
Exchanges, expiration or receipt of notice
and Conversions
Mandatory Puts, Defaults, At posting of funds or None Upon receipt
Liquidations, Bankruptcies, securities received
Stock Splits, Mandatory
Exchanges
Full and Partial Calls Later of 10 business days prior to None Upon receipt
expiration or receipt of notice
</TABLE>
NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.
-35-
<PAGE>
EXHIBIT C
FIRSTAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Firstar Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
-36-
EXPENSE LIMITATION AGREEMENT
----------------------------
HUSSMAN ECONOMETRICS ADVISORS, INC.
3525 Ellicott Mills Drive
Ellicott City, Maryland 21043
_________________, 2000
HUSSMAN INVESTMENT TRUST
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
Dear Sirs:
Hussman Econometrics Advisors, Inc. confirms our agreement with you as
follows:
1. You are an open-end, diversified management investment company
registered under the Investment Company Act of 1940 (the "Act") and are
authorized to issue shares of separate series (funds), with each fund having its
own investment objective, policies and restrictions. You propose to engage in
the business of investing and reinvesting the assets of each of your funds in
accordance with applicable limitations. Pursuant to an Investment Advisory
Agreement dated as of ___________, 2000 (the "Advisory Agreement"), you have
employed us to manage the investment and reinvestment of such assets.
2. We hereby agree that, notwithstanding any provision to the contrary
contained in the Advisory Agreement, we shall limit as provided herein the
aggregate expenses of every character incurred by your Hussman Strategic Growth
Fund (the "Fund"), including but not limited to the fees ("Advisory Fees")
payable to us under the Advisory Agreement (the "Limitation"). Under the
Limitation, we agree that, through December 31, 2001, such expenses shall not
exceed a percentage (the "Percentage Expense Limitation") of the average daily
net assets of the Fund equal to 2% on an annualized basis. To determine our
liability for the Fund's expenses in excess of the
<PAGE>
Percentage Expense Limitation, the amount of allowable fiscal-year-to-date
expenses shall be computed daily by prorating the Percentage Expense Limitation
based on the number of days elapsed within the fiscal year of the Fund, or
limitation period, if shorter the ("Prorated Limitation"). The Prorated
Limitation shall be compared to the expenses of the Fund recorded through the
current day in order to produce the allowable expenses to be recorded for the
current day (the "Allowable Expenses"). If Advisory Fees and other expenses of
the Fund for the current day exceed the Allowable Expenses, Advisory Fees for
the current day shall be reduced by such excess ("Unaccrued Fees"). In the event
such excess exceeds the amount due as Advisory Fees, we shall be responsible to
the Fund for the additional excess ("Other Expenses Exceeding Limit"). If
cumulative Unaccrued Fees or cumulative Other Expenses Exceeding Limit remain at
December 31, 2001, these amounts shall be paid to us in the future, provided
that (1) no such payment shall be made to us after December 31, 2003, (2) such
payment shall be made only to the extent that it does not cause the Fund's
aggregate expenses, on an annualized basis, to exceed the Percentage Expense
Limitation, and (3) no such payment shall be made to us to the extent that the
aggregate of such payments would exceed the amount of organizational and
offering expenses (as defined by the Financial Accounting Standards Board)
recorded by you for financial reporting purposes on or before December 31, 2001.
3. Nothing in this Agreement shall be construed as preventing us from
voluntarily limiting, waiving or reimbursing your expenses outside the contours
of this Agreement during any time period before or after December 31, 2001, nor
shall anything herein be construed as requiring that we limit, waive or
reimburse any of your expenses incurred after December 31, 2001, or, except as
expressly set forth herein, prior to such date.
4. This Agreement shall become effective on the date hereof and remain in
effect until December 31, 2001. This Agreement may be terminated by either party
hereto upon not less than 60 days' prior written notice to the other party. Upon
the termination or expiration hereof, we shall have no claim against you for any
amounts not reimbursed to us pursuant to the provisions of paragraph 2.
<PAGE>
5. This Agreement shall be construed in accordance with the laws of the
State of Maryland, provided, however, that nothing herein shall be construed as
being inconsistent with the Act.
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
HUSSMAN ECONOMETRICS ADVISORS, INC.
By: ______________________________
Agreed to and accepted as of
the date first set forth above.
HUSSMAN INVESTMENT TRUST
By: ________________________
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this ____ day of _______, 2000, by and between
Hussman Investment Trust (the "Trust"), an Ohio business trust having its
principal place of business at 3525 Ellicott Mills Drive, Suite B, Ellicott
City, Maryland 21043, and ULTIMUS FUND SOLUTIONS, LLC ("Ultimus"), a limited
liability company organized under the laws of the State of Ohio and having its
principal place of business at 135 Merchant Street, Suite 230, Cincinnati, Ohio
45246.
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires that Ultimus provide certain administrative
services for each series of the Trust, listed on Schedule A attached hereto and
made part of this Agreement, as such Schedule A may be amended from time to time
(individually referred to herein as the "Portfolio" and collectively as the
"Portfolios"); and
WHEREAS, Ultimus is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. RETENTION OF ULTIMUS.
The Trust hereby retains Ultimus to act as the administrator of the Trust
and to furnish the Trust with the services as set forth below. Ultimus hereby
accepts such employment to perform such duties.
Ultimus shall provide the Trust with regulatory reporting, all necessary
office space, equipment, personnel, compensation and facilities for handling the
affairs of the Trust and such other services as Ultimus shall, from time to
time, determine to be necessary to perform its obligations under this Agreement.
Without limiting the generality of the foregoing, Ultimus shall:
(a) calculate Trust expenses and control all disbursements for the Trust,
and as appropriate compute the Trust's yields, total return, expense
ratios and portfolio turnover rate;
(b) prepare and coordinate, in consultation with Trust counsel, the
preparation of prospectuses, statements of additional information,
registration statements and proxy materials;
(c) prepare such reports, notice filing forms and other documents
(including reports regarding the sale and redemption of shares of the
Trust as may be required in order to comply with federal and state
securities law) as may be necessary or desirable to make notice
filings relating to the Trust's shares with state securities
authorities, monitor the sale of Trust shares for compliance with
state securities laws, and file with the appropriate state securities
authorities the registration statements and reports for the Trust and
the Trust's shares and all amendments
<PAGE>
thereto, as may be necessary or convenient to qualify and keep
effective the Trust and the Trust's shares with state securities
authorities to enable the Trust to make a continuous offering of its
shares;
(d) develop and prepare, with the assistance of the Trust's investment
adviser, communications to shareholders, including the annual report
to shareholders, coordinate the mailing of prospectuses, notices,
proxy statements, proxies and other reports to Trust shareholders, and
supervise and facilitate the proxy solicitation process for all
shareholder meetings, including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Trust with, among others, the
Trust's investment adviser, distributor, custodian, transfer agent and
fund accountant;
(f) supervise the Trust's transfer agent with respect to the payment of
dividends and other distributions to shareholders;
(g) calculate performance data of the Trust for dissemination to
information services covering the investment company industry;
(h) coordinate and supervise the preparation and filing of the Trust's tax
returns;
(i) assist with the layout and printing of prospectuses and assist with
and coordinate layout and printing of the Trust's semi-annual and
annual reports to shareholders;
(j) provide individuals reasonably acceptable to the Trust's Trustees to
serve as officers of the Trust, who will be responsible for the
management of certain of the Trust's affairs as determined by the
Trustees;
(k) advise the Trust and its Trustees on matters concerning the Trust and
its affairs;
(l) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Trust in
accordance with the requirements of the 1940 Act and as such bonds and
policies are approved by the Trustees;
(m) monitor and advise the Trust and its Portfolios on their registered
investment company status under the Internal Revenue Code of 1986;
(n) monitor and advise the Trust and its Portfolios on compliance with
applicable limitations as imposed by the 1940 Act and the rules and
regulations thereunder or set forth in the Trust's or any Portfolio's
then current Prospectus or Statement of Additional Information;
(o) provide such internal legal services as are requested by the Trust
including, but not limited to, the coordination of meetings and
preparation of materials for the quarterly and special meetings of the
Trustees;
(p) cooperate with, and take all reasonable actions in the performance of
its duties under this Agreement to ensure that all necessary
information is made available to, the Trust's independent public
accountants in connection with the preparation of any audit or report
requested by the Trust;
2
<PAGE>
(q) cooperate with, and take all reasonable actions in the performance of
its duties under this Agreement to ensure that the necessary
information is made available to the Securities and Exchange
Commission (the "SEC") in connection with any regulatory audit of the
Trust or the investment adviser of the Trust;
(r) perform all administrative services and functions of the Trust to the
extent administrative services and functions are not provided to the
Trust by other agents of the Trust;
(s) prepare and file with the SEC the semi-annual report for the Trust on
Form N-SAR and all required notices pursuant to Rule 24f-2; and
(t) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Trust as the Trust and Ultimus shall
determine desirable.
2. SUBCONTRACTING.
Ultimus may, at its expense and, upon written notice to the Trust,
subcontract with any entity or person concerning the provision of the services
contemplated hereunder; provided, however, that Ultimus shall not be relieved of
any of its obligations under this Agreement by the appointment of such
subcontractor and provided further, that Ultimus shall be responsible, to the
extent provided in Section 7 hereof, for all acts of such subcontractor as if
such acts were its own.
3. ALLOCATION OF CHARGES AND EXPENSES.
Ultimus shall furnish at its own expense the executive, supervisory and
clerical personnel necessary to perform its obligations under this Agreement.
Ultimus shall also pay all compensation, if any, of officers of the Trust who
are affiliated persons of Ultimus.
The Trust assumes and shall pay or cause to be paid all other expenses of
the Trust not otherwise allocated herein, including, without limitation,
organization costs, taxes, expenses for legal and auditing services, the
expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing shareholders, all expenses incurred in connection with
issuing and redeeming shares, the costs of custodial services, the cost of
initial and ongoing registration and/or qualification of the shares under
federal and state securities laws, fees and out-of-pocket expenses of Trustees
who are not affiliated persons of Ultimus or the investment adviser to the
Trust, insurance premiums, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Trust.
