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OMB Number: 3235-0570
Expires: April 30, 2008
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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 811-09911
---------------------------------------------
Hussman Investment Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
5136 Dorsey Hall Drive Ellicott City, Maryland 21042
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(Address of principal executive offices) (Zip code)
John F. Splain
Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, Ohio 45246
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(Name and address of agent for service)
Registrant's telephone number, including area code: (410) 715-1145
---------------------------
Date of fiscal year end: June 30, 2008
------------------------------------
Date of reporting period: December 31, 2007
------------------------------------
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 OMITTED] 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, 2007
(UNAUDITED)
[LOGO OMITTED] HUSSMAN
FUNDS
STRATEGIC GROWTH FUND
Comparison of the Change in Value of a $10,000 Investment in the
Hussman Strategic Growth Fund versus the Standard & Poor's 500 Index
and the Russell 2000 Index (a)
[LINE GRAPH OMITTED]
HSGFX equity investments
Hussman Strategic equivalents and cash
Growth Fund (HSGFX) only (unhedged)(b) S&P 500 Index Russell 2000 Index
- ---------------------- ---------------------- ---------------------- ----------------------
7/24/2000 $ 10,000 7/24/2000 $ 10,000 7/24/2000 $ 10,000 7/24/2000 $ 10,000
7/31/2000 10,000 7/31/2000 9,997 7/31/2000 9,773 7/31/2000 9,736
8/31/2000 10,030 8/31/2000 10,545 8/31/2000 10,380 8/31/2000 10,479
9/30/2000 10,350 9/30/2000 10,226 9/30/2000 9,832 9/30/2000 10,171
10/31/2000 10,040 10/31/2000 9,639 10/31/2000 9,790 10/31/2000 9,717
11/30/2000 10,840 11/30/2000 9,561 11/30/2000 9,018 11/30/2000 8,719
12/31/2000 11,640 12/31/2000 10,486 12/31/2000 9,063 12/31/2000 9,468
1/31/2001 11,270 1/31/2001 10,437 1/31/2001 9,384 1/31/2001 9,961
2/28/2001 12,030 2/28/2001 10,488 2/28/2001 8,528 2/28/2001 9,307
3/31/2001 12,430 3/31/2001 10,351 3/31/2001 7,988 3/31/2001 8,852
4/30/2001 12,190 4/30/2001 10,886 4/30/2001 8,609 4/30/2001 9,545
5/31/2001 12,340 5/31/2001 11,137 5/31/2001 8,667 5/31/2001 9,779
6/30/2001 12,200 6/30/2001 11,056 6/30/2001 8,456 6/30/2001 10,117
7/31/2001 12,470 7/31/2001 10,825 7/31/2001 8,372 7/31/2001 9,569
8/31/2001 12,770 8/31/2001 10,597 8/31/2001 7,848 8/31/2001 9,260
9/30/2001 12,640 9/30/2001 9,523 9/30/2001 7,215 9/30/2001 8,014
10/31/2001 12,767 10/31/2001 9,944 10/31/2001 7,352 10/31/2001 8,483
11/30/2001 13,236 11/30/2001 11,015 11/30/2001 7,916 11/30/2001 9,139
12/31/2001 13,348 12/31/2001 11,444 12/31/2001 7,985 12/31/2001 9,703
1/31/2002 13,840 1/31/2002 11,713 1/31/2002 7,869 1/31/2002 9,602
2/28/2002 13,963 2/28/2002 11,568 2/28/2002 7,717 2/28/2002 9,339
3/31/2002 14,477 3/31/2002 12,637 3/31/2002 8,007 3/31/2002 10,090
4/30/2002 14,823 4/30/2002 12,629 4/30/2002 7,522 4/30/2002 10,182
5/31/2002 15,192 5/31/2002 12,529 5/31/2002 7,466 5/31/2002 9,730
6/30/2002 14,913 6/30/2002 11,567 6/30/2002 6,935 6/30/2002 9,247
7/31/2002 15,338 7/31/2002 10,544 7/31/2002 6,394 7/31/2002 7,851
8/31/2002 15,394 8/31/2002 10,510 8/31/2002 6,436 8/31/2002 7,831
9/30/2002 15,204 9/30/2002 9,644 9/30/2002 5,737 9/30/2002 7,268
10/31/2002 14,935 10/31/2002 9,997 10/31/2002 6,241 10/31/2002 7,501
11/30/2002 14,775 11/30/2002 10,649 11/30/2002 6,609 11/30/2002 8,171
12/31/2002 15,220 12/31/2002 10,296 12/31/2002 6,221 12/31/2002 7,716
1/31/2003 15,148 1/31/2003 9,962 1/31/2003 6,058 1/31/2003 7,502
2/28/2003 14,931 2/28/2003 9,598 2/28/2003 5,967 2/28/2003 7,276
3/31/2003 14,919 3/31/2003 9,688 3/31/2003 6,025 3/31/2003 7,369
4/30/2003 15,184 4/30/2003 10,524 4/30/2003 6,521 4/30/2003 8,068
5/31/2003 16,338 5/31/2003 11,605 5/31/2003 6,865 5/31/2003 8,934
6/30/2003 16,590 6/30/2003 11,857 6/30/2003 6,952 6/30/2003 9,095
7/31/2003 17,119 7/31/2003 12,282 7/31/2003 7,075 7/31/2003 9,665
8/31/2003 17,528 8/31/2003 12,740 8/31/2003 7,213 8/31/2003 10,108
9/30/2003 17,155 9/30/2003 12,345 9/30/2003 7,136 9/30/2003 9,921
10/31/2003 17,756 10/31/2003 13,190 10/31/2003 7,540 10/31/2003 10,754
11/30/2003 18,032 11/30/2003 13,573 11/30/2003 7,606 11/30/2003 11,136
12/31/2003 18,429 12/31/2003 14,176 12/31/2003 8,005 12/31/2003 11,362
1/31/2004 18,645 1/31/2004 14,624 1/31/2004 8,152 1/31/2004 11,855
2/29/2004 19,247 2/29/2004 15,119 2/29/2004 8,265 2/29/2004 11,962
3/31/2004 19,174 3/31/2004 14,979 3/31/2004 8,140 3/31/2004 12,073
4/30/2004 19,018 4/30/2004 14,542 4/30/2004 8,013 4/30/2004 11,458
5/31/2004 19,078 5/31/2004 14,704 5/31/2004 8,123 5/31/2004 11,640
6/30/2004 19,114 6/30/2004 15,037 6/30/2004 8,281 6/30/2004 12,130
7/31/2004 18,693 7/31/2004 14,204 7/31/2004 8,007 7/31/2004 11,313
8/31/2004 18,260 8/31/2004 14,058 8/31/2004 8,039 8/31/2004 11,255
9/30/2004 18,657 9/30/2004 14,481 9/30/2004 8,126 9/30/2004 11,784
10/31/2004 18,717 10/31/2004 14,580 10/31/2004 8,250 10/31/2004 12,016
11/30/2004 19,151 11/30/2004 15,474 11/30/2004 8,584 11/30/2004 13,058
12/31/2004 19,379 12/31/2004 15,992 12/31/2004 8,876 12/31/2004 13,444
1/31/2005 19,190 1/31/2005 15,591 1/31/2005 8,660 1/31/2005 12,883
2/28/2005 19,619 2/28/2005 16,118 2/28/2005 8,842 2/28/2005 13,102
3/31/2005 19,707 3/31/2005 15,882 3/31/2005 8,685 3/31/2005 12,727
4/30/2005 19,619 4/30/2005 15,408 4/30/2005 8,521 4/30/2005 11,998
5/31/2005 19,808 5/31/2005 16,054 5/31/2005 8,792 5/31/2005 12,783
6/30/2005 20,060 6/30/2005 16,382 6/30/2005 8,804 6/30/2005 13,276
7/31/2005 20,098 7/31/2005 17,031 7/31/2005 9,132 7/31/2005 14,117
8/31/2005 20,439 8/31/2005 17,031 8/31/2005 9,049 8/31/2005 13,855
9/30/2005 20,742 9/30/2005 17,317 9/30/2005 9,122 9/30/2005 13,899
10/31/2005 20,388 10/31/2005 16,780 10/31/2005 8,970 10/31/2005 13,467
11/30/2005 20,338 11/30/2005 17,250 11/30/2005 9,309 11/30/2005 14,121
12/31/2005 20,486 12/31/2005 17,340 12/31/2005 9,312 12/31/2005 14,057
1/31/2006 20,695 1/31/2006 18,067 1/31/2006 9,559 1/31/2006 15,317
2/28/2006 20,852 2/28/2006 18,161 2/28/2006 9,585 2/28/2006 15,275
3/31/2006 20,826 3/31/2006 18,448 3/31/2006 9,704 3/31/2006 16,016
4/30/2006 21,074 4/30/2006 18,774 4/30/2006 9,834 4/30/2006 16,013
5/31/2006 21,074 5/31/2006 18,091 5/31/2006 9,551 5/31/2006 15,114
6/30/2006 21,074 6/30/2006 18,053 6/30/2006 9,564 6/30/2006 15,211
7/31/2006 21,166 7/31/2006 18,024 7/31/2006 9,623 7/31/2006 14,716
8/31/2006 21,140 8/31/2006 18,325 8/31/2006 9,852 8/31/2006 15,152
9/30/2006 21,153 9/30/2006 18,656 9/30/2006 10,106 9/30/2006 15,278
10/31/2006 21,179 10/31/2006 19,256 10/31/2006 10,435 10/31/2006 16,158
11/30/2006 21,166 11/30/2006 19,544 11/30/2006 10,634 11/30/2006 16,583
12/31/2006 21,206 12/31/2006 19,747 12/31/2006 10,783 12/31/2006 16,638
1/31/2007 21,111 1/31/2007 20,010 1/31/2007 10,946 1/31/2007 16,917
2/28/2007 21,342 2/28/2007 19,733 2/28/2007 10,732 2/28/2007 16,783
3/31/2007 21,545 3/31/2007 20,057 3/31/2007 10,852 3/31/2007 16,962
4/30/2007 21,464 4/30/2007 20,749 4/30/2007 11,333 4/30/2007 17,267
5/31/2007 21,111 5/31/2007 21,292 5/31/2007 11,728 5/31/2007 17,974
6/30/2007 21,491 6/30/2007 21,125 6/30/2007 11,533 6/30/2007 17,711
7/31/2007 21,979 7/31/2007 20,424 7/31/2007 11,176 7/31/2007 16,500
8/31/2007 22,264 8/31/2007 20,618 8/31/2007 11,343 8/31/2007 16,874
9/30/2007 22,155 9/30/2007 21,184 9/30/2007 11,767 9/30/2007 17,163
10/31/2007 21,898 10/31/2007 21,239 10/31/2007 11,954 10/31/2007 17,656
11/30/2007 22,143 11/30/2007 20,207 11/30/2007 11,455 11/30/2007 16,388
12/31/2007 22,089 12/31/2007 19,924 12/31/2007 11,375 12/31/2007 16,378
Past performance is not predictive of future performance.
