1
SATURNA INVESTMENT TRUST OFFERS IDAHO TAX-EXEMPT FUND, A NO-LOAD MUTUAL FUND.
IDAHO TAX-EXEMPT FUND seeks income exempt from federal and Idaho income taxes by
investing in a portfolio of Idaho municipal securities. The secondary objective
is to preserve capital.
A Statement of Additional Information dated September 28, 1995, has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. You may obtain a free copy by writing or calling:
SATURNA CAPITAL;
1300 N. STATE STREET, ;
BELLINGHAM, WA 98225;
800/ SATURNA [800/ 728-8762];
E-MAIL: [email protected] ;
This Prospectus contains information you should read before investing in
the Funds. Please read it carefully and keep it for future reference.;
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES AUTHORITY NOR HAS THE COMMISSION OR
ANY STATE AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Graphic depiction of name and state of Idaho omitted
FROM
SATURNA CAPITAL LOGO OMITTED
NO-LOAD,
NO SALES CHARGE,
NO 12B-1
PROSPECTUS
September 28, 1995
<PAGE>
1
EXPENSES
The Fund imposes no sales load on purchases or reinvested dividends, no deferred
sales load upon redemption nor any "12b-1" fees. There are no redemption fees or
exchange fees. The following table illustrates operating expenses of the Fund
for the fiscal year ended November 30, 1994.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<S> <C>
Management and Administrative Fees (after waiver) ............... 0.36%
12b-1 Expenses .................................................. NONE
Other Expenses .................................................. 0.39%
Total Fund Operating Expenses ................................... 0.75%*
</TABLE>
<TABLE>
For Example:
<S> <C> <C>
The Fund estimates paying 1 year -- $8
these expenses on a $1,000 3 years-- $25
investment, assuming 5% 5 years-- $44
annual return: 10 years-- $100
<FN>
*The Adviser voluntarily limits operating expenses of the Fund
at 0.75% annually. This limit, first adopted in October 1990,
has been extended through March 31, 1997. Without the
limitation, the management and administrative fee would have
been 0.50% and operating expenses of the Fund would have been
0.89%. The example assumes a continuation of this expense cap
for the 3, 5 and 10 year periods.
</FN>
</TABLE>
THE PRECEDING INFORMATION IS INTENDED TO HELP YOU IN UNDERSTANDING THE VARIOUS
(BOTH DIRECT AND INDIRECT) EXPENSES THAT AN INVESTOR WILL BEAR. THIS TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES ARE LIKELY TO BE MORE OR LESS THAN THOSE SHOWN. SEE FINANCIAL
HIGHLIGHTS ANDINVESTMENT ADVISER for more details.
<PAGE>
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED]
Selected data for a share of IDAHO TAX-EXEMPT FUND beneficial interest
outstanding throughout each period. The following schedule for each of the five
years ended November 30, 1994 has been audited by Price Waterhouse, LLP
independent accountants, whose report thereon is included in the Annual Report
to Shareowners, which is incorporated by reference into the Statement of
Additional Information. The data for each of the two years in the period ended
November 30, 1989 and for the period September 4, 1987 (commencement of
operations) through November 30, 1987 were audited by other independent
accountants whose report dated January 19, 1990 expressed an unqualified opinion
on those data. This schedule should be read with the other financial statements
and notes thereto included in the Trust's Annual Report which also includes
Management's Discussion of the Fund's performance. The Trust's Annual Report is
available without charge from the Trust.
<TABLE>
<CAPTION>
Sept. 4 '87
(commence-
ment of op-
________Year Ended November 30_________ erations) to
1994 1993 1992 1991 1990 1989 1988 NOV. 30 '87
---- ---- ---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $5.23 $5.16 $5.10 $5.03 $5.07 $4.98 $5.03 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income .27 .25 .28 .30 .33 .35 .35 .02
Net gains or losses on securities
both realized and unrealized) (.46) .12 .09 .07 (04) .09 (.05) .02
----- --- --- --- ---- --- ----- ---
Total From Investment Operations (.19) .37 .37 .37 .29 .44 .30 .04
LESS DISTRIBUTIONS
Dividends (from net investment
income) (.27) (.25) (.285) (.30) (.33) (.35) (.35) (.01)
Distributions (from capital gains) (.01) (.05) (.025) .00 .00 .00 .00 .00
Total Distributions (.28) (.30) (.31) (.30) (.33) (.35) (.35) (.01)
----- --- ---- ---- ----- ----- ----- ----
Net asset value at end of period $4.76 $5.23 $5.16 $5.10 $5.03 $5.07 $4.98 $5.03
----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN -3.76% 7.35% 7.49% 7.63% 5.94% 9.17% 6.45% 3.20%
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets (000), End of Period $6,841 $7,367 $5,808 $3,803 $2,540 $808 $335 $29
Ratio of Expenses to Average Net
Assets+ .75% .75% .75% .75% .97% .90% .28% .11%*
Ratio of Net Investment Income to
Average Net Assets+ 5.28% 4.79% 5.64% 6.08% 6.74% 6.51% 6.58% .56%*
Portfolio Turnover Rate 36% 31% 17% 15% 17% 13% 100% 0%
<FN>
*Not Annualized
+For each of the above years, all or a portion of the investment advisory and
administration fees were waived, and a portion of the operating expenses were
directly assumed by the adviser. If these costs had not been waived and
directly assumed, the resulting increase to expenses per share in each of the
above periods would be $.007, $.009, $.008, $.02, $.05, $.10, $.19, and $.01,
respectively. The increase to the ratio of expenses to average monthly net
assets would be .14%, 18%, .17%, .54%, 1.01%, 1.25%, 2.24%, and .11%,
respectively.
Note: Fund shareowners approved a new investment contract and adviser
October 12, 1990.
</FN>
</TABLE>
<PAGE>
ABOUT THE TRUST
IDAHO TAX-EXEMPT FUND is intended to provide investors the opportunity to
receive income exempt from both federal and Idaho income tax. Preservation of
capital is a secondary objective of the Fund. The Fund is "no-load," meaning
that there are no sales or redemption charges, nor does the Fund have so-called
"12b-1" charges.
Mutual funds enable you to invest as you might do for yourself in you had the
time, experience and resources to research and diversify your own investments.
Mutual funds do so by selling their own shares to the public and investing those
proceeds in a portfolio of securities. The value of the funds' own shares
fluctuates as the value of their portfolio of securities changes over time.
You may purchase shares of Idaho Tax-Exempt Fund directly from the Fund without
any sales charge or "load." Because no charges are deducted from your
investment, the entire amount you pay for shares is invested in the Fund.
INVESTMENT OBJECTIVES AND POLICIES
The IDAHO TAX-EXEMPT FUND is designed to provide monthly dividends free from
federal income, federal alternative minimum and Idaho state income taxes. The
Fund does have a secondary objective of attempting to preserve capital.
The Fund's fundamental policy is to invest at least 80% of net assets in
securities generating income exempt from federal income tax, including the
alternative minimum tax. Also, under normal market conditions, at least 65% of
total assets are invested in debt securities generating income exempt from Idaho
income tax.
The Fund is "non-diversified," meaning that it does not invest in a wide range
of investments, but limits its investments to a certain type--debt securities
issued by political subdivisions of the State of Idaho. The Fund does invest in
a broad portfolio of such securities and makes available to investors the
benefits of being diversified and limiting the risk associated with investing in
only a few securities. The Fund is intended primarily for residents of Idaho who
may benefit from its policy of investing in securities exempt from both Idaho
state and federal income taxes. Idaho presently imposes a state income tax
graduated to 8.2% of taxable income over $20,000 (single) or $40,000 (joint
return).
INVESTMENT POLICIES AND RISK CONSIDERATIONS
Investing in securities entails both market risk and risk of price variation in
individual securities. There can be no guarantee that the investment objectives
of the Fund will be realized.
The risks inherent in the Fund depend primarily on the terms and quality of the
obligations in its portfolio, as well as on market conditions. Interest rate
fluctuations will affect the Fund's net asset value, but not the income received
by the Fund from its portfolio securities. Because yields on debt securities
available for purchase by the Fund vary over time, the Fund's yield will also
vary.
Because the Fund is "nondiversified"* and invests primarily in municipal
securities of a single state, its investments are more susceptible to factors
adversely affecting that state. These factors include economic and financial
trends, as well as political conditions in Idaho and its political subdivisions.
Note that if any issuer of securities held by the Fund is unable to meet its
financial obligations, the income derived therefrom, the ability to preserve
capital, and the Fund's liquidity would all be adversely affected.
The Fund is also vulnerable to a change in tax rates, either at the state or
federal level inasmuch as the value of municipal securities is derived in
significant part from the ability of the recipient of interest payments to
exclude such payments from taxation. Should this exclusion be reduced in whole
or in part, the market for municipal securities, and consequently the Fund's
share value, may be adversely affected.
Among Idaho's leading industries are agriculture, forest products, tourism and
electronic/computer equipment. Locally-oriented industries include retail trade,
finance, insurance, real estate, transportation, communications, utilities,
government and construction. A more complete discussion of these factors is
available in the Statement of Additional Information.
The Fund does not purchase high-yield ("junk") bonds. The Fund requires that at
time of purchase a bond be rated at least "A" or equivalent by a national bond
rating agency (Standard and Poor's, Moody's Investor's Services, or equivalent),
or, if non-rated, to be of equivalent quality in the opinion of the Adviser. The
Fund requires notes to be rated at least MIG-2 by Moody's or SP-2 by Standard &
Poor's, or if non-rated, to be of equivalent quality in the opinion of the
Adviser. The Fund requires commercial paper to be rated at least Prime-2 by
Moody's or A-2 by Standard & Poor's, or, if non-rated, to be of equivalent
quality in the opinion of the Adviser.
Up to 60% of total assets of the Fund can be invested in non-rated bonds. Note
that bonds issued by the State of Idaho and its municipalities are often smaller
issues in total dollars, typically being issued by relatively small Idaho
communities to finance local government projects. Because of the smaller size,
the expense of obtaining a rating for the issuer is typically not undertaken. By
investing in non-rated bonds, the Adviser believes it can often obtain higher
yields without a material sacrifice in quality.
Although both rated and non-rated bonds are traded among dealers based on the
creditworthiness of the issuer, generally, rated bonds have greater market
recognition and the market has more dealers than does the market for non-rated
bonds. The Adviser will purchase only those non-rated bonds that it believes are
liquid and can be sold within seven days at about the value given for net asset
value purposes.
The Fund occasionally may purchase an entire issue of a small municipal
security, resulting in a higher yield to the Fund as well as the elimination of
certain underwriting expenses to the municipality.
Investors can expect the weighted average portfolio maturity to range between 6
and 15 years. Usually, shorter maturity bonds provide lower current yields,
while a maturity beyond 15 years generally implies greater current yield but
significantly increased risk to capital from interest rate increases.
The Fund may purchase municipal obligations on a delayed-delivery or when-issued
basis (I.E., securities may be purchased with settlement taking place in the
future, often a month or more). The Fund only makes commitments to purchase such
obligations with the intention of acquiring the securities. Obligations
purchased on a when-issued basis involve the risk that the yields available in
the market when delivery takes place may be higher than those obtained in the
transaction itself, with the result that the market value of the securities may
be lower at settlement, just as if the securities had actually been held in the
Fund's portfolio. Conversely, should rates decrease, the value will be higher by
a similar amount.+
During uncertain market or economic conditions, the Idaho Tax-Exempt Fund may
adopt a temporary, defensive position and invest more than 20% of assets in cash
or equivalents, government securities, unaffiliated money-market mutual funds,
and other debt securities having an "A" rating or better. While such defensive
investments may not contribute to the primary objective of tax-free income, they
do assist the secondary objective of capital preservation.
The Fund's investment objectives cannot be changed without shareowner approval.
Except as explained above, all of the policies in this section can be changed by
a majority of the Board of Trustees. The Fund has adopted certain other
restrictions, as outlined in the STATEMENT OF ADDITIONAL INFORMATION.
INVESTMENT RESULTS
Shareowners receive financial reports showing the investments, income and
expenses of the Fund every six months. Current share values are available any
time by calling the adviser at 800-SATURNA (800/728-8762).
PERFORMANCE DATA
The Fund may advertise or publish current yield and average annual total return
in advertisements or in information furnished to publications and to investors.
In any comparison of the Fund's return with that of alternative investments, you
should consider differences between the Fund and the alternative investment, the
periods and methods used in calculation of the returns, and the effect of taxes
on the investments. Of course, past results are not necessarily indicative of
future performance.
You may compute current yield by (i) dividing net investment income over the
rolling 30 day period for which the yield is being computed by the average
number of shares eligible to receive dividends for the period and (ii) dividing
that figure by the Fund's net asset value per share on the last day of the
period, and then (iii) annualizing the results.
The Fund also may quote a taxable equivalent yield, which is the equivalent
amount an investor must earn before deducting federal and any applicable state
income taxes (at rates stated in the quotation), to equal the Fund's 30-day
current yield.
To compute the Fund's average annual total return for any specified period (i)
assume an investment of $1,000 made at net asset value on the first day of the
period and that all dividends paid during the period are reinvested in
additional shares at net asset value and then (ii) divide the ending balance
(I.E., the number of shares now held multiplied by the ending net asset value)
by the beginning balance. For a more complete description of the method of
computation, see the STATEMENT OF ADDITIONAL INFORMATION.
CAPITAL STOCK; DIVIDENDS
Saturna Investment Trust, an open-end "series trust" was organized as a
Washington Business Trust on February 20, 1987. The Trust is an open-end "series
trust" that now offers five separate Funds: The Fund and the four Sextant Funds
(the Sextant Funds offer a range of investments intended to be the basic
elements of an investment program and are offered through a separate prospectus
available from the Adviser.) The Trust (formerly known as Northwest Investors
Trust) began operations on September 4, 1987. The Fund's current investment
advisory agreement became effective on its approval by shareowners on October
12, 1990.
The Fund is divided into shares of beneficial interest, with equal voting
rights. All shares are fully paid, non-assessable, transferable, have rights of
redemption, and are not subject to preemptive rights. The Trust is not required
to hold annual shareowner meetings, but special meetings may be called for such
purposes as electing or removing Trustees, changing fundamental policies, or
voting on approval of an advisory contract. On issues relating solely to a
single Fund, only the shareowners of that Fund are entitled to vote.
All dividends and distributions are distributed pro rata to shareowners in
proportion to the number of shares of the Fund owned.
The Fund intends to distribute substantially all its net investment income and
net realized capital gains, if any, to its shareowners. The Fund pays dividends
from investment income daily and reinvests or distributes them monthly.
Dividends from capital gains, if any, are declared and paid at the end of
November.
Both dividends and capital gains distributions are automatically reinvested in
additional full and fractional shares of the Fund, unless you have elected to
receive either or both in cash.
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code and to distribute substantially all net income and realized net
gains on investments. The Fund is then relieved of paying federal income taxes
on amounts it distributes.
At year-end, the Fund's transfer agent reports to you and to the IRS the amount
of each redemption you made during the year, as well as the amount of dividends
and capital gain distributed to you. The Fund accounts for its distributions as
either taxable capital gains (originating from net realized gains on portfolio
transactions), or taxable income (originating from dividends, taxable interest
and certain other types of gains) or tax-exempt income (originating from
interest on municipal bonds). Fund distributions may be subject to state and
local taxes.
To avoid being subject to a 31% federal withholding tax on dividends and
distributions, you must furnish the transfer agent your correct Social Security
or Tax Identification Number in the space on the application.
NET ASSET VALUE
The Fund computes its net asset value per share each business day by dividing
(i) the value of all of its securities and other assets, less liabilities, by
(ii) the number of shares outstanding. The Fund computes its net asset value as
of the close of trading on the New York Stock Exchange (generally 4 p.m. New
York time) on each day the Exchange is open for trading. The Fund's shares are
not priced on any customary national business holiday that securities markets
are closed. The net asset value applicable to purchases or redemption's of
shares of the Fund is the net asset value next computed after receipt of a
purchase or redemption order.
Since daily bid prices are not available for many municipal bond issues, the
Fund values securities using a matrix of municipal bond yields for various
maturities and qualities. Prices are adjusted for factors unique to each bond.
To verify its knowledge of market factors, the adviser periodically obtains
appraisals from independent sources.
HOW TO BUY SHARES
You may open an account and purchase shares by sending a completed Application
with a check for $1,000 (U.S. only) or more ($100 under a group plan) to the
Fund. The Fund does not accept initial orders unaccompanied by payment nor by
telephone. The price you receive is the net asset value next determined after
receipt of a purchase order. There are no sales charges or loads.
You may purchase additional shares at any time in minimum amounts of $100. Once
your account is open, purchases can be made by check, by electronic funds
transfer, or by wire.
You may authorize the use of the Automated Clearing House ("ACH") to purchase or
redeem shares by completing the appropriate section of the application. The
authorization must be received at least two weeks before ACH can be used. ACH is
a system for electronic funds transfer. To use ACH to purchase or redeem shares,
simply call the transfer agent (minimum ACH purchase $100, redemption $500).
You also may wire money to purchase shares (minimum wire purchase $500), though
typically your wiring bank will charge you a fee for this service. Call the
transfer agent for the information you will need BEFORE requesting your bank to
wire funds.
Each time you purchase or redeem shares, you receive a statement showing the
details of the transaction as well as the current number, cost, and value of
shares you hold. Share balances are computed in full and fractional shares,
expressed to three decimal places. You don't have to worry about safekeeping of
certificates because they are not issued.
At the end of each calendar year, you will receive a complete annual statement,
which you should retain for tax purposes and a complete historical record of all
transactions.
The Fund offers several optional plans and services. Materials describing these
plans and applications may be obtained from the Adviser or the transfer agent.
Other plans offered by the Fund include: (1) an automatic investment plan, (2) a
systematic withdrawal plan to provide regular payments to you, and (3) the right
to exchange your shares without charge for any other no-load mutual fund for
which Saturna Capital is the investment adviser.
HOW TO REDEEM SHARES
You may redeem your shares on any business day of the Fund. The Fund pays
redemptions in U.S. dollars, and the amount you receive is the net asset value
per share next determined after receipt of your redemption request. The amount
received will depend on the value of the investments in the Fund at the time of
your redemption, and the amount you receive may be more or less than the cost of
the shares you are redeeming. A redemption constitutes a sale for federal income
tax purposes, and you may realize a capital gain or loss on the redemption.
The Fund normally pays for shares redeemed or exchanged within three days after
a proper instruction is received. To allow time for clearing, redemption of
investments made by check may be restricted for up to ten calendar days.
There are several methods you may choose to redeem shares.
WRITTEN REQUEST
Write: Idaho Tax-exempt Fund
Box 2838
Bellingham WA 98227-2838
Fax: 360/734-0755
You may redeem shares by a written request and choose one of the following
options for the proceeds:
(A) Redemption check (no minimum) sent to registered owner(s).
(B) Redemption check (no minimum) sent as directed if the signature(s) are
guaranteed. If proceeds are to be sent to other than the registered owner(s) at
the last address, the signatures on the request must be guaranteed by a national
bank or trust company or by a member of a national securities exchange.
(C) Federal funds wire. The proceeds ($5000 minimum) may be wired to any bank
designated in the request if the signature(s) are guaranteed as explained above.
TELEPHONE REQUEST
Call: 800-728-8762 or
360-734-9900
You may redeem shares by a telephone request and choose one of the following
options for the proceeds:
(A) Redemption check (no minimum) sent to registered owner(s).
(B) ACH transfer ($500 minimum) with proceeds transferred to your bank
account as designated by the ACH authorization on your application. The ACH
authorization must be received by the transfer agent at least two weeks before
ACH transfer can be used.
(C) Exchange (in at least the minimum established by the Fund being
purchased) for shares of any other Fund for which Saturna Capital 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. Of course,
shares must be authorized and registered for purchase in your state before an
exchange may be made. Exchanging shares may have tax consequences, because an
exchange is considered a closing capital transaction for tax purposes.
