[LOGO] HUSSMAN
STRATEGIC GROWTH FUND
For Investors Seeking Long-Term Capital Appreciation,
with Added Emphasis on Capital Preservation in
Unfavorable Market Conditions
TREND UNIFORMITY
V
A
L FAVORABLE UNFAVORABLE
U -------------------------------
A FAVORABLE AGGRESSIVE MODERATE
T -------------------------------
I UNFAVORABLE POSITIVE HEDGED
O -------------------------------
N
HUSSMAN INVESTMENT TRUST PROSPECTUS: JULY 20, 2000
For information or assistance in opening an account, please call toll-free
1-800-HUSSMAN (1-800-487-7626)
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 the Fund's shares or determined if this
Prospectus is accurate or complete. It is a criminal offense to state
otherwise.
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Table of Contents
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Risk/Return Summary ...................................................... 1
Fees and Expenses ........................................................ 4
Investment Objective, Principal Strategies
and Related Risks ..................................................... 5
Fund Management .......................................................... 11
How the Fund Values Its Shares ........................................... 13
How to Buy Shares ........................................................ 13
How to Redeem Shares ..................................................... 16
Shareholder Services ..................................................... 19
Dividends, Distributions and Taxes ....................................... 20
[Photo of Dr. John Hussman]
John P. Hussman, Ph.D. is the president of Hussman Econometrics Advisors and the
portfolio manager of the Hussman Strategic Growth Fund. Previously, Dr. Hussman
was a professor at the University of Michigan, where he taught courses in
Financial Markets, Banking, and International Finance. He holds a Ph.D. in
Economics from Stanford University. He also holds a B.A. in Economics, Phi Beta
Kappa, and an M.S. in Education and Social Policy from Northwestern University..
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Hussman Strategic Growth Fund (800) HUSSMAN
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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, except for
modest cash balances that may occasionally arise due to the day-to-day
management of the portfolio. When market conditions are favorable in the view of
the investment manager, the Fund may use options to increase its investment
position. When conditions are viewed as unfavorable, the Fund may use options
and index futures to reduce its exposure to market fluctuations.
Based on historical evidence, the investment manager believes that market
return/risk characteristics differ significantly across market conditions. The
two most important dimensions considered by the investment manager are
"valuation" and "trend uniformity". Favorable valuation means that stock prices
appear reasonable in view of the stream of earnings, dividends, revenues and
cash flows expected in the future. Favorable trend uniformity means that price
trends are generally advancing across a wide range of securities and industry
groups, including large-capitalization stocks, small-capitalization stocks,
corporate bonds, Treasury securities, utility stocks, and so forth.
Historically, different combinations of valuation and trend uniformity have been
accompanied by significantly different stock market performance in terms of
return/risk. The investment manager intends to intentionally "leverage" or
increase the stock market exposure of the Fund in environments where the return
from market risk is expected to be high, and to reduce or "hedge" the exposure
of the Fund in environments where the return from market risk is expected to be
unfavorable.
Specific strategies for "leveraging" or increasing stock market exposure
include buying call options on individual stocks or market indices and writing
put options on stocks which the Fund seeks to own. The maximum position of the
Fund in stocks, either directly through purchases of stock or indirectly through
option positions, will be limited to 150% of its net assets. This means that the
value of the underlying positions represented by options will be limited to 50%
of the value of the Fund's net assets at the time of investment.
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1
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Risk/Return Summary (continued)
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Specific strategies for reducing or "hedging" market exposure include
buying put options on individual stocks or market indices, writing covered call
options on stocks which the Fund owns or call options on market indices, and
establishing short futures positions on one or more market indices closely
correlated with the Fund's portfolio. The total notional value of such positions
is not expected to exceed the value of stocks owned by the Fund, so the most
defensive position expected by the Fund will be a "market neutral" position in
which long and short positions are of equal size.
In general, the stock selection approach of the investment manager focuses
on securities demonstrating favorable valuation and/or trend strength. An
important factor is the relationship between current price and the present value
of expected future cash flows or dividends. Other valuation measures, such as
the ratio of the stock price to earnings and stock price to revenue, are also
analyzed in relation to expected future growth rates. The analysis of market
activity includes measurements of price strength and unusual trading volume. The
investment manager believes that strength in these measures is often followed by
favorable earnings surprises above consensus estimates.
The choice of market indices used for hedging will be based on a
consideration of the securities held by the portfolio from time to time, and the
liquidity of the futures and options on such indices. The Russell 2000 Index,
rep-resenting roughly two-thirds of the actively traded stocks in the United
States, has historically been most closely correlated with Hussman's stock
selection approach. This index includes stocks with market capitalizations
between about $300 million and $2.5 billion. The investment manager does not,
however, specifically restrict the selection of stocks to companies with
capitalizations in this range.
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 values 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
investment manager's skill in assessing the potential of the securities in which
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2 Hussman Strategic Growth Fund (800) HUSSMAN
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Risk/Return Summary (continued)
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the Fund invests. Also, because the Fund's investment position at any given time
will range from aggressive to defensive depending on the investment manager's
current view of the overall climate of the stock market, a significant factor
affecting the Fund's performance will be the investment manager's ability
through its proprietary models to correctly identify market conditions. For
example, if the Fund has taken a defensive posture by hedging its portfolio, and
stock prices advance unexpectedly, the return to investors will be lower than if
the portfolio had not been hedged. Alternatively, if the Fund has leveraged its
portfolio in a climate which has historically been favorable for stocks, an
unanticipated market decline will magnify the Fund's investment losses. When the
Fund is in its most aggressive position, the share price of the Fund could be
expected to fluctuate as much as 1 1/2 times as much as if the Fund had not
leveraged its portfolio.
The techniques that will be used by the Fund to hedge its portfolio are
generally considered by the investment manager to be conservative strategies,
but involve certain risks. For example, a hedge might not actually correlate
well to the price movements of the Fund's stock investments and may have
unexpected or undesired results, such as a loss or a reduction in gains. When
options are owned by the Fund, it is possible that they may lose value over
time, even if the securities underlying such options are unchanged.
Shares of the Fund may 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.
WHAT HAS BEEN THE FUND'S PERFORMANCE HISTORY?
The Fund is new and therefore does not have a performance history for a
full calendar year.
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3
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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.
