File No. 33-13247
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 15
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
POST-EFFECTIVE AMENDMENT NO. 15
SATURNA INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
1300 North State Street
Bellingham, Washington 98225-4730
(Address of Principal Executive Offices)
Registrant's Telephone Number - (360) 734-9900
Pandora Larner
1300 North State Street
Bellingham, Washington 98225-4730
(Name and Address of Agent for Service)
It is proposed that this filing will become effective: ______ Immediately
uponfiling pursuant to paragraph (b) of rule 485 ___X__ on March 26, 1997
pursuantto paragraph (b) of Rule 485 ______ 60 days after filing pursuant to
paragraph(a)(1) of Rule 485
______ on _______pursuant to paragraph (a)(1) of rule 485
______ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ _ on pursuant to paragraph (a)(2) of rule 485 If appropriate, check the
following box: ____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment. The above issuer has
registered an indefinite number of shares under the Securities Act of 1933
pursuant to Rule 24f-2 of the Investment Company Act of 1940. No filing fee is
due because of reliance on Rule 24f-2. The Notice required by such Rule for the
fiscal year ended November 30, 1996 was filed on January 21, 1997.
<PAGE>
CROSS REFERENCE SHEET
PART A PROSPECTUS CAPTIONS
1. Cover Page About the Trust;
Expenses
2. Synopsis Expenses
3. Condensed Financial Information Expenses; Financial
Highlights
4. General Description of Registrant About the Trust,
Investment Objectives
and Policies; Investment
Policies and Risk
Considerations
5. Management of the Fund Trust Management,
Investment Adviser
6. Capital Stock and Other Securities Capital Stock; Dividends
7. Purchase of Securities Being Offered Net Asset Value,
How to Buy Shares
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTIONS
10. Cover Page Cover Page
11. Table of Contents TABLE OF CONTENTS
12. General Information and History General Information and
History
<PAGE>
13. Investment Objectives & Policies INVESTMENT OBJECTIVES
AND POLICIES;
PORTFOLIO TURNOVER;
INVESTMENT
CONSIDERATIONS
14. Management of the Registrant MANAGEMENT OF THE TRUST
15. Control Persons and Principal PRINCIPAL HOLDERS OF
SECURITIES
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISORY
Services AND OTHER SERVICES
17. Brokerage Allocation and Other BROKERAGE ALLOCATION
Practices PORTFOLIO TURNOVER
18. Capital Stock and Other Securities Not Applicable
19. Purchase, Redemptions and Pricing PURCHASE, REDEMPTION AND
of Securities Being Offered PRICING OF SECURITIES
BEING OFFERED
20. Tax Status TAX STATUS
21. Underwriters Not Applicable
22. Calculations of Performance Data PERFORMANCE DATA
23. Financial Statements FINANCIAL STATEMENTS
<PAGE>
PART A
PROSPECTUS
<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
You should read this Prospectus before investing in the Funds. Please read it
carefully and keep it for future reference. A Statement of Additional
Information dated March 26, 1997, was filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. You may obtain
a free copy at the SEC website (www.sec.gov) or the Saturna website
(www.saturna.com), or by contacting:
SATURNA CAPITAL
1300 N. STATE STREET
BELLINGHAM, WA 98225
800/ SATURNA [800/ 728-8762]
E-MAIL: [email protected]
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 OMITTED]
SEXTANT MUTUAL FUNDS
[GRAPHIC OMITTED]
FROM
[GRAPHIC OMITTED]
SATURNA CAPITAL
MUTUAL FUNDS
NO-LOAD,
NO SALES CHARGE,
NO 12B-1
PROSPECTUS
March 26, 1997
<PAGE>
EXPENSES
The table illustrates each Fund's operating expenses for the fiscal year ended
Nov. 30, 1996. 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.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<S> <C> <C> <C> <C>
Sextant Sextant Sextant Sextant
Growth International Short-Term Bond Income
Fund Fund Bond Fund Fund
------ ------ ------ ------
(1) (2)
Advisory fee (after waivers) 0.60% 0.62% 0.34% 0.00%
12b-1 Expenses NONE NONE NONE NONE
Other Expenses 0.35% 1.18% 0.51% 0.63%
Total Fund Operating Expenses 0.95% 1.80% 0.85% 0.63%
</TABLE>
<TABLE>
<CAPTION>
FOR EXAMPLE:
<S> <C> <C> <C> <C> <C>
Each Fund estimates
paying these expenses 1 year-- $10 $19 $9 $7
on a $1000 investment, 3 years-- $32 $61 $28 $21
assuming a 5% net 5 years-- $56 $106 $50 $37
annual return: 10 years-- $127 $242 $113 $84
<FN>
(1) Each Sextant Fund pays an Investment Advisory and Administrative Services
Fee of 0.60% annually. This fee is then subject to a performance adjustment
(plus or minus) of up to 0.30%.
(2) The Adviser voluntarily waives its advisory fee to limit the expenses of
the two Sextant bond funds to 0.60% annually through March 31, 1998. Moreover,
it waives its fee entirely when assets are less than $2 million. Earnings
credits allow the Funds' custodian to waive fees for all four Funds. Without
these limitations and with the maximum performance adjustment, Advisory fees
of the bond Funds might be as high as 0.80%, and Total Fund Operating Expenses
1.20%. The example assumes a continuation of the most recent year's fees and
limits for the 3, 5 and 10 year periods.
</FN>
</TABLE>
The preceding information is to help you understand the various (both direct and
indirect) expenses that an investor bears. This table is not a representation of
past or future expenses. Actual expenses are likely to be more or less than
those shown.
See FINANCIAL HIGHLIGHTS and INVESTMENT ADVISER for more details.
1
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each of the SEXTANT FUNDS follows. These schedules
were audited by Price Waterhouse LLP, independent accountants, whose report is
included in the Sextant Mutual Funds' Annual Report (incorporated by reference
into the Statement of Additional Information). These schedules should be read
with the other financial statements and notes in the Annual Report (available
without charge from the Trust), which also includes management's discussion of
each Fund's performance.
[GRAPHIC OMITTED]
SEXTANT INTERNATIONAL FUND
Selected data for a share of SEXTANT INTERNATIONAL FUND outstanding from
September 28, 1995 (commencement of operations) through November 30, 1996.
<TABLE>
<CAPTION>
<S> <C> <C>
Sept.28,'95
Year Ended (Inception)
Nov.30,'96 Nov.30,'95*
----------- -----------
NET ASSET VALUE AT BEGINNING OF PERIOD $4.99 $5.00
INCOME FROM INVESTMENT OPERATIONAS
Net investment income 0.03 (0.02)
Net gains or losses on securities (both 0.88 0.01
---- ----
realized and unrealized)
Total from investment operations 0.91 (0.01)
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.03) 0.00
Distributions (from capital gains) 0.00 0.00
---- ----
Total distributions (0.03) 0.00
NET ASSET VALUE AT END OF PERIOD $5.87 $4.99
TOTAL RETURN 18.16% (0.20)%
RATIOS / SUPPLEMENTAL DATA
Net assets ($000), end of period $695 $328
Ratio of expenses to average net assets + 1.80% 0.49%
Ratio of net investment income to average net
assets + 0.60% (0.38)%
Portfolio turnover rate 11% 12%
Average commission rate paid $0.0827 $0.0192
<FN>
+ For the above periods, all or a portion of the operating expenses were
waived. If costs had not been have waived and directly assumed, the
resulting increase to expenses per share in the period would have been $.03
and $.01, respectively. The increase to the ratio of expenses to average
monthly net assets would be .50% and .21%, respectively.
