IDAH0 TAX-EXEMPT FUND ANNUAL REPORT
November 30, 1996
DEAR SHAREOWNERS:
1996 was a year of patience and determination for fixed income investors.
Concern over excessive economic growth and the potential for rising inflation
pushed interest rates higher and bond prices lower through July. But high taxes
and restrictive monetary policy kept the economy and inflation under control. In
the end, Idaho Tax-Exempt Fund provided a total 4.66% return for fiscal 1996.
The current tax-exempt yield of 4.74% is equivalent to 8.54% taxable yield for
top-bracket Idaho taxpayers.
Looking forward, we foresee a positive environment for fixed income investments.
Modest growth and low inflation should continue, allowing interest rates to move
lower into 1997. Congress will limit federal spending. The cautious monetary
policy of the Federal Reserve will continue under Greenspan's leadership. The
highly competitive world economy limits inflation's potential.
Idaho Tax-Exempt Fund has over 9 full years of operating experience. Total
return since inception has averaged 6.70% per year, almost entirely tax-free.
The Fund maintains its conservative approach to credit quality (portfolio
average rating is AA-) and maturity risk (portfolio average maturity is 7.1
years). We shun risk enhancing techniques such as derivatives or leverage in the
Fund. We buy only quality Idaho municipal bonds, which can be hard to find,
rather than substitutes from places like Puerto Rico or Guam. We seek to improve
yield through low operating expenses rather than high portfolio risks.
As your portfolio manager, I welcome opportunities to hear from shareowners and
prospective investors. As a true no-load mutual fund, the Fund provides
investors with the advantages of daily liquidity, professional management, and a
proven record of relative price stability. Thank you for investing with us, and
our best wishes for the New Year.
PHELPS MCILVAINE,
VICE PRESIDENT, PORTFOLIO MANAGER
<PAGE>
<TABLE>
<CAPTION>
INVESTMENTS
November 30, 1996
RATING* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
- -------------------------------------------------------------------------------
ELECTRIC POWER (2.1%)
<S> <C> <C> <C>
AAA Idaho Falls
Electric Revenue 6.75%due $100,000 $105,344
4/1/2019
GENERAL OBLIGATIONS (33.5%)
AA Ada and Canyon 6.65%due 100,000 108,330
Counties 1/30/2011
Joint School Dist 7.375%due 100,000 110,200
#2 Meridian 7/30/2000
A- Bannock County 6.00%due 100,000 103,684
County Jail Bond 9/1/2012
AAA Boise City ID 5.50%due 95,000 97,506
UTGO ISD 7/30/2011
AA- " 5.50%due 150,000 152,005
7/30/2016
A Bonneville 7.00%due 100,000 106,673
Cnty SD #91 8/1/2008
AAA Canyon County ISD 5.40%due 100,000 101,752
#132 7/30/2011
A Canyon County SD 5.90%due 50,000 52,079
#135 Notus 8/1/2005
" 6.00%due 50,000 52,201
8/1/2006
" 6.00%due 50,000 52,222
8/1/2007
AAA Gooding County
(Wendell)
School Dist.#232 6.00%due 55,000 57,606
8/1/2008
AAA Kootenai County
School District 6.00%due 100,000 104,831
#273 8/1/2012
AAA Madison County
School District 5.60%due 150,000 153,890
#321 2/1/2010
AA Payette County 6.50%due 80,000 86,777
7/31/2008
AA School District 6.75%due 155,000 169,935
#372 7/31/2009
" 6.75%due 100,000 109,193
7/31/2010
AAA Teton County 5.50%due 75,000 77,292
ID UTGO 8/01/2012 -------- --------
SUB-TOTAL 1,610,000 1,696,176
HOUSING (9.4%)
AA Idaho Housing
Authority Single
Farm Mortgage, B-1 6.85%due 110,000 113,308
7/1/2012
AA Idaho Housing
Authority
Refunding Ser A 6.15%due 150,000 154,380
7/1/2024
AA Idaho Housing
Authority Single
Fam Mort Mezz-E-1 6.60%due 115,000 119,250
7/1/2011
AA Idaho Housing
Authority Single
Fam Mort Rev Ser B1 8.125%due 5,000 5,250
7/1/2019
" 8.00%due 25,000 26,095
1/1/2020
AA Idaho Housing
Authority Single 7.70%due 55,000 56,543