(D) Federal funds wire. Proceeds ($5000 minimum) may be wired only to the
bank previously designated, or as directed in a prior written instruction with
signatures guaranteed, as explained above.
For telephone requests the Fund will endeavor to confirm that instructions are
genuine and may be liable for losses if it does not. The caller must provide (1)
the name of the person making the request, (2) the name and address of the
registered owner(s), (3) the account number, (4) the amount to be withdrawn, and
(5) the method for payment of the proceeds. The Fund also may require a form of
personal identification, and provide written confirmation of transactions. The
Fund will not be responsible for the results of transactions it reasonably
believes genuine.
CHECK WRITING
You may also redeem shares in your account by drawing checks on your account for
amounts of $500 or more.
The Fund will provide you a small book of blank checks for a $7 fee, which may
be payable to any payee. Checks are redeemed at the net asset value next
determined after receipt by the transfer agent. If you wish to use this feature,
you should request the Check Writing Privilege on the Application at the time
you open an account. Note that, as with any redemption, each check is a closing
capital transaction for tax reporting purposes.
INVESTMENT ADVISER
Saturna Capital Corporation, 1300 N. State Street, Bellingham, Wash. 98225
(the "Adviser") is the Investment Adviser to the Trust. The Adviser is a
Washington State corporation formed in July 1989. Shareholders owning more than
10% of the common stock are: Nicholas F. Kaiser, Phelps S. McIlvaine, James D.
Winship, and Brian A. Anderson. The directors of the Adviser are Nicholas Kaiser
(President), James D. Winship (Vice President and Secretary), Phelps S.
McIlvaine (Vice President), Brian A. Anderson (Vice President) and Markell F.
Kaiser (Treasurer).
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. Through March 31, 1997,
the Adviser has voluntarily waived its fee and reimburses the Fund as necessary
to limit total Fund expenses to 0.75% of average annual net assets. A waiver may
have the effect of subsidizing the yield for the period it is in effect.
Under the Fund's investment advisory agreement the Fund pays its own taxes,
brokerage commissions (if any), trustees' fees, legal and accounting fees,
insurance, transfer agent, registrar and dividend disbursing agent fees,
expenses incurred in complying with state and federal laws regulating the issue
and sale of its shares, and mailing and printing costs for prospectuses, reports
and notices to shareowners. The Adviser furnishes office space, facilities and
equipment, personnel, and clerical and bookkeeping services required to conduct
the business of the Fund. Saturna Capital Corporation acts as investment adviser
to six other investment companies, the four Sextant Funds: Growth ($1 million),
International (a new fund), Bond Income ($1 million) and Short-Term Bond (a new
fund), as well as Amana Income Fund, which has assets of approximately $10
million and Amana Growth Fund, with approximately $2 million in assets.
Each of the Sextant Funds pays the Adviser an Investment Advisory and
Administrative Services Fee computed at the annual rate of 0.60% of average net
assets of each Fund and paid monthly. Each Fund's Fee is subject to an
adjustment (up to a maximum adjustment of 0.30%) that is determined by that
Fund's total return performance relative to a specified index. The advisory fee
for both of the Amana Funds is .95%.
Saturna also manages individual advisory accounts. The Adviser's wholly-owned
subsidiary, Investors National Corporation, is a discount brokerage firm and
acts as distributor for the Funds without compensation. The Adviser is permitted
to place brokerage transactions through the affiliate, and the Adviser may
allocate brokerage to any broker in return for research or services and for
selling shares of any Fund.
Phelps McIlvaine, primary manager of the Fund, entered the investment business
in 1976 and managed bond hedge funds from 1987 to 1993. He also manages two of
the Sextant Funds (Bond Income and Short-term Bond).
The manager of the Fund and other investment personnel are permitted to engage
in securities transactions for their own accounts but only in accordance with a
code of ethics that, among other things, requires advance approval of all trades
and disclosure of all holdings. It also prohibits a number of transactions, and
contains other provisions.
Saturna Capital Corporation acts as transfer agent, maintaining all shareowner
records.
<PAGE>
TRUST MANAGEMENT
Saturna Investment Trust is managed by a Board of five Trustees: Gary A.
Goldfogel, John E. Love, John S. Moore, Nicholas F. Kaiser and James D. Winship.
The Trustees establish policies, as well as review and approve contracts and
their continuance. The Trustees also elect the officers, determine the amount of
any dividend or capital gain distribution and serve on any committees of the
Trust. For other information concerning the officers and Trustees, see the
STATEMENT OF ADDITIONAL INFORMATION.
<PAGE>
PLEASE SAVE THIS QUICK GUIDE TO
IDAHO TAX-EXEMPT FUND
ACCOUNTS
Open your account by sending a completed Application to the Fund. For
convenience, you may have your account consolidated with others of your
household or other group. We will appoint a representative to whom you
may refer all questions regarding your account(s). Extra forms will be
sent for certain accounts.
INVESTMENTS
Initial investments are $1,000 or more and must be accompanied by an
Application. Additional investments may be made for $100 or more at any
time. There are no sales commissions or other charges.
REDEMPTIONS
You may sell your shares any time. As with purchases, you may choose
from several methods including telephone, written instructions, and
checkwriting. You will be paid the market price for your shares on the
day we receive your instructions, and there are no redemption fees or
charges. If we receive your redemption request by one p.m. Pacific
time, your check is normally mailed to you the same day.
STATEMENTS
On the date of each transaction, you are mailed a confirmation, showing
the details of the transaction and your account balance. At year-end
and at selected points during the year we mail a statement showing all
transactions for the period. Monthly consolidated statements are
available for an extra fee.
DIVIDENDS AND PRICES
The Fund declares dividends daily and pays them monthly. The Fund's
price is available on electronic quotations systems and by calling the
Fund at 800-SATURNA.
FOR MORE INFORMATION
Please consult the applicable pages of this Prospectus for additional
details on the Fund and its shareholder services. You may also call
800-SATURNA (800-728-8762) with any questions.
<PAGE>
IDAHO TAX-EXEMPT FUND
INVESTMENT APPLICATION
Mail application and check to: For assistance, call:
IDAHO TAX-EXEMPT FUND (800) SATURNA or (360) 734-9900
Box 2838, Bellingham WA 98227-2838 FAX (360) 734-0755
ACCOUNT TYPE AND NAME
q Individual
First Middle Initial
Social Security Number Date of Birth___________
q Joint with
First Middle Initial Last
Joint Owner's Social Security Number
(Joint accounts are presumed to be "Joint Tenancy with Right of
Survivorship" unless otherwise indicated)
q Gifts to Minor AS CUSTODIAN FOR
Name of Custodian Name of Minor
qUNIFORM GIFTS TO MINORS ACT
UNDER THE qUNIFORM TRANSFERS / /
State TO MINORS ACT Minor's S. S. No.
q Other
Indicate name of corporation, other organization or fiduciary capacity.
Tax Identification Number
If a trust, include name(s) of trustees and date of trust instruments.
Name(s) of person(s) authorized to transact business for the above
entity.
MAILING
ADDRESS Street Apt., Suite, Etc.
City State ZIP
TELEPHONE ( ) ( )
- - - -
Daytime Home
INITIAL INVESTMENT $
(Minimum $1000) Make check payable to Idaho Tax-Exempt Fund.
<PAGE>
TELEPHONE REDEMPTION PRIVILEGES
You automatically have telephone redemption by check and telephone exchange
privileges unless you strike this line. The Fund will endeavor to confirm
that instructions are genuine and it may be liable for losses if it does not.
(Procedures may include requiring a form of personal identification, and
providing written confirmation of transactions.)
ACH TELEPHONE TRANSFER PRIVILEGE
q To transfer funds by ACH at no charge to or from my (our) bank account, I
(we) authorize electronic fund transfers through the Automated Clearing
House (ACH) for my (our) bank account designated. PLEASE ATTACH A VOIDED
CHECK OR DEPOSIT SLIP.
AUTOMATIC INVESTMENT PLAN
q Invest $ _______ into this Fund on the _____ day of each month (the 15th
unless another date is chosen) by ACH transfer from my (our) bank
account. This plan may be canceled at any time. PLEASE ATTACH A VOIDED
CHECK OR DEPOSIT SLIP.
CHECK WRITING PRIVILEGE ($500 per check minimum) ($7 checkbook charge)
q I (We)hereby request the Custodian to honor checks drawn by me (us) on my
(our) account subject to acceptance by the Trust, with payment to be made
by redeeming sufficient shares in my (our) account. None of the custodian
bank, Saturna Capital Corporation, nor Saturna Investment Trust shall
incur any liability to me (us) for honoring such checks, for redeeming
shares to pay such checks, or for returning checks which are not
accepted.
qSINGLE SIGNATURE AUTHORITY -- JOINT ACCOUNTS ONLY: (CHECKS FOR JOINT
ACCOUNTS REQUIRE BOTH SIGNATURES UNLESS THIS BOX IS MARKED TO AUTHORIZE
CHECKS WITH A SINGLE SIGNATURE). By our signatures below, we agree to
permit check redemptions upon the single signature of a joint owner. The
signature of one joint owner is on behalf of himself and as attorney in
fact on behalf of each other joint owner by appointment. We hereby agree
with each other, with the Trust and with Saturna Capital Corporation that
all moneys now or hereafter invested in our account are and shall be
owned as Joint Tenants with Right of Survivorship, and not as Tenants in
Common.
The undersigned warrants(s) that I (we) have full authority to make this
Application, am (are) of legal age, and have received and read a current
Prospectus and agree to be bound by its terms. Unless this sentence is struck, I
(we) certify, under penalties of perjury, that I (we) am not subject to backup
withholding under the provisions of section 3406(a)(1)(C) of the Internal
Revenue Code. This application is not effective until it is received and
accepted by the Trust.
Date Signature of Individual (or Custodian)
- ---------------
Date Signature of Joint Registrant, if any
[GRAPHIC OMITTED]
NO-LOAD MUTUAL FUNDS
- --------
* Please refer to the Statement of Additional Information for a more extensive
discussion of the meaning and implications of the Fund's being nondiversified.
+ Municipal securities purchased on a delayed-delivery or when-issued basis are
regarded as "senior securities" for purposes of the Investment Company Act. A
segregated account is established on the date a Fund enters an agreement,
containing cash, U.S. government securities, or other high-grade debt securities
in an amount equal to the purchase price due on the settlement date.
<PAGE>
1
SATURNA INVESTMENT TRUST
IDAHO TAX-EXEMPT FUND
1300 State Street
Bellingham, Washington 98225
360-734-9900
800-SATURNA
STATEMENT OF ADDITIONAL INFORMATION
September 28, 1995
Idaho Tax-Exempt Fund (the "Fund") is a series of Saturna Investment Trust (the
"Trust"). The Fund is a series of the Trust and represents shares of beneficial
interest in a separate portfolio of securities and other assets, with its own
objectives and policies. This Statement of Additional Information is not a
Prospectus. It merely furnishes additional information that should be read in
conjunction with the Fund's prospectus dated September 28, 1995. The Fund's
prospectus may be obtained free of charge by telephoning the numbers above or
writing the Fund at the address shown above.
<PAGE>
TABLE OF CONTENTS
Page
General Information and History...........................3
Investment Objectives and Policies........................3
Investment Considerations.................................8
Portfolio Turnover.......................................11
Performance Data ........................................11
Management of the Trust..................................13
Principal Holders of Securities..........................15
Investment Advisory and Other Services...................15
Brokerage Allocation.....................................16
Purchase, Redemption and Pricing of Securities Being Offered 17
Tax Status...............................................18
Financial Statements.....................................19
<PAGE>
GENERAL INFORMATION AND HISTORY
Saturna Investment Trust (the "Trust") is a business trust formed pursuant to
RCW 23.90 of the laws of the State of Washington to operate as an open-end
management company. When formed on February 20, 1987, the name was Northwest
Investors Tax-Exempt Business Trust. The Trust's name was changed to Northwest
Investors Trust on October 12, 1990. Most recently, in connection with the
formation of a new series of funds and reorganization and realignment of certain
existing series, the Trust's name was changed to Saturna Investment Trust on
September 28, 1995.
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares in any Fund of the Trust. The Trust may establish
additional Funds in the future by approval of the Trustees. All shares will have
no par value and when issued will be fully paid and non-assessable and will have
no preemptive, conversion, or sinking fund rights.
The Trust has five separate Funds, the Fund (initially known as the Idaho
Extended Maturity Tax-Exempt Fund) and four others which are offered through a
separate Prospectus and Statement of Additional Information: Sextant Growth Fund
(formerly known as Northwest Growth Fund), Sextant Bond Income Fund (formerly
known as Washington Tax-Exempt Fund), Sextant International Fund, and Sextant
Short-Term Bond Fund.
INVESTMENT OBJECTIVES AND POLICIES
This section is provided only for the purpose of expanding or outlining certain
policies and restrictions not thoroughly covered in the Prospectus.
The primary investment objective of the Fund is to obtain a return of income
from debt securities issued by or on behalf of the State of Idaho or any
political subdivision, agency, or instrumentality thereunder, the income from
which is exempt from both federal and Idaho State income taxes, and the federal
alternative minimum tax. The secondary objective is to preserve the Fund's
capital.
To achieve its objectives, the Fund invests primarily in Idaho bonds. Financial
conditions and the diversification requirements of Subchapter M of the Internal
Revenue Code of 1986 (the "Code") may require investment in cash and other
securities from time to time, the income from which may be taxable. Such
investments will only exceed 20% of the Fund's net assets on a temporary basis,
such as significant adverse economic, political or other circumstances that
require immediate action to avoid losses.
The Fund is "non-diversified." This means that with respect to at least 75% of
total assets, greater than 5% may be invested in the securities of any one
issuer. However, the Fund is required to meet Internal Revenue Code requirements
that at the end of each quarter at least 50% of total assets is represented by
(a) cash or equivalents, (b) U. S. government securities, (c) securities of
other regulated investment companies, and (d) other securities, if, as to any
one issuer, the value of such issuer's securities does not exceed 5% of the
Fund's total assets and such issuer's securities held by the Fund represent not
more than 10% of the outstanding voting securities of such issuer. The balance
of the Fund may be invested in other securities if not more than 25% of total
assets are invested in the securities of any one issuer, or two or more issuers
engaged in the same or similar trade or business.
The Adviser may direct investments in other tax-exempt investment companies
which do not concentrate their investments in Idaho Bonds, but nevertheless
yield income which is exempt from both federal income and alternative minimum
taxation. Such income may be taxable at the state level. It is the policy of the
Fund not to devote more than 5% of its total assets to any one investment
company, nor to devote greater than 10% of its total assets to investments in
investment companies generally. It is anticipated that shares of such investment
companies may be obtained by an affiliated broker/dealer, Investors National
Corporation (the "Distributor"), which has agreed to act as agent for the Fund
and not charge a commission or receive any compensation on purchases of
securities made on behalf of the Fund. The purchase of securities of other
investment companies may result in the Fund's shareowners paying investment
advisory fees twice on the same assets.
Investment objectives and certain policies of the Fund may not be changed
without the prior approval of the holders of the majority of the outstanding
shares of the Fund. Objectives and policies which are considered fundamental and
subject to change only by prior approval of the shareowners include: (1) the
primary and secondary investment objectives; (2) the 80% of net assets minimum
investment in tax-exempt income securities; (3) the classification of the Fund
as an open-end management company and the sub-classification of the Fund as a
non-diversified company; and (4) the policies listed under "Investment
Restrictions." However, the mix of investments between (1) cash and cash items;
(2) government securities; (3) securities of other investment companies; (4)
securities in rated and non-rated bonds; (5) short and long maturities, and the
length of time investment positions are held; and (6) other debt securities, are
considered management decisions and may be altered without prior shareowner
approval. Management has delegated to an affiliate, Saturna Capital Corporation
(the "Adviser"), management the Fund's investments.
NON-RATED BONDS. Management and the Adviser believe that many of the debt
securities issued by the State of Idaho or the political subdivisions, agencies
or instrumentalities thereunder are small issues in total dollars, and are
typically issued by smaller communities or instrumentalities to obtain capital.
Because of the small size of such issues, the expense of obtaining a rating for
the issued obligation (the "Bond") is typically not undertaken. Without a
rating, investors must rely solely on their own analysis and investigation to
determine investment risk and worth of such Bonds. Since the cost of such
analysis and investigation is typically not considered warranted due to the size
of such issues, despite a higher return typically available from such non-rated
Bonds, issues of non-rated Bonds generally do not have a trading market
consisting of as many dealers as comparable rated issuers. Occasionally, the
financial institution lending the funds to a municipality receives the Bond and
holds it until maturity. As a result, although trading markets exist for
non-rated Bonds, generally the number of dealers participating in the market are
fewer than that which exists for rated Bonds. Although all rated and non-rated
Bonds are traded on the basis of dealers' perception of credit-worthiness, a
non-rated Bond having greater recognition among dealers will have a market
consisting of a greater number of dealers than will the market for a Bond not
having as great a recognition. Management anticipates that investment in
non-rated Bonds will occur only when the Adviser to the Fund believes the credit
of the issuer of such non-rated Bonds is such so as to warrant an investment
without unreasonable risk to the preservation of capital and which is
sufficiently recognized among the market dealers so as to provide ready
marketability of the investment. In the opinion of Management and the Adviser,
such non-rated Bonds will be comparable to rated Bonds having an "A" rating.
Experience of the Adviser indicates that investments in certain good quality
non-rated Bonds are liquid and can be sold within seven days at or near the
value given for computing net asset value.
Management and the Adviser believe that there exist both rated and non-rated
Bonds that constitute good investments that will promote the investment
objectives of the Fund. Purchases of Bonds on behalf of the Fund may be made
directly from the issuer. Some purchases are by sealed bid with the entire issue
being awarded to the lowest interest rate that is bid. Most issuers are willing
to negotiate a rate directly with the managing underwriter and/or purchaser. In
this instance, the Adviser will deal in good faith to arrive at a competitive
rate.
In contemplating the rate at which to bid a Bond, the Adviser may consider the
opinions and evaluations of independent broker/dealers specializing in Idaho
municipal bonds. Such brokers may also be requested to render their opinions as
to the value of the Fund's investment securities portfolio, including rated and
non-rated Bonds. The Fund and Adviser may consider such evaluations and
valuation services provided by such independent brokers in determining where it
effects transactions in investment securities and the amount of commissions to
be paid such broker.
INVESTMENTS. The Fund invests at least 40% of total assets in municipal
securities rated "A" or better by Moody's Investors Service, Inc. ("Moody's") or
Standard and Poor's ("S&P"). The Fund invests more heavily in rated Bonds for
various purposes, including (a) diversification or greater liquidity, (b) when
the difference in returns between rated and non-rated Bonds is not material, or
(c) when interest rates are expected to increase. SEE THE "APPENDIX" FOR A
DESCRIPTION OF BOND RATINGS.
Under normal market conditions the Fund may invest up to 60% of total assets in
non-rated Bonds only when the Adviser believes the credit of the issuer warrants
an investment without unreasonable risk to the preservation of capital and the
Bonds are sufficiently recognized among the market dealers so as to provide the
ready marketability of the investment. The Fund employs the services of
independent broker/dealers specializing in municipal bonds to assist the Adviser
in both (1) determining the purchase price of rated and non-rated Bonds and (2)
valuing the rated and non-rated Bonds for net asset value computation purposes.
In evaluating Bonds, the Adviser analyzes the extent of investment risk by
policies that include:
(1)The extent of unemployment within the assessment district for the issuer of
a Bond and the extent to which this may affect repayment of the Bond at
maturity;
(2)The extent to which the real property within the assessment district is
owned by a small number of persons or entities and the relative economic
strength of such persons or entities which may affect repayment of the Bond
at maturity;
(3)The financial position of the political subdivision, including, but not
limited to, the extent of its existing indebtedness.