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AVERAGE ANNUAL TOTAL RETURNS(c)
For Periods Ended December 31, 2007
Since
1 Year 3 Years 5 Years Inception(d)
------ ------- ------- ---------
Hussman Strategic Growth Fund 4.16% 4.46% 7.73% 11.24%
S&P 500 Index 5.49% 8.62% 12.83% 1.75%
Russell 2000 Index (1.57%) 6.80% 16.25% 6.86%
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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) "HSGFX equity investments and cash equivalents only (unhedged)" reflects
the performance of the Fund's stock investments and modest day-to-day cash
balances, after fees and expenses, but excluding the impact of hedging
transactions. The Fund's unhedged equity investments do not represent a
separately available portfolio, and their peformance is presented solely
for purposes of comparison and performance attribution.
(c) Total return includes income from interest and dividends as well as
capital gains. Performance figures quoted above assume that income 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) Annualized. Initial public offering of shares was July 24, 2000.
[LOGO OMITTED] HUSSMAN
FUNDS
STRATEGIC TOTAL RETURN FUND
Comparison of the Change in Value of a $10,000 Investment in the Hussman
Strategic Total Return Fund versus the Lehman U.S. Aggregate Index (a)
[LINE GRAPH OMITTED]
Hussman Strategic Lehman Brothers
Total Return Fund U.S. Aggregate Index
------------------------ -------------------------
9/12/2002 $10,000 9/12/2002 $10,000
9/30/2002 9,960 9/30/2002 10,097
10/31/2002 9,830 10/31/2002 10,051
11/30/2002 9,790 11/30/2002 10,048
12/31/2002 10,230 12/31/2002 10,256
1/31/2003 10,240 1/31/2003 10,264
2/28/2003 10,270 2/28/2003 10,406
3/31/2003 10,177 3/31/2003 10,398
4/30/2003 10,177 4/30/2003 10,484
5/31/2003 10,610 5/31/2003 10,679
6/30/2003 10,681 6/30/2003 10,658
7/31/2003 10,407 7/31/2003 10,300
8/31/2003 10,670 8/31/2003 10,368
9/30/2003 10,977 9/30/2000 10,643
10/31/2003 10,987 10/31/2003 10,544
11/30/2003 11,069 11/30/2003 10,569
12/31/2003 11,233 12/31/2003 10,677
1/31/2004 11,297 1/31/2004 10,762
2/29/2004 11,466 2/29/2004 10,878
3/31/2004 11,689 3/31/2004 10,960
4/30/2004 11,052 4/30/2004 10,675
5/31/2004 11,275 5/31/2004 10,632
6/30/2004 11,267 6/30/2004 10,692
7/31/2004 11,309 7/31/2004 10,798
8/31/2004 11,577 8/31/2004 11,004
9/30/2004 11,714 9/30/2004 11,034
10/31/2004 11,843 10/31/2004 11,127
11/30/2004 11,942 11/30/2004 11,038
12/31/2004 11,963 12/31/2004 11,139
1/31/2005 11,768 1/31/2005 11,209
2/28/2005 11,931 2/28/2005 11,143
3/31/2005 11,817 3/31/2005 11,086
4/30/2005 11,665 4/30/2005 11,236
5/31/2005 11,752 5/31/2005 11,358
6/30/2005 11,987 6/30/2005 11,420
7/31/2005 11,834 7/31/2005 11,316
8/31/2005 12,031 8/31/2005 11,461
9/30/2005 12,415 9/30/2005 11,343
10/31/2005 12,239 10/31/2005 11,253
11/30/2005 12,432 11/30/2005 11,303
12/31/2005 12,681 12/31/2005 11,411
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 13,078 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
1/31/2007 13,386 1/31/2007 11,900
2/28/2007 13,483 2/28/2007 12,083
3/31/2007 13,495 3/31/2007 12,083
4/30/2007 13,605 4/30/2007 12,148
5/31/2007 13,520 5/31/2007 12,056
6/30/2007 13,520 6/30/2007 12,021
7/31/2007 13,941 7/31/2007 12,121
8/31/2007 13,978 8/31/2007 12,270
9/30/2007 14,423 9/30/2007 12,363
10/31/2007 14,748 10/31/2007 12,474
11/30/2007 14,931 11/30/2007 12,698
12/31/2007 15,088 12/31/2007 12,734
Past performance is not predictive of future performance.
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AVERAGE ANNUAL TOTAL RETURNS(b)
For Periods Ended December 31, 2007
Since
1 Year 3 Years 5 Years Inception(c)
------ ------- ------- ---------
Hussman Strategic Total Return Fund 12.61% 8.04% 8.08% 8.07%
Lehman Brothers U.S. Aggregate Index 6.97% 4.56% 4.42% 4.66%
- --------------------------------------------------------------------------------
(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) Total return includes income from interest and dividends as well as
capital gains. Performance figures quoted above assume that income 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.
(c) Annualized. Initial public offering of shares was September 12, 2002.
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS FEBRUARY 22, 2008
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DEAR SHAREHOLDER,
The Hussman Strategic Growth Fund ended 2007 with positive returns for the
8th consecutive year. The Hussman Strategic Total Return Fund ended 2007 with
positive returns for the 6th consecutive year. Both Funds have substantially
outperformed their respective benchmarks since inception, while maintaining
contained volatility.
For the year ended December 31, 2007, the Strategic Growth Fund achieved a
total return of 4.16%, compared with a total return of 5.49% for the S&P 500
Index. Since inception on July 24, 2000 to December 31, 2007, the Fund has
achieved an average annual total return of 11.24%, compared with an average
annual total return of 1.75% for the S&P 500 Index over the same period. With
regard to periodic losses, the deepest peak-to-trough pullback in the Strategic
Growth Fund within this period was -6.98%, compared with -47.41% for the S&P 500
Index. An initial $10,000 investment in the Fund on July 24, 2000 would have
grown to $22,089, compared with $11,375 for a similar investment in the S&P 500
index.
For the year ended December 31, 2007, the Strategic Total Return Fund
achieved a total return of 12.61%, compared with a total return of 6.97% for the
Lehman Brothers U.S. Aggregate Index. Since inception on September 12, 2002, the
Fund has achieved an average annual total return of 8.07%, compared with an
average annual total return of 4.66% for the Lehman Brothers U.S. Aggregate
Index over the same period. An initial $10,000 investment in the Fund on
September 12, 2002 would have grown to $15,088, compared with $12,734 for a
similar investment in the Lehman U.S. Aggregate Index.
The table below 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 Fund, the table
separately presents the annual returns of the Fund and the annual returns of the
stock positions and cash equivalents held by the Fund (after expenses), without
the impact of hedging transactions.
- --------------------------------------------------------------------------------
1
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
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% 28.68%
2004 5.16% 12.81% 10.88%
2005 5.71% 8.43% 4.91%
2006 3.51% 13.88% 15.79%
2007 4.16% 0.89% 5.49%
Since Inception
(Average Annual Returns) 11.24% 9.71% 1.75%
* July 24, 2000 - December 31, 2000, not annualized
The table below presents the annual returns for the Strategic Total Return
Fund and the Lehman Brothers U.S. Aggregate Index since the inception of the
Fund.
LEHMAN BROTHERS U.S.
YEAR HSTRX AGGREGATE INDEX
----------------------------------------------------------------
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%
2007 12.61% 6.97%
* September 12, 2002 - December 31, 2002, not annualized
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 their emphasis on risk management, Fund
returns will periodically behave differently than various market indices. The
intent of our investment strategy is to outperform the major indices over the
complete market cycle (bull and bear markets combined), with added emphasis on
defending capital in unfavorable market conditions.
- --------------------------------------------------------------------------------
2
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
STRATEGIC GROWTH FUND
Our investment strategy has strongly outperformed the S&P 500 over the
complete bull-bear market cycle since 2000, with substantially smaller periodic
losses, and I believe that it is well-suited to pursue those objectives in the
years ahead. That said, the past few years of positive but single-digit returns
have been an obvious disappointment - admittedly a fraction of my long-term
expectations.
For the four-year period ended December 31, 2007, the S&P 500 itself has
only outperformed Treasury bills by about 4% annually (which is a slim margin
for a bull market period). The market decline in early 2008 has narrowed this
margin even further. Given that hedging market risk only limits our returns to
the extent that the market indices outperform Treasury bills, the hedged
position of the Strategic Growth Fund has not been the cause of significant
forgone returns in recent years.
Rather, our primary challenge during recent years has been in stock
selection. Characteristics that have historically been well-rewarded over the
long-term (such as favorable valuation, stable profit margins, and reliable
growth in earnings and revenues) have been somewhat out of favor in recent
years. The recent returns of the S&P 500 have been disproportionately
attributable to stocks of companies engaged in the energy, basic materials,
capital goods sectors, and other companies that we see as having poor stability
in earnings and balance sheets. We've held positions in some of these
(particularly oil companies), but due to the unpredictability of their long-term
cash flows, their valuations have a large speculative and commodity-driven
component. Despite the excitement about demand from China and other developing
countries, I am skeptical that the world economy will "decouple" from the U.S.,
and remain averse to placing a large portion of shareholder assets at risk in
companies that strike me as cyclical and commodity plays.
