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HUSSMAN STRATEGIC INTERNATIONAL FUND TICKER SYMBOL: HSIEX An Investment Portfolio of HUSSMAN INVESTMENT TRUST Statement of Additional Information November 1, 2016 This Statement of Additional Information
HUSSMAN STRATEGIC INTERNATIONAL FUND TICKER SYMBOL: HSIEX An Investment Portfolio of HUSSMAN INVESTMENT TRUST Statement of Additional Information November 1, 2016 This Statement of Additional Information is not a Prospectus, but should be read in conjunction with the Prospectus for Hussman Strategic International Fund dated November 1, 2016, which may be supplemented from time to time. This Statement of Additional Information is incorporated by reference in its entirety into the Prospectus. Copies of the Prospectus, the Annual Report or the Semi-Annual Report may be obtained without charge, upon request, by writing Hussman Investment Trust at 225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246, or by calling toll-free HUSSMAN ( ). TABLE OF CONTENTS FUND OBJECTIVE, INVESTMENTS, STRATEGIES AND RISKS... 2 CALCULATION OF NET ASSET VALUE ADDITIONAL PURCHASE AND REDEMPTION INFORMATION SPECIAL SHAREHOLDER SERVICES MANAGEMENT OF THE TRUST INVESTMENT ADVISER PORTFOLIO TRANSACTIONS OTHER SERVICE PROVIDERS GENERAL INFORMATION ADDITIONAL TAX INFORMATION PERFORMANCE INFORMATION FINANCIAL STATEMENTS APPENDIX A: PROXY VOTING POLICIES AND PROCEDURES STATEMENT OF ADDITIONAL INFORMATION Hussman Investment Trust (the Trust ) is an open-end management investment company which currently offers four diversified investment portfolios, Hussman Strategic International Fund (prior to January 2012, named Hussman Strategic International Equity Fund), Hussman Strategic Growth Fund, Hussman Strategic Total Return Fund and Hussman Strategic Value Fund. This Statement of Additional Information applies only to Hussman Strategic International Fund (the Fund ). For information on Hussman Strategic Growth Fund, Hussman Strategic Total Return Fund and Hussman Strategic Value Fund, please call The Trust was organized and its Agreement and Declaration of Trust was filed with the State of Ohio on June 1, FUND OBJECTIVE, INVESTMENTS, STRATEGIES AND RISKS Investment Objective The Fund seeks to achieve long-term capital appreciation, with added emphasis on the protection of capital during unfavorable market conditions. Additional Information on Portfolio Investments, Strategies and Risks Information contained in this Statement of Additional Information expands upon information contained in the Fund s Prospectus. No investment in shares of the Fund should be made without first reading the Prospectus. Foreign Securities The Fund invests principally in foreign securities, including those traded domestically as American Depositary Receipts ( ADRs ). ADRs are receipts typically issued by an American bank or trust company that evidence ownership of underlying securities issued by a foreign corporation. Investments in foreign securities present special considerations not typically associated with investments in domestic securities. Foreign governments may impose potentially confiscatory withholding or other taxes, thereby reducing the amount of income and capital gains available to distribute to shareholders. Currency exchange rates and regulations may cause fluctuation in the value of foreign securities. Foreign securities are subject to different regulatory environments than in the United States and, compared to the United States, there may be less comprehensive or stringent accounting, auditing and financial reporting standards or a lack of uniformity with respect to such standards, less volume and liquidity and more volatility, less public information, and less regulation of foreign issuers. Other risks include possible delays in the settlement of transactions or in the payment of income. Brokerage commissions, custodial fees and other fees are also generally higher for non-u.s. securities. Certain countries have been known to expropriate or nationalize assets, and foreign investments may be subject to political, financial or social instability or adverse diplomatic developments. There may be difficulties in obtaining service of process on foreign issuers and difficulties in enforcing judgments with 2 respect to claims under the U.S. securities laws against such issuers. Favorable or unfavorable differences between U.S. and foreign economies could affect foreign securities values. General economic and financial conditions and events in particular countries or geographic regions may adversely impact the prices of securities held by the Fund. For example, European Union ( EU ) member countries that use the Euro as their currency (so-called Eurozone countries) lack the ability to implement an independent monetary policy and may be significantly affected by requirements that limit their fiscal options. Decreasing imports or exports, changes in governmental or other regulations on trades, changes in the exchange rate of the Euro, the default or threat of default by one or more EU member countries on its sovereign debt and/or an economic recession in one or more EU member countries may have a significant adverse effect on the economies of other EU member countries and major trading partners outside Europe. In recent years, the European financial markets have experienced volatility and adverse trends due to concerns about economic downturns, high unemployment rates, rising government debt levels and the possible default of government debt in several European countries, including Greece, Ireland, Italy, Portugal and Spain. Several countries, including Greece and Italy, have agreed to multi-year bailout loans from the European Central Bank, the International Monetary Fund and other institutions. A default or debt restructuring by any European country, such as the restructuring of Greece s outstanding sovereign debt, can adversely impact holders of that country s debt and can affect exposures to other Eurozone countries and their financial companies as well. The manner in which the EU responded to the global recession and sovereign debt issues raised questions about its ability to react quickly to rising borrowing costs and revealed a lack of cohesion in dealing with the fiscal problems of member states. To address budget deficits and public debt concerns, a number of Eurozone countries have imposed strict