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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-099111
-----------------------------------
Hussman Investment Trust
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(Exact name of registrant as specified in charter)
5136 Dorsey Hall Drive Ellicott City, Maryland 221042
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(Address of principal executive offices) (Zip code)
John F. Splain
Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, Ohio 45246
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (410) 715-1145
----------------------
Date of fiscal year end: June 30, 2006
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Date of reporting period: December 31, 2005
--------------------------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED] HUSSMAN
FUNDS
HUSSMAN INVESTMENT TRUST
HUSSMAN STRATEGIC GROWTH FUND
[GRAPHIC OMITTED]
HUSSMAN STRATEGIC TOTAL RETURN FUND
[GRAPHIC OMITTED]
SEMI-ANNUAL REPORT
DECEMBER 31, 2005
(UNAUDITED)
[GRAPHIC OMITTED] HUSSMAN
FUNDS
STRATEGIC GROWTH FUND
Comparison of the Change in Value of a $10,000 Investment in the Hussman
Strategic Growth Fund versus the Standard & Poor's 500 Index and the Russell
2000 Index(a)
[GRAPHIC OMITTED]
Hussman Strategic Growth Fund -
Equity investments and cash
Hussman Strategic Growth Fund equivalents only (unhedged)(b) S&P 500 Index Russell 2000 Index
- ----------------------------- -------------------------------- ------------------ --------------------
7/24/2000 10,000 7/24/2000 10,000 7/24/2000 10,000 7/24/2000 10,000
7/31/2000 10,000 7/31/2000 9,997 7/31/2000 9,773 7/31/2000 9,736
8/31/2000 10,030 8/31/2000 10,545 8/31/2000 10,380 8/31/2000 10,479
9/30/2000 10,350 9/30/2000 10,226 9/30/2000 9,832 9/30/2000 10,171
10/31/2000 10,040 10/31/2000 9,639 10/31/2000 9,790 10/31/2000 9,717
11/30/2000 10,840 11/30/2000 9,561 11/30/2000 9,018 11/30/2000 8,719
12/31/2000 11,640 12/31/2000 10,486 12/31/2000 9,063 12/31/2000 9,468
1/31/2001 11,270 1/31/2001 10,437 1/31/2001 9,384 1/31/2001 9,961
2/28/2001 12,030 2/28/2001 10,488 2/28/2001 8,528 2/28/2001 9,307
3/31/2001 12,430 3/31/2001 10,351 3/31/2001 7,988 3/31/2001 8,852
4/30/2001 12,190 4/30/2001 10,886 4/30/2001 8,609 4/30/2001 9,545
5/31/2001 12,340 5/31/2001 11,137 5/31/2001 8,667 5/31/2001 9,779
6/30/2001 12,200 6/30/2001 11,056 6/30/2001 8,456 6/30/2001 10,117
7/31/2001 12,470 7/31/2001 10,825 7/31/2001 8,372 7/31/2001 9,569
8/31/2001 12,770 8/31/2001 10,597 8/31/2001 7,848 8/31/2001 9,260
9/30/2001 12,640 9/30/2001 9,523 9/30/2001 7,215 9/30/2001 8,014
10/31/2001 12,767 10/31/2001 9,944 10/31/2001 7,352 10/31/2001 8,483
11/30/2001 13,236 11/30/2001 11,015 11/30/2001 7,916 11/30/2001 9,139
12/31/2001 13,348 12/31/2001 11,444 12/31/2001 7,985 12/31/2001 9,703
1/31/2002 13,840 1/31/2002 11,713 1/31/2002 7,869 1/31/2002 9,602
2/28/2002 13,963 2/28/2002 11,568 2/28/2002 7,717 2/28/2002 9,339
3/31/2002 14,477 3/31/2002 12,637 3/31/2002 8,007 3/31/2002 10,090
4/30/2002 14,823 4/30/2002 12,629 4/30/2002 7,522 4/30/2002 10,182
5/31/2002 15,192 5/31/2002 12,529 5/31/2002 7,466 5/31/2002 9,730
6/30/2002 14,913 6/30/2002 11,567 6/30/2002 6,935 6/30/2002 9,247
7/31/2002 15,338 7/31/2002 10,544 7/31/2002 6,394 7/31/2002 7,851
8/31/2002 15,394 8/31/2002 10,510 8/31/2002 6,436 8/31/2002 7,831
9/30/2002 15,204 9/30/2002 9,644 9/30/2002 5,737 9/30/2002 7,268
10/31/2002 14,935 10/31/2002 9,997 10/31/2002 6,241 10/31/2002 7,501
11/30/2002 14,775 11/30/2002 10,649 11/30/2002 6,609 11/30/2002 8,171
12/31/2002 15,220 12/31/2002 10,296 12/31/2002 6,221 12/31/2002 7,716
1/31/2003 15,148 1/31/2003 9,962 1/31/2003 6,058 1/31/2003 7,502
2/28/2003 14,931 2/28/2003 9,598 2/28/2003 5,967 2/28/2003 7,276
3/31/2003 14,919 3/31/2003 9,688 3/31/2003 6,025 3/31/2003 7,369
4/30/2003 15,184 4/30/2003 10,524 4/30/2003 6,521 4/30/2003 8,068
5/31/2003 16,338 5/31/2003 11,605 5/31/2003 6,865 5/31/2003 8,934
6/30/2003 16,590 6/30/2003 11,857 6/30/2003 6,952 6/30/2003 9,095
7/31/2003 17,119 7/31/2003 12,282 7/31/2003 7,075 7/31/2003 9,665
8/31/2003 17,528 8/31/2003 12,740 8/31/2003 7,213 8/31/2003 10,108
9/30/2003 17,155 9/30/2003 12,345 9/30/2003 7,136 9/30/2003 9,921
10/31/2003 17,756 10/31/2003 13,190 10/31/2003 7,540 10/31/2003 10,754
11/30/2003 18,032 11/30/2003 13,573 11/30/2003 7,606 11/30/2003 11,136
12/31/2003 18,429 12/31/2003 14,176 12/31/2003 8,005 12/31/2003 11,362
1/31/2004 18,645 1/31/2004 14,624 1/31/2004 8,152 1/31/2004 11,855
2/29/2004 19,247 2/29/2004 15,119 2/29/2004 8,265 2/29/2004 11,962
3/31/2004 19,174 3/31/2004 14,979 3/31/2004 8,140 3/31/2004 12,073
4/30/2004 19,018 4/30/2004 14,542 4/30/2004 8,013 4/30/2004 11,458
5/31/2004 19,078 5/31/2004 14,704 5/31/2004 8,123 5/31/2004 11,640
6/30/2004 19,114 6/30/2004 15,037 6/30/2004 8,281 6/30/2004 12,130
7/31/2004 18,693 7/31/2004 14,204 7/31/2004 8,007 7/31/2004 11,313
8/31/2004 18,260 8/31/2004 14,058 8/31/2004 8,039 8/31/2004 11,255
9/30/2004 18,657 9/30/2004 14,481 9/30/2004 8,126 9/30/2004 11,784
10/31/2004 18,717 10/31/2004 14,580 10/31/2004 8,250 10/31/2004 12,016
11/30/2004 19,151 11/30/2004 15,474 11/30/2004 8,584 11/30/2004 13,058
12/31/2004 19,379 12/31/2004 15,992 12/31/2004 8,876 12/31/2004 13,444
1/31/2005 19,190 1/31/2005 15,591 1/31/2005 8,660 1/31/2005 12,883
2/28/2005 19,619 2/28/2005 16,118 2/28/2005 8,842 2/28/2005 13,102
3/31/2005 19,707 3/31/2005 15,882 3/31/2005 8,685 3/31/2005 12,727
4/30/2005 19,619 4/30/2005 15,408 4/30/2005 8,521 4/30/2005 11,998
5/31/2005 19,808 5/31/2005 16,054 5/31/2005 8,792 5/31/2005 12,783
6/30/2005 20,060 6/30/2005 16,382 6/30/2005 8,804 6/30/2005 13,276
7/31/2005 20,098 7/31/2005 17,032 7/31/2005 9,132 7/31/2005 14,117
8/31/2005 20,439 8/31/2005 17,002 8/31/2005 9,060 8/31/2005 13,855
9/30/2005 20,742 9/30/2005 17,287 9/30/2005 9,122 9/30/2005 13,899
10/31/2005 20,388 10/31/2005 16,751 10/31/2005 8,970 10/31/2005 13,467
11/30/2005 20,338 11/30/2005 17,221 11/30/2005 9,309 11/30/2005 14,121
12/31/2005 20,486 12/31/2005 17,310 12/31/2005 9,312 12/31/2005 14,057
Past performance is not predictive of future performance.
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AVERAGE ANNUAL TOTAL RETURNS(c)
For Periods Ended December 31, 2005
Since
1 Year 3 Years 5 Years Inception(d)
------ ------- ------- ------------
Hussman Strategic Growth Fund 5.71% 10.41% 11.97% 14.10%
S&P 500 Index 4.91% 14.39% 0.54% (1.30%)
Russell 2000 Index 4.55% 22.13% 8.22% 6.46%
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(a) The Hussman Strategic Growth Fund invests in stocks listed on the New York,
American, and NASDAQ exchanges, and does not specifically restrict its
holdings to a particular market capitalization. The S&P 500 and Russell
2000 are indices of large and small capitalization stocks, respectively.
(b) "Equity investments and cash equivalents only (unhedged)" reflects the
performance of the Fund's portfolio of stock investments and modest
day-to-day cash balances, after fees and expenses, but excluding the impact
of hedging transactions. The Fund's unhedged investment holdings do not
represent a separately available portfolio, and their performance is
presented solely for purposes of comparison and performance attribution.
(c) Returns do not reflect the deduction of taxes a shareholder would pay on
Fund distributions or the redemption of Fund shares.
(d) Annualized. Initial public offering of shares was July 24, 2000.
[GRAPHIC OMITTED] HUSSMAN
FUNDS
STRATEGIC TOTAL RETURN FUND
Comparison of the Change in Value of a $10,000 Investment in the Hussman
Strategic Total Return Fund versus the Lehman Brothers U.S. Aggregate Index(a)
[GRAPHIC OMITTED]
Lehman Brothers
Hussman Strategic Total Return Fund U.S. Aggregate Index
------------------------------------ ---------------------------
9/12/2002 $ 10,000 9/12/2002 $ 10,000
9/30/2002 9,960 9/30/2002 10,097
10/31/2002 9,830 10/31/2002 10,051
11/30/2002 9,790 11/30/2002 10,048
12/31/2002 10,230 12/31/2002 10,256
1/31/2003 10,240 1/31/2003 10,264
2/28/2003 10,270 2/28/2003 10,406
3/31/2003 10,177 3/31/2003 10,398
4/30/2003 10,177 4/30/2003 10,484
5/31/2003 10,610 5/31/2003 10,679
6/30/2003 10,681 6/30/2003 10,658
7/31/2003 10,407 7/31/2003 10,300
8/31/2003 10,670 8/31/2003 10,368
9/30/2003 10,977 9/30/2000 10,643
10/31/2003 10,987 10/31/2003 10,544
11/30/2003 11,069 11/30/2003 10,569
12/31/2003 11,233 12/31/2003 10,677
1/31/2004 11,297 1/31/2004 10,762
2/29/2004 11,466 2/29/2004 10,878
3/31/2004 11,689 3/31/2004 10,960
4/30/2004 11,052 4/30/2004 10,675
5/31/2004 11,275 5/31/2004 10,632
6/30/2004 11,267 6/30/2004 10,692
7/31/2004 11,309 7/31/2004 10,798
8/31/2004 11,577 8/31/2004 11,004
9/30/2004 11,714 9/30/2004 11,034
10/31/2004 11,843 10/31/2004 11,127
11/30/2004 11,942 11/30/2004 11,038
12/31/2004 11,963 12/31/2004 11,139
1/31/2005 11,768 1/31/2005 11,209
2/28/2005 11,931 2/28/2005 11,143
3/31/2005 11,817 3/31/2005 11,086
4/30/2005 11,665 4/30/2005 11,236
5/31/2005 11,752 5/31/2005 11,358
6/30/2005 11,987 6/30/2005 11,420
7/31/2005 11,834 7/31/2005 11,316
8/31/2005 12,031 8/31/2005 11,461
9/30/2005 12,415 9/30/2005 11,343
10/31/2005 12,239 10/31/2005 11,253
11/30/2005 12,432 11/30/2005 11,303
12/31/2005 12,681 12/31/2005 11,411
Past performance is not predictive of future performance.