From January 1, 2004 through December 31, 2007, the stocks held by the
Fund achieved an average annual total return of 8.88% (after expenses and
excluding the impact of hedging). This is only slightly below the 9.18% average
annual total return achieved by the S&P 500. The shortfall may not appear to be
a significant disappointment, but in the absence of a strong performance margin
from our stock selection, the single-digit "implied interest" earned by our
hedges was left as our primary source of total returns in recent years (our
option combinations behave largely as interest-bearing short-sales on the
indices we use to hedge).
- --------------------------------------------------------------------------------
3
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
As detailed in the table above, the Fund's stock selections outperformed
the S&P 500 by an average of over 10% (i.e. 1000 basis points) per year from the
Fund's inception in 2000 through 2003. From my perspective, the period from
2000-2003 represented the faithful application of our investment discipline, and
what I viewed as reasonable returns, consistent with historical evidence and
experience. For that reason, I described the Fund's performance at the time as
"neither extraordinary nor disappointing" and generally began the annual and
semi-annual reports with a note that the Fund had performed as intended. In
contrast, our stock selections have achieved overall total returns little
different from the total returns of the S&P 500 since 2004.
I believe that this recent period of leadership among "low-quality" stocks
will prove itself to be temporary, and that long-term investment returns will
continue to be driven by value, quality and sponsorship. Ultimately, stocks are
a claim on a long-term stream of cash flows that will be delivered to investors
over time. Our primary source of long-term returns has been the discipline of
purchasing those cash flows at reasonable prices, particularly when there is
evidence of demand, or "sponsorship" from other investors on the basis of
price/volume behavior.
Placing this period of positive but modest returns in a longer-term
perspective, the Fund has clearly achieved the goal of outperforming the S&P 500
over the full market cycle since 2000, with significantly smaller periodic
losses. This period is what we consider a meaningful "full cycle" horizon; in
this case, a significant bear market decline, coupled with a significant bull
market advance.
Moreover, the sharp market decline in the early weeks of 2008 has
substantially closed the performance gap with the S&P 500 that had emerged in
more recent years. From January 1, 2004 through February 21, 2008 (as this
shareholder letter is written), the S&P 500 has achieved a cumulative total
return of 30.32% (6.60% annually) versus a cumulative total return of 19.86%
(4.47% annually) for the Strategic Growth Fund. Assuming the Fund's hedged
position is unchanged in the face of a continued market decline, the S&P 500
would currently have to retreat 8.03% further to place the Fund even with the
S&P 500 since the end of 2003. [Calculation: 1.1986/1.3032 - 1 = -0.0803].
Finally, I should emphasize that we continue to find ample liquidity in
the stocks that we wish to own. Our recent challenge in achieving a strong
margin of outperformance from our stock selections may be due to my aversion to
- --------------------------------------------------------------------------------
4
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
stocks and sectors that I believe will be vulnerable over time, but it is not
attributable to any difficulty establishing investment positions that I do
expect to be rewarding. It is typical for mutual funds to close investments to
new shareholders at the point where a fund's largest stock holdings represent
several days of average daily trading volume in those stocks. Among the 25
largest stock holdings (by dollar value invested) in the Strategic Growth Fund,
our median investment represents just 8.4% of a single day's average trading
volume at present.
STRATEGIC TOTAL RETURN FUND
For the year ended December 31, 2007, the Strategic Total Return Fund
achieved a total return of 12.61%, compared with a total return of 6.97% for the
Lehman Brothers U.S. Aggregate Index. The relatively strong total return of the
Fund was driven by investments in Treasury Inflation Protected Securities (TIPS)
and precious metals shares. The returns in both of these asset classes benefited
from a general decline in real, inflation-adjusted interest rates. In addition
to the direct impact on TIPS prices, falling real interest rates exerted
downward pressure on the value of the U.S. dollar last year (that is, foreign
currencies became more expensive), which created upward pressure on the prices
of globally-traded commodities such as gold, as measured in dollars.
The Strategic Total Return Fund has the ability to hold up to 30% of its
assets in investments other than U.S. fixed income securities, including foreign
government bonds, utility stocks and precious metals shares. Given that the
Strategic Total Return Fund seeks to preserve and enhance long-term purchasing
power against inflation, precious metals have been an effective component of our
investment strategy. As in recent years, the primary source of day-to-day
fluctuation in the Fund has been its holdings of precious metals shares, which
have generally varied in a range of 5-25% of net assets, depending on market
conditions.
Recently, precious metals shares have reflected what have historically
been very depressed valuations relative to spot gold prices, with the ratio of
gold prices to share prices (analogous to an "earnings yield") at levels that
have historically been followed by particularly strong total returns in gold
shares. Accordingly, the Fund has maintained between 20-25% of assets in
precious metals shares in recent months, which is at the high end of our typical
allocations. Since gold stock prices tend to be fairly volatile, the Strategic
Total Return Fund generally varies its exposure around a "core" position in
response to extended short-term price trends; reducing its holdings on
short-term
- --------------------------------------------------------------------------------
5
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
strength, and increasing them on short-term weakness. This practice contributed
to the returns of the Strategic Total Return Fund during 2007.
PORTFOLIO COMPOSITION AND PERFORMANCE DRIVERS
As of December 31, 2007, the Strategic Growth Fund had net assets of
$2,957,446,456, and held 126 stocks in a wide variety of industries. The largest
sector holdings were in information technology (33.3%), consumer discretionary
(22.5%), health care (15.1%), and energy (13.2%). The smallest sector weights
were in financials (0.8%) and utilities (0.0%).
The Fund's holdings of individual stocks as of December 31, 2007 accounted
for $2,907,501,716, or 98.3% of net assets. Against these stock positions, the
Fund also held 14,000 option combinations (long put option, short call option)
on the S&P 500 Index, 8,000 option combinations on the Russell 2000 Index and
700 option combinations on the Nasdaq 100 Index. Each option combination behaves
as a short sale on the underlying index, with a notional value of $100 times the
index value. On December 31, 2007, the S&P 500 Index closed at 1,468.36, while
the Russell 2000 Index and the Nasdaq 100 Index closed at 766.03 and 2,084.93,
respectively. The Fund's total hedge therefore represented a short position of
$2,814,473,100, thereby hedging 96.8% of the dollar value of the Fund's long
investment positions in individual stocks.
Though 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, 2007: Research in Motion, Garmin, Medco Health Solutions,
NVIDIA, Western Digital, Exxon Mobil, and Nokia. Holdings with losses in excess
of $10 million during this same period were Talbots, Advanced Energy, Men's
Warehouse, Kohl's, WellCare Health Plans, and Dollar Tree Stores. For the full
calendar year ended December 31, 2007, the Fund achieved gains in excess of $15
million in Research in Motion, Garmin, Nokia, Energizer Holdings, Nike, Medco
Health Solutions, and Exxon Mobil. The Fund experienced a loss greater than $15
million in Kohl's, WellCare Health Plans, and Lexmark International.
It is important to recognize that while the Fund's stock selection
approach emphasizes favorable valuation, we do not equate undervaluation with
low price/earnings or price/book multiples. Rather, we see the value of a
security as being determined by the long-term stream of cash flows that a
company can
- --------------------------------------------------------------------------------
6
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
reasonably be expected to deliver to shareholders over time. In many cases,
plausible growth expectations and highly defensible product lines imply "fair"
valuation multiples considerably above prevailing market multiples. This is
particularly true where we believe that earnings and revenues for a certain
company have the potential to double or triple within a few years.
It has historically been true that stocks grouped by low price/earnings
multiples have performed well relative to stocks grouped by high multiples.
However, our historical research indicates that price-to-discounted-cash-flow
has been a more effective indicator of investment performance over the long-term
(though these values require more financial analysis to estimate properly). For
that reason, the Fund's investment in a few stocks with high price/earnings
multiples should be taken to imply our expectations for significant long-term
growth or substantial liquidation/buyout value for these companies, not as a
departure from our value-conscious discipline.
As of December 31, 2007, the Strategic Total Return Fund had net assets of
$205,998,109. Treasury Inflation Protected Securities accounted for 40.5% of the
Fund's net assets, with short-term Treasury bills, government agency securities,
and money market securities representing an additional 39.4% of net assets.
Precious metals shares accounted for 19.6% of net assets. The Fund carried a
duration of approximately 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).
In the Strategic Total Return Fund, during the semi-annual period ended
December 31, 2007 portfolio gains in excess of $1 million were achieved in
Barrick Gold, Cia De Mina Buena ADR, Agnico-Eagle Mines, Newmont Mining, U.S.
Treasury Inflation-Protected Note (3.375%, due 1/15/2012), U.S. Treasury
Inflation-Protected Note (3.00%, due 7/15/2012), Goldcorp, and U.S. Treasury
Inflation-Protected Note (2.375%, due 1/15/2025). The Fund did not experience
any losses greater than $500,000 during this period. For the full calendar year
ended December 31, 2007, the Fund achieved gains in excess of $1 million in Cia
De Mina Buena ADR, Barrick Gold, U.S. Treasury Inflation-Protected Note (3.375%,
due 1/15/2012), U.S. Treasury Inflation-Protected Note (3.00%, due 7/15/2012),
Agnico-Eagle Mines, and U.S. Treasury Inflation-Protected Note (2.375%, due
1/15/2025). The Fund did not experience any losses greater than $500,000 during
this period.
- --------------------------------------------------------------------------------
7
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
PRESENT CONDITIONS
Six months ago, I noted in our Annual Report that "I continue to be
concerned about current debt burdens on U.S. households, businesses and the
nation itself (via large fiscal and current account imbalances). Ultimately,
these imbalances are not likely to be sustained, and we are likely to observe
continued slow growth in U.S. gross domestic investment as our dependence on
borrowed and imported capital is gradually replaced by domestic savings. This is
likely to be a long and difficult adjustment. Historically, activities that
benefit most from debt and leverage during a period of credit expansion are also
the activities most harmed by credit contraction. At present, the clearest
examples of this are mortgage lenders, but my impression is that the earnings
and book values of other merchants of leverage, such as investment banks, may
also be affected."