* no annualized
</FN>
</TABLE>
2
<PAGE>
[GRAPHIC OMITTED]
SEXTANT GROWTH FUND
Selected data for a share of SEXTANT GROWTH FUND. The following schedule for
each of the seven years ended November 30, 1996 has been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is included in the
Annual Report. 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sept 4,'87
(commencement
of operations)
For Year Ended November 30, to Nov.
--------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 30 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
NET ASSET VALUE AT BEGINNING
OF PERIOD $7.42 $5.82 $6.38 $5.93 $5.55 $4.93 $4.88 $4.88 $4.96 $5.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment 0.00 (0.03) (0.03) 0.01 0.01 0.04 0.27 0.28 0.30 0.06
income
Net gains or losses on securities
(both realized
and unrealized 0.50 1.82 (0.53) 0.45 0.38 0.60 0.01 0.00 (0.08) (0.04)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total from investment
operatiions 0.50 1.79 (0.56) 0.46 0.39 0.64 0.28 0.28 0.22 0.02
LESS DISTRIBUTIONS
Dividends (from net investment
income) 0.00 0.00 0.00 (0.01) (0.01) (0.02) (0.23) (0.28) (0.30) (0.06)
Distributions (from
capital gains) 0.00 (0.19) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Distributions 0.00 (0.19) 0.00 (0.01) (0.01) (0.02) (0.23) (0.28) (0.30) (0.06)
NET ASSET VALUE AT END
OF PERIOD $7.92 $7.42 $5.82 $6.38 $5.93 $5.55 $4.93 $4.88 $4.88 $4.96
TOTAL RETURN 6.74% 30.76% (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 $1,616 $1,137 $1,010 $1,425 $1,321 $947 $53 $1,356 $1,365 $315
Ratio of expenses to average
net assets + 0.95% 1.63% 1.50% 1.40% 1.60% 1.93% 1.06% 0.89% 0.25% .06%*
Ratio of net investment
income to average
net assets+ 0.01% (0.45)%(0.43)% 0.15% 0.17% 0.60% 5.25% 5.60% 5.86% .85%*
Portfolio turnover rate 32% 40% 12% 25% 46% 16% 29% 19% 20% 0%
Average commission
rate paid $.0458 $.0572
<FN>
+ For 1996, 1995 and for each of the above years prior to 1992, all or a portion
of the operating 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, $.01, $.05, .$.05, $.10, $.16, and $.02, respectively. The increase to the
ratio of expenses to average net assets would have been 0.18%, 0.21%, 0.76%,
1.02%, 1.28%, 2.02%, and 0.17%, respectively.
* not annualized
</FN>
</TABLE>
Fund shareowners changed the Fund's investment objectives on September 28, 1995
and on October 12, 1990. Consequently, data prior to 1995 in this table is
unlikely to be indicative of future operations of this Fund.
3
<PAGE>
SEXTANT BOND INCOME FUND
Selected data for a share of Sextant Bond Income Fund outstanding from March 1,
1993 (commencement of operations) through November 30, 1996.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Sept 28, 95
YEAR ENDED NOVEMBER 30, (inception) to
-------------------------
1996 1995 1994 NOV. 30,'95*
NET ASSET VALUE AT BEGINNING OF PERIOD $4.91 $4.39 $5.03 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.24 0.25 0.16
Net gains or losses on securities (both (0.12) 0.52 (0.64) 0.04
realized ----- ----- ----- -----
Total from investment operations 0.18 0.76 (0.39) 0.20
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.30) (0.24) (0.25) (0.167)
Distributions (from capital gains) (0.03) 0.00 0.00 (0.003)
----- ----- ----- -----
Total distributions (0.33) (0.24) (0.25) (0.17)
NET ASSET VALUE AT END OF PERIOD $4.76 $4.91 $4.39 $5.03
TOTAL RETURN 4.04% 17.69% (8.24)% 4.86%
RATIOS / SUPPLEMENTAL DATA
Net assets ($000), end of period $1,201 $1,096 $1,456 $1,662
Ratio of expenses to average net assets + 0.63% 0.54% 0.41% 0.35%
Ratio of net investment income to average net 5.96% 5.15% 5.48% 3.28%
assets +
Portfolio turnover rate 75% 77% 74% 36%
<FN>
+ For the above periods, all or a portion of the operating expenses were
waived. If these costs had not been have waived, the resulting increase to
expenses per share in each of the above periods would be $.03, $0.22, $0.13
and $.03, respectively. The increase to the ratio of expenses to average
monthly net assets would be .70%, .60%, .51% and .26%, respectively.
* not annualized
</FN>
</TABLE>
SEXTANT SHORT-TERM BOND FUND
Selected data for a share of Sextant Short-Term Bond Fund outstanding from
September 28, 1995 (commencement operations) through November 30, 1996.
[GRAPHIC OMITTED)
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE YEAR SEPT.28.'95 (Incep-
ENDED NOV.30,'96 TION)TO NOV. 30'95*
---------------- --------------
NET ASSET VALUE AT BEGINNING OF PERIOD $5.03 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.25 0.03
Net gains or losses on securities (both (0.03) 0.03
realized and unrealized ------ ------
Total from investment operations 0.22 0.06
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.25) (0.03)
Distributions (from capital gains) 0.00 0.00
------ ------
Total Distributions (0.25) (0.03)
NET ASSET VALUE AT END OF PERIOD $5.00 $5.03
TOTAL RETURN 4.85% 1.05%
RATIOS / SUPPLEMENTAL DATA
Net assets ($000), end of period $2,016 $878
Ratio of expenses to average net assets + 0.85% 0.23%
Ratio of net investment income to average 6.30% 0.68%
net assets +
Portfolio turnover rate 100% 0%
<FN>
+For the above period, all or a portion of the operating expenses were waived.
If costs had not been waived, the resulting increase to expenses per share in
the period would have been $.02 and $.007. The increase to the ratio of
expenses to average monthly net assets would be .52% and .16%, respectively.
* not annualized
</FN>
</TABLE>
4
<PAGE>
ABOUT THE SEXTANT FUNDS
The Sextant Funds provide basic elements in a balanced investment program. The
Funds are "no-load" funds, meaning that there are no sales or redemption
charges, nor do the Funds have any "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. SHORT-TERM BOND FUND seeks to preserve capital by
investing in short-term debt securities. BOND INCOME FUND, which invests in
longer-term debt securities, has the potential for greater income but the risk
of greater price fluctuation. Both seek a high level of current income.
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 sell their own shares to the public and invest the proceeds in a
securities portfolio. The value of each fund's own shares fluctuates as the
value of its portfolio securities fluctuates over time.
You purchase shares without any sales charge or "load." Because no charges are
deducted, the entire amount you pay for shares is invested in the Fund you
choose.
INVESTMENT OBJECTIVES AND POLICIES
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. It also may invest in
other securities suited for the Fund's investment objective. It may invest in
securities of smaller or newer companies as well as those of well-seasoned
companies of any size. The Fund is not designed for investors seeking current
income, and does not ordinarily invest in straight debt securities. The policy
of investing for long-term capital appreciation requires shareholder approval to
change.
SEXTANT INTERNATIONAL FUND'S seeks long-term capital appreciation by investing
in a diversified portfolio of foreign common stocks and other equity-type
securities (such as securities convertible into common stock and preferred
stocks). The Fund normally invests at least 65% of its total assets in
securities of non-U.S. issuers. The Fund is not designed for investors seeking
current income.
