Idaho Documents | Saturna Capital

 

Idaho Tax-Exempt Fund Summary Prospectus March 27, 2020

Beginning on January 29, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Idaho Tax-Exempt Fund's annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund's website (www.saturna.com/reports), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 800-SATURNA (800-728-8762) or by sending an e-mail request to Idaho Tax-Exempt Fund at info@saturna.com.

Beginning on January 2, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 800-SATURNA (800-728-8762) or send an e-mail request to Idaho Tax-Exempt Fund at info@saturna.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.

Idaho Tax-Exempt Fund

Ticker Symbol: NITEX

March 27, 2020

SUMMARY PROSPECTUS

Before you invest, you may want to review Idaho Tax-Exempt Fund's prospectus, which contains more information about the Fund and its risks. You can find the Fund's prospectus and other information about the Fund, including the statement of additional information and most recent reports to shareowners, online at www.saturna.com/prospectus. You can also get this information at no cost by calling 1-800-728-8762 or by sending an email request to info@saturna.com. The Fund's prospectus and statement of additional information, both dated March 27, 2020, are incorporated by reference into this Summary Prospectus.


Idaho Tax-Exempt Fund

NITEX

Investment Objective

Idaho Tax-Ex­empt Fund seeks to provide income free from federal income, federal alternative mini­mum, and Idaho state income taxes. Preservation of capital is a sec­ondary objective.

Fees and Expenses

This section describes the fees and expenses that you may pay if you buy and hold shares of the Idaho Tax-Exempt Fund.

Shareowner Fees

None.

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fee 0.50%
Other Expenses 0.19%
Total Annual Fund Operating Expenses 0.69%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although actual costs may be higher or lower, based on these assumptions, your costs would be:

1 Year 3 Years 5 Years 10 Years
$70 $221 $384 $859

Portfolio Turnover

The Fund may pay transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 4.44% of the average value of its portfolio.

Principal Investment Strategies

Idaho Tax-Exempt Fund invests in debt securities issued by the State of Idaho and its political subdivisions. These municipal bonds, notes, and commercial paper may be in various forms, including general obligation bonds, revenue bonds, mortgage bonds, certificates of participation, local improvement district bonds, and refunding bonds.

The Fund buys investment grade bonds, meaning those rated BBB or higher by a national bond rating agency (e.g., Standard & Poor's), or, if unrated, of equivalent quality in the opinion of the adviser, considered at the time of purchase. At least 40% of bonds that the Fund buys must be rated A or higher or, if unrated, of equivalent quality, on a similar basis. Factors used in bond evaluations include such information as the bond district's financial position, population size, employment trends, economic activity, and diversification. The portfolio's dollar-weighted average effective maturity is expected to range between 6 and 15 years. In accordance with the fundamental investment policies of the Fund, under normal circumstances, at least 80% of net assets are in­vested in debt se­curities generating in­come exempt from both federal and Idaho income tax.

Principal Risks of Investing

Market risk: The value of the Fund's shares rises and falls as the market value of the securities in which the Fund invests goes up and down. The market value of securities will fluctuate, sometimes significantly and unpredictably, with stocks generally being more volatile than bonds. When you redeem your shares, they may be worth more or less than what you paid for them. Only consider investing in the Fund if you are willing to accept the risk that you may lose money.

Investment strategy risk: Because the Fund concentrates its investments primarily in Idaho municipal securities, its investments are susceptible to factors adversely affecting Idaho. These factors include economic and financial trends as well as political conditions in Idaho and its political subdivisions. Investing primarily in Idaho bonds means the Fund is less diversified than some other types of mutual funds. Concentrating investments in a single state or a small number of security issues may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

Tax risk: The Fund is vulnerable to tax rate changes, either at the Idaho or federal level, since part of municipal securities' value is derived from the recipient's ability to exclude interest payments from taxation. Should this exclusion be reduced, the market for municipal securities, and consequently the Fund's share value, may be adversely affected.


Idaho Tax-Exempt Fund

NITEX

Interest rate risk: Investing in bonds includes the risk that as interest rates rise, bond prices will fall. Conversely, during periods of declining interest rates bond prices generally rise, but bond issuers may call or prepay the bond and reissue debt at lower interest rates. The longer a bond's maturity, the more sensitive the bond is to interest rate changes. The risks associated with changing interest rates may have unpredictable effects on bond markets, the liquidity of bonds, and the Fund's investments. The risks associated with changing interest rates may have unpredictable effects on bond markets, the liquidity of bonds, and the Fund's investments.

Call risk: Bonds with embedded callable options also contain an element of prepayment or call risk. When interest rates decline, issuers can retire their debt and reissue bonds at a lower interest rate.

Credit risk: Investing in bonds includes the risk that an issuer will not pay interest or principal when due, or the issuer may default altogether. If an issuer's credit quality is perceived to decline, the value and liquidity of the issuer's bonds may also decline.

State-specific bond risk: Investing only in Idaho bonds means the Fund has greater exposure to events in that state. Factors such as political, economic, and financial trends in the state of Idaho can affect market prices for the Fund's holdings.

Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If the Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, the Fund may lose money on its investments. As a result, the Fund may be unable to achieve its objective.

Performance

Annual Total Return

The following bar chart presents the calendar year total returns of the Fund before taxes. The bar chart provides an indication of the risks of investing in the Fund by showing changes in performance from year to year. A fund's past performance (before and after taxes) is not a guarantee of how a fund will perform in the future.

Performance data current to the most recent month-end and quarter-end are available on www.idahotaxexemptfund.com.

Idaho Tax-Exempt Fund Annual Total Returns
Best Quarter Q3 2010 3.09%
Worst Quarter Q4 2010 -3.27%

Average Annual Total Returns

The table below presents the average annual returns for the Fund and provides an indication of the risks of investing in the Fund by showing how the Fund's average annual returns for 1, 5, and 10 years compare to those of a broad-based market index.

Periods ended December 31, 2019
  1 Year 5 Year 10 Year
Return before taxes 6.05% 2.46% 3.05%
Return after taxes on distributions 6.05% 2.46% 3.05%
Return after taxes on distributions and sale of Fund shares 4.42% 2.30% 2.66%
S&P Idaho Municipal Bond Index
(reflects no deduction for fees, expenses or taxes)
7.04% 3.71% 4.74%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of any state or local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.


Idaho Tax-Exempt Fund

NITEX

Investment Adviser

Saturna Capital Corporation is Idaho Tax-Exempt Fund's investment adviser.

Portfolio Manager

Ms. Elizabeth Alm CFA®, a senior investment analyst of Saturna Capital Corporation, is the person primarily responsible for the day-to-day management of the Idaho Tax-Exempt Fund, which she has managed since 2020. Mr. Christopher W. Lang CFA®, Vice President of Saturna Brokerage Services Inc., and Investment Analyst of Saturna Capital Corporation, is the deputy portfolio manager, a role he assumed in 2020.

Purchase and Sale of Fund Shares

You may open an account and purchase shares by sending a completed application, a photocopy of a government-issued identity document, and a check made payable to the Idaho Tax-Exempt Fund.

The minimum intitial investment is $1,000 (for tax-sheltered accounts, there is no minimum).

Shareowners may purchase additional shares at any time in minimum amounts of $25.

Shareowners may redeem shares on any business day by several methods:

Written request

Write:   Idaho Tax-Exempt Fund
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

Telephone request

Call: 800-728-8762 or 360-734-9900

Online

Visit: www.idahotaxexemptfund.com

Tax Information

The Fund's distribution of dividends paid from investments in Idaho bonds are generally not subject to federal or Idaho state income taxes. Interest on certain bonds, such as revenue bonds, may be subject to the federal alternative minimum income tax (AMT). Bonds subject to AMT do not count as satisfying the Fund's requirement to invest 80% of its net assets in debt securities generating tax-exempt income. Any ordinary income dividends or capital gain distributions you receive from the Fund may be subject to federal, state, and local income taxes.

Financial Intermediary Compensation

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.


# # #

 

Idaho Tax-Exempt Fund Prospectus March 27, 2020

Beginning on January 29, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Idaho Tax-Exempt Fund's annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund's website (www.saturna.com/reports), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 800-SATURNA (800-728-8762) or by sending an e-mail request to Idaho Tax-Exempt Fund at info@saturna.com.

Beginning on January 2, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 800-SATURNA (800-728-8762) or send an e-mail request to Idaho Tax-Exempt Fund at info@saturna.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.

Idaho Tax-Exempt Fund

Ticker Symbol: NITEX

Prospectus

March 27, 2020

Please read this Prospectus and keep it for future reference. It is designed to provide important information and to help investors decide if the Fund's goals match their own.

Neither the Securities and Exchange Commission nor any state securities authority has approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Idaho Tax-Exempt Fund is a series of Saturna Investment Trust.


Table of Contents:

Idaho Tax-Exempt Fund Summary 3
Investment Objectives 6
Principal Investment Strategies 6
Principal Risks 6
Investment Information 7
Investment Adviser 7
Fund Share Pricing 8
Purchase and Sale of Fund Shares 8
Purchase and Sale of Fund Shares Through Financial Intermediaries 9
Distributions 9
Frequent Trading Policy 10
Tax Consequences 10
Distribution Arrangements 10
Financial Highlights 11

 

2


Idaho Tax-Exempt Fund

NITEX

Investment Objective

Idaho Tax-Ex­empt Fund seeks to provide income free from federal income, federal alternative mini­mum, and Idaho state income taxes. Preservation of capital is a sec­ondary objective.

Fees and Expenses

This section describes the fees and expenses that you may pay if you buy and hold shares of the Idaho Tax-Exempt Fund.

Shareowner Fees

None.

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fee 0.50%
Other Expenses 0.19%
Total Annual Fund Operating Expenses 0.69%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although actual costs may be higher or lower, based on these assumptions, your costs would be:

1 Year 3 Years 5 Years 10 Years
$70 $221 $384 $859

Portfolio Turnover

The Fund may pay transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 4.44% of the average value of its portfolio.

Principal Investment Strategies

Idaho Tax-Exempt Fund invests in debt securities issued by the State of Idaho and its political subdivisions. These municipal bonds, notes, and commercial paper may be in various forms, including general obligation bonds, revenue bonds, mortgage bonds, certificates of participation, local improvement district bonds, and refunding bonds.

The Fund buys investment grade bonds, meaning those rated BBB or higher by a national bond rating agency (e.g., Standard & Poor's), or, if unrated, of equivalent quality in the opinion of the adviser, considered at the time of purchase. At least 40% of bonds that the Fund buys must be rated A or higher or, if unrated, of equivalent quality, on a similar basis. Factors used in bond evaluations include such information as the bond district's financial position, population size, employment trends, economic activity, and diversification. The portfolio's dollar-weighted average effective maturity is expected to range between 6 and 15 years. In accordance with the fundamental investment policies of the Fund, under normal circumstances, at least 80% of net assets are in­vested in debt se­curities generating in­come exempt from both federal and Idaho income tax.

Principal Risks of Investing

Market risk: The value of the Fund's shares rises and falls as the market value of the securities in which the Fund invests goes up and down. The market value of securities will fluctuate, sometimes significantly and unpredictably, with stocks generally being more volatile than bonds. When you redeem your shares, they may be worth more or less than what you paid for them. Only consider investing in the Fund if you are willing to accept the risk that you may lose money.

Investment strategy risk: Because the Fund concentrates its investments primarily in Idaho municipal securities, its investments are susceptible to factors adversely affecting Idaho. These factors include economic and financial trends as well as political conditions in Idaho and its political subdivisions. Investing primarily in Idaho bonds means the Fund is less diversified than some other types of mutual funds. Concentrating investments in a single state or a small number of security issues may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

Tax risk: The Fund is vulnerable to tax rate changes, either at the Idaho or federal level, since part of municipal securities' value is derived from the recipient's ability to exclude interest payments from taxation. Should this exclusion be reduced, the market for municipal securities, and consequently the Fund's share value, may be adversely affected.

3


Idaho Tax-Exempt Fund

NITEX

Interest rate risk: Investing in bonds includes the risk that as interest rates rise, bond prices will fall. Conversely, during periods of declining interest rates bond prices generally rise, but bond issuers may call or prepay the bond and reissue debt at lower interest rates. The longer a bond's maturity, the more sensitive the bond is to interest rate changes. The risks associated with changing interest rates may have unpredictable effects on bond markets, the liquidity of bonds, and the Fund's investments. The risks associated with changing interest rates may have unpredictable effects on bond markets, the liquidity of bonds, and the Fund's investments.

Call risk: Bonds with embedded callable options also contain an element of prepayment or call risk. When interest rates decline, issuers can retire their debt and reissue bonds at a lower interest rate.

Credit risk: Investing in bonds includes the risk that an issuer will not pay interest or principal when due, or the issuer may default altogether. If an issuer's credit quality is perceived to decline, the value and liquidity of the issuer's bonds may also decline.

State-specific bond risk: Investing only in Idaho bonds means the Fund has greater exposure to events in that state. Factors such as political, economic, and financial trends in the state of Idaho can affect market prices for the Fund's holdings.

Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If the Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, the Fund may lose money on its investments. As a result, the Fund may be unable to achieve its objective.

Performance

Annual Total Return

The following bar chart presents the calendar year total returns of the Fund before taxes. The bar chart provides an indication of the risks of investing in the Fund by showing changes in performance from year to year. A fund's past performance (before and after taxes) is not a guarantee of how a fund will perform in the future.

Performance data current to the most recent month-end and quarter-end are available on www.idahotaxexemptfund.com.

Idaho Tax-Exempt Fund Annual Total Returns
Best Quarter Q3 2010 3.09%
Worst Quarter Q4 2010 -3.27%

Average Annual Total Returns

The table below presents the average annual returns for the Fund and provides an indication of the risks of investing in the Fund by showing how the Fund's average annual returns for 1, 5, and 10 years compare to those of a broad-based market index.

Periods ended December 31, 2019
  1 Year 5 Year 10 Year
Return before taxes 6.05% 2.46% 3.05%
Return after taxes on distributions 6.05% 2.46% 3.05%
Return after taxes on distributions and sale of Fund shares 4.42% 2.30% 2.66%
S&P Idaho Municipal Bond Index
(reflects no deduction for fees, expenses or taxes)
7.04% 3.71% 4.74%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of any state or local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

4


Investment Adviser

Saturna Capital Corporation is Idaho Tax-Exempt Fund's investment adviser.

Portfolio Manager

Ms. Elizabeth Alm CFA®, a senior investment analyst of Saturna Capital Corporation, is the person primarily responsible for the day-to-day management of the Idaho Tax-Exempt Fund, which she has managed since 2020. Mr. Christopher W. Lang CFA®, Vice President of Saturna Brokerage Services Inc., and Investment Analyst of Saturna Capital Corporation, is the deputy portfolio manager, a role he assumed in 2020.

