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OMB Number: 3235-0570
Expires: September 30, 2007
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hours per response: 19.4
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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
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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 Cincinnati, Ohio 45246
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(Name and address of agent for service)
Registrant's telephone number, including area code: (410) 715-1145
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Date of fiscal year end: June 30, 2007
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Date of reporting period: December 31, 2006
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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.
[LOGO] HUSSMAN
FUNDS
HUSSMAN INVESTMENT TRUST
HUSSMAN STRATEGIC GROWTH FUND
MARKET ACTION
FAVORABLE UNFAVORABLE
---------- ----------
FAVORABLE AGGRESSIVE MODERATE
---------- ----------
VALUATION
---------- ----------
UNFAVORABLE POSITIVE HEDGED
---------- ----------
HUSSMAN STRATEGIC TOTAL RETURN FUND
LONG MEDIUM NEAR SHORT
TARGET
MATURITY HIGH & HIGH & LOW & LOW &
FALLING RISING FALLING RISING
YIELDS YIELDS YIELDS YIELDS
SEMI-ANNUAL REPORT
DECEMBER 31, 2006
(UNAUDITED)
[LOGO] 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)
[LINE GRAPH OMITTED]
Hussman Strategic HSGFX equity investments and cash
Growth Fund (HSGFX) equivalents only (unhedged)(b) Russell 2000 Index S&P 500 Index
------------------- ------------------------------ ------------------ -------------
7/25/2000 $ 10,000 7/24/2000 $ 10,000 7/25/2000 $ 10,000 7/25/2000 $ 10,000
7/31/2000 10,000 7/31/2000 9,997 7/31/2000 9,736 7/31/2000 9,773
8/31/2000 10,030 8/31/2000 10,545 8/31/2000 10,479 8/31/2000 10,380
9/30/2000 10,350 9/30/2000 10,226 9/30/2000 10,171 9/30/2000 9,832
10/31/2000 10,040 10/31/2000 9,639 10/31/2000 9,717 10/31/2000 9,790
11/30/2000 10,840 11/30/2000 9,561 11/30/2000 8,719 11/30/2000 9,018
12/31/2000 11,640 12/31/2000 10,486 12/31/2000 9,468 12/31/2000 9,063
1/31/2001 11,270 1/31/2001 10,437 1/31/2001 9,961 1/31/2001 9,384
2/28/2001 12,030 2/28/2001 10,488 2/28/2001 9,307 2/28/2001 8,528
3/31/2001 12,430 3/31/2001 10,351 3/31/2001 8,852 3/31/2001 7,988
4/30/2001 12,190 4/30/2001 10,886 4/30/2001 9,545 4/30/2001 8,609
5/31/2001 12,340 5/31/2001 11,137 5/31/2001 9,779 5/31/2001 8,667
6/30/2001 12,200 6/30/2001 11,056 6/30/2001 10,117 6/30/2001 8,456
7/31/2001 12,470 7/31/2001 10,825 7/31/2001 9,569 7/31/2001 8,372
8/31/2001 12,770 8/31/2001 10,597 8/31/2001 9,260 8/31/2001 7,848
9/30/2001 12,640 9/30/2001 9,523 9/30/2001 8,014 9/30/2001 7,215
10/31/2001 12,767 10/31/2001 9,944 10/31/2001 8,483 10/31/2001 7,352
11/30/2001 13,236 11/30/2001 11,015 11/30/2001 9,139 11/30/2001 7,916
12/31/2001 13,348 12/31/2001 11,444 12/31/2001 9,703 12/31/2001 7,985
1/31/2002 13,840 1/31/2002 11,713 1/31/2002 9,603 1/31/2002 7,869
2/28/2002 13,963 2/28/2002 11,568 2/28/2002 9,339 2/28/2002 7,717
3/31/2002 14,477 3/31/2002 12,637 3/31/2002 10,090 3/31/2002 8,007
4/30/2002 14,823 4/30/2002 12,629 4/30/2002 10,182 4/30/2002 7,522
5/31/2002 15,192 5/31/2002 12,529 5/31/2002 9,730 5/31/2002 7,466
6/30/2002 14,913 6/30/2002 11,567 6/30/2002 9,247 6/30/2002 6,935
7/31/2002 15,338 7/31/2002 10,544 7/31/2002 7,851 7/31/2002 6,394
8/31/2002 15,394 8/31/2002 10,510 8/31/2002 7,831 8/31/2002 6,436
9/30/2002 15,204 9/30/2002 9,644 9/30/2002 7,268 9/30/2002 5,737
10/31/2002 14,935 10/31/2002 9,997 10/31/2002 7,501 10/31/2002 6,241
11/30/2002 14,775 11/30/2002 10,649 11/30/2002 8,171 11/30/2002 6,609
12/31/2002 15,220 12/31/2002 10,296 12/31/2002 7,716 12/31/2002 6,220
1/31/2003 15,148 1/31/2003 9,962 1/31/2003 7,502 1/31/2003 6,058
2/28/2003 14,931 2/28/2003 9,598 2/28/2003 7,276 2/28/2003 5,967
3/31/2003 14,919 3/31/2003 9,688 3/31/2003 7,369 3/31/2003 6,025
4/30/2003 15,184 4/30/2003 10,524 4/30/2003 8,068 4/30/2003 6,521
5/31/2003 16,338 5/31/2003 11,605 5/31/2003 8,934 5/31/2003 6,865
6/30/2003 16,590 6/30/2003 11,857 6/30/2003 9,095 6/30/2003 6,952
7/31/2003 17,119 7/31/2003 12,282 7/31/2003 9,665 7/31/2003 7,075
8/31/2003 17,528 8/31/2003 12,740 8/31/2003 10,108 8/31/2003 7,212
9/30/2003 17,155 9/30/2003 12,345 9/30/2003 9,921 9/30/2003 7,136
10/31/2003 17,756 10/31/2003 13,190 10/31/2003 10,754 10/31/2003 7,540
11/30/2003 18,032 11/30/2003 13,573 11/30/2003 11,136 11/30/2003 7,606
12/31/2003 18,429 12/31/2003 14,176 12/31/2003 11,362 12/31/2003 8,005
1/31/2004 18,645 1/31/2004 14,624 1/31/2004 11,855 1/31/2004 8,152
2/29/2004 19,247 2/29/2004 15,119 2/29/2004 11,962 2/29/2004 8,265
3/31/2004 19,174 3/31/2004 14,979 3/31/2004 12,073 3/31/2004 8,140
4/30/2004 19,018 4/30/2004 14,542 4/30/2004 11,458 4/30/2004 8,013
5/31/2004 19,078 5/31/2004 14,704 5/31/2004 11,640 5/31/2004 8,123
6/30/2004 19,114 6/30/2004 15,037 6/30/2004 12,130 6/30/2004 8,281
7/31/2004 18,693 7/31/2004 14,204 7/31/2004 11,313 7/31/2004 8,007
8/31/2004 18,260 8/31/2004 14,058 8/31/2004 11,255 8/31/2004 8,039
9/30/2004 18,657 9/30/2004 14,481 9/30/2004 11,784 9/30/2004 8,126
10/31/2004 18,717 10/31/2004 14,580 10/31/2004 12,016 10/31/2004 8,250
11/30/2004 19,151 11/30/2004 15,474 11/30/2004 13,058 11/30/2004 8,584
12/31/2004 19,379 12/31/2004 15,992 12/31/2004 13,444 12/31/2004 8,876
1/31/2005 19,190 1/31/2005 15,591 1/31/2005 12,883 1/31/2005 8,660
2/28/2005 19,619 2/28/2005 16,118 2/28/2005 13,102 2/28/2005 8,842
3/31/2005 19,707 3/31/2005 15,882 3/31/2005 12,727 3/31/2005 8,685
4/30/2005 19,619 4/30/2005 15,408 4/30/2005 11,998 4/30/2005 8,521
5/31/2005 19,808 5/31/2005 16,054 5/31/2005 12,783 5/31/2005 8,792
6/30/2005 20,060 6/30/2005 16,382 6/30/2005 13,276 6/30/2005 8,804
7/31/2005 20,098 7/31/2005 17,031 7/31/2005 14,117 7/31/2005 9,132
8/31/2005 20,439 8/31/2005 17,031 8/31/2005 13,855 8/31/2005 9,049
9/30/2005 20,742 9/30/2005 17,317 9/30/2005 13,899 9/30/2005 9,122
10/31/2005 20,388 10/31/2005 16,780 10/31/2005 13,467 10/31/2005 8,970
11/30/2005 20,338 11/30/2005 17,250 11/30/2005 14,121 11/30/2005 9,309
12/31/2005 20,486 12/31/2005 17,340 12/31/2005 14,057 12/31/2005 9,312
1/31/2006 20,695 1/31/2006 18,067 1/31/2006 15,317 1/31/2006 9,559
2/28/2006 20,852 2/28/2006 18,161 2/28/2006 15,275 2/28/2006 9,585
3/31/2006 20,826 3/31/2006 18,448 3/31/2006 16,016 3/31/2006 9,704
4/30/2006 21,074 4/30/2006 18,774 4/30/2006 16,013 4/30/2006 9,834
5/31/2006 21,074 5/31/2006 18,091 5/31/2006 15,114 5/31/2006 9,551
6/30/2006 21,074 6/30/2006 18,053 6/30/2006 15,211 6/30/2006 9,564
7/31/2006 21,166 7/31/2006 18,024 7/31/2006 14,716 7/31/2006 9,623
8/31/2006 21,140 8/31/2006 18,325 8/31/2006 15,152 8/31/2006 9,852
9/30/2006 21,153 9/30/2006 18,656 9/30/2006 15,278 9/30/2006 10,106
10/31/2006 21,179 10/31/2006 19,256 10/31/2006 16,158 10/31/2006 10,435
11/30/2006 21,166 11/30/2006 19,544 11/30/2006 16,583 11/30/2006 10,634
12/31/2006 21,206 12/31/2006 19,747 12/31/2006 16,638 12/31/2006 10,783
Past performance is not predictive of future performance.