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SHAREHOLDER FEES (fees paid directly from your investment)
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Maximum Sales Charge (Load) Imposed on Purchases None
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Maximum Contingent Deferred Sales Charge (Load) None
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Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
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Redemption Fee (as a percentage of the amount redeemed) 1.5%(1)(2)
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ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
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Management Fees 1.25%
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Distribution (12b-1) Fees None
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Other Expenses(3) 1.48%
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Total Annual Fund Operating Expenses 2.73%
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Waivers and/or Expense Reimbursements(4) (.73%)
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Net Expenses 2.00%
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(1) The redemption fee is imposed only on redemptions of shares WITHIN SIX
MONTHS OF THE DATE OF PURCHASE and does not apply to the redemption of
shares acquired through reinvestment of dividends and other distributions.
(2) A wire transfer fee of $13 is charged by the Fund's custodian in the case
of redemptions paid by wire transfer. This fee is subject to change.
(3) Other Expenses are based on estimated expenses for the current fiscal year.
(4) The investment manager has contractually agreed to waive a portion of its
advisory fees or reimburse a portion of the Fund's operating expenses until
at least December 31, 2001 so that the Fund's ordinary operating expenses
do not exceed an amount equal to 2.00% per annum. Advisory fee waivers and
expense reim-bursements by the investment manager are generally subject to
repayment by the Fund for a period of three years after such fees and
expenses were incurred provided that the repayments do not cause the
ordinary operating expenses to exceed 2.00% per annum.
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4 Hussman Strategic Growth Fund (800) HUSSMAN
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Fees and Expenses (continued)
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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
invest-ment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1 3
YEAR YEARS
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$203 $742
Investment Objective, Principal Strategies and
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Related Risks
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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
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. The
investment manager's investment process involves an analysis of a company's
"fundamentals" - revenues, earnings, cash-flows, dividends, and balance sheet
information - coupled with an analysis of price trends and trading volume.
The investment manager's selection model generally seeks securities which
display one or more of the following: 1) favorable valuation, meaning a price
which is attractive relative to revenues, earnings, cash-flows and dividends
expected in the future, 2) positive "surprises" in earnings and
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5
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Investment Objective, Principal Strategies and
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Related Risks (continued)
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expected future growth rates estimated by Wall Street analysts, and 3) favorable
market action as measured by price strength and trading volume.
The investment manager 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 about what traders know. For example, positive earnings
surprises are generally followed by price strength. More importantly, such
surprises are often preceded by price strength. So in addition to using
fundamental research on earnings and valuation, the investment manager relies on
proprietary statistical methods to infer as much information as possible from
the behavior of individual stock prices. Stated simply, these statistical
methods attempt to "filter" information from volatile price behavior in the
similar way that a radio isolates a signal from noisy airwaves.
The focus of this approach is to buy securities of quality companies
exhibiting attractive valuation, as well as price and volume behavior which
conveys favorable information about future earnings surprises.
MARKET CLIMATE
Some risks are more rewarding than others. Rather than exposing the Fund to
stock market risk at all times, the investment manager attempts to limit the
risk of major capital loss during historically unfavorable market conditions. In
conditions which the investment manager identifies as involving high risk and
low expected return, 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". The Fund will typically be fully invested or leveraged when
the investment manager identifies conditions in which stocks have historically
been rewarding investments.
The following discussion is intended to explain the general framework used
by the investment manager to assess whether market conditions are favorable or
unfavorable. It should not be interpreted as an exhaustive account of the market
analysis techniques used by Hussman. The descriptions of market performance
during various investment climates are based on historical data. There is no
assurance that these historical return/risk profiles will persist in the future.
The investment manager's approach combines "valuation" and "trend
uniformity" to define investment conditions. Favorable valuation means that
stock prices appear reasonable in view of the stream of earnings, dividends,
rev-
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6 Hussman Strategic Growth Fund (800) HUSSMAN
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Investment Objective, Principal Strategies and
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Related Risks (continued)
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enues and cash flows expected in the future. Favorable trend uniformity means
that price trends are generally advancing across a wide range of securities and
industry groups, including large-capitalization stocks, small-capitalization
stocks, corporate bonds, Treasury securities, utility stocks, and so forth.
Each unique combination of valuation and trend uniformity conditions
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 the investment
manager 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.
The investment manager believes that the strongest returns will emerge when
both valuations and trend uniformity conditions are extremely favorable. On a
historical basis, much of the lowest risk, highest return performance of the
market has been associated with these conditions. Accordingly, this is typically
a climate in which the Fund will establish an aggressive investment position,
possibly including the use of leverage. Although historical stock market returns
in this climate have been above the norm, on average, it is possible that
returns in this climate may be negative during any particular period. The use of
leverage during such a period could lead to a greater loss than if the Fund had
not leveraged.
In contrast, the investment manager 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
conditions have been unfavorable, the stock market has historically generated
poor returns, on average. Even so, it is possible that returns in this climate
may be positive during any particular period. The use of hedging during such a
period could lead to a loss or a smaller gain than if the Fund had not hedged.
Hedging and leverage may be used to a lesser extent during intermediate
Market Climates where either valuations or trend uniformity is favorable and the
other is unfavorable. When stock valuations have been unfavorably high but trend
uniformity has been favorable, stocks have historically generated above-average
returns. In this climate, the Fund may partially hedge its portfolio, but will
generally maintain a positive market position overall. While
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7
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Investment Objective, Principal Strategies and
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Related Risks (continued)
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actual returns will vary depending on the specific stocks held by the Fund, a
"positive market position" means a portfolio which would be expected to benefit
from a general advance in the stock market. When valuations have been favorable
but trend uniformity has been unfavorable, stocks have historically generated
positive but more moderate returns. In this climate, the Fund may be fully or
partially hedged, and may attempt to increase stock market exposure by
leveraging in response to general price declines.
Here are the general characteristics of the basic Market Climates as
defined by the investment manager, based on historical market data, and the
general investing approaches for the Fund which correspond to those climates:
TREND UNIFORMITY
FAVORABLE UNFAVORABLE
-----------------------------------------------------------------
Very High Expected Return Average Expected Return
Relatively Low Risk of Loss Considerable Risk of Loss
FAVORABLE
V Modest Volatility Very High Volatility
A
L Emphasize aggressive opportunities Increase market exposure
U for capital appreciation moderately on declines
A -----------------------------------------------------------------
T Above Average Expected Return Negative Expected Return
I
O Modest Risk of Loss Extreme Risk of Loss
N
UNFAVORABLE Modest Volatility High Volatility
Maintain a generally Emphasize preservation
positive market position of capital
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INVESTMENT PRACTICES AND RISKS
A brief description of the principal investment strategies that the Fund
may employ and the principal risks associated with these strategies is provided
below. Because of the types of securities in which the Fund invests and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. While the investment manager 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.