Fam Mort SR Ser C1 7/1/2017 -------- --------
SUB-TOTAL 460,000 474,826
IRRIGATION (4.2%)
AA Boise Kuna 6.00%due 200,000 211,390
Irr. Dist. 7/1/2008
MEDICAL/HOSPITALS (4.6%)
Idaho Health
Facility
AA St. Alphonsus 6.25%due 175,000 187,350
Medical Center 12/1/2012
AA " 6.25%due 45,000 47,551
12/1/2022 -------- --------
SUB-TOTAL 220,000 234,901
REAL ESTATE (6.6%)
A Idaho Falls 8.05%due 100,000 115,820
Redevel. Agency Rev 10/1/2006
" 8.125%due 100,000 115,786
10/1/2008
AAA Idaho St Bldg 5.70%due 100,000 104,571
Authority Ser C 9/1/2007 -------- --------
SUB-TOTAL 300,000 336,177
(The accompanying notes are an integral part of these
financial statements)
<PAGE>
Investments, continued
RATING ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
- -------------------------------------------------------------
ROADS (5.6%)
A Payette L.I.D. 7.60%due 30,000 30,366
5/1/2005
A Post Falls, 6.75%due 10,000 9,985
Kootenai County 4/15/1997
L.I.D. #91-1 7.00%due 10,000 9,987
4/15/1998
" 7.20%due 15,000 14,990
4/15/1999
" 7.40% 15,000 15,004
4/15/2000
" 7.60%due 15,000 15,010
4/15/2001
" 7.75%due 20,000 20,018
4/15/2002
" 7.95%due 20,000 20,030
4/15/2003
" 7.95%due 20,000 20,029
4/15/2004
" 7.95%due 20,000 20,020
4/15/2005
" 7.95%due 20,000 20,019
4/15/2006
" 7.95%due 20,000 20,018
4/15/2007
A Post Falls L.I.D. 5.40%due 35,000 34,957
#91-4 9/1/2002
" 5.60%due 35,000 34,838
9/1/2003 -------- -------
SUB-TOTAL 285,000 285,271
STATE EDUCATION (14.5%)
AAA Boise St. Univ. 6.20%due 200,000 212,694
4/1/2010
AAA Fee Revenue 6.30%due 100,000 106,437
4/1/2014
A- Idaho State
University Student
Fee Revenue 6.40%due 250,000 269,591
4/1/2014
AAA University of Idaho
Student Fee Revenue 7.70%due 85,000 89,313
4/1/2010
A- University of Idaho
Fee Revenue 6.85%due 50,000 54,738
4/1/2016 -------- --------
SUB-TOTAL 685,000 732,773
SEWER (4.9%)
A Hayden Lake 6.00%due 60,000 59,516
L.I.D. #1 9/1/2004
A Troy Sewer 6.90%due 10,000 10,001
Revenue 2/1/1997
" 7.00%due 10,000 10,188
2/1/1998
" 7.10%due 10,000 10,327
2/1/1999
" 7.20%due 10,000 10,466
2/1/2000
" 7.30%due 10,000 10,470
2/1/2001
" 7.40%due 10,000 10,463
2/1/2002
" 7.50%due 10,000 10,474
2/1/2003
" 7.60%due 10,000 10,446
2/1/2004
" 7.70%due 15,000 15,679
2/1/2005
" 7.80%due 15,000 15,731
2/1/2006
" 7.90%due 15,000 15,747
2/1/2007
" 8.00%due 15,000 15,754
2/1/2008
" 8.00%due 20,000 21,035
2/1/2009
" 8.00%due 20,000 21,118
2/1/2010 -------- --------
SUB-TOTAL 240,000 247,415
WATER SUPPLY (11.0%)
A- American Falls 7.25%due 70,000 76,302
Res. 5/1/2004
Ref. Series A 7.625%due 150,000 164,630
5/1/2021
A McCall Water 6.25%due 200,000 204,516
Rev., Ser 1994 9/1/2008
A McCall Water 6.375%due 70,000 74,402
Revenue 9/1/2014
A Ucon Water & 7.75%due 35,000 37,338
Sewer Rev. Ref. 12/1/2002 -------- --------
SUB-TOTAL 525,000 557,188
-------- --------
TOTAL INVESTMENTS Cost$4,682,148 $4,625,000 $4,881,461
(96.4%) ==========
Other Assets (net
of liabilities) (3.6%) 182,773
--------
Total Net Assets (100%) $5,064,234
===========
<FN>
*
These unaudited bond ratings reflect the adviser's current rating of each bond,
as determined using Standard & Poor's and Moody's ratings. (The accompanying
notes are an integral part of these financial statements)
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data per share of capital
Sept. 4'87
stock outstanding throughout the period: (commencement
of operations)
to
For Year Ended November 30
---------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 NOV.30 '87*
---- ---- ---- ---- ---- ---- ---- ---- ---- -----------
NET ASSET VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AT BEGINNING 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 0.27 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) (0.03) 0.52 (0.46) 0.12 0.09 0.07 (0.04) 0.09 (0.05) 0.02
