IDAHO TAX-EXEMPT FUND
MAY 31, 1996 REPORT
MORNINGSTAR MUTUAL FUNDS CONTINUES TO AWARD ITS TOP "FIVE-STAR" RATING TO IDAHO
TAX-EXEMPT FUND AS OF MAY 31, 1996. THE MORNINGSTAR RATING IS A WIDELY RESPECTED
MEASURE OF RISK-ADJUSTED PERFORMANCE.* THE FUND'S MANAGERS ARE PROUD THIS
ACCOMPLISHMENT AND WORK HARD TO CONTINUE EXCELLENT RESULTS.
FELLOW SHAREOWNERS:
For fiscal 1995, our Idaho Tax-Exempt Fund provided shareholders with a total
return of 16.7%. But increasing interest rates reversed the trend, and for the
six months ended on May 31, your Fund had a total return of -3.0%. The current
30-day yield on your Fund is 5.1%, tax-free - equivalent to 9.2% of taxable
income to top-bracket Idaho taxpayers.
So far, 1996 has challenged the bond market. Economic and employment growth
rates are reasonably strong. The Consumer Price Index accelerated from a 2.7%
annual rate to 2.9%. Political debate has slowed progress toward balancing
government deficits. Long-term interest rates have risen in response to these
developments.
Looking ahead, we remain optimistic about the potential returns from bonds.
Increases in economic growth and inflation do not require further Fed action.
International competition continues to keep wages and inflation on a tight rein.
The US will continue to enjoy the advantages of having the world's reserve
currency. Governments will reduce expenditure growth. The future looks solid for
bonds.
Idaho Tax-Exempt Fund remains conservative in its operations. We employ no
leverage, purchase no derivatives or employ any other risk-enhancing techniques.
Our effective portfolio maturity is just 9 years.
Our staff and portfolio managers always welcome your comments and suggestions.
Only with your help can we be certain that we are meeting your investment needs
- -- our primary objective. We appreciate your investing with us.
NICHOLAS KAISER, PHELPS MCILVAINE,
PRESIDENT VICE PRESIDENT, PORTFOLIO MANAGER
June 19, 1996
- ------------------
*Morningstar's proprietary ratings reflect historical risk-adjusted performance.
The ratings are subject to change each month, and are calculated from a fund's 3
and 5-year average annual returns with sales charge adjustments (if any) and a
risk factor that reflects performance relative to three month Treasury bill
returns. Ten per cent of the funds in a Morningstar investment category receive
five stars. From time to time the adviser has waived all or a portion of fees or
expenses, resulting in higher returns. Naturally, past performance may not
indicate future results.
INVESTMENTS
MAY 31, 1996
<TABLE>
<CAPTION>
RATING ISSUER COUPON/MATURITY FACE AMOUNT MARKET
VALUE
- ---------------------------------------------------------------------------------------------------------
GENERAL OBLIGATION (2.0)%
<S> <C> <C> <C>
A Bannock County Jail Bond 6.00% due 9/1/2012 $100,000 $99,096
HOUSING (12.0%)
AA Idaho Housing Authority
Single Fam Mortgage, B-1 6.85% due 7/1/2012 110,000 110,496
AA Idaho Housing Authority
Refunding Ser A 6.15% due 7/1/2024 250,000 249,863
AA Idaho Housing Authority
Single Fam Mort Mezz-E-1 6.60% due 7/1/2011 125,000 125,658
AA Idaho Housing Authority
Single Fam Mort Rev Ser B1 8.125% due 5,000 5,004
7/1/2019
8.00% due 1/1/2020 30,000 30,090
AA Idaho Housing Authority