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8 Hussman Strategic Growth Fund (800) HUSSMAN
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Investment Objective, Principal Strategies and
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Related Risks (continued)
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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. In
addition, other factors can adversely 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.
The success of the Fund's investment strategy depends largely on the
investment manager's skill in analyzing and selecting securities for
purchase and sale and the accuracy and appropriateness of the models
utilized by the investment manager in determining which securities to
purchase and in determining whether to leverage or hedge the Fund's
portfolio.
o DERIVATIVE INSTRUMENTS. The Fund may sell futures contracts on broad-based
stock indices (and options on such futures contracts), and may purchase and
write put and call options on such indices. The Fund may also purchase and
write call and put options on individual securities. These are all referred
to as "derivative" instruments, since their values are based on ("derived
from") the values of other securities.
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. When a futures
contract is sold short, the seller earns a positive return if the stock
index declines, and earns a negative return if the stock index advances.
The primary use of stock index futures by the Fund will be to hedge the
Fund's stock portfolio against potential market declines. 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 call option gives the purchaser of the option the right to purchase the
underlying security from the writer of the option at a specified exercise
price. A put option gives the purchaser of the option the right to sell the
underlying security to the writer of the option at a specified exercise
price. The expected use of call options by the Fund will generally be to
purchase
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9
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Investment Objective, Principal Strategies and
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Related Risks (continued)
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call options on stocks which the Fund seeks to own, and to write call
options on stocks which are owned by the Fund but are not expected to
advance significantly over the short term. Call options may also be written
on market indices for the purpose of hedging market risk. The expected use
of put options by the Fund will generally be to purchase put options on
market indices for the purpose of hedging market risk, and to write put
options as a method of reducing the potential acquisition cost of stocks
which the Fund seeks to own.
The Fund will adhere to specific limitations on its use of derivatives. The
most aggressive stance expected to be taken by the Fund will be a leveraged
position in which the total ownership of stocks, directly through purchase
and indirectly through options, is equal to 150% of net assets. This means
that the value of the underlying positions represented by these options
will be limited to 50% of the value of the Fund's net assets at the time of
investment. Thus, when the Fund is in its most aggressive stance, the share
price of the Fund could be expected to fluctuate as much as 1 1 /2 times as
much as if the Fund had not leveraged its portfolio. The most defensive
stance expected to be taken by the Fund will be a "market neutral"
position. Accordingly, even during the most unfavorable market conditions,
the notional value of hedging positions through the combination of short
futures contracts, short call options and purchased put options will not
significantly exceed the value of the stock portfolio owned by the Fund.
The percentage limitations on the use of derivative instruments set forth
above applies at the time an investment in a derivative is made. A later
change in percentage resulting from an increase or decrease in the values
of investments or in the net assets of the Fund will not constitute a
violation of such limitations.
Derivative instruments can be volatile and involve considerable risks. The
use of such instruments requires special skills and knowledge of investment
techniques that are different than those normally required for purchasing
and selling securities. If the investment manager uses a derivative
instrument at the wrong time or judges market conditions incorrectly, or if
the derivative instrument does not perform as expected, these 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. Options purchased by the Fund may decline in
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10 Hussman Strategic Growth Fund (800) HUSSMAN
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Investment Objective, Principal Strategies and
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Related Risks (continued)
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value with the passage of time, even in the absence of movement in the
underlying security.
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
period of time thereafter to realize 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,
which would reduce the Fund's performance. In addition, a high level of
short-term trading may increase the amount of taxable distributions to
shareholders at the end of the year, which would reduce the after-tax
performance of the Fund.
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Fund Management
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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 as of the date of this Prospectus. 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 of Hussman
Investment Trust and portfolio manager of the Fund. From 1992 until 1999, he was
an Adjunct Assistant 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 computed
at the annual rate of 1.25% of the Fund's average daily net assets, less any fee
waivers and expense reimbursements. The investment advisory fee paid by the Fund
is higher than those paid by most other mutual funds.
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11
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Fund Management (continued)
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Hussman has agreed, until at least December 31, 2001, to waive its
investment advisory fees and to reimburse Fund expenses to the extent necessary
to limit the Fund's aggregate annual ordinary operating expenses to 2% of its
average daily net assets. Any such fee waivers by Hussman through December 31,
2001 or thereafter, or payments or reimbursements of expenses which are the
Fund's obligation, are subject to repayment by the Fund pro-vided that the
repayment does not cause the Fund's ordinary operating expenses to exceed the 2%
limit, and provided further that the fees and expenses which are the subject of
the repayment were incurred within three years of the repayment.
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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12 Hussman Strategic Growth Fund (800) HUSSMAN
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How the Fund Values Its Shares
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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).
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How to Buy Shares
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The Fund is no-load, which means that shares may be purchased without
imposition of a sales charge. Shares of the Fund are available for purchase from
the Fund 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."
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13
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How to Buy Shares (continued)
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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 46707
Cincinnati, Ohio 45246
BY WIRE. To open a new account by wire, call the Transfer Agent at
1-800-HUSSMAN. 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 # 821663168
Account Name _________________
For Account # _________________
The order is considered received when Firstar Bank, N.A., the Fund'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. 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:
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14 Hussman Strategic Growth Fund (800) HUSSMAN
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How to Buy Shares (continued)
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o By sending a check, made payable to the Fund, to Hussman Investment Trust,
c/o Ultimus Fund Solutions, LLC, P.O. Box 46707, Cincinnati, Ohio 45246.
The shareholder will be responsible for any fees incurred or losses
suffered by the Fund as a result of any check returned for insufficient
funds.
o By wire to the Fund account as described under "Opening an Account - By
Wire." Shareholders should call the Transfer Agent at 1-800-HUSSMAN 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-HUSSMAN. 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-HUSSMAN.
There are no charges for ACH transactions imposed by the Fund or the Transfer
Agent. ACH share purchase trans-actions 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 the
next NAV calculated after your order is placed by calling the Transfer Agent at
1-800-HUSSMAN 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
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15
<PAGE>
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How to Buy Shares (continued)
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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.