Purchase and Sale of Fund Shares

You may open an account and purchase shares by sending a completed application, a photocopy of a government-issued identity document, and a check made payable to the Idaho Tax-Exempt Fund.

The minimum intitial investment is $1,000 (for tax-sheltered accounts, there is no minimum).

Shareowners may purchase additional shares at any time in minimum amounts of $25.

Shareowners may redeem shares on any business day by several methods:

Written request

Write:   Idaho Tax-Exempt Fund
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

Telephone request

Call: 800-728-8762 or 360-734-9900

Online

Visit: www.idahotaxexemptfund.com

Tax Information

The Fund's distribution of dividends paid from investments in Idaho bonds are generally not subject to federal or Idaho state income taxes. Interest on certain bonds, such as revenue bonds, may be subject to the federal alternative minimum income tax (AMT). Bonds subject to AMT do not count as satisfying the Fund's requirement to invest 80% of its net assets in debt securities generating tax-exempt income. Any ordinary income dividends or capital gain distributions you receive from the Fund may be subject to federal, state, and local income taxes.

Financial Intermediary Compensation

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

5


Investment Objectives

Idaho Tax-Ex­empt Fund seeks to provide income free from federal income, federal alternative mini­mum, and Idaho state income taxes. Preservation of capital is a sec­ondary objective.

There can be no guarantee that the particular investment objectives of the Fund will be realized. These investment objectives may only be changed with approval by vote of a majority of the outstanding shares of the Fund.

Principal Investment Strategies

Under normal circumstances, at least 80% of net assets are in­vested in debt se­curities generating in­come exempt from both federal and Idaho income tax.

The Fund buys investment grade bonds, meaning those rated BBB or higher by a national bond rating agency (e.g., Standard & Poor's) or, if unrated, of equivalent quality in the opinion of the adviser, considered at the time of purchase. At least 40% of bonds that the Fund buys must be rated A or higher or, if unrated, of equivalent quality, on a similar basis. The portfolio's dollar-weighted average effective maturity is expected to range between 6 and 15 years.

Up to 60% of total assets of the Fund can be in­vested in non-rated bonds. The adviser will purchase only those nonrated bonds that it believes are liquid and can be sold at the value consistent with that used for net asset value purposes.

The Fund may, from time to time, take temporary defensive positions that are inconsistent with the Fund's investment strategies in attempting to respond to adverse market, economic, political, or other conditions. Temporary defensive positions may protect principal in adverse market conditions but could reduce returns if security prices are increasing. Taking a temporary defensive position may keep the Fund from attaining its investment objective.

Principal Risks

As with any investment in a mutual fund, the value of a Fund's shares rises and falls as the market value of the securities in which the Fund invests goes up and down. When you redeem your shares, they may be worth more or less than what you paid for them. Before you invest in a Fund, you should carefully evaluate the Fund's investment risk in light of your investment goals. Only consider investing in the Fund if you are willing to accept the risk that you may lose money. An investment in the Fund held for longer periods over full market cycles typically provides the best potential for favorable investment returns. The Fund's principal investment strategies include the following principal investment risks.

Market risk: The market value of securities will fluctuate, sometimes significantly and unpredictably, with stocks generally being more volatile than bonds. The securities markets are also susceptible to data imprecision, technology malfunctions, operational errors, and similar factors that may adversely affect a single issuer, a group of issuers, an industry, or the market as a whole. Changes in value may be temporary or may last for extended periods. A slow growing economy or a recessionary environment may adversely impact securities markets and prices of securities in which the Fund invests. Economies and financial markets throughout the world are becoming increasingly interconnected. Local, regional or global events such as war, acts of terrorism, the spread of infectious disease or other public health issues, or other events could have a significant impact on the Fund and itsinvestments. As a result, events or conditions that impact the economies or securities markets may adversely impact the Fund even if it is not invested primarily in those economies or markets.

Investment strategy risk: Because the Fund concentrates its investments primarily in Idaho municipal securities, its investments are susceptible to factors adversely affecting Idaho. These factors include economic and financial trends as well as political conditions in Idaho and its political subdivisions. Investing primarily in Idaho bonds means the Fund is less diversified than some other types of mutual funds. Concentrating investments in a single state or a small number of security issues may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

Tax risk: The Fund is vulnerable to tax rate changes, either at the Idaho or federal level, since part of municipal securities' value is derived from the recipient's ability to exclude interest payments from taxation. Should this exclusion be reduced, the market for municipal securities, and consequently the Fund's share value, may be adversely affected.

Interest rate risk: Investing in bonds includes the risk that as interest rates rise, bond prices will fall. The longer a bond's maturity, the more sensitive the bond is to interest rate changes. A bond's sensitivity to interest rate changes often is measured by a bond's duration. As levels of interest rates fluctuate, bonds with longer duration generally have larger price changes than bonds with shorter duration.

The historically low interest rate environment heightens the risks associated with rising interest rates. A rising interest rate environment may adversely impact the liquidity of bonds and lead to increased volatility of bond markets. A wide variety of market factors can cause interest rates to rise, including central bank monetary policy, rising inflation, and changes in general economic conditions. Interest rates are currently extremely low, even negative, as government policies artificially support bond prices. Future changes in governments, and their fiscal and monetary policies could lessen bond prices.

Call risk: Bonds with embedded callable options also contain an element of prepayment or call risk. When interest rates decline, issuers can retire their debt and reissue bonds at a lower interest rate. This hurts investors because yields available for reinvestment will have declined and upward price mobility on callable bonds is generally limited by the call price.

Credit risk: Investing in bonds includes the risk that an issuer will not pay interest or principal when due, or the issuer may default altogether. If an issuer's credit quality is perceived to decline, the

6


value and liquidity of the issuer's bonds may also decline. The perceived credit of a bond issuer, and hence the price of its bonds, varies for many reasons, including profits of a business, the willingness of government units to pay their obligations, and unforeseen liabilities such as increased pension plan obligations resulting from low interest rate earnings assumptions.

Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If the Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, the Fund may lose money on its investments. The risk of loss may increase depending on the size and frequency of redemptions and whether redemptions occur during market turmoil or declining prices. The Fund may be unable to sell its less liquid securities at its desired price. The purchase price and subsequent valuation of less liquid securities typically reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists. Reduced liquidity may result from a drop in overall market trading volume, an inability to find a ready buyer, or legal restrictions on the securities' resale.

State-specific bond risk: State-specific bond risk entails changes in investor perceptions about the state of Idaho or other entities issuing bonds in Idaho. Investing only in Idaho bonds means the Idaho Tax-Exempt Fund has greater exposure to events in that state. Factors such as political, economic, and financial trends in the state of Idaho will affect market prices for the Fund's holdings of Idaho issuers, regardless of the actions of the broader market for municipal bonds. Investor perceptions of those events may cause bonds in the Fund's portfolio to vary up and down.

Operational Risk

Cybersecurity risk: The risk of a cybersecurity incident arises as a result of an overall increase in deliberate attacks and the rapidly evolving nature of such attacks. Such an attack may seek to gain unauthorized access to electronic systems for purposes of obtaining nonpublic personally identifiable information or proprietary information or causing operational disruption. Saturna cannot control the cybersecurity systems of third party service providers or issuers and, therefore, a cybersecurity incident that impacts a company with which Saturna or the Fund does business may also impact Fund shareowners. While Saturna has established internal risk management measures designed to identify, protect against, detect, respond to, and recover from cybersecurity incidents, no program can guarantee that all threats and vulnerabilities have been eliminated. There currently is no insurance policy available to cover all of the potential risk of loss that may result from or is associated with a cyber attack. Unless specifically agreed by Saturna Capital separately or as may be required by law, Saturna and the Fund are neither guarantors against, nor obligors for, any damages resulting from a cyber-related incident.

Please refer to the Trust's Statement of Additional Information for further details about the risks of investing in the Fund.

Investment Information

Shareowners receive a financial report showing the investment returns, portfolios, income, and expenses of the Fund every six months. A copy of the audited financial statements of the Fund for the period ended November 30, 2019, in the Fund's Annual Report, is available on request. Investors may obtain current share prices daily on financial information websites, by calling toll-free 1-800-728-8762, on electronic quotation systems (symbol: NITEX), and at www.idahotaxexemptfund.com.

This prospectus, financial reports, performance information, proxy voting records, and other useful information are also available at www.idahotaxexemptfund.com. Portfolio holdings are provided each month-end online (see the Statement of Additional Information for a description of portfolio disclosure policies).

Investment Adviser

Saturna Capital Corporation, 1300 N. State Street, Bellingham, Washington 98225 is the Fund's investment adviser and administrator ("Saturna Capital" or the "adviser"). Founded in 1989, Saturna Capital Corporation has approximately $4.3 billion in assets under management as of December 31, 2019. It is also the adviser to other funds of the Saturna Investment Trust, the Amana Mutual Funds Trust, and to separately managed accounts. Saturna Capital's wholly-owned subsidiary in Malaysia manages separate accounts and investment funds. Another wholly-owned subsidiary, Saturna Environmental Corporation, owns an environmental education camp.

Ms. Elizabeth Alm CFA®, portfolio manager of Idaho Tax-Exempt Fund, joined Saturna Capital in 2018. Ms. Alm is also portfolio manager of the Sextant Bond Income and deputy portfolio manager of the Saturna Sustainable Bond and Amana Participation Funds. From 2007 to 2018, Ms. Alm was a senior research analyst with Wells Fargo Asset Management focusing on high-yield municipal bonds.

Mr. Christopher W. Lang CFA®, deputy portfolio manager of Idaho Tax-Exempt Fund, joined Saturna Capital in 2005. Mr. Lang is also the deputy portfolio manager of Sextant International Fund. For Saturna Capital he has worked in mutual fund operations, investment research, and is Vice President of Saturna Brokerage Services, Inc., the Funds' distributor and a wholly-owned subsidiary of the adviser.

See the Statement of Additional Information for a discussion of their compensation, other accounts managed, and ownership of the Idaho Tax-Exempt Fund. Portfolio managers may maintain substantial positions in Saturna mutual funds and generally do not purchase individual securities for their own accounts.

Advisory Fee
The Fund pays a monthly advisory fee at the annual rate of 0.50% of the aver­age daily net assets up to $250 mil­lion, 0.40% of assets be­tween $250 mil­lion and $1 billion, and 0.30% of assets in ex­cess of $1 billion. For the fiscal year ended November 30, 2019, the aggregate advisory fee paid was 0.48% of average net assets.

7


A discussion regarding the basis for the Board of Trustee's renewing the advisory contract is available in the Fund's Annual Report published for the fiscal year ended November 30, 2019.

Fund Share Pricing

The Fund computes its daily share price (net asset value) using market prices as of the close of trading on the New York Stock Exchange (generally 4 p.m. Eastern time). Fund shares are not priced on the days when New York Stock Exchange trading is closed (typically weekends and US national holidays). Bonds and other fixed-income securities are valued at prices supplied by one or more independent pricing services, which generally reflect valuations provided by securities broker-dealers and analysis conducted by the independent pricing service. Securities for which there are no sales are valued at the latest bid price. Occasionally there may be days without a readily available market price for a security. These may happen when trading in a security is suspended, the market on which a security is principally traded closes early, or trading volume is insufficent to produce a reliable quoted or computed price. When this occurs, a fair value for such security is determined in good faith using fair value procedures approved by and administered under the supervision of the Board of Trustees. Using fair value to price a security may result in a value different from the security's most recent closing price and from the prices used by other mutual funds to calculate their share prices.

Additional information about portfolio security valuation, including foreign securities, is contained in the Fund's Statement of Additional Information (SAI).

Purchase and Sale of Fund Shares

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, street address, date of birth, and other information that will allow us to identify you. For most accounts, we will ask for a photocopy of your driver's license or other identifying documents.

You may open an account and purchase shares by sending a completed application, a photocopy of a government-issued identity document, and a check made payable to the Idaho Tax-Exempt Fund. The minimum intitial investment is $1,000 (for tax-sheltered accounts, there is no minimum). The Fund does not accept initial orders via telephone or unaccompanied by payment.

The price applicable to purchases and redemptions of Fund shares is the price next computed after receipt of a purchase or redemption request in proper order by the Fund's transfer agent (Saturna Capital Corporation). There are no sales charges or loads. The Fund may reject purchases for any reason, such as excessive trading. In addition, anti-money laundering regulations limit the acceptance of third-party checks and money orders.

Shareowners may purchase additional shares at any time in minimum amounts of $25. Once an account is open, pur­chases can be made by check, by electronic funds transfer, or by wire. With prior authorization, orders can be entered at www.saturna.com.

Shareowners may autho­rize the purchase or redemption of shares via electronic funds transfer ("EFT") by completing the appropriate section of the applica­tion. The authorization must be received at least two weeks before EFT can be used. To use EFT to pur­chase or redeem shares, simply call 800-728-8762 (800-SATURNA). Investors also may wire money to purchase shares, though the wiring bank typi­cally charges a fee for this service. Please notify Saturna Capital when you are wiring money.

Each time shares are purchased or redeemed, a confirmation is sent showing the details of the transaction as well as the current number and value of shares held. Share balances are computed in full and frac­tional shares, expressed to three decimal places.

Shareowners may request a redemption of all or part of their investment on any business day of the Fund. The Fund pays redemption proceeds in US dol­lars, and the amount per share received is the price next determined after receipt of a re­demption request in proper order. The amount received depends on the value of the investments of the Fund on that day and may be more or less than the cost of the shares being redeemed.

If you are redeeming shares that you recently purchased by check, the Funds may delay sending your redemption proceeds until your check has cleared. This may take up to 15 calendar days after your check is received. If you are redeeming shares that you have recently purchased by EFT, those shares may be subject to a 60-day waiting period during which such shares may only be redeemed by EFT to the same bank account from which the funds were initially withdrawn. Such shares may not be redeemed online during the 60-day waiting period.

There are several methods you may choose to redeem shares:

Written request

Write:   Idaho Tax-Exempt Fund
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

You may redeem shares by a written request and choose one of the following options for the proceeds:

  • Redemption check (no minimum)
  • Federal funds wire ($5,000 minimum)

Note: Signatures on written requests, such as payments directed to a third party, may need to be guaranteed by a national bank or trust com­pany, or by a member of a national se­curities exchange.

Prevailing rates apply to federal funds wires and expedited courier service for redemption checks. Delivery times cannot be guaranteed by the Fund.

8


Telephone request

Call: 800-728-8762 or 360-734-9900

Unless Saturna is notified in advance that you do not want this privilege, for telephone requests, the Funds will endeavor to confirm that instructions are genuine. The caller must provide:

  • the name of the per­son making the request,
  • the name and address of the regis­tered owner(s),
  • the account number,
  • the amount to be redeemed, and
  • the method for remittance of the pro­ceeds.