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AVERAGE ANNUAL TOTAL RETURNS(c)
For Periods Ended December 31, 2006
Since
1 Year 3 Years 5 Years Inception(d)
------ ------- ------- ------------
Hussman Strategic Growth Fund 3.51% 4.79% 9.70% 12.38%
S&P 500 Index 15.79% 10.44% 6.19% 1.18%
Russell 2000 Index 18.37% 13.56% 11.39% 8.23%
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(a) 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.
[LOGO] 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 U.S. Aggregate Index(a)
[LINE GRAPH OMITTED]
Hussman Strategic Total Return Fund Lehman Brothers 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 10,642
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 11,140
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
1/31/2006 12,989 1/31/2006 11,411
2/28/2006 12,840 2/28/2006 11,449
3/31/2006 12,850 3/31/2006 11,336
4/30/2006 13,079 4/30/2006 11,316
5/31/2006 12,953 5/31/2006 11,304
6/30/2006 13,067 6/30/2006 11,328
7/31/2006 13,194 7/31/2006 11,481
8/31/2006 13,240 8/31/2006 11,657
9/30/2006 12,986 9/30/2006 11,759
10/31/2006 13,254 10/31/2006 11,837
11/30/2006 13,592 11/30/2006 11,974
12/31/2006 13,398 12/31/2007 11,905
Past performance is not predictive of future performance.
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AVERAGE ANNUAL TOTAL RETURNS(b)
For Periods Ended December 31, 2006
Since
1 Year 3 Years Inception(c)
------ ------- ------------
Hussman Strategic Total Return Fund 5.66% 6.05% 7.04%
Lehman Brothers U.S. Aggregate Index 4.33% 3.70% 4.14%
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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's adviser
has agreed until at least December 31, 2007 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 12, 2007
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DEAR SHAREHOLDER,
Hussman Strategic Growth Fund ended 2006 with positive returns for the 7th
consecutive year. Hussman Strategic Total Return Fund ended 2006 with positive
returns for the 5th consecutive year. Both Funds have substantially outperformed
their respective benchmarks since inception, while maintaining contained
volatility.
For the year ended December 31, 2006, Hussman Strategic Growth Fund
achieved a total return of 3.51%, compared with a total return of 15.79% in the
S&P 500 Index. Since inception on July 24, 2000, the Fund has achieved an
overall total return of 112.06% (12.38% average annualized) versus an overall
total return of 7.83% (1.18% average annualized) for the S&P 500 Index.
For the year ended December 31, 2006, Hussman Strategic Total Return Fund
achieved a total return of 5.66%, compared with a total return of 4.33% for the
Lehman U.S. Aggregate Index. Since inception on September 12, 2002, the Fund has
achieved an overall total return of 33.98% (7.04% average annualized) versus an
overall total return of 19.05% (4.14% average annualized) for the Lehman U.S.
Aggregate Index.
The investment objectives of the Hussman Funds are distinctly long-term
and "full cycle" in nature, placing very little weight on tracking the market
over short periods of time. Because of our emphasis on risk management, Fund
returns will periodically behave differently than various market indices. The
intent of our risk management is to outperform the major indices over a complete
market cycle (bull and bear markets combined), with added emphasis on defending
capital in unfavorable market conditions.
The following table presents the total returns for the Strategic Growth
Fund and S&P 500 Index since the inception of the Fund. In order to assist in
attributing the effects of stock selection and hedging on the Strategic Growth
Fund, the table separately presents the returns of the stock positions and cash
equivalents held by the Fund (after expenses), without the impact of hedging
transactions.
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1
THE HUSSMAN FUNDS
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LETTER TO SHAREHOLDERS (CONTINUED)
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HSGFX
YEAR HSGFX STOCKS ONLY* S&P 500
----------------------------------------------------------------------
2000** 16.40% 4.86% -9.37%
2001 14.67% 9.13% -11.89%
2002 14.02% -10.03% -22.10%
2003 21.08% 37.68% 28.69%
2004 5.16% 12.81% 10.88%
2005 5.71% 8.43% 4.91%
2006 3.51% 13.88% 15.79%
Since Inception
(Average annualized) 12.38% 11.15% 1.18%
* Reflects the Fund's portfolio of stock investments and cash equivalents
only and excludes the impact of hedging transactions. This is not a
separately available portfolio, and the performance is presented solely
for purposes of comparison and performance attribution.
** July 24, 2000 - December 31, 2000, not annualized
The table below presents the returns for the Strategic Total Return Fund
since inception.
LEHMAN
YEAR HSTRX U.S. AGGREGATE
-------------------------------------------------------------
2002* 2.30% 2.56%
2003 9.80% 4.10%
2004 6.50% 4.34%
2005 6.00% 2.43%
2006 5.66% 4.33%
Since Inception
(Average annualized) 7.04% 4.14%
* September 12, 2002 - December 31, 2002, not annualized
STRATEGIC GROWTH FUND
Although the Strategic Growth Fund has achieved strong long-term
performance with very low volatility, last year's 3.51% return in the Fund was
well below expectations, even for a year in which the Fund was generally
fully-hedged.
The long-term performance of the Fund is driven by two factors. First, the
Fund typically holds a fully invested position in stocks displaying some
combination of favorable valuation and market action. Second, based on
- --------------------------------------------------------------------------------
2
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
prevailing market conditions, the Fund may hedge the exposure of its stock
portfolio to general market fluctuations.
During 2006, the Fund generally held a fully-hedged investment position.
The stock market weakened in the first half of the year, and the S&P 500
declined to a year-to-date loss by mid-July. Despite rich valuations and market
action that has frequently been associated with continued steep declines, the
stock market recovered during the second half of the year. In recent months, the
market has maintained elevated valuations and a strenuously "overbought"
condition. As of February 2007, the S&P 500 has reached the second-longest
period on record without a 10% correction.
The market's late-2006 recovery did not reflect how the market has
typically behaved under similar conditions of valuation and market action, but
such deviations are to be expected from time to time. Every set of conditions we
identify is associated with a range of outcomes - if there was no range, there
would be no risk. As usual, we don't attempt to forecast which direction the
market will move in each specific instance, but are concerned instead with the
average return/risk profile that is associated with a given set of market
conditions. So while the market's late-2006 advance was not a typical outcome,
it did not provide any compelling evidence that the market's long-term dynamics
have changed.
Over time, rich stock market valuations are strongly associated with
unsatisfactory long-term returns. There is not a single instance in historical
data since 1871 that the S&P 500 traded above 18 times record earnings and there
was not a low a year or more later that erased every bit of advantage over
Treasury bills. When rich valuations are coupled with poor internal market
action, or with extremely bullish investor sentiment, rising interest rates and
overextended short-term trends, the market has generally underperformed Treasury
bills, and has often experienced abrupt short-term losses as well. Such losses
need not occur in every instance to justify heightened defenses in the face of
those conditions.
So the Fund's defensive investment position, though early, was also very
intentional. As an investment manager, my primary disappointment last year was
that the Fund's stock selections lagged the S&P 500 by a small margin of 1.91%.
In prior years, the Fund's stock holdings have consistently and significantly
outperformed the S&P 500.
- --------------------------------------------------------------------------------
3
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
When the Fund has a fully-hedged investment position, the Fund's total
return will generally exceed short-term Treasury bill yields by the extent to
which the stocks held by the Fund outperform the indices used to hedge (after
expenses). While past performance does not ensure future results, the Fund's
stock holdings have outperformed the S&P 500 Index by an average of 9.97%
annually since the inception of the Fund. This increment has been positive in
every year except 2006. Given the Fund's hedged investment position in 2006, the
modest shortfall in stock selection performance last year was enough to hold the
total return of the Strategic Growth Fund below Treasury bill returns.