PURCHASES IN KIND
The Fund may accept securities in lieu of cash in payment for the purchase
of shares of the Fund. The acceptance of such securities is at the sole
discretion of Hussman based upon the suitability of the securities as an
investment for the Fund, the marketability of such securities, and other factors
which Hussman may deem appropriate. If accepted, the securities will be valued
using the same criteria and methods utilized for valuing securities to compute
the Fund's NAV.
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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 NAV 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 46707,
Cincinnati, Ohio 45246. 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 Fund, 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. The
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16 Hussman Strategic Growth Fund (800) HUSSMAN
<PAGE>
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How to Redeem Shares (continued)
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Transfer Agent has adopted standards for accepting signature guarantees from the
above institutions. The Fund may elect in the future to limit eligible signature
guarantors to institutions that are members of a signature guarantee pro-gram.
The Fund 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-HUSSMAN. 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-HUSSMAN.
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 a fee of
$13 by the Fund's custodian 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
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17
<PAGE>
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How to Redeem Shares (continued)
--------------------------------------------------------------------------------
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 sent on the business day following a redemption.
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 1.5% of the dollar value of the shares redeemed,
payable to the Fund, is imposed on any redemption of shares within six months of
the date of purchase. No redemption fee will be imposed to the extent that the
value of the shares redeemed does not exceed (i) the current value of shares
acquired through reinvestment of dividends or capital gain distributions, plus
(ii) any increase in the 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.
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 the value of
shares above the total amount of payments for the purchase of such shares; then,
from amounts representing shares purchased more than six months prior to
redemption; and finally, from amounts representing shares purchased within six
months prior to the redemption.
MINIMUM ACCOUNT BALANCE
Due to the high cost of maintaining accounts with low balances, the Fund
may involuntarily redeem shares in an account, and pay the proceeds to the
shareholder, if the shareholder's account balance falls below a required
mini-mum value of $1,000 ($500 for IRA accounts or gifts to minors) due to
share-holder redemptions. This does not apply, however, if the balance falls
below the minimum solely because of a decline in the Fund's NAV 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.
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18 Hussman Strategic Growth Fund (800) HUSSMAN
<PAGE>
--------------------------------------------------------------------------------
How to Redeem Shares (continued)
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REDEMPTIONS 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.
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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 share-holders
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 and
(4) retirement plans such as Individual Retirement Accounts. Information
concerning these plans and related charges and account applications are
available from the Transfer Agent by calling 1-800-HUSSMAN.
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19
<PAGE>
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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 redeem Fund shares, you generally realize a gain or loss. Except
for tax-deferred accounts and tax-exempt investors, any gain on a redemption 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 during the prior year. 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 not the same, you should consult your
tax professional about federal, state and local tax consequences of an
investment in the Fund.
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20 Hussman Strategic Growth Fund (800) HUSSMAN
<PAGE>
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ADMINISTRATOR/TRANSFER AGENT
Ultimus Fund Solutions, LLC
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
www.hussman.net
1-800-HUSSMAN (1-800-487-7626)
INVESTMENT ADVISER
Hussman Econometrics Advisors, Inc.
3525 Ellicott Mills Drive, Suite B
Ellicott City, Maryland 21043
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
425 Walnut Street, Suite 1500
Cincinnati, Ohio 45202
LEGAL COUNSEL
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
<PAGE>
[LOGO] HUSSMAN
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. The first annual report will be available within 60 days
following the fiscal year ending June 30, 2001.
o Statement 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 materials and other information, without charge,
or make inquiries to the Fund by writing to Ultimus Fund Solutions at the
address on the previous page. You may also call toll-free:
1-800-HUSSMAN (1-800-487-7626)
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 202-942-8090. 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, or by sending
your request electronically to the following e-mail address: [email protected].
Investment Company Act File No. 811-9911
www.hussman.net
[GRAPHIC OMITTED]
<PAGE>
HUSSMAN STRATEGIC GROWTH FUND
An Investment Portfolio of
HUSSMAN INVESTMENT TRUST
Statement of Additional Information
July 20, 2000
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus for Hussman Investment Trust dated July
20, 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 Hussman Investment Trust at 135 Merchant Street, Suite 230,
Cincinnati, Ohio 45246, or by calling toll free 1-800-HUSSMAN (1-800-487-7626).
TABLE OF CONTENTS
FUND OBJECTIVE, INVESTMENTS, STRATEGIES AND RISKS ........................ 2
NET ASSET VALUE .......................................................... 11
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ........................... 11
SPECIAL SHAREHOLDER SERVICES ............................................. 12
MANAGEMENT OF THE TRUST .................................................. 13
INVESTMENT ADVISER ....................................................... 15
PORTFOLIO TRANSACTIONS ................................................... 16
OTHER SERVICE PROVIDERS .................................................. 17
GENERAL INFORMATION ...................................................... 19
ADDITIONAL TAX INFORMATION ............................................... 20
PERFORMANCE INFORMATION .................................................. 21
FINANCIAL STATEMENTS ..................................................... 24
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 June 1, 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 AND FUTURES
As discussed in the Prospectus, the Fund may engage in certain transactions
in options and futures contracts and options on futures contracts. The specific
transactions in which the Fund may engage are noted and described in the
Prospectus. The discussion below provides additional information regarding the
use of futures and options transactions.
Regulatory Matters. The Fund will comply with and adhere to all limitations
on the manner and extent to which it effects transactions in futures and options
on such futures currently imposed by the rules and policy guidelines of the
Commodity Futures Trading Commission as conditions for the exemption of a mutual
fund, or the investment adviser thereto, from registration as a commodity pool
operator. In accordance with those restrictions, the Fund will use futures and
options thereon solely for bona fide hedging or for other non-speculative
purposes within the meaning and intent of the applicable provisions of the
Commodities Exchange Act and regulations thereunder. As to long positions which
are used as part of the Fund's investment strategy and are incidental to its
activities in the underlying cash market, the "underlying commodity value" of
the Fund's futures and options thereon must not exceed the sum of (i) cash set
aside in an identifiable manner, or short-term U.S. debt obligations or other
dollar-denominated high-quality, short term money instruments so set aside, plus
sums deposited on margin; (ii) cash proceeds from existing investments due in 30
days; and (iii) accrued profits held at the futures commission merchant. The
"underlying commodity value" of a future is computed by multiplying the size of
the future by the daily settlement price of the future.