Single Fam Mort SR Ser C1 7.70% due 7/1/2017 55,000 55,635
------- ------
SUB-TOTAL 575,000 576,746
IRRIGATION (5.3%)
AA Boise Kuna Irr. Dist. 6.00% due 7/1/2008 250,000 255,575
MEDICAL/HOSPITALS (4.6%)
A Idaho Health Facility
St. Alphonsus Med. Ctr. 6.25% due 175,000 177,378
12/1/2012
6.25% due 45,000 44,913
12/1/2022
SUB-TOTAL 220,000 222,291
REAL ESTATE (6.8%)
A Idaho Falls
Redevel. Agency Rev. 8.05% due10/1/2006 100,000 112,656
8.125% due 100,000 112,998
10/1/2008
AAA Idaho Bldg. Authority
Rev. Ref. Ser C 5.70% due 9/1/2007 100,000 100,771
-------- -------
SUB-TOTAL 300,000 326,425
ROADS (7.2%)
A Hayden LID 6.00% due 9/1/2004 60,000 59,292
A Payette L.I.D. 7.60% due 5/1/2005 30,000 30,431
A Post Falls, Kootenai County 6.75% due 10,000 9,963
4/15/1997
L.I.D. #91-1 7.00% due 10,000 9,968
4/15/1998
7.20% due 15,000 14,973
4/15/1999
7.40% due 15,000 15,006
4/15/2000
7.60% due 15,000 15,021
4/15/2001
7.75% due 20,000 20,040
4/15/2002
7.95% due 20,000 20,066
4/15/2003
7.95% due 20,000 20,064
4/15/2004
7.95% due 20,000 20,065
4/15/2005
7.95% due 20,000 20,060
4/15/2006
7.95% due 20,000 20,058
4/15/2007
A Post Falls L.I.D. #91-4 5.40% due 9/1/2002 35,000 34,981
5.60% due 9/1/2003 35,000 34,984
------- ------
SUB-TOTAL 345,000 344,972
SCHOOL (GO'S) (27.8%)
AA Ada and Canyon Counties 6.65% due1/30/2011 100,000 105,120
Joint School Dist #2 Meridian 7.375% due 100,000 109,610
7/30/2000
A Boise City ISD 1996 UTGO 5.50% due 150,000 142,210
7/30/2016
A Bonneville County
School Dist #91 7.00% due 8/1/2008 155,000 164,236
A Canyon County 5.90% due 8/1/2005 50,000 50,650
School Dist. #135 6.00% due 8/1/2006 50,000 50,495
6.00% due 8/1/2007 50,000 50,340
AAA Gooding Co.(Wendell)
School Dist. #232 6.00% due 8/1/2008 55,000 56,738
AAA Kootenai County
School Dist #273 6.00% due 8/1/2012 100,000 100,900
AAA Madison County
School Dist. #321 5.60% due 2/1/2010 150,000 147,266
AA Payette County 6.50% due 7/31/2008
School Dist. #372 6.75% due 7/31/2009 155,000 166,424
6.75% due 7/31/2009 100,000 107,729
7/31/2010 1,295,000 1,336,429
SUB-TOTAL
STATE EDUCATION (14.8%)
AAA Boise St. Univ. 6.20% due 4/1/2010 200,000 205,720
Fee Revenue 6.30% due 4/1/2014 100,000 102,218
A Idaho State University
Student Fee 6.40% due 4/1/2014 250,000 259,925
AAA University of Idaho
Student Fee Rev. 7.70% due 4/1/2010 85,000 88,052
A University of Idaho
Revenue 6.85% due 4/1/2016 50,000 53,564
------- ------
SUB-TOTAL 685,000 709,479
UTILITY-ELECTRIC POWER (2.2%)
AAA Idaho Falls
Elec. Rev. 6.75% due 4/1/2019 100,000 104,162
UTILITY-SEWER (3.9%)
A Hayden Lake L.I.D. #1 6.90% due 2/1/1997 10,000 10,063
A Troy Sewer Rev. 7.00% due 2/1/1998 10,000 10,189
7.10% due 2/1/1999 10,000 10,186
7.20% due 2/1/2000 10,000 10,210
7.30% due 2/1/2001 10,000 10,216
7.40% due 2/1/2002 10,000 10,267
7.50% due 2/1/2003 10,000 10,332
7.60% due 2/1/2004 10,000 10,361
7.70% due 2/1/2005 15,000 15,595
7.80% due 2/1/2006 15,000 15,653
7.90% due 2/1/2007 15,000 15,672
8.00% due 2/1/2008 15,000 15,680
8.00% due 2/1/2009 20,000 20,940
8.00% due 2/1/2010 20,000 20,983
------- ------
SUB-TOTAL 180,000 186,347
UTILITY-WATER SUPPLY (11.4%)
A- American Falls Res. 7.25% due 5/1/2004 70,000 76,062
Ref. Series A 7.625%due 5/1/2021 150,000 165,345
A McCall Water Revenue 6.25% due 9/1/2008 200,000 199,860