Why has our stock selection approach had difficulty outperforming the
market recently? The most important factor has been a preference by investors
for stocks of low quality, on measures such as earnings stability and balance
sheet strength. For example, Standard & Poor's Corporation publishes quality
ratings on a large number of traded stocks. Although the number of individual
stocks outperforming the S&P 500 diminished as 2006 progressed, an increasing
fraction of these leaders had poor quality rankings. This same speculation in
low quality issues is evident in the bond market, where default premiums have
narrowed to unusually thin levels even for the riskiest classes of debt. To some
extent, this increasing preference for "garbage stocks" and junk bonds has been
apparent since 2003.
Though I believe that this favor toward speculative issues is a
short-sighted preference that will ultimately end badly for investors, my
emphasis on sound valuation and financial stability has admittedly not earned
the Fund's shareholders great wealth during the past few years. Still, I
strongly believe that over time, investors benefit from paying no more for
stocks what they can expect to receive in likely cash flows. When shareholders
invest in the Strategic Growth Fund, I intend for them to own a portfolio that I
honestly believe has an intrinsic value greater than the Fund's net assets, not
simply a group of speculative and debt-laden stocks, blessed in hindsight by
price momentum.
FULL CYCLES
Meanwhile, it is helpful to analyze the Fund's performance within the
context of its relevant investment horizon - the complete market cycle (the
combination of at least one bull market and one bear market).
The Strategic Growth Fund achieved double digit annual gains despite deep
market losses in 2000, 2001, and 2002, and achieved a further 21.08% return as
the stock market recovered in 2003. By December 31,
- --------------------------------------------------------------------------------
4
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
2003, the Fund had achieved a total return of 84.29% since its July 24, 2000
inception (an average annual return of 19.47%) versus a loss of -19.95% in the
S&P 500 (an average annual return of -6.27%).
More recently, however, the Fund has achieved only single-digit annual
gains. During the three-year period from December 31, 2003 through December 31,
2006, the Strategic Growth Fund achieved an overall total return of 15.07% (an
average annual return of 4.79%) versus an overall total return of 34.70% (an
average annual return of 10.43%) for the S&P 500 Index.
This three-year performance gap is actually a modest disparity for a
hedged investment strategy. With the market extremely overdue for a material
correction, it would take little market difficulty to put the Fund even with the
S&P 500 for the period since 2003.
To illustrate, suppose that the Fund remains fully-hedged during a
one-year bear market decline. Given the prevailing yield of 5% on short-term
Treasury bills, and assuming the Fund's stock holdings (after expenses) perform
no better or worse than the indices it uses to hedge, the Fund would also
achieve a total return of about 5%.
How deep would the bear market loss in the S&P 500 then have to be in
order to close the performance gap that has emerged since 2003? The calculation
is:
1 - 1.05 x 1.1507 / 1.3470 = -10.30%.
We evidently do not require much of a bear market.
Of course, if the Fund's stock investments were to perform better than the
indices we use to hedge, the performance of the Fund would be positively
affected. If the Fund's stock investments were to lose substantially more in a
bear market decline than the indices we use to hedge, or if the Fund was not
fully hedged during such a decline, the performance of the Fund would be
negatively affected.
The impact of bear market declines on compound returns is striking. It is
useful to remember that, historically, less than half of the gains enjoyed
during bull market advances are retained by investors by the end of the
subsequent bear market. For example, a 30% bear market decline (about average by
historical standards) would whittle an 80% bull market gain to just 26% over
- --------------------------------------------------------------------------------
5
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
the full cycle (i.e. 0.70 x 1.80 = 1.26). As noted above, I would expect the
modest performance difference between the Fund and the S&P 500 in recent years
to be eliminated by a much shallower decline.
Unless investors assume that the market will experience no declines of
significance in the coming years, my impression is that any concerns about the
hedged stance of the Fund are probably misplaced. The larger issue, in my view,
is the extent to which investors are no longer demanding significant risk
premiums and default premiums on securities that are actually quite risky.
As I inquired in a recent weekly comment, if the parents or the children
of Wall Street analysts were to ask for wise investment advice, would the first
thought of these analysts really be to encourage stock purchases at a multi-year
market high, in a long-uncorrected and strenuously overbought advance, at a
multiple of over 18 times record earnings on unusually wide profit margins, with
wages and unit labor costs rising faster than inflation, while interest rates
are rising, bullish sentiment is unusually high, and corporate insiders are
selling heavily? Would the potential for further gains in that environment
exceed the next inevitable correction by an amount that would make the net gains
worth the risk?
My advice would be to patiently defend capital until conditions emerge
that have historically produced acceptable returns, on average, given the risks
involved. Those conditions will inevitably arrive, but they are currently not
present.
STRATEGIC TOTAL RETURN FUND
For the year ended December 31, 2006, the Strategic Total Return Fund
achieved a total return of 5.66%, compared with a total return of 4.33% for the
Lehman U.S. Aggregate Index.
During the past three years, the range of annual interest rate
fluctuations in U.S. Treasury bonds has been less than half the average of the
past 50 years. In 2006, the yield on 10-year Treasury bonds fluctuated in a
range of less than 100 basis points. The 10-year Treasury yield increased
modestly, from 4.44% to 4.75%. For most of the year, the yield curve was
"inverted," with short-term Treasury bill yields exceeding Treasury bond yields.
Given the combination of low Treasury yields, a relatively narrow trading
range, and an inverted yield curve, there was not much opportunity last year to
strategically vary our exposure to interest rate fluctuations. Accordingly, the
- --------------------------------------------------------------------------------
6
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
Fund generally maintained an exposure to shorter-duration Treasury securities in
2006, primarily holding inflation-protected notes.
The Strategic Total Return Fund also has the ability to hold up to 30% of
its assets in alternatives to U.S. fixed income securities, including foreign
government bonds, utility stocks and precious metals shares. During 2006, the
Fund maintained a small exposure to utility stocks (generally less than 5% of
assets), and a similarly small position in yen-denominated agency notes. As in
recent years, the primary source of day-to-day fluctuation in the Fund's net
asset value has been its holdings of precious metals shares, which have
generally represented in the range of 10-20% of net assets, depending on market
conditions.
PORTFOLIO COMPOSITION
As of December 31, 2006, the Strategic Growth Fund had net assets of
$2,842,875,029 and held 130 stocks in a wide variety of industries. The largest
sector holdings were in consumer staples (20.1% of total investments) and
healthcare (17.7% of total investments). The smallest industry weight relative
to the S&P 500 remained in financials (2.8% of total investments).
Within a small day-to-day range of fluctuation due to share purchases and
redemptions, and securities settlements, the Fund's portfolio has remained fully
invested in individual stocks, with an offsetting short position in the S&P 500
and Russell 2000 Indices, using long-put / short-call index option combinations,
where no more than one of those options is "in the money" at the time the
position is established. These option combinations hedge the value of the Fund's
stock positions against the impact of market fluctuations, although Fund returns
are still influenced by the extent that the performance of the stocks held by
the Fund differs from the performance of the indices used to hedge.
While the performance of the Strategic Growth Fund's diversified portfolio
cannot be attributed to any narrow group of stocks, the following holdings
achieved gains in excess of $10 million during the semi-annual period ended
December 31, 2006: McDonalds, NVIDIA, Exxon Mobil, Nike and Lexmark. The Fund
experienced a loss in excess of $10 million in Omnivision Technologies. For the
full calendar year ended December 31, 2006, the Fund achieved gains in excess of
$10 million in NVIDIA, Exxon Mobil, McDonalds, Applera, Lexmark, ConocoPhillips,
Marathon Oil, Garmin and Energizer Holdings. The Fund experienced a loss greater
than $10 million in Omnivision Technologies and Omnicare.
- --------------------------------------------------------------------------------
7
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
As of December 31, 2006, the Strategic Total Return Fund had net assets of
$188,175,444. Treasury inflation protected securities accounted for 50.6% of the
Fund's net assets. Short-term Treasury bills, government agency securities and
money market securities represented an additional 26.1% of net assets. Precious
metals shares represented 18.8% of net assets, and utility stocks represented
3.7%. The Fund had an average duration of just over 2 years (meaning that a 1%
change in interest rates would be expected to impact the Fund's asset value by
about 2% on the basis of bond price fluctuations). Because of that very low
duration, precious metals shares continued to account for most of the day-to-day
fluctuations in the net asset value of the Fund.