Although we have observed a significant widening of credit spreads and an
increase in losses and write-offs among banks and other lenders, I continue to
believe that the U.S. economy is quite early in the process of "deleveraging"
from the excess debt creation of recent years. A large wave of mortgage
interest-rate resets began to come due in October 2007, and will continue into
2009. Although Treasury interest rates have declined sharply due to a flight to
safety by investors, mortgage rates have been fairly stubborn. More importantly,
recent rates of delinquency and foreclosure are not yet representative of the
high rates that can be expected in the coming years. In the typical foreclosure
event, there is first a burdensome reset, followed by several months of
attempted payments, followed by several months of delinquency, and only then by
foreclosure action. Given that the heavy resets only started in October, the
U.S. economy remains perhaps two or three quarters away from serious credit
losses, foreclosures and writedowns.
To imagine that financial companies can simply "come clean" and "just put
their cards on the table" assumes that lenders actually know which loans are
facing default, and how many. But lenders are still months away from even
finding this out. Meanwhile, publicly traded financials face a double-edged
sword if they boost loan loss reserves too much in advance, because the SEC
discourages it as a potential method of "managing" and misrepresenting ongoing
earnings. Finally, with funding sources becoming more risk averse, my impression
is that major banks will inevitably be forced to cut their dividends in an
attempt to maintain capital.
- --------------------------------------------------------------------------------
8
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
With regard to the U.S. economy, our most reliable gauge of recession risk
became unfavorable in November - essentially the same set of information that
prompted our expectation of a recession in late-2000. While no individual
element of this combination has an errorless record, the full "syndrome" has
been observed in every post-war recession, and has never been observed except
during or immediately surrounding recessions. These conditions include: 1)
widening credit spreads over the most recent 6-month period; 2) a moderate or
flat yield curve (10-year Treasury yield no more than 2.5% above 3-month
Treasury yields); 3) falling stock prices over the most recent 6-month period;
4) a moderating ISM Purchasing Managers Index (below 54) and; 5) weakening
employment growth (total nonfarm employment growth below 1.3% over the preceding
year, or an unemployment rate up 0.4% or more from its 12-month low).
That said, I expect that the most significant area of difficulty in the
economy will be among industries that rely on, or are active in, debt
origination. These include primarily homebuilders and financial companies.
Recessions are not caused by a general or uniform decline in the demand for
goods and services. Instead, they are periods when the mix of goods and services
demanded in the economy becomes mismatched with the mix of goods and services
that was previously supplied.
Though consumption represents about three-quarters of economic activity,
it is also the most stable. The belief that consumer spending declines
significantly during recession is simply counter to historical evidence -
nominal consumption has never declined on a year-over-year basis. Rather, job
losses in a recession tend to be concentrated in those areas where demand no
longer absorbs the capacity that was previously supplied. In the present
instance, construction and finance are primarily at risk.
Meanwhile, many industries enjoy a shift in demand toward their goods and
services, and continue to grow during recessions, despite a weak economy. In the
present instance, the healthcare, technology and even consumer sectors appear
well-positioned. Notably, the low U.S. inventory/sales ratio suggests that
inventories are quite lean at present, so while I do anticipate a recession, the
effects are likely to focus on declining asset prices - particularly mortgage
related credit - rather than sharp losses in real output.
- --------------------------------------------------------------------------------
9
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
Along with the risk of a weaker economy, there is substantial risk of
further weakness in the U.S. dollar. Presently, the U.S. economy is running the
deepest current account deficit in history, even as the Federal government
promises additional debt to run a "stimulus package." At the same time, the
carry between Chinese interest rates and U.S. Treasury yields has now turned
negative, meaning that there is no longer a favorable interest rate differential
to encourage Chinese investment in U.S. government debt. Moreover, the gradual
appreciation of the yuan continues, meaning that the Chinese are also taking
losses on their holdings of U.S. Treasuries due to dollar devaluation.
The only remaining allure of Treasuries has been for capital gains due to
investors' flight to safety, but with yields already compressed, it is
increasingly risky to expect continued downward pressure on long-maturity
interest rates. This places the U.S. in the difficult position of having to
finance an enormous volume of capital needs from foreigners, particularly for
Treasury debt, yet without being able to offer competitive yields or strong
prospects for additional capital gains.
My impression is that the markets will respond to this difficulty with
what MIT economist Rudiger Dornbusch referred to in 1976 as "exchange rate
overshooting." Specifically, if there is a weak prospect that foreign lenders
will achieve a total return on U.S. Treasuries competitive with what they can
earn in their own country, and every prospect that short-term interest rates in
the U.S. will remain depressed or fall even further, the only way to attract
capital is to immediately drive the value of the U.S. dollar to such a depressed
level that it will be expected to appreciate over time.
With regard to the prospects for monetary and fiscal "stimulus" to
materially reduce recession risk, it is notable that the total increase in the
U.S. monetary base (the only monetary aggregate that the Federal Reserve
controls) amounted to just $9.8 billion in 2007, all of which was drawn out of
the banking system as currency in circulation. The notion that the Fed has
"injected" enormous amounts of liquidity is an artifact of counting the
continuous and regular rollover of short-term repurchase agreements as if they
represent new money. The entire stock of U.S. bank reserves amounts to $42.6
billion, an amount that fluctuates from year-to-year by only about $1 billion.
During periods when the demand for currency soars, the Fed has an
essential role in accommodating this demand, as the Fed did in the weeks around
the "year 2000" transition. Aside from these periods, the monetary
- --------------------------------------------------------------------------------
10
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
base simply does not fluctuate much, and its long-term growth is almost entirely
due to growth of currency in circulation. Meanwhile, the Federal Funds rate is
wholly determined by trading of day-to-day excesses and shortfalls in a very
shallow, stable pool of bank reserves. The belief that this object controls the
fate of the U.S. economy is the triumph of superstition over analysis.
The simplest way to understand the fiscal stimulus is to recognize that in
equilibrium, every security issued must be held. If the government issues $150
billion of new debt to finance tax rebates, then by pure accounting identity,
exactly $150 billion of savings must be absorbed from someone to purchase that
debt. Government itself is a zero sum game. The proposed "fiscal stimulus"
amounts to the government issuing additional debt to some individuals in the
economy, and allocating the proceeds to others. The only relevant issue is
whether adding to the Federal debt in order to redistribute purchasing power
will bring resources into use that otherwise would lay idle; whether the
redistribution of purchasing power will relieve some constraint that would be
binding in the absence of the program, in a way that ultimately increases
economic activity.
For most families, the most binding constraint right now is not the
ability to spend out of current income, but the ability to service debt. A
temporary boost to current income is likely to be spread out in a way that best
allows that family to operate under its constraints, which means that the
predominant use of "stimulative" tax rebates will be for debt service. This may
very well provide the economy with a modest reduction in credit strains, but it
certainly won't avoid delinquencies and foreclosures. Most mortgage obligations
will swallow down the entire rebate in a single month. There is not much fiscal
policy can or should do to bring back the "good old days" of irresponsible
lending and a housing bubble. Once a market becomes overvalued - in stocks,
bonds, or housing - either falling prices or poor long-term returns become
inevitable.
In the bond market, the flight to the safety of Treasury securities
recently pressed the 10-year Treasury yield to less than 3.4%, nearly one
percent less than the most recent year-over-year CPI inflation rate. It seems
unlikely that fixed income investors will be content to sustain such low levels
of prospective total return for a full decade, which suggests that there is a
substantial speculative component in current Treasury prices. Historically, the
level of yields has been a much better indication of subsequent bond market
returns than the prevailing trend of yields has been. Accordingly, I would
expect to maintain a relatively low duration in bonds for the Strategic Total
Return Fund,
- --------------------------------------------------------------------------------
11
THE HUSSMAN FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
with higher yields or wider credit spreads being the primary factors that would
prompt an increase in the maturity of the Fund's holdings.
With regard to stock market valuations, it is important to emphasize that
P/E ratios based on "forward operating earnings" and even our own
"price/peak-earnings" measures are somewhat corrupted by the fact that the
earnings in these ratios implicitly assume the continuation of record profit
margins that are about 40-50% above long-term norms. To the extent that these
profit margins are not likely to be sustained indefinitely, P/E ratios are
likely to be a poor metric of valuation, encouraging investors to believe that
stocks are cheap on the basis of recent earnings, when they are not at all cheap
on the basis of long-term earnings. Very simply, a moderate P/E multiple on
elevated earnings does not imply moderate valuation. For that reason, our
analysis of market valuation considers a variety of fundamentals beyond recent
earnings and the "forward" earnings estimates of Wall Street analysts.
As always, our investment positions at any given time will be driven by
the prevailing evidence we observe from valuations and market action. Although
we believe that current conditions suggest an economic downturn, dollar
weakness, and an absence of compelling value in the stock and bond markets, we
do not require the market to decline to undervalued levels to warrant a
substantial or complete removal of our hedges. It is the nature of financial
markets to experience a wide variety of conditions over the course of a complete
cycle. As we enter 2008, we remain defensive based on the prevailing evidence,
but remain open to increasing our exposure to stock and bond market fluctuations
as the evidence from valuation and market action becomes more constructive.
I am grateful for your investment in the Funds, and for your trust.
Best wishes,
John P. Hussman, Ph.D.
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12
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.
WEEKLY UPDATES REGARDING MARKET CONDITIONS AND INVESTMENT STRATEGY, AS
WELL AS SPECIAL REPORTS, ANALYSIS, AND PERFORMANCE DATA CURRENT TO THE MOST
RECENT MONTH END, ARE AVAILABLE 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 or views expressed, actual results may
differ, sometimes significantly so, from those expected or expressed. The
securities held by the Funds that are discussed in the Letter to Shareholders
were held during the period covered by this 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 Funds' adviser with respect to
those securities may change at any time.