4. COMPENSATION OF ULTIMUS.
For the services to be rendered, the facilities furnished and the expenses
assumed by Ultimus pursuant to this Agreement, the Trust shall pay to Ultimus
compensation at an annual rate specified in Schedule B attached hereto. Such
compensation shall be calculated and accrued daily, and paid to Ultimus monthly.
The Trust shall also reimburse Ultimus for its reasonable out-of-pocket
expenses, including but not limited to the travel and lodging expenses incurred
by officers and employees of Ultimus in connection with attendance at Board
meetings. Any out-of-pocket expenses incurred by Ultimus on behalf of the Trust
shall be pre-approved by the Trust for all amounts in excess of $1,000 per month
with respect to each transaction/cost item.
3
<PAGE>
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, Ultimus' compensation for that
part of the month in which this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. Payment
of Ultimus' compensation for the preceding month shall be made promptly.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Portfolio as of the
date first written above (or, if a particular Portfolio is not in existence on
that date, on the date such Portfolio commences operation) (the "Effective
Date").
6. TERM OF THIS AGREEMENT.
The term of this Agreement shall continue in effect, unless earlier
terminated by either party hereto as provided hereunder, for a period of two
years (the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one-year
periods ("Rollover Periods").
This Agreement may be terminated without penalty: (i) by provision of
written notice of nonrenewal at least sixty (60) days prior to the end of the
Initial Term or any Rollover Period, as the case may be; (ii) by mutual
agreement of the parties; or (iii) for "cause" (as defined herein) upon the
provision of sixty (60) days' advance written notice by the party alleging
cause.
For purposes of this Agreement, "cause" shall mean: (i) a material breach
of this Agreement that has not been remedied within thirty (30) days following
written notice of such breach from the non-breaching party, (ii) a series of
negligent acts or omissions or breaches of this Agreement which, in the
aggregate, constitute in the reasonable judgment of the Trust, a serious failure
to perform satisfactorily Ultimus' obligations hereunder; (iii) a final,
unappealable judicial, regulatory or administrative ruling or order in which the
party to be terminated has been found guilty of criminal or unethical behavior
in the conduct of its business; or (iv) financial difficulties on the part of
the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in effect, or any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or the modification or alteration of the rights of
creditors.
Notwithstanding the foregoing, after such termination for so long as
Ultimus, with the written consent of the Trust, in fact continues to perform any
one or more of the services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including without limitation
the provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Ultimus and unpaid by the Trust upon such termination
shall be immediately due and payable upon and notwithstanding such termination.
Ultimus shall be entitled to collect from the Trust, in addition to the
compensation described in Schedule B, the amount of all of Ultimus' cash
disbursements for services in connection with Ultimus' activities in effecting
such termination, including without limitation, the delivery to the Trust and/or
its designees of the Trust's property, records, instruments and documents.
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<PAGE>
7. STANDARD OF CARE.
The duties of Ultimus shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against Ultimus
hereunder. Ultimus shall be obligated to exercise care and diligence in the
performance of its duties hereunder and to act in good faith in performing the
services provided for under this Agreement. Ultimus shall be liable for any
damages arising directly or indirectly out of Ultimus' failure to perform its
duties under this Agreement to the extent such damages arise directly or
indirectly out of Ultimus' willful misfeasance, bad faith, negligence in the
performance of its duties, or reckless disregard of it obligations and duties
hereunder. (As used in this Article 7, the term "Ultimus" shall include
directors, officers, employees and other agents of Ultimus as well as Ultimus
itself.)
Without limiting the generality of the foregoing or any other provision of
this Agreement, (i) Ultimus shall not be liable for losses beyond its reasonable
control, provided that Ultimus has acted in accordance with the standard of care
set forth above; and (ii) Ultimus shall not be liable for the validity or
invalidity or authority or lack thereof of any instruction, notice or other
instrument that Ultimus reasonably believes to be genuine and to have been
signed or presented by a duly authorized representative of the Trust (other than
an employee or other affiliated persons of Ultimus who may otherwise be named as
an authorized representative of the Trust for certain purposes).
Ultimus may apply to the Trust at any time for instructions and may consult
with counsel for the Trust or its own counsel and with accountants and other
experts with respect to any matter arising in connection with Ultimus' duties
hereunder, and Ultimus shall not be liable or accountable for any action taken
or omitted by it in good faith in accordance with such instruction or with the
reasonable opinion of such counsel, accountants or other experts qualified to
render such opinion.
8. INDEMNIFICATION.
The Trust agrees to indemnify and hold harmless Ultimus from and against
any and all actions, suits, claims, losses, damages, costs, charges, reasonable
counsel fees and disbursements, payments, expenses and liabilities (including
reasonable investigation expenses) (collectively, "Losses") arising directly or
indirectly out of any action or omission to act which Ultimus takes (i) at any
request or on the direction of or in reliance on the reasonable advice of the
Trust, (ii) upon any instruction, notice or other instrument that Ultimus
reasonably believes to be genuine and to have been signed or presented by a duly
authorized representative of the Trust (other than an employee or other
affiliated person of Ultimus who may otherwise be named as an authorized
representative of the Trust for certain purposes) or (iii) on its own
initiative, in good faith and in accordance with the standard of care set forth
herein, in connection with the performance of its duties or obligations
hereunder; provided, however that the Trust shall have no obligation to
indemnify or reimburse Ultimus under this Article 8 to the extent that Ultimus
is entitled to reimbursement or indemnification for such Losses under any
liability insurance policy described in this Agreement or otherwise.
Ultimus shall not be indemnified against or held harmless from any Losses
arising directly or indirectly out of Ultimus' own willful misfeasance, bad
faith, negligence in the performance of its duties, or reckless disregard of its
obligations and duties hereunder. (As used in this Article 8, the term "Ultimus"
shall include directors, officers, employees and other agents of Ultimus as well
as Ultimus itself.)
5
<PAGE>
9. RECORD RETENTION AND CONFIDENTIALITY.
Ultimus shall keep and maintain on behalf of the Trust all books and
records which the Trust and Ultimus is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance
of books and records in connection with the services to be provided hereunder.
Ultimus further agrees that all such books and records shall be the property of
the Trust and to make such books and records available for inspection by the
Trust or by the SEC at reasonable times and otherwise to keep confidential all
books and records and other information relative to the Trust and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
10. FORCE MAJEURE.
Ultimus assumes no responsibility hereunder, and shall not be liable, for
any damage, loss of data, delay or any other loss whatsoever caused by events
beyond its reasonable control, including acts of civil or military authority,
national emergencies, fire, flood, catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
11. RIGHTS OF OWNERSHIP; RETURN OF RECORDS.
All records and other data except computer programs and procedures
developed to perform services required to be provided by Ultimus are the
exclusive property of the Trust and all such records and data will be furnished
to the Trust in appropriate form as soon as practicable after termination of
this Agreement for any reason. Ultimus may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Ultimus' files, records and documents created and maintained by Ultimus pursuant
to this Agreement which are no longer needed by Ultimus in the performance of
its services or for its legal protection. If not so turned over to the Trust,
such documents and records will be retained by Ultimus for six years from the
year of creation. At the end of such six-year period, such records and documents
will be turned over to the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
12. REPRESENTATIONS OF THE TRUST.
The Trust certifies to Ultimus that: (1) as of the close of business on the
Effective Date, each Portfolio that is in existence as of the Effective Date has
authorized unlimited shares, and (2) this Agreement has been duly authorized by
the Trust and, when executed and delivered by the Trust, will constitute a
legal, valid and binding obligation of the Trust, enforceable against the Trust
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.
13. REPRESENTATIONS OF ULTIMUS.
Ultimus represents and warrants that: (1) the various procedures and
systems which Ultimus has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Trust and Ultimus's records, data, equipment facilities and other
property used in the performance of its obligations hereunder are
6
<PAGE>
adequate and that it will make such changes therein from time to time as are
required for the secure performance of its obligations hereunder, and (2) this
Agreement has been duly authorized by Ultimus and, when executed and delivered
by Ultimus, will constitute a legal, valid and binding obligation of Ultimus,
enforceable against Ultimus 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.
14. INSURANCE.
Ultimus shall furnish the Trust with pertinent information concerning the
professional liability insurance coverage that it maintains. Such information
shall include the identity of the insurance carrier(s), coverage levels and
deductible amounts. Ultimus shall notify the Trust should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Ultimus shall notify the Trust of any material
claims against it with respect to services performed under this Agreement,
whether or not they may be covered by insurance, and shall notify the Trust from
time to time as may be appropriate of the total outstanding claims made by
Ultimus under its insurance coverage.
15. INFORMATION TO BE FURNISHED BY THE TRUST.
The Trust has furnished to Ultimus the following:
(a) Copies of the Declaration of Trust and of any amendments thereto,
certified by the proper official of the state in which such document
has been filed.
(b) Copies of the following documents:
(1) The Trust's Bylaws and any amendments thereto; and
(2) Certified copies of resolutions of the Trustees covering the
approval of this Agreement, authorization of a specified officer
of the Trust to execute and deliver this Agreement and
authorization for specified officers of the Trust to instruct
Ultimus thereunder.
(c) A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct Ultimus in
all matters.
(d) Copies of the Prospectus and Statement of Additional Information for
each Portfolio.
16. AMENDMENTS TO AGREEMENT.
This Agreement, or any term thereof, may be changed or waived only by
written amendment signed by the party against whom enforcement of such change or
waiver is sought.
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and Ultimus
may conclusively assume that any special procedure which has been approved by
the Trust does not conflict with or violate any requirements of its Declaration
of Trust or then current prospectuses, or any rule, regulation or requirement of
any regulatory body.