2
<PAGE>
For an option on a future, that value is the underlying commodity value of the
future underlying the option.
Futures and Options Transactions. The Fund may use futures contracts and
related options for the purpose of seeking to reduce the overall investment risk
that would otherwise be associated with the securities in which it invests. For
example, the Fund may sell a stock index futures contract in anticipation of a
general market or market sector decline that might adversely affect prices of
the Fund's portfolio securities. To the extent that there is a correlation
between the Fund's portfolio and a particular stock index, the sale of futures
contracts on that index could reduce general market risk and permit the Fund to
retain its securities positions.
The Fund may purchase call options on individual stocks and baskets of
stocks to hedge against a market advance that might increase the prices of
securities that the Fund is planning to acquire. Alternatively, the Fund may
sell stock index futures contracts (or purchase puts on such contracts) to
provide protection against a decline in the price of a security below a
specified level or a sector or general market decline. The Fund may purchase and
write options in combination with each other to adjust the risk and return of
its overall investment positions. For example, the Fund may purchase a put
option and write a call option on the same underlying instrument, in order to
synthesize a position similar to that which would be achieved by selling a
futures contract.
By purchasing a put option on an individual stock, the Fund could hedge the
risk of a devaluation of that individual stock. The value of the put option
would be expected to rise as a result of a market decline and thus could offset
all or a portion of losses resulting from declines in the prices of individual
securities held by the Fund. However, option premiums tend to decrease over time
as the expiration date nears. Therefore, because of the cost of the option (in
the form of premium and transaction costs), the Fund would suffer a loss in the
put option if prices do not decline sufficiently to offset the deterioration in
the value of the option premium.
By purchasing a call option on a stock index, the Fund would attempt to
participate in potential price increases of the underlying index, with results
similar to those obtainable from purchasing a futures contract, but with risk
limited to the cost of the option if stock prices fell. At the same time, the
Fund would suffer a loss if stock prices do not rise sufficiently to offset the
cost of the option.
The Fund may engage in the writing (selling) of covered call options with
respect to the securities in the Fund's portfolio to supplement the Fund's
income and enhance total returns. The Fund may write (sell) listed or
over-the-counter call options on individual securities held by the Fund, on
baskets of such securities or on the Fund's portfolio as a whole. The Fund will
write only covered call options, that is, the Fund will write call options only
when it has in its portfolio (or has the right to acquire at no cost) the
securities subject to the option. A written option may also be considered to be
covered if the Fund owns an option that entirely or
3
<PAGE>
partially offsets its obligations under the written option. Index options will
be considered covered if the pattern of price fluctuations of the Fund's
portfolio or a portion thereof substantially replicates the pattern of price
fluctuations in the index underlying the option. A call option written by the
Fund obligates the Fund to sell specified securities to the holder of the option
at a predetermined price if the option is exercised on or before its expiration
date. An index call option written by the Fund obligates the Fund to make a cash
payment to the holder of the option if the option is exercised and the value of
the index has risen above a predetermined level on or before the expiration date
of the option. The Fund may terminate its obligations under a call option by
purchasing an option identical to the one written. Writing covered call options
provides the Fund with opportunities to increase the returns earned from
portfolio securities through the receipt of premiums paid by the purchasers of
the options. Writing covered call options may reduce the Fund's returns if the
value of the underlying security or index increases and the option position is
exercised or closed out by the Fund at a loss.
Risks of Futures and Options. The purchase and sale of options and futures
contracts and related options involve risks different from those involved with
direct investments in securities and also require different skills from the
investment manager in managing the Fund's portfolio of investments. While
utilization of options, futures contracts and similar instruments may be
advantageous to the Fund, if the investment manager is not successful in
employing such instruments in managing the Fund's investments or in predicting
market changes, the Fund's performance will be worse than if the Fund did not
make such investments. It is possible that there will be imperfect correlation,
or even no correlation, between price movements of the investments being hedged
and the options or futures used. It is also possible that the Fund may be unable
to purchase or sell a portfolio security at a time that otherwise would be
favorable for it to do so, or that the Fund may need to sell a portfolio
security at a disadvantageous time, due to the need for the Fund to maintain
"cover" or to segregate securities in connection with these transactions, or
that the Fund may be unable to closed out or liquidate its hedged position. In
addition, the Fund will pay commissions and other costs in connection with such
investments, which may increase the Fund's expenses and reduce its yield. The
Fund's current policy is to limit options and futures transaction to those
described above. The Fund may purchase and write both over-the-counter and
exchange traded options.
Risks of Options on Stock Indices. As discussed above, the purchase and
sale of options on stock indices will be subject to risks applicable to options
transactions generally. In addition, the distinctive characteristics of options
on indices create certain risks that are not present with stock options. Index
prices may be distorted if trading of certain stocks included in the index is
interrupted. Trading in index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index or if dissemination of the current level of an underlying
index is interrupted. If this occurs, the Fund would not be able to close out
options which it had purchased and, if restrictions on exercise were
4
<PAGE>
imposed, may be unable to exercise an option it holds, which could result in
losses if the underlying index moves adversely before trading resumes. However,
it is a policy of the Fund to purchase options only on indices which include a
sufficient number of stocks so that the likelihood of a trading halt in the
index is minimized.
The purchaser of an index option may also be subject to a timing risk. If
an option is exercised by the Fund before final determination of the closing
index value for that day, the risk exists that the level of the underlying index
may subsequently change. If such a change caused the exercised option to fall
out-of-the-money (that is, the exercising of the option would result in a loss,
not a gain), the Fund will be required to pay the difference between the closing
index value and the exercise price of the option (times the applicable
multiplier) to the assigned writer. Although the Fund may be able to minimize
this risk by withholding exercise instructions until just before the daily
cutoff time, it may not be possible to eliminate this risk entirely, because the
exercise cutoff times for index options may be earlier than those fixed for
other types of options and may occur before definitive closing index values are
announced. Alternatively, when the index level is close to the exercise price,
the Fund may sell rather than exercise the option. Although the markets for
certain index option contracts have developed rapidly, the markets for other
index options are not as liquid. The ability to establish and close out
positions on such options will be subject to the development and maintenance of
a liquid secondary market. It is not certain that this market will develop in
all index option contracts. The Fund will not purchase or sell any index option
contract unless and until, in the opinion of the investment manager, the market
for such options has developed sufficiently that the risk in connection with
such transactions is no greater than the risk in connection with options on
stocks.