--------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(b)
For Periods Ended December 31, 2005
Since
1 Year 3 Years Inception(c)
------ ------- ------------
Hussman Strategic Total Return Fund 6.00% 7.42% 7.46%
Lehman Brothers U.S. Aggregate Index 2.44% 3.62% 4.08%
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(a) The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for U.S. government, agency
and corporate securities.
(b) Returns do not reflect the deduction of taxes a shareholder would pay on
Fund distributions or the redemption of Fund shares. The Fund adviser has
agreed until at least December 31, 2006 to waive its investment advisory
fees and to absorb Fund expenses to the extent necessary to limit the
Fund's annual ordinary operating expenses to 0.90% of its average daily net
assets. The Fund's performance has been positively affected by these
provisions. Absent such waivers and expense reimbursements, Fund
performance would be lower.
(c) Annualized. Initial public offering of shares was September 12, 2002.
The Hussman Funds
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Letter to Shareholders February 15, 2006
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DEAR SHAREHOLDER,
The Hussman Funds continued to perform as intended during 2005 despite
relatively uninspiring conditions in the U.S. stock and bond markets, with both
the Strategic Growth Fund and the Strategic Total Return Fund achieving modest
continued appreciation with contained volatility. In 2005, while being broadly
hedged against the impact of market fluctuations, the Strategic Growth Fund
achieved a total return of 5.71%, compared with a total return of 4.91% in the
S&P 500 Index.1 Meanwhile, the Strategic Total Return Fund achieved a total
return of 6.00%, compared with a total return of 2.44% in the Lehman Brothers
U.S. Aggregate Bond Index.2
The Strategic Growth Fund has achieved an average annual total return of
14.10% from its inception on July 24, 2000 through December 31, 2005, more than
doubling in value, including reinvested distributions, compared with an average
annual total return of -1.30% for the S&P 500 Index over the same period.
Meanwhile, the deepest pullback in the value of the Fund since inception has
been 6.98%, compared with a 47.41% drawdown for the S&P 500 Index.
The Strategic Total Return Fund has achieved an average annual total return
of 7.46% from its inception on September 12, 2002 through December 31, 2005,
compared with a 4.08% average annual total return in the Lehman Brothers U.S.
Aggregate Bond Index. Since inception, the deepest peak-to-trough drawdown for
the Strategic Total Return Fund has been 6.90%, compared with a drawdown of
4.66% experienced by the Lehman Brothers Aggregate Bond Index during that
period.
1 Performance information for the S&P 500 Index is provided for comparison
purposes. This index is perhaps the most widely recognized index of common
stock prices. It is a widely used benchmark for growth-oriented investors
and is believed to be an appropriate benchmark to use in evaluating the
long-term performance of the Strategic Growth Fund. The S&P 500 Index is
primarily comprised of large capitalization companies.
Companies whose common stocks are included in the S&P 500 Index are
typically the largest companies in their respective industries. The S&P 500
Index is a capitalization-weighted index, with each stock affecting the
index in proportion to its market value. The performance information for
the S&P 500 takes into account actual dividends and capital gains
distributions before taxes, and assumes such dividends were reinvested. The
Strategic Growth Fund does not restrict its investments to securities
included in the S&P 500 Index. The returns of the S&P 500 Index and the
Fund will differ, particularly over the short term.
2 Performance information for the Lehman Brothers U.S. Aggregate Bond Index
is provided for comparison purposes. This index is an unmanaged index
consisting of more than 5,000 taxable U.S. government, investment-grade
corporate and mortgage backed securities and is considered representative
of the U.S. investment-grade, fixed-income bond market. The maturities of
securities included in the Lehman Brothers U.S. Aggregate Bond Index are
over one year. The Strategic Total Return Fund does not restrict its
investments to securities included in the index. The returns of the Lehman
Brothers U.S. Aggregate Bond Index and the Fund will differ, particularly
over the short term.
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1
The Hussman Funds
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Letter to Shareholders (CONTINUED)
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Performance charts for both Funds are presented at the beginning of this
Report. Current information regarding market conditions and the investment
stance of the Funds is available at www.hussmanfunds.com.
INVESTMENT STRATEGY
In recent years, both the stock and bond markets have featured unusually
low yields, and with them, unusually low prospects for long-term returns. In
this environment, neither the Strategic Growth Fund nor the Strategic Total
Return Fund has accepted a great deal of exposure to market fluctuations,
achieving returns primarily through individual security selection and sector
allocation, rather through than general market exposure (known as "beta" in the
stock market and "duration" in the bond market).
It is important for shareholders to understand that this is neither a
typical nor desirable situation. Historically, both stocks and bonds have
delivered very satisfactory returns as compensation for their risk. Favorably
valued markets provide long-term investors with the opportunity to benefit both
from security selection and from broad exposure to market fluctuations. So
appropriate valuations typically deliver higher total returns for long-term
investors. In contrast, rich valuations (and the poor long-term return prospects
they imply) force us to invest with figuratively one hand tied behind our backs.
This is another way of saying that a defensive and substantially hedged
investment position is not my preference, nor should it be considered a
"standard" investment position in either Fund. During the past 5 years, however,
stock valuations have generally been well within the highest ranges of
historical experience. Even the 2002 trough in the S&P 500 occurred at
above-average valuations (near 16 times prior peak earnings, compared with
typical bear markets that have typically taken the index to less than 11 times
prior peak earnings, and generally much lower). As a result, the fact that the
Strategic Growth Fund has been generally hedged in recent years should not be
interpreted as a permanent tendency or a "bearish bias." Rather, it should be
viewed as respect for historical fact: high valuations produce unsatisfactory
long-term returns and often very poor short-term return/risk tradeoffs as well.
Although the Strategic Growth Fund outperformed the S&P 500 in 2005, it is
generally not useful to evaluate Fund returns over such short performance
periods, nor over periods restricted to rising-only or falling-only markets. For
long-term investors, I believe that an appropriate goal is to achieve strong
returns measured over the complete market cycle (bull markets and bear markets
combined), while defending capital in market conditions that have
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2
The Hussman Funds
- --------------------------------------------------------------------------------
Letter to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
typically been unfavorable for stocks. Accordingly, a reasonable way to measure
investment performance is to examine periods that include some portion of both
bull and bear markets. Evaluating performance between two separate market peaks,
including an intervening bear market decline (such as the period from 2000 to
the present), provides useful information that is often obscured by the use of
exact calendar periods.
It is notable that the past 3 years have represented a general advance in
the stock market, recovering from the deep losses of the prior bear market. The
Strategic Growth Fund has clearly participated in this recovery, but a hedged
position generally will not outperform an unhedged position when the investment
horizon is restricted to a trough-to-peak movement in the market. For the 3-year
period ended December 31, 2005, the Strategic Growth Fund achieved an annual
total return of 10.41%, compared with 14.39% for the S&P 500. The shortfall in
Fund performance is the clear result of the Fund's hedging during this period.
The Fund accepted a reasonable amount of impact from market fluctuations in
2003, when valuations were only moderately above historical norms. Since 2004,
however, the Fund has been substantially or fully hedged, reflecting unusually
elevated valuations by most measures and less favorable behavior among market
internals and interest rates.
From the standpoint of the Fund's investment objectives, a more informative
view of the past 3 years emerges if we compare returns as measured between the
2002 peak for the S&P 500, which occurred on March 19, 2002, and the 2005 peak,
which occurred on December 8, 2005. During that span, the Strategic Growth Fund
achieved an average annual total return of 10.27%, compared with an average
annual total return of 3.73% for the S&P 500. Clearly, the inclusion of even a
portion of the prior bear market decline substantially alters the comparison
between the Fund and the S&P 500. This underscores the importance of examining
Fund returns from one important market peak to another, rather than using only
specific calendar dates.
The largest industry holdings in the Strategic Growth Fund continue to be
health care and consumer related stocks. Meanwhile, the Fund continues to have a
relatively low exposure to financial stocks.
Though the widely diversified portfolio of the Strategic Growth Fund makes
it impossible to attribute performance to any short list of securities,
individual stocks contributing to the Fund's performance during the latest
semiannual period included SanDisk, Garmin, McDonald's, Newmont Mining,
Burlington Northern, Cerner, NVIDIA, Grupo Televisa, AON Corp., Petroleo
- --------------------------------------------------------------------------------
3
The Hussman Funds
- --------------------------------------------------------------------------------
Letter to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
Brasileiro, and Computer Sciences, each which achieved in excess of $5 million
in gains for the Fund through December 31, 2005. Losses above that amount were
experienced in Scholastic Corp.
The Strategic Total Return Fund's exposure to bond market fluctuations
remained close to 2 years in the most recent semiannual period, meaning that a
100 basis point change in interest rates would be expected to impact the Fund by
about 2% on the basis of bond price fluctuations. The majority of the Fund's
Treasury bond exposure has been in inflation protected securities. Meanwhile,
the Fund generally held close to 20% of its assets in precious metals shares
during 2005. In early 2006, in response to a very strong advance in precious
metals shares, richer valuations, and at least temporarily firm economic
conditions, the Fund's exposure to precious metals shares was reduced to
approximately 5% of assets.
Individual securities contributing to the Total Return Fund's performance
during the most recent semiannual period included Placer Dome, Newmont Mining,
Barrick Gold, and Anglogold Ashanti, each which achieved in excess of $500,000
in gains for the Fund. Losses in excess of this amount were experienced in one
inflation-protected Treasury position, the TIPS 2.0% issue maturing 1/15/14.
PORTFOLIO COMPOSITION
As of December 31, 2005, the Strategic Growth Fund had net assets of
$2,305,453,656, and held 198 stocks in a wide variety of industries. The largest
industry holdings were in health care (21.7%), consumer discretionary (16.3%),
consumer staples (16.3%), and information technology (12.8%). The smallest
industry weight relative to the S&P 500 remained in financials (1.7%).
As of December 31, 2005, the Strategic Total Return Fund had net assets of
$127,475,445. Treasury inflation protected securities accounted for 34.5% of the
Fund's portfolio, with Treasury bills, short-term U.S. government agency
securities, and money market securities representing an additional 44.5% of
assets. Precious metals shares accounted for 17.9% of assets, and utility stocks
for 2.9%.
MARKET CONDITIONS
For what is now more than seven and a half years, the S&P 500 has
underperformed even the depressed yields on short-term Treasury bills. This is
the central problem with rich valuations - not that stocks decline persistently,
but rather that investors can hold stocks faithfully for years, experiencing
wide market fluctuations, and end up with very little reward.
- --------------------------------------------------------------------------------
4
The Hussman Funds
- --------------------------------------------------------------------------------
Letter to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
The S&P 500 currently trades at 19 times net trailing earnings.