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<PAGE>
17. COMPLIANCE WITH LAW.
Except for the obligations of Ultimus otherwise set forth herein, the Trust
assumes full responsibility for the preparation, contents and distribution of
each prospectus of the Trust as to compliance with all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), the 1940 Act
and any other laws, rules and regulations of governmental authorities having
jurisdiction. The Trust represents and warrants that no shares of the Trust will
be offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
18. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such
notice, at the following address: if to the Trust, at 3525 Ellicott Mills Drive,
Suite B, Ellicott City, Maryland 21043, Attn: John P. Hussman; and if to
Ultimus, at 135 Merchant Street, Suite 230, Cincinnati, Ohio 45246, Attn: Robert
G. Dorsey; or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
19. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
20. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the State
of Ohio and the applicable provisions of the 1940 Act. To the extent that the
applicable laws of the State of Ohio, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter shall control.
21. LIMITATION OF LIABILITY.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the State of Ohio, and notice is hereby given that this instrument
is executed on behalf of the Board of Trustees of the Trust and not individually
and that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust (or if the matter relates only to a particular
Portfolio, that Portfolio), and the Ultimus shall look only to the assets of the
Trust, or the particular Portfolio, for the satisfaction of such obligations.
22. MULTIPLE ORIGINALS.
This Agreement may be executed in two or more 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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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
HUSSMAN INVESTMENT TRUST
By: __________________________
Title: President
ULTIMUS FUND SOLUTIONS, LLC
By: __________________________
Title: President
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<PAGE>
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT BETWEEN
HUSSMAN INVESTMENT TRUST
AND
ULTIMUS FUND SOLUTIONS, LLC
FUND PORTFOLIOS
---------------
Hussman Strategic Growth Fund
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<PAGE>
SCHEDULE B
TO THE ADMINISTRATION AGREEMENT BETWEEN
HUSSMAN INVESTMENT TRUST
AND
ULTIMUS FUND SOLUTIONS, LLC
FEES
----
Pursuant to Article 4, in consideration of services rendered and expenses
assumed pursuant to this Agreement, the Trust will pay Ultimus on the first
business day after the end of each month, or at such time(s) as Ultimus shall
request and the parties hereto agree, a fee computed respect to each Portfolio
as follows:
-------------------------------------------------------------
AVERAGE DAILY NET ASSETS ADMINISTRATION FEE
-------------------------------------------------------------
Up to $50 million .150%
-------------------------------------------------------------
-------------------------------------------------------------
$50 to $100 million .125%
-------------------------------------------------------------
-------------------------------------------------------------
$100 to $250 million .100%
-------------------------------------------------------------
-------------------------------------------------------------
$250 to $500 million .075%
-------------------------------------------------------------
-------------------------------------------------------------
In excess of $500 million .050%
-------------------------------------------------------------
The fee will be subject to a monthly minimum of $2,000 with respect to each
Portfolio.
In addition to the above fees, the Trust will reimburse Ultimus for certain
out-of-pocket expenses incurred on the Trust's behalf, including but not limited
to, travel expenses to attend Board meetings and any other expenses approved by
the Trust. The Trust will be responsible for its normal operating expenses, such
as federal and state filing fees, insurance premiums, typesetting and printing
of the Trust's public documents, and fees and expenses of the Trust's other
vendors and providers.
The foregoing fees will be discounted by 25% with respect to the Hussman
Strategic Growth Fund until the earlier of (i) one year from the date of this
Agreement or (ii) such Fund's net assets reach $10 million.
11
TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT is made as of this ____ day of _______, 2000, by and between
Hussman Investment Trust (the "Trust"), an Ohio business trust having its
principal place of business at 3525 Ellicott Mills Drive, Suite B, Ellicott
City, Maryland 21043, and ULTIMUS FUND SOLUTIONS, LLC ("Ultimus"), a limited
liability company organized under the laws of the State of Ohio and having its
principal place of business at 135 Merchant Street, Suite 230, Cincinnati, Ohio
45246.
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires that Ultimus perform certain transfer agent and
shareholder services for each series of the Trust, listed on Schedule A attached
hereto and made part of this Agreement, as such Schedule A may be amended from
time to time (individually referred to herein as the "Portfolio" and
collectively as the "Portfolios"); and
WHEREAS, Ultimus is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. RETENTION OF ULTIMUS.
The Trust hereby retains Ultimus to perform for the Trust transfer agent
services as set forth below. Ultimus also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. Ultimus shall perform such
additional services as are provided on an amendment to this Agreement hereof, in
consideration of such fees as the parties hereto may agree.
(a) Shareholder Transactions
------------------------
(i) Process shareholder purchase and redemption orders.
(ii) Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
(iii) Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
(iv) Issue periodic statements for shareholders.
(v) Process transfers and exchanges.
(vi) Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
<PAGE>
(b) Shareholder Information Services
--------------------------------
(i) Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
(ii) Produce detailed history of transactions through duplicate or
special order statements upon request.
(iii) Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
(c) Compliance Reporting
--------------------
(i) Provides reports to the Securities and Exchange Commission and
the states in which the Portfolios are registered.
(ii) Prepare and distribute appropriate Internal Revenue Service
forms for shareholder income and capital gains.
(iii) Issue tax withholding reports to the Internal Revenue Service.
(d) Dealer/Load Processing (if applicable)
--------------------------------------
(i) Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
(ii) Account for separation of shareholder investments from
transaction sale charges for purchase of Portfolio shares.
(iii) Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
(iv) Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Portfolio.
(e) Shareholder Account Maintenance
-------------------------------
(i) Maintain all shareholder records for each account in each
Portfolio.
(ii) Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
(iii) Record shareholder account information changes.
(iv) Maintain account documentation files for each shareholder.
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Ultimus shall perform such other services for the Trust that are mutually
agreed upon by the parties from time to time either at no additional fees or for
such reasonable and customary fees as are mutually agreed upon by the parties;
provided, however that the Trust may retain third parties to perform such other
services. Such services may include performing internal audit examination;
mailing the annual reports of the Portfolios; preparing an annual list of
shareholders; and mailing notices of shareholders' meetings, proxies and proxy
statements, for all of which the Trust will pay Ultimus' out-of-pocket expenses.
2. SUBCONTRACTING.
Ultimus may, at its expense and, upon written notice to the Trust,
subcontract with any entity or person concerning the provision of the services
contemplated hereunder; provided, however, that Ultimus shall not be relieved of
any of its obligations under this Agreement by the appointment of such
subcontractor and provided further, that Ultimus shall be responsible, to the
extent provided in Section 7 hereof, for all acts of such subcontractor as if
such acts were its own.
3. COMPENSATION.
The Trust shall pay for the services to be provided by Ultimus under this
Agreement in accordance with, and in the manner set forth in, Schedule B
attached hereto, as such Schedule may be amended from time to time.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, Ultimus' compensation for that
part of the month in which the Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. Payment
of Ultimus' compensation for the preceding month shall be made promptly.
4. REIMBURSEMENT OF EXPENSES.
In addition to paying Ultimus the fees described in Schedule B attached
hereto, the Trust agrees to reimburse Ultimus for its reasonable out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
(a) All freight and other delivery and bonding charges incurred by Ultimus
in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Ultimus in communication
with the Trust, the Trust's investment adviser or custodian, dealers
or others as required for Ultimus to perform the services to be
provided hereunder;
(c) The cost of microfilm or microfiche of records or other materials;
(d) The cost of printing and generating confirmations, statements and
other documents and the cost of mailing such documents to shareholders
and others;
(e) All expenses incurred in connection with any custom programming or
systems modifications required to provide any special reports or
services requested by the Trust;
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<PAGE>
(f) Any expenses Ultimus shall incur at the written direction of an
officer of the Trust thereunto duly authorized other than an employee
or other affiliated person of Ultimus who may otherwise be named as an
authorized representative of the trust for certain purposes; and
(g) Any additional expenses reasonably incurred by Ultimus in the
performance of its duties and obligations under this Agreement,
provided that any such expenses incurred by Ultimus on behalf of the
Trust shall be pre-approved by the Trust for all amounts in excess of
$1,000 per month with respect to each transaction/cost item.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Portfolio as of the
date first written above (or, if a particular Portfolio is not in existence on
that date, on the date such Portfolio commences operation) (the "Effective
Date").
6. TERM OF THIS AGREEMENT.
The term of this Agreement shall continue in effect, unless earlier
terminated by either party hereto as provided hereunder, for a period of two
years (the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one-year
periods ("Rollover Periods").
This Agreement may be terminated without penalty: (i) by provision of
written notice of nonrenewal at least sixty (60) days prior to the end of the
Initial Term or any Rollover Period, as the case may be; (ii) by mutual
agreement of the parties; or (iii) for "cause" (as defined herein) upon the
provision of sixty (60) days' advance written notice by the party alleging
cause.
For purposes of this Agreement, "cause" shall mean: (i) a material breach
of this Agreement that has not been remedied within thirty (30) days following
written notice of such breach from the non-breaching party, (ii) a series of
negligent acts or omissions or breaches of this Agreement which, in the
aggregate, constitute in the reasonable judgment of the Trust, a serious failure
to perform satisfactorily Ultimus' obligations hereunder; (iii) a final,
unappealable judicial, regulatory or administrative ruling or order in which the
party to be terminated has been found guilty of criminal or unethical behavior
in the conduct of its business; or (iv) financial difficulties on the part of
the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in effect, or any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or the modification or alteration of the rights of
creditors.
Notwithstanding the foregoing, after such termination for so long as
Ultimus, with the written consent of the Trust, in fact continues to perform any
one or more of the services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including without limitation
the provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Ultimus and unpaid by the Trust upon such termination
shall be immediately due and payable upon and notwithstanding such termination.
Ultimus shall be entitled to collect from the Trust, in addition to the
compensation described in Schedule B, the amount of all of Ultimus' cash
disbursements for services in connection with
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<PAGE>
Ultimus' activities in effecting such termination, including without limitation,
the delivery to the Trust and/or its designees of the Trust's property, records,
instruments and documents.