Stock Index Futures Characteristics. Currently, stock index futures
contracts can be purchased or sold with respect to several different stock
indices, each based on a different measure of market performance. A
determination as to which of the index contracts would be appropriate for
purchase or sale by the Fund will be based upon, among other things, the
liquidity offered by such contracts and the volatility of the underlying index.
Unlike when the Fund purchases or sells a security, no price is paid to or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in its segregated asset account an amount
of cash or qualifying securities (currently U.S. Treasury bills) currently
ranging from approximately 10% to 15% of the contract amount. This is called
"initial margin." Such initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract. Gains and losses on open contracts are
required to be reflected in cash in the form of variation margin payments which
the Fund may be required to make during the term of the contracts to its broker.
Such payments would be required where, during the term of a stock index futures
contract purchased by the Fund, the price of the underlying stock index
declined, thereby making the Fund's position less valuable. In all instances
involving the purchase of stock index
5
<PAGE>
futures contracts by the Fund, an amount of cash together with such other
securities as permitted by applicable regulatory authorities to be utilized for
such purpose, at least equal to the market value of the futures contracts, will
be deposited in a segregated account with the Fund's custodian to collateralize
the position. At any time prior to the expiration of a futures contract, the
Fund may elect to close its position by taking an opposite position with will
operate to terminate its position in the futures contract.
Where futures are purchased to hedge against a possible increase in the
price of a security before the Fund is able to fashion its program to invest in
the security or in options on the security, it is possible that the market may
decline. If the Fund, as a result, decided not to make the planned investment at
that time either because of concern as to the possible further market decline or
for other reasons, the Fund would realize a loss on the futures contract that is
not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the stock index future and the
portion of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movements in the stock index due to certain market
distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the index
itself and the value of a future. Moreover, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market and may therefore cause increased participation by speculators in the
futures market. Such increased participation may also cause temporary price
distortions. Due to the possibility of price distortion in the futures market
and because of the imperfect correlation between movements in stock indices and
movements in the prices of stock index futures, the value of stock index futures
contracts as a hedging device may be reduced. In addition, if the Fund has
insufficient available cash, it may at times have to sell securities to meet
variation margin requirements. Such sales may have to be effected at a time when
it may be disadvantageous to do so.
BORROWING MONEY
Borrowing for the purpose of purchasing securities is a practice known as
"leverage." This practice involves special risks and is considered a speculative
investment technique. Leverage exists when the Fund incurs borrowings or other
liabilities to enable it to purchase and hold investment positions in an amount
that exceeds the Fund's capital base. Leverage creates the risk of magnified
capital losses which occur when the additional investments purchased by using
leverage decline in value because, in such cases, the Fund's losses will be
greater than if it did not borrow money to purchase investments. Borrowing
involves the creation of a liability that requires the Fund to pay interest.
6
<PAGE>
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 declines in the prices of the Fund's investments, adverse
market movements and increases in the cost of borrowing. So long as the Fund is
able to realize a net return on the additional investments purchased by using
leverage that is higher than the interest expense incurred, leverage will result
in higher investment returns to 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 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.
During the coming year, the Fund does not intend to borrow money for
leveraging purposes, but may borrow up to 20% of its net assets to maintain
necessary liquidity to make payments for redemptions of Fund shares; provided
that the Fund will not purchase any additional investments while such borrowings
are outstanding.
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 the Fund may not
acquire more than 3% of the total outstanding shares of any money market fund,
and provided further 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.
Notwithstanding the foregoing percentage limitations, the Fund may invest any
percentage of its assets in a money market fund if immediately after such
purchase not more than 3% of the total outstanding shares of such money market
fund is owned by the Fund and all affiliated persons of the Fund. The Fund will
incur additional expenses due to the duplication of expenses to the extent it
invests in securities of 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
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instruments is more risky than investment in instruments in higher-rated
categories.
ILLIQUID SECURITIES
The Fund may purchase illiquid securities, but will not do so if as a
result more than 15% of its net assets would be invested in those securities.
Illiquid securities generally include (i) private placements and 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 sell those securities at the times it desires to do so
or at prices which are favorable. The investment manager will monitor the
liquidity of the Fund's investments in illiquid securities. Certain Rule 144A
securities will not be treated as "illiquid" for purposes of this limit on
investments in accordance with procedures adopted 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 investment manager's most recent estimate of their
fair market value. Generally, less public information is available about the
issuers of such securities than about companies whose securities are publicly
traded.
REPURCHASE AGREEMENTS
The Fund may purchase securities subject to repurchase agreements. Under
the terms of a repurchase agreement, the Fund acquires securities from a member
bank of the Federal Reserve or a registered broker-dealer which the investment
manager deems creditworthy, subject to the seller's agreement to repurchase
those 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 is
obligated to maintain at all times with the Fund's Custodian or a sub-custodian
the underlying securities as collateral in an amount not less than the
repurchase price (including accrued interest). If the seller defaults on its
repurchase obligation or becomes insolvent, the Fund has the right to sell the
collateral and recover the amount due from the seller. However, the Fund will
suffer a loss to the extent that the proceeds from the sale of the underlying
securities is less than the repurchase price under the agreement, or to the
extent that the disposition of the securities by the Fund is delayed pending
court
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<PAGE>
action. 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 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 has
the right 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 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 investment manager has determined are
creditworthy under guidelines established by the Trustees.
At such time as the Fund engages in the practice of securities lending, the
Trustees will adopt procedures in order to manage the risks of securities
lending.
INVESTMENT RESTRICTIONS
The Fund's investment objective may not 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 not be changed
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares. When used in this Statement of Additional Information and
the Prospectus, a "majority" of the Fund's outstanding shares means the vote of
the lesser of (1) two-thirds of the shares of the Fund present at a meeting if
the holders or more than 50% of the outstanding shares are present in person or
by proxy, or (2) more than 50% of the outstanding shares of the Fund.
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. With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer or
purchase more than 10% of the outstanding voting securities of any one
issuer (except that such limitation does not apply to U.S. Government
securities and securities of other investment companies).
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<PAGE>
3. 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.
4. Make loans to other persons except (i) by the purchase of a portion of
an issue of bonds, debentures or other debt securities; (ii) by
lending portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets; and (iii) by entering into repurchase
agreements.