In the Strategic Total Return Fund, during the semi-annual period ended
December 31, 2006, portfolio gains in excess of $500,000 were achieved in Agnico
Eagle Mines, Goldcorp, and Endesa. The Fund experienced a loss in excess of
$500,000 in Newmont Mining. For the full calendar year ended December 31, 2006,
the Fund achieved gains in excess of $500,000 in Agnico Eagle Mines, Goldcorp,
Endesa, Barrick Gold, and OGE Energy. The Fund experienced a loss greater than
$500,000 in Newmont Mining.
PRESENT CONDITIONS
As usual, our investment positions are not based on specific forecasts of
near-term market direction, but on market conditions that have historically been
associated with unsatisfactory return/risk profiles, on average. Changes in our
investment position are driven primarily by changes in prevailing, observable
evidence regarding valuations and other market conditions.
Once market valuations become very rich, the market loses "investment
merit" because elevated market valuations have historically been associated with
unsatisfactory long-term returns. Further bull market gains are then only
speculative, because they tend to be temporary in nature, and are typically
surrendered during the subsequent bear market decline.
Still, it has generally been possible to capture some portion of these
speculative returns. Specifically, the stock market has historically provided
reasonably good return/risk performance even when valuations have been rich,
provided that broad market action has been favorable across a wide range of
stocks, industries and security types, and market conditions have not been
over-extended on the basis of price trends or bullish sentiment.
Accordingly, we do not require stocks to decline to average or
below-average valuations in order to establish a constructive investment
position. If
- --------------------------------------------------------------------------------
8
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
the major indices can decline sufficiently to clear recent extremes in price
trends and investor optimism, without a strong deterioration in broad market
action, I would expect to increase the exposure of the Strategic Growth Fund to
market fluctuations. That exposure would most probably be established using call
options, in order to retain protection against unanticipated market losses.
In any event, it should not be assumed that the stock market must fall to
historic undervaluation before the Strategic Growth Fund reduces its hedges.
Overvaluation raises the burden of proof, but it does not rule out moderate
speculative exposure to market fluctuations.
In the bond market, the factors most likely to support a greater exposure
to interest rate fluctuations in the year ahead would be a widening of credit
spreads, or a significant increase in yield levels. As of December 31, 2006,
yield levels remained too low to provide compelling value, while credit spreads
were narrow and the yield curve was inverted. An abrupt widening of credit
spreads (the difference between risky corporate yields and default-free Treasury
yields) would indicate not only heightened default risks, but also risk to the
U.S. economy. This would most probably create downward pressure on yields,
despite their relatively low levels at present. Alternatively, higher yield
levels would provide an opportunity to take a more constructive investment
position in bonds, by improving conditions on the basis of valuation.
Although prevailing conditions do not warrant substantial exposure to
fluctuations in the stock and bond markets, these conditions are unlikely to be
sustained indefinitely. It is the nature of the financial markets to experience
a rich variety of conditions over the course of a complete market cycle, just as
it is the nature of economies to ebb and flow. From this perspective, it is
dangerous for investors to believe that valuations have established a
permanently high plateau or that an economic setting described with words like
"Goldilocks" and "Eden-like" will long remain balanced on the razor's edge.
As always, I am grateful for your investment in the Funds, and for your
trust.
Best wishes,
JOHN P. HUSSMAN, PH.D.
- --------------------------------------------------------------------------------
9
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT
RESULTS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 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 Letter to Shareholders seeks to describe some of the adviser's current
opinions and views of the financial markets. Although the adviser believes
it has a reasonable basis for any opinions and views expressed, actual
results may differ, sometimes significantly so, from those it expects and
expresses. The securities held by the Funds that are discussed in the
Letter to Shareholders were held during the period covered by this
Semi-Annual Report. 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 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.
- --------------------------------------------------------------------------------
10
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF TOTAL INVESTMENTS)
[PIE CHART OMITTED]
Consumer Staples 20.1%
Health Care 17.7%
Consumer Discretionary 16.7%
Information Technology 14.6%
Energy 8.7%
Telecommunications Services 7.1%
Industrials 5.6%
Materials 4.4%
Financials 2.8%
Other 2.1%
Utilities 0.2%
HUSSMAN STRATEGIC TOTAL RETURN FUND
PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSET ALLOCATION (% OF TOTAL INVESTMENTS)
[PIE CHART OMITTED]
U.S. Treasury Inflation-Protection Notes 51.0%
Precious Metal Stocks 19.0%
Other U.S. Treasury Obligations 15.8%
Other 7.3%
Utility Stocks 3.7%
U.S. Government Agency Obligations 3.2%
- --------------------------------------------------------------------------------
11
HUSSMAN INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
--------------- ---------------
ASSETS
Investments in securities:
At acquisition cost ............................................ $ 2,685,149,474 $ 168,508,074
=============== ===============
At value (Note 1) .............................................. $ 2,955,879,102 $ 173,206,439
Investments in money market funds .................................. 179,775,703 13,632,467
Cash ............................................................... 500,000 --
Dividends and interest receivable .................................. 4,665,765 1,510,743
Receivable for capital shares sold ................................. 3,480,032 22,320
Other assets ....................................................... 125,341 32,222
--------------- ---------------
Total Assets ................................................... 3,144,425,943 188,404,191
--------------- ---------------
LIABILITIES
Dividends payable .................................................. 3,778,587 --
Written call options, at value (Notes 1 and 4)
(premiums received $280,424,000) ............................... 289,278,000 --
Payable for capital shares redeemed ................................ 5,783,348 88,877
Accrued investment advisory fees (Note 3) .......................... 2,358,540 76,865
Payable to administrator (Note 3) .................................. 209,700 21,250
Other accrued expenses and liabilities ............................. 142,739 41,755
--------------- ---------------
Total Liabilities .............................................. 301,550,914 228,747
--------------- ---------------
NET ASSETS ........................................................... $ 2,842,875,029 $ 188,175,444
=============== ===============
Net assets consist of
Paid-in capital .................................................... $ 2,778,423,755 $ 184,575,825
Accumulated undistributed (overdistributed) net investment income .. 130,988 (81,012)
Accumulated net realized losses from security
transactions and option contracts .............................. (197,555,342) (1,017,420)
Net unrealized appreciation on investments and options ............. 261,875,628 4,925,152
Net unrealized depreciation on translation of assets
and liabilities in foreign currencies .......................... -- (227,101)
--------------- ---------------
NET ASSETS ........................................................... $ 2,842,875,029 $ 188,175,444
=============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) ................................ 181,803,511 17,036,007
=============== ===============
Net asset value, offering price and redemption
price per share(a) (Note 1) ........................................ $ 15.64 $ 11.05
=============== ===============
(a) Redemption price varies based on length of time shares are held.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
HUSSMAN INVESTMENT TRUST
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
------------- -------------
INVESTMENT INCOME
Dividends ................................................. $ 29,946,393 $ 831,265
Foreign withholding taxes on dividends .................... (181,301) (8,390)
Interest .................................................. -- 1,323,028
------------- -------------
Total Income .......................................... 29,765,092 2,145,903
------------- -------------
EXPENSES
Investment advisory fees (Note 3) ......................... 14,241,329 485,445
Administration fees (Note 3) .............................. 759,926 70,638
Transfer agent, account maintenance and
shareholder services fees (Note 3) .................... 690,472 41,837
Custodian and bank service fees ........................... 115,333 12,277
Fund accounting fees (Note 3) ............................. 101,217 23,812
Registration and filing fees .............................. 81,945 30,411
Professional fees ......................................... 54,999 44,349
Trustees' fees and expenses ............................... 28,900 28,900
Insurance expense ......................................... 35,218 2,442
Compliance service fees (Note 3) .......................... 31,044 4,618
Plus previously waived investment advisory fees
recouped by the Adviser (Note 3) ...................... -- 21,922
Other expenses ............................................ 54,307 27,713
------------- -------------
Total Expenses ........................................ 16,194,690 794,364
------------- -------------
NET INVESTMENT INCOME ....................................... 13,570,402 1,351,539
------------- -------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS,
OPTION CONTRACTS AND FOREIGN CURRENCIES (NOTE 4)
Net realized gains (losses) from:
Security transactions ................................. 34,742,930 (956,007)
Option contracts ...................................... (228,266,510) --
Foreign currency transactions ......................... -- (1,857)