7. STANDARD OF CARE.
The duties of Ultimus shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against Ultimus
hereunder. Ultimus shall be obligated to exercise care and diligence in the
performance of its duties hereunder and to act in good faith in performing the
services provided for under this Agreement. Ultimus shall be liable for any
damages arising directly or indirectly out of Ultimus' failure to perform its
duties under this Agreement to the extent such damages arise directly or
indirectly out of Ultimus' willful misfeasance, bad faith, negligence in the
performance of its duties, or reckless disregard of it obligations and duties
hereunder. (As used in this Article 7, the term "Ultimus" shall include
directors, officers, employees and other agents of Ultimus as well as Ultimus
itself.)
Without limiting the generality of the foregoing or any other provision of
this Agreement, (i) Ultimus shall not be liable for losses beyond its reasonable
control, provided that Ultimus has acted in accordance with the standard of care
set forth above; and (ii) Ultimus shall not be liable for the validity or
invalidity or authority or lack thereof of any instruction, notice or other
instrument that Ultimus reasonably believes to be genuine and to have been
signed or presented by a duly authorized representative of the Trust (other than
an employee or other affiliated persons of Ultimus who may otherwise be named as
an authorized representative of the Trust for certain purposes).
Ultimus may apply to the Trust at any time for instructions and may consult
with counsel for the Trust or its own counsel and with accountants and other
experts with respect to any matter arising in connection with Ultimus' duties
hereunder, and Ultimus shall not be liable or accountable for any action taken
or omitted by it in good faith in accordance with such instruction or with the
reasonable opinion of such counsel, accountants or other experts qualified to
render such opinion.
8. INDEMNIFICATION.
The Trust agrees to indemnify and hold harmless Ultimus from and against
any and all actions, suits, claims, losses, damages, costs, charges, reasonable
counsel fees and disbursements, payments, expenses and liabilities (including
reasonable investigation expenses) (collectively, "Losses") arising directly or
indirectly out of any action or omission to act which Ultimus takes (i) at any
request or on the direction of or in reliance on the reasonable advice of the
Trust, (ii) upon any instruction, notice or other instrument that Ultimus
reasonably believes to be genuine and to have been signed or presented by a duly
authorized representative of the Trust (other than an employee or other
affiliated person of Ultimus who may otherwise be named as an authorized
representative of the Trust for certain purposes) or (iii) on its own
initiative, in good faith and in accordance with the standard of care set forth
herein, in connection with the performance of its duties or obligations
hereunder; provided, however that the Trust shall have no obligation to
indemnify or reimburse Ultimus under this Article 8 to the extent that Ultimus
is entitled to reimbursement or indemnification for such Losses under any
liability insurance policy described in this Agreement or otherwise.
Ultimus shall not be indemnified against or held harmless from any Losses
arising directly or indirectly out of Ultimus' own willful misfeasance, bad
faith, negligence in the performance of its duties, or reckless disregard of its
obligations and duties hereunder. (As used
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<PAGE>
in this Article 8, the term "Ultimus" shall include directors, officers,
employees and other agents of Ultimus as well as Ultimus itself.)
9. RECORD RETENTION AND CONFIDENTIALITY.
Ultimus shall keep and maintain on behalf of the Trust all books and
records which the Trust and Ultimus is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance
of books and records in connection with the services to be provided hereunder.
Ultimus further agrees that all such books and records shall be the property of
the Trust and to make such books and records available for inspection by the
Trust or by the SEC at reasonable times and otherwise to keep confidential all
books and records and other information relative to the Trust and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
10. FORCE MAJEURE.
Ultimus assumes no responsibility hereunder, and shall not be liable, for
any damage, loss of data, delay or any other loss whatsoever caused by events
beyond its reasonable control, including acts of civil or military authority,
national emergencies, fire, flood, catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
11. RIGHTS OF OWNERSHIP; RETURN OF RECORDS.
All records and other data except computer programs and procedures
developed to perform services required to be provided by Ultimus are the
exclusive property of the Trust and all such records and data will be furnished
to the Trust in appropriate form as soon as practicable after termination of
this Agreement for any reason. Ultimus may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Ultimus' files, records and documents created and maintained by Ultimus pursuant
to this Agreement which are no longer needed by Ultimus in the performance of
its services or for its legal protection. If not so turned over to the Trust,
such documents and records will be retained by Ultimus for six years from the
year of creation. At the end of such six-year period, such records and documents
will be turned over to the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
12. REPRESENTATIONS OF THE TRUST.
The Trust certifies to Ultimus that: (1) as of the close of business on the
Effective Date, each Portfolio that is in existence as of the Effective Date has
authorized unlimited shares, and (2) this Agreement has been duly authorized by
the Trust and, when executed and delivered by the Trust, will constitute a
legal, valid and binding obligation of the Trust, enforceable against the Trust
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.
13. REPRESENTATIONS OF ULTIMUS.
Ultimus represents and warrants that: (1) the various procedures and
systems which Ultimus has implemented with regard to safeguarding from loss or
damage attributable to fire,
15
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theft, or any other cause the records, and other data of the Trust and Ultimus's
records, data, equipment facilities and other property used in the performance
of its obligations hereunder are adequate and that it will make such changes
therein from time to time as are required for the secure performance of its
obligations hereunder, and (2) this Agreement has been duly authorized by
Ultimus and, when executed and delivered by Ultimus, will constitute a legal,
valid and binding obligation of Ultimus, enforceable against Ultimus 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.
14. INSURANCE.
Ultimus shall furnish the Trust with pertinent information concerning the
professional liability insurance coverage that it maintains. Such information
shall include the identity of the insurance carrier(s), coverage levels and
deductible amounts. Ultimus shall notify the Trust should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Ultimus shall notify the Trust of any material
claims against it with respect to services performed under this Agreement,
whether or not they may be covered by insurance, and shall notify the Trust from
time to time as may be appropriate of the total outstanding claims made by
Ultimus under its insurance coverage.
15. INFORMATION TO BE FURNISHED BY THE TRUST.
The Trust has furnished to Ultimus the following:
(a) Copies of the Declaration of Trust and of any amendments thereto,
certified by the proper official of the state in which such document
has been filed.
(b) Copies of the following documents:
(1) The Trust's Bylaws and any amendments thereto; and
(2) Certified copies of resolutions of the Trustees covering the
approval of this Agreement, authorization of a specified officer
of the Trust to execute and deliver this Agreement and
authorization for specified officers of the Trust to instruct
Ultimus thereunder.
(c) A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct Ultimus in
all matters.
(d) Copies of the Prospectus and Statement of Additional Information for
each Portfolio.
16. AMENDMENTS TO AGREEMENT.
This Agreement, or any term thereof, may be changed or waived only by
written amendment signed by the party against whom enforcement of such change or
waiver is sought.
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and Ultimus
may conclusively assume that any special procedure which has been approved by
the Trust does not conflict with or violate any requirements of its Declaration
of Trust or then current prospectuses, or any rule, regulation or requirement of
any regulatory body.
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<PAGE>
17. COMPLIANCE WITH LAW.
Except for the obligations of Ultimus otherwise set forth herein, the Trust
assumes full responsibility for the preparation, contents and distribution of
each prospectus of the Trust as to compliance with all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), the 1940 Act
and any other laws, rules and regulations of governmental authorities having
jurisdiction. The Trust represents and warrants that no shares of the Trust will
be offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
18. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such
notice, at the following address: if to the Trust, at 3525 Ellicott Mills Drive,
Suite B, Ellicott City, Maryland 21043, Attn: John P. Hussman; and if to
Ultimus, at 135 Merchant Street, Suite 230, Cincinnati, Ohio 45246, Attn: Robert
G. Dorsey; or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
19. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
20. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the State
of Ohio and the applicable provisions of the 1940 Act. To the extent that the
applicable laws of the State of Ohio, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter shall control.
21. LIMITATION OF LIABILITY.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the State of Ohio, and notice is hereby given that this instrument
is executed on behalf of the Board of Trustees of the Trust and not individually
and that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust (or if the matter relates only to a particular
Portfolio, that Portfolio), and the Ultimus shall look only to the assets of the
Trust, or the particular Portfolio, for the satisfaction of such obligations.
22. MULTIPLE ORIGINALS.
This Agreement may be executed in two or more 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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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
HUSSMAN INVESTMENT TRUST
By: __________________________
Title: President
ULTIMUS FUND SOLUTIONS, LLC
By: __________________________
Title: President
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<PAGE>
SCHEDULE A
TO THE TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT BETWEEN
HUSSMAN INVESTMENT TRUST
AND
ULTIMUS FUND SOLUTIONS, LLC
FUND PORTFOLIOS
---------------
Hussman Strategic Growth Fund
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT BETWEEN
HUSSMAN INVESTMENT TRUST
AND
ULTIMUS FUND SOLUTIONS, LLC
FEES AND EXPENSES
-----------------
FEES:
Ultimus shall be entitled to receive a fee from the Trust on the first
business day following the end of each month, or at such time(s) as Ultimus
shall request and the parties hereto shall agree, a fee computed with respect to
each Portfolio as follows:
Base fee per year $18,000 per Portfolio/class
Annual fee per shareholder account $15.00
OUT-OF-POCKET EXPENSES:
The fees set forth above shall be in addition to the payment of
out-of-pocket expenses, as provided for in Section 4 of this Agreement.
11
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this ____ day of _______, 2000, by and between
Hussman Investment Trust (the "Trust"), an Ohio business trust having its
principal place of business at 3525 Ellicott Mills Drive, Suite B, Ellicott
City, Maryland 21043, and ULTIMUS FUND SOLUTIONS, LLC ("Ultimus"), a limited
liability company organized under the laws of the State of Ohio and having its
principal place of business at 135 Merchant Street, Suite 230, Cincinnati, Ohio
45246.