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 an
5
<PAGE>
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.)
As a matter of operating policy (changeable by the Board of Trustees), the Fund
presently limits its investments to those securities of foreign issuers that
trade and settle in the U.S. or to American Depository Receipts ("ADR's")
representing shares of foreign issuers.*
The Fund's policy of seeking long-term capital appreciation by investing in a
diversified portfolio of foreign securities requires shareholder approval to
change.
SEXTANT SHORT-TERM BOND FUND seeks 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 does 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. They also want less price
fluctuation than is likely from a longer-term fund, such as the Bond Income
Fund. 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.
SEXTANT BOND INCOME FUND seeks to provide a high level of current income. The
Fund invests primarily in marketable long-term debt securities. As an operating
policy (changeable by the Board of Trustees), the Fund normally maintains a
dollar-weighted average effective maturity in excess of ten years.+
Bond Income Fund seeks a higher level of current income than is generally
available from a shorter-term fund. It has greater levels of interest rate and
other risks associated with investment in longer-term securities.
Under normal market conditions, the Sextant Short-Term Bond Fund and Sextant
Bond Income Fund each invests at least 65% of its assets in "bonds," meaning:
o Marketable debt securities payable in U.S. dollars, rated within the three
highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa or A) or
by Standard & Poor's Corporation (AAA, AA or A);
o U.S. Government securities;
o High quality commercial paper; and
o Bank obligations, including repurchase agreements** of banks, having total
assets in excess of $1 billion.
*ADRs are receipts typically issured 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 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 pre-
payments and call provisions.
**A repurchase agreement involves the sales of securities to the Fund, with the
concurrent agreement of the seller to repurchase the securites 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
6
<PAGE>
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). Considered medium
grade, these securities 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 qualifying minimum for purchase, the
adviser is not required to dispose of it, but considers that factor in
connection with deciding whether to hold it in the Fund's portfolio.
Short-Term Bond Fund's policy of seeking a high level of current income
consistent with the preservation of capital requires shareholder approval to
change. Similarly, the Bond Income Fund's policy of pursuing a high level of
current income requires shareholder approval to change.
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 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.
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 investments.See the STATEMENT OF
ADDITIONAL INFORMATION for a more complete discussion of foreign investment
risks.
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
- ---------------------------------
experience both delays in liquidating the underlying securities and lossses.
7
<PAGE>
obligations in each Fund's portfolio,
as well as on market conditions. Interest rate fluctuations affect a Fund's net
asset value, but not the income received by the Fund from its portfolio
securities. Because prices and yields on debt securities vary over time, the
Fund's yield also varies.
ALL FUNDS
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.
The Sextant Funds are all "diversified." No Fund invests 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, the policies outlined in this section are changeable
the Board of Trustees. Each Fund has additional restrictions as outlined in the
STATEMENT OF ADDITIONAL INFORMATION.
INVESTMENT RESULTS
You receive a financial report showing the investments, income and expenses of
each Fund every six months. You may obtain current share values any time by
calling 888 / 732-6262.
HOW TO BUY SHARES
You may open an account and purchase shares by sending a completed application
with a check for $1,000 or more ($25 under a group or retirement plan) to the
Fund of your choice. The Funds do 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 $25. Once
your account is open, purchases can be made by check, ACH, or 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. To use
ACH to purchase or redeem shares, simply call your Fund. You also may wire money
to purchase shares (minimum wire purchase $500), though typically wiring banks
charge you a fee for this service. Call for details 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 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 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 optional plans and services, including
retirement plans and free Individual Retirement Accounts. Ma-
8
<PAGE>
terials describing these plans and applications may be obtained from
the Adviser.
Other plans offered by the Funds:
o automatic investment plan,
o a systematic withdrawal plan to provide regular payments to you, and o the
right to exchange your shares without charge for any other Saturna fund.
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 depends on the value of the investments in that Fund at the time of
your redemption. 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 Mutual Funds
Box 2838
Bellingham WA 98227-2838
Fax: 360 / 734-0755
You may redeem shares by a written request, with these payment options:
o Redemption check (no minimum) sent to registered owner(s).
o 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.
o Federal funds wire ($5000 minimum). The proceeds 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 telephone request, with these payment options:
o Redemption check (no minimum) sent to registered owner(s).
o ACH transfer ($100 minimum) with proceeds transferred to your bank account as
designated on your application. The ACH authorization must be received at
least two weeks before ACH can be used.
o Exchange ($25 minimum) for shares of any other Fund for which Saturna Capital
is adviser. If the exchange is your initial investment into this Fund, the new
9
<PAGE>
account automatically has the same registration as your original account. An
exchange is considered a closing capital transaction for tax purposes.
o Federal funds wire ($5000 minimum). Proceeds 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 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 are not responsible for the results of transactions reasonably believed
genuine.
CHECK WRITING
You may also redeem shares in your account by drawing checks on your account for
amounts of $500 or more.
Your Fund can mail you a small book of blank checks for a $10 fee. These checks
may be payable to any payee. Checks are redeemed at the net asset value next
determined after receipt. If you wish to use this feature, request the Check
Writing Privilege on the application. Note that, as with any redemption, each
check is a closing capital transaction for tax reporting purposes.
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.
10
<PAGE>
TRUST MANAGEMENT
Saturna Investment Trust is managed by a Board of Trustees, currently: Gary
Goldfogel, John E. Love, John S. Moore, and Nicholas F. Kaiser. 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 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 are Nicholas Kaiser (President), Phelps S.
McIlvaine (Vice President), Brian A. Anderson (Vice President), Meredith L. Ross
(Secretary), and Markell F. Kaiser (Treasurer).
Each Fund pays the Adviser an Investment Advisory and Administrative Services
Fee. The Fee covers compensation for portfolio management as well as certain
administrative services such as portfolio accounting and reporting, and
shareholder servicing. The base portion of the Fee is 0.60% of average net
assets of each Fund per annum, payable monthly. This base Fee is subject to
adjustment up or down depending on the investment performance of each Fund
relative to a specified Morningstar index.
For each month in which either GROWTH FUND's 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%.
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%.
Selected total return investment performance as published by Morningstar, Inc.
is the index used for comparison purposes. For each Fund, the Morningstar
category used is:
O SEXTANT GROWTH FUND:
"DOMESTIC GROWTH FUNDS"
O SEXTANT INTERNATIONAL FUND:
"FOREIGN STOCK FUNDS"
o SEXTANT BOND INCOME FUND:
"LONG-TERM BOND FUNDS"
o SEXTANT SHORT-TERM BOND FUND:
"SHORT-TERM BOND FUNDS"
11
<PAGE>
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 to conduct the business of the Funds, as well
as other expenses.
The Adviser's subsidiary, Investors National Corporation ("INC"), is a
broker-dealer engaged in a general brokerage business and conducts all its
transactions on an agency basis for "deep discount" commissions. Most stock
brokerage for the Trust is conducted through INC. The Adviser may allocate
brokerage to any broker in return for research or services and for selling
shares of any Fund. Investors National Corporation acts as distributor for the
Funds without compensation.
The Adviser voluntarily limits expenses of Bond Income Fund and Short-Term Bond
Fund to 0.60% through March 31, 1998. The Adviser entirely waives its fee as to
either of these Funds when assets are less than $2 million. A waiver has the
effect of subsidizing the yield for the period it is in effect.
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 $5 million; Amana Income Fund ($15 million);
and Amana Growth Fund ($6 million). The advisory fee for Idaho Tax-Exempt Fund
is .50% annually; the Amana Funds have an annual advisory and administration fee
of .95%. Saturna also manages individual private accounts.