These limitations and policies are considered primarily at the time of purchase.
The sale of a Bond is not mandated in the event of a subsequent change in
circumstances. Indeed, Bonds are commonly held until maturity, when the Bond
will be redeemed for its full face value, assuming no defaults. Nonetheless,
both rated and non-rated Bonds may be sold prior to maturity for various
purposes, such as a desire for greater liquidity or to preserve capital.
The Fund invests predominantly in municipal obligations issued by the State of
Idaho or any political subdivision, agency or instrumentality thereof
("Municipality"). These municipal obligations generally include Municipal bonds,
Municipal notes, Municipal commercial paper, and any other obligation from which
the payment of interest, in the opinion of the bond issuer's counsel, is exempt
from Federal and Idaho State income tax. A general description of these
investments are:
MUNICIPAL BONDS are debt obligations issued to obtain funds for various public
purposes such as construction of public facilities (e.g., airports, highways,
bridges, and schools). Maturities of municipal bonds at the time of issuance
may range from one year to 30 years or more.
MUNICIPAL NOTES are short-term obligations of municipalities, generally with a
maturity ranging from six months to three years. The principal types of notes
include tax, bond, and revenue anticipation notes and project notes.
MUNICIPAL COMMERCIAL PAPER refers to short-term obligations of municipalities,
which may be issued at a discount. Such paper is likely to be issued to meet
seasonal working capital needs of the Municipality or interim construction
financing. Municipal commercial paper is, in most cases, backed by letters of
credit, lending agreements, note repurchase agreements, or other credit
facility agreements offered by banks and other institutions.
Municipal notes and commercial paper obligations are usually issued in the
following circumstances: (a) When borrowing is in anticipation of long-term
financing, the paper is generally referred to as bond anticipation notes
("BAN"). Cities are authorized to issue revenue bond anticipation notes. The
maturity date cannot exceed five years from the date of issue. Payment can be
extended for not more than three years from their maturity date. BANs are
secured by income and revenues derived by the city from the project and from the
sale of the revenue bonds in anticipation of which the notes are issued. (b)
Borrowings to level temporary shortfalls in revenue occasioned by irregular
receipts of taxes are generally referred to as tax anticipation notes ("TAN").
Taxing districts, including counties, any political subdivision of the state,
any municipal corporation, school districts, any quasi-municipal corporation or
any other public corporation authorized to levy taxes, are authorized to borrow
money and issue a TAN. The TANs must mature no longer than one year form the
date of issue and are issued in anticipation of collection of taxes in the
current fiscal year. The taxing district is limited to an amount equal to 75% of
the taxes levied in the current fiscal year and not yet collected. TANs are
backed by the full faith and credit of the taxing districts. The State of Idaho
is also authorized to issue a TAN in anticipation of income or revenue from
taxes, but is forbidden by its constitution to engage in deficit spending or
long-term borrowing. The term of the obligation is the shorter of 12 months or
to the end of the fiscal year. Likewise, the borrowed amount cannot exceed 75%
of the income or revenue from taxes which the State tax commission or other tax
collection agency certifies is reasonably anticipated to be collected during the
current fiscal year.
Municipal bonds include debt obligations issued to obtain funds for various
public purposes, including the construction of public facilities. Municipal
bonds may be used to refund outstanding obligations, to obtain funds for general
operating expenses, or for lending public or private institutions funds for the
construction of educational facilities, hospitals, or housing, or for other
public purposes. The two principal classifications of municipal bonds are
general obligation and limited obligation (or revenue) bonds. Limited project
bonds are known as local improvement district ("LID") bonds.
GENERAL OBLIGATION BONDS ("GO Bonds") are those obligations of an issuer to
which the full faith and credit of the municipality is pledged. The proceeds
from GO Bonds are used for a wide variety of public uses, including, but not
limited to, public facilities such as the structure or improvement of
schools, highways, and roads, water and sewer systems, and facilities for a
variety of public purposes. A GO Bond is paid from ad valorem property taxes
or from other tax sources. Many types of obligations may be general
obligations of a municipality whether or not they are incurred through the
issuance of bonds. GO Bonds may be incurred in the form of a registered
warrant, conditional sales contract, or other instrument in which an
unconditional and unlimited promise to pay from ad valorem taxes is made.
REVENUE BONDS may be issued to fund a wide variety of revenue-producing capital
projects including, but not limited to, electric, gas, water and sewer
systems, highways, bridges, and tunnels, airport facilities, colleges and
universities, hospitals, and health, convention, recreational, and housing
facilities. Although the principal security of these bonds varies, generally,
revenue bonds are payable from a debt service reserve fund, the cash for
which is derived from the operation of the particular utility or enterprise.
Revenue bonds are not general obligations. They are secured by the revenues
of the particular utility or system. They can be issued by agencies of a
state and can also be issued by political subdivisions including counties,
cities, towns, water districts, sewer districts, irrigation districts, port
districts, and housing authorities.
The Fund will invest in revenue bonds with a coverage factor between net revenue
to the annual debt service of a minimum of 1 to 1.25. Only issues that have a
debt service reserve fund balance equal to the average annual debt service will
be purchased.
LOCAL IMPROVEMENT DISTRICT ("LID") bonds are secured by assessments levied
against the properties benefited by the improvements constructed with the
proceeds of the bonds. This type of financing is available to counties, water
and/or sewer districts, highway districts, irrigation districts and cities.
The property must be specially benefited by the improvements constructed out
of the proceeds of the bonds, generally within a local improvement district.
PRIVATE ACTIVITY BONDS, including Industrial Development Bonds ("IDB"), are
commonly issued by public authorities but generally are not secured by any
taxing power. Rather, they are secured by the revenues derived from the lease
or rental payments received by the industrial user, and the credit quality of
such Municipal Bonds is usually directly related to the credit standing of
the user of the facilities. Since 1986 there have been substantial
limitations on new issues of municipal bonds to finance privately operated
facilities. To the extent such municipal bonds would generate income that
might be taxed under federal alternative minimum tax provisions, the Fund
does not invest in Private Activity bonds. The Fund does not anticipate that
greater than 5% of the Fund's total assets will be invested in Private
Activity Bonds.
The Fund may purchase certain variable or floating rate obligations in which the
interest rate is adjusted at predesignated periodic intervals (variable rate) or
when there is a change in the market rate of interest on which the interest rate
payable on the obligation is based (floating rate). Variable or floating rate
obligations may include a demand feature that entitles the purchaser to demand
prepayment of the principal amount prior to stated maturity. Also, the issuer
may have a corresponding right to prepay the principal amount prior to maturity.
INVESTMENT CONSIDERATIONS
Investing in securities entails both market risk and risk of price variation in
individual securities. THIS IS TRUE EVEN FOR DEBT SECURITIES ISSUED BY THE U.S.
GOVERNMENT. By diversifying its investments, the Fund may reduce the risk
associated with owning one or a few individual securities. However, there is no
assurance that the Fund will achieve its investment objectives.
Many factors may cause the value of a shareholder's investment in the Fund to
fluctuate in value. The value of the Fund's portfolio will normally fluctuate
inversely with changes in market interest rates. Generally, when market interest
rates rise the price of municipal bonds held in the Fund will fall; when rates
fall, the price of such bonds will generally rise. In addition, there is a risk
that the issuer of a municipal bond or other security will fail to make timely
payments of principal and interest. Interest rate fluctuations will affect the
Fund's net asset value, but not the income received by the Fund from its
portfolio securities. However, because yields on debt securities available for
purchase by the Fund vary over time, no specific yield on shares of the Fund can
be assured.
Because the Fund concentrates its investments in a single state, there is a
greater risk of fluctuation in the values of its portfolio securities than with
mutual funds the investments of which are more geographically diverse. Investors
should carefully consider the investment risks of such concentration. The Fund's
share prices can be affected by political and economic developments within and
by the financial condition of the State of Idaho, its public authorities and
political subdivisions. The following information may be relevant in considering
an investment in the Fund, but is not intended to provide all information
relevant to such an investment. Discussions concerning the financial health of
the State government might not be relevant to municipal obligations issued by a
political subdivision. In addition, general economic conditions may or may not
affect issuers of the obligations of the State.
Idaho is located in the Northwestern portion of the United States, bordered by
Washington, Oregon, Nevada, Utah, Wyoming, Montana and Canada. Idaho consists of
approximately 84,000 square miles of varied terrain. The terrain and access to
outdoor activities such as boating, fishing, hunting and skiing, make tourism
and recreation a major, growing industry in the State.
Although located in the arid West, Idaho has significant water resources,
including 26,000 miles of rivers and streams and more than 2,000 natural lakes.
The drop in elevation of rivers like the Snake permit hydropower production,
allowing the State some of the lowest electricity rates in the nation.
The State has a broadly based economy, ranging from mining and timber resources
to agricultural lands which are irrigated by a series of man-made reservoirs and
irrigation systems. More than four million acres are irrigated in the Snake
River Basin.
Traditionally, Idaho has been an agricultural State. Livestock, beef, dairy
cattle and sheep are important to the economy, while the major food crops
include potatoes, wheat, barley, sugar beets, seed crops and fruit. Major
manufacturing industries include food processing, forest products, phosphate
processing, computer components and electronics. Mining also has been important
in the development of the State with phosphate rock, silver, lead, zinc and
molybdenum among the resources mined. Mining activity is dependent on the market
prices of products and over the past few years with depressed prices, mining
activity has been declining, and may not improve.
In the past, the State's economy has often behaved counter to national economic
trends. In spite of the national difficulties in the 1970's, the State enjoyed
economic growth for most years in the decade. The State's economy experienced
weaker than average economic performance during the first half of the 1980's.
Idaho's economy turned up in 1988, and has continued above the national rates.
Much of the State's economic behavior is explained in terms of Idaho's changing
mix of industries and markets. In recent years, non-agricultural employment has
grown more rapidly, with Idaho's electronics and machinery industry, service
sector, tourism, and government sectors among leading areas. Mining has been
particularly weak, with forest products, food processing and chemical products
sectors among the weaker sectors. The shift from industries dependent on natural
resources should make the State less sensitive to events in international and
national markets.
Idaho has benefited from recent population exodus from California. The shift has
helped make the state among the fastest growing economies in the nation. However
impressive this may sound, it is important to bear in mind that Idaho has a
relatively small population and percentages are easily changed by the influx of
relatively few people. Also, such immigration brings a demand for increased
infrastructure and the financing to fund it. Any such increase in infrastructure
would require that economic growth be maintained to support it, and if growth is
not maintained economic problems could develop.
The State operates under an annual budget system that coincides with the
July-June fiscal year. The State Division of Financial Management in the
Governor's office, in connection with the Governor prepares the proposed budget
for the ensuing year and the Governor submits this budget to the Legislature.
The State must operate on a balanced budget, in accordance with revenue
projections. Following the legislative process, appropriation bills for each
department or agency are submitted to the House and Senate for approval and then
sent to the Governor for signature. The Governor has "line-item veto" power. The
appropriations constitute the limit for each department or agency for
expenditures.
The State may not incur long-term debt, and, consequently, the funding for
projects requiring such debt is done through cities, instrumentalities, agencies
and political subdivisions of the State.
The State derives its revenues substantially from three sources: personal and
corporate income taxes, sales taxes and motor fuel taxes, of which the income
taxes provide approximately half. The balance of State revenue came from a
variety of minor taxes.
INVESTMENT RESTRICTIONS. In addition to the restrictions stated in the
Prospectus, the Fund shall not purchase securities on margin or sell securities
short or purchase or write put or call options; purchase "restricted securities"
(those which are subject to legal or contractual restrictions on resale or are
otherwise not readily marketable); nor invest in oil, gas or other mineral
exploration leases and programs. The Fund shall not make loans to others, except
for the purchase of debt securities, or entering into repurchase agreements. The
Fund shall not invest in securities so as to not comply with Subchapter M of the
Code, in that generally at the close of each quarter of the tax year, at least
50% of the value of the Fund's total assets is represented by (i) cash and cash
items, government securities, and securities of other regulated investment
companies, and (ii) other securities, except that with respect to any one issuer
in an amount more than 5% of the Fund's total assets, and no more than 10% of
the Fund's voting securities of any one issuer. In addition, the Fund shall not
purchase real estate; real estate limited partnerships (excepting master limited
partnerships that are publicly traded on a national security exchange or
NASDAQ's National Market System); commodities or commodity contracts; issue
senior securities; provided, however, that a fund may borrow money for
extraordinary or emergency purposes and then only if after such borrowing there
is asset coverage of at least 300% for all such borrowings; nor act as a
securities underwriter except that they may purchase securities directly from
the issuer for investment purposes. No Fund will purchase securities if it has
outstanding borrowings exceeding 5% of its net assets Also, the Fund shall not
purchase or retain securities of any issuer if the officers or trustees of the
Trust or its adviser own more than one-half of one percent of the securities of
such issuer; invest in any company for the purpose of management or exercising
control. The Fund shall not invest in the securities of other investment
companies, except by purchase where no commission or profit results.
<PAGE>
PORTFOLIO TURNOVER
The Fund places no restrictions on portfolio turnover and will buy or sell
investments according to the Adviser's appraisal of the factors affecting the
market and the economy.
The portfolio turnover rate of the Fund for the fiscal years ended November 30,
1994, 1993, and 1992 was 36%, 31%, 17%, respectively.
PERFORMANCE DATA
Average annual Total Return and Current Yield information may be useful to
investors in reviewing the Fund's performance. However, certain factors should
be taken into account before using the information as a basis for comparison
with alternative investments. No adjustment is made for taxes payable on
distributions. The performance for any given past period is not an indication of
future rates of return or yield on its shares.
The Fund's total return for the one year from November 30, 1993 through November
30, 1994 was -3.76% Average annual total return for the three year period
through November 30, 1994 was 3.56%, for the five year period then ended 4.84%
and for the period from October 30, 1987 (inception of the Fund) through
November 30, 1994, 5.65%,.
Average annual TOTAL RETURN quotations for various periods illustrated are
computed by finding the average annual compounded rate of return over the period
quoted that would equate the initial amount invested to the ending redeemable
value according to the following formula:
P (1 + T)n = ERV
Where P = a hypothetical initial Payment of $1,000 T = average annual
Total return n = Number of years ERV =Ending Redeemable Value of the
$1,000 payment
made at the beginning of the period.
To solve for average Total Return, the formula is as follows:
T = (ERV/P) 1/n - 1
The Fund intends to advertise the tax exempt and/or taxable equivalent yield to
investors.
(a)The advertised tax-exempt yield will be the dollar weighted average yield
to maturity or call. In determining whether each security in the portfolio
will use yield to maturity or yield to call, the lesser of the two will be
selected.
(b)In determining the advertised taxable equivalent yield the effective tax
rate will first be calculated and so stated. It may include federal income
tax, state income tax, and federal alternative minimum tax as clearly
defined in the ad. The advertised tax exempt portion of the standardized
yield will then be divided by the inverse of the stated effective tax rate
and increased by any taxable yield to determine the taxable equivalent
yield.
The Fund utilizes the following procedures in determining yield. The yield
calculation is based on a 30 day period and is computed by the following formula
using the compounded semi-annual APR:
Nominal Yield = [ [ [ ( (a-b) / ( c*d ) ) + 1 ] -1 ] /30 ] * 360
Compounded Semi-Annual APR = [ [ 1 + [ Nominal Yield / 2 ] ] 2 ] - 1
Where: a = dividends and interest earned during the period; b = expenses accrued
for the period (net of reimbursement); c = the average daily number of shares
outstanding during the period that were entitled to receive dividends; and d =
the maximum offering price per share (equivalent to Net Asset Value for no-load
funds) on the last day of the period.
The Fund's tax-exempt yield for the 30-day period ended November 30, 1994 was
6.0%. The equivalent after-tax yield was 10.90% for Idaho residents with taxable
incomes of $250,000, based on a 1995 combined effective federal and Idaho tax
rate of 44.5%.
In advertising and sales literature, the Fund may compare its performance with
that of other mutual funds, indexes or averages of other mutual funds, indexes
or data, and other competing investment and deposit products. The composition of
these indexes or averages differs from that of the Fund. Comparison of the Fund
to an alternative investment should be made with consideration of the
differences in features and expected performance of the investments.
All of the indexes and averages noted below will be obtained from the indicated
sources or reporting services, which the Trust believes to be generally
accurate. The Fund may also note its mention or recognition in other newspapers,
magazines or media from time to time. However, the Fund assumes no
responsibility for the accuracy of such data. Among the newspapers and magazines
that might mention the Funds are:
Barron's Money
Business Week Mutual Fund Letter
Changing Times Morningstar
Consumer Reports New York Times
Consumer Digest Pensions and Investment
Financial World USA Today
Forbes US News and World Report
Fortune Wall Street Journal
Investors Daily
The Fund may also compare itself to the Consumer Price Index, a widely
recognized measure of inflation, and to other indexes and averages such as:
Dow Jones Industrials New York stock Exchange Composite
Standard & Poor's 500 Stock Index
Index American Stock Exchange Composite
Standard & Poor's 400 Index
Industrials NASDAQ Composite
Wilshire 5000 NASDAQ Industrials
Russell 2000 Lipper General Equity Fund Average
Lipper Capital Appreciation Lipper Equity Funds Average
Fund Average Lipper Growth Fund Index
Lipper Growth Funds Average Lipper Growth & Income Fund
Lipper Small Company Growth Average
Fund Average Lipper Balanced Fund Average
Lipper Equity Income Fund Lipper Growth & Income Fund Index
Average Lipper Equity Income Fund Index
Lipper Capital Appreciation Lipper Balanced Fund Index
Fund Index Ibbotson Common Stocks Index
Lipper Growth Fund Index
Lipper Small Company Growth
Fund Index
Morningstar Mutual Fund
Indices
The indexes and averages are measures of performance of stocks and mutual funds
that are classified, calculated and published by these independent services. The
Fund may also use comparative performance as computed in a ranking by these or
other independent services.
A Fund may also cite its rating or other mention by Morningstar or another
entity. Morningstar's ratings are based on risk-adjusted total return
performance, as computed by Morningstar by subtracting the Fund's risk score as
computed by Morningstar, from the fund's total return score. This numerical
score is then translated into rating categories.
MANAGEMENT OF THE TRUST
Information concerning Trustees and Officers of the Trust and their principal
occupations for the past five years is shown below:
GARY A. GOLDFOGEL, M.D., Trustee
1500 N. State Street, Bellingham, WA 98225.
Pathologist and Medical Dir., Whatcom Pathology Lab. Whatcom County;
Medical Examiner, Whatcom County
NICHOLAS KAISER, M.B.A., C.F.A. - President and Trustee *
1300 N. State Street, Bellingham, WA 98225.
President of Saturna Capital Corporation, since July 1989.
President of Unified Management Corporation, Indianapolis IN, investment
advisers and brokers, from 1976 through June 1989.
JOHN E. LOVE, Trustee
Box 188, Garfield, Washington 99130
Owner, J.E. Love Co., international agricultural equipment manufacturer,
Garfield, WA Director, Bank of Whitman, Colfax, Wash.
Rear Admiral, U.S. Navy, Retired.
JOHN S. MOORE, Trustee
College of Business and Economics, Western Washington University,
Bellingham, WA 98225-9077
Professor of Business Administration
JAMES D. WINSHIP, J.D., M.B.A.- Trustee and Secretary*
1300 N. State Street, Bellingham, WA 98225.
Vice President and Secretary, Saturna Capital Corporation, October 1991 to
present. Editor-at-large, FUND DIRECTIONS industry newsletter, December 1991 to
present. Executive Vice-President and member of the management committee, Stein
Roe & Farnham Incorp., Chicago IL, investment adviser, and head of its mutual
fund division, prior to October 1991.