Net change in unrealized appreciation/depreciation on:
Investments ........................................... 221,149,515 4,186,173
Option contracts ...................................... (23,776,500) --
Foreign currency translation .......................... -- (218,100)
------------- -------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS,
OPTION CONTRACTS AND FOREIGN CURRENCIES ................... 3,849,435 3,010,209
------------- -------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .................. $ 17,419,837 $ 4,361,748
============= =============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
HUSSMAN STRATEGIC GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2006 JUNE 30,
(UNAUDITED) 2006
--------------- ---------------
FROM OPERATIONS
Net investment income ......................................... $ 13,570,402 $ 14,378,679
Net realized gains (losses) from:
Security transactions ..................................... 34,742,930 244,834,733
Option contracts .......................................... (228,266,510) (162,052,342)
Net change in unrealized appreciation/depreciation on:
Investments ............................................... 221,149,515 (38,796,122)
Option contracts .......................................... (23,776,500) 48,136,250
--------------- ---------------
Net increase in net assets resulting from operations ............ 17,419,837 106,501,198
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .................................... (23,489,795) (7,903,689)
From net realized gains ....................................... (82,737,302) (69,606,458)
--------------- ---------------
Net decrease in net assets from distributions to shareholders ... (106,227,097) (77,510,147)
--------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ..................................... 527,846,267 1,393,333,433
Net asset value of shares issued in reinvestment of
distributions to shareholders ............................. 91,037,302 69,245,755
Proceeds from redemption fees collected (Note 1) .............. 716,949 775,369
Payments for shares redeemed .................................. (504,026,642) (511,750,868)
--------------- ---------------
Net increase in net assets from capital share transactions ...... 115,573,876 951,603,689
--------------- ---------------
TOTAL INCREASE IN NET ASSETS .................................... 26,766,616 980,594,740
NET ASSETS
Beginning of period ........................................... 2,816,108,413 1,835,513,673
--------------- ---------------
End of period ................................................. $ 2,842,875,029 $ 2,816,108,413
=============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME ................. $ 130,988 $ 10,050,381
=============== ===============
CAPITAL SHARE ACTIVITY
Sold .......................................................... 32,842,447 86,814,263
Reinvested .................................................... 5,814,975 4,421,266
Redeemed ...................................................... (31,477,197) (32,050,718)
--------------- ---------------
Net increase in shares outstanding ............................ 7,180,225 59,184,811
Shares outstanding at beginning of period ..................... 174,623,286 115,438,475
--------------- ---------------
Shares outstanding at end of period ........................... 181,803,511 174,623,286
=============== ===============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
HUSSMAN STRATEGIC TOTAL RETURN FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2006 JUNE 30,
(UNAUDITED) 2006
------------- -------------
FROM OPERATIONS
Net investment income ......................................... $ 1,351,539 $ 3,918,703
Net realized gains (losses) from:
Security transactions ..................................... (956,007) 8,194,573
Foreign currency transactions ............................. (1,857) 6,396
Net change in unrealized appreciation/depreciation on:
Investments ............................................... 4,186,173 (901,485)
Foreign currency translation .............................. (218,100) (64,909)
------------- -------------
Net increase in net assets resulting from operations ............ 4,361,748 11,153,278
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .................................... (1,550,182) (3,807,952)
From net realized gains ....................................... (6,811,839) (3,268,055)
------------- -------------
Net decrease in net assets from distributions to shareholders ... (8,362,021) (7,076,007)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ..................................... 39,056,295 54,330,916
Net asset value of shares issued in reinvestment of
distributions to shareholders ............................. 7,580,612 6,375,542
Proceeds from redemption fees collected (Note 1) ............. 56,132 28,184
Payments for shares redeemed .................................. (13,252,628) (34,232,131)
------------- -------------
Net increase in net assets from capital share transactions ...... 33,440,411 26,502,511
------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 29,440,138 30,579,782
NET ASSETS
Beginning of period ........................................... 158,735,306 128,155,524
------------- -------------
End of period ................................................. $ 188,175,444 $ 158,735,306
============= =============
ACCUMULATED (OVERDISTRIBUTED) UNDISTRIBUTED
NET INVESTMENT INCOME ......................................... $ (81,012) $ 119,488
============= =============
CAPITAL SHARE ACTIVITY
Sold .......................................................... 3,473,034 4,831,412
Reinvested .................................................... 692,928 574,073
Redeemed ...................................................... (1,179,235) (3,068,452)
------------- -------------
Net increase in shares outstanding ............................ 2,986,727 2,337,033
Shares outstanding at beginning of period ..................... 14,049,280 11,712,247
------------- -------------
Shares outstanding at end of period ........................... 17,036,007 14,049,280
============= =============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
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 YEAR
DECEMBER 31, ENDED ENDED ENDED ENDED ENDED
2006 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2006 2005 2004 2003 2002
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at
beginning of period .................... $ 16.13 $ 15.90 $ 15.89 $ 13.80 $ 13.34 $ 12.20
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss) .............. 0.07 0.08 0.06 (0.04) (0.02) (0.04)
Net realized and unrealized
gains on investments
and options ............................. 0.03 0.69 0.68 2.13 1.36 2.52
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations ............ 0.10 0.77 0.74 2.09 1.34 2.48
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net
investment income ..................... (0.13) (0.05) (0.03) -- -- --
Distributions from
net realized gains .................... (0.46) (0.50) (0.71) (0.01) (0.93) (1.35)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ......................... (0.59) (0.55) (0.74) (0.01) (0.93) (1.35)
----------- ----------- ----------- ----------- ----------- -----------
Proceeds from redemption fees
collected (Note 1) .................... 0.00(e) 0.01 0.01 0.01 0.05 0.01
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of period ............ $ 15.64 $ 16.13 $ 15.90 $ 15.89 $ 13.80 $ 13.34
=========== =========== =========== =========== =========== ===========
Total return(a) ............................. 0.63%(d) 5.05% 4.95% 15.22% 11.25% 22.24%
=========== =========== =========== =========== =========== ===========
Net assets at end
of period (000's) ......................... $ 2,842,875 $ 2,816,108 $ 1,835,514 $ 1,316,703 $ 511,928 $ 173,342
=========== =========== =========== =========== =========== ===========
Ratio of net expenses to
average net assets ........................ 1.10%(b) 1.14% 1.24% 1.34% 1.45% 1.99%(c)
Ratio of net investment income
(loss) to average net assets .............. 0.92%(b) 0.63% 0.44% (0.39%) (0.15%) (0.81%)
Portfolio turnover rate ..................... 46%(d) 63% 81% 66% 123% 199%
(a) 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.
(b) Annualized.
(c) Absent investment advisory fees waived by the Adviser, the ratio of
expenses to average net assets would have been 2.03% for the year ended
June 30, 2002.
(d) Not annualized
(e) Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
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 YEAR PERIOD
DECEMBER 31, ENDED ENDED ENDED ENDED
2006 JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2006 2005 2004 2003(a)
----------- ----------- ----------- ----------- -----------
Net asset value at beginning of period ............ $ 11.30 $ 10.94 $ 10.53 $ 10.54 $ 10.00
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income ........................... 0.09 0.32 0.24 0.21 0.14
Net realized and unrealized gains on
investments and foreign currencies .......... 0.19 0.65 0.42 0.35 0.52
----------- ----------- ----------- ----------- -----------
Total from investment operations .................. 0.28 0.97 0.66 0.56 0.66
----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net investment income ............ (0.10) (0.31) (0.24) (0.21) (0.14)
Distributions from net realized gains ........... (0.43) (0.30) (0.02) (0.37) --
----------- ----------- ----------- ----------- -----------
Total distributions ............................... (0.53) (0.61) (0.26) (0.58) (0.14)
----------- ----------- ----------- ----------- -----------
Proceeds from redemption
fees collected (Note 1) ......................... 0.00(b) 0.00(b) 0.01 0.01 0.02
----------- ----------- ----------- ----------- -----------
Net asset value at end of period .................. $ 11.05 $ 11.30 $ 10.94 $ 10.53 $ 10.54
=========== =========== =========== =========== ===========
Total return(c) ................................... 2.54%(d) 9.01% 6.40% 5.49% 6.81%(d)
=========== =========== =========== =========== ===========
Net assets at end of period (000's) .............. $ 188,175 $ 158,735 $ 128,156 $ 105,308 $ 18,983
=========== =========== =========== =========== ===========
Ratio of net expenses to average net assets(e) ... 0.90%(f) 0.90% 0.90% 0.90% 0.90%(f)
Ratio of net investment income
to average net assets .......................... 1.53%(f) 2.94% 2.25% 2.34% 1.99%(f)
Portfolio turnover rate .......................... 36%(d) 55% 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
0.92%, 1.01%, 1.17% and 2.32%(f) for the periods ended June 30, 2006,
2005, 2004 and 2003, respectively.