5. Underwrite securities of other issuers, except to the extent that the
disposition of portfolio securities, either directly from an issuer or
from an underwriter for an issuer, may be deemed to be an underwriting
under the federal securities laws.
6. Purchase securities of companies for the purpose of exercising
control.
7. Purchase or sell real estate, except that the Fund may invest in
securities of companies that invest in real estate or interests
therein and in securities that are secured by real estate or interests
therein.
8. Purchase or sell commodities or commodities contracts, except that the
Fund may purchase and sell futures contracts and options thereon.
Unless stated otherwise, if a percentage limitation set forth above, or
stated elsewhere in this Statement of Additional Information or in the
Prospectus, is met at the time an investment is made, a later change in
percentage resulting from a change in the value of the Fund's investments or in
the net assets of the Fund will not constitute a violation of such percentage
limitation.
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. The investment manager does not anticipate that the Fund's annual
portfolio turnover rate will exceed 200%.
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<PAGE>
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 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.
In valuing the assets of the Fund for purposes of computing net asset
value, securities are valued at market value as of the close of trading on each
business day when the NYSE is open. Securities, other than stock options, listed
on the NYSE or other exchanges are valued on the basis of the last sale price on
the exchange on which they are primarily traded. However, if the last sale price
on the NYSE is different than the last sale price on any other exchange, the
NYSE price will be used. If there are no sales on that day, the securities are
valued at the closing bid price on the NYSE or other primary exchange for that
day. Securities traded in the over-the-counter market are valued on the basis of
the last sale price as reported by NASDAQ. If there are no sales on that day,
the securities are valued at the mean between the closing bid and asked prices
as reported by NASDAQ. Stock options traded on national securities exchanges are
valued at the last sale price prior to the time of computation of net asset
value per share. Futures contracts and options thereon, which are traded on
commodities exchanges, are valued at their daily settlement value as of the
close of such commodities exchanges. Securities for which quotations are not
readily available and other assets are valued at their fair value as determined
pursuant to procedures adopted in good faith by the Board of Trustees of the
Trust. Debt securities will be valued at their current market value when
available or at their fair value, which for securities with remaining maturities
of 60 days or less has been determined in good faith by the Board of Trustees to
be represented by amortized cost value, absent unusual circumstances. One or
more pricing services may be utilized to determine the fair value of securities
held by the Fund. The Board of Trustees will review and monitor the methods used
by such services to assure itself that securities are appropriately valued.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are offered for sale on a continuous basis, directly by
the Fund. Shares of the Fund are sold and redeemed at their net asset value as
next determined after receipt of the purchase or redemption order in proper
form.
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
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<PAGE>
practicable for the Fund to determine the fair market value of its net assets.
The Fund may pay the proceeds of a redemption by making an in-kind
distribution of securities, but it 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.
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 a redemption, 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
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<PAGE>
the Fund. Payment may also be made by check made payable to the designated
recipient and mailed within 7 days of the redemption 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.
No redemption fees are charged to shareholders under this 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 that the redemption of shares to make withdrawal
payments 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-HUSSMAN, or by writing to:
Hussman Investment Trust
c/o Ultimus Fund Solutions, LLC
P.O. Box 46707
Cincinnati, Ohio 45246
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
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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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.
David C. Anderson Trustee Network Administrator for
916 North Oak Park Avenue Hephzibah Childrens Association
Oak Park, Illinois 60302 (child welfare); prior to 1996,
Age 49 a self-employed futures trader.
Lee R. Baker* Trustee Director of the Raymond F. Baker
5330 NW 71st Place Foundation; member of the Board
Johnston, Iowa 50131 of Governors of the Iowa State
Age 70 University Foundation; Director of
the Baker Council for Excellence in
Agronomy.
Nelson F. Freeburg Trustee President and Owner of Formula
4745 Poplar Avenue, Suite 307 Research, Inc. (financial
Memphis, Tennessee 38117 newsletter publisher); Owner of
Age 48 Freeburg Properties LLC,
Freeburg Development LLC and
Chickasaw Land & Investment Co.
William H. Vanover Trustee Investment Officer for Planning
838 Long Lake Road, Suite 100 Alternatives, Ltd. (registered
Bloomfield Hills, Michigan 48302 investment adviser).
Age 53
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>
* Trustee who is deemed to be an "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 retainer of $ 2,000 for services as a Trustee to the Trust, plus a per
meeting fee of $500 for each meeting attended.
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<PAGE>
Trustees are reimbursed for expenses incurred in attending such meetings.
The Trustees have established a Nominating Committee, which is responsible
for identifying and nominating qualified individuals to serve as Trustees, and
an Audit Committee, which oversees the Fund's accounting and financial reporting
policies and the independent audit of its financial statements. Mr. Anderson,
Mr. Freeburg and Mr. Vanover are the members of the Nominating Committee and the
Audit Committee.
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 July 20, 2000 (the "Advisory
Agreement"). The Adviser, founded in 1993, is a registered investment adviser
that manages more than $ 25 million in assets as of the date of this Statement
of Additional Information. Subject to the Fund's investment objective and
policies approved by the Trustees of the Trust, the Adviser manages the Fund's
portfolio and makes all investment decisions for the Fund, and continuously
reviews, supervises and administers the Fund's investment program.
For these services, the Fund pays the Adviser a monthly fee which is
computed at the annual rate of 1.25% of the average daily net assets of the
Fund. The Adviser has contractually agreed to waive a portion of its advisory
fees or to reimburse the Fund's operating expenses to the extent necessary so
that the Fund's ordinary operating expenses do not exceed an amount equal to 2%
annually of the Fund's net assets. This expense limitation agreement remains in
effect until at least December 31, 2001. Any fee waivers or expense
reimbursements by the Adviser, either before or after December 31, 2001, are
subject to repayment by the Fund provided the Fund is able to effect such
repayment and remain in compliance with the undertaking by the Adviser to limit
expenses of the Fund, and provided further that the expenses which are the
subject of the repayment were incurred within three years of such repayment.
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 and the rules thereunder.
The Advisory Agreement provides that the Adviser shall not be liable for
any error of judgment or for any loss suffered by the Trust in connection with
the performance of its duties, except a loss resulting from willful misfeasance,
bad faith or gross negligence on
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<PAGE>
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 investment 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.
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 Fund, 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 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
brokerage orders 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 accounts managed by the Adviser. Any other 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 account managed by the Adviser, the policy of the Adviser generally is
that 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 account. In some instances, this procedure may
adversely affect the price paid or
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<PAGE>
received by the Fund or the size of the position obtained by the Fund.