austerity measures and comprehensive financial and labor market reforms, which could increase political or social instability. In June 2016, the United Kingdom (the UK ) approved a referendum to leave the EU, commonly referred as Brexit, which sparked depreciation in the value of the British pound and heightened risk of continued worldwide economic volatility. The UK has one of the largest economies in Europe and is a major trading partner with the other EU countries and the United States. If implemented, Brexit might negatively affect The City of London s economy, which is heavily denominated by financial services, as banks might be forced to move staff and comply with two separate sets of rules or lose business to banks in Continental Europe. In addition, Brexit would likely create additional economic stress for the UK, including the potential for decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to uncertainty and declines in business and consumer spending as well as foreign direct investment. Further, the departure of the UK from the EU would potentially cause volatility within the EU, which could trigger prolonged economic downturns in certain European countries or spark additional member states to contemplate departing the EU, thereby exacerbating political and economic instability in the region. Global economies and financial markets are becoming increasingly interconnected, which increases the possibility that conditions in one country or region might adversely impact issuers in, or foreign exchange rates with, a different country or region. If the Fund invests a significant portion of its assets in investments tied economically to (or related to) a particular geographic region, foreign country or particular market, it would have more exposure to regional and country 3 economic risks than a fund that invests throughout the world 0s economies. A recession, debt crisis, or decline in currency valuation in one country within a region can spread to other countries in that region. Furthermore, to the extent the Fund invests in the securities of companies located in a particular geographic region or foreign country, it may be particularly vulnerable to events affecting companies located in that region or country because those companies may share common characteristics, are often subject to similar business risks and regulatory burdens, and often react similarly to specific economic, market, political or other developments. Certain of these risks may also apply to stocks of U.S. companies that conduct a significant amount of business in non-u.s. markets or rely on suppliers from non-u.s. markets. The value of a company s stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the company s products or services. A stock s value also may fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. To the extent the Fund invests a significant portion of its assets in securities of a particular industry or sector, the Fund s performance could be negatively affected if that industry or sector performs poorly. The value of a company s stock also may be affected by changes in the financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. The value of a company s stock is also generally subject to the risk of future local, national or global economic disturbances based on unknown weaknesses in the markets in which the Fund invests. In the event of such a disturbance, issuers of securities held by the Fund may experience significant declines in the value of their assets and even cease operations, or may receive government assistance accompanied by increased restrictions on their business operations or other government intervention. Instability in the financial markets has led many governments and regulators, including the U.S. Government, to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme volatility and, in some cases, a lack of liquidity. It is not certain if the U.S. Government or other governments will intervene in response to a future market disturbance and the effect of any such future intervention cannot be predicted. In addition, political events within the United States and abroad, including the U.S. Government s ongoing difficulty agreeing on a long-term budget and deficit reduction plan, uncertainty surrounding the sovereign debt of EU members and the aftermath of the war in Iraq and possible terrorist attacks, could negatively impact financial markets and the Fund s performance. The Fund may invest a portion of its assets in emerging markets. An emerging market is any country that the World Bank, the International Finance Corporation or the United Nations or its authorities has determined to have a low or middle income economy. Investing in emerging markets involves exposure to potentially unstable governments, the risk of nationalization of business, restrictions on foreign ownership, prohibitions on repatriation of assets and a system of laws that may offer less protection of property rights. The governments of certain Asian countries maintain their currencies at artificial levels in relation to the U.S. dollar, rather than at levels determined by the market, which may have an adverse impact on foreign investments. Financial imbalances among various economic sectors, fueled by rising asset prices, strong credit growth and relatively easy financing conditions in certain Asian countries may also negatively impact those economies. Emerging market economies may be based on only a few industries, 4 may be highly vulnerable to changes in local and global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. The securities markets in emerging markets are typically less efficient and substantially smaller, less liquid and more volatile than the major securities markets in the United States and other developed countries. A high proportion of the shares of many issuers may be held by a limited number of persons and financial institutions, which may limit the number of shares available for investment by the Fund. A limited number of issuers in emerging markets may represent a disproportionately large percentage of market capitalization and trading value. The limited liquidity of securities markets in these countries may also affect the Fund s ability to acquire or dispose of securities at the price and time it wishes to do so. The inability of the Fund to dispose fully and promptly of positions in declining markets