- --------------------------------------------------------------------------------
13
HUSSMAN STRATEGIC GROWTH FUND
PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF TOTAL INVESTMENTS)
[PIE CHART OMITTED]
Information Technology 33.3%
Consumer Discretionary 22.5%
Health Care 15.1%
Energy 13.2%
Consumer Staples 6.7%
Industrials 5.5%
Telecommunications Services 2.0%
Materials 0.9%
Financials 0.8%
HUSSMAN STRATEGIC TOTAL RETURN FUND
PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSET ALLOCATION (% OF TOTAL INVESTMENTS)
[PIE CHART OMITTED]
U.S. Treasury Inflation-Protection Notes 43.1%
Other U.S. Treasury Obligations 33.2%
Precious Metal Stocks 20.8%
U.S. Government Agency Obligations 2.9%
- --------------------------------------------------------------------------------
14
HUSSMAN INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
-------------- --------------
ASSETS
Investments in securities:
At acquisition cost .......................... $3,182,355,462 $ 185,405,323
============== ==============
At value (Note 1) ............................ $2,996,242,916 $ 193,806,772
Investments in money market funds ............... 278,363,807 11,059,931
Cash ............................................ 500,000 --
Dividends and interest receivable ............... 2,315,132 1,177,382
Receivable for capital shares sold .............. 3,552,586 555,930
Other assets .................................... 118,992 21,389
-------------- --------------
Total Assets ................................. 3,281,093,433 206,621,404
-------------- --------------
LIABILITIES
Dividends payable ............................... 3,447,616 147,228
Written call options, at value (Notes 1 and 4)
(premiums received $224,162,950) ............. 201,972,000 --
Payable for investment securities purchased ..... 109,883,936 --
Payable for capital shares redeemed ............. 5,420,026 331,065
Accrued investment advisory fees (Note 3) ....... 2,442,111 103,852
Payable to administrator (Note 3) ............... 214,450 21,420
Other accrued expenses and liabilities .......... 266,838 19,730
-------------- --------------
Total Liabilities ............................ 323,646,977 623,295
-------------- --------------
NET ASSETS ......................................... $2,957,446,456 $ 205,998,109
============== ==============
Net assets consist of
Paid-in capital ................................. $2,915,530,242 $ 195,011,651
Accumulated undistributed net investment income . 184,017 11,163
Accumulated net realized gains from security
transactions and option contracts ............ 205,653,793 2,573,846
Net unrealized appreciation (depreciation)
on investments and options ................... (163,921,596) 8,401,449
-------------- --------------
NET ASSETS ......................................... $2,957,446,456 $ 205,998,109
============== ==============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ...... 189,953,985 17,910,172
============== ==============
Net asset value, offering price and redemption
price per share(a) (Note 1) ..................... $ 15.57 $ 11.50
============== ==============
(a) Redemption price varies based on length of time shares are held.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
HUSSMAN INVESTMENT TRUST
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
-------------- --------------
INVESTMENT INCOME
Dividends .............................................. $ 21,705,248 $ 588,614
Foreign withholding taxes on dividends ................. (415,446) (5,638)
Interest ............................................... -- 2,740,252
-------------- --------------
Total Income ..................................... 21,289,802 3,323,228
-------------- --------------
EXPENSES
Investment advisory fees (Note 3) ...................... 14,046,874 554,484(a)
Administration fees (Note 3) ........................... 745,069 71,352
Transfer agent, account maintenance and
shareholder services fees (Note 3) .................. 652,492 37,853
Trustees' fees and expenses ............................ 63,264 63,264
Fund accounting fees (Note 3) .......................... 100,318 24,532
Custodian and bank service fees ........................ 104,827 14,442
Professional fees ...................................... 67,811 40,911
Postage and supplies ................................... 86,419 14,487
Registration and filing fees ........................... 70,649 19,359
Printing of shareholder reports ........................ 66,691 4,718
Insurance expense ...................................... 33,320 2,590
Compliance service fees (Note 3) ....................... 30,437 4,785
Other expenses ......................................... 50,037 3,030
-------------- --------------
Total Expenses ...................................... 16,118,208 855,807
-------------- --------------
NET INVESTMENT INCOME ..................................... 5,171,594 2,467,421
-------------- --------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS,
OPTION CONTRACTS AND FOREIGN CURRENCIES (NOTE 4)
Net realized gains (losses) from:
Security transactions ............................... 261,646,783 11,302,969
Option contracts .................................... 283,968,525 --
Foreign currency transactions ....................... -- (150,818)
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... (408,713,530) 6,613,498
Option contracts .................................... (67,840,100) --
Foreign currency translation ........................ -- 405,641
-------------- --------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS,
OPTION CONTRACTS AND FOREIGN CURRENCIES ................ 69,061,678 18,171,290
-------------- --------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................ $ 74,233,272 $ 20,638,711
============== ==============
(a) Includes previously waived investment advisory fees recouped by the
Adviser (Note 3).
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
HUSSMAN STRATEGIC GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2007 JUNE 30,
(UNAUDITED) 2007
-------------- --------------
FROM OPERATIONS
Net investment income .................................... $ 5,171,594 $ 25,856,188
Net realized gains (losses) from:
Security transactions ................................. 261,646,783 233,531,062
Option contracts ...................................... 283,968,525 (454,519,908)
Net change in unrealized appreciation (depreciation) on:
Investments ........................................... (408,713,530) 207,026,921
Option contracts ...................................... (67,840,100) 41,102,500
-------------- --------------
Net increase in net assets resulting from operations ........ 74,233,272 52,996,763
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................... (17,404,351) (23,489,795)
From net realized gains .................................. (114,940,907) (82,737,302)
-------------- --------------
Net decrease in net assets from distributions to shareholders (132,345,258) (106,227,097)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................ 597,556,397 1,059,530,817
Net asset value of shares issued in reinvestment of
distributions to shareholders ......................... 110,537,587 91,037,302
Proceeds from redemption fees collected (Note 1) ......... 451,473 1,117,226
Payments for shares redeemed ............................. (411,311,072) (1,196,239,367)
-------------- --------------
Net increase (decrease) in net assets from
capital share transactions ............................... 297,234,385 (44,554,022)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ..................... 239,122,399 (97,784,356)
NET ASSETS
Beginning of period ...................................... 2,718,324,057 2,816,108,413
-------------- --------------
End of period ............................................ $2,957,446,456 $2,718,324,057
============== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME ............. $ 184,017 $ 12,416,774
============== ==============
CAPITAL SHARE ACTIVITY
Sold ..................................................... 37,162,787 66,736,341
Reinvested ............................................... 7,055,880 5,814,975
Redeemed ................................................. (25,722,813) (75,716,471)
-------------- --------------
Net increase (decrease) in shares outstanding ............ 18,495,854 (3,165,155)
Shares outstanding at beginning of period ................ 171,458,131 174,623,286
-------------- --------------
Shares outstanding at end of period ...................... 189,953,985 171,458,131
============== ==============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
HUSSMAN STRATEGIC TOTAL RETURN FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2007 JUNE 30,
(UNAUDITED) 2007
-------------- --------------
FROM OPERATIONS
Net investment income .................................... $ 2,467,421 $ 5,119,554
Net realized gains (losses) from:
Security transactions ................................. 11,302,969 287,748
Foreign currency transactions ......................... (150,818) (2,220)
Net change in unrealized appreciation/depreciation on:
Investments ........................................... 6,613,498 1,048,972
Foreign currency translation .......................... 405,641 (396,640)
-------------- --------------
Net increase in net assets resulting from operations ........ 20,638,711 6,057,414
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................... (2,329,909) (5,212,353)
From net realized gains .................................. (8,955,458) (6,811,839)
-------------- --------------
Net decrease in net assets from distributions to shareholders (11,285,367) (12,024,192)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................ 32,870,095 55,949,249
Net asset value of shares issued in reinvestment of
distributions to shareholders ......................... 10,251,248 10,639,496
Proceeds from redemption fees collected (Note 1) ......... 22,391 76,402
Payments for shares redeemed ............................. (20,979,411) (44,953,233)
-------------- --------------
Net increase in net assets from capital share transactions .. 22,164,323 21,711,914
-------------- --------------
TOTAL INCREASE IN NET ASSETS ................................ 31,517,667 15,745,136
NET ASSETS
Beginning of period ...................................... 174,480,442 158,735,306
-------------- --------------
End of period ............................................ $ 205,998,109 $ 174,480,442
============== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME ............. $ 11,163 $ 24,469
============== ==============
CAPITAL SHARE ACTIVITY
Sold ..................................................... 2,868,799 5,000,298
Reinvested ............................................... 894,024 972,118
Redeemed ................................................. (1,837,133) (4,037,214)
-------------- --------------
Net increase in shares outstanding ....................... 1,925,690 1,935,202
Shares outstanding at beginning of period ................ 15,984,482 14,049,280
-------------- --------------
Shares outstanding at end of period ...................... 17,910,172 15,984,482
============== ==============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
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
2007 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2007 2006 2005 2004 2003
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at
beginning of period ......... $ 15.85 $ 16.13 $ 15.90 $ 15.89 $ 13.80 $ 13.34
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
investment operations:
Net investment income (loss) 0.02 0.14 0.08 0.06 (0.04) (0.02)
Net realized and unrealized
gains on investments
and options ............. 0.42 0.16 0.69 0.68 2.13 1.36
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.44 0.30 0.77 0.74 2.09 1.34
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income ........ (0.09) (0.13) (0.05) (0.03) -- --
Distributions from net
realized gains ........... (0.63) (0.46) (0.50) (0.71) (0.01) (0.93)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............ (0.72) (0.59) (0.55) (0.74) (0.01) (0.93)
---------- ---------- ---------- ---------- ---------- ----------
Proceeds from redemption fees
collected (Note 1) .......... 0.00(d) 0.01 0.01 0.01 0.01 0.05
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period $ 15.57 $ 15.85 $ 16.13 $ 15.90 $ 15.89 $ 13.80
========== ========== ========== ========== ========== ==========
Total return(a) ................ 2.78%(c) 1.98% 5.05% 4.95% 15.22% 11.25%
========== ========== ========== ========== ========== ==========
Net assets at end of
period (000's) .............. $2,957,446 $2,718,324 $2,816,108 $1,835,514 $1,316,703 $ 511,928
========== ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets .......... 1.11%(b) 1.11% 1.14% 1.24% 1.34% 1.45%
Ratio of net investment income
(loss) to average net assets 0.36%(b) 0.91% 0.63% 0.44% (0.39%) (0.15%)
Portfolio turnover rate ........ 79%(c) 106% 63% 81% 66% 123%
(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) Not annualized.