Nicholas Kaiser, primary manager of the Growth and International Funds, has
managed mutual funds since 1976. Phelps McIlvaine, manager of Bond Income and
Short-Term Bond Funds, entered the investment business in 1976 and managed bond
hedge funds from 1987 to 1993. He managed the predecessor to Bond Income Fund
from 1994, and manages Idaho Tax-Exempt Fund, another series of the Trust.
Employees of the Adviser, including Fund managers, are permitted to engage in
securities transactions for their own accounts in accordance with a code of
ethics that, among other provisions, requires advance approval of all trades and
disclosure of all holdings.
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,
offered through a separate prospectus). The Trust, formerly known as Northwest
Investors Trust, 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 are called for
such pur-
12
<PAGE>
poses 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 distributes its net investment income and net realized capital gains
(if any) to 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 pay dividends from investment income daily and reinvest or distribute 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 that pays them, unless a
shareholder has elected to receive either or both in cash.
The Funds qualify as regulated investment companies under the Internal Revenue
Code, which requires distribution of substantially all net income and realized
net gains on investments. A Fund is relieved of federal income taxes on amounts
it distributes.
At year-end, the Funds report to you and 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. 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 your correct Social Security or Tax
Identification Number.
Shareowners who are not U.S. taxpayers may be subject to a 30% withholding tax
under U.S. provisions applicable to foreign investors, unless a reduced rate or
exemption is provided under a tax treaty. However, capital gain distributions
paid by the Funds are not subject to foreign withholding.
PERFORMANCE DATA
The Funds may publish current yield and average annual total return in
advertisements or other publications. In comparing a Fund investment with
alternatives, 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.
The Funds' 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 made on the first day of the period and reinvest all
dividends paid during the period in additional shares 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
13
<PAGE>
computation, see the STATEMENT OF ADDITIONAL INFORMATION.
<PAGE>
14
[GRAPHIC OMITTED]
INVESTMENT APPLICATION for
q Sextant GROWTH FUND
q Sextant INTERNATIONAL FUND
q Sextant BOND INCOME FUND
q 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 ther
--------------------------------------- --------------------------
Indicate name of corporation, other organization Tax Indentification
or fiduciary capacity. 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 $
------------
Make check payable to the Fund being purchased (minimum $1000).
<PAGE>
TELEPHONE REDEMPTION PRIVILEGES
You automatically have telephone redemption by check and telephone exchange
privileges unless you strike this line. Each Fund endeavors 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. The Fund
also provides 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.
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.
CHECK WRITING PRIVILEGE ($500 per check minimum)($10 checkbook charge)
qI(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
<PAGE>
PLEASE SAVE THIS QUICK GUIDE TO
THE SEXTANT MUTUAL FUNDS
ACCOUNTS
Open your account by sending a completed application, indicating your
Fund selection. For convenience, you may have your account consolidated
with others of your household or other group. We appoint a trained
representative to whom you may refer all questions regarding your
account(s). Extra forms are needed for certain accounts, such as IRA's.
INVESTMENTS
Initial investments are $1,000 or more ($25 under a group or retirement
plan), and must be accompanied by an application. Additional investments
may be made for $25 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, ACH, and
checkwriting. You are 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 new 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. Fund prices are
recorded daily at 888/732-6262 and on the Internet at www.saturna.com.
FREE RETIREMENT PLANS
Saturna Capital offers 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
You may consult the applicable pages of this prospectus for additional
details on the Sextant Funds and their shareholder services. Please call
800 / SATURNA (800/728-8762) with any questions.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
SATURNA INVESTMENT TRUST
SEXTANT GROWTH FUND
SEXTANT BOND INCOME FUND
SEXTANT INTERNATIONAL FUND
SEXTANT SHORT-TERM BOND FUND
1300 N. State Street
Bellingham, Washington 98225
360-734-9900
800-SATURNA
STATEMENT OF ADDITIONAL INFORMATION
March 26, 1997
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 March 26, 1997. A free Fund prospectus may be obtained
by telephoning the numbers above or writing the Funds at the address shown
above.
1
<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.....................................15
Investment Advisory and Other Services..............................16
Brokerage Allocation................................................19
Purchase, Redemption and Pricing of Securities Being Offered........20
Tax Status..........................................................21
Financial Statements................................................22
Appendix............................................................23
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 have no
par value and when issued are fully paid and non-assessable and have no
preemptive, conversion, or sinking fund rights.
2
<PAGE>
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 invests 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.
3
<PAGE>
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
applic able 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. (ADR's are receipts typically issued by an
American bank or trust company evidencing ownership of the underlying foreign
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" ADR's. 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
results in a corresponding change in the U.S. dollar value of the Fund's assets
denominated in that currency. Such changes 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
rises. 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.
4
<PAGE>
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 does 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
affect a Fund's net asset value, but not the income received by the Fund from
its portfolio securities. However, because prices and yields on debt securities
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 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.
5
<PAGE>
Under normal market conditions, each of Sextant Short-Term Bond Fund and Sextant
Bond Income Fund invests at least 65% of the value of its total assets (taken at
market value at the time of investment) in "bonds," meaning:
o 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)*
o U.S. Government Securities;
o 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
o 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 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
- ----------------------------
*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.
6
<PAGE>
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. 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
7
<PAGE>
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 normally fluctuates
inversely with changes in market interest rates. Generally, when market interest
rates rise the prices of bonds fall; when rates fall, bond prices generally
rise. In addition, there is a risk that the issuer of a bond or other security
fails 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 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
8
<PAGE>
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 purchases 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 does 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.
9
<PAGE>
The portfolio turnover rate of the Sextant Growth Fund (previously Northwest
Growth Fund) for the fiscal years ended November 30, 1996, 1995, and 1994, was
32%, 40%, and 12%, respectively.
The portfolio turnover rate of the Sextant Bond Income Fund (previously
Washington Tax-Exempt Fund) for the fiscal years ended November 30, 1996, 1995
and 1994 was 75%, 77%, and 74%, respectively.
Portfolio turnover for the Sextant Short-Term Bond Fund for the fiscal year
ended November 30, 1996 and the period September 28, 1995 (inception) through
November 30, 1995, was 100% and 0%, respectively. Portfolio turnover for the
Sextant International Fund for the fiscal year ended November 30, 1996 and the
period September 28, 1995 (inception) through November 30, 1995, was 11% and
12%, respectively.
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.
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 total return for the one year period ended November
30, 1996 was 6.74%. Average annual total return from April 1, 1987 (inception of
the predecessor fund) through November 30, 1996 was 7.41%. Performance figures
for the Sextant Growth Fund for the period prior to October 12, 1990 reflect the
Fund's investment objective at that time of tax-free income and capital
preservation.
The total return of the Sextant Bond Income Fund (formerly Washington Tax-Exempt
Fund) for the one year period ended November 30, 1996 was 4.04%. Average annual
total return for the period March 1, 1993 (commencement of operations) through
November 30, 1996, was 4.23%.