(f) Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 101.75% VALUE
================================================================================
AIR FREIGHT & LOGISTICS -- 0.77%
200,000 FedEx Corp........................................ $ 21,724,000
---------------
AUTO COMPONENTS -- 0.14%
66,900 Autoliv, Inc...................................... 4,034,070
---------------
AUTOMOBILES -- 1.99%
750,000 Honda Motor Co. Ltd. - ADR........................ 29,655,000
200,000 Toyota Motor Corp. - ADR.......................... 26,862,000
---------------
56,517,000
---------------
BEVERAGES -- 5.69%
1,400,000 Coca-Cola Co. (The)............................... 67,550,000
400,000 Coca-Cola Enterprises, Inc........................ 8,168,000
30,200 Fomento Economico Mexicano, S.A. de C.V. - ADR.... 3,495,952
650,000 Pepsi Bottling Group, Inc. (The).................. 20,091,500
1,000,000 PepsiCo, Inc...................................... 62,550,000
---------------
161,855,452
---------------
BIOTECHNOLOGY -- 3.08%
1,750,000 Applera Corp. - Applied Biosystems Group.......... 64,207,500
270,400 Gilead Sciences, Inc. (a)......................... 17,557,072
119,500 Illumina, Inc. (a)................................ 4,697,545
27,400 Integra LifeSciences Holdings (a)................. 1,166,966
---------------
87,629,083
---------------
BUILDING PRODUCTS -- 0.53%
500,000 Masco Corp........................................ 14,935,000
---------------
CAPITAL MARKETS -- 0.72%
250,000 Morgan Stanley ................................... 20,357,500
---------------
CHEMICALS -- 1.84%
232,800 Albany Molecular Research, Inc. (a)............... 2,458,368
100,000 BASF AG - ADR..................................... 9,720,000
341,700 Eastman Chemical Co............................... 20,266,227
350,000 Headwaters, Inc. (a).............................. 8,386,000
250,000 OM Group, Inc. (a)................................ 11,320,000
---------------
52,150,595
---------------
COMMERCIAL BANKS -- 0.97%
300,000 Bank of America Corp. ............................ 16,017,000
200,000 Barclays plc - ADR................................ 11,628,000
---------------
27,645,000
---------------
- --------------------------------------------------------------------------------
18
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 101.75% (CONTINUED) VALUE
================================================================================
COMMERCIAL SERVICES & SUPPLIES -- 2.07%
1,600,000 Waste Management, Inc............................. $ 58,832,000
---------------
COMMUNICATIONS EQUIPMENT -- 1.04%
711,700 CommScope, Inc. (a)............................... 21,692,616
250,000 Polycom, Inc. (a)................................. 7,727,500
---------------
29,420,116
---------------
COMPUTERS AND PERIPHERALS -- 3.09%
155,000 Ambient Corp. (a)................................. 13,175
600,000 Lexmark International, Inc. (a)................... 43,920,000
1,020,024 SanDisk Corp. (a)................................. 43,891,632
---------------
87,824,807
---------------
CONSTRUCTION MATERIALS -- 0.47%
308,000 Encore Wire Corp. ................................ 6,779,080
71,500 Nanophase Technologies Corp. (a).................. 426,855
75,000 POSCO - ADR....................................... 6,200,250
---------------
13,406,185
---------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 7.00%
500,000 ALLTEL Corp....................................... 30,240,000
1,000,000 AT&T, Inc......................................... 35,750,000
107,800 BT Group plc - ADR................................ 6,456,142
500,000 CenturyTel, Inc................................... 21,830,000
2,500,000 Nokia Oyj - ADR................................... 50,800,000
1,250,000 Verizon Communications, Inc....................... 46,550,000
516,963 Windstream Corp................................... 7,351,214
---------------
198,977,356
---------------
ELECTRICAL EQUIPMENT -- 1.00%
400,000 Energizer Holdings, Inc. (a)...................... 28,396,000
---------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.54%
626,300 Benchmark Electronics, Inc. (a)................... 15,256,668
500,000 Checkpoint Systems, Inc. (a)...................... 10,100,000
1,000,000 Flextronics International Ltd. (a)................ 11,480,000
250,000 Garmin Ltd........................................ 13,915,000
721,200 Nano-Proprietary, Inc. (a)........................ 1,009,680
400,000 Trimble Navigation Ltd. (a)....................... 20,292,000
---------------
72,053,348
---------------
ENERGY EQUIPMENT & SERVICES -- 0.45%
250,000 Valero Energy Corp. .............................. 12,790,000
---------------
- --------------------------------------------------------------------------------
19
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 101.75% (CONTINUED) VALUE
================================================================================
FOOD PRODUCTS -- 10.59%
1,750,000 Archer-Daniels-Midland Co......................... $ 55,930,000
1,500,000 Campbell Soup Co.................................. 58,335,000
1,000,000 General Mills, Inc................................ 57,600,000
689,600 H.J. Heinz Co..................................... 31,038,896
1,250,000 Kellogg Co........................................ 62,575,000
1,000,000 Kraft Foods, Inc. ................................ 35,700,000
---------------
301,178,896
---------------
GAS UTILITIES -- 0.16%
115,600 National Fuel Gas Co.............................. 4,455,224
---------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.05%
250,000 Accelrys, Inc. (a)................................ 1,502,500
---------------
HEALTH CARE PROVIDERS & SERVICES -- 1.73%
150,000 Cardinal Health, Inc.............................. 9,664,500
400,000 Molina Healthcare, Inc. (a)....................... 13,004,000
500,000 Quest Diagnostics, Inc............................ 26,500,000
---------------
49,168,500
---------------
HOTELS, RESTAURANTS & LEISURE -- 1.87%
1,200,000 McDonald's Corp................................... 53,196,000
---------------
HOUSEHOLD DURABLES -- 0.86%
238,700 Rent-A-Center, Inc. (a)........................... 7,044,037
13,800 Sherwin-Williams Co............................... 877,404
200,000 Whirlpool Corp.................................... 16,604,000
---------------
24,525,441
---------------
HOUSEHOLD PRODUCTS -- 4.60%
900,000 Clorox Co. (The).................................. 57,735,000
600,000 Colgate-Palmolive Co.............................. 39,144,000
500,000 Kimberly-Clark Corp............................... 33,975,000
---------------
130,854,000
---------------
INFORMATION TECHNOLOGY CONSULTING &
SERVICES -- 2.93%
1,000,000 Computer Sciences Corp. (a)....................... 53,370,000
500,000 Convergys Corp. (a)............................... 11,890,000
230,000 Fiserv, Inc. (a).................................. 12,056,600
214,300 Macrovision Corp. (a)............................. 6,056,118
---------------
83,372,718
---------------
INSURANCE -- 1.23%
400,000 Berkley (W.R.) Corp............................... 13,804,000
400,000 Chubb Corp. (The)................................. 21,164,000
---------------
34,968,000
---------------
- --------------------------------------------------------------------------------
20
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 101.75% (CONTINUED) VALUE
================================================================================
INTERNET SOFTWARE & SERVICES -- 0.29%
300,000 Cisco Systems, Inc. (a)........................... $ 8,199,000
---------------
LEISURE EQUIPMENT & PRODUCTS -- 2.90%
200,000 Borders Group, Inc................................ 4,470,000
49,400 Fuji Photo Film Co. Ltd. - ADR.................... 2,041,702
1,200,000 Grupo Televisa S.A. - ADR......................... 32,412,000
1,750,000 Mattel, Inc. ..................................... 39,655,000
755,000 TiVo, Inc. (a).................................... 3,865,600
---------------
82,444,302
---------------
MACHINERY -- 1.43%
200,000 Caterpillar, Inc.................................. 12,266,000
300,000 Deere & Co........................................ 28,521,000
---------------
40,787,000
---------------
MARINE -- 0.02%
12,200 Tsakos Energy Navigation Ltd...................... 559,980
---------------
MEDIA -- 1.10%
100,000 Comcast Corp - Class A Special (a)................ 4,188,000
50,000 Idearc, Inc. (a).................................. 1,432,500
750,000 Walt Disney Co. (The)............................. 25,702,500
---------------
31,323,000
---------------
METALS & MINING -- 1.44%
750,000 Nucor Corp........................................ 40,995,000
---------------
MULTILINE RETAIL -- 1.55%
400,000 Dollar General Corp............................... 6,424,000
1,250,000 Dollar Tree Stores, Inc. (a)...................... 37,625,000
---------------
44,049,000
---------------
OFFICE ELECTRONICS -- 0.65%
326,500 Canon, Inc. - ADR................................. 18,476,635
---------------
OIL & GAS -- 8.65%
150,000 Anadarko Petroleum Corp........................... 6,528,000
250,000 BP Amoco plc - ADR................................ 16,775,000
250,000 Chevron Corp...................................... 18,382,500
804,105 ConocoPhillips.................................... 57,855,355
1,000,000 Exxon Mobil Corp. ................................ 76,630,000
450,000 Marathon Oil Corp. ............................... 41,625,000
100,000 Petroleo Brasileiro S.A. - ADR.................... 10,299,000
250,000 Royal Dutch Petroleum Co.......................... 17,697,500
---------------
245,792,355
---------------