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total From 0.24 0.78 (0.19) 0.37 0.37 0.37 0.29 0.44 0.30 0.04
Investment
Operations
LESS DISTRIBUTIONS
Dividends (from
net investment
income) $(0.27)$(0.26)$(0.27)$(0.25)$(0.29) $(0.30)$(0.33)$(0.35)$(0.35) $(0.01)
Distributions
(from capital
gains) 0.00 0.00 (0.01) (0.05)(0.025) 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----- ---- ---- ---- ---- ----
Total
Distributions (0.27) (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 $5.25 $5.28 $4.76 $5.23 $5.16 $5.10 $5.03 $5.07 $4.98 $5.03
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN 4.66% 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 $5,064 $5,220 $6,841 $7,367 $5,808 $3,803 $2,540 $ 808 $ 335 $ 29
Ratio of expenses
to average net
assets+ 0.79% 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+ 5.10% 5.07% 5.28% 4.79% 5.64% 6.08% 6.74% 6.51% 6.58% 0.56%
Portfolio
turnover rate 9% 28% 36% 31% 17% 15% 17% 13% 100% 0%
<FN>
*Not annualized annualized
+
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 $.01, $.016, $.007,$.009, $.008, $.02, $.02,
$.05, $.10, $.19, and $.01 respectively. The increase to the ratio of expenses
to average daily net assets would be .27%, .26%, .14%,.18%, .17%, .54%, 1.01%,
1.25%, 2.24%, and .11%, respectively.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1996
ASSETS
<S> <C>
Municipal Bond Investments
(cost $4,655,657) $4,881,461
Cash 93,746
Interest receivable 93,850
Insurance deposit 801
----------
Total Assets $5,069,858
----------
LIABILITIES
Payable to affiliate 5,624
----------
Total Liabilities 5,624
----------
NET ASSETS $5,064,234
==========
FUND SHARES OUTSTANDING 964,641
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized,
no par value) 4,907,854
Undistributed net investment income (loss) 84
Accumulated net realized gain (loss)
on investments (69,508)
Unrealized net appreciation on investments 225,804
-----------
Net Assets applicable to Fund shares outstanding $5,064,234
===========
NET ASSET VALUE PER SHARE $5.25
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended November 30, 1996
INVESTMENT INCOME
<S> <C> <C>
Interest income $302,111
Amortization of bond premiums (10,769)
Accretion 202
---------
Gross Investment Income $291,544
EXPENSES
Investment adviser and administration fee 24,540
Professional fees 15,349
Shareowner servicing 4,232
Printing and postage 3,909
Filing and registration fees 1,878
Custodian Fees 1,128
Other expenses 864
--------
Total gross expenses 51,900
Less earnings credi (1,128)
Less advisory fee waive (11,923)
---------
Net expenses 38,849
--------
Net investment income 252,695
--------
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 586,517
Less cost of securities sold
based on identified cost 592,031
---------
Realized net loss (5,514)
--------
UNREALIZED GAIN (LOSS)ON INVESTMENTS
End of period 225,804
Beginning of period 251,225
---------
Decrease in unrealized gain
for the period (25,421)
---------
Net realized and unrealized
gain on investments (30,935)
---------
NET INCREASE IN NET ASSESTS RESULTING
FROM OPERATIONS $221,760
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS
Year ended Year ended
Nov.30,1996 Nov.30,1995
OPERATIONS:
<S> <C> <C>
Net investment income $ 252,695 $ 311,923
Net realized (loss) gain
on investments (5,514) (64,404)
Net increase (decrease)in
unrealized appreciation (25,421) 751,487
------------ ------------
Net increase (decrease)in
net assets 221,760 999,006
------------ ------------
DIVIDENDS TO SHAREOWNERS FROM:
Net investment income (252,571) (311,941)
------------ ------------
Capital gains distributions ------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from sales of shares 837,937 793,990
Value of shares issued in
reinvestment of dividends 191,502 226,992