The total return of the Sextant Short-Term Bond Fund and Sextant International
Fund for the one-year period ended November 30, 1996 was 4.85% and 18.16%,
respectively. Average annual total returns for the period September 28, 1995
(commencement of operations) through November 30, 1996 was 5.06% and 15.09%,
respectively. 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:
10
<PAGE>
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 yield on Sextant Bond Income Fund for the 30-day period ended November 30,
1996 was 6.3%. The yield on Sextant Short-Term Bond Fund for the 30-day period
ended November 30, 1996 was 7.1%. 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 are 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:
11
<PAGE>
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 500 Stock Index American Stock Exchange Composite Index Standard &
Poor's 400 Industrials NASDAQ Composite Wilshire 5000 NASDAQ Industrials
Russell 2000 Lipper General Equity Fund Average Lipper Capital
Appreciation Fund Lipper Equity Funds Average
Average Lipper Growth & Income Fund Average
Lipper Growth Funds Average Lipper Balanced Fund Average
Lipper Small Company Growth Fund Ibbotson Common Stocks Index
Average
Lipper Equity Income Fund Average
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, MD - Trustee
1500 N. State Street, Bellingham, WA 98225.
Pathologist. Whatcom County Medical Examiner, Bellingham WA.
NICHOLAS KAISER, MBA, CFA - President and Trustee * 1300 N. State Street,
Bellingham, WA 98225.
12
<PAGE>
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, PhD - Trustee
College of Business and Economics, Western Washington University,
Bellingham, WA 98225-9077
Professor of Business Administration
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
PANDORA M. LARNER - Secretary
1300 N. State Street, Bellingham, WA 98225.
Saturna Capital Corporation, October 1996 to present.
Medical supervisor, 1991 to 1993.
Housewife, 1994.
Clothing sales representative, 1995 to Feb. 1996.
Medical receptionist, Feb. 1996 to Sept. 1996.
TERESA K. ANDERSON, CMA., MBA - Treasurer
1300 N. State Street, Bellingham, WA 98225.
Assistant Treasurer, Saturna Capital Corporation, December, 1993 to
present.
Student prior to December, 1993.
* Nicholas Kaiser is 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). Mr. Kaiser receives no
compensation from the Trust, nor are the other officers of the Trust paid for
their duties with the Trust.
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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
- -------------------------------------------------------------------------------
GARY GOLDFOGEL, $400 $0 $0 $400
Trustee
JOHN E. LOVE, 400 0 0 400
Trustee
JOHN S. MOORE, 400 0 0 400
Trustee
NICHOLAS F. KAISER, 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 November 30, 1996
officers, trustees and their families as a group, own the following shares of
the Funds
Percent of
FUND SHARES OWNED OUTSTANDING
---- ------------ -----------
Sextant Short-Term Bond 88,347 14%
Sextant Bond Income Fund 69,409 30%
Sextant Growth Fund 23,793 14%
Sextant International Fund 32,618 32%
14
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of February 7, 1997 the shareholders of Sextant Short-Term Bond Fund owning
5% or more were as follows:
NAME SHARES PERCENTAGE
---- ------- ----------
SAAR Foundation, Inc. 93,692 23.19%
Robert L. Foote 57,503 14.23%
Investors National Corporation. 31,891 7.89%
Henry D. Klein 31,682 7.84%
Evelyn C. Heaps 27,552 6.82%
Michael McRory, DDS Pension Plan 20,249 5.01%
As of February 7, 1997 the shareowners with 5% or more of Sextant Bond Income
Fund were as follows:
NAME SHARES PERCENTAGE
---- ------ -----------
Nicholas F. Kaiser
Markell F. Kaiser, Jt. Ten. 45,630 17.88%
Carol Lingow, Guardian
FBO Robert C. Schmidt 27,658 10.84%
Luzenia B. Redpath 26,821 10.51%
Loie E. Haggen 17,156 6.72%
Saturna Capital Corporation 17,024 6.67%
Patricia A Kust IRA Rollover 16,333 6.40%
David K. Heaps IRA Rollover 15,906 6.23%
Frederick M. Graham
Mary J. Graham, Jt. Ten 14,104 5.52%
15
<PAGE>
As of February 7, 1997 the shareowners owning 5% or more of Sextant Growth Fund
were:
NAME SHARES PERCENTAGE
---- ------ ----------
Nicholas F. Kaiser IRA Rollover 17,448 8.14%
Sutherland Enterprises Ltd. 11,712 5.46%
As of February 7, 1997 the only shareowners with 5% or more of Sextant
International Fund were:
NAME SHARES PERCENTAGE
---- ------ ----------
Nicholas F. Kaiser IRA Rollover 23,613 20.22%
Heritage Education Trust, Inc. 9,584 8.20%
Robert F. Kaiser IRA Rollover 8,995 7.70%
Norman H. Bell MD 7,116 6.09%
Northwest Eye Clinic Inc. Employee
Pension Trust #13 Frederick Kaiser 6,968 5.96%
Elaine C. Oberleitner Trust
Kathryn Oberleitner, Kurt 6,043 5.17%
Kathryn D. Oberleitner 5,867 5.02%
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
16
<PAGE>
.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 is used as the index for comparison
purposes. The comparative Morningstar categories used are:
Sextant Growth Fund: "DOMESTIC GROWTH FUNDS"
Sextant International Fund: "FOREIGN STOCK FUNDS"
Sextant Bond Income Fund: "LONG-TERM BOND FUNDS"
Sextant Short-Term Bond Fund: "SHORT-TERM BOND FUNDS"
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 0.60% through March 31, 1998. 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.
17
<PAGE>
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 served as the independent accountants for the Trust for the
fiscal year ending November 30, 1996. Tait, Weller and Baker, Two Penn Center
Plaza, Philadelphia, PA 19102 have been appointed by the Trustees to serve as
independent accountants for the fiscal year ending November 30, 1997. 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
18
<PAGE>
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, 1996, no Sextant fund paid
transfer agent fees. For the fiscal year ended November 30, 1995, Sextant Growth
Fund, (formerly Northwest Growth Fund) paid transfer agent fees of $1,272, and
Sextant Bond Income Fund (formerly Washington Tax-Exempt Fund) paid $842.
For the fiscal year ended November 30, 1996, Sextant Growth Fund paid investment
adviser and administration fees of $7,540. For fiscal 1995, Sextant Growth Fund
paid investment adviser and administration fees of $7,255, a portion of which
was paid under the new contract approved by shareholders effective September 28,
1995. For fiscal 1994, under the former contracts Sextant Growth Fund paid
$9,318 in administrative and advisory fees, and no waiver or reimbursement was
required.
For the fiscal year ended November 30, 1996, Sextant Bond Income Fund paid
investment adviser and administration fees of $6,640 (all of which was waived by
Saturna Capital). For fiscal 1995, Sextant Bond Income Fund paid investment
adviser and administration fees of $5,838, all of which was waived under the
adviser's voluntary expense reimbursements. For fiscal 1994, under the former
contracts Sextant Bond Income Fund paid $8,394 in administrative and advisory
fees of which Saturna Capital waived or reimbursed $8,046.
For the fiscal year ended November 30, 1996 and the period September 28, 1995
(inception) through November 30, 1995, Sextant Short-Term Bond Fund paid Saturna
Capital investment adviser and administration fees of $15,583 (of which $8,375
was waived) and $605 (entirely waived), respectively.
Similarly, for the fiscal year ended November 30, 1996 and the period September
28, 1995 (inception) through November 30, 1995, Sextant International Fund paid
Saturna Capital investment adviser and administration fees of $3,148 and $296,
respectively.
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
19
<PAGE>
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. Most stock and US Government bond brokerage for the
Trust is conducted through Investors National Corporation, and the Board of
Trustees has given permission for the Adviser to so direct. As this brokerage is
conducted through an affiliate of the Adviser, the Trustees 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 receive detailed quarterly monitoring reports and review brokerage
procedures at least annually.