MEREDITH L. ROSS - M.B.A., Treasurer
1300 N. State Street, Bellingham, WA 98225.
Assistant Treasurer, Saturna Capital Corporation, Sept.r 1989 to present
* Nicholas Kaiser and James Winship are each an "interested person" of the Trust
as defined in the Investment Company Act of 1940.
The Trust intends to pay disinterested trustees $100 per meeting attended and
reimbursement of travel expenses (pro-rata to each Fund). However, the trustees
have agreed to waive meeting fees until the Trust's assets reach $10 million,
and have served to date without being paid such fees, as set forth below:
Neither Mr. Winship nor Mr. Kaiser receives compensation from the Trust, nor are
the other officers of the Trust paid for their duties with the Trust.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Compensation
Name of Compensa- Benefits Accrued Estimated Annual From Registrant
Person; tion From As Part of Fund Benefits Upon and Fund Complex
POSITION REGISTRANT EXPENSES RETIREMENT PAID TO DIRECTORS
<S> <C> <C> <C> <C>
GARY A. GOLDFOGEL $0 $0 $0 $0
Trustee
JOHN E. LOVE, 0 0 0 0
Trustee
JOHN S. MOORE, 0 0 0 0
Trustee
NICHOLAS F. KAISER 0 0 0 0
Trustee
JAMES D. WINSHIP 0 0 0 0
Trustee
</TABLE>
The Board has authority to establish an Executive Committee with the power to
act on behalf of the Board between meetings and to exercise all powers of the
Trustees in the management of the Trust. No Executive Committee has been
established at this time. An Audit Committee, consisting of the disinterested
directors, meets to select the independent accountant and review all audit
reports.
As of June 29, 1995, officers, trustees and their families as a group owned
3,538 shares, being less than 1% of the outstanding shares of the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of June 29, 1995, no shareholder was known to own 5% or more of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund is obligated to pay Saturna Capital monthly an 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. Through March 31, 1997, Saturna is voluntarily obligated to
reimburse the Fund monthly if non-extraordinary expenses exceed an annual rate
of 0.75% of average daily net asset value, subject to cancellation by the
adviser on 30 days' notice.
The Fund pays its own taxes, brokerage commissions (if any), trustees' fees,
legal and accounting fees, insurance premiums, custodian, transfer agent,
registrar and dividend disbursing agent fees, expenses incurred in complying
with state and federal laws regulating the issue and sale of its shares, and
mailing and printing costs for prospectuses, reports and notices to shareowners.
The Adviser, at its own expense and without additional cost to the Fund,
furnishes office space, office facilities and equipment, personnel (including
executive officers) and clerical and bookkeeping services required to conduct
the business of the Fund.
The laws and regulations of various states set expense limitations for mutual
funds as a condition for registration to offer and sell shares in that state.
Usually, the expense limitation requires reimbursement if, and to the extent
that, the aggregate operating expenses including the advisory fee but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of a specified percentage of the average net assets of a Fund for its
fiscal year. The only state the adviser believes maintains an expense limitation
is California, which limits aggregate annual expenses (with exceptions) to 2.5%
of the first $30 million of average net assets, 2% of the next $70 million and
1.5% of the remaining average net assets.
Saturna Capital Corporation provides services as the transfer agent and
dividend-paying agent for each Fund. As transfer agent, Saturna furnishes to
each shareowner a statement after each transaction, an historical statement at
the end of each year showing all transactions during the year, and Form 1099 tax
forms. Saturna also, on behalf of the Trust, responds to shareowners' questions
or correspondence. Further, the transfer agent regularly furnishes each Fund
with current shareowner lists and information necessary to keep the shares in
balance with the Trust's records. The mailing of all financial statements,
notices and prospectuses to shareowners is performed by the transfer agent. The
transfer agent maintains records of contributions, disbursements and assets as
required for IRAs and other qualified retirement accounts.
As compensation for services as transfer agent and dividend disbursement agent,
the Fund pays Saturna an annual fee of $1.10 per month per shareowner account
(plus $.30 per month for Funds paying dividends more frequently than once per
quarter), which the Trustees have determined is no more than the cost of
performing such services. The Fund reimburses Saturna for any out-of-pocket
expense for forms and mailing costs used in performing its functions. For the
fiscal year ended November 30, 1994, The Fund paid transfer agent fees of
$5,344.
For the fiscal year ending November 30, 1994, the Fund was required to pay
$36,251 in administrative and advisory fees, of which Saturna Capital waived
$10,190. For fiscal year 1993, the Fund paid $32,394, of which Saturna Capital
waived $11,689. For fiscal 1992, the Fund paid $23,788, but Saturna Capital
waived or reimbursed $8,324.
National City Bank, Indianapolis, Indiana 46255 is the custodian of the Fund's
securities and other assets. As custodian, the bank holds in custody all
securities and cash, settles for all securities transactions, receives money
from sale of shares and on order of the Fund pays the authorized expenses of the
Fund. When Fund shares are redeemed by investors, the proceeds are paid to the
shareowner by check drawn on the custodian bank.
Price Waterhouse, LLP 1001 Fourth Avenue Plaza, Seattle, Washington 98154 serves
as the independent accountants for the Trust. The independent accountants
conduct the annual audit of the Trust as of November 30 and prepare the tax
returns of each Fund.
BROKERAGE ALLOCATION
For fiscal years 1994, 1993 and 1992, Idaho Tax-Exempt Fund paid no brokerage
commissions.
BROKERAGE POLICIES
The placing of purchase and sale orders as well as the negotiation of
commissions, if any, is performed by the Adviser and is reviewed by the Board of
Trustees. The Adviser may allocate brokerage to any broker in return for
research or services and for selling shares of the Fund. Brokers may provide
research or statistical material to the Adviser, but this information is only
supplemental to the research and other statistics and material accumulated and
maintained through the Adviser's own efforts. Any such supplemental information
may or may not be of value or used in making investment decisions for the Fund
or any other account serviced by the Adviser.
The primary consideration in effecting securities transactions for the Fund is
to obtain the best price and execution which in the judgment of the Adviser is
attainable at the time and which would bring the best net overall economic
result to the Fund. Factors taken into account in the selection of brokers
include the price of the security, commissions paid on the transaction, the
efficiency and cooperation with which the transaction is effected, the
expediency of making settlement and the financial strength and stability of the
broker. The Adviser may negotiate commissions at a rate in excess of the amount
another broker would have charged if it determines in good faith that the
overall net economic result is favorable to the Fund. The Adviser evaluates
whether brokerage commissions are reasonable based upon available information
about the general level of commissions paid by similar mutual funds for
comparable services.
The Adviser's subsidiary, Investors National Corporation, is qualified as a
broker-dealer to engage in a general brokerage business. Investors National
Corporation conducts all its transactions on an agency basis for established
"deep discount" commissions; it does not make markets, "deal," or maintain
inventories of securities. For brokerage conducted through an affiliate of the
Adviser, the Trustees have adopted procedures reasonably designed to ensure that
any brokerage fees are reasonable and fair compared to remuneration received by
other brokers in comparable transactions. The Trustees are provided detailed
quarterly monitoring reports and review the procedures at least annually.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
See HOW TO BUY SHARES, HOW TO REDEEM SHARES and NET ASSET VALUE in the
Prospectus for an explanation about the ways to purchase or redeem shares.
In addition to normal purchases or redemptions, the shares of each Fund may be
exchanged for shares of other Funds of Saturna Investment Trust when additional
Funds are offered. Exchange will be made at no charge upon written request or by
telephone if the shareowner has previously authorized telephone privileges on
the application. A gain or loss for federal tax purposes will be realized upon
redemption of any shares for the purposes of an exchange as described above.
Net asset value per share is determined by dividing the value of all securities
and other assets, less liabilities, by the number of shares outstanding. The net
asset value is determined for each Fund as of the close of trading on the New
York Stock Exchange (generally 4 p.m. New York time) on each day the Exchange is
open for trading. The Exchange is generally closed on: New Year's Day,
Washington's Birthday/President's Day, Good Friday, Memorial Day, Independence
Day (observance), Labor Day, Thanksgiving Day and Christmas Holiday.
TAX STATUS
Saturna Investment Trust is organized as a "series" investment company. At
present only the Fund and the Sextant Funds are offered, but the Trust may
create in the future additional Funds with different investment objectives. Each
Fund is a separate economic entity with separate assets and liabilities and
separate income streams. The shareowners of each separate Fund may look only to
that Fund for income, capital gain or loss, redemption, liquidation, or
termination. Each Fund has separate arrangements with the Adviser. Assets of
each Fund are segregated. The creditors and shareowners of each Fund are limited
to the assets of that Fund for recovery of charges, expenses and liabilities.
Each Fund conducts separate voting on issues relating solely to that Fund,
except as required by the Investment Company Act. The tax status and tax
consequences to shareowners of each separate Fund will differ, depending upon
the investment objectives, operations, income, gain or loss, and distributions
from each Fund.
Each Fund intends to distribute to shareowners substantially all of its net
investment income and net realized capital gains, if any, and to comply, as it
has since inception, with the provisions of the Internal Revenue Code applicable
to regulated investment companies, which relieve the Funds of federal income
taxes on the amounts so distributed. The Fund declares dividends from net
investment tax-exempt income daily, payable at each month-end. Net investment
taxable income, if any, is declared as a dividend only at month-end.
Distribution of any capital gains is made at the end of the fiscal year in
November.
The amount of investment income and capital gains, if any, which will be
available for distribution by a Fund of the Trust in the future cannot be
predicted due to continually changing economic conditions and market prices.
Dividends and distributions from capital gains are normally reinvested in
additional full and fractional shares of the Fund. The shares purchased with
dividends or capital gains distributions may be redeemed using any of the
methods for redemption of shares.
Distributions and dividends may be subject to federal, state and local taxes.
Shareowners will be taxed whether the shares automatically purchased with
dividends and distributions are left in the Fund or are redeemed by the
shareowner.
Interest received upon the obligations of the State of Idaho or political
subdivisions thereof are exempt from income tax in the State of Idaho. An Idaho
Income Tax ruling provides a pass-through of the tax-exempt character of
interest received by a regulated investment company, such as the Idaho
Tax-Exempt Fund, upon distribution to shareholders.
Shortly after the end of each calendar year shareowners are mailed a Form
1099-DIV advising of the dividends paid the shareowner for the year.
If you do not furnish the transfer agent with a valid Social Security or Tax
Identification Number and in certain other circumstances, we are required to
withhold 31% of income from your account. Dividends and capital gains
distributions to shareowners who are nonresident aliens may be subject to a 30%
United States withholding tax under the existing provisions of the code
applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
If the IRS determines that the Trust should be fined or penalized for inaccurate
or missing or otherwise inadequate reporting of a Tax Identification Number, the
amount of the IRS fee or penalty will be directly assessed to the shareowner
account involved.
FINANCIAL STATEMENTS
The most recent audited annual report accompanies this Statement of Additional
Information. The financial statements and selected per share data and ratios
dated November 30, 1994, together with the report of independent accountants
dated December 16, 1994, are considered a part of the Statement of Additional
Information and are incorporated by reference.
The unaudited financial statements and selected per share data and ratios dated
May 31, 1995 are considered a part of the Statement of Additional Information
and are incorporated by reference.
<PAGE>
APPENDIX-BOND RATINGS
GENERAL. Moody's and S&P's ratings represent their opinions as to quality of the
municipal bonds which they undertake (for a fee) to rate. Such ratings are not
intended to be an absolute standard of quality. Consequently, a municipal bond
with the same maturity, coupon, and ratings may have different yields while
municipal bonds having the same maturity and coupon, but with different ratings,
may have the same yield.
BOND RATINGS
MOODY'S INVESTORS SERVICES, INC., describes its ratings for debt securities as
follows:
AAA Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large, or exceptionally stable margin, and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
the Aaa securities or fluctuation of protective elements may be of
greater amplitude, or there may be other elements present which
may make the long-term risks appear somewhat larger than the Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are being considered as upper medium-grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
STANDARD & POOR'S describes its rating for debt securities as follows:
AAA Bonds which are rated AAA have the highest rating assigned by
Standard & Poor's. Capacity to repay interest and to pay principal
is extremely strong.
AA Bonds which are rated AA have a very strong capacity to pay
interest and to repay principal, and differ from the higher rated
issues only in small degree.
A Bonds which are rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to
the adverse effect of changes and circumstances in economic
conditions than bonds in higher rated categories.
NOTES
MOODY'S INVESTORS SERVICES, INC., describes its ratings for municipal notes
as follows
MIG-1 The MIG-1 designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity
support, or demonstrated broad-based access to the market for
refinancing.
MIG-2 The MIG-2 designation denotes high quality, with margins for
protection ample though not as large as that for MIG-1.
STANDARD & POOR'S describes its rating for municipal notes as follows:
SP-1 The SP-1 rating denotes a very strong or strong capacity to pay
principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 The SP-2 rating denotes a satisfactory capacity to pay principal
and interest.
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICES, INC., describes its ratings for commercial
paper as follows
PRIME-1 Issuers rated PRIME-1, or related supporting institutions, have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
(i) Leading market positions in well-established industries.
(ii)High rates of return on funds employed
(iii)Conservative capitalization structures with moderate reliance on
debt and a ample asset protection.
(iv) Broad margins in earnings, coverage of fixed financial charges, and
high internal cash generation (v) Well-established access to a range of
financial markets and sources of alternate liquidity.
PRIME-2 Issuers rated PRIME-2, or related supporting institutions, have a
strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earning
trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
STANDARD & POOR'S describes its rating for commercial paper as follows:
A-1 The A-1 designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus (+)
designation.
A-2 The A-2 designation indicates capacity for timely payment is
satisfactory. However, the relative degree of safety is not as
high as for issues designated A-1.
Under normal market conditions, the Fund does not anticipate investing in
Moody's rated bonds below A or Moody's rated notes below MIG 2 or Moody's rated
commercial paper below Prime-2. Similarly, the Fund does not anticipate
investing in S&P rated bonds below A or S&P rated notes below SP-2 or S&P rated
commercial paper below A-2.
<PAGE>
SATURNA INVESTMENT TRUST OFFERS FOUR NO-LOAD SEXTANT FUNDS:
SEXTANT GROWTH FUND seeks long-term growth through investment in U.S.
common stocks
SEXTANT INTERNATIONAL FUND seeks long-term growth through investment in
foreign stocks
SEXTANT SHORT-TERM BOND FUND seeks capital stability and a high level of
current income by investing in short-term debt securities
SEXTANT BOND INCOME FUND seeks a high level of current income by investing in
long-term debt securities
A STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 28, 1995 HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS INCORPORATED BY
REFERENCE INTO THISPROSPECTUS. YOU MAY OBTAIN A FREE COPY BY WRITING OR CALLING:
SATURNA CAPITAL
1300 N. STATE STREET
BELLINGHAM, WA 98225
800/ SATURNA [800/ 728-8762]
E-MAIL: [email protected]
This Prospectus contains information you should read before investing in
the Funds. Please read it carefully and keep it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES AUTHORITY NOR HAS THE COMMISSION OR
ANY STATE AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
GRAPHIC OF NAME AND A SEXTANT OMITTED
GRAPHIC OF SATURNA CAPITAL NAME OMITTED
NO-LOAD,
NO SALES CHARGE,
NO 12B-1
PROSPECTUS
September 28, 1995
<PAGE>
EXPENSES
The Sextant Funds impose no sales load on purchases or reinvested dividends, no
"12b-1" fees, nor any deferred sales load upon redemption. There are no
redemption fees or exchange fees.
The following table illustrates each Funds' estimated operating expenses.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Sextant Sextant Sextant
Sextant Bond Intern- Short-Term
Growth Income ational Bond
FUND(2) FUND(3) FUND(NEW) Fund(NEW)
<S> <C> <C> <C> <C>
Management Fees (after waiv 0.90% 0.40% 0.90% 0.40%
12b-1 Expenses NONE NONE NONE NONE
Other Expenses 0.67% 0.40% 0.67% 0.40%
Total Fund Operating Expenses 1.57% 0.80%(4) 1.57% 0.80%(4)
</TABLE>
<TABLE>
<CAPTION>
FOR EXAMPLE:
<S> <C> <C> <C> <C> <C>
Each Fund estimates 1 year $ 17 $ 8 $ 17 $ 8
paying these expenses 3 yrs-- $ 53 $ 27 $ 53 $ 27
on a $ 1,000 investment, 5 yrs-- $ 93 $ 47 $ 93 $ 47
assuming a 5% net : 10 yrs-- $211 $107 $211 $107
annual return
<FN>
(1)Each Sextant Fund pays an Investment Advisory and Administrative Services
Fee of 0.60% annually. This base fee is then subject to a plus or minus
performance adjustment of up to 0.20% (Sextant Bond Income and Sextant
Short-Term Bond) or 0.30% (Sextant Growth and Sextant International). The
table reflects the maximum fees, which may be subject to fee waivers.
(2)Prior to September 28, 1995, Sextant Growth Fund operated as Northwest
Growth Fund with different fee arrangements and investment objectives. Total
Operating Expenses were 1.50% for the year ending November 30, 1994.
Expenses shown are estimates using arrangements now in place.
(3)Prior to September 28, 1995, Sextant Bond Income Fund operated as
Washington Tax-Exempt Fund with different fee arrangements and investment
objectives. Total Operating Expenses were 0.92% although the Adviser's
voluntary fee waiver reduced expenses to 0.41%. Expenses shown are estimates
using arrangements now in place.
(4)The Adviser has agreed to voluntarily waive its Management Fees to limit
the operating expenses of the Sextant Bond Funds to 0.80% annually, at least
through March 31, 1997. Without this limitation, Management Fees of these
Funds might be as high as 0.80%, and Total Operating Expenses 1.20%. The
example assumes a continuation of this expense limit for the 3, 5 and 10
year periods.
</FN>
</TABLE>
The preceding information is intended to help you in understanding the various
(both direct and indirect) expenses that an investor will bear. This table
should not be considered a representation of past or future expenses and actual
expenses are likely to be more or less than those shown. See FINANCIAL
HIGHLIGHTS and INVESTMENT ADVISER for more details.
<PAGE>
1
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED]
Selected data for a share of SEXTANT GROWTH FUND (previously Northwest Growth
Fund) beneficial interest outstanding throughout each period. The following
schedule for each of the five years ended November 30, 1994 has been audited by
Price Waterhouse LLP, independent accountants, whose report thereon included in
the Annual Report to Shareowners which is incorporated by reference into the
Statement of Additional Information. The data for each of the two years in the
period ended November 30, 1989 and for the period September 4, 1987
(commencement of operations) through November 30, 1987 were audited by other
independent accountants whose report dated January 19, 1990 expressed an
unqualified opinion on those data. This schedule should be read with the other
financial statements and notes thereto included in the Trust's Annual Report
(available without charge from the Trust) which also includes Management's
Discussion of the Fund's performance.
<TABLE>
<CAPTION>
Sept.4 '87
(commence
-mentof op-
erations)to
1994 1993 1992 1991 1990 1989 1988 NOV.30 '87
---- ---- ---- ---- ----- ---- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $6.38 $5.93 $5.55 $4.93 $4.88 $4.88 $4.96 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (.03) .01 .01 .04 .27 .28 .30 .06
Net gains or losses on securities
(both realized andunrealized) (.53) .45 .38 .60 .01 .00 (.08) (.04)
----- --- --- --- --- --- ----- -----
Total From Investment Operations (.56) .46 .39 .64 .28 .28 .22 .02
LESS DISTRIBUTIONS
Dividends (from net investment income) .00 (.01) (.01) (.02) (.23) (.28) (.30) (.06)
Distributions (from capital gains) .00 .00 .00 .00 .00 .00 .00 .00
--- --- --- --- --- --- --- ---
Total Distributions .00 (.01) (.01) (.02) (.23) (.28) (.30) (.06)
Net asset value at end of period $5.82 $6.38 $5.93 $5.55 $4.93 $4.88 $4.88 $4.96
----- ---- ---- ----- ----- ------ ---- -----
TOTAL RETURN (8.78%) 7.76% 7.01% 11.79% 7.37% 5.22% 5.12% 2.17%
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets (000), End of Period $1,010 $1,425 $1,321 $947 $53 $1,356 $1,365 $315
Ratio of Expenses to
Average Net Assets+ 1.61% 1.40% 1.60% 1.93% 1.06% .89% .25% .06%*
Ratio of Net Investment
Income to Average Net Assets+ -.43% .15% .17% .60% 5.25% 5.60% 5.86% .85%*
Portfolio Turnover Rate 12% 25% 46% 16% 29% 19% 20% 0%
<FN>
*Not Annualized
Fund shareowners agreed to change the investment objectives on September 28,
1995, and had previously done so on October 12, 1990. Consequently, data in
this table are unlikely to be indicative of future operations of the Fund.