Historically, earnings have grown at only 6% annually when measured from peak to
peak across economic cycles - a fact that has remained even in recent decades.
Unfortunately, when S&P 500 earnings have achieved a fresh record, as they have
recently done, the price/earnings ratio for the index has historically averaged
just above 12. Yet we need not assume that valuations will approach anything
near that level in order to conclude that stock market returns will probably be
unsatisfactory in the coming years.
Suppose, for example, that over the next 5 years, S&P 500 earnings continue
along the peak of their 6% historical growth channel (where they currently
reside), and that the S&P 500 price/earnings multiple simply touches a level of
16 - still well above its historical average - 5 years from now. Given the
current dividend yield of 1.86%, it is simple algebra to calculate that the
total return on the S&P 500 over the next 5 years would be approximately:
(1.06)(16/19)1/5 + .0186(19/16+1)/2 - 1.0 = 4.45% annually
[Note - the first term in the above equation is a capital gains factor, the
second term approximates the average dividend yield, and subtracting 1.0
produces a net return.]
Suffice it to say that the difficulty with rich valuations is not
necessarily that they imply weak short-term returns for buy-and-hold investors
in the S&P 500, but rather, that rich valuations imply unsatisfactory long-term
returns, regardless of short-term direction. As a rule, defensive investment
positions taken in richly valued markets have generally increased, not
decreased, the long-term returns achieved by investors, while also reducing risk
exposure.
The earnings assumptions in the foregoing analysis may actually be somewhat
optimistic. Current earnings figures reflect among the highest profit margins in
decades. In a competitive economy, profit margins have a very strong tendency to
revert to normal over time. The driving force behind these wide profit margins
is the very low share of corporate revenues going to labor compensation. Indeed,
growth in labor compensation over the past 5 years has been the lowest on record
since 1947.
There is emerging evidence that the compression of wages, and with it, the
expansion of profit margins, is beginning to reverse course. In recent economic
reports, real wage growth has begun to outstrip productivity growth. This is
important, because productivity measures the amount of goods and services
produced per worker, and real wages measure the amount of goods
- --------------------------------------------------------------------------------
5
The Hussman Funds
- --------------------------------------------------------------------------------
Letter to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
and services that workers can purchase with their compensation. The difference,
after other expenses, is real-profit-per-worker that is retained by businesses.
So as real wage growth outstrips productivity growth, profit margins naturally
come under pressure.
Corporate earnings have grown very quickly from their recessionary trough
in 2002, but this recovery has simply taken earnings back to the 6% growth trend
that connects historical earnings peaks over time. Record earnings in the S&P
500 are typically followed by substantially below-average earnings growth over
the following 5-year period. For all of these reasons, it would not be
surprising if analyst earnings projections turn out to be overly optimistic in
the coming years.
ECONOMIC PERSPECTIVES
Looking ahead, the challenges faced by the economy and the financial
markets will not be mainly dependent on new, unforeseen developments, but
rather, will probably be the inevitable result of conditions that are already
established. Rich stock valuations, wide profit margins and depressed levels of
labor compensation, for example, produce unsatisfactory long-term returns and
disappointing earnings growth as their natural consequences. The timing of these
consequences is not highly predictable. But for long-term investors, knowledge
that these consequences are likely will be helpful in making sound decisions for
the coming years.
Likewise, the paucity of domestic savings, both at the consumer level and
at the government level, also has natural consequences. In 2005, the U.S. trade
deficit reached a fresh record - the U.S. now requires foreign savings inflows
of over $2 billion a day in order to finance current levels of gross domestic
investment. Foreign investors and central banks now own more than half of the
float in the U.S. Treasury debt market. Investment booms in the U.S. have always
relied on the ability to import increasing amounts of capital from foreign
savers (in fact, the most durable economic expansions have started with the U.S.
current account position in surplus). With the U.S. current account at the
deepest deficit in history, it will be difficult to mount much sustained growth
in U.S. gross domestic investment in the coming years. Most likely, whatever
growth we observe in capital spending will be financed by reductions in other
forms of domestic investment such as housing.
2006 also begins with what I view as excessive attention to the Federal
Reserve, which owes its success in containing inflation not to the effectiveness
of monetary policy, but rather to the fiscal conservatism of both the Bush
- --------------------------------------------------------------------------------
6
The Hussman Funds
- --------------------------------------------------------------------------------
Letter to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
(senior) and Clinton administrations, as well as the more recent appetite of
China and Japan for U.S. dollar liabilities (as a way of supporting the value of
the U.S. dollar and keeping their own currencies cheap). Inflation is not
specifically a monetary phenomenon, but a fiscal one. It is the result of growth
in unproductive government spending that produces an excess of government
liabilities beyond the desire of the public to hold them.
Presently, the Fed is faced with at least three problems. First, gone is
the fiscal conservatism that provided Alan Greenspan with policy flexibility and
was at the core of the disinflation that was credited to his efforts. Second,
with the trade and current account at fresh record deficits, the protectionist
call will inevitably increase for China and Japan to revalue their currencies
(and by extension, reduce their accumulation of U.S. Treasuries, which is the
method they use to prop up the U.S. dollar relative to their own currencies). So
essentially, the incoming chairman, Ben Bernanke, will inherit a rapidly growing
stock of government liabilities, while the chief source of demand for those
liabilities will be in retreat.
The third problem Bernanke faces is that his favored policy target -
inflation - cannot be reliably set by the Federal Reserve. While former Fed
chairmen like Paul Volcker and Alan Greenspan focused on different policy
instruments, they both targeted instruments that they could, in fact, control.
Volcker chose the growth rate of the money supply, while Greenspan chose the
Federal Funds rate. Inflation, by contrast, is largely determined by fiscal
policy, can only be observed with a lag, is not under direct control of the Fed,
and can often respond counter-intuitively in response to Fed actions (for
example, interest rate hikes typically cause inflation to accelerate in the
short-term). The attempt to manage outcomes rather than actions may lead to
greater inflation and interest rate uncertainty rather than less.
In the end, the path of inflation over the coming few years will probably
be determined by a factor that the Federal Reserve has little power to control:
monetary "velocity." Inflation essentially measures how fast government
liabilities are increasing beyond the desire of the public to hold them. The
easiest way to avoid inflation, and in fact, to produce deflation, is for the
economy to suffer credit defaults and bankruptcies. The reason is that these
risks provoke a strong demand by the public for safe government liabilities (to
figuratively stuff under the mattress). This is known as a decline in
"velocity." Essentially, a surge in the demand for government liabilities (a
plunge in monetary velocity) is the essential ingredient of deflation.
- --------------------------------------------------------------------------------
7
The Hussman Funds
- --------------------------------------------------------------------------------
Letter to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
The U.S. is not currently experiencing any sort of default crisis, so
inflationary pressures continue to be dominant here. As long as credit spreads
(the difference in yields between risky corporate securities and default-free
Treasuries) remain well behaved, it appears likely that these inflationary
pressures will continue, particularly given the demands on China and Japan to
reduce their accumulation of U.S. Treasury securities. If at some point we
observe credit spreads widening substantially, however, we can expect to see an
increased rate of credit defaults, and with them, weaker economic conditions and
declining inflation pressures. At that point, we would also expect to observe
the Federal Reserve reducing interest rates in response, but it will be
important to remember that this will simply be a cart following the horse. It
would be best to keep an eye on the horse by monitoring credit spreads directly.
For now, both the Strategic Growth Fund and the Strategic Total Return Fund
remain defensively positioned. As usual, even without accepting a great deal of
exposure to general market fluctuations, there are always investment
opportunities available through individual security selection and sector
allocation - opportunities which have substantially contributed to the
performance of both Funds since their inception. A defensive market posture is
certainly not my preferred investment stance, but clearly favorable investment
conditions in the stock and bond markets occur regularly enough for long-term
investors, and there is no need to over-reach when valuations and market action
are far less compelling.
I appreciate your investment in the Funds.
Best wishes,
JOHN P. HUSSMAN, PH.D.
- --------------------------------------------------------------------------------
8
The Hussman Funds
- --------------------------------------------------------------------------------
Letter to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED.
PERFORMANCE DATA, CURRENT TO THE MOST RECENT MONTH END, MAY BE FOUND AT THE
HUSSMAN FUNDS' WEBSITE WWW.HUSSMANFUNDS.COM.
An investor should consider the investment objectives, risks, charges and
expenses of the Funds carefully before investing. The Funds' prospectuses
contain this and other important information. To obtain a copy of the Hussman
Funds' prospectuses please visit our website at www.hussmanfunds.com or call
1-800-487-7626 and a copy will be sent to you free of charge. Please read the
prospectus carefully before you invest. The Hussman Funds are distributed by
Ultimus Fund Distributors, LLC.
The securities held by the Funds that are discussed in this letter were held
during 2005. They do not comprise the entire investment portfolios of the Funds,
may be sold at any time and may no longer be held by the Funds. The opinions of
the Funds' adviser with respect to those securities may change at any time.
Weekly updates regarding market conditions and investment strategy, as well as
special reports and analysis, are available at no charge at the Fund's website
www.hussmanfunds.com.