- --------------------------------------------------------------------------------
21
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 101.75% (CONTINUED) VALUE
================================================================================
PAPER & FOREST PRODUCTS -- 0.84%
700,000 International Paper Co............................ $ 23,870,000
---------------
PHARMACEUTICALS -- 13.51%
558,700 Altair Nanotechnologies, Inc. (a)................. 1,469,381
1,000,000 Biovail Corp. ................................... 21,160,000
250,000 Cephalon, Inc. (a)................................ 17,602,500
500,000 Forest Laboratories, Inc. (a)..................... 25,300,000
1,000,000 GlaxoSmithKline plc - ADR......................... 52,760,000
1,000,000 Johnson & Johnson................................. 66,020,000
500,000 King Pharmaceuticals, Inc. (a).................... 7,960,000
750,000 Novartis AG - ADR................................. 43,080,000
500,000 Omnicare, Inc..................................... 19,315,000
2,000,000 Pfizer, Inc....................................... 51,800,000
340,000 Pharmaceutical Product Development, Inc........... 10,954,800
125,000 Pharmacopeia Drug Discovery, Inc. (a)............. 532,500
579,000 Sanofi-Aventis - ADR.............................. 26,732,430
250,000 Shire Pharmaceuticals Group plc - ADR............. 15,440,000
200,000 Teva Pharmaceutical Industries Ltd. - ADR......... 6,216,000
350,000 Wyeth............................................. 17,822,000
---------------
384,164,611
---------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 2.93%
400,000 NVIDIA Corp. (a).................................. 14,804,000
1,588,300 OmniVision Technologies, Inc. (a)................. 21,680,295
2,574,975 Taiwan Semiconductor Manufacturing Co. Ltd. - ADR. 28,144,477
1,000,000 Veeco Instruments, Inc. (a)....................... 18,730,000
---------------
83,358,772
---------------
SOFTWARE -- 1.67%
200,000 BEA Systems, Inc. (a)............................. 2,516,000
150,000 Citrix Systems, Inc. (a).......................... 4,057,500
500,000 Intuit, Inc. (a).................................. 15,255,000
1,500,000 Oracle Corp. (a).................................. 25,710,000
---------------
47,538,500
---------------
SPECIALTY RETAIL -- 5.20%
1,400,000 Estee Lauder Cos., Inc. (The) - Class A........... 57,148,000
239,290 GameStop Corp. (a)................................ 13,103,520
500,000 Gap, Inc. (The)................................... 9,750,000
750,000 Limited Brands, Inc............................... 21,705,000
250,000 Men's Wearhouse, Inc. (The)....................... 9,565,000
1,500,000 Rite Aid Corp. ................................... 8,160,000
1,000,700 TJX Cos., Inc. (The).............................. 28,499,936
---------------
147,931,456
---------------
- --------------------------------------------------------------------------------
22
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 101.75% (CONTINUED) VALUE
================================================================================
TEXTILES & APPAREL -- 1.74%
500,000 NIKE, Inc. - Class B.............................. $ 49,515,000
---------------
WIRELESS TELECOMMUNICATIONS SERVICES -- 0.42%
200,000 Amdocs Ltd. (a)................................... 7,750,000
95,400 China Mobile Ltd. - ADR........................... 4,123,188
---------------
11,873,188
---------------
TOTAL COMMON STOCKS (Cost $2,611,000,167)......... $ 2,892,646,590
---------------
UNITS UNIT TRUSTS -- 0.00% VALUE
================================================================================
2,700 Penn West Energy Trust (Cost $112,307)............ $ 82,512
---------------
CONTRACTS CALL OPTION CONTRACTS -- 0.85% VALUE
================================================================================
10,000 S&P 500 Index Option, 02/17/2007 at $1,420
(Cost - $29,801,000).............................. $ 24,050,000
---------------
CONTRACTS PUT OPTION CONTRACTS -- 1.38% VALUE
================================================================================
8,000 Russell 2000 Index Option, 03/17/2007 at $780..... $ 17,784,000
10,000 S&P 500 Index Option, 03/17/2007 at $1,330........ 8,680,000
6,000 S&P 500 Index Option, 03/17/2007 at $1,400........ 12,636,000
---------------
Total Put Option Contracts (Cost $44,236,000)..... $ 39,100,000
---------------
TOTAL INVESTMENTS AT VALUE -- 103.98%
(Cost $2,685,149,474)............................. $ 2,955,879,102
---------------
SHARES MONEY MARKET FUNDS -- 6.32% VALUE
================================================================================
179,775,703 First American Treasury Obligations Fund - Class A
(Cost $179,775,703)............................. $ 179,775,703
---------------
TOTAL INVESTMENTS AND MONEY MARKET FUNDS AT VALUE
-- 110.30% (Cost $2,864,925,177)................. $ 3,135,654,805
LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.30%). (292,779,776)
---------------
NET ASSETS -- 100.00%............................. $ 2,842,875,029
===============
(a) Non-income producing security.
ADR - American Depositary Receipt
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
23
HUSSMAN STRATEGIC GROWTH FUND
SCHEDULE OF OPEN WRITTEN OPTION CONTRACTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE OF PREMIUMS
CONTRACTS WRITTEN CALL OPTION CONTRACTS OPTIONS RECEIVED
================================================================================
8,000 Russell 2000 Index Option,
03/17/2007 at $700.................... $ 78,152,000 $ 84,628,000
6,000 S&P 500 Index Option,
03/17/2007 at $1,250.................. 106,896,000 100,311,000
10,000 S&P 500 Index Option,
03/17/2007 at $1,330.................. 104,230,000 95,485,000
------------ ------------
$289,278,000 $280,424,000
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
HUSSMAN STRATEGIC TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 22.56% VALUE
================================================================================
ELECTRICAL EQUIPMENT -- 0.86%
35,000 Endesa S.A. - ADR................................... $ 1,628,200
-------------
ELECTRIC UTILITIES -- 2.10%
25,000 Korea Electric Power Corp. - ADR.................... 567,750
37,500 MDU Resources Group, Inc............................ 961,500
40,000 OGE Energy Corp..................................... 1,600,000
20,000 SCANA Corp.......................................... 812,400
-------------
3,941,650
-------------
GAS UTILITIES -- 0.78%
45,000 WGL Holdings, Inc. ................................. 1,466,100
-------------
METALS & MINING -- 18.82%
100,000 Agnico-Eagle Mines Ltd.............................. 4,124,000
100,000 AngloGold Ashanti Ltd. - ADR........................ 4,709,000
225,000 Barrick Gold Corp................................... 6,907,500
200,000 Compania de Minas Buenaventura S.A.u. - ADR......... 5,612,000
125,000 Goldcorp, Inc....................................... 3,555,000
75,000 Harmony Gold Mining Co.............................. 1,181,250
150,000 Newmont Mining Corp................................. 6,772,500
50,000 Randgold Resources Ltd. - ADR (a)................... 1,173,000
75,000 Stillwater Mining Co. (a)........................... 936,750
35,000 USEC, Inc........................................... 445,200
-------------
35,416,200
-------------
TOTAL COMMON STOCKS (Cost $36,610,657) ............. $ 42,452,150
-------------
PAR VALUE U.S. TREASURY OBLIGATIONS -- 66.31% VALUE
================================================================================
U.S. TREASURY BILLS -- 15.69%
$15,000,000 Discount note, due 03/15/2007....................... $ 14,857,260
15,000,000 Discount note, due 06/14/2007....................... 14,671,620
-------------
29,528,880
-------------
U.S. TREASURY INFLATION-PROTECTION NOTES -- 50.62%
23,193,400 3.50%, due 01/15/2011............................... 24,151,960
30,690,630 3.375%, due 01/15/2012.............................. 32,051,330
22,451,200 3.00%, due 07/15/2012............................... 23,111,602
16,484,100 1.875%, due 07/15/2013.............................. 15,930,350
-------------
95,245,242
-------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $125,672,324). $ 124,774,122
-------------
- --------------------------------------------------------------------------------
25
HUSSMAN STRATEGIC TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.18% VALUE
================================================================================
FEDERAL FARM CREDIT BANK -- 0.21%
$ 400,000 2.625%, due 09/24/2007........................... $ 392,648
-------------
FEDERAL HOME LOAN BANK -- 0.26%
500,000 5.70%, due 04/16/2018............................ 491,641
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.71%
JPY 600,000,000 2.125%, due 10/09/2007........................... 5,095,878
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $6,225,094)................................ $ 5,980,167
-------------
TOTAL INVESTMENTS AT VALUE -- 92.05%
(Cost $168,508,074).............................. $ 173,206,439
-------------
SHARES MONEY MARKET FUNDS -- 7.24% VALUE
================================================================================
13,632,467 First American Treasury Obligations Fund - Class A
(Cost $13,632,467)............................... $ 13,632,467
-------------
TOTAL INVESTMENTS AND MONEY MARKET FUNDS AT VALUE
-- 99.29% (Cost $182,140,541).................. $ 186,838,906
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.71%... 1,336,538
-------------
NET ASSETS -- 100.00%............................ $ 188,175,444
=============
(a) Non-income producing security.