+ For each of the above years prior to 1992, all or a portion of the investment
advisory and distribution fees were waived, and a portion of the operating
expenses were directly assumed by the adviser. If these costs had not been
waived and directly assumed, the resulting increase to expenses per share in
the years 1991 to 1988 and the initial period in 1987 would be $.05, $.05,
$.10, $.16, and $.02, respectively. The increase to the ratio of expenses to
average monthly net assets would be .76%, 1.02%, 1.28%, 2.02% and .17%,
respectively.
</FN>
</TABLE>
<PAGE>
1
Selected data for a share of SEXTANT BOND INCOME FUND (previously Washington
Tax-Exempt Fund) beneficial interest outstanding from March 1, 1993
(commencement of operations) through November 30, 1994. The following schedule
has been audited by Price Waterhouse LLP, independent accountants, whose report
thereon is included in the Annual Report to Shareowners, which is incorporated
by reference into the Statement of Additional Information. This schedule should
be read with the other financial statements and notes thereto included in the
Trust's Annual Report (available without charge from the Trust) which also
includes Management's Discussion of the Fund's performance. [GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Period
Year March 1,
Ended 1993 to
November November
30, 1994 30, 1993
-------- --------
<S> <C> <C>
Net asset value at beginning of period $5.03 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income .25 .16
Net gains or losses on securities (both realized
and unrealized) -.64 .04
---- ---
Total From Investment Operations -.39 .20
LESS DISTRIBUTIONS ---- ----
Dividends (from net investment income) -.25 -.167
Distributions (from capital gains) 0 -.003
Total Distributions -.25 -.17
Net asset Value at end of period $4.39 $5.03
----- -----
TOTAL RETURN -8.24% 4.86%
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets (000), End of Period $1,456 $1,662
Ratio of Expenses to Average Net Assets+ .41% .35%*
Ratio of Net Investment Income to Average Net Assets+ 5.48% 3.28%*
Portfolio Turnover Rate 74% 36%*
*Not annualized
<FN>
Fund shareowners agreed to a change in the investment objective on September 28,
1995. Consequently, data in this table are unlikely to be indicative of future
operations of the Fund.
+For the above periods, all or a portion of the investment advisory fees were
waived. If this cost had not been waived and directly assumed, the resulting
increase to expenses per share in the above period would be $0.22 for 1994 and
$0.13 for 1993. The increase to the ratio of expenses to average monthly net
assets would be 0.51% and 0.26%
</FN>
</TABLE>
.
<PAGE>
ABOUT THE SEXTANT FUNDS
The Sextant Funds are intended to provide investors the basic elements of a
balanced investment program. The Funds are "no-load" funds, meaning that there
are no sales or redemption charges, nor do the Funds have so-called "12b-1"
charges.
The SEXTANT GROWTH FUND and SEXTANT INTERNATIONAL FUND seek long-term growth.
GROWTH FUND pursues its objective through investment in common stocks and other
equity-type securities, principally of U.S. issuers. The INTERNATIONAL FUND, by
contrast, invests primarily in a diversified portfolio of foreign common stocks
and other equity-type securities.
SEXTANT SHORT-TERM BOND FUND and SEXTANT BOND INCOME FUND both seek a high level
of current income. SHORT-TERM BOND FUND also attempts to preserve capital and
does so by investing primarily in short-term debt securities. BOND INCOME FUND,
on the other hand, invests primarily in long-term debt securities, which have
the potential for greater income but the risk of greater price fluctuation.
Mutual funds enable you to invest as you might do for yourself if you had the
time, experience and resources to research and diversify your own investments.
Mutual funds do so by selling their own shares to the public and investing those
proceeds in a portfolio of securities. The value of the funds' own shares
fluctuates as the value of their portfolio securities fluctuates over time.
You may purchase shares of the Sextant Funds directly from the Funds without any
sales charge or "load." Because no charges are deducted from your investment,
the entire amount you pay for shares is invested in the Fund you choose.
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVES AND POLICIES
[GRAPHIC OMITTED]
SEXTANT GROWTH FUND seeks long-term capital appreciation. The Fund invests
primarily in a diversified portfolio of U.S. common stocks, securities
convertible into common stocks, and preferred stocks, but may invest in other
securities that are suited for the Fund's investment objective. Although income
is considered when an investment is considered, the Fund is not designed for
investors seeking income. The Fund ordinarily will not invest in straight debt
securities. The Fund may invest in securities of smaller or newer companies as
well as those of well-seasoned companies of any size, and to a limited extent in
foreign companies. The policy of investing for long-term capital appreciation
cannot be changed without shareholder approval.
[GRAPHIC OMITTED]
SEXTANT INTERNATIONAL FUND'S objective is to seek long-term capital appreciation
by investing primarily in a diversified portfolio of foreign diversified
portfolio of foreign common stocks and other equity-type securities (E.G.,
securities convertible into common stock and preferred stocks). Under normal
market conditions, the Fund will invest at least 65% of its total assets (taken
at market value) in foreign securities (securities of non-U.S. issuers). The
Fund ordinarily invests in securities of at least three countries outside the
U.S. Although income is considered, the Fund is not designed for investors
seeking income. The Fund ordinarily will not invest in straight debt securities.
The Fund diversifies its investments among several countries and does not
concentrate in any particular industry. The Fund varies its investments
geographically and by type of securities in which it invests based on the
adviser's evaluation of economic, market, and political trends throughout the
world. The adviser considers the relative political and economic stability of a
company's home and operating countries in evaluating the potential rewards and
risks of an investment opportunity. The Fund may invest in securities traded in
mature markets (such as Canada and the United Kingdom) in less developed markets
(for example, Chile and Mexico), and in emerging markets (for example Peru).
Investments in foreign securities, especially those in less developed and
emerging markets present additional risk. (See "Investment Policies and Risk
Considerations.")
Although the Fund may invest throughout the world outside the U.S. as a matter
of operating policy (that can be changed by the Board of Trustees), the Fund
presently limits its investments to those securities of foreign issuers that are
traded and settled in the U.S. or to American Depository Receipts ("ADR's") that
represent underlying shares of foreign issuers.*
The Fund's policy of seeking long-term capital appreciation by investing
primarily in a diversified portfolio of foreign securities cannot be changed
without shareholder approval.
[GRAPHIC OMITTED]
The objective of SEXTANT SHORT-TERM BOND FUND is to provide a high level of
current income, consistent with the preservation of capital. The Fund invests
primarily in marketable short-term debt securities. Under normal circumstances
the Fund's dollar-weighted average maturity will not exceed three years.
Short-Term Bond Fund is appropriate for investors who seek yields that are
typically higher than are usually available from money market instruments with
relatively stable prices and shorter maturities, but who also want less price
fluctuation than is likely from a longer term fund, such as the Bond Income
Fund, which also may be expected to reflect a higher yield. In contrast to money
market funds, Short-Term Bond Fund does not seek to maintain a fixed net asset
value, and an investor may receive more or less than the price paid for his
shares at redemption.
[GRAPHIC OMITTED]
SEXTANT BOND INCOME FUND has the objective of providing a high level of current
income. The Fund invests primarily in marketable long-term debt securities. As
an operating policy that may be changed by the Board of Trustees, under normal
market conditions the Fund maintains a dollar-weighted average effective
maturity in excess of ten years.+
Bond Income Fund is intended for investors who seek a higher level of income
than is generally available from a shorter-term fund, yet who can accept greater
levels of interest rate and other risks associated with investment in
longer-term securities
Under normal market conditions, each of Sextant Short-Term Bond Fund and Sextant
Bond Income Fund will invest at least 65% of the value of its total assets
(taken at market value at the time of investment) in "bonds", meaning:
(1) Marketable debt securities payable in U.S. dollars, rated
within the three highest grades assigned by Moody's Investors
Service, Inc. ("Moody's") (Aaa, Aa or A) or by Standard & Poor's
Corporation ("S&P") (AAA, AA or A);
(2) U.S. Government Securities;
(3) High quality commercial paper; and
(4) Bank obligations, including repurchase agreementsss. of banks, having total
assets in excess of $1 billion.
These Funds may not invest in a security rated at time of purchase below the
fourth highest grade assigned by Moody's (Baa) or S&P (BBB). These securities
are considered medium grade, and represent obligations of issuers with less
capacity to pay interest and repay principal than those rated more highly.
Investment in these debt securities involves somewhat greater investment risk,
including the possibility of issuer default or bankruptcy. An economic downturn
could adversely affect the value of outstanding bonds and the ability of issuers
to repay principal and interest. During a period of adverse economic changes,
including a period of rising interest rates, issuers of such bonds may
experience difficulty in servicing their principal and interest payment
obligations.
Should a security's rating fall below the minimum qualifying it for purchase by
the Fund, the Adviser will not be required to dispose of it, but will consider
that factor in connection with deciding whether to continue to hold it for the
Fund's portfolio.
Short-Term Bond Fund's policy of seeking a high level of current income,
consistent with the preservation of capital cannot be changed without
shareholder approval.
Similarly, the policy of Bond Income Fund's policy of pursuing a high level of
current income cannot be changed without shareholder approval.
INVESTMENT POLICIES AND RISK CONSIDERATIONS
Investing in securities entails both market risk and risk of price variation in
individual securities. By diversifying its investments, a Fund reduces the risk
of owning one or a few individual securities. There can be no guarantee that the
investment objectives of any Fund will be realized.
SEXTANT SHORT-TERM BOND FUND AND SEXTANT BOND INCOME FUND
The risks inherent in the Short-Term Bond Fund and Bond Income Fund depend
primarily on the terms and quality of the obligations in each Fund's portfolio,
as well as on market conditions. Interest rate fluctuations will affect a Fund's
net asset value, but not the income received by the Fund from its portfolio
securities. However, because yields on debt securities available for purchase by
a Fund vary over time, the Fund's yield will also vary.
SEXTANT GROWTH FUND AND SEXTANT INTERNATIONAL FUND
Both of these Funds may invest in smaller companies. Smaller companies involve
higher investment risks in that they often have limited product lines, markets
and resources, or their securities may trade less frequently and have greater
price fluctuation than those of larger companies. THESE FACTORS MAY BE
PARTICULARLY APPLICABLE IN SMALLER OR EMERGING FOREIGN MARKETS.
INVESTMENT IN FOREIGN SECURITIES
You should understand and carefully consider the risks involved in foreign
investing. Investing in foreign securities or instruments involves risks and
opportunities not typically associated with investing in U.S. securities. These
include fluctuations in exchange rates of foreign currencies; less public
information with respect to issuers of securities; less governmental supervision
of exchanges, issuers, brokers; lack of uniform accounting, auditing, and
financial reporting standards. There is also a risk of adverse political, social
or diplomatic developments that could affect investment in these nations. Refer
to the STATEMENT OF ADDITIONAL INFORMATION available from the Fund at no charge
for a more complete discussion of the risks of foreign investments.
ALL FUNDS
Under normal market conditions, the Funds expect to be invested in accordance
with their objectives, but under unusual circumstances any of the Sextant Funds
may adopt a temporary defensive position and invest without limitation in
high-quality debt obligations, U.S. government debt obligations or cash
equivalents.
All of the Sextant Funds are diversified. No Fund will invest more than 5% of
total assets in the securities of any one issuer, nor more than 25% of its
assets in any particular industry (other than U.S. Government securities.)
Except as explained above, all of the policies outlined in this section can be
changed by a majority of the Board of Trustees. The Funds have also adopted
certain restrictions for each Fund, as outlined in the STATEMENT OF ADDITIONAL
INFORMATION.
HOW TO BUY SHARES
You may open an account and purchase shares by sending a completed Application
with a check for $1,000 (U.S. only) or more ($25 under a group or retirement
plan) to the Fund of your choice. The Trust does not accept initial orders
unaccompanied by payment nor by telephone. The price you receive is the net
asset value (see "Net Asset Value") next determined after receipt of a purchase
order.
There are no sales charges or loads.
You may purchase additional shares at any time in minimum amounts of $25. Once
your account is open, purchases can be made by check, by electronic funds
transfer, or by wire.
You may authorize the use of the Automated Clearing House ("ACH") to purchase or
redeem shares by completing the appropriate section of the application. The
authorization must be received at least two weeks before ACH can be used. ACH is
a system for electronic funds transfer. To use ACH to purchase or redeem shares,
simply call the transfer agent (minimum ACH purchase $100, redemption $500). You
also may wire money to purchase shares (minimum wire purchase $500), though
typically your wiring bank will charge you a fee for this service. Call the
transfer agent for the information you will need BEFORE requesting your bank to
wire funds.
Each time you purchase or redeem shares, you will receive a statement showing
the details of the transaction as well as the current number and value of shares
you hold. Share balances are computed in full and fractional shares, expressed
to three decimal places.
At the end of each calendar year, you will receive a complete annual statement,
which you should retain for tax purposes and a complete historical record of all
transactions.
The Sextant Funds offer several free optional plans and services, including a
prototype defined contribution plan and Individual Retirement Accounts.
Materials describing these plans and applications may be obtained from the
Adviser or the transfer agent.
Other plans offered by the Funds include: (1) an automatic investment plan, (2)
a systematic withdrawal plan to provide regular payments to you, and (3) the
right to exchange your shares without charge for any other no-load mutual fund
for which Saturna Capital is the investment adviser.
The Funds may be appropriate for a wide range of investors,
including corporations, partnerships, associations and other
organizations. Accounts may be established by trusts and
fiduciaries. You also may make investments as custodian for
minor children under the Uniform Gifts [or Transfers] to Minors
Act of your state of residence.
HOW TO REDEEM SHARES
You may redeem your shares on any business day of the Funds. The Funds pay
redemptions in U.S. dollars, and the amount you receive is the net asset value
per share next determined after receipt of your redemption request. The amount
received will depend on the value of the investments in that Fund at the time of
your redemption, and the amount you receive may be more or less than the cost of
the shares you are redeeming. A redemption constitutes a sale for federal income
tax purposes, and you may realize a capital gain or loss on the redemption.
The Funds normally pay for shares redeemed or exchanged within three days after
a proper instruction is received. To allow time for clearing, redemption of
investments made by check may be restricted for up to ten calendar days.
There are several methods you may choose to redeem shares.
WRITTEN REQUEST
Write: Sextant Funds
Box 2838
Bellingham WA 98227-2838
Fax: 360-734-0755
You may redeem shares by a written request and choose one of the following
options for the proceeds:
(A) Redemption check (no minimum) sent to registered owner(s).
(B) Redemption check (no minimum) sent as directed if the signature(s) are
guaranteed. If proceeds are to be sent to other than the registered owner(s) at
the last address, the signatures on the request must be guaranteed by a national
bank or trust company or by a member of a national securities exchange.
(C) Federal funds wire. The proceeds ($5000 minimum) may be wired to any bank
designated in the request if the signature(s) are guaranteed as explained above.
TELEPHONE REQUEST
Call: 800-728-8762 or
360-734-9900
You may redeem shares by a telephone request and choose one of the following
options for the proceeds:
(A) Redemption check (no minimum) sent to registered owner(s).
(B) ACH transfer (when available; $500 minimum) with proceeds transferred to
your bank account as designated by the ACH authorization on your application.
The ACH authorization must be received by the transfer agent at least two weeks
before ACH transfer can be used.
(C) Exchange (in at least the minimum established by the Fund being purchased)
for shares of any other Fund for which Saturna Capital 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. Of course,
shares must be authorized and registered for purchase in your state before an
exchange may be made. Exchanging shares may have tax consequences, because an
exchange is considered a closing capital transaction for tax purposes.
(D) Federal funds wire. Proceeds ($5000 minimum) may be wired only to the bank
previously designated, or as directed in a prior written instruction with
signatures guaranteed, as explained above.
For telephone requests the Funds will endeavor to confirm that instructions are
genuine and may be liable for losses if they do not. The caller must provide (1)
the name of the person making the request, (2) the name and address of the
registered owner(s), (3) the account number, (4) the amount to be withdrawn, and
(5) the method for payment of the proceeds. The Funds also may require a form of
personal identification, and provide written confirmation of transactions. The
Funds will not be responsible for the results of transactions they reasonably
believe genuine.
CHECK WRITING
You may also redeem shares in your account by drawing checks on your account for
amounts of $500 or more.
The Funds will provide you a small book of blank checks for a $7 fee, which may
be payable to any payee. Checks are redeemed at the net asset value next
determined after receipt by the transfer agent. If you wish to use this feature,
you should request the Check Writing Privilege on the Application at the time
you open an account. Note that, as with any redemption, each check is a closing
capital transaction for tax reporting purposes.
CAPITAL STOCK; DIVIDENDS
Saturna Investment Trust, an open-end "series trust" was organized as a
Washington Business Trust on February 20, 1987. The Trust is an open-end "series
trust" that now offers five separate Funds: the four Sextant Funds and Idaho
Tax-Exempt (a fund investing in municipal securities in the State of Idaho, and
offered through a separate prospectus). The Trust was formerly known as
Northwest Investors Trust, and began operations on September 4, 1987. The
current investment advisory agreements of the Sextant Funds became effective in
connection with changes in their objectives approved at a shareholder meeting on
September 28, 1995.
Each Fund is divided into shares of beneficial interest, with equal voting
rights. All shares are fully paid, non-assessable, transferable and have rights
of redemption, and are not subject to preemptive rights. The Trust is not
required to hold annual shareowner meetings, but special meetings may be called
for such purposes as electing or removing Trustees, changing fundamental
policies, or voting on approval of an advisory contract. On issues relating
solely to a single Fund, only the shareowners of that Fund are entitled to vote.
All dividends and distributions for each Fund are distributed pro rata to
shareowners in proportion to the number of shares owned.
Each Fund intends to distribute substantially all its net investment income and
net realized capital gains, if any, to its shareowners. The Growth Fund and
International Fund expect to pay a dividend from net investment income annually,
at the end of November. The bond funds declare dividends from investment income
daily and pay dividends monthly. Dividends from capital gains, if any, are
declared and paid at the end of November.
Both dividends and capital gains distributions are automatically reinvested in
additional full and fractional shares of the Fund that pays them, unless a
shareholder has elected to receive either or both in cash.
The Funds intend to qualify as regulated investment companies under the Internal
Revenue Code and to distribute substantially all net income and realized net
gains on investments. A Fund is then relieved of paying federal income taxes on
amounts it distributes.
At year-end, the Fund's transfer agent reports to you and to the I.R.S. the
amount of each redemption you made during the year, as well as the amount of
dividends and capital gain distributed to you. Each Fund accounts for its
distributions as either taxable capital gains (originating from net realized
gains on portfolio transactions), or taxable income (originating from dividends,
taxable interest and certain other types of gains). Fund distributions may be
subject to state and local taxes.
To avoid being subject to a 31% federal withholding tax on dividends and
distributions, you must furnish the transfer agent your correct Social Security
or Tax Identification Number in the space on the application.