For fiscal years 1996, 1995 and 1994, Sextant Growth Fund paid $2,536, $3,188
and $1,514 in brokerage commissions to Investors National Corporation. For the
year ended November 30, 1996 and the period September 28, 1995 (inception) to
November 30, 1995, Sextant International Fund paid $1,562 and $266, respectively
in commissions to Investors National Corporation. This represented 100% of each
Fund's commissions and aggregate brokerage transactions for each of these years.
For fiscal years 1996, 1995 and 1994 Sextant Bond Income Fund paid $49, $0, and
$0 in brokerage commissions to Investors National Corporation. For the fiscal
year ended November 30, 1996 and the period September 28, 1995 (inception)
through November 30, 1995, Sextant Short-Term Bond Fund paid $98 and $0 in
commissions to Investors National Corporation.
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 is
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 is normally 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
20
<PAGE>
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 differs, 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 or 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, 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 are 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. Income dividends 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
21
<PAGE>
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 is 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, 1996, together with the report of independent accountants
dated December 18, 1996, are considered a part of the Statement of Additional
Information and are incorporated by reference.
22
<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 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:
23
<PAGE>
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 are denoted with a plus (+)
sign.
24
<PAGE>
CROSS REFERENCE SHEET
PART A PROSPECTUS CAPTIONS
1. Cover Page About the Fund;
Expenses
2. Synopsis Not Applicable
3. Condensed Financial Information Expenses;
Financial Highlights
4. General Description of Registrant About the Fund,
Investment Objectives
and Policies; Investment
Policies and Risk
Considerations
5. Management of the Fund Trust Management,
Investment Adviser
6. Capital Stock and Other Securities Capital Stock;
Dividends
7. Purchase of Securities Being Offered Net Asset Value,
How to Buy Shares
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
1
<PAGE>
STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTIONS
10. Cover Page Cover Page
11. Table of Contents TABLE OF CONTENTS
12. General Information and History General Information and
History
13. Investment Objectives & Policies INVESTMENT OBJECTIVES
AND POLICIES;
PORTFOLIO TURNOVER;
INVESTMENT
CONSIDERATIONS
14. Management of the Registrant MANAGEMENT OF THE TRUST
15. Control Persons and Principal PRINCIPAL HOLDERS OF
Holders of Securities SECURITIES
16. Investment Advisory and Other INVESTMENT ADVISORY
Services AND OTHER SERVICES
17. Brokerage Allocation and Other BROKERAGE ALLOCATION
Practices PORTFOLIO TURNOVER
18. Capital Stock and Other Securities Not Applicable
19. Purchase, Redemptions and Pricing PURCHASE, REDEMPTION AND
of Securities Being Offered PRICING OF SECURITIES
BEING OFFERED
20. Tax Status TAX STATUS
2
<PAGE>
21. Underwriters Not Applicable
22. Calculations of Performance Data PERFORMANCE DATA
23. Financial Statements FINANCIAL STATEMENTS
3
<PAGE>
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.
You should read this Prospectus before investing in the Fund. Please read it
carefully and keep it for future reference. A Statement of Additional
Information dated March 26, 1997 has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. You may obtain
a free copy at the SEC website (www.sec.gov) or the Saturna website
(www.saturna.com), or by contacting:
SATURNA CAPITAL
1300 N. STATE STREET
BELLINGHAM, WA 98225
800/ SATURNA [800/ 728-8762]
E-MAIL: [email protected]
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COM-MISSION OR ANY STATE SECURITIES AUTHORITY NOR HAS THE COM-MISSION
OR ANY STATE AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[GRAPHIC OMITTED]
IDAHO TAX-EXEMPT FUND
FROM SATURNA CAPITAL
[GRAPHIC OMITTED]
MUTUAL FUNDS
NO-LOAD,
NO SALES CHARGE,
NO 12B-1
PROSPECTUS
March 26, 1997
4
<PAGE>
EXPENSES
The table illustrates Fund operating expenses for the fiscal year ended November
30, 1996. The Fund imposes 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.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management and Administrative Fees (after waiver) 0.26%
12b-1 Expenses NONE
Other Expenses 0.53%
Total Fund Operating Expenses 0.79%*
FOR EXAMPLE:
The Fund estimates paying 1 year -- $ 8
these expenses on a $1,000 3 years-- $ 26
investment, assuming 5% 5 years-- $ 46
annual return: 10 years-- $105
* The Adviser voluntarily limits operating expenses of the Fund. This
limit, first adopted in October 1990, is 0.80% annually and extends
through March 31, 1998. Without the limitation, the management and
administrative fee would have been 0.50% and operating expenses of
the Fund would have been 1.03%. The example assumes a continuation
of this expense cap for the 3, 5 and 10 year periods.
The preceding information is to help understand the various (both direct and
indirect) expenses that an investor bears. This table should not be considered a
representation of past or future expenses. Actual expenses may be more or less
than those shown. See FINANCIAL HIGHLIGHTS and INVESTMENT ADVISER for more
details.
5
<PAGE>
FINANCIAL HIGHLIGHTS
[GRAPHIC OMITTED]
Selected data for a share of IDAHO TAX-EXEMPT FUND outstanding throughout each
priod. The schedule for each of the seven years ended November 30, 1996 was
audited by Price Waterhouse, LLP independent accountants, whose report is
included in the Fund's Annual Report (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 in the Annual Report (available without charge
from the Fund), which also includes management's discussion of the Fund's
performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sept.4,'87
(commence-
ment of op-
FOR YEAR ENDED NOVEMBER 30 erations)to
----------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 Nov.30 87*
----- ----- ----- ----- ----- ----- ----- ----- ----- ---------
NET ASSET VALUE 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 investment
operations 0.24 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) (0.27) (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 10% 28% 36% 31% 17% 15% 13% 100% 0% 17%
<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 $.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 * Not annualized
</FN>
</TABLE>
6
<PAGE>
ABOUT THE FUND
IDAHO TAX-EXEMPT FUND provides investors the opportunity to receive income
exempt from both federal and Idaho income tax. Preservation of capital is a
secondary objective. The Fund is "no-load," meaning that there are no sales or
redemption charges, nor does the Fund have any "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 sell their own shares to the public and invest the proceeds in a
securities portfolio. The value of the funds' own shares fluctuates as the value
of its securities portfolio changes over time.
You may purchase shares without any sales charge or "load." Because no charges
are deducted, the entire amount you pay for shares is invested in the Fund.
INVESTMENT OBJECTIVES AND POLICIES
The IDAHO TAX-EXEMPT FUND seeks 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 provides investors the
benefits of being diversified and limiting the risk associated with investing in
only a few securities. The Fund is primarily for residents of Idaho who may
benefit from its policy of investing in securities exempt from both federal and
Idaho state income taxes.
INVESTMENT POLICIES AND RISK CONSIDERATIONS
Investing in securities entails both market risk and risk of price variation in
individual securities. There is no guarantee that the Fund's investment
objectives 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 affect the Fund's net asset value, but not the income received by
the Fund from its portfolio securities. Because prices and yields on debt
securities vary over time, the Fund's yield also varies.
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.
7
<PAGE>
The Fund is vulnerable to tax rate changes, either at the Idaho or federal
level, since part of municipal securities' value is derived from the recipient's
ability to exclude interest payments from taxation. Should this exclusion be
reduced, the market for municipal securities, and consequently the Fund's share
value, may be adversely affected. 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 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
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.
8
<PAGE>
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.
Shareowner approval is required to change the Fund's investment objectives.