Online

Visit: www.idahotaxexemptfund.com

To initiate transactions online, shareowners must first complete an Online Access and E-Delivery form available on www.idahotaxexemptfund.com or by calling toll-free 1-800-728-8762. When accessing their account, users must provide the username and password, and possible security prompts.

When you redeem shares, you may choose one of the following options for the proceeds:

  • Redemption check (no mini­mum) sent to registered owner(s) at the account address of record. Note: Redemption checks sent to other than registered owners may require a written request with a signature guarantee.
  • Electronic Funds Transfer ($100 minimum) with proceeds transferred to your bank ac­count as desig­nated by the EFT au­thorization on your application. The transfer agent must receive the EFT authori­za­tion at least two weeks before EFT transfer can be used.
  • Exchange (in at least the mini­mum initial amount established by the Fund being purchased) for shares of any other Fund for which Saturna Capital Corporation is adviser. If the exchange is your initial investment into this Fund, the new account will au­tomatically have the same registration as your original ac­count.

As the transfer agent, Saturna may also require a form of personal identification. Neither the transfer agent nor the Fund will be responsible for the re­sults of transactions they rea­sonably believe genuine.

The shares and/or uncashed checks of redemptions, dividends, or distributions may be transferred to your state of residence if no activity occurs within your account during an "inactivity period" specified in your state's laws. The shareowner's last known address of record determines which state has jurisdiction. Some states, such as Texas, allow shareowners to designate a representative to receive escheatment (transfer) notifications if their account is being transfered to a state government.

The Fund may restrain any account and suspend account services when: the Fund believes that there may exist a dispute between the registered or beneficial account owners; the Fund believes that a transaction may be fraudulent; in cases of abusive or threatening conduct or suspected illegal activity; or if the Fund is unable to verify the identity of the person(s) or entity opening an account or requesting a transaction.

The Fund normally sends redemption proceeds within one day, however if the Fund reasonably believes that a cash redemption would negatively impact the operations of a Fund or that the shareowner may be engaged in market-timing or frequent trading, the Fund reserves the right to delay payment of the redemption proceeds for up to seven calendar days. The Fund's investment team continually monitors portfolio liquidity and adjusts the Fund's cash levels based on market outlook, portfolio and investor transactions, and other relevant criteria. Unlike many mutual funds, the Idaho Tax-Exempt Fund does not maintain a bank line of credit that could be used to meet short-term liquidity needs. There can be no assurance that the Fund will be able to manage liquidity successfully in all market environments. Under stressed conditions, the Fund may not pay redemption proceeds in a timely fashion.

The Funds reserve the right to change the terms of purchasing shares and services offered.

Purchase and Sale of Fund Shares Through Financial Intermediaries

The Fund has authorized financial intermediaries (such as securities brokers or dealers, retirement plan recordkeepers, banks and trust companies) to receive purchase, redemption, and exchange orders on behalf of the Fund. These authorized intermediaries may designate other intermediaries to receive such orders. The Fund will be deemed to have received a purchase, redemption, or exchange order when an authorized intermediary (or its designee) receives the transaction request in good order.

If you purchase shares through an intermediary, the transfer agent may not have your account information. If so, you must contact your intermediary to perform transactions. Investors should be aware that intermediaries might have policies different than the Fund's policies regarding purchases, redemptions, or exchanges and these may be in addition to or in place of the Fund's policies. For more information about these restrictions and policies, please contact your broker, retirement plan administrator, or other intermediary.

Distributions

The Fund intends to distribute its net investment income and net realized capital gains, if any, to its shareowners. The Fund accounts for its distributions as taxable capital gains (originating from net realized gains on portfolio transactions), taxable income (originating from dividends, taxable interest, and certain other types of gains), or tax-exempt income (originating from interest on certain municipal bonds). Income dividends are declared daily and reinvested or distributed (paid) monthly. Distributions from capital gains are paid annually, typically by the end of the year.

9


Both dividends and capital gain distributions are paid in additional full and fractional shares of the Fund owned. At your option, you may receive dividends and/or capital gain distributions greater than $10 in cash. Dividends or capital gains in amounts less than $10 will be reinvested. If you do not indicate any choice on your application, your dividends will be reinvested. You are notified of each dividend and capital gain distribution at the end of the month when paid.

Returned dividend checks and dividend checks that remain uncashed for six months will be automatically reinvested into your account and invested in additional shares of the Fund owned; future dividends in such accounts will continue to be reinvested until the shareowner is located or the account is closed.

Frequent Trading Policy

The Fund is intended for long-term investment and does not permit rapid trading. The Fund's Board of Trustees has adopted a frequent trading policy that attempts to identify and limit rapid trading. Rapid trading may lead to higher portfolio turnover, which may negatively affect performance or increase costs, thereby adversely affecting other shareowners.

To the extent reasonably practicable, the Fund monitors trading in its shares in an effort to identify trading patterns that appear to indicate frequent purchases and redemptions that might violate the Frequent Trading Policy. If the Fund, the transfer agent, or the Fund's manager, based on the information available, believes that it has identified a pattern of such trading (whether directly through the Fund, indirectly through an intermediary, or otherwise), it may, in its sole discretion, temporarily or permanently bar future purchases of shares of the Fund (or any other fund managed by the adviser) by the account holder, or any accounts under common control (such as those advised by an investment manager or any other type of asset allocator).

In making such a judgment, factors considered may include the size of the trades, the frequency and pattern of trades, the methods used to communicate orders, and other factors considered relevant.

Although this process involves judgments that are inherently subjective, the Fund seeks to make decisions that are consistent with the interests of the Fund's shareowners. The Fund reserves the right to refuse or revoke any purchase order for any reason the Fund, the transfer agent, or the Fund's manager believes to be contrary to the Frequent Trading Policy.

The Fund often receives orders through financial intermediaries who trade Fund shares through omnibus accounts (i.e., a single account in which the transactions of individual shareowners are combined). When possible, the Fund obtains contractual agreements with intermediaries to enforce the Fund's redemption policies and relies on intermediaries to have reasonable procedures in place to detect and prevent excessive trading or market timing of Fund shares. The Fund cannot always identify all intermediaries or detect or prevent trading that violates the Frequent Trading Policy through intermediaries and omnibus accounts. Some intermediaries trade shares of several funds and cannot always enforce the Fund's policies.

Tax Consequences

The Fund declares and pays exempt-interest dividends from its net investment income, which are exempt from federal and Idaho state income taxes. Distributions of short-term capital gains and gains characterized as market discount are taxable as ordinary income. Such distributions and any capital gain distributions may be subject to income tax, whether they are paid in cash or reinvested in additional Fund shares.

An exchange of the Fund's shares for shares of another fund will be treated as a sale of the Fund's shares and any gain on the transaction may be subject to federal income tax.

Shareowners receive quarterly statements. The year-end statement should be retained for tax accounting. As transfer agent, Saturna Capital Corporation keeps each account's entire investment transaction history and helps shareowners maintain the tax records needed to determine reportable capital gains and losses as well as dividend income.

Each February, the transfer agent reports to each shareowner (consolidated by taxpayer ID) and to the Internal Revenue Service ("IRS") the amount of each redemp­tion transaction and the amount of income divi­dends and capital gains distributions. Dividend amounts represent the proportionate share the shareowner is to report on a tax return for the year. The Fund expects that its distributions will consist primarily of tax-exempt income dividends, but it may invest a portion of its assets in securities that generate income dividends that are not exempt from federal or Idaho income tax. Income dividends exempt from federal tax may be subject to state and local income tax. Any capital gains distributed by the Fund may be taxable.

Tax regulations require reporting cost basis information to you and the IRS on Form 1099-B. This information is reported using a cost basis method selected by you or, in the event no cost basis method was selected, our default method (FIFO — First In, First Out). Please note that the cost basis information reported to you may not always be the same as what you report on your tax return as different rules may apply. You should save your transaction records to make sure the information reported on your tax return is accurate.

To avoid being subject to fed­eral backup with­holding tax on dividends and distri­bu­tions, you must furnish your cor­rect Social Security or Tax Identification Number.

Distribution Arrangements

The Idaho Tax-Exempt Fund intends to comply with with the concept of Clean Shares as defined by the United States Securities and Exchange Commission. Clean Shares are characterized by a lack of any ongoing distribution expenses, sub-transfer agency, or recordkeeping fees, and that financial intermediaries transact shares solely on an agency basis. When you purchase Clean Shares through a financial intermediary, such as a broker-dealer or financial adviser, you may be charged a transaction fee or commission to purchase the shares.

Shares of the Idaho Tax-Exempt Fund are Clean Shares.

10


Shares may be purchased and sold through intermediaries, such as broker-dealers and retirement plan administrators, having agreements with the Funds. These intermediaries may require the adviser/distributor to the Funds to share revenues to compensate the intermediaries for their services. Any such payments could be characterized as "revenue sharing." An intermediary's receipt or expectation of receipt of revenue sharing payments could influence an intermediary's recommendation of the Funds. You should review your intermediary's compensation practices for that information. For more information, see the Funds' Statement of Additional Information.

Financial Highlights

This table can help you understand the Fund's financial performance. The top section reflects financial results for a single Fund share. The total returns represent the rate that an investor earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions and without regard to income taxes. Tait, Weller & Baker, LLP, independent registered public accounting firm for the Fund, audited this information. Their report and the Fund's financial statements are in the Fund's annual report (available free upon request from the Fund at www.idahotaxexemptfund.com or by calling 800-728-8762).

                                         

 

    For the year ended November 30,  
           

Selected data per share of outstanding capital stock throughout each year:

    2019       2018       2017       2016       2015  
           

Net asset value at beginning of year

    $5.28       $5.37       $5.29       $5.48       $5.51  
           

Income from investment operations

                                       
           

Net investment income

    0.11       0.12       0.13       0.14       0.15  
           

Net gains (losses) on securities (both realized and unrealized)

    0.27       (0.09     0.08       (0.19     (0.03
                                         
           

Total from investment operations

    0.38       0.03       0.21       (0.05     0.12  
                                         
           

Less distributions

                                       
           

Dividends (from net investment income)

    (0.11     (0.12     (0.13     (0.14     (0.15
           

Distributions (from capital gains)

    -       -       -       0.00 A       0.00 A  
                                         
           

Total distributions

    (0.11     (0.12     (0.13     (0.14     (0.15
                                         
           
                                         
           

Net asset value at end of year

    $5.55       $5.28       $5.37       $5.29       $5.48  
           
                                         

Total return

    7.30%       0.51%       3.90%       (0.95 )%      2.21%  
           
                                         
           

Ratios / supplemental data

                                       
           

Net assets ($000), end of year

    $13,487       $13,554       $17,474       $17,997       $17,420  
           

Ratio of expenses to average net assets

                                       
           

Before transfer agent fee waiver and custodian fee credits

    0.69%       0.68%       0.67%       0.67%       0.67%  
           

After transfer agent fee waiver

    0.67%       0.67%       0.66%       0.66%       0.66%  
           

After transfer agent fee waiver and custodian fee credits

    0.67%       0.67%       0.65%       0.65%       0.66%  
           

Ratio of net investment income after fee waiver and custodian credits to average net assets

    2.07%       2.20%       2.33%       2.54%       2.66%  
           

Portfolio turnover rate

    4%       13%       20%       15%       7%  
           
                                         
A 

Amount is less than $0.01

 

11


Additional information about the Fund's in­vestments is available in the Fund's annual and semi-annual shareowner reports. The Fund's annual report includes a discussion of the market conditions and in­vestment strategies that significantly affected the Fund's performance during its last fiscal year. The Statement of Additional Information contains additional information and is incorporated in this Prospectus by reference. To request a free copy of the Statement of Additional Information, any reports or other information associated with Idaho Tax-Exempt Fund, and to make shareowner inquiries, please contact us at:

Saturna Investment Trust – Idaho Tax-Exempt Fund
1300 N. State St., Bellingham, WA 98225
1-800-SATURNA [1-800-728-8762]
www.idahotaxexemptfund.com

The Statement of Additional Information, the Annual and Semi-Annual Reports, this Prospectus, and other documents are available to download from our website, www.idahotaxexemptfund.com, and/or from your financial intermediary.

Reports and other information about the Funds are also available on the SEC's EDGAR database (www.sec.gov), and copies may be obtained, upon payment of a duplicating fee, by sending an email to publicinfo@sec.gov.

Idaho Tax-Exempt Fund is a series of Saturna Investment Trust.

(logo omitted)

Saturna Capital
1300 N. State Street
Bellingham, WA 98225
1-800-728-8762
www.saturna.com

Saturna Investment Trust's Investment Company Act file number is 811-05071.


# # #

Idaho Tax-Exempt Fund Annual Report Cover

 


 
     
Performance Summary (as of December 31, 2019)    (unaudited)

 

                                                 

Average Annual Returns (before any taxes paid by shareowners)

 

             
       1 Year        3 Year        5 Year        10 Year        15 Year        Expense Ratio  
             

Idaho Tax-Exempt Fund

     6.05%        3.59%        2.46%        3.05%        3.23%        0.68% 1  
             

S&P Idaho Municipal Bond Index

     7.04%        4.41%        3.71%        4.74%        4.70%        n/a  
             

“Muni Single State Intermediate” Category Average2

     5.69%        3.30%        2.44%        3.20%        3.31%        0.96%  

Performance data quoted in this report represents past performance, is before any taxes payable by shareowners, and is no guarantee of future results. Current performance may be higher or lower than that stated herein. Performance current to the most recent month-end is available by calling toll-free 1-800-728-8762 or visiting www.idahotaxexemptfund.com. Average annual total returns are historical and include change in share value as well as reinvestment of dividends and capital gains, if any. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Please consider an investment’s objectives, risks, charges, and expenses carefully before investing. To obtain this and other important information about the Idaho Tax-Exempt Fund in a prospectus or summary prospectus, ask your financial advisor, visit www.idahotaxexemptfund.com, or call toll free 1-800-728-8762. Please read the prospectus or summary prospectus carefully before investing.

A note about risk: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with the Fund, please see the Fund’s prospectus or summary prospectus.

 

1 

By regulation, the expense ratio shown in this table is as stated in the Fund’s most recent prospectus, which is dated March 27, 2019, and incorporates results for the fiscal year ended November 30, 2018. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

 

2 

Source: Morningstar December 31, 2019. Morningstar, Inc. is an independent fund performance monitor. Category returns are determined monthly from total returns by Morningstar, by category as determined by Morningstar. Category average expense ratios are determined by Morningstar from prospectus level data reported by funds in the category.

On the cover: An elk in the Sawtooth Mountains.