(d) Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
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 YEAR PERIOD
DECEMBER 31, ENDED ENDED ENDED ENDED ENDED
2007 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2007 2006 2005 2004 2003(a)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at
beginning of period ........... $ 10.92 $ 11.30 $ 10.94 $ 10.53 $ 10.54 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ......... 0.15 0.32 0.32 0.24 0.21 0.14
Net realized and unrealized
gains on investments
and foreign currencies ..... 1.11 0.06 0.65 0.42 0.35 0.52
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations . 1.26 0.38 0.97 0.66 0.56 0.66
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income .......... (0.14) (0.33) (0.31) (0.24) (0.21) (0.14)
Distributions from
net realized gains ......... (0.54) (0.43) (0.30) (0.02) (0.37) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions .............. (0.68) (0.76) (0.61) (0.26) (0.58) (0.14)
---------- ---------- ---------- ---------- ---------- ----------
Proceeds from redemption
fees collected (Note 1).. ..... 0.00(b) 0.00(b) 0.00(b) 0.01 0.01 0.02
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period . $ 11.50 $ 10.92 $ 11.30 $ 10.94 $ 10.53 $ 10.54
========== ========== ========== ========== ========== ==========
Total return(c) .................. 11.60%(d) 3.46% 9.01% 6.40% 5.49% 6.81%(d)
========== ========== ========== ========== ========== ==========
Net assets at end of
period (000's) ................ $ 205,998 $ 174,480 $ 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% 0.90%(f)
Ratio of net investment income
to average net assets ......... 2.59%(f) 2.86% 2.94% 2.25% 2.34% 1.99%(f)
Portfolio turnover rate .......... 67%(d) 41% 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.
- --------------------------------------------------------------------------------
20
HUSSMAN STRATEGIC GROWTH FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 98.31% VALUE
================================================================================
APPAREL -- 2.30%
1,000,000 NIKE, Inc. - Class B ........................ $ 64,240,000
150,000 Wolverine World Wide, Inc. .................. 3,678,000
--------------
67,918,000
--------------
AUTO MANUFACTURERS -- 0.36%
100,000 Toyota Motor Corp. - ADR .................... 10,617,000
--------------
BEVERAGES -- 1.80%
250,000 Coca-Cola Co. (The) ......................... 15,342,500
500,000 Pepsico, Inc. ............................... 37,950,000
--------------
53,292,500
--------------
BIOTECHNOLOGY -- 1.75%
1,000,000 Amgen, Inc. (a) ............................. 46,440,000
50,000 LifeCell Corp. (a) .......................... 2,155,500
150,000 QIAGEN N.V. (a) ............................. 3,157,500
--------------
51,753,000
--------------
CHEMICALS -- 1.77%
38,400 BASF AG - ADR ............................... 5,685,020
450,000 Dow Chemical Co. (The) ...................... 17,739,000
500,000 Sherwin-Williams Co. (The) .................. 29,020,000
--------------
52,444,020
--------------
COMMERCIAL SERVICES -- 0.67%
200,000 Apollo Group, Inc. - Class A (a) ............ 14,030,000
179,300 Deluxe Corp. ................................ 5,897,177
--------------
19,927,177
--------------
COMPUTERS -- 6.89%
50,000 Affiliated Computer Services, Inc. - Class A (a) 2,255,000
1,000,000 Dell, Inc. (a) .............................. 24,510,000
400,000 International Business Machines Corp. ....... 43,240,000
300,000 Lexmark International, Inc. - Class A (a) ... 10,458,000
600,000 Research in Motion Ltd. (a) ................. 68,040,000
750,000 Seagate Technology .......................... 19,125,000
1,200,000 Western Digital Corp. (a) ................... 36,252,000
--------------
203,880,000
--------------
COSMETICS/PERSONAL CARE -- 1.48%
1,000,000 Estee Lauder Cos., Inc. (The) - Class A ..... 43,610,000
--------------
ELECTRICAL COMPONENTS & EQUIPMENT -- 1.37%
950,000 Advanced Energy Industries, Inc. (a) ........ 12,426,000
250,000 Energizer Holdings, Inc. (a) ................ 28,032,500
--------------
40,458,500
--------------
- --------------------------------------------------------------------------------
21
HUSSMAN STRATEGIC GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 98.31% (CONTINUED) VALUE
================================================================================
ELECTRONICS -- 2.04%
479,100 Avnet, Inc. (a) ............................. $ 16,754,127
450,000 Garmin Ltd. ................................. 43,650,000
--------------
60,404,127
--------------
FOOD -- 1.01%
471,000 Campbell Soup Co. ........................... 16,828,830
250,000 Kellogg Co. ................................. 13,107,500
--------------
29,936,330
--------------
HEALTH CARE - PRODUCTS -- 3.71%
700,000 Johnson & Johnson ........................... 46,690,000
400,000 Medtronic, Inc. ............................. 20,108,000
401,000 Respironics, Inc. (a) ....................... 26,257,480
250,000 Zimmer Holdings, Inc. (a) ................... 16,537,500
--------------
109,592,980
--------------
HEALTH CARE - SERVICES -- 3.95%
750,000 Apria Healthcare Group, Inc. (a) ............ 16,177,500
700,000 Health Net, Inc. (a) ........................ 33,810,000
35,100 Pediatrix Medical Group, Inc. (a) ........... 2,392,065
750,000 Quest Diagnostics, Inc. ..................... 39,675,000
200,000 Universal Health Services, Inc. - Class B ... 10,240,000
342,900 WellCare Health Plans, Inc. (a) ............. 14,542,389
--------------
116,836,954
--------------
HOME FURNISHINGS -- 0.59%
673,000 Tempur-Pedic International, Inc. ............ 17,477,810
--------------
INSURANCE -- 0.75%
400,000 SAFECO Corp. ................................ 22,272,000
--------------
INTERNET -- 2.77%
300,000 Amazon.com, Inc. (a) ........................ 27,792,000
1,250,000 Check Point Software Technologies Ltd. (a) .. 27,450,000
800,000 eBay, Inc. (a) .............................. 26,552,000
--------------
81,794,000
--------------
LEISURE TIME -- 0.08%
50,000 Harley-Davidson, Inc. ....................... 2,335,500
--------------
MACHINERY -- 0.74%
300,000 Caterpillar, Inc. ........................... 21,768,000
--------------
MEDIA -- 1.61%
900,000 EchoStar Communications Corp. - Class A (a) . 33,948,000
116,000 Gannett Co., Inc. ........................... 4,524,000
50,000 Idearc, Inc. ................................ 878,000
500,000 Time Warner, Inc. ........................... 8,255,000
--------------
47,605,000
--------------
- --------------------------------------------------------------------------------
22
HUSSMAN STRATEGIC GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS -- 98.31% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
METAL FABRICATE/HARDWARE -- 0.06%
106,300 Worthington Industries, Inc. ................ $ 1,900,644
--------------
MISCELLANEOUS MANUFACTURING -- 3.32%
500,000 3M Co. ...................................... 42,160,000
200,000 Ceradyne, Inc. (a) .......................... 9,386,000
49,400 FUJIFILM Holdings Corp. - ADR ............... 2,059,486
400,000 Illinois Tool Works, Inc. ................... 21,416,000
500,000 Ingersoll-Rand Co. Ltd. - Class A ........... 23,235,000
--------------
98,256,486
--------------
OIL & GAS -- 12.27%
800,000 Chevron Corp. ............................... 74,664,000
750,000 ConocoPhillips .............................. 66,225,000
150,000 ENSCO International, Inc. ................... 8,943,000
1,025,000 Exxon Mobil Corp. ........................... 96,032,250
700,000 Marathon Oil Corp. .......................... 42,602,000
250,000 Royal Dutch Shell plc - ADR ................. 21,050,000
530,000 Tesoro Corp. ................................ 25,281,000
400,000 Valero Energy Corp. ......................... 28,012,000
--------------
362,809,250
--------------
PHARMACEUTICALS -- 5.88%
931,300 Biovail Corp. ............................... 12,535,298
450,000 Forest Laboratories, Inc. (a) ............... 16,402,500
600,000 GlaxoSmithKline plc - ADR ................... 30,234,000
500,000 King Pharmaceuticals, Inc. (a) .............. 5,120,000
500,000 Medco Health Solutions, Inc. (a) ............ 50,700,000
500,000 NBTY, Inc. (a) .............................. 13,700,000
183,000 Shire plc - ADR ............................. 12,617,850
1,300,000 ViroPharma, Inc. (a) ........................ 10,322,000
500,000 Wyeth ....................................... 22,095,000
--------------
173,726,648
--------------
RETAIL -- 15.85%
350,000 Abercrombie & Fitch Co. - Class A ........... 27,989,500
2,000,000 Aeropostale, Inc. (a) ....................... 53,000,000
45,000 AutoZone, Inc. (a) .......................... 5,395,950
860,000 BJ's Wholesale Club, Inc. (a) ............... 29,093,800
42,200 Buckle, Inc. (The) .......................... 1,392,600
750,000 Coach, Inc. (a) ............................. 22,935,000
1,164,000 Dollar Tree Stores, Inc. (a) ................ 30,170,880
211,000 Genesco, Inc. (a) ........................... 7,975,800
2,000,000 Home Depot, Inc. (The) ...................... 53,880,000
700,000 Kohl's Corp. (a) ............................ 32,060,000
400,000 Liz Claiborne, Inc. ......................... 8,140,000
600,000 Lowe's Cos., Inc. ........................... 13,572,000
- --------------------------------------------------------------------------------
23
HUSSMAN STRATEGIC GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 98.31% (CONTINUED) VALUE
================================================================================
RETAIL -- 15.85% (CONTINUED)
500,000 Men's Wearhouse, Inc. (The) ................. $ 13,490,000
929,800 Pacific Sunwear of California, Inc. (a) ..... 13,119,478
950,000 PetSmart, Inc. .............................. 22,353,500
1,300,000 Starbucks Corp. (a) ......................... 26,611,000
797,000 Talbots, Inc. (The) ......................... 9,420,540
300,000 Tiffany & Co. ............................... 13,809,000
700,000 Under Armour, Inc. - Class A (a) ............ 30,569,000
600,000 Walgreen Co. ................................ 22,848,000
650,000 Wal-Mart Stores, Inc. ....................... 30,894,500
--------------
468,720,548
--------------
SEMICONDUCTORS -- 9.36%
1,700,000 Applied Materials, Inc. ..................... 30,192,000
850,000 Broadcom Corp. - Class A (a) ................ 22,219,000
547,400 Cabot Microelectronics Corp. (a) ............ 19,657,134
2,000,000 Intel Corp. ................................. 53,320,000
600,000 KLA-Tencor Corp. ............................ 28,896,000
500,000 Linear Technology Corp. ..................... 15,915,000
730,000 MKS Instruments, Inc. (a) ................... 13,972,200
500,000 Nano-Proprietary, Inc. (a) .................. 540,000
900,000 NVIDIA Corp. (a) ............................ 30,618,000
1,690,000 OmniVision Technologies, Inc. (a) ........... 26,448,500
2,500,000 ON Semiconductor Corp. (a) .................. 22,200,000
1,300,000 Taiwan Semiconductor Manufacturing Co.