would cause the Fund s net asset value to decline as the values of the unsold positions are marked to lower prices. In addition, these securities markets are susceptible to being influenced by large investors trading significant blocks of securities. Management Risk As an actively managed investment company, the Fund is subject to management risk. The Fund s investment manager (the Adviser ) will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that its decisions will produce the desired results. The ability of the Adviser to accurately analyze overall market conditions and utilize strategies for hedging market exposure will be dependent, in part, on the Adviser s ability to correctly assess current stock market conditions and to manage the Fund s investment position and exposures in a manner that is responsive to pertinent market movements and market risk, none of which can be assured. The Adviser attempts to classify prevailing investment conditions with those historical instances having the greatest similarity and an investment may perform differently than expected due to changes in historical trends. The use of derivative instruments may involve risks different from, and potentially greater than, the risks associated with investing directly in securities and other more traditional assets. Even if the Adviser uses these strategies only for hedging purposes, if a transaction is not successful, it could result in a significant loss to the Fund. The amount of loss could be more than the principal amount invested. Economic and Market Events Risk and Geopolitical Risk Events in the financial sector have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. These events have included, but are not limited to: bankruptcies, corporate restructuring, and other events related to the sub-prime mortgage crisis in 2008; financial distress in the U.S. auto industry; steep declines in oil prices; credit and liquidity issues involving certain money market and high yield mutual funds; Standard & Poor s downgrade of the U.S. long-term sovereign debt and measures to address U.S. federal and state budget deficits; governmental efforts to limit short selling and high frequency trading; social, political and economic instability in Europe; economic stimulus by the Japanese central bank; dramatic changes in currency exchange rates; and China s economic slowdown. Both domestic and foreign equity markets have experienced increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage and credit markets particularly affected, and it is uncertain when these conditions will recur. Banks and financial 5 service companies could suffer losses if interest rates were to rise or economic conditions deteriorate. In addition to financial market volatility, the reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide. This reduced liquidity may result in less money being available to purchase raw materials, goods and services, which may, in turn, bring down the prices of these economic staples. It may also result in issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their stock prices. Actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth, such as decreases or increases in short-term interest rates, or interventions in currency markets, could cause high volatility in the equity and fixed-income markets. These events and possible continuing market volatility may have an adverse effect on the Fund, including making it more difficult for the Fund to accurately value its securities or to sell its securities on a timely basis. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation. Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely. If a country s economy slips into a deflationary pattern, it could last for a prolonged period and may be difficult to reverse. Political turmoil within the United States and abroad may also impact the Fund. Although the U.S. Government has honored its credit obligations, it remains possible that the United States could default on its obligations. While it is impossible to predict the consequences of such an unprecedented event, it is likely that a default by the United States would be highly disruptive to the U.S. and global securities markets and could significantly impair the value of the Fund s investments. Similarly, political events within the United States at times have resulted, and may in the future result, in a shutdown of government services, which could negatively affect the U.S. economy, decrease the value of the Fund s investments and increase uncertainty in or impair the operation of the U.S. and other securities markets. Further, certain municipalities of the United States and its territories are financially strained and may face the possibility of default on their debt obligations, which could directly or indirectly detract from the Fund s performance. Uncertainties surrounding the sovereign debt of a number of EU countries and the viability of the EU have disrupted and may in the future disrupt markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, the world s securities markets likely will be significantly disrupted. In June 2016, the United Kingdom approved a referendum to leave the EU, commonly referred to as Brexit. There is significant market uncertainty regarding the ramifications of Brexit and the range and potential implications of possible political, regulatory, economic and market outcomes are difficult to predict. Political and military events, including the military crises in Ukraine and the Middle East and nationalist unrest in Europe, also may cause market disruptions. Foreign Currency Transactions As discussed in the Prospectus, investments in foreign securities involve currency risk. The Fund may engage in various transactions to hedge currency risk, but is not required to do so. The instruments the Fund may use for this purpose include forward foreign currency contracts, foreign currency futures contracts and options on foreign currencies. 6 A forward foreign currency contract is an obligation to purchase or sell a specified currency at a future date which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price established at the time of the contract. These contracts are entered into directly between currency traders and their customers. The Fund may use these contracts to purchase or sell a foreign currenc
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