A 6.375%due 9/1/2014 70,000 69,979
A Ucon Water & Sewer 7.75% due 12/1/2002 35,000 37,950
------- ------
SUB-TOTAL 525,000 549,196
-------- -------
TOTAL INVESTMENTS (98%) $4,575,000 $4,710,718
=========== ==========
Other Assets (net of liabilities) (2.0%) 97,234
------
Total Net Assets (100%) $4,807,952
===========
These unaudited bond ratings reflect the adviser's current rating of each bond,
as determined using Standard
& Poor's and Moody's ratings.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Sept. 4,'87
Six (commence-
Months Ended ment of
op-
May 31, FOR YEAR ENDED erations)
NOVEMBER 30 to
--------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 Nov. 30'87
---- ---
NET ASSET VALUE AT
BEGINNING
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OF PERIOD $ 5.28 $4.76 $5.23 $5.16 $ 5.10 $5.03 $5.07 $ 4.98 $5.03 $5.00
INCOME FROM
INVESTMENT
OPERATIONS
Net investment income 0.14 0.26 0.27 0.25 0.28 0.30 0.33 0.35 0.35 0.02
Net gains or losses
on securities
(both realized and
unrealized) (0.16) 0.52 (0.46) 0.12 0.09 0.07 (0.04) 0.09 (0.05) 0.02
------ ----- ------ ----- ----- ----- ------ ----- ------ ----
Total from investment
operations (0.02) 0.78 (0.19) 0.37 0.37 0.37 0.29 0.44 0.30 0.04
LESS DISTRIBUTIONS
Dividends (from net
investment income) $(0.14) $(0.26) $(0.27)$(0.25) $(0.285)$(0.30) $(0.33) $(0.35) $(0.35)$
Distributions (from 0.00 0.00 (0.01) (0.05) (0.025) 0.00 0.00 0.00 0.00 0.00
----- ----- ------------ ------- ----- ----- ----- ----- ----
capital gains)
Total distributions (0.14) (0.26) (0.28) (0.30) (0.31) (0.30) (0.33) (0.35) (0.35) (0.01)
NET ASSET VALUE AT END
OF PERIOD $5.12 5.28 4.76 5.23 5.16 5.10 5.03 5.07 4.98 $
TOTAL RETURN (3.03)% 16.68% (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 $ 4,807 5,220 6,841 7,367 5,808 3,803 2,540 808 $ 335 $29
Ratio of expenses to average
net assets* 0.40% 0.75% 0.75% 0.75% 0.75% 0.75% 0.97% 0.90% 0.28% 0.11%
Ratio of net investment
income to average net assets* 2.65% 5.07% 5.28% 4.79% 5.64% 6.08% 6.74% 6.51% 6.58% 0.56%
Portfolio turnover rate 3% 28% 36% 31% 17% 15% 17% 13% 100% 0%
* Not Annualized
<FN>
For each of the above years, all or a portion of the expenses were waived. If
these costs had not been waived, the resulting increase to expenses per share in
each of the above periods would be $.0.008, $.016, $.007, $.009, $.008, $. 02
$.02, $.05, $.10, $.19, and $.01, respectively. The increase to the ratio of
expenses to average monthly net assets would be .15%, .26%, .14%, .18%, .17%,
.54%, 1.01%, 1.25%, 2.24% and .11%, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 1996
ASSETS
Investments, at value
<S> <C>
Municipal Bonds (cost $4,641,053) $4,710,718
Cash 7,797
Interest receivable 87,381
Insurance deposit 800
---
Total Assets $4,806,696
LIABILITIES
Payable to affiliate (1,256)
Total Liabilities (1,256)
NET ASSETS $4,807,952
FUND SHARES OUTSTANDING 939,819
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, no par value) 4,778,865
Undistributed net investment income (loss) 97
Accumulated net realized gain (loss) on (64,447)
investments
Unrealized net appreciation on investments 93,437
------
Net Assets applicable to Fund shares $ 4,807,952
=========
NET ASSET VALUE PER SHARE $5.12
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