 

 

             
 
       
2                  November 30, 2019   Annual Report

 


 

 

     
Fellow Shareowners:    January 14, 2020

Idaho thrived in 2019, and the nation noticed. Personal income has grown at a 6% annual rate since 2016 and the state expects this to increase from $80 billion to $90 billion by 2021. Remarkably, state taxpayers are as healthy as the state’s finances.

Population and urban single-family home prices are both rising at some of the fastest rates in the country. While Hewlett Packard may be cutting jobs in Idaho, Amazon is expanding employment. Wheat exports to Taiwan were recently contracted to grow 10% over two years to $576 million.

Idaho State total gross domestic product reached $80.45 billion, a 2.4% increase for the fiscal year. State Reserve Funds grew 10% to $459 million, equaling 8.8% of the General Fund. The Unassigned General Fund balance (for discretionary use) ended the year at $803 million or 3% of the general fund. Idaho’s Combined Net Position (a useful indicator of whether the financial position of the State is improving or deteriorating) grew $550 million or 4.4%. Idaho also improved pension funding slightly (plan fiduciary net position as a % of total pension liabilities) to 82.6%. With so many Idaho bonds directly or indirectly relying on the state’s finances, the Idaho Tax-Exempt Fund pays particular attention to these details.

The 2018 individual and corporate income tax rate reductions, and the 2018 Idaho Child Income Tax Credit contributed to an expected decline in general fund revenue of $227 million. Softer national economic conditions also contributed to general fund revenue coming in below budget. The Idaho Legislature increased appropriations for health and welfare, education, and the Governor’s New Technology initiative, leaving the state’s general fund in a slight budget deficit for the period.

In 2019, Idaho initiated a comprehensive review all state regulations. The result was a significant reduction in the number of regulations. Idaho may now be one of the least regulated states in the nation. The governor is considering making this regulation cull an annual event. This unique editing process adds to the appeal of one of the nation’s most economically competitive states. Cutting personal and corporate taxes as well as regulations appears to be a winning formula practically unique to Idaho.

The American Legislative Exchange Council ranked Idaho second best in the nation in its forward-looking Economic Outlook Rank. Conning’s 2019 “State of the States,” municipal credit report analyzes state reserves, fixed costs, debt burdens, tax collections, population growth, and pension liabilities. This year Idaho ranked third best state municipal credit in the nation citing its “strong balance sheet and generally good economic conditions.”

Idaho continues to offer discriminating investors the opportunity to invest in high quality tax-exempt securities in an exceptionally creditworthy state.

Respectfully,

(photo omitted)

Jane Carten,

President

(photo omitted)

Phelps McIlvaine,

Vice President, Portfolio Manager

 

 

             
 
       
Annual Report   November 30, 2019                  3

 


 
     

Performance Summary

   (unaudited)

 

                                 

Average Annual Returns (as of November 30, 2019)

 

         
       1 Year        5 Year        10 Year        Expense Ratio1  
         

Idaho Tax-Exempt Fund

       7.30%          2.56%          3.01%          0.68%  
         

S&P Idaho Municipal Bond Index

       8.03%          3.78%          4.77%          n/a  

Growth of $10,000

 

 

     
Idaho Tax-Exempt Fund Growth of $10,000
  Comparison of any mutual fund to a market index must be made bearing in mind that the Index is unmanaged and expense-free. Conversely, the fund will (1) be actively managed; (2) have an objective other than mirroring the index, such as limiting risk; (3) bear transaction and other costs; (4) stand ready to buy and sell its securities to shareowners on a daily basis; and (5) provide a wide range of services. The graph compares $10,000 invested in the Fund on November 30, 2009, to an identical amount invested in the Standard & Poor’s Idaho Municipal Bond Index, a broad-based index of Idaho municipal bond prices. The graph shows that an investment in the Fund would have risen to $13,458 versus $15,934 in the S&P Idaho Municipal Bond Index.

Past performance does not guarantee future results. The “Growth of $10,000” graph and “Average Annual Returns” performance table assume the reinvestment of dividends and capital gains. They do not reflect the deduction of taxes that a shareowner might pay on fund distributions or the redemption of fund shares.

 

1 

By regulation, the expense ratio for the Fund shown in this table is as stated in the Fund’s most recent prospectus, which is dated March 27, 2019, and incorporates results for the fiscal year ended November 30, 2018. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

Fund Objective

 

Idaho Tax-Exempt Fund seeks to provide income free from federal income, federal alternative minimum, and Idaho state income taxes. Preservation of capital is a secondary objective.

 

                     

Portfolio Diversification

                
     
    % of Total Net Assets

 

        
       
 

General Obligation

    48.9%     

 

 

 

Idaho Tax-Exempt Fund Portfolio Diversification

 

 

 

State Education

    19.9%  
 

Real Estate

    11.1%  
 

Financial Services

    5.8%  
 

Pollution Control

    2.5%  
 

Medical - Hospitals

    2.4%  
 

Health Care Facilities

    2.3%  
 

Water Supply

    2.1%  
 

Transportation

    1.6%  
 

Other assets (net of liabilities)

    3.4%  

 

         

Top 10 Holdings

 

 
% of Total Net Assets  
   

Teton Co, ID SCD #401 Driggs (4.00% due 09/15/2035)

     4.3%  
   

University of Idaho Revenue (5.00% due 04/01/2032)

     3.6%  
   

Canyon Co ID SCD #134 Middleton (4.00% due 09/15/2028)

     3.4%  
   

Idaho Bond Bank (4.00% due 09/15/2032)

     3.3%  
   

Idaho State Building Authority (5.00% due 09/01/2032)

     3.2%  
   

Nez Perce CO ISD #1 Lewiston (5.00% due 09/15/2029)

     3.0%  
   

Idaho Fish Wildlife Foundation Rev (5.00% due 12/01/2033)

     2.9%  
   

Ada & Canyon Cos ID JSD #2 Meridian (5.00% due 08/15/2032)

     2.9%  
   

Boise City Urban Renewal Lease Rev (5.00% due 12/15/2032)

     2.7%  
   

Idaho Housing & Finance Rev (3.00% due 07/01/2036)

     2.5%  

 

 

             
 
       
4                  November 30, 2019   Annual Report

 


 
     

Discussion of Fund Performance

   (unaudited)

For the 12 months ended November 30, 2019, Idaho Tax- Exempt Fund returned 7.30%, which was higher than the 6.52% average annual return of its Morningstar Muni Single State Intermediate category peer group. For the five years ended November 30, 2019, the Fund provided an annualized total return of 2.56%, compared to the 2.49% annualized return for the Morningstar category peer group. The Fund’s net operating expense ratio was 0.68%. For the year, the Fund’s net assets fell -0.35% to $13.49 million. The Fund’s net asset value per share rose from $5.28 to $5.55. Over the one-year period, the Fund’s outstanding shares declined 5.00% to 2.43 million.

Factors Affecting Past Performance

2019 began with the US Federal Reserve Bank policy at an inflection point. Good US economic growth and low US unemployment justified policy normalization, meaning shrinking the Fed’s balance sheet (quantitative tightening) and moving the Federal Funds rates higher. However, softening global growth, trade tensions, a flat yield curve, a strong US dollar, and faltering financial asset prices required the opposite policy response. By November 2019, US policy makers had reversed rate normalization, setting Federal Funds at 1.50%, below their level in June 2018. Quantitative tightening was halted. The policy dichotomy between US economic strength and global economic weakness was resolved with global concerns and the urgent need for greater US dollar liquidity prevailing.

This rapid policy reversal triggered a “risk on” response in financial markets. The Fed succeeded in steepening the US Treasury yield curve, discounting a flat curve’s recession signal. Reinvigorated investors poured money into financial assets, and especially income producing assets like municipal bonds. Reinvestment risk suddenly re-emerged at the most urgent of investment objectives. Corporate bond spreads narrowed significantly, returning to previous lows in 1998, 2003, and 2018. High-yield spreads narrowed significantly more than investment grade spreads. US 30-yr bond yields established a new low, eclipsing the previous low in 2016.

More recently, the US Federal Reserve expanded short-term liquidity funding to address funding shortfalls in the US repo market. An unusual structural balance of payments deficit caused by record US government deficit spending, restrictive banking regulations, and weak foreign demand for US Treasury paper combined to create the funding deficit.

In echoes of 2008, the European Central Bank, Japan, and Britain also amplified their own monetary easing policies. With interest rates falling and corporate bond spreads narrowing simultaneously, bond markets produced exceptional returns.

Looking Forward

Seven of Conning Municipal Credit Research’s 10 strongest state municipal credits are in the Rocky Mountain region. The economy of the greater Rocky Mountain region looks like it will continue to outperform most of the nation. US economic growth and inflation will likely remain relatively benign while progress on Brexit and the US China trade negotiations may relax some anxieties. New monetary and fiscal stimulus from the US, Britain, Japan, and others will be deployed to fund debt burdens, fiscal deficits as well as boost economic growth and inflation in 2020.

In the last decade, monetary and fiscal stimulus policies initially pushed bond yields higher. However, these reflation policies have a mixed record of producing lasting results. Once these policies run their course, inflation and bond yields may fall again, boosting municipal bond prices. Despite these reflation initiatives, negative nominal and real rates will not disappear. Reinvestment risk will remain the most urgent concern for bond investors over the medium to long term. The yield famine will continue.

With yields only slightly higher than recent lows, credit spreads offering historically little additional compensation, and real yields near zero, it is tempting to discount the appeal of municipal bonds in 2020. But municipal bonds still offer another exceptional quality: diversification. As an asset class, municipal bonds demonstrated excellent negative correlation to common stocks on days when stock prices fell during 2019. Higher yields in the next few quarters represent a buying opportunity. For yield starved investors looking for a relatively calm mooring, Idaho municipal bonds may offer the comfort of low asset class correlation when many asset classes offer persistently high valuations and low potential returns.

For those seeking a conservative investment vehicle, the Idaho Tax-Exempt Fund offers a portfolio of high-grade issues intended to provide income exempt from federal income, federal alternative minimum, and Idaho state income taxes. The Fund may purchase carefully vetted, nonrated Idaho bonds.

Idaho Tax-Exempt Fund chooses not to invest in US territories such as Puerto Rico, Guam, and the US Virgin Islands to boost income at the expense of creditworthiness. The Fund does not employ derivatives or other financial engineering tools to modify risk and return.

 

 

                         
 Bond Quality Diversification              (unaudited)  
       
        % of Total Net Assets

 

        
         
     

Rated “AAA”

    35.7%     

 

 

 

Idaho Tax-Exempt Fund Bond Quality Diversification

 

 

     

Rated “AA+”

    24.1%  
     

Rated “AA”

    5.5%  
     

Rated “AA-”

    15.4%  
     

Rated “A+”

    9.5%  
     

Rated “A”

    3.9%  
     

Not rated

    2.5%  
         
     

Other assets (net of liabilities)

    3.4%           
 
Credit ratings are the lesser of S&P Global Ratings or Moody’s Investors Service. If neither S&P nor Moody’s rate a particular security, that security is categorized as not rated (except for US Treasury securities and securities issued or backed by US agencies which inherit the credit rating for the US government). Ratings range from AAA (highest) to D (lowest). Bonds rated BBB or above are considered investment grade. Credit ratings BB and below are lower-rated securities (junk bonds). Ratings apply to the creditworthiness of the issuers of the underlying securities and not the Fund or its shares. Ratings may be subject to change.

 

 

 

             
 
       
Annual Report   November 30, 2019                  5

 


 
                                     
    Schedule of Investments                                As of November 30, 2019  
             
    Tax-Exempt Municipal Bonds – 96.6%       Coupon / Maturity    Face Amount      Market Value      Percentage of Assets  
             
    Financial Services                             
             
   

Idaho Bond Bank

      4.00% due 09/15/2032      $405,000        $439,445        3.3%  
             
   

Idaho Housing & Finance Rev

      3.00% due 07/01/2036      335,000        339,781        2.5%  
             
                            779,226        5.8%  
   
    General Obligation  
             
   

Ada & Canyon Cos ID JSD #2 Meridian

      5.00% due 08/15/2032      325,000        385,200        2.9%  
             
   

Ada & Canyon Cos ID JSD #3 Kuna

      4.00% due 09/15/2027      100,000        118,479        0.8%  
             
   

Boise City ID Independent SD

      3.00% due 08/01/2038      100,000        101,793        0.8%  
             
   

Bonneville & Bingham Cos JSD #93

      5.00% due 09/15/2031      200,000        220,218        1.6%  
             
   

Bonneville & Bingham Cos JSD #93

      5.00% due 09/15/2029      250,000        275,776        2.0%  
             
   

Bonneville Co ID SCD #91

      4.00% due 09/15/2026      15,000        16,150        0.1%  
             
   

Bonneville Co ID SCD #91

      4.00% due 09/15/2026      35,000        37,632        0.3%  
             
   

Bonneville Co ID SCD #91

      3.75% due 09/15/2032      285,000        305,318        2.3%  
             
   

Boundary County ID SCD #101

      4.00% due 08/15/2021      240,000        241,462        1.8%  
             
   

Canyon Co ID SCD #134 Middleton

      4.00% due 09/15/2028      400,000        454,840        3.4%  
             
   

Canyon Co ID SCD #135 Notus

      3.25% due 09/15/2031      290,000        311,518        2.3%  
             
   

Canyon Co ID SCD #135 Notus

      3.25% due 09/15/2032      170,000        182,208        1.4%  
             
   

Canyon Co ID SCD #139 Vallivue

      5.00% due 09/15/2024      260,000        286,959        2.1%  
             
   

Cariboo Franklin Bannock JSD #148

      3.25% due 09/15/2035      300,000        324,858        2.4%  
             
   

Cassia Oneida Twin Falls JSD #151

      3.375% due 09/15/2034      160,000        167,866        1.2%  
             
   

Kootenai Co ID SCD # 271 UNREF

      4.00% due 09/15/2025      125,000        134,370        1.0%  
             
   

Kootenai Co ID SCD #271 PREREF

      4.00% due 09/15/2025      40,000        43,011        0.3%  
             
   

Kootenai Co ID SCD #273

      4.00% due 08/15/2031      265,000        296,805        2.2%  
             
   

Kootenai-Shoshone ID Area Libraries

      4.25% due 08/01/2021      220,000        221,120        1.6%  
             
   

Latah Co ID SCD #281 Moscow Ser B

      4.00% due 08/15/2027      100,000        109,163        0.8%  
             
   

Latah Co ID SCD #281 Moscow Ser B

      4.00% due 08/15/2028      200,000        217,572        1.6%  
             
   

Madison Co. Id. SDC #321

      5.00% due 09/15/2035      250,000        307,432        2.3%  
             
   

Owyhee & Canyon Co. # 363 Marsing

      4.00% due 09/15/2035      150,000        169,551        1.3%  
             
   

Teton Co, ID SCD #401 Driggs

      4.00% due 09/15/2035      500,000        575,125        4.3%  
             
   

Twin Falls Co ID SCD #411

      4.00% due 09/15/2027      170,000        190,147        1.4%  
             
   

Twin Falls Co ID SCD #411

      4.25% due 09/15/2030      300,000        335,205        2.5%  
             
   

Twin Falls Co ID SCD #411

      4.75% due 09/15/2039      200,000        232,804        1.7%  
             
   

Twin Falls Co ID SCD #411 Series A

      4.25% due 09/15/2031      100,000        111,522        0.8%  
             
   

Valley & Adams Cos ID JSD #421

      3.00% due 08/01/2026      220,000        229,548        1.7%  
             
                            6,603,652        48.9%  
   
    Health Care Facilities  
             
   

Idaho Health Faci Auth Hos Rev

      5.00% due 12/01/2047      260,000        307,663        2.3%  
             
                            307,663        2.3%  
             
    Medical/Hospitals                             
             
   

Idaho Health Rev Trinity Health Grp

      3.25% due 12/01/2028      300,000        320,085        2.4%  
             
                            320,085        2.4%  
             
    Pollution Control                             
             
   

Idaho Bond Bank

      4.00% due 09/15/2033      135,000        154,933        1.1%  
             
   

Idaho Bond Bank Authority

      4.30% due 09/01/2022      20,000        20,048        0.1%  
             
   

Idaho Bond Bank Authority

      4.00% due 09/15/2032      130,000        149,524        1.1%  
             
   

Idaho Bond Bank Authority

      4.125% due 09/15/2023      20,000        20,045        0.2%  
             
                            344,550        2.5%  

 

Continued on next page.