Ltd. - ADR ................................ 12,948,000
--------------
276,925,834
--------------
SOFTWARE -- 4.80%
500,000 Citrix Systems, Inc. (a) .................... 19,005,000
100,000 Cognos, Inc. (a) ............................ 5,757,000
250,000 Dun & Bradstreet Corp. (The) ................ 22,157,500
1,100,000 Microsoft Corp. ............................. 39,160,000
2,000,000 Oracle Corp. (a) ............................ 45,160,000
600,000 Parametric Technology Corp. (a) ............. 10,710,000
--------------
141,949,500
--------------
TELECOMMUNICATIONS -- 8.73%
2,000,000 ADC Telecommunications, Inc. (a) ............ 31,100,000
105,800 Anixter International, Inc. (a) ............. 6,588,166
100,000 BT Group plc - ADR .......................... 5,392,000
2,350,000 Cisco Systems, Inc. (a) ..................... 63,614,500
500,000 CommScope, Inc. (a) ......................... 24,605,000
321,000 NETGEAR, Inc. (a) ........................... 11,450,070
1,300,000 Nokia Oyj - ADR ............................. 49,907,000
1,600,000 Plantronics, Inc. ........................... 41,600,000
500,000 QUALCOMM, Inc. .............................. 19,675,000
100,000 Verizon Communications, Inc. ................ 4,369,000
--------------
258,300,736
--------------
- --------------------------------------------------------------------------------
24
HUSSMAN STRATEGIC GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 98.31% (CONTINUED) VALUE
================================================================================
TOYS/GAMES/HOBBIES -- 0.98%
1,525,000 Mattel, Inc. ................................ $ 29,036,000
--------------
TRANSPORTATION -- 1.42%
100,000 FedEx Corp. ................................. 8,917,000
388,200 Tidewater, Inc. ............................. 21,296,652
166,000 United Parcel Service, Inc. - Class B ....... 11,739,520
--------------
41,953,172
--------------
TOTAL COMMON STOCKS (Cost $3,048,679,105) ... $2,907,501,716
--------------
UNITS UNIT TRUSTS -- 0.00% VALUE
================================================================================
2,700 Penn West Energy Trust (Cost $112,307) ...... $ 70,200
--------------
CONTRACTS PUT OPTION CONTRACTS -- 3.00% VALUE
================================================================================
700 Nasdaq 100 Index Option, 03/22/2008 at $2,000 $ 4,445,000
8,000 Russell 2000 Index Option, 03/22/2008 at $780 36,320,000
9,000 S&P 500 Index Option, 01/19/2008 at $1,480 .. 29,106,000
5,000 S&P 500 Index Option, 03/22/2008 at $1,400 .. 18,800,000
--------------
TOTAL PUT OPTION CONTRACTS (Cost $133,564,050) $ 88,671,000
--------------
TOTAL INVESTMENTS AT VALUE -- 101.31%
(Cost $3,182,355,462) ..................... $2,996,242,916
--------------
SHARES MONEY MARKET FUNDS -- 9.41% VALUE
================================================================================
278,363,807 First American Treasury Obligations Fund -
Class A (Cost $278,363,807) ................. $ 278,363,807
--------------
TOTAL INVESTMENTS AND MONEY MARKET
FUNDS AT VALUE -- 110.72%
(Cost $3,460,719,269) .................... $3,274,606,723
LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.72%) (317,160,267)
--------------
NET ASSETS -- 100.00% ....................... $2,957,446,456
==============
(a) Non-income producing security.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
HUSSMAN STRATEGIC GROWTH FUND
SCHEDULE OF OPEN WRITTEN OPTION CONTRACTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE OF PREMIUMS
CONTRACTS WRITTEN CALL OPTION CONTRACTS OPTIONS RECEIVED
================================================================================
700 Nasdaq 100 Index Option,
03/22/2008 at $2,000......... $ 11,438,000 $ 11,667,950
8,000 Russell 2000 Index Option,
03/22/2008 at $780........... 27,752,000 34,388,000
9,000 S&P 500 Index Option,
01/19/2008 at $1,350......... 108,432,000 122,386,500
5,000 S&P 500 Index Option,
03/22/2008 at $1,400......... 54,350,000 55,720,500
-------------- --------------
$ 201,972,000 $ 224,162,950
============== ==============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
HUSSMAN STRATEGIC TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS -- 19.56% VALUE
================================================================================
METALS & MINING -- 19.56%
125,000 Agnico-Eagle Mines Ltd. ..................... $ 6,828,750
50,000 AngloGold Ashanti Ltd. - ADR ................ 2,140,500
260,000 Barrick Gold Corp. .......................... 10,933,000
60,000 Compania de Minas Buenaventura S.A.u. - ADR . 3,396,000
100,000 Goldcorp, Inc. .............................. 3,393,000
75,000 Harmony Gold Mining Co. Ltd. - ADR (a) ...... 773,250
210,000 Newmont Mining Corp. ........................ 10,254,300
50,000 Randgold Resources Ltd. - ADR ............... 1,856,500
75,000 Stillwater Mining Co. (a) ................... 724,500
--------------
TOTAL COMMON STOCKS (Cost $35,395,276) ...... $ 40,299,800
--------------
PAR VALUE U.S. TREASURY OBLIGATIONS -- 71.81% VALUE
================================================================================
U.S. TREASURY BILLS -- 31.27%
$ 25,000,000 Discount note, due 01/24/2008 ............... $ 24,960,000
25,000,000 Discount note, due 05/15/2008 ............... 24,697,575
15,000,000 Discount note, due 06/26/2008 ............... 14,758,215
--------------
64,415,790
--------------
U.S. TREASURY INFLATION-PROTECTION NOTES -- 40.54%
17,649,000 3.375%, due 01/15/2012 ...................... 19,258,095
23,239,400 3.00%, due 07/15/2012 ....................... 25,176,636
21,052,400 2.00%, due 01/15/2016 ....................... 21,611,615
16,625,400 2.375%, due 01/15/2025 ...................... 17,459,280
--------------
83,505,626
--------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $144,549,618) ....................... $ 147,921,416
--------------
PAR VALUE U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.71% VALUE
================================================================================
FEDERAL HOME LOAN BANK -- 2.71%
$ 5,000,000 5.75%, due 02/23/2017 ....................... $ 5,085,480
500,000 5.70%, due 04/16/2018 ....................... 500,076
--------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,460,429) ......................... $ 5,585,556
--------------
TOTAL INVESTMENTS AT VALUE -- 94.08%
(Cost $185,405,323) ....................... $ 193,806,772
--------------
- --------------------------------------------------------------------------------
27
HUSSMAN STRATEGIC TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES MONEY MARKET FUNDS -- 5.37% VALUE
================================================================================
11,059,931 First American Treasury Obligations Fund -
Class A (Cost $11,059,931) ................ $ 11,059,931
--------------
TOTAL INVESTMENTS AND MONEY MARKET FUNDS AT
VALUE -- 99.45% (Cost $196,465,254) ....... $ 204,866,703
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.55% 1,131,406
--------------
NET ASSETS -- 100.00% ....................... $ 205,998,109
==============
(a) Non-income producing security.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Hussman Strategic Growth Fund and Hussman Strategic Total Return Fund
(each, a "Fund", and collectively, the "Funds") are each a diversified series of
Hussman Investment Trust (the "Trust"), which is registered under the Investment
Company Act of 1940 (the "1940 Act") as an open-end managment investment
company. 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.
Hussman Strategic Growth 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, other than NASDAQ quoted securities, are
valued at the last sales price, or if there are not sales on that day, at the
mean of the closing bid and asked prices. Values of foreign securities are
translated from the local currency into
- --------------------------------------------------------------------------------
29
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
U.S. dollars using currency exchange rates supplied by a pricing quotation
service.