SIX MONTHS ENDED MAY 31, 1996
INVESTMENT INCOME
<S> <C>
Interest income $152,814
Amortization of bond premiums (6,198)
Accretion 370
Gross investment income $146,986
EXPENSES
Investment adviser and administration fee 12,662
Professional fees 7,290
Shareowner servicing 2,309
Printing and postage 2,433
Filing and 948
registration fees
Custodian fees 580
Other expenses 774
---
Total gross expenses 26,996
Less earnings (580)
credits
Less advisory fee waived (6,762)
-------
Net expenses 19,654
Net investment 127,332
income
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 362,425
Less cost of securities sold based on identified 362,878
-------
cost
Realized net loss (453)
UNREALIZED GAIN (LOSS) ON INVESTMENTS
End of period 93,437
Beginning of period 251,225
-------
Increase in unrealized gain for the period (157,788)
---------
Net realized and unrealized gain on (158,241)
---------
investments
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $(30,909)
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS Period Year ended
ended
May 31, Nov. 30,
1996 1995
FROM OPERATIONS
<S> <C> <C>
Net investment income $127,332 $311,923
Net realized (loss) gain on investments (453) (64,404)
Net increase (decrease) in unrealized appreciation (157,788) 751,487
--------- -------
Net increase (decrease) in net assets (30,909) 999,006
-------- -------
DIVIDENDS TO SHAREOWNERS FROM
Net investment income (126,746) (311,941)
Capital gains distributions 0 0
-- -
FUND SHARE TRANSACTIONS
Proceeds from sales of shares 327,929 793,990
Value of shares issued in reinvestment of dividends 96,703 226,992
------- -------
424,632 1,020,982
Cost of shares redeemed (679,339) (3,329,049)
--------- -----------
Net increase (decrease) in net assets from share transactions (254,707) (2,308,067)
--------- -----------
Total increase (decrease) in net assets (412,362) (1,621,002)
NET ASSETS
Beginning of period 5,220,314 6,841,316
---------- ---------
End of period $4,807,952 $5,220,314
Shares of the Fund Sold and Redeemed
Number of shares sold 63,107 225,327
Number of shares issued in reinvestment of dividends 18,507 44,240
Number of shares redeemed (130,555) (717,954)
--------- ---------
Net Increase (Decrease) in Number of Shares Outstanding (48,941) (448,387)
</TABLE>
NOTES TO FINANCIAL STATEMENTS
Note 1-ORGANIZATION
Saturna Investment Trust, (formerly Northwest Investors Trust) (the "Trust") was
established under Washington State Law as a Business Trust on February 20, 1987.
The Trust is registered as a no-load, open-end series investment company under
the Investment Company Act of 1940, as amended. Four portfolios have been
created to date in addition to Idaho Tax-Exempt Fund (the "Fund.") The other
four portfolios distribute through a separate prospectus and the results of
those funds are contained in a separate report.
NOTE 2--SIGNIFICANT ACCOUNTING
POLICIES
The following is a summary of the significant accounting policies followed by
the Fund.
INVESTMENTS:
Fixed-income securities for which there are no publicly available market
quotations are valued using a matrix based on maturity, quality, yield and
similar factors, which are compared periodically to multiple dealer bids and
adjusted by the adviser under policies established by the Trustees.