 

 

                 
 
         
6                  November 30, 2019   Annual Report   The accompanying notes are an integral part of these financial statements.

 


 
                                     
    Schedule of Investments                          As of November 30, 2019  
             
    Tax-Exempt Municipal Bonds – 96.6%       Coupon / Maturity    Face Amount      Market Value      Percentage of Assets  
             
    Real Estate                             
             
   

Boise City Urban Renewal Lease Rev

      5.00% due 12/15/2032      300,000        355,929        2.7%  
             
   

Idaho Fish Wildlife Foundation Rev

      5.00% due 12/01/2033      320,000        397,815        2.9%  
             
   

Idaho State Building Authority

      5.00% due 09/01/2031      200,000        218,412        1.6%  
             
   

Idaho State Building Authority

      5.00% due 09/01/2032      400,000        436,484        3.2%  
             
   

Post Falls ID LID SPA

      5.00% due 05/01/2021      90,000        90,438        0.7%  
             
                            1,499,078        11.1%  
             
    State Education                             
             
   

Boise State University ID Revenue

      5.00% due 04/01/2028      125,000        146,531        1.1%  
             
   

Boise State University ID Revenue

      5.00% due 04/01/2032      160,000        189,946        1.4%  
             
   

Idaho State University

      4.00% due 04/01/2027      170,000        194,698        1.5%  
             
   

Idaho State University

      4.00% due 04/01/2030      245,000        275,338        2.1%  
             
   

Idaho State University Revenue

      3.00% due 04/01/2031      250,000        262,618        2.0%  
             
   

Idaho State University Revenue

      3.00% due 04/01/2032      160,000        167,410        1.2%  
             
   

Nez Perce CO ISD #1 Lewiston

      5.00% due 09/15/2029      330,000        408,012        3.0%  
             
   

North Idaho College Dormitory Rev

      4.00% due 11/01/2030      285,000        316,381        2.3%  
             
   

University of Idaho Revenue

      5.00% due 04/01/2028      225,000        227,702        1.7%  
             
   

University of Idaho Revenue

      5.00% due 04/01/2032      455,000        490,708        3.6%  
             
                            2,679,344        19.9%  
             
    Transportation                             
             
   

Boise ID Airport Park Fac Rev

      3.00% due 09/01/2028      210,000        214,299        1.6%  
             
                            214,299        1.6%  
             
    Water Supply                             
             
   

Payette Lakes Rec Wtr & Swr Rev

      4.00% due 08/01/2034      $255,000        284,720        2.1%  
             
                            284,720        2.1%  
             
                                        
             
    Total investments       (Cost $12,418,803)               13,032,617        96.6%  
             
    Other assets (net of liabilities)                       454,108        3.4%  
             
    Total net assets                       $13,486,725        100.0%  
             
                                        

 

 

                 
 
         
The accompanying notes are an integral part of these financial statements.   Annual Report   November 30, 2019                 

7

 


 

Statement of Assets and Liabilities

 

         
As of November 30, 2019

 

   
         
   

Assets

       
   

Investments in securities, at value

(Cost $12,418,803)

    $13,032,617  
   

Cash

    340,897  
   

Interest receivable

    127,427  
   

Other assets

    4,464  
   

Receivable for Fund shares sold

    250  
         
   

Total assets

    13,505,655  
         
   

Liabilities

       
   

Accrued advisory fees

    5,514  
   

Accrued audit expenses

    4,174  
   

Distributions payable

    3,442  
   

Payable for Fund shares redeemed

    2,991  
   

Accrued insurance expenses

    912  
   

Accrued registration/filling fees

    687  
   

Accrued Chief Compliance Officer expenses

    583  
   

Accrued other operating expenses

    314  
   

Accrued trustee expenses

    222  
   

Accrued retirement plan custody fee

    91  
         
   

Total liabilities

    18,930  
         
   

Net assets

    $13,486,725  
   
         
   

Analysis of net assets

       
   

Paid-in capital (unlimited shares authorized, without par value)

    $12,960,960  
   

Total distributable earnings

    525,765  
         
   

Net assets applicable to Fund shares outstanding

    $13,486,725  
   
         

Fund shares outstanding

    2,431,502  
   

Net asset value, offering and redemption price per share

    $5.55  
         

 

Statement of Operations

 

         
Year ended November 30, 2019

 

   
         
   

Investment income

                          
   

Interest income

    $369,367  
         
   

Total investment income

    369,367  
         
   

Expenses

       
   

Investment advisory fees

    67,172  
   

Audit fees

    6,621  
   

Chief Compliance Officer expenses

    3,902  
   

Trustee fees

    3,163  
   

Filing and registration fees

    3,125  
   

Legal fees

    3,087  
   

Transfer agent fees

    1,890  
   

Other expenses

    1,859  
   

Printing and postage expenses

    995  
   

Custodian fees

    544  
   

Retirement plan custodial fees

    99  
         
   

Total gross expenses

    92,457  
         
   

Less transfer agent fees waived

    (1,890
   

Less custodian fee credits

    (510
         
   

Net expenses

    90,057  
         
   

Net investment income

    $279,310  
   
         
   
         
   

Net realized gain from investments

    $15,726  
   

Net increase in unrealized appreciation on investments

    641,062  
         
   

Net gain on investments

    $656,788  
   
         
   

Net increase in net assets resulting from operations

    $936,098  
         

 

 

                 
 
         
8                  November 30, 2019   Annual Report   The accompanying notes are an integral part of these financial statements.

 


 
                 

Statement of Changes of Net Assets

    Year ended November 30, 2019          Year ended November 30, 2018  
     

Decrease in net assets from operations

                  
     

From operations

                  
     

Net investment income

    $279,310          $361,335  
     

Net realized gain (loss) on investment

    15,726          (44,849
     

Net increase (decrease) in unrealized appreciation

    641,062          (232,107
                    
     

Net increase in net assets

    936,098          84,379  
                    
     
                    
     

Distributions to shareholders

    (278,541        (361,335
     
                    
     

Capital share transactions

                  
     

Proceeds from sales of shares

    1,163,543          3,147,317  
     

Value of shares issued in reinvestment of dividends

    224,410          300,919  
     

Cost of shares redeemed

    (2,113,103        (7,091,173
                    
     

Total capital share transactions

    (725,150        (3,642,937
                    
     

Total decrease in net assets

    (67,593        (3,919,893
     
                    
     

Net assets

                  
     

Beginning of year

    13,554,318          17,474,211  
     

End of year

    $13,486,725          $13,554,318  
     
                    
     

Shares of the Fund sold and redeemed

                  
     

Number of shares sold

    212,460          591,416  
     

Number of shares issued in reinvestment of dividends

    40,958          56,625  
     

Number of shares redeemed

    (386,786        (1,337,291
                    
     

Net decrease in number of shares outstanding

    (133,368        (689,250
     
                    

 

                                         

Financial Highlights

    For the year ended November 30,  
           

Selected data per share of outstanding capital stock throughout each year:

    2019       2018       2017       2016       2015  
           

Net asset value at beginning of year

    $5.28       $5.37       $5.29       $5.48       $5.51  
           

Income from investment operations

                                       
           

Net investment income

    0.11       0.12       0.13       0.14       0.15  
           

Net gains (losses) on securities (both realized and unrealized)

    0.27       (0.09     0.08       (0.19     (0.03
                                         
           

Total from investment operations

    0.38       0.03       0.21       (0.05     0.12  
                                         
           

Less distributions

                                       
           

Dividends (from net investment income)

    (0.11     (0.12     (0.13     (0.14     (0.15
           

Distributions (from capital gains)

    -       -       -       0.00 A       0.00 A  
                                         
           

Total distributions

    (0.11     (0.12     (0.13     (0.14     (0.15
                                         
           
                                         
           

Net asset value at end of year

    $5.55       $5.28       $5.37       $5.29       $5.48  
           
                                         

Total return

    7.30%       0.51%       3.90%       (0.95 )%      2.21%  
           
                                         
           

Ratios / supplemental data

                                       
           

Net assets ($000), end of year

    $13,487       $13,554       $17,474       $17,997       $17,420  
           

Ratio of expenses to average net assets

                                       
           

Before transfer agent fee waiver and custodian fee credits

    0.69%       0.68%       0.67%       0.67%       0.67%  
           

After transfer agent fee waiver

    0.67%       0.67%       0.66%       0.66%       0.66%  
           

After transfer agent fee waiver and custodian fee credits

    0.67%       0.67%       0.65%       0.65%       0.66%  
           

Ratio of net investment income after fee waiver and custodian credits to average net assets

    2.07%       2.20%       2.33%       2.54%       2.66%  
           

Portfolio turnover rate

    4%       13%       20%       15%       7%  
           
                                         

 

A 

Amount is less than $0.01

 

 

                 
 
         
The accompanying notes are an integral part of these financial statements.   Annual Report   November 30, 2019                   9

 


 

Notes to Financial Statements

 

Note 1 – Organization

Saturna Investment Trust (the “Trust”) was established under Washington State Law as a business trust on February 20, 1987. The Trust is registered as an open-end, diversified management company under the Investment Company Act of 1940, as amended. In addition to Idaho Tax-Exempt Fund (the “Fund”), eight portfolios have been created to date: Sextant Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Core Fund, Sextant Global High Income Fund, Sextant Growth Fund, Sextant International Fund, Saturna Sustainable Equity Fund, and Saturna Sustainable Bond Fund (each, a “Fund”, and collectively, the “Funds”). The other eight portfolios are distributed through separate prospectuses and the results of those Funds are contained in separate reports.

The Idaho Tax-Exempt Fund was first authorized to sell shares of beneficial interest on September 4, 1987.

The Fund is an investment company and accordingly follows the investment accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services – Investment Companies.”

Investment risks:

The value of Fund shares rises and falls as the value of the bonds in which the Fund invests goes up and down. The risks inherent in the Fund depend primarily on the terms and quality of the obligations in the Fund’s portfolio, as well as on market conditions. When interest rates rise, bond prices fall. When interest rates fall, bond prices go up. Bonds with longer maturities, such as those held by the Fund, usually are more sensitive to interest rate changes than bonds with shorter maturities. Only consider investing in the Fund if you are willing to accept the risk that you may lose money.

The Fund entails credit risk, which is the possibility that a bond will not be able to pay interest or principal when due. If the credit quality of a bond is perceived to decline, investors will demand a higher yield, which means a lower price on that bond to compensate for the higher level of risk. If a security held by the Fund defaults on payment of interest or principal, the Fund’s income, ability to preserve capital, and liquidity would all be adversely affected.

Fund investments are susceptible to factors adversely affecting Idaho, such as political, economic, and financial trends unique to this relatively small state. Investing only in Idaho bonds means that the Fund’s investments are more concentrated than other mutual funds, and relatively few bond price changes may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

The Fund is vulnerable to income tax rate changes, either at the Idaho or federal level, since part of municipal securities’ value is derived from the recipient’s ability to exclude interest payments from taxation.

Note 2 – Significant Accounting Policies

The following is a summary of the significant accounting policies, in conformity with accounting principles generally accepted in the United States of America, which are consistently followed by the Fund in the preparation of its financial statements.

Security valuation:

Debt securities are valued using bid-side valuations provided by an independent service. The service determines valuations using factors such as yields or prices of bonds of comparable quality, type of issue, coupon maturity, ratings, trading activity, and general market conditions. In the absence of a valuation from an independent service for a security, a fair value for such security is determined in good faith by or under the direction of the Board of Trustees.

Security transactions are recorded on trade date. Realized gains and losses on sales of securities are recorded on the identified cost basis.

Share valuation:

The net asset value (“NAV”) per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares are not priced or traded on days the New York Stock Exchange is closed. The NAV is the offering and redemption price per share.

The Trustees have adopted certain policies and procedures with respect to frequent trading of Fund shares. The Fund is intended for long-term investment and does not permit rapid trading of its shares. The Fund cannot always identify all intermediaries, or detect or prevent trading that violates the Frequent Trading Policy through intermediaries or omnibus accounts.

Fair value measurements:

Accounting Standards Codification (ASC) 820 establishes a three-tier framework for measuring fair value based on a hierarchy of inputs. The hierarchy distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized below.

 

  Level 1 — 

Unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access.

 

  Level 2 — 

Observable inputs other than quoted prices in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.

 

  Level 3 — 

Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Trust’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

 

             
 
       
10                  November 30, 2019   Annual Report

 


 

Notes to Financial Statements (continued)

 

The following table is a summary of the inputs used as of November 30, 2019, in valuing the Fund’s investments carried at value.

 

                                 
         
  Fair Value Inputs   

Level 1

Quoted Price

    

Level 2

Significant Observable Input

    

Level 3

Significant Unobservable Input

     Total  
         

Municipal Bonds1

     $-        $13,032,617        $-        $13,032,617  
         

Total Assets

     $-        $13,032,617        $-        $13,032,617  
                                     

 

¹

See Schedule of Investments for industry breakout.

During the period ended November 30, 2019, the Fund had no transfers among Levels 1, 2, or 3.

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

Income taxes:

The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareowners sufficient to relieve it from all or substantially all federal income taxes. As the Fund intends to meet requirements for tax-exempt income dividends, and the requirements of the Idaho Department of Revenue for income dividends exempt from Idaho state income tax, no income tax provisions are required.