- --------------------------------------------------------------------------------
9
Hussman Strategic Growth Fund
Portfolio Information
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Healthcare - 21.7%
Consumer Discretionary - 16.3%
Consumer Staples - 16.3%
Information Technology - 12.8%
[GRAPHIC OMITTED] Energy - 9.7%
Materials - 6.3%
Industrials - 5.8%
Other - 4.7%
Telecommunications Services - 4.7%
Financials - 1.7%
Hussman Strategic Total Return Fund
Portfolio Information
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
U.S. Treasury Inflation-Protection Notes - 34.5%
Other U.S. Treasury Obligations - 31.0%
Precious Metal Stocks - 17.9%
[GRAPHIC OMITTED] U.S. Government Agency Obligations - 8.5%
Other - 5.0%
Utility Stocks - 2.9%
Foreign Government Obligations - 0.2%
- --------------------------------------------------------------------------------
10
Hussman Investment Trust
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
--------------- ---------------
ASSETS
Investments in securities:
At acquisition cost ............................................. $ 2,098,369,969 $ 117,978,891
=============== ===============
At value (Note 1)................................................ $ 2,228,435,605 $ 122,847,369
Investments in money market funds.................................. 138,886,506 2,940,325
Cash............................................................... 500,000 --
Dividends and interest receivable.................................. 2,120,385 718,668
Receivable for capital shares sold................................. 5,199,980 127,732
Receivable for investment securities sold.......................... 35,950,169 1,058,278
Other assets....................................................... 118,305 28,663
--------------- ---------------
Total Assets .................................................... 2,411,210,950 127,721,035
--------------- ---------------
LIABILITIES
Dividends payable ................................................. 1,057,816 115,117
Written call options, at value (Notes 1 and 4)
(premiums received $114,745,750) ................................ 84,070,000 --
Payable for investment securities purchased ....................... 16,535,835 --
Payable for capital shares redeemed ............................... 1,764,015 54,903
Accrued investment advisory fees (Note 3) ......................... 1,919,677 31,544
Payable to administrator (Note 3) ................................. 172,500 17,950
Other accrued expenses and liabilities ............................ 237,451 26,076
--------------- ---------------
Total Liabilities ............................................... 105,757,294 245,590
--------------- ---------------
NET ASSETS $ 2,305,453,656 $ 127,475,445
=============== ===============
Net assets consist of:
Paid-in capital ................................................... $ 2,218,969,954 $ 121,940,530
Undistributed net investment income ............................... 64,699 39,657
Accumulated net realized gains (losses) from security
transactions and option contracts ............................... (74,322,383) 626,902
Net unrealized appreciation/depreciation on investments and options 160,741,386 5,044,224
Net unrealized appreciation/depreciation on translation of assets
and liabilities in foreign currencies ........................... -- (175,868)
--------------- ---------------
NET ASSETS .......................................................... $ 2,305,453,656 $ 127,475,445
=============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) ............................... 147,020,230 11,472,287
=============== ===============
Net asset value, offering price and redemption
price per share(a) (Note 1) ....................................... $ 15.68 $ 11.11
=============== ===============
(a) Redemption price varies based on length of time shares are held.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------
11
Hussman Investment Trust
Statements of Operations
- ------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
--------------- ---------------
INVESTMENT INCOME
Dividends ......................................................... $ 16,789,265 $ 263,577
Foreign withholding taxes on dividends ............................ (216,195) (12,360)
Interest .......................................................... -- 2,152,611
--------------- ---------------
Total Income .................................................... 16,573,070 2,403,828
--------------- ---------------
EXPENSES
Investment advisory fees (Note 3) ................................. 10,505,263 348,013
Administration fees (Note 3) ...................................... 617,770 63,291
Transfer agent, account maintenance and
shareholder services fees (Note 3) .............................. 460,389 32,181
Registration and filing fees ...................................... 128,100 20,633
Custodian and bank service fees ................................... 107,122 15,255
Fund accounting fees (Note 3) ..................................... 80,694 21,401
Professional fees ................................................. 55,372 42,882
Postage and supplies .............................................. 76,847 16,746
Printing of shareholder reports ................................... 48,700 8,636
Insurance expense ................................................. 33,499 2,629
Compliance service fees ........................................... 25,501 4,383
Trustees' fees and expenses ....................................... 14,397 14,397
Other expenses .................................................... 26,419 6,978
--------------- ---------------
Total Expenses .................................................. 12,180,073 597,425
Less fees waived by the Adviser (Note 3) .......................... -- (27,949)
--------------- ---------------
Net Expenses .................................................... 12,180,073 569,476
--------------- ---------------
NET INVESTMENT INCOME ............................................... 4,392,997 1,834,352
--------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS,
OPTION CONTRACTS AND FOREIGN CURRENCIES (Note 4)
Net realized gains (losses) from:
Security transactions ........................................... 84,271,243 2,071,048
Option contracts ................................................ (154,516,775) --
Foreign currency transactions ................................... -- (92)
Net change in unrealized appreciation/depreciation on:
Investments ..................................................... 29,831,681 3,403,760
Option contracts ................................................ 75,747,220 --
Foreign currency translation .................................... -- (231,776)
--------------- ---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS,
OPTION CONTRACTS AND FOREIGN CURRENCIES ........................... 35,333,369 5,242,940
--------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .......................... $ 39,726,366 $ 7,077,292
=============== ===============
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------
12
Hussman Strategic Growth Fund
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2005 JUNE 30,
(UNAUDITED) 2005
--------------- ---------------
FROM OPERATIONS
Net investment income ............................................. $ 4,392,997 $ 6,534,070
Net realized gains (losses) from:
Security transactions ........................................... 84,271,243 128,081,602
Option contracts ................................................ (154,516,775) (71,915,118)
Net change in unrealized appreciation/depreciation on:
Investments ..................................................... 29,831,681 10,505,250
Option contracts ................................................ 75,747,220 5,114,698
--------------- ---------------
Net increase in net assets resulting from operations ................ 39,726,366 78,320,502
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ........................................ (7,903,689) (2,958,679)
From net realized gains ........................................... (69,606,458) (65,407,312)
--------------- ---------------
Net decrease in net assets from distributions to shareholders ....... (77,510,147) (68,365,991)
--------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................................... 632,275,274 945,870,427
Net asset value of shares issued in reinvestment of
distributions to shareholders .................................... 69,245,756 62,556,168
Proceeds from redemption fees collected (Note 1) ................... 388,621 897,771
Payments for shares redeemed ....................................... (194,185,887) (500,468,505)
--------------- ---------------
Net increase in net assets from capital share transactions .......... 507,723,764 508,855,861
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................................ 469,939,983 518,810,372
NET ASSETS
Beginning of period ............................................... 1,835,513,673 1,316,703,301
--------------- ---------------
End of period ..................................................... $ 2,305,453,656 $ 1,835,513,673
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME ................................. $ 64,699 $ 3,575,391
=============== ===============
CAPITAL SHARE ACTIVITY
Sold .............................................................. 39,335,963 60,870,730
Reinvested ........................................................ 4,421,266 4,142,422
Redeemed .......................................................... (12,175,474) (32,455,996)
--------------- ---------------
Net increase in shares outstanding ................................ 31,581,755 32,557,156
Shares outstanding at beginning of period ......................... 115,438,475 82,881,319
--------------- ---------------
Shares outstanding at end of period ............................... 147,020,230 115,438,475
=============== ===============
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------
13
Hussman Strategic Total Return Fund
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2005 JUNE 30,
(UNAUDITED) 2005
--------------- ---------------
FROM OPERATIONS
Net investment income ............................................. $ 1,834,352 $ 2,683,744
Net realized gains (losses) from:
Security transactions ........................................... 2,071,048 2,558,400
Foreign currency transactions ................................... (92) (2)
Net change in unrealized appreciation/depreciation on:
Investments ..................................................... 3,403,760 1,740,565
Foreign currency translation .................................... (231,776) (10,725)
--------------- ---------------
Net increase in net assets resulting from operations ................ 7,077,292 6,971,982
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ........................................ (1,796,944) (2,689,295)
From net realized gains ........................................... (3,268,054) (236,796)
--------------- ---------------
Net decrease in net assets from distributions to shareholders ....... (5,064,998) (2,926,091)
--------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ......................................... 14,300,771 52,663,764
Net asset value of shares issued in reinvestment of
distributions to shareholders ................................... 4,596,534 2,605,781
Proceeds from redemption fees collected (Note 1) .................. 17,452 62,447
Payments for shares redeemed ...................................... (21,607,130) (36,530,467)
--------------- ---------------
Net increase (decrease) in net assets from capital share transactions (2,692,373) 18,801,525
--------------- ---------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................. (680,079) 22,847,416
NET ASSETS
Beginning of period ............................................... 128,155,524 105,308,108
--------------- ---------------
End of period ..................................................... $ 127,475,445 $ 128,155,524
=============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME ................................. $ 39,657 $ 2,341
=============== ===============
CAPITAL SHARE ACTIVITY
Sold .............................................................. 1,294,175 4,832,068
Reinvested ........................................................ 416,468 237,556
Redeemed .......................................................... (1,950,603) (3,354,971)
--------------- ---------------
Net increase (decrease) in shares outstanding ..................... (239,960) 1,714,653
Shares outstanding at beginning of period ......................... 11,712,247 9,997,594
--------------- ---------------
Shares outstanding at end of period ............................... 11,472,287 11,712,247
=============== ===============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
Hussman Strategic Growth Fund
Financial Highlights
- ------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
DECEMBER 31, ENDED ENDED ENDED ENDED ENDED
2005 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2005 2004 2003 2002 2001(a)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at beginning
of period ......................... $ 15.90 $ 15.89 $ 13.80 $ 13.34 $ 12.20 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income/(loss) ...... 0.03 0.06 (0.04) (0.02) (0.04) (0.04)
Net realized and unrealized
gains on investments
and options ..................... 0.30 0.68 2.13 1.36 2.52 2.23
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations .... 0.33 0.74 2.09 1.34 2.48 2.19
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net
investment income ............... (0.05) (0.03) -- -- -- --
Distributions from net
realized gains .................. (0.50) (0.71) (0.01) (0.93) (1.35) --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ................. (0.55) (0.74) (0.01) (0.93) (1.35) --
----------- ----------- ----------- ----------- ----------- -----------
Proceeds from redemption fees
collected (Note 1) ................ 0.00(b) 0.01 0.01 0.05 0.01 0.01
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of period .... $ 15.68 $ 15.90 $ 15.89 $ 13.80 $ 13.34 $ 12.20
=========== =========== =========== =========== =========== ===========
Total return(c) ..................... 2.12%(d) 4.95% 15.22% 11.25% 22.24% 22.00%(d)
=========== =========== =========== =========== =========== ===========
Net assets at end of
period (000's) .................... $ 2,305,454 $ 1,835,514 $ 1,317,703 $ 511,928 $ 173,342 $ 20,228
=========== =========== =========== =========== =========== ===========
Ratio of net expenses to
average net assets (e) ............ 1.16%(f) 1.24% 1.34% 1.45% 1.99% 1.99%(f)
Ratio of net investment income/(loss)
to average net assets ............. 0.42%(f) 0.44% (0.39%) (0.15%) (0.81%) (0.53%)(f)
Portfolio turnover rate ............. 58%(f) 81% 66% 123% 199% 55%(f)
(a) Represents the period from the commencement of operations (July 24, 2000)
through June 30, 2001.
(b) Amount rounds to less than $0.01 per share.
(c) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. Returns do not reflect
the deduction of taxes a shareholder would pay on Fund distributions or the
redemption of Fund shares.
(d) Not annualized.
(e) Absent investment advisory fees waived by the Adviser, the ratios of
expenses to average net assets would have been 2.03% and 2.36%(f) for the
periods ended June 30, 2002 and 2001, respectively.
(f) Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
Hussman Strategic Total Return Fund
Financial Highlights
- ------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
DECEMBER 31, ENDED ENDED ENDED
2005 JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2005 2004 2003(a)
----------- ----------- ----------- -----------
Net asset value at beginning of period ....... $ 10.94 $ 10.53 $ 10.54 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income ...................... 0.16 0.24 0.21 0.14
Net realized and unrealized gains on
investments and foreign currencies ....... 0.47 0.42 0.35 0.52
----------- ----------- ----------- -----------
Total from investment operations ............. 0.63 0.66 0.56 0.66
----------- ----------- ----------- -----------
Less distributions:
Dividends from net investment income ....... (0.16) (0.24) (0.21) (0.14)
Distributions from net realized gains....... (0.30) (0.02) (0.37) --
----------- ----------- ----------- -----------
Total distributions .......................... (0.46) (0.26) (0.58) (0.14)
----------- ----------- ----------- -----------
Proceeds from redemption fees
collected (Note 1) ......................... 0.00(b) 0.01 0.01 0.02
----------- ----------- ----------- -----------
Net asset value at end of period ............. $ 11.11 $ 10.94 $ 10.53 $ 10.54
=========== =========== =========== ===========
Total return(c) .............................. 5.78%(d) 6.40% 5.49% 6.81%(d)
=========== =========== =========== ===========
Net assets at end of period (000's) .......... $ 127,475 $ 128,156 $ 105,308 $ 18,983
=========== =========== =========== ===========
Ratio of net expenses to
average net assets(e) ...................... 0.90%(f) 0.90% 0.90% 0.90%(f)
Ratio of net investment income to
average net assets ......................... 2.90%(f) 2.25% 2.34% 1.99%(f)
Portfolio turnover rate ...................... 28%(f) 64% 174% 151%(f)
(a) Represents the period from the commencement of operations (September 12,
2002) through June 30, 2003.
(b) Amount rounds to less than $0.01 per share.
(c) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. Returns do not reflect
the deduction of taxes a shareholder would pay on Fund distributions or the
redemption of Fund shares.
(d) Not annualized.
(e) Absent investment advisory fees waived and expenses reimbursed by the
Adviser, the ratios of expenses to average net assets would have been
0.94%(f) for the six months ended December 31, 2005 and 1.01%, 1.17% and
2.32%(f) for the periods ended June 30, 2005, 2004 and 2003, respectively.