------------ ------------
1,029,439 1,020,982
Cost of shares redeemed (1,154,708) (3,329,049)
------------ ------------
Net increase (decrease) in net
assets from share transactions (125,269) (2,308,067)
------------ ------------
Total (decrease) in net assests (156,080) (1,621,002)
NET ASSETS
Beginning of period 5,220,314 6,841,316
------------ ------------
End of period $5,064,234 $5,220,314
============ ============
(Including undistributed net investment income of $98 at November 30, 1996
and ($26) at November 30, 1995)
Shares of the Fund Sold and Redeemed
Number of shares sold 208,082 225,327
Number of shares issued in
reinvestment of dividends 36,855 44,240
Number of shares redeemed (269,057) (717,954)
------------- ------------
Net Increase (Decrease) in Number
of Shares Outstanding (24,120) (448,387)
============= ============
</TABLE>
(The accompanying notes are an integral part of these financial
statements)
<PAGE>
For the twelve-month period ending November 30, 1996, Idaho Tax Exempt Fund
returned shareholders +4.66%. At November 30, 1996, the price per share (Net
Asset Value) was $5.25 and the current yield was 4.74%.
For the year, on a relative basis municipal bonds performed well compared to
corporate and government debt. Municipal bonds recouped their relative losses
due to the 1995 "flat tax" scare and closed the year in a more normal
relationship to other bond sectors. Despite reasonably strong economic growth
and rising interest rates in the first half of 1996, bond prices have returned
to similar levels of one year ago. The bond market has become comfortable with
the possibility that economic growth does not necessarily lead to higher
inflation. And if the economy does slow, we expect to see inflation and interest
rates fall further.
The primary objective of the Fund is income exempt from federal and Idaho
personal income taxes. To earn high income, 24% of the Fund is invested in the
debt of non-rated issuers with strong creditworthiness. These issuers must, in
the opinion of the advisor, must have credit quality strong enough to earn at
least an "A" rating from a nationally recognized rating agency. In the last
fiscal year, the yield spread between highly rated and non-rated Idaho municipal
issues has narrowed. Non-rated paper performed well compared to higher rated
issues.
The secondary objective of the Fund is capital preservation. The average
maturity of the Fund may be the most important factor affecting principal values
in the portfolio. The effective average maturity of the Fund is now 7.1 years,
slightly less than the 7.9 years at the beginning of the fiscal year. We are
optimistic that interest rates will continue to fall in 1997 but we do not
believe that extending beyond the intermediate sector of the yield curve offers
enough additional return to compensate for the added risk to the Fund.
Idaho's economic outlook remains healthy. However, economic growth and
employment have slowed from the unusually high levels of 1994 and 1995. The
weakness in the computer industries, important to Idaho's income tax revenues,
appears to be passing. Idaho's superior quality of life continues to attract
significant immigration. Property values continue to increase in many areas,
providing additional protection to the value of many municipal bonds.
The current combination of high federal and state income taxes in Idaho creates
a substantial appetite among investors for tax-exempt bonds. Idaho municipals
benefit from an imbalance between the number of buyers and the number of issues
sold within the <PAGE>
state. This imbalance is especially important in weak markets when Idaho
bonds often outperform similar issues from other states. Idaho's outstanding
record of repaying municipal debt also fuels investor appetites.