The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2016 – 2018), or expected to be taken in the Fund’s 2019 tax return. The Fund identifies its major tax jurisdiction as US federal and foreign jurisdictions where the Fund makes significant investments; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

Reclassification of capital accounts:

Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting.

As of November 30, 2019, there were no reclassifications to the capital accounts.

Distributions to shareowners:

The Fund’s dividends to shareowners from net investment income are paid daily and distributed on the last business day of each month.

Distributions of capital gains, if any, are made at least annually and as required to comply with federal excise tax requirements. Distributions to shareowners are determined in accordance with income tax regulations and are recorded on the ex-dividend date. Dividends are paid in shares of the Fund, at the net asset value on the payable date. Shareowners may elect to take distributions in cash if they total $10 or more.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

Other:

Interest income is recognized on an accrual basis. Premiums on securities purchased are amortized and discounts are accreted over the lives of the respective securities.

 

Recent accounting pronouncements:

In August 2018, FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820: Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. ASU 2018-13 will require the need to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 will also require that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and allows for early adoption of either the entire standard or only the provisions that eliminate or modify the requirements. Management has elected to adopt early the provisions that eliminate the disclosure requirements. Management is still currently evaluating the impact of applying the rest of the guidance.

 

 

             
 
       
Annual Report   November 30, 2019                  11

 


 

Notes to Financial Statements (continued)

 

Note 3 – Transactions with Affiliated Persons

Under a contract approved by shareowners on September 28, 1995 and reviewed annually by the Board of Trustees, Saturna Capital Corporation provides investment advisory services and certain other administrative and distribution services to conduct the Fund’s business. For such services, the Fund pays an annual fee equal to 0.50% of its average daily net assets. For the fiscal period ended November 30, 2019, the Fund incurred advisory fee expenses of $67,172. Expenses incurred by the Trust on behalf of the Fund (e.g., legal fees) are allocated to the Fund and the other Funds of the Trust on the basis of relative daily average net assets.

Saturna Capital also acts as transfer agent for the Fund, for which it did not receive any compensation during the fiscal period ended November 30, 2019. Saturna Capital has voluntarily elected to waive the transfer agent fee through November 30, 2019, to reduce the Fund’s operating expenses. Such fees, had they been charged, would have totaled $1,890.

Saturna Brokerage Services, Inc. (“SBS”), a discount brokerage and subsidiary of Saturna Capital, is registered as a broker-dealer and acts as distributor for the Fund.

Saturna Trust Company (“STC”), a subsidiary of Saturna Capital, acts as a retirement plan custodian for Fund shareowners. For the fiscal period ended November 30, 2019, the Fund incurred retirement plan custodial fees of $99.

Mrs. Jane Carten serves as a trustee and president of the Trust. She is also a director and the president of Saturna Capital and Saturna Trust Company. She is not compensated by the Trust. For the fiscal year ended November 30, 2019, the Trust paid trustee compensation expenses of $31,500 which is included in the $44,545 of total expenses paid for the independent Trustees. The Fund’s allocation of these expenses was $3,163.

The officers of the Trust are paid by Saturna Capital, not the Trust, except the Chief Compliance Officer, who is partially compensated by the Trust. For the period ended November 30, 2019, the Fund’s allocation of these expenses was $3,902.

On November 30, 2019, the trustees, officers, and their immediate families as a group directly or indirectly owned 17.98% of the outstanding shares of the Fund.

Note 4 – Distributions to Shareowners

The tax characteristics of distributions paid during the fiscal periods ended November 30, 2019, and November 30, 2018, were as follows:

 

                 
     
     November 30, 2019      November 30, 2018  
     

Tax-exempt income

     $277,251        $360,134  
     

Taxable income

     $1,290        $1,201  
                   

Note 5 – Federal Income Taxes

The cost basis of investments for federal income tax purposes at November 30, 2019 was as follows:

 

         
   

Cost of investments

     $12,418,803  
          
   

Gross unrealized appreciation

     $615,218  
   

Gross unrealized depreciation

     $(1,404
          
   

Net unrealized appreciation

     $613,814  
          

As of November 30, 2019, the components of distributable earnings on a tax basis were as follows:

 

         
   

Undistributed tax exempt income

     $3,820  
          
   

Tax-exempt accumulated earnings

     $3,820  
   

Accumulated capital loss

     $(91,869
   

Unrealized appreciation

     $613,814  
          
   

Total accumulated earnings

     $525,765  
          

 

As of November 30, 2019, the Fund had capital loss carryforwards as follows, subject to regulation.

 

                 
     
       Carryforward        Expiration  
     

Short-term loss carryforward

     $(55,441      Unlimited  
     

Long-term loss carryforward

     $(36,428      Unlimited  
     
       $(91,869         
                   

Note 6 – Investments

During the period ended November 30, 2019, the Fund purchased    $570,167 of securities and sold/matured $1,112,441 of securities.

Note 7 – Custodian

Under the agreement in place with UMB Bank custody fees are reduced by credits for cash balances. Such reduction for the period ended November 30, 2019, amounted to $510.

Note 8 – Subsequent Events

In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

There were no other events or transactions during the period that materially impacted the amounts or disclosures in the Funds’ financial statements.

 

 

             
 
       
12                  November 30, 2019   Annual Report

 


 

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of

Saturna Investment Trust

and the Shareholders of Idaho Tax-Exempt Fund,

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Idaho Tax-Exempt Fund, (the “Fund”), a series of Saturna Investment Trust, including the schedule of investments, as of November 30, 2019, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of November 30, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the auditor of one or more of the funds in the Trust since 1997.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of November 30, 2019 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.

Philadelphia, Pennsylvania

January 29, 2020

/s/ Tait, Weller & Baker LLP

Tait, Weller & Baker LLP

 

 

             
 
       
Annual Report   November 30, 2019                  13

 


 
     
Expenses    (unaudited)

All mutual funds have operating expenses. As an Idaho Tax-Exempt Fund shareowner, you incur ongoing costs, including management fees and other fund expenses such as shareowner reports (like this one). Operating expenses, which are deducted from a fund’s gross earnings, directly reduce the investment return of a fund. Mutual funds (unlike other financial investments) only report their results after deduction of operating expenses.

With the Idaho Tax-Exempt Fund, unlike many mutual funds, you do not incur sales charges (loads) on purchases, reinvested dividends, or other distributions. You do not incur redemption fees or exchange fees. You may incur fees related to extra services requested by you for your account, such as bank wires. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

Example

The following example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (June 1, 2019, to November 30, 2019).

Actual Expenses

The first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you have invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The Fund may charge for extra services (such as domestic bank wires, international bank wires, or overnight courier delivery of redemption checks) rendered on request, which you may need to estimate to determine your total expenses.

Hypothetical Example for Comparison Purposes

The second line provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio (based on the last six months) and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareowner reports of other mutual funds. You may wish to add other fees that are not included in the expenses shown in the table, such as charges for extra services like bank wires.

Please note that the expenses shown are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees (note that the Idaho Tax-Exempt Fund does not charge any such transactional costs). Therefore, the “Hypothetical” line is useful in comparing ongoing costs only, and may not help you determine the relative total costs of owning different funds.

 

                                 
         
     Beginning Account Value
[June 1, 2019]
     Ending Account Value
[November 30, 2019]
     Expenses Paid
During Period1
     Annualized
Expense Ratio
 
         

Actual

     $1,000.00        $1,021.10        $3.51        0.69%  
         

Hypothetical (5% return before expenses)

     $1,000.00        $1,021.59        $3.51        0.69%  

 

1 

Expenses are equal to Idaho Tax-Exempt Bond Fund’s annualized expense ratio of 0.69% (based on the most recent semi-annual period of June 1, 2019 through November 30, 2019) multiplied by the average account value over the period multiplied by 183/365 (to reflect the one-half year period).

 

 

             
 
       
14                  November 30, 2019   Annual Report

 


 
     
Trustees and Officers    (unaudited)

 

                 
  Name, Address, and Age   

Position(s) Held with Trust and

Number of Saturna Fund

Portfolios Overseen

  

Principal occupation(s) during past

5 years, including Directorships

   Other
Directorships
held by Trustee
 

Independent Trustees

         

(photo omitted)

 

Marina E. Adshade (52)

1300 N. State Street

Bellingham WA 98225

   Independent Trustee (since 2017);
Nine
  

Professor of Economics, University of British Columbia, Vancouver and Simon Fraser University;

 

Author

   None
         

(photo omitted)

 

Ronald H. Fielding, MA, MBA, CFA (70) 1300 N. State Street

Bellingham WA 98225

   Independent Trustee (since 2009);
Thirteen
   Director, ICI Mutual Insurance Company    Amana Mutual Funds Trust
         

(photo omitted)

 

Gary A. Goldfogel, MD (61)

1300 N. State Street

Bellingham WA 98225

   Chairman (since 2017); Independent Trustee (since 1995);
Nine
  

Medical Examiner (pathologist)

 

Owner, Avocet Environmental Testing (laboratory)

   None
         

(photo omitted)

 

Jim V. McKinney (58)

1300 N. State Street

Bellingham WA 98225

   Independent Trustee (since 2017);
Nine
   Executive Director, Common Threads Northwest; President/CEO, Apple Mountain LLC, consulting and development; US Army Foreign Area Officer—Political/Military Advisor to US Army Central; Senior Defense Official, Defense Attaché, US Embassy Slovenia    None
         

(photo omitted)

 

Sarah E.D. Rothenbuhler (51)

1300 N. State Street

Bellingham WA 98225

   Independent Trustee (since 2017);
Nine
   CEO, Birch Equipment (industrial rentals and sales)    None
 

Interested Trustee

         

(photo omitted)

 

Jane K. Carten, MBA (44)

1300 N. State Street

Bellingham WA 98225

   President, Trustee (since 2017);
Nine
  

President and Director, Saturna Capital Corporation

 

Vice President and Director,

Saturna Trust Company

 

President,

Saturna Brokerage Services

   None
         
                    

 

 

             
 
       
Annual Report   November 30, 2019                  15

 


 
     
Trustees and Officers (continued)    (unaudited)

 

                 
  Name (Age) and Address   

Position(s) held with Trust and

Number of Saturna Fund
Portfolios Overseen

  

Principal occupation(s) during past

5 years, including Directorships

   Other
Directorships
held by Trustee
 

Officers Who Are Not Trustees

         

(photo omitted)

 

Phelps S. McIlvaine (66)

1300 N. State Street

Bellingham, WA 98225

   Vice President (since 1994);
N/A
  

Vice President, Saturna Capital Corporation

 

Director, Vice President, and former Treasurer Saturna Brokerage Services

   N/A
         

(photo omitted)

 

Christopher R. Fankhauser (47) 1300 N. State Street

Bellingham, WA 98225

   Treasurer1 (since 2002);
N/A
  

Chief Operations Officer, Saturna Capital Corporation

 

Vice President and Chief Operations Officer, Saturna Brokerage Services

 

Director, Vice President, and Chief Operations Officer, Saturna Trust Company

   N/A
         

(photo omitted)

 

Michael E. Lewis (58)

1300 N. State Street

Bellingham, WA 98225

   Chief Compliance Officer1 (since 2012);
N/A
   Chief Compliance Officer, Saturna Capital, Saturna Trust Company, and Affiliated Funds    N/A
         

(photo omitted)

 

Jacob A. Stewart (39)

1300 N. State Street

Bellingham, WA 98225

   Anti-Money Laundering Officer1 (since 2015);
N/A
  

Anti-Money Laundering Officer, Saturna Capital Corporation, Saturna Brokerage Services

 

Chief Compliance Officer, Saturna Brokerage Services

 

Bank Secrecy Act Officer, Saturna Trust Company

   N/A
         

(photo omitted)

 

Nicole Trudeau (40)

1300 N. State Street

Bellingham WA 98225

   Secretary1 (since 2018)
N/A
  

Chief Legal Officer, Saturna Capital Corporation

 

Former: Counsel, Simpson Thacher & Bartlett LLP; Partner, Stradley Ronon Stevens & Young, LLP; Partner, K&L Gates LLP

   N/A
         
                    

Term of Office: each Trustee serves for the lifetime of the Trust or until they die, resign, are removed, or not re-elected by the shareowners. Each officer serves a one-year term subject to annual reappointment by the Trustees.

The Trust’s Statement of Additional Information, available without charge upon request by calling Saturna Capital at 1-800-728-8762 and on the Funds’ website, www.idahotaxexemptfund.com, includes additional information about the Trustees.

On November 30, 2019 the Trustees, officers, and their related accounts as a group owned 17.98% of the outstanding shares of the Fund.

During the year ended November 30, 2019, the Independent Trustees were each paid by the Trust: (1) $2,000 annual retainer plus $1,000 per board meeting attended (in person or by phone), plus reimbursement of travel expenses; (2) $250 for committee meetings; and (3) $250 per quarter for serving as chariman of the board or any committee.

Mrs. Carten is an Interested Trustee by reason of her positions with the Trust’s adviser (Saturna Capital Corporation) and underwriter (Saturna Brokerage Services), and is the primary manager of the Saturna Sustainable Equity Fund portfolio. She is paid by Saturna Capital a salary, plus a bonus for each month the Saturna Sustainable Equity Fund portfolio earns a 4 or 5 star rating from Morningstar (see www.saturna.com). The officers are paid by Saturna Capital and not the Trust. As of November 30, 2019, all Saturna Capital employees listed above as officers owned shares in one or more of the Saturna Investment Trust funds, with Mrs. Carten owning (directly or indirectly) over $0.92 million.

 

1 

Holds the same postion with Amana Mututal Funds Trust

 

 

             
 
       
16                  November 30, 2019   Annual Report

 


 
     

Renewal of Investment Advisory Contract

   (unaudited)

During their meeting of September 17, 2019, the Trustees of Saturna Investment Trust, including those Trustees who are not “interested persons” (as that term is defined in the Investment Company Act of 1940) of the Trust or Saturna Capital (the “Independent Trustees”), discussed the continuance of the Investment Advisory and Administrative Services Agreement (“Agreement”) between the Trust, on behalf of the Fund, and Saturna Capital. In considering the renewal of the Agreement, the Trustees discussed the nature, extent, and quality of the services provided by Saturna Capital to the Trust and the Fund. The Trustees considered Saturna Capital’s specific responsibilities in all aspects of day-to-day management of the Fund as well as the qualifications, experience and responsibilities of the Fund’s portfolio manager and other key personnel at Saturna Capital. The Trustees discussed Saturna Capital’s experience, ability, and commitment to quality service through performing internally such functions as shareowner servicing, administration, accounting, marketing, and distribution — all in addition to investment management.