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires that Ultimus perform certain fund accounting
services for each series of the Trust, listed on Schedule A attached hereto and
made part of this Agreement, as such Schedule A may be amended from time to time
(individually referred to herein as the "Portfolio" and collectively as the
"Portfolios"); and
WHEREAS, Ultimus is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. RETENTION OF ULTIMUS.
The Trust hereby retains Ultimus to act as the fund accountant of the Trust
and to furnish the Trust with the services as set forth below. Ultimus hereby
accepts such employment to perform such duties.
(a) MAINTENANCE OF BOOKS AND RECORDS.
Ultimus will keep and maintain the following books and records of each
Portfolio pursuant to Rule 31a-1 under the 1940 Act (the "Rule"):
(i) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and
disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including
interest accrued and interest received, as required by
subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection (b)(2)(ii) and
(iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the
Rule.
(b) PERFORMANCE OF DAILY ACCOUNTING SERVICES.
In addition to the maintenance of the books and records specified
above, Ultimus shall perform the following accounting services daily
for each Portfolio:
<PAGE>
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection 1(b)(ii)
below;
(ii) Obtain security prices from independent pricing services, or if
such quotes are unavailable, then obtain such prices from each
Portfolio's investment adviser or its designee, as approved by
the Trust's Board of Trustees (hereafter referred to as
"Trustees");
(iii) Verify and reconcile with the Portfolios' custodian all daily
trade activity;
(iv) Compute, as appropriate, each Portfolio's net income and capital
gains, dividend payables, dividend factors, yields, and weighted
average portfolio maturity;
(v) Review daily the net asset value calculation and dividend factor
(if any) for each Portfolio prior to release to shareholders,
check and confirm the net asset values and dividend factors for
reasonableness and deviations, and distribute net asset values
and yields to NASDAQ;
(vi) Determine unrealized appreciation and depreciation on securities
held by the Portfolios;
(vii) Amortize premiums and accrete discounts on securities purchased
at a price other than face value, if requested by the Trust;
(viii)Update fund accounting system to reflect rate changes, as
received from a Portfolio's investment adviser, on variable
interest rate instruments;
(ix) Post Portfolio transactions to appropriate categories;
(x) Accrue expenses of each Portfolio according to instruction
received from the Trust's administrator;
(xi) Determine the outstanding receivables and payables for all (1)
security trades, (2) Portfolio share transactions and (3) income
and expense accounts;
(xii) Provide accounting reports in connection with the Trust's
regular annual audit and other audits and examinations by
regulatory agencies; and
(xiii) Provide such periodic reports as the parties shall agree upon.
(c) SPECIAL REPORTS AND SERVICES.
(i) Ultimus may provide additional special reports upon the request
of the Trust or a Portfolio's investment adviser, which may
result in an additional charge, the amount of which shall be
agreed upon between the parties.
(ii) Ultimus may provide such other similar services with respect to
a Portfolio as may be reasonably requested by the Trust, which
may result in an additional charge, the amount of which shall be
agreed upon between the parties.
(d) ADDITIONAL ACCOUNTING SERVICES.
Ultimus shall also perform the following additional accounting services for
each Portfolio:
(i) Provide monthly a set of financial statements for each Portfolio
as described below, upon request of the Trust:
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<PAGE>
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Security Purchases and Sales Journals
Portfolio Holdings Reports
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal excise tax
returns;
(B) the Trust's semi-annual reports with the Securities and
Exchange Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and quarterly (if any)
shareholder reports;
(D) registration statements on Form N-1A and other filings
relating to the registration of shares;
(E) Ultimus' monitoring of the Trust's status as a regulated
investment Trust under Subchapter M of the Internal Revenue
Code, as amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
2. SUBCONTRACTING.
Ultimus may, at its expense and, upon written notice to the Trust,
subcontract with any entity or person concerning the provision of the services
contemplated hereunder; provided, however, that Ultimus shall not be relieved of
any of its obligations under this Agreement by the appointment of such
subcontractor and provided further, that Ultimus shall be responsible, to the
extent provided in Section 7 hereof, for all acts of such subcontractor as if
such acts were its own.
3. COMPENSATION.
The Trust shall pay for the services to be provided by Ultimus under this
Agreement in accordance with, and in the manner set forth in, Schedule B
attached hereto, as such Schedule may be amended from time to time.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, Ultimus' compensation for that
part of the month in which the Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. Payment
of Ultimus' compensation for the preceding month shall be made promptly.
4. REIMBURSEMENT OF EXPENSES.
In addition to paying Ultimus the fees described in Schedule B attached
hereto, the Trust agrees to reimburse Ultimus for its reasonable out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
(a) All freight and other delivery and bonding charges incurred by Ultimus
in delivering materials to and from the Trust;
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<PAGE>
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Ultimus in communication
with the Trust, the Trust's investment adviser or custodian, dealers
or others as required for Ultimus to perform the services to be
provided hereunder;
(c) The cost of obtaining security market quotes;
(d) All expenses incurred in connection with any custom programming or
systems modifications required to provide any special reports or
services requested by the Trust;
(e) Any expenses Ultimus shall incur at the written direction of an
officer of the Trust thereunto duly authorized other than an employee
or other affiliated person of Ultimus who may otherwise be named as an
authorized representative of the Trust for certain purposes; and
(f) Any additional expenses reasonably incurred by Ultimus in the
performance of its duties and obligations under this Agreement,
provided that any such expenses incurred by Ultimus on behalf of the
Trust shall be pre-approved by the Trust for all amounts in excess of
$1,000 per month with respect to each transaction/cost item.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Portfolio as of the
date first written above (or, if a particular Portfolio is not in existence on
that date, on the date such Portfolio commences operation) (the "Effective
Date").
6. TERM OF THIS AGREEMENT.
The term of this Agreement shall continue in effect, unless earlier
terminated by either party hereto as provided hereunder, for a period of two
years (the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one-year
periods ("Rollover Periods").
This Agreement may be terminated without penalty: (i) by provision of
written notice of nonrenewal at least sixty (60) days prior to the end of the
Initial Term or any Rollover Period, as the case may be; (ii) by mutual
agreement of the parties; or (iii) for "cause" (as defined herein) upon the
provision of sixty (60) days' advance written notice by the party alleging
cause.
For purposes of this Agreement, "cause" shall mean: (i) a material breach
of this Agreement that has not been remedied within thirty (30) days following
written notice of such breach from the non-breaching party, (ii) a series of
negligent acts or omissions or breaches of this Agreement which, in the
aggregate, constitute in the reasonable judgment of the Trust, a serious failure
to perform satisfactorily Ultimus' obligations hereunder; (iii) a final,
unappealable judicial, regulatory or administrative ruling or order in which the
party to be terminated has been found guilty of criminal or unethical behavior
in the conduct of its business; or (iv) financial difficulties on the part of
the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in
4
<PAGE>
effect, or any applicable law, other than said Title 11, of any jurisdiction
relating to the liquidation or reorganization of debtors or the modification or
alteration of the rights of creditors.
Notwithstanding the foregoing, after such termination for so long as
Ultimus, with the written consent of the Trust, in fact continues to perform any
one or more of the services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including without limitation
the provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Ultimus and unpaid by the Trust upon such termination
shall be immediately due and payable upon and notwithstanding such termination.
Ultimus shall be entitled to collect from the Trust, in addition to the
compensation described in Schedule B, the amount of all of Ultimus' cash
disbursements for services in connection with Ultimus' activities in effecting
such termination, including without limitation, the delivery to the Trust and/or
its designees of the Trust's property, records, instruments and documents.
7. STANDARD OF CARE.
The duties of Ultimus shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against Ultimus
hereunder. Ultimus shall be obligated to exercise care and diligence in the
performance of its duties hereunder and to act in good faith in performing the
services provided for under this Agreement. Ultimus shall be liable for any
damages arising directly or indirectly out of Ultimus' failure to perform its
duties under this Agreement to the extent such damages arise directly or
indirectly out of Ultimus' willful misfeasance, bad faith, negligence in the
performance of its duties, or reckless disregard of it obligations and duties
hereunder. (As used in this Article 7, the term "Ultimus" shall include
directors, officers, employees and other agents of Ultimus as well as Ultimus
itself.)
Without limiting the generality of the foregoing or any other provision of
this Agreement, (i) Ultimus shall not be liable for losses beyond its reasonable
control, provided that Ultimus has acted in accordance with the standard of care
set forth above; and (ii) Ultimus shall not be liable for the validity or
invalidity or authority or lack thereof of any instruction, notice or other
instrument that Ultimus reasonably believes to be genuine and to have been
signed or presented by a duly authorized representative of the Trust (other than
an employee or other affiliated persons of Ultimus who may otherwise be named as
an authorized representative of the Trust for certain purposes).
Ultimus may apply to the Trust at any time for instructions and may consult
with counsel for the Trust or its own counsel and with accountants and other
experts with respect to any matter arising in connection with Ultimus' duties
hereunder, and Ultimus shall not be liable or accountable for any action taken
or omitted by it in good faith in accordance with such instruction or with the
reasonable opinion of such counsel, accountants or other experts qualified to
render such opinion.
8. INDEMNIFICATION.
The Trust agrees to indemnify and hold harmless Ultimus from and against
any and all actions, suits, claims, losses, damages, costs, charges, reasonable
counsel fees and disbursements, payments, expenses and liabilities (including
reasonable investigation expenses) (collectively, "Losses") arising directly or
indirectly out of any action or omission to act which Ultimus takes (i) at any
request or on the direction of or in reliance on the reasonable advice of the
Trust, (ii) upon any instruction, notice or other instrument that Ultimus
reasonably believes to be genuine and to have been signed or presented by a duly
authorized representative of the Trust (other than
5
<PAGE>
an employee or other affiliated person of Ultimus who may otherwise be named as
an authorized representative of the Trust for certain purposes) or (iii) on its
own initiative, in good faith and in accordance with the standard of care set
forth herein, in connection with the performance of its duties or obligations
hereunder; provided, however that the Trust shall have no obligation to
indemnify or reimburse Ultimus under this Article 8 to the extent that Ultimus
is entitled to reimbursement or indemnification for such Losses under any
liability insurance policy described in this Agreement or otherwise.