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 July 20,
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 net asset value 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
17
<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 or prices from pricing services used
in determining net asset value; 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 fees 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 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 at the annual rate of $17
per shareholder account, subject to a minimum fee of $1,500 per month.
Unless sooner terminated as provided therein, the Service Agreements
between the Trust and Ultimus will continue in effect until July 20, 2002. The
Service Agreements thereafter, 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
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<PAGE>
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 July 20,
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 Arthur Andersen LLP, 425 Walnut Street, Cincinnati,
Ohio 45202, to serve as independent auditors for the Trust and to audit the
financial statements of the Trust for its first fiscal period ending June 30,
2001.
TRUST COUNSEL
The Trust has selected Schulte Roth & Zabel LLP, 900 Third Avenue, New
York, New York 10022, to serve as counsel for the Trust and counsel to the
Trustees who are not "interested persons" of the Trust.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Trust is an unincorporated business trust that was organized under Ohio
law on June 1, 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, and may further divide shares of a series into
separate classes. In the event of a liquidation or dissolution of the Trust or
an individual series or class, shareholders of a particular series or class
would be entitled to receive the assets available for distribution belonging to
such series or class. Shareholders of a series or class are entitled to
participate equally in the net distributable assets of the particular series or
class involved on liquidation, based on the number of shares of the series or
class 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 or class, the Trustees shall allocate them among any one or
more series or classes 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 and classes 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
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interests of the shareholders of a particular series or class. Rule 18f-2 under
the 1940 Act provides, in substance, 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
or class affected by the matter. A series or class is affected by a matter
unless it is clear that the interests of each series or class in the matter are
substantially identical or that the matter does not affect any interest of the
series or class. Under Rule 18f-2, the approval of an investment advisory
agreement, a distribution plan or any change in a fundamental investment policy
would be effectively acted upon with respect to a series or class only if
approved by a majority of the outstanding shares of such series or class.
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 or class.
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 monitors compliance with its Code
of Ethics.
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 its net investment income and net realized capital gains are distributed
in accordance with the Code. Depending on the extent of the 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
20
<PAGE>
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.
The Fund's net realized capital gains from securities transactions will be
distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess, if
any, of the Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of that calendar year
plus undistributed amounts from prior years. The Fund intends to make
distribution sufficient to avoid imposition of the excise tax.
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 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
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<PAGE>
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 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.
PERFORMANCE COMPARISONS
Advertisements, sales materials and shareholder reports may compare the
investment performance of the Fund to the performance of other mutual funds with
comparable investment objectives and policies or to various mutual fund or
market indices, such as those prepared by Dow Jones & Co., Inc., Standard &
Poor's, 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
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<PAGE>
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 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.
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<PAGE>
HUSSMAN STRATEGIC GROWTH FUND,
a series of
HUSSMAN INVESTMENT TRUST
FINANCIAL STATEMENTS
AS OF
JUNE 20, 2000
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Shareholder and Board of Trustees of the Hussman Strategic Growth Fund:
We have audited the accompanying statement of assets and liabilities of the
Hussman Strategic Growth Fund of the Hussman Investment Trust (an Ohio business
trust) as of June 20, 2000, and the related statement of operations for the
period then ended. These financial statements are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 20, 2000, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial staements referred to above present fairly, in all
material respects, the financial position of the Hussman Strategic Growth Fund
as of June 20, 2000 and the results of its operations for the period then ended,
in conformity with accounting pricniples generally accepted in the United
States.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
June 22, 2000
<PAGE>
HUSSMAN INVESTMENT TRUST
HUSSMAN STRATEGIC GROWTH FUND
Statement of Assets and Liabilities
As of June 20, 2000
ASSETS
Cash $ 100,000
-----------
TOTAL ASSETS 100,000
-----------
Net assets for shares of beneficial
interest outstanding $ 100,000
===========
Shares outstanding 10,000
===========
Net asset value per share $ 10.00
===========
The accompanying notes are an integral part of this statement.
<PAGE>
HUSSMAN INVESTMENT TRUST
HUSSMAN STRATEGIC GROWTH FUND
Statement of Operations
For the Period Ended June 20, 2000*
INVESTMENT INCOME $ -
-----------
EXPENSES
Organization costs 55,000
Reimbursement of expenses by Adviser (55,000)
-----------
NET EXPENSES -
-----------
NET INVESTMENT INCOME $ -
===========
* The commencement of Fund operations was June 20, 2000
The accompanying notes are an integral part of this statement.
<PAGE>
HUSSMAN INVESTMENT TRUST
HUSSMAN STRATEGIC GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
AS OF JUNE 20, 2000
(1) The Hussman Strategic Growth Fund (the "Fund") is a diversified series of
the Hussman Investment Trust, an open-end management investment company
established as an Ohio business trust under a Declaration of Trust dated
March 20, 2000. The Fund seeks to provide long-term capital appreciation,
with added emphasis on capital preservation during unfavorable market
conditions. On June 20, 2000, 10,000 shares of the Fund were issued for
cash, at $10.00 per share, to John P. Hussman, who is President and a
Trustee of the Trust. The Fund has had no operations except for the initial
issuance of shares.
(2) Hussman Econometrics Advisors, Inc. (the "Investment Adviser") serves as
the investment adviser to the Fund. For its services, the Fund pays the
Investment Adviser an investment advisory fee at the annual rate of 1.25%
of the Fund's average daily net assets, less any fee waivers and expense
reimbursements. The Fund is responsible for its own operating expenses. The
Investment Adviser has agreed, until at least December 31, 2001, to reduce
fees payable to it by the Fund to the extent necessary to limit the Fund's
aggregate annual operating expenses to 2.00% of the average daily net
assets. Any such reductions made by the Investment Adviser through December
31, 2001 or thereafter in its fees or payments or reimbursement of expenses
which are the Fund's obligations ($55,000 as of June 20, 2000) may be
subject to repayment by the Fund provided the Fund is able to effect such
repayment and remain in compliance with applicable expense limitations, and
provided further that the expenses which are the subject of the repayment
were incurred within three years of such repayment.
(3) Reference is made to the Prospectus and the Statement of Additional
Information for a description of the Advisory Agreement, the Administration
Agreement, tax aspects of the Fund and the calculation of the net asset
value of shares of the Fund.