The Trustees took into consideration Saturna Capital’s continued avoidance of significant operational and compliance problems, plus its investments in infrastructure, information management systems, personnel, training, and investor education materials, all designed to provide high quality investor services and meet investor needs. They recognized Saturna Capital’s efforts to recruit and retain qualified and experienced staff and improve the capital base on which Saturna Capital operates, which the Trustees believe is important to the long-term success of the Fund. They considered Saturna Capital’s focus on investors and its efforts to avoid potential conflicts of interest.

The Trustees considered the investment performance of the Fund over time, including the Fund’s average annual total returns relative to its benchmark for the one-, three-, five-, ten-, and fifteen-year periods, all as of August 31, 2019. The Trustees also considered comparative information published by Morningstar Inc. (“Morningstar”), an independent data service provider that, among other things, ranks mutual fund performance within categories comprised of similarly managed funds. The Trustees considered and discussed the Fund’s performance relative to its Morningstar category for the one-, three-, five-, ten-, and fifteen-year periods ended August 31, 2019. The Trustees also considered the Fund’s Morningstar performance ranking (three stars), and the Fund’s performance ranking relative to the Fund’s category selected by Lipper, Inc. for the one-, three-, five- and ten-year periods ended as of August 31, 2019.

With respect to long-term (10- and 15-year) performance, the Trustees found that the average annual total return of the Fund for the 10- and 15-year periods ended on August 31, 2019, was below the Morningstar category average for the same periods. The Trustees also considered the short- and medium-term performance of the Fund, noting that the Fund’s average annual total return for the five-year period ended on August 31, 2019 was below its Morningstar category average, while average annual total return for the one- and three-year periods outperformed its Morningstar category average.

The Trustees noted the risk-averse investment style of the Fund and other factors which can affect the Fund’s performance relative to its broader Morningstar category. The Trustees also noted certain differences between the Fund and the peer funds within its Morningstar category, including differences in investment strategies and asset size. The Trustees found that Saturna Capital continued to manage the Fund in a manner that is designed to be risk-averse and attractive to long-term investors. The Trustees discussed and considered the efforts of Saturna Capital to make additional resources available to assist in managing the Fund. The Trustees also considered Saturna Capital’s focus on improving investment performance without incurring materially higher levels of risk.

The Trustees also considered the performance and expenses of the Fund as compared to smaller group of funds with similar assets and investment objectives and strategies. The Trustees considered these comparative performance and expense data, along with the comparative data published by Morningstar and the Fund’s performance relative to its benchmark, to evaluate the Fund’s performance over near-term and long-term time periods.

The Trustees also reviewed the fees and expenses of the Fund, including comparative data on fees and expenses published by Morningstar, and considered the components of the Fund’s operating expenses. The Trustees noted the steps that Saturna Capital has undertaken to maintain competitive levels of Fund operating expenses. They noted the significant sponsorship of the Fund by Saturna Capital evidenced, in part, by certain fees and expenses paid by Saturna Capital out of its own resources. The Trustees recognized Saturna Capital’s efforts help make the Fund more widely available and less expensive than would otherwise be the case without Saturna Capital’s efforts.

The Trustees recognized that the Fund remains relatively small and there have not been opportunities to consider economies of scale. The Trustees noted Saturna Capital’s commitment to continue operating the Fund and the costs undertaken by Saturna Capital.

The Trustees reviewed Saturna Capital’s financial information and discussed the issue of Saturna Capital’s profitability as related to management and administration of the Trust. They discussed the reasonableness of Saturna Capital’s profitability as part of their evaluation of whether the advisory fees bear a reasonable relationship to the mix of services provided by Saturna Capital, including the nature, extent, and quality of such services.

The Trustees considered and compared the fees charged by Saturna Capital to other types of accounts, including non-mutual fund advisory clients. The Trustees noted the differences between the full range of services Saturna Capital provides to the Fund, including investment advisory services, transfer agency services, administrative and other services, as compared to the investment advisory services provided to the other advisory accounts.

 

Continued on next page.

 

 

                 
 
         
    Annual Report   November 30, 2019                  17

 


 
     
Renewal of Investment Advisory Contract (continued)    (unaudited)

 

The Trustees considered potential benefits to Saturna Capital’s other business lines from acting as investment adviser to the Fund, but also recognized that Saturna Capital’s other business lines benefit the Fund. The Trustees considered whether there are other potential benefits to Saturna Capital in continuing to manage the Fund and the Trustees found that there were no material benefits other than Saturna Capital’s receipt of advisory fees.

The Trustees concluded based on their business judgement that the fees paid by the Fund to Saturna Capital were, from an arm’s-length bargaining perspective, reasonable and in the best interest of the Fund and its shareowners in light of the services provided, comparative performance, expense and advisory fee information, costs of services provided, profits to be realized, and benefits derived or to be derived by Saturna Capital from its relationship with the Fund. Following this discussion, the Trustees, including the Independent Trustees, unanimously agreed to renew the Agreement of Idaho Tax-Exempt Fund with Saturna Capital.

 

 

             
 
       
18                  November 30, 2019   Annual Report

 


 

Availability of Portfolio Information

 

 

(1)

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.

 

(2)

The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and at www.idahotaxexemptfund.com.

 

(3)

The Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800/SEC-0330.

 

(4)

The Fund makes a complete schedule of portfolio holdings after the end of each month available to investors at www.idahotaxexemptfund.com.

Availability of Proxy Voting Information

 

 

(1)

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (a) without charge, upon request, by calling Saturna Capital at 1-800-728-8762; (b) on the Fund’s website at www. idahotaxexemptfund.com; and (c) on the SEC’s website at www.sec.gov.

 

(2)

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (a) without charge, upon request, by calling Saturna Capital at 1-800-728-8762; (b) on the Fund’s website at www.idahotaxexemptfund.com; and (c) on the SEC’s website at www.sec.gov.

Householding Policy

 

To reduce expenses, we may mail only one copy of the Fund’s prospectus, each annual and semi-annual report, and proxy statement when necessary, to those addresses shared by two or more accounts. If you wish to receive individual and/or more copies of these documents, please call us at 1-800-728-8762 or write to us at Saturna Capital/Idaho Tax-Exempt Fund, P.O. Box N, Bellingham, WA 98227. We will begin sending you individual copies 30 days after receiving your request.

If you are currently receiving multiple copies and wish to receive only one copy, please call us at 1-800-728-8762 or write to us at Saturna Capital/Idaho Tax-Exempt Fund, P.O. Box N, Bellingham, WA 98227. We will begin sending you a single copy with subsequent report mailings.

Privacy Statement

 

At Saturna Capital and the Idaho Tax-Exempt Fund, we understand the importance of maintaining the privacy of your financial information. We want to assure you that we protect the confidentiality of any personal information that you share with us. In addition, we do not sell information about our current or former customers.

In the course of our relationship, we gather certain nonpublic information about you, including your name, address, investment choices, and account information. We do not disclose your information to unaffiliated third parties unless it is necessary to process a transaction; service your account; deliver your account statements, shareowner reports and other information; or as required by law. When we disclose information to unaffiliated third parties, we require a contract to restrict the companies’ use of customer information and from sharing or using it for any purposes other than performing the services for which they were required.

We may share information within the Saturna Capital family of companies in the course of informing you about products or services that may address your investing needs.

We maintain our own technology resources to minimize the need for any third party services, and restrict access to information within Saturna. We maintain physical, electronic, and procedural safeguards to guard your personal information. If you have any questions or concerns about the security or privacy of your information please call us at 1-800-728-8762.

 

 

             
 
       
Annual Report   November 30, 2019                  19

 


 
Idaho Tax-Exempt Fund Annual Report Back Cover

# # #

Idaho Tax-Exempt Fund Semi-Annual Report May 31, 2019

 

 


 
     

Performance Summary (as of June 30, 2019)

 

    
                                                 

Average Annual Returns (before any taxes paid by shareowners)

 

             
       1 Year        3 Year        5 Year        10 Year        15 Year        Expense Ratio  
             

Idaho Tax-Exempt Fund

     5.80%        1.74%        2.56%        3.21%        3.36%        0.68% 1  
             

S&P Idaho Municipal Bond Index

     6.42%        2.61%        3.99%        5.29%        n/a        n/a  
             

“Muni Single State Intermediate” Category Average2

     5.25%        1.56%        2.58%        3.49%        3.46%        0.96%  

Performance data quoted in this report represents past performance, is before any taxes payable by shareowners, and is no guarantee of future results. Current performance may be higher or lower than that stated herein. Performance current to the most recent month-end is available by calling toll-free 1-800-728-8762 or visiting www.idahotaxexemptfund.com. Average annual total returns are historical and include change in share value as well as reinvestment of dividends and capital gains, if any. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Please consider an investment’s objectives, risks, charges, and expenses carefully before investing. To obtain this and other important information about the Idaho Tax-Exempt Fund in a prospectus or summary prospectus, ask your financial advisor, visit www.idahotaxexemptfund.com, or call toll free 1-800-728-8762. Please read the prospectus or summary prospectus carefully before investing.

A note about risk: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with the Fund, please see the Fund’s prospectus or summary prospectus.

 

1 

By regulation, the expense ratio shown in this table is as stated in the Fund’s most recent prospectus, which is dated March 27, 2019, and incorporates results for the fiscal year ended November 30, 2018. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

 

2 

Source: Morningstar June 30, 2019. Morningstar, Inc. is an independent fund performance monitor. Category returns are determined monthly from total returns by Morningstar, by category as determined by Morningstar. Category average expense ratios are determined by Morningstar from prospectus level data reported by funds in the category.

 

 

             
 
       
2                  May 31, 2019   Semi-Annual Report

 


 
Idaho Tax-Exempt Fund Logo

Fellow Shareowners:

Idaho is thriving. Broad economic opportunities, record low unemployment (2.7%), affordable housing, strong personal income, nation leading home price appreciation, a balanced tax structure, abundant outdoor attractions, and a burgeoning tech sector all contribute to Idaho’s booming population growth. Idaho has the 10th highest percentage of vacation homes in the US and the highest percentage in the Pacific Northwest according to Bloomberg Pursuits. SmartAsset ranked Idaho fourth best in the nation for Best Places for The Middle Class in 2018. Remarkably, state tax payers are as healthy as the state’s finances.

Idaho state total gross domestic product surpassed $77 billion for the first time in 2018, a 6.3% increase. State reserve funds grew 15%. Total revenues for governmental activities exceeded total expenditures for governmental activities by $1 billion. The unassigned general fund balance (for discretionary use) ended the year at $801 million, up 15%. Idaho’s combined net position (a useful indicator of whether the financial position of the state is improving or deteriorating) grew $803 million or 6%. Idaho also improved pension funding (plan fiduciary net position as a % total pension liabilities) to 82.5%.

With improving economic conditions and strong revenue growth, the legislature increased appropriations for education, cut taxes for most individuals and businesses providing nearly $142 million in tax relief, and approved the largest cut in state regulations in history. These actions add to the attractiveness of one of the nation’s most economically competitive states. There is not much the state of Idaho is getting wrong these days. The point of this highlight reel is to emphasize that Idaho learned the lessons of 2008 and is better prepared than most other states to successfully endure whatever the next economic calamity happens to be.

Low US unemployment, a firm US Dollar, and modest US inflation do not normally signal US monetary policy easing. However, the uncertainty of the US China trade dispute and its depressing impact on global economic growth and inflation has now overwhelmed the US Federal Reserve’s drive to normalize US interest rates. In 2018, slowing global growth and falling US inflation expectations tightened US monetary conditions, causing a full percent decline in US yields. With US bond yields already in decline, and with Europe and China readying new rounds of monetary policy easing, the Fed may be unable to resist matching their easing moves.

As global growth softens, a US recession remains at the forefront of the minds of US investors. Despite recent slowdowns in US housing, automobiles, and manufacturing sectors, the US economy continues to grow, albeit slowly. In a stabilizing sign for the US economy, the yield spread between 10-year and 30-year US Treasurys has widened from 0.10% to 0.50% over the last year. With quantitative easing and lower short-term rates on standby in case of a US economic slowdown, market conditions are supportive for fixed-income asset prices. Diminished US municipal yields remain some of the most attractive in a world with $13 trillion of negative yielding sovereign and corporate bonds destroying investors’ capital. US rates appear to have room to fall further in the coming years, boosting municipal bond returns in the process.

Respectfully,

(photo omitted)

Jane Carten,

President

(photo omitted)

Phelps McIlvaine,

Vice President, Portfolio Manager

 

 

 

             
 
       
May 31, 2019        Semi-Annual Report              3

 


 

    

 

     

Performance Summary

    

 

                                 

Average Annual Returns (as of May 31, 2019)

 

         
       1 Year        5 Year        10 Year        Expense Ratio1  
         

Idaho Tax-Exempt Fund

       5.25%          2.43%          3.07%          0.68%  
         

S&P Idaho Municipal Bond Index

       5.97%          3.92%          5.18%          n/a  

Growth of $10,000

 

 

     
Idaho Tax-Exempt Fund Growth of $10,000
  Comparison of any mutual fund to a market index must be made bearing in mind that the Index is unmanaged and expense-free. Conversely, the fund will (1) be actively managed; (2) have an objective other than mirroring the index, such as limiting risk; (3) bear transaction and other costs; (4) stand ready to buy and sell its securities to shareowners on a daily basis; and (5) provide a wide range of services. The graph compares $10,000 invested in the Fund on November 30, 2008, to an identical amount invested in the Standard & Poor’s Idaho Municipal Bond Index, a broad-based index of Idaho municipal bond prices. The graph shows that an investment in the Fund would have risen to $13,532 versus $16,576 in the S&P Idaho Municipal Bond Index.

Past performance does not guarantee future results. The “Growth of $10,000” graph and “Average Annual Returns” performance table assume the reinvestment of dividends and capital gains. They do not reflect the deduction of taxes that a shareowner might pay on fund distributions or the redemption of fund shares.

 

1 

By regulation, the expense ratio for the Fund shown in this table is as stated in the Fund’s most recent prospectus, which is dated March 27, 2019, and incorporates results for the fiscal year ended November 30, 2018. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

Fund Objective

 

Idaho Tax-Exempt Fund seeks to provide income free from federal income, federal alternative minimum, and Idaho state income taxes. Preservation of capital is a secondary objective.