Pursuant to valuation procedures approved by the Board of Trustees,
options traded on a national securities exchange are valued at prices 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, 2007, 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. Fixed
income securities may also 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
- --------------------------------------------------------------------------------
30
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is recorded as a liability in
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 will be required to pay the difference between the
closing index value and the exercise price of the option. 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
- --------------------------------------------------------------------------------
31
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
SHARE VALUATION AND REDEMPTION FEES -- The net asset value of each Fund is
calculated as of 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 by dividing the total value of the
Fund's assets, less its liabilities, by the number of its 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, 2007 and
June 30, 2007, proceeds from redemption fees totaled $451,473 and $1,117,226,
respectively, for Hussman Strategic Growth Fund and $22,391 and $76,402,
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.
- --------------------------------------------------------------------------------
32
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The tax character of distributions paid during the periods ended December
31, 2007 and June 30, 2007 was as follows:
Long-Term
Periods Ordinary Capital Total
Ended Income Gains Distributions
- ----------------------------------------------------------------------------------------------
Hussman Strategic Growth Fund 12/31/07 $17,404,351 $114,940,907 $132,345,258
6/30/07 $77,733,245 $ 28,493,852 $106,227,097
- ----------------------------------------------------------------------------------------------
Hussman Strategic Total Return Fund 12/31/07 $ 6,953,612 $ 4,331,755 $ 11,285,367
6/30/07 $ 9,684,385 $ 2,339,807 $ 12,024,192
- ----------------------------------------------------------------------------------------------
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 - Expenses of the Trust not attributable solely to one of
the Funds are allocated between 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 and the disclosure of contingent 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.
- --------------------------------------------------------------------------------
33
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of
December 31, 2007:
HUSSMAN HUSSMAN
STRATEGIC STRATEGIC TOTAL
GROWTH FUND RETURN FUND
--------------- --------------
Cost of portfolio investments and
written call options .................. $3,215,899,593 $ 196,632,674
============== ==============
Gross unrealized appreciation ............ $ 237,666,074 $ 8,725,263
Gross unrealized depreciation ............ (380,930,944) (491,234)
-------------- --------------
Net unrealized appreciation (depreciation) $ (143,264,870) $ 8,234,029
Undistributed net investment income ...... 3,631,633 158,391
Capital loss carryforwards ............... (179,313,026) --
Other gains .............................. 364,310,093 2,741,266
Other temporary differences .............. (3,447,616) (147,228)
-------------- --------------
Total accumulated earnings ............... $ 41,916,214 $ 10,986,458
============== ==============
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.
As of June 30, 2007, Hussman Strategic Growth Fund has capital loss
carryforwards for federal income tax purposes of $179,313,026, all of which
expire June 30, 2015. These capital loss carryforwards may be utilized in the
current and future years to offset net realized capital gains prior to
distributing such gains to shareholders.
For the six months ended December 31, 2007, Hussman Strategic Total Return
Fund reclassified $150,818 of foreign exchange losses from accumulated net
realized gains to accumulated undistributed 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.
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released 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 the financial statements. FIN
48 requires the evaluation of tax positions taken in the course of preparing the
Funds' tax returns to determine whether the tax positions are
"more-likely-than-
- --------------------------------------------------------------------------------
34
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
not" of being sustained by the applicable tax authority. Tax positions not
deemed to meet the more-likely-than-not threshold would be recorded as a tax
benefit or expense in the current year. 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 each Fund's net asset value calculations as late as the Fund's last such
calculation in the first required financial statement reporting period. As a
result, the Funds have adopted FIN 48 with this Semi-Annual report. Based on
management's analysis, the adoption of FIN 48 does not have a material impact on
the financial statements. The statute of limitations on the Funds' tax returns
remains open for the years ended June 30, 2005 through June 30, 2007.
Additionally, management does not anticipate FIN 48 having a material impact on
the financial statements for the year ended June 30, 2008.
2. INVESTMENT TRANSACTIONS
During the six months ended December 31, 2007, cost of purchases and
proceeds from sales and maturities of investment securities, other than
short-term investments and U.S. government securities, amounted to
$2,556,920,975 and $2,185,114,262, respectively, for Hussman Strategic Growth
Fund and $31,986,544 and $44,816,565, 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. Under the terms of a separate Advisory
Agreement between the Trust and the Adviser, 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.
- --------------------------------------------------------------------------------
35
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (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 remained in effect until December 31, 2007. During the six months
ended December 31, 2007, there were no fees waived by the Adviser.
Any fee waivers or expense reimbursements by the Adviser are subject to
repayment by Hussman Strategic Total Return 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, 2007, the Adviser recouped
$31,490 of previously waived fees from Hussman Strategic Total Return Fund. As
of December 31, 2007, the amount of fee waivers and expense reimbursements
available for recoupment by the Adviser is $131,156. The Adviser may recoup a
portion of this amount no later than the dates as stated below:
JUNE 30, JUNE 30,
2008 2009
- --------------------------------------------------------------------------------
Hussman Strategic Total Return Fund .............. $103,207 $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 annual rates of 0.075% 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 per Fund minimum monthly fee of
$2,000.
- --------------------------------------------------------------------------------
36
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (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 the Fund's average daily net assets up to
$500 million and 0.005% of such net assets in excess of $500 million. In
addition, the Funds reimburse Ultimus for certain out-of-pocket expenses
incurred 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 computed at an annual rate of $17 per account, subject to a per Fund minimum
monthly fee of $1,500. For the six months ended December 31, 2007, such fees
paid by Hussman Strategic Growth Fund and Hussman Strategic Total Return were
$370,220 and $20,567, respectively. In addition, the Funds reimburse Ultimus for
certain out-of-pocket expenses, including, but not limited to, postage and
supplies.
For shareholder accounts held through financial intermediaries, the Funds
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, 2007, Hussman
Strategic Growth Fund and Hussman Strategic Total Return Fund paid $282,272 and
$17,286, 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 Trust's 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 annual rates of .005% of the
- --------------------------------------------------------------------------------
37
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
average value of its aggregate daily net assets from $100 million to $500
million, .0025% of such assets from $500 million to $1 billion and .00125% of
such assets in excess of $1 billion. In addition, the Funds reimburse Ultimus
for reasonable out-of-pocket expenses, if any, incurred 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, 2007 were as follows:
OPTION OPTION
CONTRACTS PREMIUMS
--------------- ---------------
Options outstanding at beginning of period ........ 21,000 $ 285,778,500
Options written ................................... 89,400 1,031,687,880
Options cancelled in a closing purchase transaction (87,700) (1,093,303,430)
--------------- ---------------
Options outstanding at end of period .............. 22,700 $ 224,162,950
=============== ===============
No contracts were written by Hussman Strategic Total Return Fund during
the six months ended December 31, 2007.
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, 2007, 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 occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
- --------------------------------------------------------------------------------
38
HUSSMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, 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 SFAS No. 157 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, 2007, 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
the measurements reported on the statements of changes in net assets for a
fiscal period.
- --------------------------------------------------------------------------------
39
HUSSMAN INVESTMENT TRUST
ABOUT YOUR FUND'S EXPENSES (UNAUDITED)
- --------------------------------------------------------------------------------
We believe it is important for you to understand the impact of costs on
your investment. As a shareholder of the Funds, you incur two types of costs:
(1) transaction costs, which may include 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 mutual fund's ongoing costs are expressed as a percentage
of its average net assets. This figure is known as the expense ratio.
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 (July 1, 2007 -
December 31, 2007).
The table on the following page 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 the period with $1,000 invested in each Fund. You may use the
information here, together with the amount of your investment, 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), and 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.
- --------------------------------------------------------------------------------
40
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 elsewhere in this report. For additional
information on operating expenses and other shareholder costs, please refer to
each Fund's prospectus.
HUSSMAN STRATEGIC GROWTH FUND
Beginning Expenses
Account Value Account Value Paid During
July 1, 2007 December 31, 2007 Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,027.80 $5.67
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,019.61 $5.65
* Expenses are equal to Hussman Strategic Growth Fund's annualized expense
ratio of 1.11% for the period, multiplied by the average account value
over the period, multiplied by 184/365 (to reflect the period covered by
this report).
HUSSMAN STRATEGIC TOTAL RETURN FUND
Beginning Expenses
Account Value Account Value Paid During
July 1, 2007 December 31, 2007 Period*
- --------------------------------------------------------------------------------
Based on Actual Fund Return $1,000.00 $1,116.00 $4.80
Based on Hypothetical 5% Return
(before expenses) $1,000.00 $1,020.67 $4.58
* Expenses are equal to Hussman Strategic Total Return Fund's annualized
expense ratio of 0.90% for the period, multiplied by the average account
value over the period, multiplied by 184/365 (to reflect the period
covered by this report).
- --------------------------------------------------------------------------------
41
HUSSMAN INVESTMENT TRUST
OTHER INFORMATION (UNAUDITED)
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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). You may also obtain copies of these 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.
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[LOGO OMITTED] HUSSMAN
FUNDS
INVESTMENT ADVISER
Hussman Econometrics Advisors, Inc.
5136 Dorsey Hall Drive
Ellicott City, Maryland 21042
www.hussmanfunds.com
1-800-HUSSMAN (1-800-487-7626)
ADMINISTRATOR/TRANSFER AGENT
Ultimus Fund Solutions, LLC
225 Pictoria Drive, Suite 450
Cincinnati, Ohio 45246
CUSTODIAN
US Bank
425 Walnut Street
Cincinnati, Ohio 45202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
1900 Scripps Center
312 Walnut Street
Cincinnati, Ohio 45202
LEGAL COUNSEL
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
This Semi-Annual Report is authorized for distribution
only if accompanied or preceded by a current
Prospectus of the Funds.
ITEM 2. CODE OF ETHICS.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable [schedule filed with Item 1]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not required
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Hussman Investment Trust
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By (Signature and Title)* /s/ John P. Hussman
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John P. Hussman, President
Date March 3, 2008
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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
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John P. Hussman, President
Date March 3, 2008
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By (Signature and Title)* /s/ Mark J. Seger
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Mark J. Seger, Treasurer
Date March 3, 2008
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* Print the name and title of each signing officer under his or her signature.