The cost of securities is the same for accounting and Federal income tax
purposes. Securities transactions are recorded on trade date. Realized gains and
losses are recorded on the identified cost basis.
INCOME AND EXPENSES:
Interest income is reduced by the amortization of bond premiums, on a constant
yield-to-maturity basis from purchase date to maturity.
Interest income is increased by accretion only for bonds underwritten as
original issue discounts. Market discounts are recorded as realized gains upon
disposition.
Expenses incurred by the Trust on behalf of the Fund (e.g., professional fees)
are allocated to the Fund and the other Funds of the Trust on the basis of
relative daily average net assets. The Adviser has agreed to certain limits on
expenses, as described below.
INCOME TAXES:
The Fund has elected to be taxed as a regulated investment company under the
Internal Revenue Code and distribute substantially all of its taxable net
investment income and realized net gains on investments. Therefore, no provision
for Federal income taxes is required. Further, the Fund intends to meet IRS
requirements for tax-free income dividends, and requirements of the Idaho
Department of Revenue for income dividends free of Idaho state income tax.
DIVIDENDS AND DISTRIBUTIONS TO SHAREOWNERS:
Dividends and distributions to shareowners are recorded on the ex-dividend date.
Dividends are paid daily and distributed on the last business day of each month.
Shareowners electing to reinvest dividends and distributions purchase additional
shares at the net asset value on the payable date.
NOTE 3--TRANSACTIONS WITH AFFILIATED PERSONS
Under a contract approved by share-owners on October 12, 1990, Saturna Capital
Corporation provides investment advisory services and certain other
administrative and distribution services to conduct the Fund's business. For
such services, the Fund pays an annual fee equal to .50% of average daily net
assets. For the six months ended May 31, 1996, the Fund incurred advisory fee
expenses of $12,662.
Saturna Capital has volunteered to reimburse the Fund to the extent that total
expenses of the Fund, (excluding interest, brokerage commissions and taxes)
exceeds 0.75% through November 30, 1995 and .80% through March 31, 1997.
Accordingly, for the six months ended May 31, 1996, Saturna Capital waived
$6,762 of the advisory fee.
In accordance with the Fund's agreement with its custodian bank, National City
Bank, for the six months ended May 31, 1996, custodian fees incurred by the
Fund, amounted to $580.
One trustee is also a director and officer of Saturna Capital Corporation.
The Trust acts as a distributor of its own shares, except in those states in
which Investors National Corporation (a subsidiary of Saturna Capital
Corporation) is itself registered as a broker-dealer and acts as distributor
without compensation. Saturna Capital Corporation acts as shareowner servicing
(transfer) agent for the Fund, for a monthly fee plus certain expenses. For the
six months ended May 31, 1996, the Fund paid such a fee of $2,309.
Effective January 1, 1996 the unaffiliated trustees receive a fee of $100 per
meeting attended each, and in the period ending May 31, 1996, such fees totalled
$600. On May 31, 1996, the trustees, officers and their immediate families as a
group owned none of the outstanding shares of the Fund.
Note 4--INVESTMENTS
At May 31, 1996, the net unrealized appreciation of investments for the Fund of
$93,437 comprised gross unrealized gains of $128,873 and gross unrealized losses
of $(35,436).
During the six months ended May 31, 1996, the Fund purchased $199,188 of
securities and sold/matured $362,712 of securities.
IDAHO TAX-EXEMPT FUND,
A PORTFOLIO OF SATURNA INVESTMENT TRUST
Saturna Capital
MUTUAL FUNDS
1-800/SATURNA
(800/728-8762)
[[email protected]]
This report is issued for the information of the shareowners of the Fund. It is
not authorized for distribution to prospective investors unless it is
accompanied or preceded by an effective prospectus relating to the securities of
the Fund. Idaho Tax-Exempt Fund is a series of Saturna Investment Trust.
GRAPHIC OMITTED (OUTLINE OF IDAHO)
SEMI-ANNUAL REPORT
MAY 31, 1996