The graph below compares the Idaho Tax-Exempt Fund`s performance to the
performance of the Lehman Brothers Composite Municipal Bond Index, a broad-based
municipal bond market index. To be comparable, the Municipal Index data includes
reinvested income (as computed by Lehman Brothers Fixed Income Research). Though
the Fund does not try to "beat" the Lehman Brothers Index or any other specific
index, the Fund's returns, considering its lower volatility, compares well to
that of the Index for the fiscal year, as shown in the accompanying chart.
Note that this graph compares an unmanaged, expense free index to an actively
managed Fund that has transaction and other costs. The Fund also stands ready to
buy and sell its securities to shareholders on a daily basis, as well as
providing a wide range of services to them. Additionally, it should be noted
that few if any investors are able to invest in an exact index portfolio because
of the large amount of securities involved to model such a index.
Were the Fund to target the index as an objective, the Fund might take greater
risk by extending the average maturity of its portfolio to take advantage of the
greater price fluctuation (for better or worse) available in such a portfolio.
As maintaining capital stability is also an objective of the portfolio, we
believe the Fund has performed well considering its investment objectives.
The graph shows that $10,000 invested in the Idaho Tax Exempt Fund at the end of
September 1987 would have grown to $21,893 at the end of November 1996. If the
$10,000 could have been invested in the Lehman Brothers Composite Municipal Bond
Index at the end of September 1987, then it would have grown to $18,028.
Date The Fund Lehman Index
Sep-87 $10,000 $10,000
11/30/88 10,679 11,391
11/30/89 11,658 12,644
11/30/90 12,351 13,620
11/29/91 13,294 15,019
11/30/92 14,290 16,525
11/30/93 15,341 18,356
11/30/94 14,763 17,392
11/30/95 17,225 20,678
11/30/96 18,028 21,893
(Graph Omitted)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1-ORGANIZATION
Saturna Investment Trust, (formerly Northwest Investors Trust) 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
<PAGE>
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 shareowners 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 year ended November 30, 1996, the Fund incurred advisory fee
expenses of $24,540.
Saturna Capital has volunteered to reimburse the Fund to the extent that total
expenses of the Fund, (excluding interest, brokerage commissions and taxes)
exceeds .80% through March 31, 1997. Accordingly, for the year ended November
30, 1996, Saturna Capital waived $11,923 of the advisory fee.
In accordance with the Fund's agreement with its custodian bank, National City
Bank, for the year ended November 30, 1996, custodian fees incurred by the Fund,
amounted to $1,128. The custodian waived its fees for earnings credits, as
represented in the Statement of Operations.
One trustee also serves as president of the Trust and is a director and
president 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
fiscal year ended November 30, 1996, the Fund paid such a fee of $4,232.
Unaffiliated trustees receive a fee of $100 per meeting attended. On November
30, 1996, the trustees, officers and their immediate families as a group owned
none of the outstanding shares of the Fund.
Note 4--FEDERAL INCOME TAXES
At November 30, 1996, the Fund had capital loss carryforwards of $69,918 which
expire in 2004. Prior to their expiration, such loss carryforwards may be used
to offset future net capital gains realized for Federal income tax purposes.
Note 5--INVESTMENTS
At November 30, 1996, the net unrealized appreciation of investments for the
Fund of $225,804 comprised gross unrealized gains of $230,249 and gross
unrealized losses of $4,445.
During the year ended November 30, 1996, the Fund purchased $468,452 of
securities and sold/matured $586,517 of securities.
<PAGE>
REPORT OF
INDEPENDENT ACCOUNTANTS
To the Board of Trustees
and Shareowners of
Saturna Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Idaho Tax-Exempt Fund, a series
of Saturna Investment Trust, (formerly Northwest Investors Trust; hereafter
referred to as the "Trust") at November 30, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the six years
in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at November 30, 1996 by correspondence with the
custodian and a broker, provide a reasonable basis for the opinion expressed
above. The financial statements of the Trust 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 statements.
Seattle, Washington
December 18, 1996
<PAGE>
IDAHO TAX-EMEMPT FUND
A PORTFOLIO OF SATURNA INVESTMENT TRUST
SATURNA CAPITAL
MUTUAL FUNDS
1-800/SATURNA
(800)/728-8762
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 of Idaho Map Omitted)
ANNUAL REPORT
NOVEMBER 30, 1996