NET ASSET VALUE
Each Fund computes its net asset value per share each business day by dividing
(i) the value of all of its securities and other assets, less liabilities, by
(ii) the number of shares outstanding. The Funds compute their net asset values
as of the close of trading on the New York Stock Exchange (generally 4 p.m. New
York time) on each day the Exchange is open for trading. The Funds' shares are
not priced on any customary national business holiday that securities markets
are closed. The net asset value applicable to purchases or redemptions of shares
of each Fund is the net asset value next computed after receipt of a purchase or
redemption order.
The Funds use the price carried by the composite tape of all national exchanges
after 4 p.m. New York time to determine the value of stocks in their portfolios.
Securities traded on a national exchange or the national over-the-counter market
system are valued at the last sale price or, in the absence of any sale on that
date, the closing bid price. Other securities traded in the over-the-counter
market are valued at the last bid price. Securities for which there are no
readily available market quotations and other assets are valued at their fair
value as determined in good faith by the Board of Trustees.
Because daily bid prices are not available for many bond issues, the Funds use a
matrix of bond yields for various maturities and qualities. Prices are adjusted
for factors unique to each bond that are known to the adviser, such as
marketability and odd-lot discounts. To verify its knowledge of market factors,
the adviser periodically obtains appraisals from independent sources.
INVESTMENT ADVISER
Saturna Capital Corporation, 1300 N. State Street, Bellingham,
Wash. 98225 (the "Adviser") is the Investment Adviser to the
Trust. The Adviser is a Washington State corporation formed in
July 1989. Shareholders owning more than 10% of the common stock
are: Nicholas F. Kaiser, Phelps S. McIlvaine, James D. Winship,
and Brian A. Anderson. The directors of the Adviser are Nicholas
Kaiser (President), James D. Winship (Vice President and
Secretary), Phelps S. McIlvaine (Vice President), Brian A.
Anderson (Vice President) and Markell F. Kaiser (Treasurer).
Saturna Capital Corporation acts as investment adviser to three other investment
companies: Idaho Tax-Exempt Fund (another series of the Trust, offered through
another prospectus) with assets of approximately $6 million; Amana Income Fund,
which has assets of approximately $10 million and Amana Growth Fund, with
approximately $2 million in assets. The advisory fee for Idaho Tax-Exempt Fund
is .50% annually and both of the Amana Funds have an advisory and administration
fee of .95%. Saturna also manages individual advisory accounts. The Adviser's
wholly-owned subsidiary, Investors National Corporation, is a discount brokerage
firm and acts as distributor for the Funds without compensation.
Each of the Sextant Funds pays the Adviser an Investment Advisory
and Administrative Services Fee (the Base "Fee.")
The Base Fee covers compensation for portfolio management, advice and
recommendations on securities to be purchased, held or sold. The Base Fee is
also compensation for certain administrative services such as portfolio
accounting, shareholder and financial reporting, shareholder servicing and
transfer agency services. The Base Fee is 0.60% of average net assets of the
Fund per annum, and is payable monthly. However, the Base Fee is subject to
adjustment up or down depending on the investment performance of the Fund
relative to a specified index (the "Performance Adjustment").
For each month in which either Bond Income Fund's or Short-Term Bond Fund's
total investment return (change in net asset value plus all distributions
reinvested) for the one year period through that month outperforms or
underperforms the total return of a specified index for that period by 1% or
more but less than 2%, the Base Fee is increased or decreased by the annual rate
of .10% of the Fund's average daily net assets for the preceding year. If the
outperformance or underperformance is 2% or more, then the adjustment is at the
annual rate of .20%.
For each month in which either Growth Fund or International Fund's total
investment return (change in net asset value plus all distributions reinvested)
for the one year period through that month outperforms or underperforms the
total return of a specified index for that period by 1% or more but less than
2%, the Base Fee is increased or decreased by the annual rate of .10% of the
Fund's average daily net assets for the preceding year. If the outperformance or
underperformance is 2% or more but less than 4%, then the adjustment is at the
annual rate of .20%. If the outperformance or underperformance is 4% or more,
the adjustment is at an annual rate of .30%.
No performance adjustment is applicable during the first year any Agreement is
in place.
Total return investment performance as calculated and published by Morningstar,
Inc. for selected groups of mutual funds will be used as the index for
comparison purposes. Each Fund and the Morningstar group to be used are:
Sextant Growth Fund:"GROWTH FUNDS"
Sextant International Fund:"FOREIGN STOCK FUNDS"
Sextant Bond Income Fund: "CORPORATE BOND FUNDS-HIGH QUALITY"
Sextant Short-Term Bond Fund: "CORPORATE BOND FUNDS-HIGH QUALITY"
In the event that a particular index is no longer available or otherwise becomes
unavailable or inappropriate, in the opinion of the Board of Trustees, the Board
may select another to replace it.
Each Fund pays its own taxes, brokerage commissions, trustees' fees, legal and
accounting fees, insurance, expenses incurred in complying with state and
federal laws regulating the issue and sale of its shares, and mailing and
printing costs for prospectuses, reports and notices to shareowners, and certain
other expenses.
The Adviser furnishes office space, facilities and equipment, personnel and
clerical and bookkeeping services required to conduct the business of the Fund,
as well as certain other expenses.
The Adviser's subsidiary, Investors National Corporation ("INC"), is qualified
as a broker-dealer to engage in a general brokerage business and conducts all
its transactions on an agency basis for established "deep discount" commissions.
Most stock brokerage for the Trust will be conducted through INC, and the
Adviser may allocate brokerage to any broker in return for research or services
and for selling shares of any Fund.
The Adviser has also voluntarily undertaken to limit expenses of Bond Income
Fund and Short-Term Bond Fund to 0.80% through March 31, 1997. A waiver may have
the effect of subsidizing the yield for the period it is in effect.
Nicholas Kaiser, primary manager of Sextant Growth Fund and the International
Fund, entered the investment business in 1970, and has managed mutual funds
since 1976. Phelps McIlvaine, primary manager of both Bond Income Fund and
Short-Term Bond Fund, entered the investment business in 1976 and managed bond
hedge funds from 1987 to 1993. He managed Washington Tax-Exempt Fund, the
predecessor fund to Bond Income Fund from 1994, and currently manages Idaho
Tax-Exempt Fund, another series of the Trust offered separately.
Managers of the Funds and other investment personnel are permitted to engage in
securities transactions for their own accounts but only in accordance with a
code of ethics that, among other things, requires advance approval of all trades
and disclosure of all holdings. It also prohibits a number of transactions, and
contains other provisions.
PERFORMANCE DATA
The Funds may advertise or publish current yield and average annual total return
in advertisements or in information furnished to publications and to investors.
In any comparison
<PAGE>
of a Fund's return with that of alternative investments, you should consider
differences between the Fund and the alternative investment, and the periods and
methods used in calculation of the returns. Of course, past results are not
necessarily indicative of future performance.
You may compute current yield by (i) dividing net investment income over the
rolling 30 day period for which the yield is being computed by the average
number of shares eligible to receive dividends for the period and (ii) dividing
that figure by the Fund's net asset value per share on the last day of the
period, and then (iii) annualizing the results.
To compute average annual total return of a Fund for any specified period (i)
assume an investment of $1,000 made at net asset value on the first day of the
period and that all dividends paid during the period are reinvested in
additional shares at net asset value and then (ii) divide the ending balance
(I.E., the number of shares now held multiplied by the ending net asset value)
by the beginning balance. For a more complete description of the method of
computation, see the STATEMENT OF ADDITIONAL INFORMATION.
<PAGE>
TRUST MANAGEMENT
Saturna Investment Trust is managed by a Board of five Trustees:
Gary Goldfogel, John E. Love, John S. Moore, Nicholas F. Kaiser
and James D. Winship. The Trustees establish policies, as well as
review and approve contracts and their continuance. The Trustees
also elect the officers, determine the amount of any dividend or
capital gain distribution and serve on any committees of the
Trust. For other information concerning the officers and
Trustees, see the STATEMENT OF ADDITIONAL INFORMATION.
INVESTMENT RESULTS
Shareowners receive financial reports showing the investments, income and
expenses of their Funds every six months. Current share values are available any
time by calling the adviser at 800-SATURNA (800/728-8762).
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
PLEASE SAVE THIS QUICK GUIDE TO
THE SEXTANT MUTUAL FUNDS
ACCOUNTS
Open your account by sending a completed Application to the Trust,
indicating your Fund selection. For convenience, you may have your account
consolidated with others of your household or other group. We will appoint
a representative to whom you may refer all questions regarding your
account(s). Extra forms will be sent for certain accounts, such as IRA's.
INVESTMENTS
Initial investments are $1,000 or more ($100 under a group or retirement
plan), and must be accompanied by an Application. Additional investments
may be made for $100 or more at any time. There are no sales commissions
or other charges.
REDEMPTIONS
You may sell your shares any time. As with purchases, you may choose from
several methods including telephone, written instructions, and
checkwriting. You will be paid the market price for your shares on the
day we receive your instructions, and there are no redemption fees or
charges. If we receive your redemption request by one p.m. Pacific time,
your check is normally mailed to you the same day.
STATEMENTS
On the date of each transaction, you are mailed a confirmation, showing
the details of the transaction and your account balance. At year-end and
at selected points during the year we mail a statement showing all
transactions for the period. Monthly consolidated statements are
available for an extra fee.
DIVIDENDS AND PRICES
Sextant Bond Income Fund and Sextant Short-Term Bond Fund declare
dividends daily and pay them monthly. Sextant Growth Fund and Sextant
International Fund pay dividends at the end of November. The Funds'
prices are available by calling the Funds at 800-SATURNA.
FREE RETIREMENT PLANS
We offer a defined contribution Profit-Sharing / Money Purchase plan and
an Individual Retirement Account. There are no extra fees or charges for
these plans.
FOR MORE INFORMATION
Please consult the applicable pages of this Prospectus for additional
details on the Sextant Funds and their shareholder services. You may also
call 800-SATURNA (800-728-8762) with any questions.
<PAGE>
INVESTMENT APPLICATION for
q Sextant GROWTH FUND q Sextant BOND INCOME FUND
q Sextant INTERNATIONAL Fq Sextant SHORT-TERM BOND FUND
Mail application and check to: For assistance, call:
SATURNA INVESTMENT TRUST (800) SATURNA or (360)734-9900
Box 2838, Bellingham WA 98227-2838 FAX (360) 734-0755
ACCOUNT TYPE AND NAME
q Individual
First Middle Initial Last
Social Security Number Date of Birth___________
q Joint with
First Middle Initial Last
Joint Owner's Social Security Number
(Joint accounts are presumed to be "Joint Tenancy with Right of
Survivorship" unless otherwise indicated)
q Gifts to Minor AS CUSTODIAN FOR
Name of Custodian Name of Minor
q UNIFORM GIFTS TO MINORS ACT
UNDER THE q UNIFORM TRANSFERS / /
State TO MINORS ACT Minor's Soc. Sec. No. Minor's
Birthdate
q Other
Indicate name of corporation, other organization or fiducTax capacity.
Identification Number
If a trust, include name(s) of trustees and date of trust instruments.
Name(s) of person(s) authorized to transact business for the above
entity.
MAILING
ADDRESS Street Apt., Suite, Etc.
City State ZIP
TELEPHONE ( ) ( )
- - - -
Daytime Home
CITIZENSHIP q U.S. q Resident Alien q Non-Resident Alien
Country
INITIAL INVESTMENT $
(Minimum $1000) Make check payable to the Fund being purchased.
<PAGE>
TELEPHONE REDEMPTION PRIVILEGES
You automatically have telephone redemption by check and telephone exchange
privileges unless you strike this line. Each Fund will try to confirm that
instructions are genuine and it may be liable for losses if it does not.
(Procedures may include requiring a form of personal identification, and
providing written confirmation of transactions.)
ACH TELEPHONE TRANSFER PRIVILEGE
q To transfer funds by ACH at no charge to or from
my (our) bank account, I (we) authorize electronic fund transfers
through the Automated Clearing House (ACH) for my (our) bank account
designated. PLEASE ATTACH A VOIDED CHECK OR DEPOSIT SLIP.
AUTOMATIC INVESTMENT PLAN
q Invest $ _______ into this Fund on the _____ day of each
month (the 15th unless another date is chosen) by ACH transfer from my
(our) bank account. This plan may be canceled at any time. PLEASE ATTACH A
VOIDED CHECK OR DEPOSIT SLIP.
CHECK WRITING PRIVILEGE ($500 per check minimum) ($7 checkbook charge) q I
(We)hereby request the Custodian to honor checks drawn by
me (us) on my (our) account subject to acceptance by the Trust, with
payment to be made by redeeming sufficient shares in my (our) account.
None of the custodian bank, Saturna Capital Corporation, nor any Sextant
Mutual Fund shall incur any liability to me (us) for honoring such checks,
for redeeming shares to pay such checks, or for returning checks which are
not accepted.
q SINGLE SIGNATURE AUTHORITY -- JOINT ACCOUNTS ONLY: (CHECKS
FOR JOINT ACCOUNTS REQUIRE BOTH SIGNATURES UNLESS THIS BOX IS MARKED TO
AUTHORIZE CHECKS WITH A SINGLE SIGNATURE). By our signatures below, we
agree to permit check redemptions upon the single signature of a joint
owner. The signature of one joint owner is on behalf of himself and as
attorney in fact on behalf of each other joint owner by appointment. We
hereby agree with each other, with the Funds and with Saturna Capital
Corporation that all moneys now or hereafter invested in our account are
and shall be owned as Joint Tenants with Right of Survivorship, and not as
Tenants in Common.
The undersigned warrants(s) that I (we) have full authority to make this
Application, am (are) of legal age, and have received and read a current
Prospectus and agree to be bound by its terms. Unless this sentence is struck, I
(we) certify, under penalties of perjury, that I (we) am not subject to backup
withholding under the provisions of section 3406(a)(1)(C) of the Internal
Revenue Code. This application is not effective until it is received and
accepted by the Trust.
- -----------------
Date Signature of Individual (or Custodian)
- -----------------
Date Signature of Joint Registrant, if any
[GRAPHIC OMITTED]
NO-LOAD MUTUAL FUNDS
- --------
* ADRs are receipts typically issued by an American bank or trust company
evidencing ownership of the underlying securities. Positions in these securities
are generally valued in U.S. dollars, and not necessarily denominated in the
same currency as the underlying security into which they may be converted.
+ The "effective maturity" of a debt instrument is the weighted average period
over which the Adviser expects the principal to be paid. It differs from the
stated maturity in that it estimates the effect of expected principal
prepayments and call provisions.
ss. A repurchase agreement involves the sale of securities to the Fund, with the
concurrent agreement of the seller to repurchase the securities at the same
price plus an amount equal to an agreed-upon interest rate, within a specifed
time. In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses.
<PAGE>
1
SATURNA INVESTMENT TRUST
SEXTANT GROWTH FUND
SEXTANT BOND INCOME FUND
SEXTANT INTERNATIONAL FUND
SEXTANT SHORT-TERM BOND FUND
1300 State Street
Bellingham, Washington 98225
360-734-9900
800-SATURNA
STATEMENT OF ADDITIONAL INFORMATION
September 28, 1995
The Sextant Funds are series of Saturna Investment Trust (the "Trust"). Each
series of the Trust represents shares of beneficial interest in a separate
portfolio of securities and other assets, with its own objectives and policies.
This Statement of Additional Information is not a Prospectus. It merely
furnishes additional information that should be read in conjunction with the
Funds' prospectus dated September 28, 1995. The Funds' prospectuses may be
obtained free of charge by telephoning the numbers above or writing the Funds at
the address shown above.
<PAGE>
TABLE OF CONTENTS
Page
General Information and History...........................2
Investment Objectives and Policies........................3
Investment Considerations.................................7
Portfolio Turnover........................................9
Performance Data ........................................10
Management of the Trust..................................12
Principal Holders of Securities..........................14
Investment Advisory and Other Services...................15
Brokerage Allocation.....................................18
Purchase, Redemption and Pricing of Securities Being Offered 19
Tax Status...............................................19
Financial Statements.....................................20
<PAGE>
GENERAL INFORMATION AND HISTORY
Saturna Investment Trust (the "Trust") is a business trust formed pursuant to
RCW 23.90 of the laws of the State of Washington to operate as an open-end
management company. When formed on February 20, 1987, the name was Northwest
Investors Tax-Exempt Business Trust. The Trust's name was changed to Northwest
Investors Trust on October 12, 1990. Most recently, in connection with the
formation of the Sextant Funds, the Trust's name was changed to Saturna
Investment Trust on September 28, 1995.
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares in any Fund of the Trust. The Trust may establish
additional Funds in the future by approval of the Trustees. All shares will have
no par value and when issued will be fully paid and non-assessable and will have
no preemptive, conversion, or sinking fund rights.
The Trust has five separate Funds, four of which are offered as the Sextant
Funds through this Prospectus and Statement of Additional Information: Sextant
Growth Fund (formerly known as Northwest Growth Fund), Sextant Bond Income Fund
(formerly known as Washington Tax-Exempt Fund), Sextant International Fund, and
Sextant Short-Term Bond Fund. The remaining Fund, Idaho Tax-Exempt Fund
(initially known as the Idaho Extended Maturity Tax-Exempt Fund) is offered
through a separate Prospectus and Statement of Additional Information.
INVESTMENT OBJECTIVES AND POLICIES
This section is provided only for the purpose of expanding or outlining certain
policies and restrictions not thoroughly covered in the Prospectus.
SEXTANT GROWTH FUND seeks long-term growth. The Fund invests in common stocks
and other equity-type securities. Although income is considered when an
investment is considered, the Fund is not designed for investors seeking income.
The Fund pursues its objective by investing primarily in common stocks and
securities convertible into common stocks and preferred stocks, but may also
invest in other securities that are suited to the Fund's investment objectives.
The Fund ordinarily does not invest in straight-debt securities.
The Fund may invest in securities of smaller or newer companies as well as those
of well-seasoned companies of any size. Smaller companies involve higher
investment risks in that they often have limited product lines, markets and
resources, or their securities may trade less frequently and have greater price
fluctuation than those of larger companies. Although the Fund invests
principally in securities of U.S. issuers, it may invest up to 5% of its total
assets (valued at the time of investment) in foreign securities, including
foreign government obligations and foreign equity and debt securities that are
traded in the U.S. (See the discussion of international investing under "Sextant
International Fund" and "Investment Considerations" below.)
Under normal market conditions, the Fund expects to be substantially fully
invested in the types of securities described in the preceding paragraphs.
However, to the extent that investments meeting the Fund's criteria for
investment are not available or when the Adviser considers a temporary defensive
investment position advisable, the Fund may invest without limitation in
high-quality corporate debt obligations or U.S. government obligations or hold
cash or cash equivalents.
SEXTANT INTERNATIONAL FUND'S objective is long term growth by investing
primarily in a diversified portfolio of foreign common stocks and other
equity-type securities (e.g. securities convertible into common stocks and
preferred stocks.) The Fund ordinarily does not invest in straight-debt
securities Under normal market conditions, the Fund will invest at least 65% of
its total assets (taken at market value at time of investment) in foreign
securities (securities of non-U.S. issuers.) The Fund ordinarily invests in
securities of at least three countries outside the U.S. However, to the extent
that investments meeting the Fund's criteria for investment are not available or
when the Adviser considers a temporary defensive investment position advisable,
the Fund may invest without limitation in high-quality debt obligations or U.S.
government obligations or hold cash or cash equivalents.
Although income is considered in the selection of securities, the Fund is not
designed for investors whose primary investment objective is income. The Fund
pursues its objective by investing primarily in common stocks and securities
convertible into common stocks, but may also invest in other securities that are
suited to the Fund's investment objectives, including preferred stocks and debt
securities.
The Fund may invest in securities of smaller or newer companies as well as those
of well-seasoned companies of any size. Smaller companies involve higher
investment risks in that they often have limited product lines, markets and
resources, or their securities may trade less frequently and have greater price
fluctuation than those of larger companies. These factors may be particularly
applicable in smaller or emerging foreign markets.