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
You receive a financial report showing the investments, income and expenses of
the Fund every six months. You may obtain daily share values by calling 888/
732-6262.
HOW TO BUY SHARES
You may open an account and purchase shares by sending a completed application
with a check for $1,000 or more ($25 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 $25. Once
your account is open, purchases can be made by check, ACH, or 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. To use
ACH to purchase or redeem shares, simply call the transfer agent. You also may
wire money to purchase shares, though typically your wiring bank will charge you
a fee for this service. Call for details 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 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 receive a complete annual statement, which
you should retain for tax purposes and a complete historical record of all
transactions.
Optional 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. Materials describing these
plans and applications may be obtained from the 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
9
<PAGE>
after receipt of your redemption request. The amount received depends on the
value of the investments in the Fund at the time of your redemption. The amount
you receive may be more or less than the cost of the shares you are redeeming. A
redemption constitutes a sale for 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, with these payment options:
o Redemption check (no minimum) sent to registered owner(s).
o 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.
o Federal funds wire ($5000 minimum). The proceeds 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 telephone request, with these payment options:
o Redemption check (no minimum) sent to registered owner(s).
o ACH transfer ($100 minimum) with proceeds transferred to your bank account as
designated on your application. The ACH authorization must be received at
least two weeks before ACH can be used.
o Exchange ($25 minimum) 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 automatically has the same registration as your original account. An
exchange is considered a closing capital transaction for tax purposes.
o Federal funds wire ($5000 minimum). Proceeds 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 endeavors 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 Fund may require a form of
personal identification, and provide written confirmation of transactions. The
Fund is not responsible for the results of transactions reasonably believed
genuine.
10
<PAGE>
CHECK WRITING
You may also redeem shares in your account by drawing checks on your account for
amounts of $500 or more.
The Fund can mail you a small book of blank checks for a $10 fee. These checks
may be payable to any payee. Checks are redeemed at the net asset value next
determined after receipt. If you wish to use this feature, request the Check
Writing Privilege on the application. Note that, as with any redemption, each
check is a closing capital transaction for tax reporting purposes.
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 matrices 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.
TRUST MANAGEMENT
Saturna Investment Trust is managed by a Board of Trustees, currently: Gary A.
Goldfogel, John E. Love, John S. Moore, and Nicholas F. Kaiser. 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 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), Phelps S. McIlvaine (Vice President), Brian A. Anderson (Vice
President), Meredith L. Ross (Secretary), 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, 1998,
the Adviser has voluntarily waived its fee and reimburses the Fund as necessary
to limit total Fund expenses to 0.80% of average annual net assets. A waiver may
have the effect of subsidizing the yield for the period it is in effect.
11
<PAGE>
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 Fund's business. Saturna Capital Corporation acts as the Fund's transfer
agent, maintaining all shareowner records.
Saturna Capital Corporation acts as investment adviser to six other investment
companies, the four Sextant Funds: Growth ($2 million), International ($1
million), Bond Income ($1 million) and Short-Term Bond ($2 million), as well as
Amana Income Fund, ($15 million) and Amana Growth Fund ($6 million).
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% in two of the Funds) 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 Fund 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). Employees of the Adviser, including Fund managers, are permitted to
engage in securities transactions for their own accounts in accordance with a
code of ethics that, among other provisions, requires advance approval of all
trades and disclosure of all holdings.
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: Idaho Tax-Exempt Fund and the four
Sextant Funds (the Sextant Funds provide 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 are called for 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.
12
<PAGE>
All dividends and distributions are distributed pro rata to shareowners in
proportion to the number of shares owned.
The Fund distributes all its net investment income and net realized capital
gains (if any) to shareowners. The Fund pays dividends from investment income
daily and reinvests or distributes them monthly. Distributions from capital
gains (if any) are 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 qualifies as a regulated investment company under the Internal Revenue
Code, which requires it 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 reports to you and the IRS the amount of each redemption
you made during the year, as well as the amount of taxable 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 taxable dividends and
distributions, you must furnish your correct Social Security or Tax
Identification Number.
PERFORMANCE DATA
The Fund may 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.
The Fund computes 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 Idaho
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 made on the first day of the period and reinvest all
dividends paid during the period in additional shares 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.
13
<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 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
qUNIFORM GIFTS TO MINORS ACT
UNDER THE qUNIFORM TRANSFERS TO / /
----- MINORS ACT ------------- -----------------
State Minor's S. S. No. Minor's Birthdate
q Other
-------------------------------------- -------------------------
Indicate name of corporation, other organization Tax Identification or
fiduciary capacity. If a trust, include Number name(s) of trustees and date
of trust instruments.
- -------------------------------------------------------------------------------
Name(s) of person(s) authorized to transact business for the bove entity.
MAILING------------------------------------------------------------------------
ADDRESS Street Apt., Suite, Etc.
------------------------------------------------------------------------
City State ZIP
TELEPHONE ( ) ( )
---------------------- ---------------------------------------
Daytime Home
INITIAL INVESTMENT $
-----------------------
Make check payable to Idaho Tax-Exempt Fund (minimum $1000).
<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.
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.
CHECK WRITING PRIVILEGE ($500 per check minimum) ($10 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.
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 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
<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 $25 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. Fund prices are
recorded daily at 888/732-6262 and on the Internet at www.saturna.com.
FOR MORE INFORMATION
You may consult the applicable pages of this prospectus for additional
details on the Fund and its shareholder services. Please call 800/ SATURNA
(800/728-8762) with any questions.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
SATURNA INVESTMENT TRUST
IDAHO TAX-EXEMPT FUND
1300 N. State Street
Bellingham, Washington 98225
360-734-9900
800-SATURNA
STATEMENT OF ADDITIONAL INFORMATION
March 26, 1997
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 March 26, 1997. 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..........................................................17
Financial Statements................................................18
Appendix............................................................19
2
<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
3
<PAGE>
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
4
<PAGE>
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;
5
<PAGE>
(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 from the
date of issue and are issued in
6
<PAGE>
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,
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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.
10
<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, 1996, 1995, and 1994 was 10%, 28%, and 36%,
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 ended November 30, 1996 was 4.66%
Average annual total return for the three year period through November 30, 1996
was 5.53%, for the five year period then ended 6.28% and for the period from
October 30, 1987 (inception of the Fund) through November 30, 1996, 6.70%.
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
11
<PAGE>
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, 1996 was 4.74%. The equivalent after-tax yield was
8.54% for Idaho residents with taxable incomes of $265,000, based on a 1996
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:
12
<PAGE>
Dow Jones Industrials New York stock Exchange Composite Index Standard &
Poor's 500 Stock Index American Stock Exchange Composite Index Standard &
Poor's 400 Industrials NASDAQ Composite Wilshire 5000 NASDAQ Industrial
Russell 2000 Lipper General Equity Fund Average Lipper Capital Appreciation
Fund Lipper Equity Funds Average
Average Lipper Growth & Income Fund Average
Lipper Growth Funds Average Lipper Balanced Fund Average
Lipper Small Company Growth Ibbotson Common Stocks Index
Fund Average
Lipper Equity Income Fund Average
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, MD - Trustee
1500 N. State Street, Bellingham, WA 98225.
Pathologist. Whatcom County Medical Examiner, Bellingham WA.
NICHOLAS KAISER, MBA, CFA - 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, PhD - Trustee
College of Business and Economics, Western Washington University,
Bellingham, WA 98225-9077
Professor of Business Administration
13
<PAGE>
PANDORA M. LARNER - Secretary
1300 N. State Street, Bellingham, WA 98225.
Saturna Capital Corporation, October 1996 to present.