ADR American Depositary Receipt
JPY Japanese Yen
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
26
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Hussman Strategic Growth Fund and Hussman Strategic Total Return Fund
(individually, a "Fund", and collectively, the "Funds") are each a diversified
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 a 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 over-the-counter markets 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.
- --------------------------------------------------------------------------------
27
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (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, 2006, 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 are 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 by the Adviser 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.
- --------------------------------------------------------------------------------
28
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (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 a daily 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.
- --------------------------------------------------------------------------------
29
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (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%, payable to the applicable Fund, if redeemed within six
months of the date of purchase. During the periods ended December 31, 2006 and
June 30, 2006, proceeds from redemption fees totaled $716,949 and $775,369,
respectively, for Hussman Strategic Growth Fund and $56,132 and $28,184,
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 generally distributed annually. 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, 2006 and June 30, 2006 were as follows:
Long-Term
Periods Ordinary Capital Total
Ended Income Gains Distributions
- ------------------------------------------------------------------------------------------
Hussman Strategic Growth Fund 12/31/06 $ 77,740,644 $ 28,486,453 $106,227,097
6/30/06 $ 77,329,170 $ 180,977 $ 77,510,147
- ------------------------------------------------------------------------------------------
Hussman Strategic Total Return Fund 12/31/06 $ 6,022,214 $ 2,339,807 $ 8,362,021
6/30/06 $ 5,081,839 $ 1,994,168 $ 7,076,007
- ------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
30
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
SECURITIES TRANSACTIONS -- For financial statement purposes, securities
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, 2006:
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
--------------- ---------------
Cost of portfolio investments ........... $ 2,564,760,177 $ 182,667,139
=============== ===============
Gross unrealized appreciation ........... $ 370,705,713 $ 6,235,425
Gross unrealized depreciation ........... (89,089,085) (2,063,659)
--------------- ---------------
Net unrealized appreciation ............. $ 281,616,628 $ 4,171,766
Net unrealized foreign exhange losses ... -- (312)
Other losses ............................ (213,386,767) (571,835)
Other temporary differences ............. (3,778,587) --
--------------- ---------------
Total accumulated earnings .............. $ 64,451,274 $ 3,599,619
=============== ===============
- --------------------------------------------------------------------------------
31
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
The difference between the federal income tax cost of portfolio
investments and the financial statement cost for the Funds 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.
For the six months ended December 31, 2006, Hussman Strategic Total Return
Fund reclassified $1,857 of foreign exchange losses from accumulated net
realized losses to accumulated overdistributed net investment income on the
Statement of Assets and Liabilities. Such reclassification, the result of
permanent differences between financial statement and income tax reporting
requirements, has no effect on the Fund's net assets or net asset value per
share.
2. INVESTMENT TRANSACTIONS
During the six months ended December 31, 2006, cost of purchases and
proceeds from sales and maturities of investment securities, other than
short-term investments and U.S. government securities, amounted to
$1,313,846,462 and $1,403,288,681, respectively, for Hussman Strategic Growth
Fund and $24,810,185 and $14,168,270, respectively, for Hussman Strategic Total
Return Fund.
3. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are affiliated with the Adviser
or with 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 annual rates of 1.00% of the first $1 billion of its
average daily net 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
annual rates of 0.55% of the first $500 million of its average daily net assets;
and 0.50% of such assets in excess of $500 million.
- --------------------------------------------------------------------------------
32
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to an Expense Limitation Agreement with respect to Hussman
Strategic 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, 2007. During the six
months ended December 31, 2006, there were no fees waived by the Adviser. 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. During the six months ended
December 31, 2006, the Adviser recouped $21,922 in previously waived fees from
Hussman Strategic Total Return Fund. As of December 31, 2006, the amount of fee
waivers and expense reimbursements available for recoupment by the Adviser is
$279,456. The Adviser may recoup a portion of this amount no later than the
dates as stated below:
June 30, June 30, June 30,
2007 2008 2009
- --------------------------------------------------------------------------------
Hussman Strategic Total Return Fund $ 116,810 $ 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.
Under the terms of the Administration Agreement, Ultimus receives a
monthly fee from each Fund computed at an annual rate of 0.08% on the Fund's
average daily net assets up to $500 million; 0.05% on the next $1.5 billion of
such assets; 0.04% on the next $1 billion of such assets; and 0.03% on such
assets in excess of $3 billion, subject to a minimum monthly fee of $2,000.
- --------------------------------------------------------------------------------
33
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 Fund a monthly base fee of $2,500, plus an asset-based fee
computed at annual rates of 0.01% of its average daily net assets up to $500
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, 2006, Hussman Strategic Growth Fund
and Hussman Strategic Total Return Fund paid $355,707 and $21,449, 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, compensate these intermediaries for providing equivalent
account maintenance and shareholder services, at an annual rate of not more than
$17 per account. During the six months ended December 31, 2006, Hussman
Strategic Growth Fund and Hussman Strategic Total Return Fund paid $334,765 and
$20,388, respectively, to financial intermediaries for such services.
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 computed at the annual rates of .005% of the average value of
its daily net assets from $100 million to $500 million, .0025% of such assets
- --------------------------------------------------------------------------------
34
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
from $500 million to $1 billion and .00125% of such assets in excess of $1
billion. For the six months ended December 31, 2006, Hussman Strategic Growth
Fund and Hussman Strategic Total Return Fund paid $31,044 and $4,618,
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.
4. OPTION CONTRACTS WRITTEN
Transactions in option contracts written by Hussman Strategic Growth Fund
during the six months ended December 31 2006 were as follows:
OPTION OPTION
CONTRACTS PREMIUMS
------------- -------------
Options outstanding at beginning of period ............ 24,500 $ 122,163,250
Options written ....................................... 49,500 435,980,750
Options cancelled in a closing purchase transactions .. (50,000) (277,720,000)
------------- -------------
Options outstanding at end of period .................. 24,000 $ 280,424,000
============= =============
No contracts were written by Hussman Strategic Total Return Fund during
the six months ended December 31, 2006.
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 determined by the lending bank at the time of borrowing. During the six
months ended December 31, 2006, 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.
- --------------------------------------------------------------------------------
35
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board (FASB) released
FASB Interpretation No. 48 (FIN 48) "Accounting for Uncertainty in Income
Taxes." FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in financial statements. FIN 48
requires the evaluation of tax positions taken in the course of preparing a
fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
benefits of positions not deemed to meet the more-likely-than-not threshold
would be booked as a tax expense in the current year and recognized as: a
liability for unrecognized tax benefits; a reduction of an income tax refund
receivable; a reduction of deferred tax asset; an increase in deferred tax
liability; or a combination thereof. Adoption of FIN 48 is required for fiscal
years beginning after December 15, 2006 and is to be applied to all open tax
years as of the effective date. Recent SEC guidance allows implementing FIN 48
in net asset value calculations as late as the last such calculation in the
first required financial statement reporting period. As a result, the Funds will
incorporate FIN 48 in their Semi-Annual report on December 31, 2007. At this
time, management is evaluating the implications of FIN 48 and its impact in the
financial statements has not yet been determined.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current generally accepted accounting principles resulting from
the application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of December 31 2006, the Trust does not believe the
adoption of SFAS No. 157 will impact the amounts reported in the Funds'
financial statements, however, additional disclosures may be required about the
inputs used to develop the measurements and the effect of certain of the
measurements reported on the statement of changes in net assets for a fiscal
period.
- --------------------------------------------------------------------------------
36
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 a Fund, 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 ongoing costs 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 the applicable 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.
- --------------------------------------------------------------------------------
37
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
Ending
Beginning Account Value Expenses
Account Value December 31, Paid During
July 1, 2006 2006 Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,006.30 $ 5.56
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,019.66 $ 5.60
* Expenses are equal to Hussman Strategic Growth Fund's annualized expense
ratio of 1.10% 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
Ending
Beginning Account Value Expenses
Account Value December 31, Paid During
July 1, 2006 2006 Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,025.40 $ 4.59
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 (after waiver of fees and absorption
of expenses pursuant to the Expense Limitation Agreement), multiplied by
the average account value over the period, multiplied by 184/365 (to
reflect the period covered by this report).
- --------------------------------------------------------------------------------
38
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 end 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.
- --------------------------------------------------------------------------------
39
THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] 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 27, 2007
------------------------------------
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 27, 2007
------------------------------------
By (Signature and Title)* /s/ Mark J. Seger
---------------------------------------------
Mark J. Seger, Treasurer
Date February 27, 2007
------------------------------------
* Print the name and title of each signing officer under his or her signature.