Ultimus shall not be indemnified against or held harmless from any Losses
arising directly or indirectly out of Ultimus' own willful misfeasance, bad
faith, negligence in the performance of its duties, or reckless disregard of its
obligations and duties hereunder. (As used in this Article 8, the term "Ultimus"
shall include directors, officers, employees and other agents of Ultimus as well
as Ultimus itself.)
9. RECORD RETENTION AND CONFIDENTIALITY.
Ultimus shall keep and maintain on behalf of the Trust all books and
records which the Trust and Ultimus is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance
of books and records in connection with the services to be provided hereunder.
Ultimus further agrees that all such books and records shall be the property of
the Trust and to make such books and records available for inspection by the
Trust or by the SEC at reasonable times and otherwise to keep confidential all
books and records and other information relative to the Trust and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
10. FORCE MAJEURE.
Ultimus assumes no responsibility hereunder, and shall not be liable, for
any damage, loss of data, delay or any other loss whatsoever caused by events
beyond its reasonable control, including acts of civil or military authority,
national emergencies, fire, flood, catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
11. RIGHTS OF OWNERSHIP; RETURN OF RECORDS.
All records and other data except computer programs and procedures
developed to perform services required to be provided by Ultimus are the
exclusive property of the Trust and all such records and data will be furnished
to the Trust in appropriate form as soon as practicable after termination of
this Agreement for any reason. Ultimus may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Ultimus' files, records and documents created and maintained by Ultimus pursuant
to this Agreement which are no longer needed by Ultimus in the performance of
its services or for its legal protection. If not so turned over to the Trust,
such documents and records will be retained by Ultimus for six years from the
year of creation. At the end of such six-year period, such records and documents
will be turned over to the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
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<PAGE>
12. REPRESENTATIONS OF THE TRUST.
The Trust certifies to Ultimus that: (1) as of the close of business on the
Effective Date, each Portfolio that is in existence as of the Effective Date has
authorized unlimited shares, and (2) this Agreement has been duly authorized by
the Trust and, when executed and delivered by the Trust, will constitute a
legal, valid and binding obligation of the Trust, enforceable against the Trust
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.
13. REPRESENTATIONS OF ULTIMUS.
Ultimus represents and warrants that: (1) the various procedures and
systems which Ultimus has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Trust and Ultimus's records, data, equipment facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes therein from time to time as are required for the
secure performance of its obligations hereunder, and (2) this Agreement has been
duly authorized by Ultimus and, when executed and delivered by Ultimus, will
constitute a legal, valid and binding obligation of Ultimus, enforceable against
Ultimus 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.
14. INSURANCE.
Ultimus shall furnish the Trust with pertinent information concerning the
professional liability insurance coverage that it maintains. Such information
shall include the identity of the insurance carrier(s), coverage levels and
deductible amounts. Ultimus shall notify the Trust should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Ultimus shall notify the Trust of any material
claims against it with respect to services performed under this Agreement,
whether or not they may be covered by insurance, and shall notify the Trust from
time to time as may be appropriate of the total outstanding claims made by
Ultimus under its insurance coverage.
15. INFORMATION TO BE FURNISHED BY THE TRUST.
The Trust has furnished to Ultimus the following:
(a) Copies of the Declaration of Trust and of any amendments thereto,
certified by the proper official of the state in which such document
has been filed.
(b) Copies of the following documents:
(1) The Trust's Bylaws and any amendments thereto; and
(2) Certified copies of resolutions of the Trustees covering the
approval of this Agreement, authorization of a specified officer
of the Trust to execute and deliver this Agreement and
authorization for specified officers of the Trust to instruct
Ultimus thereunder.
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<PAGE>
(c) A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct Ultimus in
all matters.
(d) Copies of the Prospectus and Statement of Additional Information for
each Portfolio.
16. AMENDMENTS TO AGREEMENT.
This Agreement, or any term thereof, may be changed or waived only by
written amendment signed by the party against whom enforcement of such change or
waiver is sought.
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and Ultimus
may conclusively assume that any special procedure which has been approved by
the Trust does not conflict with or violate any requirements of its Declaration
of Trust or then current prospectuses, or any rule, regulation or requirement of
any regulatory body.
17. COMPLIANCE WITH LAW.
Except for the obligations of Ultimus otherwise set forth herein, the Trust
assumes full responsibility for the preparation, contents and distribution of
each prospectus of the Trust as to compliance with all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), the 1940 Act
and any other laws, rules and regulations of governmental authorities having
jurisdiction. The Trust represents and warrants that no shares of the Trust will
be offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
18. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such
notice, at the following address: if to the Trust, at 3525 Ellicott Mills Drive,
Suite B, Ellicott City, Maryland 21043, Attn: John P. Hussman; and if to
Ultimus, at 135 Merchant Street, Suite 230, Cincinnati, Ohio 45246, Attn: Robert
G. Dorsey; or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
19. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
20. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the State
of Ohio and the applicable provisions of the 1940 Act. To the extent that the
applicable laws of the State of Ohio, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter shall control.
8
<PAGE>
21. LIMITATION OF LIABILITY.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the State of Ohio, and notice is hereby given that this instrument
is executed on behalf of the Board of Trustees of the Trust and not individually
and that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust (or if the matter relates only to a particular
Portfolio, that Portfolio), and the Ultimus shall look only to the assets of the
Trust, or the particular Portfolio, for the satisfaction of such obligations.
22. MULTIPLE ORIGINALS.
This Agreement may be executed in two or more 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
HUSSMAN INVESTMENT TRUST
By: __________________________
Title: President
ULTIMUS FUND SOLUTIONS, LLC
By: __________________________
Title: President
9
<PAGE>
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT BETWEEN
HUSSMAN INVESTMENT TRUST
AND
ULTIMUS FUND SOLUTIONS, LLC
FUND PORTFOLIOS
---------------
Hussman Strategic Growth Fund
10
<PAGE>
SCHEDULE B
TO THE FUND ACCOUNTING AGREEMENT BETWEEN
HUSSMAN INVESTMENT TRUST
AND
ULTIMUS FUND SOLUTIONS, LLC
FEES AND EXPENSES
-----------------
FEES:
Ultimus shall be entitled to receive a fee from the Trust on the first
business day following the end of each month, or at such time(s) as Ultimus
shall request and the parties hereto shall agree, a fee computed with respect to
each Portfolio as follows:
Base fee per year = $30,000, plus
Asset based fee of:
--------------------------------------------------------
AVERAGE DAILY NET ASSETS ASSET BASED FEE
--------------------------------------------------------
Up to $500 million .010%
--------------------------------------------------------
In excess of $500 million .005%
--------------------------------------------------------
The above base fee assumes one class of shares. For a Portfolio that offers
more than one class of shares, the base fee is $36,000.
The foregoing fees will be discounted by 25% with respect to the Hussman
Strategic Growth Fund until the earlier of (i) one year from the date of this
Agreement or (ii) such Fund's net assets reach $10 million.
OUT-OF-POCKET EXPENSES:
The fees set forth above shall be in addition to the payment of
out-of-pocket expenses, as provided for in Section 4 of this Agreement.
Hussman Econometrics Advisors, Inc.
3525 Ellicott Mills Drive
Ellicott City, Maryland 21043
_________________, 2000
Hussman Investment Trust
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
Re: Initial Capital Agreement
Gentlemen:
In connection with our purchase from you and your issuance to us of 10,000
shares of the Hussman Strategic Growth Fund for an aggregate cash consideration
of One Hundred Thousand Dollars ($100,000), this will confirm that we are buying
such shares for investment for our account only and not with a view to reselling
or otherwise distributing them.
Very truly yours,
Hussman Econometrics Advisors, Inc.
By: ____________________________
Name: John P. Hussman
Title: President
CODE OF ETHICS
HUSSMAN INVESTMENT TRUST
Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act")
addresses conflicts of interest that arise from personal trading activities of
investment company personnel. In particular, Rule 17j-1 prohibits fraudulent,
deceptive or manipulative acts by such personnel in connection with their
personal transactions in securities held or to be acquired by the investment
company. The Rule also requires an investment company to adopt a code of ethics
containing provisions reasonably necessary to prevent fraudulent, deceptive or
manipulative acts and requires certain persons to report their personal
securities transactions to the investment company.
This Code of Ethics has been adopted by the Board of Trustees of Hussman
Investment Trust (the "Trust"). It is based on the principle that the trustees
and officers of the Trust owe a fiduciary duty to the Trust's shareholders to
conduct their affairs, including their personal securities transactions, in such
a manner as to avoid (1) serving their own personal interests ahead of the
shareholders, (2) taking advantage of their position, and (3) any actual or
potential conflicts of interest.
I. DEFINITIONS. As used in this Code of Ethics, the following terms shall
have the following meanings:
(a) "Adviser" shall mean Hussman Econometrics Advisors, Inc.
(b) "Beneficial ownership" shall have the same meaning as in Rule
16a-1(a)(2) for the purposes of Section 16 of the Securities Exchange
Act of 1934. Generally, a person is considered the beneficial owner of
securities if the person has a pecuniary interest in the securities
and includes securities held by members of the person's immediate
family sharing the same household, or other persons if, by reason of
any contract, understanding, relationship, agreement or other
arrangement, the person obtains from such securities benefits
substantially equivalent to those of ownership
(c) "Disinterested trustee" shall mean a trustee of the Trust who is not
an "interested person" of the Trust within the meaning of Section
2(a)(19) of the 1940 Act.
(d) "Fund" shall mean the Hussman Strategic Growth Fund.