 

         

Top 10 Holdings

        
 
% of Total Net Assets  
   

Teton Co, ID SCD #401 Driggs (4.00% due 09/15/2035)

     4.2%  
   

University of Idaho Revenue (5.00% due 04/01/2032)

     3.6%  
   

Canyon Co ID SCD #134 Middleton (4.00% due 09/15/2028)

     3.3%  
   

Idaho State Building Authority (5.00% due 09/01/2032)

     3.2%  
   

Idaho Bond Bank (4.00% due 09/15/2032)

     3.2%  
   

Nez Perce CO ISD #1 Lewiston (5.00% due 09/15/2029)

     3.0%  
   

Idaho Fish Wildlife Foundation Rev (5.00% due 12/01/2033)

     2.9%  
   

Ada & Canyon Cos ID JSD #2 Meridian (5.00% due 08/15/2032)

     2.8%  
   

Boise City Urban Renewal Lease Rev (5.00% due 12/15/2032)

     2.6%  
   

Twin Falls Co ID SCD #411 (4.25% due 09/15/2030)

     2.5%  

 

 

                         

Portfolio Diversification

                        
       
% of Total Net Assets                         
       

General Obligation

    46.9%           

 

 

 

Idaho Tax-Exempt Fund Portfolio Diversification

 

 

State Education

    19.6%        

Real Estate

    10.9%        

Financial Services

    5.7%        

Pollution Control

    2.5%        

Medical - Hospitals

    2.3%        

Health Care Facilities

    2.2%        

Water Supply

    2.1%        

Transportation

    1.6%        

Other assets (net of liabilities)

    6.2%        

 

 

 

             
 
       
4                  May 31, 2019   Semi-Annual Report

 


 

    

 

                                     
    Schedule of Investments                          As of May 31, 2019  
             
    Tax-Exempt Municipal Bonds - 93.8%       Coupon / Maturity    Face Amount      Market Value      Percentage of Assets  
             
    Financial Services                             
             
   

Idaho Bond Bank

      4.00% due 09/15/2032      $405,000        $437,185        3.2%  
             
   

Idaho Housing & Finance Rev

      3.00% due 07/01/2036      335,000        333,704        2.5%  
             
                            770,889        5.7%  
             
    General Obligation                             
             
   

Ada & Canyon Cos ID JSD #2 Meridian

      5.00% due 08/15/2032      325,000        384,384        2.8%  
             
   

Ada & Canyon Cos ID JSD #3 Kuna

      4.00% due 09/15/2027      100,000        117,504        0.9%  
             
   

Adams & Washington Cos ID JSD #432

      4.00% due 08/15/2019      100,000        100,522        0.7%  
             
   

Bonneville & Bingham Cos JSD #93

      5.00% due 09/15/2031      200,000        221,400        1.6%  
             
   

Bonneville & Bingham Cos JSD #93

      5.00% due 09/15/2029      250,000        277,342        2.0%  
             
   

Bonneville Co ID SCD #91

      4.00% due 09/15/2026      15,000        16,191        0.1%  
             
   

Bonneville Co ID SCD #91

      4.00% due 09/15/2026      35,000        37,809        0.3%  
             
   

Bonneville Co ID SCD #91

      3.75% due 09/15/2032      285,000        297,178        2.2%  
             
   

Boundary County ID SCD #101

      4.00% due 08/15/2021      240,000        241,291        1.8%  
             
   

Canyon Co ID SCD #134 Middleton

      4.00% due 09/15/2028      400,000        454,056        3.3%  
             
   

Canyon Co ID SCD #135 Notus

      3.25% due 09/15/2031      290,000        308,430        2.3%  
             
   

Canyon Co ID SCD #135 Notus

      3.25% due 09/15/2032      170,000        180,339        1.3%  
             
   

Canyon Co ID SCD #139 Vallivue

      5.00% due 09/15/2024      260,000        288,964        2.1%  
             
   

Cariboo Franklin Bannock JSD #148

      3.25% due 09/15/2035      300,000        318,894        2.3%  
             
   

Cassia Oneida Twin Falls JSD #151

      3.375% due 09/15/2034      160,000        166,147        1.2%  
             
   

Kootenai Co ID SCD #271 PREREF

      4.00% due 09/15/2025      40,000        43,109        0.3%  
             
   

Kootenai Co ID SCD #271 UNREF

      4.00% due 09/15/2025      125,000        134,916        1.0%  
             
   

Kootenai Co ID SCD #273

      4.00% due 08/15/2031      265,000        295,772        2.2%  
             
   

Kootenai-Shoshone ID Area Libraries

      4.25% due 08/01/2021      220,000        220,990        1.6%  
             
   

Latah Co ID SCD #281 Moscow Ser B

      4.00% due 08/15/2027      100,000        109,102        0.8%  
             
   

Latah Co ID SCD #281 Moscow Ser B

      4.00% due 08/15/2028      200,000        217,358        1.6%  
             
   

Madison Co. Id. SDC #321

      5.00% due 09/15/2035      250,000        302,378        2.2%  
             
   

Teton Co, ID SCD #401 Driggs

      4.00% due 09/15/2035      500,000        566,530        4.2%  
             
   

Twin Falls Co ID SCD #411

      4.00% due 09/15/2027      170,000        190,373        1.4%  
             
   

Twin Falls Co ID SCD #411

      4.25% due 09/15/2030      300,000        335,574        2.5%  
             
   

Twin Falls Co ID SCD #411

      4.75% due 09/15/2039      200,000        232,876        1.7%  
             
   

Twin Falls Co ID SCD #411 Series A

      4.25% due 09/15/2031      100,000        110,997        0.8%  
             
   

Valley & Adams Cos ID JSD #421

      3.00% due 08/01/2026      220,000        229,603        1.7%  
             
                            6,400,029        46.9%  
             
     Health Care Facilities                              
             
   

Idaho Health Faci Auth Hos Rev

      5.00% due 12/01/2047      260,000        304,806        2.2%  
             
                            304,806        2.2%  
             
     Medical - Hospitals                              
             
   

Idaho Health Rev Trinity Health Grp

      3.25% due 12/01/2028      300,000        317,991        2.3%  
             
                            317,991        2.3%  
             
    Pollution Control                             
             
   

Idaho Bond Bank

      4.00% due 09/15/2033      135,000        152,797        1.1%  
             
   

Idaho Bond Bank Authority

      4.30% due 09/01/2022      20,000        20,043        0.2%  
             
   

Idaho Bond Bank Authority

      4.00% due 09/15/2032      130,000        147,619        1.1%  
             
   

Idaho Bond Bank Authority, Undefeasement

      4.125% due 09/15/2023      20,000        20,042        0.1%  
             
                            340,501        2.5%  

 

Continued on next page.

 

 

                 
 
         
The accompanying notes are an integral part of these financial statements.   Semi-Annual Report   May 31, 2019                  5

 


 

    

 

                                     
    Schedule of Investments                          As of May 31, 2019  
             
    Tax-Exempt Municipal Bonds - 93.8%       Coupon / Maturity    Face Amount      Market Value      Percentage of Assets  
             
    Real Estate                             
             
   

Boise City Urban Renewal Lease Rev

      5.00% due 12/15/2032      $300,000        $349,911        2.6%  
             
   

Idaho Fish Wildlife Foundation Rev

      5.00% due 12/01/2033      320,000        393,277        2.9%  
             
   

Idaho State Building Authority

      5.00% due 09/01/2031      200,000        219,494        1.6%  
             
   

Idaho State Building Authority

      5.00% due 09/01/2032      400,000        438,460        3.2%  
             
   

Post Falls ID LID SPA

      5.00% due 05/01/2021      90,000        90,862        0.6%  
             
                            1,492,004        10.9%  
             
    State Education                             
             
   

Boise State University ID Revenue

      5.00% due 04/01/2028      125,000        146,431        1.1%  
             
   

Boise State University ID Revenue

      5.00% due 04/01/2032      160,000        189,046        1.4%  
             
   

Idaho State University

      4.00% due 04/01/2027      170,000        191,933        1.4%  
             
   

Idaho State University

      4.00% due 04/01/2030      245,000        271,634        2.0%  
             
   

Idaho State University Revenue

      3.00% due 04/01/2031      250,000        259,313        1.9%  
             
   

Idaho State University Revenue

      3.00% due 04/01/2032      160,000        165,112        1.2%  
             
   

Nez Perce CO ISD #1 Lewiston

      5.00% due 09/15/2029      330,000        407,078        3.0%  
             
   

North Idaho College Dormitory Rev

      4.00% due 11/01/2030      285,000        314,421        2.3%  
             
   

University of Idaho Revenue

      5.00% due 04/01/2028      225,000        231,109        1.7%  
             
   

University of Idaho Revenue

      5.00% due 04/01/2032      455,000        492,706        3.6%  
             
                            2,668,783        19.6%  
             
     Transportation                              
             
   

Boise ID Airport Park Fac Rev

      3.00% due 09/01/2028      210,000        214,498        1.6%  
             
                            214,498        1.6%  
             
     Water Supply                              
             
   

Payette Lakes Rec Wtr & Swr Rev

      4.00% due 08/01/2034      255,000        279,908        2.1%  
             
                            279,908        2.1%  
             
                                        
             
    Total investments       (Cost $12,308,490)               12,789,409        93.8%  
             
    Other assets (net of liabilities)                       844,249        6.2%  
             
    Total net assets                       $13,633,658        100.0%  
             
                                        

 

 

                         

Bond Quality Diversification

                        
     
% of Total Net Assets

 

                
       

Rated “AAA”

    33.8%           

 

 

 

Idaho Tax-Exempt Fund Bond Quality Diversification

 

 

Rated “AA+”

    22.3%        

Rated “AA”

    8.5%        

Rated “AA-”

    7.4%        

Rated “A+”

    15.9%        

Rated “A”

    4.9%        

Not rated

    1.0%        

Other Assets (net of liabilities)

    6.2%        
 
Credit ratings are the lesser of S&P Global Ratings or Moody’s Investors Service. If neither S&P nor Moody’s rate a particular security, that security is categorized as not rated (except for US Treasury securities and securities issued or backed by US agencies which inherit the credit rating for the US government). Ratings range from AAA (highest) to D (lowest). Bonds rated BBB or above are considered investment grade. Credit ratings BB and below are lower-rated securities (junk bonds). Ratings apply to the creditworthiness of the issuers of the underlying securities and not the Fund or its shares. Ratings may be subject to change.

 

 

 

                 
 
         
6                  May 31, 2019   Semi-Annual Report   The accompanying notes are an integral part of these financial statements.

 


 

    

 

Statement of Assets and Liabilities

 

         
As of May 31, 2019

 

   
         
   

Assets

                          
   

Investments in securities, at value
(Cost $12,308,490)

    $12,789,409  
   

Cash

    729,586  
   

Interest receivable

    124,154  
   

Prepaid expenses

    3,319  
   

Insurance reserve premium

    801  
         
   

Total assets

    13,647,269  
         
   

Liabilities

       
   

Accrued advisory fees

    5,728  
   

Distributions payable

    4,551  
   

Payable for fund shares redeemed

    2,939  
   

Accrued Chief Compliance Officer expenses

    352  
   

Accrued retirement plan custodial fees

    41  
         
   

Total liabilities

    13,611  
         
   

Net assets

    $13,633,658  
   
         
   

Analysis of net assets

       
   

Paid-in capital (unlimited shares authorized, without par value)

    $13,241,556  
   

Total distributable earnings

    392,102  
         
   

Net assets applicable to Fund shares outstanding

    $13,633,658  
   
         

Fund shares outstanding

    2,481,344  
   

Net asset value, offering and redemption price per share

    $5.49  
         

 

Statement of Operations

 

         
Period ended May 31, 2019

 

   
         
   

Investment income

       
   

Interest income

    $185,504  
         
   

Total investment income

    185,504  
         
   

Expenses

       
   

Investment adviser fees

    33,263  
   

Audit fees

    2,587  
   

Chief Compliance Officer expenses

    1,980  
   

Trustee fees

    1,608  
   

Filing and registration fees

    1,478  
   

Transfer agent fees

    918  
   

Other expenses

    778  
   

Printing and postage

    578  
   

Legal fees

    426  
   

Custodian fees

    286  
   

Retirement plan custodial fees

    50  
         
   

    Total gross expenses

    43,952  
         
   

Less transfer agent fees waived

    (918
   

Less custodian fee credits

    (234
         
   

Net expenses

    42,800  
         
   

Net investment income

    $142,704  
   
         
   
         
   

Net realized gain from investments

    $15,727  
   

Net increase in unrealized appreciation on investments

    508,167  
         
   

Net gain on investments

    $523,894  
   
         
   

Net increase in net assets resulting from operations

    $666,598  
         

 

 

                 
 
         
The accompanying notes are an integral part of these financial statements.   Semi-Annual Report   May 31, 2019                  7

 


 

    

 

                 

Statement of Changes of Net Assets

    Period ended May 31, 2019          Year ended November 30, 2018  
     

Increase (decrease) in net assets from operations

                  
     

From operations

                  
     

Net investment income

    $142,704          $361,335  
     

Net realized gain (loss) on investment

    15,727          (44,849
     

Net increase (decrease) in unrealized appreciation

    508,167          (232,107
                    
     

Net increase in net assets

    666,598          84,379  
                    
     
                    
     

Distributions to shareholders

    (142,704        (361,335
     
                    
     

Capital share transactions

                  
     

Proceeds from sales of shares

    501,240          3,147,317  
     

Value of shares issued in reinvestment of dividends

    113,999          300,919  
     

Cost of shares redeemed

    (1,059,793        (7,091,173
                    
     

Total capital share transactions

    (444,554        (3,642,937
                    
     

Total increase (decrease) in net assets

    79,340          (3,919,893
     
                    
     

Net assets

                  
     

Beginning of period

    13,554,318          17,474,211  
     

End of period

    $13,633,658          $13,554,318  
     
                    
     

Shares of the Fund sold and redeemed

                  
     

Number of shares sold

    92,966          591,416  
     

Number of shares issued in reinvestment of dividends

    21,072          56,625  
     

Number of shares redeemed

    (197,564        (1,337,291
                    
     

Net decrease in number of shares outstanding

    (83,526        (689,250
     
                    

 

                                                 

Financial Highlights

    For period ended       For the year ended November 30,  
             

Selected data per share of outstanding capital stock throughout each period:

    May 31, 2019       2018       2017       2016       2015       2014  
             

Net asset value at beginning of period

    $5.28       $5.37       $5.29       $5.48       $5.51       $5.36  
             

Income from investment operations

                                               
             

Net investment income

    0.06       0.12       0.13       0.14       0.15       0.16  
             

Net gains (losses) on securities (both realized & unrealized)

    0.21       (0.09     0.08       (0.19     (0.03     0.15  
                                                 
             

Total from investment operations

    0.27       0.03       0.21       (0.05     0.12       0.31  
                                                 
             

Less distributions

                                               
             

Dividends (from net investment income)

    (0.06     (0.12     (0.13     (0.14     (0.15     (0.16
             

Distributions (from capital gains)

    -       -       -       0.00 A       0.00 A       0.00 A  
                                                 
             

Total distributions

    (0.06     (0.12     (0.13     (0.14     (0.15     (0.16
                                                 
             

Net asset value at end of period

    $5.49       $5.28       $5.37       $5.29       $5.48       $5.51