(f) Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
Hussman Strategic Growth Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 95.28% VALUE
================================================================================
AUTO COMPONENTS -- 0.10%
31,500 Magna International, Inc. ......................... $ 2,267,685
------------
AUTOMOBILES -- 0.25%
200,000 Honda Motor Co., Ltd. - ADR ....................... 5,794,000
------------
BEVERAGES -- 4.66%
500,000 Anheuser-Busch Cos., Inc. ......................... 21,480,000
176,800 Cadbury Schweppes plc - ADR ....................... 6,769,672
1,000,000 Coca-Cola Company (The) ........................... 40,310,000
30,200 Fomento Economico Mexicano SA - ADR ............... 2,189,802
250,000 Pepsi Bottling Group, Inc. (The) .................. 7,152,500
500,000 PepsiCo, Inc. ..................................... 29,540,000
------------
107,441,974
------------
BIOTECHNOLOGY -- 2.46%
200,000 Andrx Corp. (a) ................................... 3,294,000
1,000,000 Applera Corp. - Applied Biosystems Group .......... 26,560,000
86,100 Flamel Technologies SA - ADR (a) .................. 1,625,568
150,000 Gilead Sciences, Inc. (a) ......................... 7,894,500
250,000 Invitrogen Corp. (a) .............................. 16,660,000
250,000 Nanogen, Inc. (a) ................................. 655,000
------------
56,689,068
------------
BUILDING PRODUCTS -- 1.39%
1,058,000 Masco Corp. ....................................... 31,941,020
------------
CHEMICALS -- 2.36%
37,800 Air Products and Chemicals, Inc. .................. 2,237,382
233,900 Albany Molecular Research, Inc. (a) ............... 2,841,885
100,000 BASF AG - ADR ..................................... 7,648,000
350,000 Headwaters, Inc. (a) .............................. 12,404,000
292,800 International Flavors & Fragrances, Inc. .......... 9,808,800
250,000 Lubrizol Corp. (The) .............................. 10,857,500
148,300 PPG Industries, Inc. .............................. 8,586,570
------------
54,384,137
------------
COMMERCIAL BANKS -- 0.37 %
200,000 Barclays plc - ADR ................................ 8,416,000
------------
COMMERCIAL SERVICES AND SUPPLIES -- 2.02%
169,800 Avery Dennison Corp. .............................. 9,384,846
150,000 ChoicePoint, Inc. (a) ............................. 6,676,500
150,000 John H. Harland Co. ............................... 5,640,000
50,000 L-3 Communications Holdings, Inc. ................. 3,717,500
- --------------------------------------------------------------------------------
17
Hussman Strategic Growth Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 95.28% (CONTINUED) VALUE
================================================================================
COMMERCIAL SERVICES AND SUPPLIES -- 2.02% (CONTINUED)
189,800 Pitney Bowes, Inc. ................................ $ 8,019,050
250,000 Sensient Technologies Corp. ....................... 4,475,000
250,000 Waste Connections, Inc. (a) ....................... 8,615,000
------------
46,527,896
------------
COMMUNICATIONS EQUIPMENT -- 0.19%
400,000 Tellabs, Inc. (a) ................................. 4,360,000
------------
COMPUTERS AND PERIPHERALS -- 0.67%
155,000 Ambient Corp. (a) ................................. 15,655
250,000 Lexmark International, Inc. (a) ................... 11,207,500
68,800 SanDisk Corp. (a) ................................. 4,322,016
------------
15,545,171
------------
CONSTRUCTION MATERIALS -- 0.68%
100,000 Nanophase Technologies Corp. (a) .................. 565,000
169,700 POSCO - ADR ....................................... 8,401,847
380,000 RPM International, Inc. ........................... 6,600,600
------------
15,567,447
------------
CONTAINERS AND PACKAGING -- 0.45%
350,000 Sonoco Products Co. ............................... 10,290,000
------------
DIVERSIFIED TELECOMMUNCATION SERVICES -- 4.13%
350,000 ALLTEL Corp. ...................................... 22,085,000
250,000 BCE, Inc. ......................................... 5,987,500
49,700 BT Group plc - ADR ................................ 1,907,486
600,000 CenturyTel, Inc. .................................. 19,896,000
1,000,000 Nokia Oyj - ADR ................................... 18,300,000
900,000 Verizon Communications, Inc. ...................... 27,108,000
------------
95,283,986
------------
ELECTRICAL EQUIPMENT -- 1.40%
112,600 American Power Conversion Corp. ................... 2,477,200
600,000 Energizer Holdings, Inc. (a) ...................... 29,874,000
------------
32,351,200
------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.14%
49,900 FEI Co. (a) ....................................... 956,583
97,600 Flextronics International Ltd. (a) ................ 1,018,944
238,400 Garmin Ltd. ....................................... 15,817,840
24,500 Gerber Scientific, Inc. (a) ....................... 234,465
300,000 MEMC Electronic Materials, Inc. (a) ............... 6,651,000
721,200 Nano-Proprietary, Inc. (a) ........................ 1,550,580
------------
26,229,412
------------
- --------------------------------------------------------------------------------
18
Hussman Strategic Growth Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 95.28% (CONTINUED) VALUE
================================================================================
ENERGY EQUIPMENT AND SERVICES -- 1.49%
350,000 American Superconductor Corp. (a) ................. $ 2,754,500
150,000 Cooper Cameron Corp. (a) .......................... 6,210,000
50,000 Distributed Energy Systems Corp. (a) .............. 378,000
70,800 Kinder Morgan Energy Partners, L.P. ............... 3,385,656
115,600 National Fuel Gas Co. ............................. 3,605,564
348,800 Valero Energy Corp. ............................... 17,998,080
------------
34,331,800
------------
FOOD AND DRUG RETAIL -- 0.74%
40,000 Albertson's, Inc. ................................. 854,000
300,000 CVS Corp. ......................................... 7,926,000
350,000 Safeway, Inc. ..................................... 8,281,000
------------
17,061,000
------------
FOOD PRODUCTS -- 5.60%
1,000,000 Archer-Daniels-Midland Co. ........................ 24,660,000
900,000 Campbell Soup Co. ................................. 26,793,000
200,000 Del Monte Foods Co. ............................... 2,086,000
300,000 H.J. Heinz Co. .................................... 10,116,000
400,000 Kellogg Co. ....................................... 17,288,000
500,000 Kraft Foods, Inc. ................................. 14,070,000
19,000 Lancaster Colony Corp. ............................ 703,950
350,000 Sara Lee Corp. .................................... 6,615,000
50,000 Smithfield Foods, Inc. (a) ........................ 1,530,000
200,000 Tyson Foods, Inc. ................................. 3,420,000
329,900 William Wrigley Jr. Co. ........................... 21,935,051
------------
129,217,001
------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 3.35%
250,000 Accelrys, Inc. (a) ................................ 2,007,500
463,200 Biosite, Inc. (a) ................................. 26,073,528
3,900 CONMED Corp. (a) .................................. 92,274
100,700 Cooper Cos., Inc. (The) ........................... 5,165,910
46,100 Gen-Probe, Inc. (a) ............................... 2,249,219
600,000 Medtronic, Inc. ................................... 34,542,000
200,000 Steris Corp. ...................................... 5,004,000
87,000 Zoll Medical Corp. (a) ............................ 2,191,530
------------
77,325,961
------------
HEALTH CARE PROVIDERS AND SERVICES -- 3.96%
20,200 BioScrip, Inc. (a) ................................ 152,308
200,000 Cardinal Health, Inc. ............................. 13,750,000
46,500 Cerner Corp. (a) .................................. 4,227,315
300,000 DaVita, Inc. (a) .................................. 15,192,000
500,000 HCA, Inc. ......................................... 25,250,000
350,000 Healthsouth Corp. (a) ............................. 1,697,500
- --------------------------------------------------------------------------------
19
Hussman Strategic Growth Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 95.28% (CONTINUED) VALUE
================================================================================
HEALTH CARE PROVIDERS AND SERVICES -- 3.96% (CONTINUED)
200,000 Health Management Associates, Inc. ................ $ 4,392,000
150,000 McKesson Corp. .................................... 7,738,500
400,000 Renal Care Group, Inc. (a) ........................ 18,924,000
------------
91,323,623
------------
HOTELS, RESTAURANTS AND LEISURE -- 2.38%
127,500 California Pizza Kitchen, Inc. (a) ................ 4,076,175
207,400 CBRL Group, Inc. .................................. 7,290,110
1,100,000 McDonald's Corp. .................................. 37,092,000
100,000 Outback Steakhouse, Inc. .......................... 4,161,000
36,200 Papa John's International, Inc. (a) ............... 2,147,022
------------
54,766,307
------------
HOUSEHOLD DURABLES -- 1.78%
250,000 Black & Decker Corp. .............................. 21,740,000
318,200 Sherwin-Williams Co. .............................. 14,452,644
130,000 Standard Pacific Corp. ............................ 4,784,000
------------
40,976,644
------------
HOUSEHOLD PRODUCTS -- 5.26%
1,250,000 BJ's Wholesale Club, Inc. (a) ..................... 36,950,000
49,900 Blyth, Inc. ....................................... 1,045,405
500,000 Clorox Co. (The) .................................. 28,445,000
600,000 Colgate-Palmolive Co. ............................. 32,910,000
172,000 Kimberly-Clark Corp. .............................. 10,259,800
200,000 Procter & Gamble Co. .............................. 11,576,000
------------
121,186,205
------------
INDUSTRIAL CONGLOMERATES -- 0.31%
250,000 Tyco International Ltd. ........................... 7,215,000
------------
INFORMATION TECHNOLOGY CONSULTING AND SERVICES -- 2.66%
600,000 Computer Sciences Corp. (a) ....................... 30,384,000
100,000 Convergys Corp. (a) ............................... 1,585,000
650,000 Fiserv, Inc. (a) .................................. 28,125,500
72,300 Macrovision Corp. (a) ............................. 1,209,579
------------
61,304,079
------------
INSURANCE -- 1.28%
334,300 Aon Corp. ......................................... 12,018,085
92,600 Chubb Corp. (The) ................................. 9,042,390
150,000 MetLife, Inc. ..................................... 7,350,000
28,000 Protective Life Corp. ............................. 1,225,560
------------
29,636,035
------------
- --------------------------------------------------------------------------------
20
Hussman Strategic Growth Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 95.28% (CONTINUED) VALUE
================================================================================
INTERNET SOFTWARE AND SERVICES -- 0.94%
297,500 Check Point Software Technologies Ltd. (a) ........ $ 5,979,750
500,000 Cisco Systems, Inc. (a) ........................... 8,560,000
268,000 Network Appliances, Inc. (a) ...................... 7,236,000
------------
21,775,750
------------
LEISURE EQUIPMENT AND PRODUCTS -- 2.74%
400,000 Borders Group, Inc. ............................... 8,668,000
92,500 Brunswick Corp. ................................... 3,761,050
750,000 Eastman Kodak Co. ................................. 17,550,000
49,400 Fuji Photo Film Co., Ltd. - ADR ................... 1,640,574
300,000 Grupo Televisa SA - ADR ........................... 24,150,000
250,000 Nautilus Group, Inc. (The) ........................ 4,665,000
525,000 TiVo, Inc. (a) .................................... 2,688,000
------------
63,122,624
------------
MACHINERY -- 0.54%
100,000 AGCO Corp. (a) .................................... 1,657,000
400,000 Pall Corp. ........................................ 10,744,000
------------
12,401,000
------------
MEDIA -- 3.22%
100,000 Comcast Corp. - Special Class A (a) ............... 2,569,000
400,000 Gannett Co., Inc. ................................. 24,228,000
199,700 Harte-Hanks, Inc. ................................. 5,270,083
150,000 McGraw-Hill Co., Inc. (The) ....................... 7,744,500
300,000 New York Times Co. (The) - Class A ................ 7,935,000
506,300 Scholastic Corp. (a) .............................. 14,434,613
400,000 Tribune Co. ....................................... 12,104,000
------------
74,285,196
------------
METALS & MINING -- 2.81%
882,200 Barrick Gold Corp. ................................ 24,586,914