(e) "Security" shall have the same meaning set forth in Section 2(a)(36)
of the 1940 Act, except that it shall not include shares of registered
open-end investment companies, direct obligations of the U.S.
Government, banker's acceptances, bank certificates of deposit,
commercial paper and high-quality short-term debt instruments,
including repurchase agreements.
(f) A "security held or to be acquired by the Fund" shall mean (1) any
security which, within the most recent fifteen (15) days, is or has
been held by the Fund or is being or has been considered by the Fund
or the Adviser for purchase by the Fund, or (2) any option to purchase
or sell, and any security convertible into or exchangeable for, any
such security.
<PAGE>
(g) "Transaction" shall mean any purchase, sale or any type of acquisition
or disposition of securities, including the writing of an option to
purchase or sell securities.
II. PROHIBITION ON CERTAIN ACTIONS. Officers and trustees of the Trust
shall not, in connection with the purchase or sale, directly or indirectly, by
such person of a security held or to be acquired by the Fund:
1. To employ any device, scheme or artifice to defraud the Fund;
2. To make any untrue statement of a material fact to the Trust or to
omit to state a material fact necessary in order to make the
statements made to the Trust, in light of the circumstances under
which they are made, not misleading;
3. To engage in any act, practice or course of business that operates or
would operate as a fraud or deceit on the Fund; or
4. To engage in any manipulative practice with respect to the Fund.
III. CODE OF ETHICS OF ADVISER. All trustees and officers of the Trust who
are also directors, officers or employees of the Adviser are subject to the Code
of Ethics of the Adviser, which is incorporated by reference herein.
IV. QUARTERLY REPORTING OF SECURITIES TRANSACTIONS. Each trustee and
officer, other than a disinterested trustee, shall file with the President of
the Trust no later than ten (10) days after the end of each calendar quarter,
all personal security transactions for that quarter. The form attached as
"Exhibit A," Personal Securities Transaction Record, shall be used for this
purpose. All such reports will be reviewed by the President. A disinterested
trustee shall be required to file such reports only with respect to transactions
where such trustee knows, or in the course of fulfilling his or her duties
should have known, that during the 15-day period immediately preceding or
following the date of a transaction in a security by the trustee such security
was purchased or sold by the Fund or the purchase or sale by the Fund is or was
considered by the Fund or the Adviser.
V. INITIAL AND ANNUAL REPORTING OF HOLDINGS. Each trustee and officer,
other than a disinterested trustee, shall file with the President of the Trust,
no later than ten (10) days after he or she becomes a trustee or officer, an
initial holdings report listing all securities beneficially owned by such person
as of the date he or she became a trustee or officer. On an annual basis, each
trustee and officer, other than a disinterested trustee, shall file with the
President a holdings report listing all securities beneficially owned by such
person; such report must be current as of a date no more than thirty (30) days
before the report is submitted. Any such initial or annual report shall set
forth the following information: (1) the title, number of shares and principal
amount of each security in which the trustee or officer had any direct or
indirect beneficial ownership; (2) the name of any broker, dealer or bank with
whom the trustee of officer maintained an account in which any securities were
held for the direct or indirect benefit of such trustee or officer; and (3) the
date that the report is submitted.
<PAGE>
VI. DISCLAIMER OF BENEFICIAL OWNERSHIP. A trustee or officer may include in
any report required under Sections IV or V, a disclaimer as to the beneficial
ownership in any securities covered by the report.
VII. SANCTIONS. If any trustee or officer violates any provisions set forth
in this Code of Ethics, the President of the Trust shall impose such sanctions
as he deems appropriate including, but not limited to, a letter of censure or
termination of employment, censure, fines, freezing of one's personal account or
securities in that account for a specified time frame.
VIII. REPORTING TO BOARD OF TRUSTEES. At least once each year, the
President of the Trust shall provide the Board of Trustees with a written report
that (1) describes issues that arose during the previous year under this Code of
Ethics including, but not limited to, information about material violations and
sanctions imposed in response to those material violations, and (2) certifies to
the Board of Trustees that the Trust has adopted procedures reasonably necessary
to prevent its access persons from violating this Code of Ethics.
IX. NOTIFICATION OF REPORTING OBLIGATION. The President of the Trust shall
identify all persons who are required to make the reports required under
Sections IV and V and shall inform those persons of their reporting obligation.
X. RETENTION OF RECORDS. The Trust shall maintain the following records,
for the time periods and in the manner set forth below, at its principal place
of business:
1. A copy of this Code of Ethics, and each code of ethics previously in
effect for the Trust at any time within the past five years, must be
maintained in an easily accessible place.
2. A record of any violation of the Trust's code of ethics, and any
action taken as a result of the violation, must be maintained in an
easily accessible place for at least five years after the end of the
fiscal year in which the violation occurs.
3. A copy of each report required to be made by an officer or trustee
pursuant to this Code of Ethics must be maintained for at least five
years after the end of the fiscal year in which the report is made,
the first two years in an easily accessible place.
4. A record of all persons, currently or within the past five years, who
are or were required to make reports under Sections IV and V, or who
are or were responsible for reviewing these reports, must be
maintained in an easily accessible place.
5. A copy of each report required to be made by the President of the
Trust to the Board of Trustees pursuant to Section VIII must be
maintained for at least five years after the end of the fiscal year in
which the report is made, the first two years in an easily accessible
place.
<PAGE>
EXHIBIT A
PERSONAL SECURITIES TRANSACTION REPORT
- ------------------------------------ ------------------------------------
Name (please print) Quarter Ending
INSTRUCTIONS: Record all applicable security transactions which are not
specifically excepted by the Code of Ethics. To indicate no transactions, the
word "NONE" must appear. This form must be returned within 10 calendar days
after the close of each quarter.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase/Sale/ Number of Shares/
Date Other Principal Amount Title of Security Price Broker/Dealer/Bank
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please disclose below any securities account over which you have a beneficial
interest and which was established during the quarter covered by this report.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Account Registration Broker/Dealer/Bank Account No. Date Established
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
I acknowledge that the transactions listed above comprise all transactions
executed in accounts in which I have a beneficial interest.
- ------------------------------- ------------------------------------
Signature of Access Person Approved
- ------------------------------- ------------------------------------
Date of Filing Date Approved
HUSSMAN ECONOMETRICS ADVISORS, INC.
CODE OF ETHICS
_____________, 2000
INTRODUCTION
Hussman Econometrics Advisors, Inc. ("Hussman") has adopted this Code of
Ethics ("Code"). This Code pertains to Hussman's investment advisory services to
Hussman Investment Trust, a registered management investment company (the
"Fund") or other Hussman clients (together with the Fund, the "Clients").
Hussman has a fiduciary duty to the Clients that requires individuals associated
with Hussman to act for the benefit of the Clients. Potential conflicts of
interest may arise in connection with the personal trading activities of Hussman
personnel. This Code establishes standards and procedures designed to prevent
improper personal trading, to identify conflicts of interest, and to provide a
means to resolve actual or potential conflicts of interest.
In addition to its specific prohibitions, this Code prohibits conduct made
unlawful under Rule 17j-1 of the Investment Company Act of 1940 (the "1940
Act"). Rule 17j-1 makes it unlawful for a person to take the following actions
in connection with the purchase or sale, directly or indirectly, by the person
of a security held or to be acquired by a Client:
1. To employ any device, scheme, or artifice to defraud a Client;
2. To make any untrue statement of a material statement to a Client or
omit to state a material fact necessary in order to make the
statements made to the Client, in light of the circumstances under
which they are made, not misleading;
3. To engage in any act, practice, or course of business that operates,
or would operate, as a fraud or deceit on a Client; or
4. To engage in any manipulative practice with respect to a Client.
Hussman requires that its personnel adhere to this Code as a basic
condition of employment at Hussman. If you have any questions about the
propriety of any activity, you should consult with Hussman's Compliance Officer
or other responsible Hussman personnel.
SECTION 1. DEFINITIONS
All terms defined by reference to Rule 17j-1, the 1940 Act, or otherwise
shall have the same meaning as they have in the Rule and the Act and shall be
interpreted as modified by or interpreted by orders of the Securities and
Exchange Commission (the "Commission"), by rules, regulations, or releases
adopted, or issued, by the Commission, or other interpretative releases or
letters issued by the Commission or its staff.
<PAGE>
(a) ACCESS PERSON has the same meaning as in Rule 17j-1 and includes any
director, trustee, officer, general partner, or Advisory Person of
Hussman. For purposes of this Code, an Access Person does not include
any person who is subject to a Code of Ethics adopted in compliance
with Rule 17j-1 by a Client or by a Client's administrator or
principal underwriter, if any.
(b) ADVISORY PERSON has the same meaning as in Rule 17j-1 and includes:
(i) any employee of Hussman (or of any company in a Control
relationship to Hussman) who, in connection with his or her
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Covered
Securities, or whose functions relate to the making of any
recommendations with respect to the purchases or sales; and
(ii) any natural person in a Control relationship to Hussman who
obtains information concerning recommendations made with regard
to the purchase or sale of Covered Securities.
(c) BENEFICIAL OWNERSHIP has the same meaning as in Rule 16a-1(a)(2) for
the purposes of Section 16 of the Securities Exchange Act of 1934 (the
"1934 Act"). Generally, a person is considered the beneficial owner of
securities if the person has a pecuniary interest in the securities
and includes securities held by members of the person's immediate
family sharing the same household, or other persons if, by reason of
any contract, understanding, relationship, agreement or other
arrangement, the person obtains from such securities benefits
substantially equivalent to those of ownership.
(d) COMPLIANCE OFFICER is the person or persons appointed by Hussman to
approve and to review any transaction by an Access Person or
Investment Personnel as required by this Code and to review reports
required to be filed by an Access Person under this Code.
(e) CONTROL has the same meaning as in Section 2(a)(9) of the 1940 Act and
generally means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the
result of an official position with such company.