The Fund diversifies its investments among several countries and does not
concentrate in any particular industry. The Fund varies its investments
geographically and by type of securities in which it invests based on the
adviser's evaluation of economic, market, and political trends throughout the
world. The adviser considers the relative political and economic stability of a
company's home country in evaluating the potential rewards and risks of an
investment opportunity. The Fund may invest in securities traded in mature
markets (such as Canada, Japan and the United Kingdom), in less developed
markets (for example, Mexico), and in emerging markets (for example, Peru).
Investments in foreign securities, especially those in less developed and
emerging markets present additional risk. (See "Investment Considerations.")
Although the Fund may invest throughout the world outside the U.S. and determine
that it is in the best interest of the Fund and shareholders to keep assets in
those countries in which the Fund is investing, as a matter of operating policy
(that can be changed by the Board of Trustees), the Fund presently limits its
investments to those securities of foreign issuers that are traded and settled
in the U.S. or to American Depository Receipts ("ADR's") that represent
underlying shares of foreign issuers. (ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the underlying
securities.) Positions in these securities are generally valued in U.S. dollars,
they are not necessarily denominated in the same currency as the underlying
security into which they may be converted. The Fund may invest in both
"sponsored" and "unsponsored" ADRs. In a sponsored ADR, the issuer typically
pays some or all of the expenses of the depository and agrees to provide its
regular shareholder communications to ADR holders. An unsponsored ADR is created
independently of the issuer of the underlying security. Unsponsored ADR holders
generally pay the expenses of the depository and do not have an undertaking from
the issuer of the underlying security to furnish shareholder communications.
(See also "Investment Considerations" below.)
The Fund may invest in securities denominated in various currencies.
Accordingly, a change in the value of such currency against the U.S. dollar will
result in a corresponding change in the U.S. dollar value of the Fund's assets
denominated in that currency. Such changes will also affect the Fund's income.
Generally, when a given currency appreciates against the dollar (that is, the
dollar weakens) the value of the Fund's securities denominated in that currency
will rise. When a given currency depreciates against the dollar (that is, the
dollar strengthens) the value of the Fund's securities denominated in that
currency would be expected to decline.
The dividends and interest payable on certain of the Fund's foreign portfolio
securities may be subject to foreign withholding taxes, thereby reducing the net
amount of income available for distribution to the Fund's shareholders. A
shareholder otherwise subject to U.S. federal income taxes may, subject to
various limitations, be entitled to claim a credit or deduction for U.S. federal
income tax purposes for his or her proportionate share of such foreign taxes
paid by the Fund.
SEXTANT SHORT-TERM BOND FUND seeks capital stability and a high level of current
income. The Fund pursues this objective by investing primarily in marketable
short-term debt securities. Under normal circumstances, the Fund's
dollar-weighted average maturity will not exceed three years.
SEXTANT BOND INCOME FUND seeks high current income. The Fund pursues this
objective by investing primarily in marketable long-term debt securities. As an
operating policy that may be changed by the Board of Trustees, under normal
market conditions the Fund maintains a dollar-weighted average effective
maturity in excess of ten years.
The risks and investment returns offered in these Funds depend primarily on the
terms and quality of the obligations in that Fund's portfolio, as well as on
market conditions. Interest rate fluctuations will affect a Fund's net asset
value, but not the income received by the Fund from its portfolio securities.
However, because yields on debt securities available for purchase by a Fund vary
over time, no specific yield on shares of a Fund can be assured.
Short-Term Bond Fund is appropriate for investors who seek yields that are
typically higher than are usually available from money market instruments. By
limiting itself to shorter maturities, Short-Term Bond Fund should provide less
net asset fluctuation than shareholders might expect from a longer-term bond
fund, such as Bond Income Fund.
Bond Income Fund is intended for investors who seek a higher level of income
than is generally available from a shorter-term fund, yet who can accept greater
levels of interest rate and other risks associated with investment in
longer-term securities.
The "effective maturity" of a debt instrument is the weighted average period
over which the Adviser expects the principal to be paid. It differs from the
stated maturity in that it estimates the effect of expected principal
prepayments and call provisions. With respect to mortgage backed securities such
as GNMA securities, the effective maturity is likely to be substantially less
than the stated maturity of the mortgages in the underlying pools. With respect
to obligations with call provisions, the effective maturity is typically the
next call date on which the obligation reasonably may be expected to be called.
Securities without prepayment or call provisions generally have an effective
maturity equal to their stated maturity. During periods of rising interest
rates, the effective maturity of mortgage backed securities and callable
obligations may increase substantially because they become less likely to be
prepaid, which may result in greater net asset value fluctuation.
Under normal market conditions, each of Sextant Short-Term Bond Fund and Sextant
Bond Income Fund will invest at least 65% of the value of its total assets
(taken at market value at the time of investment) in "bonds", meaning:
(1) Marketable straight-debt securities of domestic issuers, and of foreign
issuers payable in U.S. dollars, rated at the time of purchase within the three
highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa
or A) or by Standard & Poor's Corporation ("S&P") (AAA, AA or A)*
(2) U.S.Government Securities;
(3) Commercial paper rated Prime-1 by Moody's or A-1 by
S&P at time of purchase, or, if unrated, issued or guaranteed by a corporation
with any outstanding debt rated Aa or better by Moody's or AA or better by S&P;
and
(4) Bank obligations, including repurchase agreements+ of banks, having
total assets in excess of $1 billion. These Funds may also invest in other debt
securities (including those convertible into, or carrying warrants to purchase,
common stocks or other equity interests, and privately placed debt securities).
However, the Funds may not invest in a security rated at time of purchase below
the fourth highest grade assigned by Moody's (Baa) or S&P (BBB). Debt rated Baa
or BBB is considered "medium grade," though still generally accepted as
investment grade. (See "Appendix" for more information regarding ratings of debt
securities.)
U.S. Government Securities include: (i) bills, notes, bonds and other debt
securities, differing as to maturity and rates of interest, that are issued by
and are direct obligations of the U.S. Treasury; and (ii) other securities that
are issued or guaranteed as to principal and interest by the U.S. Government or
by its agencies or instrumentalities. U.S. Government Securities are generally
accepted as being among the safest debt securities with respect to the timely
payment of principal and interest (but not any premium paid on their purchase),
but generally bear a lower rate of interest than corporate debt securities.
However, they are subject to market risk like other debt securities, and the
Funds' shares will fluctuate in value.
Among the Government Securities the Funds may purchase are those issued by
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and other agencies. Securities such as these represent an
interest in a pool of mortgages insured in whole or in part by other agencies or
the U.S. Treasury, depending on the terms of the issue. These issues may or may
not represent the guarantee of the U.S.
Treasury.
These "mortgage-backed" debt securities are entitled to interest and principal
payments on mortgages in the pool as they are paid. During periods of declining
interest rates there is an increased likelihood that these mortgages will be
prepaid, resulting in a loss of the benefit of holding the instrument to full
term, and loss of any premium the Fund may have paid to buy the security.
The Funds may also invest in floating rate instruments which provide for
periodic adjustments in coupon interest rates that are automatically reset based
on changes in amount and direction of specified market interest rates. To the
extent such instruments are subject to lifetime or periodic interest rate caps
or floors, such instruments may experience greater price volatility than debt
instruments without such features.
Medium grade (Baa or BBB) debt securities are obligations of issuers with less
capacity to pay interest and repay principal than those rated more highly.
Investment in these debt securities involves somewhat greater investment risk,
including the possibility of issuer default or bankruptcy. An economic downturn
could adversely affect the value of outstanding bonds and the ability of issuers
to repay principal and interest. During a period of adverse economic changes,
including a period of rising interest rates, issuers of such bonds may
experience difficulty in servicing their principal and interest payment
obligations.
Some issuers of debt securities choose not to have their securities rated by a
rating service. The Funds may invest in unrated securities that in the adviser's
opinion are comparable to securities having at least a medium grade rating and
are suitable for investment by the Funds.
INVESTMENT CONSIDERATIONS
Investing in securities entails both market risk and risk of price variation in
individual securities. THIS IS TRUE EVEN FOR DEBT SECURITIES ISSUED BY THE U.S.
GOVERNMENT. By diversifying its investments, each Fund may reduce the risk
associated with owning one or a few individual securities. However, there is no
assurance that any Fund will achieve its investment objectives.
The Growth Fund and the International Fund may invest in securities of smaller
or newer companies as well as those of well-seasoned companies of any size.
Smaller companies involve higher investment risks in that they often have
limited product lines, markets and resources, or their securities may trade less
frequently and have greater price fluctuation than those of larger companies.
These factors may be particularly applicable in smaller or emerging foreign
markets.
INVESTMENT IN FOREIGN SECURITIES
Investors should understand and carefully consider the risks involved in foreign
investing. Investing in foreign securities or instruments involves risks and
opportunities not typically associated with investing in U.S. securities. These
include: fluctuations in exchange rates of foreign currencies; possible
imposition of exchange control regulation or currency restrictions that would
prevent cash from being brought back to the U.S.; less public information with
respect to issuers of securities; less governmental supervision of exchanges,
issuers, brokers; lack of uniform accounting, auditing, and financial reporting
standards; lack of uniform trading practices; less liquidity or greater price
volatility in foreign markets; possible imposition of foreign taxes; or less
advantageous legal, operational, and financial protections applicable to foreign
custodial arrangements. There is also a risk of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or other assets,
establishment of exchange controls, adoption of foreign government restrictions,
or adverse political, social or diplomatic developments that could affect
investment in these nations.
SHORT-TERM BOND FUND AND BOND INCOME FUND
Many factors may cause the value of a shareholder's investment in the Fund to
fluctuate in value. The value of each Fund's portfolio will normally fluctuate
inversely with changes in market interest rates. Generally, when market interest
rates rise the price of bonds held in the Funds will fall; when rates fall, the
price of such bonds will generally rise. In addition, there is a risk that the
issuer of a bond or other security will fail to make timely payments of
principal and interest.
The risks inherent in these Funds depend primarily on the terms and quality of
the obligations in that Fund's portfolio, as well as on market conditions.
Interest rate fluctuations will affect a Fund's net asset value, but not the
income received by the Fund from its portfolio securities. However, because
yields on debt securities available for purchase by a Fund vary over time, no
specific yield on shares of a Fund can be assured.
INVESTMENT RESTRICTIONS. In addition to the restrictions stated in the
Prospectus, the Funds shall not purchase securities on margin or sell securities
short or purchase or write put or call options; purchase "restricted securities"
(those which are subject to legal or contractual restrictions on resale or are
otherwise not readily marketable); nor invest in oil, gas or other mineral
exploration leases and programs. The Funds shall not make loans to others,
except for the purchase of debt securities, or entering into repurchase
agreements. The Funds shall not invest in securities so as to not comply with
Subchapter M of the Code, in that generally at the close of each quarter of the
tax year, at least 50% of the value of each Fund's total assets is represented
by (i) cash and cash items, government securities, and securities of other
regulated investment companies, and (ii) other securities, except that with
respect to any one issuer in an amount more than 5% of either Fund's total
assets, and no more than 10% of the Fund's voting securities of any one issuer.
In addition, the Funds shall not purchase real estate; real estate limited
partnerships (excepting master limited partnerships that are publicly traded on
a national security exchange or NASDAQ's National Market System); commodities or
commodity contracts; issue senior securities; provided, however, that a fund may
borrow money for extraordinary or emergency purposes and then only if after such
borrowing there is asset coverage of at least 300% for all such borrowings; nor
act as a securities underwriter except that they may purchase securities
directly from the issuer for investment purposes. Also, no Fund of the Trust
shall purchase or retain securities of any issuer if the officers or trustees of
the Trust or its adviser own more than one-half of one percent of the securities
of such issuer; invest in any company for the purpose of management or
exercising control. No Fund of the Trust shall invest in the securities of other
open-end investment companies, except in connection with a merger,
consolidation, acquisition, or reorganization or by purchase in the open market
where no commission or profit to a sponsor or dealer results from the purchase
other than the customary broker's commission..
No Fund shall purchase securities of any issuer in excess of 5% of the Fund's
total assets or purchase more than 10% of the outstanding voting securities of
any issuer; or concentrate its investments in a single industry beyond 25% of
the total value of the Fund; or invest more than 10% of its assets in the
securities of issuers which together have a record of less than three years
continuous operation. No Fund will purchase securities if it has outstanding
borrowings exceeding 5% of its net assets. No Fund's investments in warrants,
valued at the lower of cost or market, shall exceed 5% of the value of the
Fund's net assets. Included within that amount, but not to exceed 2% of the
value of the Fund's net assets, may be warrants which are not listed on the New
York or American Stock Exchange. Warrants acquired in units or attached to
securities may be deemed to be without value.
Notwithstanding the above, the Funds may purchase securities pursuant to the
exercise of subscription rights, provided that such purchase will not result in
the Fund's ceasing to be a diversified investment company. Japanese and European
corporations frequently issue additional capital stock by means of subscription
rights offerings to existing shareholders at a price substantially below the
market price of the shares. The failure to exercise such rights would result in
a Funds' interest in the issuing company being diluted. The market for such
rights is not well developed in all cases and, accordingly, the Funds may not
always realize the full value on the sale of rights. The exception applies in
cases where the limits set forth in the investment restrictions would otherwise
be exceed by exercising rights or would have already been exceeded as a result
of fluctuations in the market value of the Funds' portfolio securities with the
result that the Fund would be forced to sell securities at a time when it might
not otherwise have done so, or to forego exercising the rights.
Investment objectives and certain policies of each of the Funds may not be
changed without the prior approval of the holders of the majority of the
outstanding shares of the respective Fund. Objectives and policies which are
considered fundamental and subject to change only by prior approval of the
shareowners include: (1) the primary and any secondary investment objectives;
(2) the classification of the Trust as an open-end management company and the
sub-classification of each of the Funds as a diversified company; and (3) the
policies listed under "Investment Restrictions."
PORTFOLIO TURNOVER
The Funds have no restrictions on portfolio turnover and buy or sell investments
according to the Adviser's assessment of the market and the economy. The figures
regarding turnover in the following paragraph's reflect the operations of
certain Funds under their previous objectives. The portfolio turnover for these
Funds under their present policies is not expected to be materially different,
however.
The portfolio turnover rate of the Sextant Growth Fund (previously Northwest
Growth Fund) for the fiscal years ended November 30, 1994, 1993, and 1992, was
12%, 25%, and 46%, respectively.
The portfolio turnover rate of the Sextant Bond Income Fund (previously
Washington Tax-Exempt Fund) for the fiscal year ended November 30, 1994 and for
the period March 1, 1993 (commencement of operations) to November 30, 1993 was
74% and 36% (not annualized).
Portfolio turnover for Sextant Short-Term Bond Fund is estimated to be less than
150% and for Sextant International Fund 50% or less.
PERFORMANCE DATA
The figures regarding yield and total return in the following paragraphs reflect
the operations of certain Funds under their previous objectives. Consequently,
no inference as to future performance of the Sextant Growth Fund or Sextant Bond
Income Fund should be drawn nor is any such implication intended.
Certain factors should be taken into account before using Total Return and
Current Yield information as a basis for comparison with alternative
investments. No adjustment is made for taxes payable on distributions. The
performance for any given past period is not an indication of future rates of
return or yield on its shares.
The Sextant Growth Fund's (formerly Northwest Growth Fund) total return for the
one year from November 30, 1993 through November 30, 1994 was -8.78%. Average
annual total return from April 1, 1987 (inception of the Northwest Growth Fund)
through November 30, 1994 was 4.78%. Performance figures for the Northwest
Growth Fund for the period prior to October 12, 1990, reflect the Fund's
investment objective at that time tax-free income and capital preservation.
The total return of the Sextant Bond Income Fund (formerly Washington Tax-Exempt
Fund) for the one year from November 30, 1993 through November 30, 1994 was
- -8.24%. Average annual total return for the period March 1, 1993 (commencement
of operations) through November 30, 1994, was -2.65%.
Average annual TOTAL RETURN quotations for various periods illustrated are
computed by finding the average annual compounded rate of return over the period
quoted that would equate the initial amount invested to the ending redeemable
value according to the following formula:
P (1 + T)n = ERV
Where P = a hypothetical initial Payment of $1,000 T = average annual
Total return n = Number of years ERV =Ending Redeemable Value of the
$1,000 payment
made at the beginning of the period.
To solve for average Total Return, the formula is as follows:
T = (ERV/P) 1/n - 1
The Funds utilize the following procedures in determining yield. The yield
calculation is based on a 30 day period and is computed by the following formula
using the compounded semi-annual APR:
Nominal Yield = [ [ [ ( (a-b) / ( c*d ) ) + 1 ] -1 ] /30 ] * 360
Compounded Semi-Annual APR = [ [ 1 + [ Nominal Yield / 2 ] ] 2 ] - 1
Where: a = dividends and interest earned during the period; b = expenses accrued
for the period (net of reimbursement); c = the average daily number of shares
outstanding during the period that were entitled to receive dividends; and d =
the maximum offering price per share (equivalent to Net Asset Value for no-load
funds) on the last day of the period.
The figures regarding yield and total return in this paragraphs reflect the
operations of Sextant Bond Income Fund under its previous objectives.
Consequently, no inference as to future performance of Sextant Bond Income Fund
should be drawn nor is any such implication intended. The yield on Sextant Bond
Income Fund (formerly Washington Tax-Exempt Fund) for the 30-day period ended
November 30, 1994 was 6.0%.
In advertising and sales literature, a Fund may compare its performance with
that of other mutual funds, indexes or averages of other mutual funds, indexes
or data, and other competing investment and deposit products. The composition of
these indexes or averages differs from that of the Funds. Comparison of a Fund
to an alternative investment should be made with consideration of the
differences in features and expected performance of the investments.
All of the indexes and averages noted below will be obtained from the indicated
sources or reporting services, which the Trust believes to be generally
accurate. A Fund may also note its mention or recognition in other newspapers,
magazines or media from time to time. However, the Trust assumes no
responsibility for the accuracy of such data. Among the newspapers and magazines
that might mention the Trust or the Funds are:
Barron's Money
Business Week Mutual Fund Letter
Changing Times Morningstar
Consumer Reports New York Times
Consumer Digest Pensions and Investment
Financial World USA Today
Forbes US News and World Report
Fortune Wall Street Journal
Investors Daily
The Funds may also compare themselves to the Consumer Price Index, a widely
recognized measure of inflation, and to other indexes and averages such as:
Dow Jones Industrials New York stock Exchange Composite Index
Standard & Poor's American Stock Exchange Composite
500 Stock Index NASDAQ Composite
Standard & Poor's NASDAQ Industrials
400 Index Lipper General Equity Fund Average
Wilshire 5000 Lipper Equity Funds Average
Russell 2000 Lipper Growth Fund Index
Lipper Capital Appreciation Lipper Growth & Income Fund Average
Fund Average Lipper Balanced Fund Average
Lipper Growth Funds Average Lipper Growth & Income Fund Index
Lipper Small Company Growth Lipper Equity Income Fund Index
Fund Average Lipper Balanced Fund Index
Lipper Equity Income Fund Ibbotson Common Stocks Index
Average
Lipper Capital Appreciation
Fund Index
Lipper Growth Fund Index
Lipper Small Company Growth
Fund Index
Morningstar Mutual Fund
Indices
The indexes and averages are measures of performance of stocks and mutual funds
that are classified, calculated and published by these independent services. The
Funds may also use comparative performance as computed in a ranking by these or
other independent services.
A Fund may also cite its rating or other mention by Morningstar or another
entity. Morningstar's ratings are based on risk-adjusted total return
performance, as computed by Morningstar by subtracting a Fund's risk score as
computed by Morningstar, from the fund's total return score. This numerical
score is then translated into rating categories.