200,000 Mittal Steel Co. - Class A ........................ 5,266,000
400,000 Newmont Mining Corp. .............................. 21,360,000
400,000 Placer Dome, Inc. ................................. 9,172,000
230,000 Worthington Industries, Inc. ...................... 4,418,300
------------
64,803,214
------------
MULTILINE RETAIL -- 1.31%
206,100 American Eagle Outfitters, Inc. ................... 4,736,178
250,000 Dollar Tree Stores, Inc. (a) ...................... 5,985,000
400,000 Kohl's Corp. (a) .................................. 19,440,000
------------
30,161,178
------------
OFFICE ELECTRONICS -- 0.10%
40,300 Canon, Inc. - ADR ................................. 2,370,849
------------
- --------------------------------------------------------------------------------
21
Hussman Strategic Growth Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 95.28% (CONTINUED) VALUE
================================================================================
OIL AND GAS -- 8.22%
125,000 Anadarko Petroleum Corp. .......................... $ 11,843,750
300,000 BP Amoco plc - ADR ................................ 19,266,000
75,000 Burlington Resources, Inc. ........................ 6,465,000
250,000 Chevron Corp. ..................................... 14,192,500
600,000 ConocoPhillips .................................... 34,908,000
800,000 Exxon Mobil Corp. ................................. 44,936,000
300,000 Marathon Oil Corp. ................................ 18,291,000
200,000 Newfield Exploration Co. (a) ...................... 10,014,000
200,000 Petroleo Brasileiro SA - ADR ...................... 14,254,000
250,000 Royal Dutch Petroleum Co. ......................... 15,372,500
------------
189,542,750
------------
PHARMACEUTICALS -- 11.93%
200,000 Abbott Laboratories ............................... 7,886,000
565,800 Altair Nanotechnologies, Inc. (a) ................. 1,148,574
547,700 Biovail Corp. ..................................... 12,996,921
150,000 Bristol-Myers Squibb Co. .......................... 3,447,000
300,000 GlaxoSmithKline plc - ADR ......................... 15,144,000
850,000 Johnson & Johnson ................................. 51,085,000
500,000 King Pharmaceuticals, Inc. (a) .................... 8,460,000
100,000 Medicis Pharmaceutical Corp. ...................... 3,205,000
200,000 Mylan Laboratories, Inc. .......................... 3,992,000
500,000 Novartis AG - ADR ................................. 26,240,000
400,000 Omnicare, Inc. .................................... 22,888,000
2,200,000 Pfizer, Inc. ...................................... 51,304,000
250,000 Pharmaceutical Product Development, Inc. .......... 15,487,500
125,000 Pharmacopeia Drug Discovery, Inc. (a) ............. 445,000
579,000 Sanofi-Aventis - ADR .............................. 25,418,100
250,000 Shire Pharmaceuticals Group plc - ADR ............. 9,697,500
350,000 Wyeth ............................................. 16,124,500
------------
274,969,095
------------
REAL ESTATE -- 0.09%
200,000 HRPT Properties Trust ............................. 2,070,000
------------
ROAD AND RAIL -- 0.11%
125,000 Swift Transportation Co. (a) ...................... 2,537,500
------------
SEMICONDUCTOR EQUIPMENT AND PRODUCTS -- 5.77%
146,900 Cabot Microelectronics Corp. (a) .................. 4,308,577
1,250,000 Emulex Corp. (a) .................................. 24,737,500
1,350,000 Intel Corp. ....................................... 33,696,000
50,000 Kyocera Corp. - ADR ............................... 3,658,500
200,000 Microchip Technology, Inc. ........................ 6,430,000
50,000 Nanometrics, Inc. (a) ............................. 550,495
- --------------------------------------------------------------------------------
22
Hussman Strategic Growth Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 95.28% (CONTINUED) VALUE
================================================================================
SEMICONDUCTOR EQUIPMENT AND PRODUCTS -- 5.77%
(CONTINUED)
800,000 NVIDIA Corp. (a) ................................. $ 29,248,000
332,300 QLogic Corp. (a) ................................. 10,803,073
195,900 Silicon Laboratories, Inc. (a) ................... 7,181,694
1,000,000 Taiwan Semiconductor Manufacturing Co. Ltd. - ADR . 9,910,000
150,000 Veeco Instruments, Inc. (a) ...................... 2,599,500
-------------
133,123,339
-------------
SOFTWARE -- 1.31%
143,100 BEA Systems, Inc. (a) ............................ 1,345,140
310,700 Borland Software Corp. (a) ....................... 2,028,871
300,000 Citrix Systems, Inc. (a) ......................... 8,634,000
159,000 Intuit, Inc. (a) ................................. 8,474,700
800,000 Oracle Corp. (a) ................................. 9,768,000
-------------
30,250,711
-------------
SPECIALTY RETAIL -- 3.62%
250,000 Abercrombie & Fitch Co. - Class A ................ 16,295,000
148,700 AutoNation, Inc. (a) ............................. 3,231,251
400,000 Barnes & Noble, Inc. ............................. 17,068,000
239,290 GameStop Corp. (a) ............................... 6,915,481
290,000 Gap, Inc. (The) .................................. 5,115,600
700,000 Home Depot, Inc. (The) ........................... 28,336,000
200,000 Timberland Co. (The) (a) ......................... 6,510,000
-------------
83,471,332
-------------
TEXTILES & APPAREL -- 0.95%
100,000 Jones Apparel Group, Inc. ........................ 3,072,000
100,000 NIKE, Inc. - Class B ............................. 8,679,000
300,000 Pacific Sunwear of California, Inc. (a) .......... 7,476,000
50,000 V.F. Corp. ....................................... 2,767,000
-------------
21,994,000
-------------
WIRELESS TELECOMMUNICATIONS SERVICES -- 0.54%
366,400 Amdocs Ltd. (a) .................................. 10,076,000
95,400 China Mobile (Hong Kong) Ltd. - ADR .............. 2,293,416
-------------
12,369,416
-------------
TOTAL COMMON STOCKS (Cost $2,067,585,689)......... $2,196,680,605
-------------
- --------------------------------------------------------------------------------
23
Hussman Strategic Growth Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
CONTRACTS PUT OPTION CONTRACTS -- 1.38% VALUE
================================================================================
6,500 Russell 2000 Index Option, 03/18/06 at $650 ...... $ 8,905,000
10,500 S&P 500 Index Option, 03/18/06 at $1,225 ......... 16,800,000
2,500 S&P 500 Index Option, 03/18/06 at $1,250 ......... 6,050,000
-------------
TOTAL PUT OPTION CONTRACTS (Cost $30,784,280)..... $ 31,755,000
-------------
TOTAL INVESTMENTS AT VALUE -- 96.66%
(Cost $2,098,369,969)........................... $2,228,435,605
-------------
SHARES MONEY MARKET FUNDS -- 6.02% VALUE
================================================================================
138,886,506 First American Treasury Obligation Fund - Class A
(Cost $138,886,506).............................. $ 138,886,506
-------------
TOTAL INVESTMENTS AND MONEY MARKET FUNDS AT VALUE -- 102.68%
(Cost $2,237,256,475)............................. $2,367,322,111
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.68%)... (61,868,455)
-------------
NET ASSETS -- 100.00%..............................$2,305,453,656
=============
(a) Non-income producing security.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
Hussman Strategic Growth Fund
Schedule of Open Written Option Contracts
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE OF PREMIUMS
CONTRACTS WRITTEN CALL OPTION CONTRACTS OPTIONS RECEIVED
================================================================================
6,500 Russell 2000 Index Option,
03/18/06 at $650................. $ 26,390,000 $ 36,065,250
10,500 S&P 500 Index Option,
03/18/06 at $1,225............... 49,980,000 68,234,250
2,500 S&P 500 Index Option,
03/18/06 at $1,250............... 7,700,000 10,446,250
------------ ------------
$ 84,070,000 $114,745,750
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
Hussman Strategic Total Return Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 22.15% VALUE
================================================================================
ELECTRICAL EQUIPMENT -- 0.71%
35,000 Endesa SA - ADR .................................. $ 910,350
-------------
ELECTRIC UTILITIES -- 1.86%
25,000 Korea Electric Power Corp. - ADR ................. 487,250
25,000 MDU Resources Group, Inc. ........................ 818,500
40,000 OGE Energy Corp. ................................. 1,071,600
-------------
2,377,350
-------------
GAS UTILITIES -- 1.06%
45,000 WGL Holdings, Inc. ............................... 1,352,700
-------------
METALS AND MINING -- 17.90%
50,000 AngloGold Ashanti Ltd. - ADR ..................... 2,466,500
175,000 Barrick Gold Corp. ............................... 4,877,250
35,000 Goldcorp, Inc. ................................... 779,800
75,000 Harmony Gold Mining Co. .......................... 978,750
80,000 Newmont Mining Corp. ............................. 4,272,000
300,000 Placer Dome, Inc. ................................ 6,879,000
79,100 Randgold Resources Ltd. - ADR (a) ................ 1,275,883
75,000 Stillwater Mining Co. (a) ........................ 867,750
35,000 USEC, Inc. ....................................... 418,250
-------------
22,815,183
-------------
OIL AND GAS -- 0.62%
20,000 SCANA Corp. ...................................... 787,600
-------------
TOTAL COMMON STOCKS (Cost $22,044,112)............ $ 28,243,183
-------------
- --------------------------------------------------------------------------------
26
Hussman Strategic Total Return Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE U.S. TREASURY OBLIGATIONS -- 65.56% VALUE
================================================================================
U.S. TREASURY BILLS -- 15.55%
$10,000,000 discount, due 02/02/2006 .................... $ 9,967,960
5,000,000 discount, due 03/30/2006 .................... 4,953,110
5,000,000 discount, due 06/22/2006 .................... 4,902,190
-------------
19,823,260
-------------
U.S. TREASURY NOTES -- 15.48%
10,000,000 1.50%, due 03/31/2006 ....................... 9,940,240
10,000,000 4.125%, due 05/15/2015 ...................... 9,783,990
-------------
19,724,230
-------------
U.S. TREASURY INFLATION-PROTECTION NOTES -- 34.53%
10,095,930 3.375%, due 01/15/2012 ...................... 10,859,041
11,078,300 3.00%, due 07/15/2012 ....................... 11,717,042
21,560,000 2.00%, due 01/15/2014 ....................... 21,444,632
-------------
44,020,715
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $84,648,170)........................... $ 83,568,205
-------------
PAR VALUE U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.49% VALUE
================================================================================
FEDERAL FARM CREDIT BANK -- 0.30%
$ 400,000 2.625%, due 09/24/2007 ...................... $ 386,303
-------------
FEDERAL HOME LOAN BANK -- 1.75%
1,000,000 2.54%, due 01/26/2006 ....................... 998,671
750,000 2.22%, due 09/12/2006 ....................... 737,569
500,000 5.70%, due 04/16/2018 ....................... 493,763
-------------
2,230,003
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 6.44%
3,000,000 2.81%, due 09/28/2006 ....................... 2,958,192
JPY 600,000,000 2.125%, due 10/09/2007 ...................... 5,249,367
-------------
8,207,559
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $11,078,082)........................... $ 10,823,865
-------------
- --------------------------------------------------------------------------------
27
Hussman Strategic Total Return Fund
Portfolio of Investments (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE FOREIGN GOVERNMENT OBLIGATIONS -- 0.17% VALUE
================================================================================
CANADIAN GOVERNMENT NOTES -- 0.17%
JPY 25,000,000 0.70%, due 03/20/2006 (Cost $208,527)........ $ 212,116
-------------
TOTAL INVESTMENTS AT VALUE -- 96.37%
(Cost $117,978,891).......................... $ 122,847,369
-------------
SHARES MONEY MARKET FUNDS -- 2.31% VALUE
================================================================================
2,940,325 First American Treasury Obligation Fund -
Class A (Cost $2,940,325).................... $ 2,940,325
-------------
TOTAL INVESTMENTS AND MONEY
MARKET FUNDS AT VALUE -- 98.68%
(Cost $120,919,216).......................... $ 125,787,694
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.32% 1,687,751
-------------
NET ASSETS -- 100.00% ........................ $ 127,475,445
=============
(a) Non-income producing security.