(f) COVERED SECURITY is a security as defined in section 2(a)(36) of the
1940 Act and includes any option written to purchase or sell a
security, but does not include:
(i) direct obligations of the United States Government;
2
<PAGE>
(ii) bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
(iii) shares issued by open-end investment companies.
(g) INITIAL PUBLIC OFFERING has the same meaning as in Rule 17j-1 and is
an offering of securities registered under the Securities Act of 1933
(the "1933 Act"), the issuer of which, immediately before the
registration, was not subject to the reporting requirements of
sections 13 or 15(d) of the 1934 Act.
(h) INVESTMENT PERSONNEL has the same meaning as in Rule 17j-1 and
includes:
(i) any employee of Hussman (or of any company in a Control
relationship to Hussman) who, in connection with his or her
regular functions or duties, makes, or participates in making
recommendations, regarding the purchase or sale of securities by
or on behalf of a Client; and
(ii) any natural person who Controls Hussman and who obtains
information concerning recommendations made regarding the
purchase or sale of securities by or on behalf of a Client.
(i) LIMITED OFFERING has the same meaning as in Rule 17j-1 and is an
offering that is exempt from registration under Sections 4(2) or 4(6)
or under rules 504, 505, or 506 under 1933 Act.
SECTION 2. POLICIES
(a) GENERAL. It is the policy of Hussman that no Access Person shall
engage in any act, practice, or course of conduct that would violate
this Code. Each Access Person has the responsibility of ensuring that
all personal trading and other professional activities comply with the
policies in this Code.
(b) ACCESS PERSON TRANSACTIONS. An Access Person must wait two full
business days after the last purchase or sale of a Covered Security
for any Client before executing a personal trade in the same security.
Before executing any security transaction, the Access Person must
verify with the Compliance Officer that no trading in the security has
either occurred in the previous two business days or is anticipated
during the next two business days by submitting to, and obtaining the
signature of, the Compliance Officer the Verification Form (in the
sample form attached as Exhibit A). This paragraph (b) is not
applicable to transactions for a Client that is a private investment
partnership or company and that is partially or wholly owned by
employees of Hussman.
3
<PAGE>
(c) PRIOR APPROVAL OF CERTAIN TRANSACTIONS BY INVESTMENT PERSONNEL. No
Investment Personnel may directly or indirectly acquire Beneficial
Ownership in any securities in an Initial Public Offering or in a
Limited Offering unless the person obtains prior written approval of
the transaction from the Compliance Officer ("Prior Approval"). The
Compliance Officer may approve the transaction if the Compliance
Officer concludes that the transaction would cause no material
conflict of interest with a Client. A request for Prior Approval must
be made by completing the Prior Approval Form (in the sample form
attached as Exhibit B) and submitting it to the Compliance Officer.
(d) UNDUE INFLUENCE: DISCLOSURE OF PERSONAL INTEREST. No Access Person
shall cause or attempt to cause any Client to purchase, sell, or hold
any security in a manner calculated to create any personal benefit to
the Access Person. No Access Person shall recommend any securities
transactions for a Client without having disclosed his or her
interest, if any, in such securities or the issuer thereof, including,
without limitation, (i) his or her Beneficial Ownership of any
securities of the issuer, (ii) any position with the issuer or its
affiliates and (iii) any present or proposed business relationship
between the issuer or its affiliates, on the one hand, and such person
or any party in which such person has a significant interest, on the
other hand.
(e) CORPORATE OPPORTUNITIES. All Access Persons are expressly prohibited
from taking personal advantage of any opportunity properly belonging
to a Client.
(f) CONFIDENTIALITY. Except as required in the normal course of carrying
out an Access Person's business responsibilities, Access Persons are
prohibited from revealing information relating to the investment
intentions or activities of any Client or securities that are being
considered for purchase or sale for any Client.
SECTION 3. REPORTING REQUIREMENTS
These reporting requirements are for the purpose of providing Hussman with
appropriate information to determine with reasonable assurance whether Access
Persons are observing this Code.
(a) Unless excepted under paragraph (b) of this section, every Access
Person must make the following reports to Hussman. Each report must be
dated on the day that the report is submitted to Hussman. An Access
Person may include a statement that the information in the report
shall not be deemed an admission that the Access Person has Beneficial
Ownership of any Covered Security to which the report relates.
(i) INITIAL HOLDINGS REPORTS. No later than 10 days after a person
becomes an Access Person, the Access Person must submit the
following information.
4
<PAGE>
(A) The title, number of shares, and principal amount of each
Covered Security in which the Access Person has Beneficial
Ownership when the person became an Access Person; and
(B) The name of any broker, dealer, or bank with which the
Access Person maintains an account in which any securities
were held for the direct or indirect benefit of the Access
Person as of the date the person became an Access Person.
(ii) TRANSACTION REPORTS. All Access Persons are required to file
with the Compliance Officer, no later than 10 days after the end
of each calendar quarter, a report of all personal security
transactions for that quarter. The form attached as Exhibit C
shall be used for this purpose. In lieu of making these reports,
Access Persons may instruct their brokerage firms to provide
duplicate broker trade confirmations and account statements to
the Compliance Officer for all personal accounts.
(iii) ANNUAL HOLDINGS REPORTS. An Access Person must submit the
following information annually and update it quarterly (current
as of a date no more than 30 days before the report is
submitted):
(A) If not previously reported, the title, number of shares,
and principal amount of each Covered Security in which the
Access Person had Beneficial Ownership; and
(B) If not previously reported, the name of any broker, dealer
or bank with which the Access Person maintains an account
in which any securities are held for the Access Person.
(b) EXCEPTIONS FROM REPORTING REQUIREMENTS. An Access Person need not make
a report under paragraph (a) of this section for transactions effected
for, and Covered Securities held in, any account over which the person
has no direct or indirect influence or Control.
SECTION 4. ADMINISTRATION OF THE CODE
(a) NOTIFICATION OF ACCESS PERSONS. Hussman will identify all Access
Persons and inform them of this Code and their reporting requirements
under this Code.
(b) REVIEW AND REPORT TO HUSSMAN. The Compliance Officer must review the
reports required under this Code and report violations of the Code to
Hussman.
(c) SANCTIONS. Upon discovering a violation of this Code, Hussman may
impose any sanctions that it deems appropriate, including, among other
things, a letter of censure, or suspension or termination of the
employment of the violator.
5
<PAGE>
(d) REPORT TO BOARD. At least annually, Hussman must furnish to the Fund's
Board of Trustees a written report that describes any issues arising
under the Code, including, but not limited to, information about
material violations of the Code and sanctions imposed in response to
the material violations.
SECTION 5. MAINTENANCE OF RECORDS
(a) Hussman shall maintain and cause to be maintained in an easily
accessible place a copy of this Code and any other Code that has at
any time within the past 5 years been in effect.
(b) Hussman also shall maintain and cause to be maintained:
(i) A record of any violation of this Code and of any action taken
as a result of the violation in an easily accessible place for
at least 5 years following the end of the fiscal year in which
the violation occurred.
(ii) A copy of each report made by an Access Person for at least five
years after the end of the fiscal year in which the report is
made, the first two years in an easily accessible place.
(iii) A record of all persons who, currently or within the past five
years, are or were Compliance Officers and Access Persons
required to make reports under this Code.
(iv) A copy of each report made to the Fund's Board of Trustees under
this Code for at least five years after the end of the fiscal
year in which it is made, the first two years in an easily
accessible place.
(v) A record of the approval of, and rationale supporting, any
direct or indirect acquisition by Investment Personnel of an
Initial Public Offering or a Limited Offering for at least five
years after the end of the fiscal year in which approval is
granted.
6
<PAGE>
EXHIBIT A
- ---------
VERIFICATION FORM
I am an Access Person of Hussman Econometrics Advisors, Inc. ("Hussman"),
as defined in Hussman's Code of Ethics. I plan to execute a personal trade in
the securities of _______________ (the "Securities"). As required by the Code, I
understand that I must wait two full business days after the last purchase or
sale of a security by or on behalf of a Client (as defined in the Code) before
executing a personal trade in the same security. This is to request verification
that no trading in the Securities by or on behalf of a Client has either
occurred in the two business days before _____________, 2000 or is anticipated
in the next two business days.
______________________________
[Signature of Access Person]
VERIFICATION
__________________________
Compliance Officer
Date:_____________________
<PAGE>
EXHIBIT B
---------
PRIOR APPROVAL FORM
I am a person that falls within the category of Investment Personnel in the
Code of Ethics of Hussman Econometrics Advisors, Inc. I plan to invest in
[DESCRIBE OFFERING], which is, under the Code, an [Initial Public Offering or
Limited Offering, as applicable]. As required by the Code, I understand that I
must obtain prior written approval of this investment to avoid any material
conflict of interest with a Client (as defined in the Code). If you conclude
that there is no material conflict of interest, please indicate you prior
approval of this investment by signing below.
_________________________________
Title:
Date:
APPROVAL
____________________________
Compliance Officer
Date:
7
<PAGE>
EXHIBIT C
PERSONAL SECURITIES TRANSACTION REPORT
- ------------------------------------ ------------------------------------
Name (please print) Quarter Ending
INSTRUCTIONS: Record all applicable security transactions which are not
specifically excepted by the Code of Ethics. To indicate no transactions, the
word "NONE" must appear. This form must be returned within 10 calendar days
after the close of each quarter.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase/Sale/ Number of Shares/
Date Other Principal Amount Title of Security Price Broker/Dealer/Bank
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please disclose below any securities account over which you have a beneficial
interest and which was established during the quarter covered by this report.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Account Registration Broker/Dealer/Bank Account No. Date Established
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
I acknowledge that the transactions listed above comprise all transactions
executed in accounts in which I have a beneficial interest.
- ------------------------------------ ------------------------------------
Signature of Access Person Approved
- ------------------------------------ ------------------------------------
Date of Filing Date Approved