MANAGEMENT OF THE TRUST
Information concerning Trustees and Officers of the Trust and their principal
occupations for the past five years is shown below:
GARY A. GOLDFOGEL, M.D., Trustee
1500 N. State Street, Bellingham, WA 98225.
Pathologist and Medical Dir., Whatcom Pathology Lab. Whatcom County;
Medical Examiner, Whatcom County
NICHOLAS KAISER, M.B.A., C.F.A. - President and Trustee *
1300 N. State Street, Bellingham, WA 98225.
President of Saturna Capital Corporation, since July 1989.
President of Unified Management Corporation, Indianapolis IN, investment
advisers and brokers, from 1976 through June 1989.
JOHN E. LOVE, Trustee
Box 188, Garfield, Washington 99130
Owner, J.E. Love Co., international agricultural equipment manufacturer,
Garfield, WA Director, Bank of Whitman, Colfax, Wash.
Rear Admiral, U.S. Navy, Retired.
JOHN S. MOORE, Trustee
College of Business and Economics, Western Washington University,
Bellingham, WA 98225-9077
Professor of Business Administration
JAMES D. WINSHIP, J.D., M.B.A.- Trustee and Secretary*
1300 N. State Street, Bellingham, WA 98225.
Vice President and Secretary, Saturna Capital Corporation, October 1991 to
present. Editor-at-large, FUND DIRECTIONS industry newsletter, December 1991 to
present. Executive Vice-President and member of the management committee, Stein
Roe & Farnham Incorp., Chicago IL, investment adviser, and head of its mutual
fund division, prior to October 1991.
PHELPS S. MCILVAINE - Vice President
1300 N. State Street, Bellingham, WA 98225.
Vice President and Director Saturna Capital Corporation, January 1994 to
present. Bond Arbitrage Trader, Hickey Financial, Chicago Illinois 1987-1994
MEREDITH L. ROSS - M.B.A., Treasurer
1300 N. State Street, Bellingham, WA 98225.
Assistant Treasurer, Saturna Capital Corporation, Sept. 1989 to present.
* Nicholas Kaiser and James Winship are each an "interested person" of the Trust
as defined in the Investment Company Act of 1940.
The Trust pays disinterested trustees $100 per meeting attended and
reimbursement of travel expenses (pro-rata to each Fund). Neither Mr. Winship
nor Mr. Kaiser receives compensation from the Trust, nor are the other officers
of the Trust paid for their duties with the Trust. The trustees have agreed to
waive meeting fees until the Trust's assets reach $10 million, and have served
to date without being paid such fees, as set forth below:
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Compensation
Name of Compensa- Benefits Accrued Estimated Annual From Registrant
Person; tion From As Part of Fund Benefits Upon and Fund Complex
POSITION REGISTRANT EXPENSES RETIREMENT PAID TO DIRECTORS
<S> <C> <C> <C> <C>
GARY GOLDFOGEL, $0 $0 $0 $0
Trustee
JOHN E. LOVE, 0 0 0 0
Trustee
JOHN S. MOORE, 0 0 0 0
Trustee
NICHOLAS F. KAISER 0 0 0 0
Trustee
JAMES D. WINSHIP 0 0 0 0
Trustee
</TABLE>
The Board has authority to establish an Executive Committee with the power to
act on behalf of the Board between meetings and to exercise all powers of the
Trustees in the management of the Trust. No Executive Committee has been
established at this time. An Audit Committee, consisting of the disinterested
directors, meets to select the independent accountant and review all audit
reports. There is no separate nominating committee.
As of June 29, 1995, officers, trustees and their families as a group, own
20,328 shares, being 10% of the outstanding shares of the Washington Tax-Exempt
Fund and 30,730 shares, being Z3% of the outstanding shares of the Northwest
Growth Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of June 29, 1995, the only shareowner with 5% or more of Northwest Growth
Fund was:
<TABLE>
NAME SHARES PERCENTAGE
<S> <C> <C>
Nicholas F. Kaiser IRA Rollover 14,660.145 10.83%
Bellingham WA
Michael R. McRory 8,922.155 6.59%
Bellingham, WA
</TABLE>
As of June 29, 1995, the only shareowners with 5% or more of Washington
Tax-Exempt Fund were:
<TABLE>
NAME SHARES PERCENTAGE
<S> <C> <C>
Saturna Capital Corporation 26,045.545 12.85%
Carol Lingow, Guardian 24,925.826 12.30%
Spokane, WA
Luzenia B. Redpath 18,983.902 9.37%
Bellingham WA
Frederick M and Mary J. Graham, Jt. Ten. 12,710.693 6.27%
St. John, WA
Investors National Corporation 21,764.821 6.6%
Bellingham, WA
Ubaldina Sanchez 11,196.172 5.52%
Bellingham, WA
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Each of the Sextant Funds monthly pays the Adviser an Advisory and
Administrative Services Fee (the "Base Fee").
The Base Fee covers certain administrative services such as portfolio
accounting, shareholder and financial reporting, shareholder servicing and
transfer agency services. The Base Fee is also compensation for portfolio
management, advice and recommendations on securities to be purchased, held or
sold. The Base Fee is computed at the annual rate of 0.60% of average daily net
assets of each Fund, and is paid monthly. The Base Fee is subject to adjustment
up or down depending on the investment performance of the Fund relative to a
specified index (the "Performance Adjustment.")
"PERFORMANCE ADJUSTMENT" FOR SEXTANT BOND INCOME FUND AND SEXTANT
SHORT-TERM BOND FUND
For each month in which either of these Funds' total investment return (change
in net asset value plus all distributions reinvested) for the one year period
through that month outperforms or underperforms the total return of a specified
index for that period by 1% or more but less than 2%, the Base Fee is increased
or decreased by the annual rate of .10% of the Fund's average daily net assets
for the preceding year. If the outperformance or underperformance is 2% or more,
then the adjustment is at the annual rate of .20%.
No performance adjustment is applicable during the first year the Agreement is
in place.
PERFORMANCE ADJUSTMENT FOR SEXTANT GROWTH FUND AND SEXTANT INTERNATIONAL FUND
For each month in which either of these Fund's total investment return (change
in net asset value plus all distributions reinvested) for the one year period
through that month outperforms or underperforms the total return of a specified
index for that period by 1% or more but less than 2%, the Base Fee is increased
or decreased by the annual rate of .10% of the Fund's average daily net assets
for the preceding year. If the outperformance or underperformance is 2% or more
but less than 4%, then the adjustment is at the annual rate of .20%. If the
outperformance or underperformance is 4% or more, the adjustment is at an annual
rate of .30%.
No Performance Adjustment is payable during the first year the Agreement is in
place.
Total return investment performance as calculated and published by
Morningstar, Inc. for selected groups of mutual funds will be used as the index
for comparison purposes. Each Fund and the comparative Morningstar group to be
used are:
Sextant Growth Fund: "GROWTH FUNDS"
Sextant International Fund: "FOREIGN STOCK FUNDS"
Sextant Bond Income Fund: "CORPORATE BOND FUNDS-HIGH QUALITY"
Sextant Short-Term Bond Fund: "CORPORATE BOND FUNDS-HIGH QUALITY"
In the event that a particular index is no longer available or otherwise becomes
unavailable or inappropriate, in the opinion of the Board of Trustees, the Board
may select another to replace it.
The Adviser has also voluntarily undertaken to limit expenses of Bond Income
Fund and Short-Term Bond Fund to 0.80% through March 31, 1997. A waiver may have
the effect of subsidizing the yield for the period it is in effect.
Each Fund pays its own taxes, brokerage commissions, trustees' fees, legal and
accounting fees, insurance, expenses incurred in complying with state and
federal laws regulating the issue and sale of its shares, and mailing and
printing costs for prospectuses, reports and notices to shareowners.
The Adviser furnishes office space, facilities and equipment, personnel and
clerical and bookkeeping services required to conduct the business of the Fund,
as well as transfer agency and certain other expenses.
For no additional charges, the Adviser provides services as the transfer agent,
registrar and dividend-paying agent for each Fund. As transfer agent, Saturna
furnishes to each shareowner a statement after each transaction, an historical
statement at the end of each year showing all transactions during the year, and
Form 1099 tax forms. Saturna also, on behalf of the Trust, responds to
shareowners' questions or correspondence. Further, the transfer agent regularly
furnishes each Fund with current shareowner lists and information necessary to
keep the shares in balance with the Trust's records. The mailing of all
financial statements, notices and prospectuses to shareowners is performed by
the transfer agent. The transfer agent maintains records of contributions,
disbursements and assets as required for IRAs and other qualified retirement
accounts. Each Fund reimburses Saturna for any out-of-pocket expense for forms
and mailing costs used in performing its functions.
The laws and regulations of various states set expense limitations for mutual
funds as a condition for registration to offer and sell shares in that state.
Usually, the expense limitation requires reimbursement if, and to the extent
that, the aggregate operating expenses including the advisory fee but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of a specified percentage of the average net assets of a Fund for its
fiscal year. The only state the adviser believes maintains an expense limitation
is California, which limits aggregate annual expenses (with exceptions) to 2.5%
of the first $30 million of average net assets, 2% of the next $70 million and
1.5% of the remaining average net assets.
National City Bank, Indianapolis, Indiana 46255 is the custodian of the Funds'
securities and other assets. As custodian, the bank holds in custody all
securities and cash, settles for all securities transactions, receives money
from sale of shares and on order of each Fund pays the authorized expenses of
the Fund. When Fund shares are redeemed by investors, the proceeds are paid to
the shareowner by check drawn on the custodian bank.
Price Waterhouse, LLP 1001 Fourth Avenue Plaza, Seattle, Washington 98154 serves
as the independent accountants for the Trust. The independent accountants
conduct the annual audit of the Trust as of November 30 and prepare the tax
returns of each Fund.
PRIOR TO SEPTEMBER 28, 1995, UNDER THE ADVISORY CONTRACTS THEN IN EFFECT,
SEXTANT GROWTH FUND AND SEXTANT BOND INCOME FUND WERE OBLIGATED TO PAY SATURNA
CAPITAL FEES UNDER MANAGEMENT CONTRACTS THAT ARE NO LONGER IN EFFECT.
Under the former contracts, Northwest Growth Fund, predecessor to Sextant Growth
Fund paid Saturna Capital monthly an advisory fee at the rate of 0.75% of
average daily net asset value annually. Similarly, Washington Tax-Exempt Fund,
predecessor to Sextant Bond Income Fund was obligated to pay Saturna Capital
monthly an 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. Under the former contracts, the
Adviser received a separate fee as compensation for services as transfer agent
and dividend disbursement agent. Each Fund paid Saturna an annual fee of $1.10
per month per shareowner account (plus $.30 per month for Funds paying dividends
more frequently than once per quarter). Each Fund reimbursed Saturna for any
out-of-pocket expense for forms and mailing costs used in performing its
functions. For the fiscal year ended November 30, 1994, Sextant Growth Fund,
(formerly Northwest Growth Fund paid transfer agent fees of $2,191, and Sextant
Bond Income Fund (formerly Washington Tax-Exempt Fund) paid $948.
For fiscal 1994, under the former contracts Sextant Growth Fund (formerly
Northwest Growth Fund) paid $9,318 in administrative and advisory fees, and no
waiver or reimbursement was required. For fiscal 1993, that Fund paid $10,504 in
administrative and advisory fees, and no waiver or reimbursement was required.
For fiscal 1992, that Growth Fund paid $8,933 in administrative and advisory
fees, and no waiver or reimbursement was required.
For fiscal 1994, under the former contracts Sextant Bond Income Fund (formerly
Washington Tax-Exempt Fund) paid $8,394 in administrative and advisory fees of
which Saturna Capital waived or reimbursed $8,046. For the period March 1, 1993
(commencement of operations) through November 30, 1993, that Fund was obligated
to pay $5,809, of which $4,184 was reimbursed or waived by the adviser.
BROKERAGE ALLOCATION
The placing of purchase and sale orders as well as the negotiation of
commissions is performed by the Adviser and is reviewed by the Board of
Trustees. The Adviser may allocate brokerage to any broker in return for
research or services and for selling shares of any Fund. Brokers may provide
research or statistical material to the Adviser, but this information is only
supplemental to the research and other statistics and material accumulated and
maintained through the Adviser's own efforts. Any such supplemental information
may or may not be of value or used in making investment decisions for the Trust
or any other account serviced by the Adviser.
The primary consideration in effecting securities transactions for each Fund is
to obtain the best price and execution which in the judgment of the Adviser is
attainable at the time and which would bring the best net overall economic
result to the Fund. Factors taken into account in the selection of brokers
include the price of the security, commissions paid on the transaction, the
efficiency and cooperation with which the transaction is effected, the
expediency of making settlement and the financial strength and stability of the
broker. The Adviser may negotiate commissions at a rate in excess of the amount
another broker would have charged if it determines in good faith that the
overall net economic result is favorable to the Fund. The Adviser evaluates
whether brokerage commissions are reasonable based upon available information
about the general level of commissions paid by similar mutual funds for
comparable services.
The Adviser's subsidiary, Investors National Corporation, is qualified as a
broker-dealer to engage in a general brokerage business. Investors National
Corporation conducts all its transactions on an agency basis for established
"deep discount" commissions; it does not make markets, "deal," or maintain
inventories of securities. It is expected that most stock brokerage for the
Trust will be conducted through Investors National Corporation, and the Board of
Trustees has given permission for the Adviser to so direct. For brokerage
conducted through an affiliate of the Adviser, the Trustees have adopted
procedures reasonably designed to ensure that such brokerage fees are reasonable
and fair compared to remuneration received by other brokers in comparable
transactions. The Trustees are provided detailed quarterly monitoring reports
and review the procedures at least annually.
For fiscal years 1994 and 1993, Sextant Growth Fund (formerly Northwest Growth
Fund) paid $1,514 and $2,505 in brokerage commissions to Investors National
Corporation. This represented 100% of the Fund's commissions and aggregate
brokerage transactions for each of these years. Similarly, for fiscal year 1994
and the period March 1, 1993 (commencement of operations) through November 30,
1993, Saturna Bond Income Fund (formerly Washington Tax-Exempt Fund) paid no
brokerage commissions.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
See HOW TO BUY SHARES, HOW TO REDEEM SHARES and NET ASSET VALUE in the
Prospectus for an explanation about the ways to purchase or redeem shares.
In addition to normal purchases or redemptions, the shares of each Fund may be
exchanged for shares of other Funds of Saturna Investment Trust. Exchange will
be made at no charge upon written request or by telephone if the shareowner has
previously authorized telephone privileges on the application. A gain or loss
for federal tax purposes will be realized upon redemption of any shares for the
purposes of an exchange as described above.
Net asset value per share is determined by dividing the value of all securities
and other assets, less liabilities, by the number of shares outstanding. The net
asset value is determined for each Fund as of the close of trading on the New
York Stock Exchange (generally 4 p.m. New York time) on each day the Exchange is
open for trading. The Exchange is generally closed on: New Year's Day,
Washington's Birthday/President's Day, Good Friday, Memorial Day, Independence
Day (observance), Labor Day, Thanksgiving Day and Christmas Holiday.
TAX STATUS
Saturna Investment Trust is organized as a "series" investment company. At
present only the Funds and Idaho Tax-Exempt Fund are offered, but the Trust may
create in the future additional funds with different investment objectives. Each
Fund is a separate economic entity with separate assets and liabilities and
separate income streams. The shareowners of each separate Fund may look only to
that Fund for income, capital gain or loss, redemption, liquidation, or
termination. Each Fund has separate arrangements with the Adviser. Assets of
each Fund are segregated. The creditors and shareowners of each Fund are limited
to the assets of that Fund for recovery of charges, expenses and liabilities.
Each Fund conducts separate voting on issues relating solely to that Fund,
except as required by the Investment Company Act. The tax status and tax
consequences to shareowners of each separate Fund will differ, depending upon
the investment objectives, operations, income, gain or loss, and distributions
from each Fund.
Each Fund intends to distribute to shareowners substantially all of its net
investment income and net realized capital gains, if any, and to comply, as it
has since inception, with the provisions of the Internal Revenue Code applicable
to regulated investment companies, which relieve the Funds of federal income
taxes on the amounts so distributed. For Sextant Growth Fund and Sextant
International Fund, dividends from net investment income and distribution of any
capital gains are made at the end of the fiscal year in November. The Sextant
Bond Income Fund and Sextant Short-Term Bond Fund pay dividends from net
investment income daily, which are reinvested as distributed at each month-end.
Distribution of any net realized capital gains is made at the end of the fiscal
year in November.
The amount of investment income and capital gains, if any, which will be
available for distribution by a Fund in the future cannot be predicted due to
continually changing economic conditions and market prices.
Dividends and distributions from capital gains are normally reinvested in
additional full and fractional shares of the Fund. The shares purchased with
dividends or capital gains distributions may be redeemed using any of the
methods for redemption of shares.
Distributions and dividends may be subject to federal, state and local taxes.
Shareowners will be taxed whether the shares automatically purchased with
dividends and distributions are left in the Fund or are paid to the shareowner.
Shortly after the end of each calendar year shareowners are mailed a Form
1099-DIV advising of the dividends paid the shareowner for the year.
If you do not furnish the transfer agent with a valid Social Security or Tax
Identification Number and in certain other circumstances, we are required to
withhold 31% of dividend income. Dividends and capital gains distributions to
shareowners who are nonresident aliens may be subject to a 30% United States
withholding tax under the existing provisions of the code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. If the IRS determines that
the Trust should be fined or penalized for inaccurate or missing or otherwise
inadequate reporting of a Tax Identification Number, the amount of the IRS fee
or penalty will be directly assessed to the shareowner account involved.
FINANCIAL STATEMENTS
The most recent audited annual report accompanies this Statement of Additional
Information. The financial statements and selected per share data and ratios
dated November 30, 1994, together with the report of independent accountants
dated December 16, 1994, are considered a part of the Statement of Additional
Information and are incorporated by reference.
The unaudited financial statements and selected per share data and ratios dated
May 31, 1995 are considered a part of the Statement of Additional Information
and are incorporated by reference.
<PAGE>
APPENDIX-BOND RATINGS
GENERAL. Moody's and S&P's ratings represent their opinions as to quality of the
bonds which they undertake (for a fee) to rate. Such ratings are not intended to
be an absolute standard of quality. A rating is not a recommendation to buy,
sell or hold a bond because it does not take into account market value or
suitability for a particular investment purpose. Ratings may vary from service
to service, and may be changed, withdrawn or suspended without notice for a
variety of reasons.
BOND RATINGS
MOODY'S INVESTORS SERVICES, INC., describes its ratings for debt securities as
follows:
AAA Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large, or exceptionally stable margin, and principal is secure.
Although the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds rated AA are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa bonds or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which may make the long-term
risks appear somewhat larger than in Aaa bonds.
A Bonds rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA Bonds rated Baa are considered as medium grade obligations; I.E.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
STANDARD & POOR'S describes its rating for debt securities as follows:
AAA Debt rated AAA has the highest rating. Capacity to pay interest and
to repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and to
repay principal, and differs from the higher rated issues only in
small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effect of changes and circumstances in economic conditions than debt
in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt
in higher rated categories.
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICES, INC. employs the following designations, all
investment grade
PRIME-1 Highest quality
PRIME-2 Higher quality
PRIME-3 High Quality
If an issuer represents that its commercial paper is supported by the credit of
another entity or entities, Moody's evaluates the financial strength of that
affiliated entity as one factor in the total rating assessment.
STANDARD & POOR'S describes its rating and their meanings as follows:
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree of safety.
AA This designation indicates that the degree of safety regarding
timely payment is very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+)
sign.
- --------
* Please refer to the Appendix for a discussion of ratings.
+ A repurchase agreement involves the sale of securities to the Fund, with the
concurrent agreement of the seller to repurchase the securities at the same
price plus an amount equal to an agreed-upon interest rate, within a specified
time. In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses.