ADR - American Depositary Receipt
JPY - Japanese Yen
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28
Hussman Investment Trust
Notes to Financial Statements
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Hussman Strategic Growth Fund and Hussman Strategic Total Return Fund
(each, a "Fund", and collectively, the "Funds") are each a series of Hussman
Investment Trust (the "Trust"), an open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"). Each Fund
is authorized to issue an unlimited number of shares.
As part of the Trust's organization, Hussman Strategic Growth Fund issued
in a private placement 10,000 shares of beneficial interest to Hussman
Econometrics Advisors, Inc. (the "Adviser") at $10.00 per share on June 20,
2000. The Fund commenced operations on July 24, 2000. Hussman Strategic Total
Return Fund commenced operations on September 12, 2002.
Hussman Strategic Growth Fund's investment objective is to provide
long-term capital appreciation, with added emphasis on protection of capital
during unfavorable market conditions.
Hussman Strategic Total Return Fund's investment objective is to provide
long-term total return from income and capital appreciation, with added emphasis
on protection of capital during unfavorable market conditions.
SECURITIES AND OPTIONS VALUATION -- The Funds' portfolio securities are
valued at market value as of the close of regular trading on the New York Stock
Exchange ("NYSE") (normally, 4:00 Eastern time) on each business day the NYSE is
open. Securities, other than options, listed on the NYSE or other exchanges are
valued on the basis of their last sale prices on the exchanges 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 last bid price on the
NYSE or other primary exchange for that day. Securities traded on a foreign
stock exchange are valued based upon the closing price on the principal exchange
where the security is traded. Securities which are quoted by NASDAQ are valued
at the NASDAQ Official Closing Price. If there are no sales on that day, the
securities are valued at the last bid price as reported by NASDAQ. Securities
traded in the over-the-counter market, and which are not quoted by NASDAQ, are
valued at the last sales price, if available, otherwise at the mean of the
closing bid and asked prices. Foreign securities are translated from the local
currency into U.S. dollars using currency exchange rates supplied by a pricing
quotation service.
- --------------------------------------------------------------------------------
29
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to valuation procedures approved by the Board of Trustees, options
traded on a national securities exchange are valued at a price between the
closing bid and ask prices determined by the Adviser to most closely reflect
market value as of the time of computation of net asset value. As of December
31, 2005, all options held by Hussman Strategic Growth Fund have been valued in
this manner. Options not traded on a national securities exchange or board of
trade, but for which over-the-counter market quotations are readily available,
are valued at the mean of their closing bid and ask prices. 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.
Fixed income securities not traded or dealt in upon any securities exchange
but for which over-the-counter market quotations are readily available generally
shall be valued at the mean of their closing bid and asked prices. When market
quotations are not readily available, fixed income securities may be valued on
the basis of prices provided by an independent pricing service. The Board of
Trustees will review and monitor the methods used by such services to assure
itself that securities are appropriately valued. The fair value of 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. In the event that market quotations are not readily
available or are determined by the Adviser to not be reflective of fair market
value due to market events or developments, securities and options are valued at
fair value as determined in good faith in accordance with procedures adopted by
the Board of Trustees. Such methods of fair valuation may include, but are not
limited to: multiple of earnings, multiple of book value, discount from market
of a similar freely traded security, purchase price of security, subsequent
private transactions in the security or related securities, or a combination of
these and other factors.
FUTURES CONTRACTS AND OPTION TRANSACTIONS -- Hussman Strategic Growth Fund
may purchase and write put and call options on broad-based stock indices. The
Fund may also purchase and write call and put options on individual securities.
Hussman Strategic Total Return Fund may use financial futures contracts and
related options to hedge against changes in the market value of its portfolio
securities that it intends to purchase. The Fund may also purchase a foreign
currency option to establish or modify the Fund's exposure to foreign
currencies, or an interest rate futures contract to protect against a decline in
the value of its portfolio or to gain exposure to securities which the Fund
otherwise wishes to purchase.
- --------------------------------------------------------------------------------
30
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is recorded in the liabilities
section of the Fund's Statement of Assets and Liabilities and is subsequently
valued. If an option expires on the stipulated expiration date or if the Fund
enters into a closing purchase transaction, it will realize a gain (or a loss if
the cost of a closing purchase transaction exceeds the net premium received when
the option is sold) and the liability related to such option will be eliminated.
If an option is exercised, the Fund may deliver the underlying security in the
open market. In this event, the proceeds of the sale will be increased by the
net premium originally received and the Fund will realize a gain or loss.
REPURCHASE AGREEMENTS -- The Funds may enter into repurchase agreements
with certain banks or non-bank dealers. The value of the underlying securities
will be monitored on an ongoing basis to ensure that the value always equals or
exceeds the repurchase price plus accrued interest.
FOREIGN CURRENCY TRANSLATION -- Amounts denominated in or expected to
settle in foreign currencies are translated into U.S. dollars based on exchange
rates on the following basis:
A. The market values of investment securities and other assets and
liabilities are translated at the closing rate of exchange each day.
B. Purchases and sales of investment securities and income and expenses
are translated at the rate of exchange prevailing on the respective
date of such transactions.
C. The Funds do not isolate that portion of the results of operations
caused by changes in foreign exchange rates on investments from those
caused by changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gains
or losses on investments.
Reported net realized foreign exchange gains or losses arise from 1)
purchases and sales of foreign currencies, 2) currency gains or losses realized
between the trade and settlement dates on securities transactions and 3) the
difference between the amounts of dividends, interest and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of the
amounts actually received or paid. Reported net unrealized foreign exchange
gains and losses arise from changes in the value of assets and liabilities,
other than investment securities, resulting from changes in exchange rates.
- --------------------------------------------------------------------------------
31
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARE VALUATION AND REDEMPTION FEES -- The net asset value of each Fund is
calculated at the close of regular trading on the NYSE (normally 4:00 p.m.,
Eastern time) on each day that the NYSE is open for business. The net asset
value per share of each Fund is calculated daily by dividing the total value of
each Fund's assets, less liabilities, by the number of shares outstanding. The
offering price and redemption price per share of each Fund is equal to the net
asset value per share, except that shares of each Fund are subject to a
redemption fee of 1.5% if redeemed within six months of the date of purchase.
During the periods ended December 31, 2005 and June 30, 2005, proceeds from
redemption fees totaled $388,621 and $897,771, respectively, for Hussman
Strategic Growth Fund and $17,452 and $62,447, respectively, for Hussman
Strategic Total Return Fund.
INVESTMENT INCOME -- Interest income is accrued as earned. Dividend income
is recorded on the ex-dividend date. Discounts and premiums on fixed income
securities are amortized using the interest method.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends arising from net investment
income, if any, are declared and paid annually to shareholders of Hussman
Strategic Growth Fund and are declared and paid quarterly to shareholders of
Hussman Strategic Total Return Fund. Net realized short-term capital gains, if
any, may be distributed throughout the year and net realized long-term capital
gains, if any, are distributed at least once a year. The amount of distributions
from net investment income and net realized gains are determined in accordance
with federal income tax regulations which may differ from accounting principles
generally accepted in the United States. These "book/tax" differences are either
temporary or permanent in nature and are primarily due to timing differences in
the recognition of capital gains or losses for option transactions, losses
deferred due to wash sales and treatment for foreign currency transactions.
The tax character of distributions paid during the periods ended December
31, 2005 and June 30, 2005 were as follows:
Long-Term
Periods Ordinary Capital Total
Ended Income Gains Distributions
- ------------------------------------------------------------------------------------------
Hussman Strategic Growth Fund 12/31/05 $77,329,170 $ 180,977 $77,510,147
6/30/05 $50,274,607 $18,091,384 $68,365,991
- ------------------------------------------------------------------------------------------
Hussman Strategic Total Return Fund 12/31/05 $ 3,070,831 $ 1,273,887 $ 5,064,998
6/30/05 $ 2,689,841 $ 236,250 $ 2,926,091
- ------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS -- Security transactions are accounted for on trade
date. Gains and losses on securities sold are determined on a specific
identification basis.
COMMON EXPENSES - Common expenses of the Trust are allocated among the
Funds based on relative net assets of each Fund or the nature of the services
performed and the relative applicability to each Fund.
ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from these estimates.
FEDERAL INCOME TAX -- It is each Fund's policy to comply with the special
provisions of Subchapter M of the Internal Revenue Code applicable to regulated
investment companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund (but
not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare and pay as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the twelve months ended October 31) plus undistributed amounts
from prior years.
The following information is computed on a tax basis for each item as of
December 31, 2005:
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
--------------- ---------------
Tax cost of portfolio investments ..................... $ 1,984,434,389 $ 120,919,216
=============== ===============
Gross unrealized appreciation ......................... $ 253,047,183 $ 6,435,462
Gross unrealized depreciation ......................... (93,115,967) (1,566,984)
--------------- ---------------
Net unrealized appreciation ........................... $ 159,931,216 $ 4,868,478
Net unrealized foreign exchange losses ................ -- (120)
Undistributed ordinary income ......................... 64,699 39,657
Post-October losses ................................... (5,889,234) --
Other gains (losses) .................................. (67,622,979) 626,900
--------------- ---------------
Total distributable earnings .......................... $ 86,483,702 $ 5,534,915
=============== ===============
- --------------------------------------------------------------------------------
33
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The difference between the federal income tax cost of portfolio investments
and the financial statement cost for Hussman Strategic Growth Fund is due to
certain timing differences in the recognition of capital gains or losses under
income tax regulations and accounting principles generally accepted in the
United States. These "book/tax" differences are temporary in nature and are
primarily due to option transactions and losses deferred due to wash sales.
Hussman Strategic Growth Fund had realized capital losses of $5,889,234
during the period November 1, 2004 through June 30, 2005, which are treated for
federal income tax purposes as arising during the Fund's tax year ended June 30,
2006. These "post-October losses" may be utilized in the current and future
years to offset net realized capital gains prior to distributing such gains to
shareholders.
2. INVESTMENT TRANSACTIONS
During the six months ended December 31, 2005, cost of purchases and
proceeds from sales and maturities of investment securities, other than
short-term investments and U.S. government securities, amounted to $898,008,842
and $585,601,608, respectively, for Hussman Strategic Growth Fund and $0 and
$9,781,031, respectively, for Hussman Strategic Total Return Fund.
3. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are affiliated with the Adviser
or Ultimus Fund Solutions, LLC ("Ultimus"), the Funds' administrator, transfer
agent and fund accounting agent.
ADVISORY AGREEMENT
Under the terms of an Advisory Agreement between the Trust and the Adviser,
Hussman Strategic Growth Fund pays a fee, which is computed and accrued daily
and paid monthly, at an annual rate of 1.10% of the first $500 million of its
average daily net assets; 1.00% of the next $500 million of such assets; 0.95%
of the next $2 billion of such assets; and 0.90% of such assets in excess of $3
billion. Hussman Strategic Total Return Fund pays the Adviser a fee, which is
computed and accrued daily and paid monthly, at the annual rate of 0.55% on the
first $500 million of its daily net assets; and 0.50% on such assets in excess
of $500 million.
- --------------------------------------------------------------------------------
34
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to an Expense Limitation Agreement with respect to Hussman Total
Return Fund, the Adviser has contractually agreed to waive a portion of its
advisory fees or to absorb operating expenses to the extent necessary so that
the Fund's ordinary operating expenses do not exceed an amount equal to 0.90%
annually of its average daily net assets. This expense limitation agreement
remains in effect until at least December 31, 2006. Accordingly, during the six
months ended December 31, 2005, the Adviser waived advisory fees of $27,949. Any
fee waivers or expense reimbursements by the Adviser 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. As of December 31, 2005, the
amount of fee waivers and expense reimbursements available for reimbursement to
the Adviser is $374,798. The Adviser may recapture these amounts no later than
the dates as stated below:
June 30, June 30, June 30, June 30,
2006 2007 2008 2009
- --------------------------------------------------------------------------------
Hussman Strategic Total Return Fund $ 73,420 $ 138,732 $ 134,697 $ 27,949
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, Ultimus supplies executive,
administrative and regulatory services to the Trust, supervises the preparation
of tax returns, and coordinates the preparation of reports to shareholders and
reports to and filings with the Securities and Exchange Commission and state
securities authorities.
For these services, Ultimus receives a monthly fee from each of the Funds
at an annual rate of 0.10% on its respective average daily net assets up to $250
million; 0.075% on the next $250 million of such assets; 0.05% on the next $1.5
billion of such assets; and 0.04% on such net assets in excess of $2 billion,
subject to a minimum monthly fee of $2,000.
FUND ACCOUNTING AGREEMENT
Under the terms of a Fund Accounting Agreement between the Trust and
Ultimus, Ultimus calculates the daily net asset value per share and maintains
the financial books and records of the Funds. For these services, Ultimus
receives from each of the Funds a monthly base fee of $2,500, plus an asset
based fee equal to 0.01% of its respective average daily net assets up to $500
- --------------------------------------------------------------------------------
35
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
million and 0.005% of such net assets in excess of $500 million. In addition,
the Funds pay certain out-of-pocket expenses incurred by Ultimus in obtaining
valuations of the Funds' portfolio securities.
TRANSFER AGENT AND SHAREHOLDER SERVICES AGREEMENT
Under the terms of a Transfer Agent and Shareholder Services Agreement
between the Trust and Ultimus, Ultimus maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent, and performs other shareholder
service functions. For these services, Ultimus receives from each Fund a monthly
fee at an annual rate of $17 per account, subject to a minimum of $1,500 per
month. For the six months ended December 31, 2005, Hussman Strategic Growth Fund
and Hussman Strategic Total Return Fund paid $234,168 and $17,147, respectively,
to Ultimus under the agreement. In addition, the Funds pay certain out-of-pocket
expenses incurred by Ultimus including, but not limited to, postage and
supplies.
For shareholder accounts held through financial intermediaries, the Fund
may, in some cases, reimburse these intermediaries for the cost of providing
account maintenance services, at an annual rate of not more than $17 per
account. During the six months ended December 31, 2005, Hussman Strategic Growth
Fund and Hussman Strategic Total Return Fund paid $226,221 and $15,034,
respectively, to financial intermediaries.
COMPLIANCE CONSULTING AGREEMENT
Under the terms of a Compliance Consulting Agreement between the Trust and
Ultimus, Ultimus provides an individual to serve as the Chief Compliance Officer
and to administer the Trust's compliance policies and procedures. For these
services, the Trust pays Ultimus a base fee of $1,000 per month, plus an
asset-based fee at the annual rate of .005% of the average value of the Trust's
aggregate daily net assets from $100 million to $500 million, .0025% of such
assets from $500 million to $1 billion and .00125% of such assets in excess of
$1 billion. For the six months ended December 31, 2005, Hussman Strategic Growth
Fund and Hussman Strategic Total Return Fund paid $25,501 and $4,383,
respectively, to Ultimus for compliance consulting services. In addition, the
Funds pay reasonable out-of-pocket expenses incurred by Ultimus in connection
with these services.
- --------------------------------------------------------------------------------
36
Hussman Investment Trust
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
4. OPTION CONTRACTS WRITTEN
Transactions in option contracts written by Hussman Strategic Growth Fund
during the six months ended December 31, 2005, were as follows:
OPTION OPTION
CONTRACTS PREMIUMS
-------------- ---------------
Options outstanding at beginning of period ............ 16,000 $ 60,703,375
Options written ....................................... 52,000 234,927,020
Options cancelled in a closing purchase transaction ... (48,500) (180,884,645)
-------------- ---------------
Options outstanding at end of period .................. 19,500 $ 114,745,750
============== ===============
No contracts were written by the Hussman Strategic Total Return Fund during
the six months ended December 31, 2005.
5. BANK LINE OF CREDIT
Hussman Strategic Growth Fund has an unsecured $10,000,000 bank line of
credit. Hussman Strategic Total Fund has an unsecured bank line of credit in the
amount of $2,000,000. Borrowings under these arrangements bear interest at a
rate per annum equal to the Prime Rate at the time of borrowing. During the six
months ended December 31, 2005, the Funds had no outstanding borrowings under
their respective lines of credit.
6. CONTINGENCIES AND COMMITMENTS
The Funds indemnify the Trust's officers and trustees for certain
liabilities that might arise from their performance of their duties to the
Funds. Additionally, in the normal course of business the Funds enter into
contracts that contain a variety of representations and warranties and which
provide general indemnifications. The Funds'maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Funds that have not yet occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
- --------------------------------------------------------------------------------
37
Hussman Investment Trust
About Your Fund's Expenses (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We believe it is important for you to understand the impact of costs on
your investment. As a shareholder of the Funds, you incur two types of costs:
(1) transaction costs, including redemption fees; and (2) ongoing costs,
including management fees and other Fund expenses. The following examples are
intended to help you understand your ongoing costs (in dollars) of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other mutual funds.
A fund's expenses are expressed as a percentage of its average net assets.
This figure is known as the expense ratio. The following examples are intended
to help you understand the ongoing costs (in dollars) of investing in the Funds
and to compare these costs with the ongoing costs of investing in other mutual
funds. The examples below are based on an investment of $1,000 made at the
beginning of the period shown and held for the entire period.
The table below illustrates each Fund's costs in two ways:
ACTUAL FUND RETURN - This section helps you to estimate the actual expenses
that you paid over the period. The "Ending Account Value" shown is derived from
each Fund's actual return, and the third column shows the dollar amount of
operating expenses that would have been paid by an investor who started with
$1,000 in each Fund. You may use the information here, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number given for each Fund under the heading "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN - This section is intended to help you compare each
Fund's costs with those of other mutual funds. It assumes that each Fund had an
annual return of 5% before expenses during the period shown. In this case,
because the return used is not each Fund's actual return, the results do not
illustrate the expenses associated with your investment. The example is useful
in making comparisons because the Securities and Exchange Commission requires
all mutual funds to provide an example of fund expenses based on a 5% return.
You can assess each Fund's costs by comparing this hypothetical example with the
hypothetical examples that appear in shareholder reports of other mutual funds.
- --------------------------------------------------------------------------------
38
Hussman Investment Trust
About Your Fund's Expenses (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note that expenses shown in the table are meant to highlight and help you
compare ongoing costs only. The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower,
depending on the amount of your investment and the timing of any purchases or
redemptions.
More information about each Fund's expenses, including annual expense
ratios since inception, can be found in this report. For additional information
on operating expenses and other shareholder costs, please refer to each Fund's
prospectus.
HUSSMAN STRATEGIC GROWTH FUND
Beginning Ending
Account Value Account Value Expenses Paid
July 1, 2005 Dec. 31, 2005 During Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,021.20 $5.91
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,019.36 $5.90
* Expenses are equal to Hussman Strategic Growth Fund's annualized expense
ratio of (1.16%) for the period, multiplied by the average account value
over the period, multiplied by 184/365 (to reflect the period covered by
this report).
HUSSMAN STRATEGIC TOTAL RETURN FUND
Beginning Ending
Account Value Account Value Expenses Paid
July 1, 2005 Dec. 31, 2005 During Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,057.80 $4.67
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,020.67 $4.58
* Expenses are equal to Hussman Strategic Total Return Fund's annualized
expense ratio of (0.90%) for the period, multiplied by the average account
value over the period, multiplied by 184/365 (to reflect the period covered
by this report).
- --------------------------------------------------------------------------------
39
Hussman Investment Trust
Other Information (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A description of the policies and procedures the Funds use to determine how
to vote proxies relating to portfolio securities is available without charge
upon request by calling toll-free 1-800-HUSSMAN (1-800-487-7626), or on the
Securities and Exchange Commission's (SEC) website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 is also
available without charge upon request by calling toll-free 1-800-HUSSMAN, or on
the SEC's website at http://www.sec.gov.
The Trust files a complete listing of portfolio holdings for each Fund with
the SEC as of the first and third quarters of each fiscal year on Form N-Q. The
filings are available upon request, by calling 1-800-HUSSMAN (1-800-487-7626).
Furthermore, you may obtain copies of the filings on the SEC's website at
http://www.sec.gov. The Trust's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC, and information on the operation
of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
- --------------------------------------------------------------------------------
40
[GRAPHIC OMITTED] HUSSMAN
FUNDS
INVESTMENT ADVISER
Hussman Econometrics Advisors, Inc.
5136 Dorsey Hall Drive
Ellicott City, Maryland 21042
www.hussmanfunds.com
1-800-HUSSMAN (1-800-487-7626)
ADMINISTRATOR/TRANSFER AGENT
Ultimus Fund Solutions, LLC
225 Pictoria Drive, Suite 450
Cincinnati, Ohio 45246
CUSTODIAN
US Bank
425 Walnut Street
Cincinnati, Ohio 45202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
1900 Scripps Center
312 Walnut Street
Cincinnati, Ohio 45202
LEGAL COUNSEL
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
This Semi-annual Report is authorized for distribution
only if accompanied or preceded by a current
Prospectus of the Funds.
ITEM 2. CODE OF ETHICS.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable [schedule filed with Item 1]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer
have concluded that such disclosure controls and procedures are reasonably
designed and are operating effectively to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to them by others within those entities, particularly during the
period in which this report is being prepared, and that the information
required in filings on Form N-CSR is recorded, processed, summarized, and
reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not required
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Hussman Investment Trust
---------------------------------------------------------
By (Signature and Title)* /s/ John P. Hussman
-------------------------------------------
John P. Hussman, President
Date February 24, 2006
--------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ John P. Hussman
-------------------------------------------
John P. Hussman, President
Date February 24, 2006
--------------------------------------
By (Signature and Title)* /s/ Mark J. Seger
-------------------------------------------
Mark J. Seger, Treasurer
Date February 24, 2006
--------------------------------------
* Print the name and title of each signing officer under his or her signature.