Medical supervisor, 1991 to 1993.
Housewife, 1994 to 1995.
Clothing sales representative, 1995 to Feb. 1996.
Medical receptionist, Feb. 1996 to Sept. 1996.
TERESA K. ANDERSON, CMA., MBA - Treasurer
1300 N. State Street, Bellingham, WA 98225.
Assistant Treasurer, Saturna Capital Corporation, December, 1993 to
present.
Full time student prior to 1993.
* Nicholas Kaiser is 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). Mr. Kaiser receives no
compensation from the Trust, nor are the other officers of the Trust paid for
their duties with the Trust.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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
GARY A. GOLDFOGEL $400 $0 $0 $400
Trustee
JOHN E. LOVE, 400 0 0 400
Trustee
JOHN S. MOORE, 400 0 0 400
Trustee
NICHOLAS F. KAISER, 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 February 12, 1997, officers, trustees and their families as a
group owned no shares of the Fund.
14
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of February 12, 1997, no one person is known to own more than 5% 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, 1998, Saturna is voluntarily obligated to
reimburse the Fund monthly if non-extraordinary expenses exceed an annual rate
of 0.80% 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.
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,
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, 1996, the Fund paid transfer agent fees of $4,232.
15
<PAGE>
For the fiscal year ended November 30, 1996, the Fund paid $24,540 in investment
adviser and administration fees, of which the adviser waived $11,923. For the
fiscal year ending November 30, 1995, the Fund was required to pay $30,862, of
which Saturna Capital waived $14,048. For fiscal year 1994, the comparable
figures were $36,251 and $10,190. 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
served as the independent accountants for the Trust for the fiscal year ending
November 30, 1996. Tait, Weller and Baker, Two Penn Center Plaza, Philadelphia
PA 19102 have been appointed by the Trustees to serve as independent accountants
for the fiscal year ending November 30, 1997. The independent accountants
conduct the annual audit of the Trust as of November 30 and prepare the tax
returns of the Fund.
BROKERAGE ALLOCATION
For fiscal years 1996, 1995, and 1994, 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.
16
<PAGE>
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
17
<PAGE>
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 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, 1996, together with the report of independent accountants
dated December 18, 1996, are considered a part of the Statement of Additional
Information and are incorporated by reference.
18
<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
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.
19
<PAGE>
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 (iiiConservative 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 assured 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
20
<PAGE>
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.
21
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
There is incorporated into Part B of this Registration Statement the
following financial information in the Annual Report to shareowners for the
fiscal year ended November 30, 1996:
Report of Price Waterhouse LLP, Independent Accountants.
For each portfolio of the Fund:
Statement of Assets and Liabilities as of November 30, 1996. Statement
of Operations - Year ended November 30, 1996. Statement of Changes in
Net Assets - years ended November
30, 1995 and November 30, 1996.
Investments - November 30, 1996.
Financial Highlights
Notes to Financial Statements
Also incorporated by reference is the Discussion of Fund
Performance (Unaudited) for each Fund of the Trust
A copy of each of the Annual Reports for the Trust are
included as Exhibits A-1 and A-2
Included in Part C:
Consent of Independent Accountants.
(b) Exhibits included with this filing:+
(1) *(a) Agreement and Declaration of Trust of Northwest Investors
Tax-Exempt Business Trust, filed February 20, 1987 with
Secretary
- ------------------------------
+Items marked with an asterisk (*) are incorporated by reference from exhibits
previously filed.
a
<PAGE>
of State of Washington. Incorporated by Reference.
Filed as Exhibit No. 1 to initial filing of Form N-1A in
1987. File No. 33-13247.
*(b) Articles of Amendment to the Declaration of Trust of
Northwest Investors Trust, as adopted by resolution of the
Board of Trustees on November 24, 1992, filed with the
Secretary of State of Washington December 1, 1992.
Incorporated by Reference. Filed as Exhibit No. 1(b) to
Amendment No. 8 to Form N-1A dated December 21, 1992.
*(c) Articles of Amendment to the Declaration of Trust of
Northwest Investors Trust, as adopted by resolution of the
Board of Trustees on July 10, 1995. Incorporated by
Reference. Filed as Exhibit No. 1-3 to Amendment No. 13 to
Form N-1A dated July 11, 1995.
*(d) Articles of Amendment to the Declaration of Trust of
Saturna Investment Trust, as adopted by vote of the
shareholders on September 28, 1995. Filed as Exhibit No. 1-4
to Amendment No. 14 to Form N-1A dated March 29, 1996.
(2)* Bylaws of Northwest Investors Trust, adopted by the Board of
Trustees, July 21, 1992. Incorporated by Reference. Filed as
Exhibit No. 2 to Amendment No. 8 to Form N-1A dated December
21, 1992.
(3) Not applicable.
(4) Not applicable.
(5) *(a) Investment Advisory and Administrative Services Agreement
for the series Sextant International Fund of Saturna
Investment Trust, as approved by the Board of Trustees on July
10, 1995 and shareholders on September 28, 1995. Filed as
Exhibit No. 5-1 to Amendment No. 14 to Form N-1A dated March
29, 1996.
*(b) Investment Advisory and Administrative Services Agreement
for the series Sextant Growth Fund of Saturna Investment
Trust, as approved by the Board of Trustees on July 10, 1995
and shareholders on September 28, 1995. Filed as Exhibit No.
5-2 to Amendment No. 14 to Form N-1A dated March 29, 1996.
*(c) Investment Advisory and Administrative Services Agreement
for the series Sextant Bond Income Fund of Saturna Investment
Trust, as approved by the Board of Trustees on July 10, 1995
and shareholders on September 28, 1995. Filed as Exhibit No.
5-3 to Amendment No. 14 to Form N-1A dated March 29, 1996.
*(d) Investment Advisory and Administrative Services Agreement for the
series Sextant Short-Term Bond Fund of Saturna Investment Trust, as
approved by the Board of Trustees on July 10, 1995 and
b
<PAGE>
shareholders on September 28, 1995. Filed as
Exhibit No. 5-4 to Amendment No. 14 to Form N-1A dated March
29, 1996.
(6) Not applicable.
(7) Not applicable.
(8)* Form of Custodian Agreement for each series of the Trust,
between the Trust and National City Bank, Indiana. Filed as
Exhibit No. 8-1 to Amendment No. 14 to Form N-1A dated March
29, 1996.
(9)* Transfer Agent Agreement for the Northwest Investors Trust
between the Trust and Saturna Capital Corporation, dated
October 12. Filed as Exhibit C to Proxy Statement dated
September 21, 1990. File No. 33-13247.
c
<PAGE>
(10) *(a) Opinion of Counsel dated 1987. Incorporated by
Reference. Filed as Exhibit to initial filing of Form N-1A in
1987. File No. 33-13247.
*(b) Opinion for Washington Tax-Exempt series. Incorporated by
Reference. Filed as Exhibit No. 10-2 to Amendment No. 8 to
Form N-1A dated December 21, 1992.
*(c) Opinion of Counsel of Barnes & Thornburg. Filed as
Exhibit 10-3 to Amendment No. 13 to Form N-1A dated July 11,
1995
(11) (a) Consent of Price Waterhouse LLP, Independent Auditors.
Filed as Exhibit 11-1.
(b) Copies of Powers of Attorney of Trustees of Saturna Investment Trust
attached as Exhibit 11-2.
(12) Not applicable.
(13) Not applicable.
(14)* (a) Prototype Paired Defined Contribution Money Purchase
Pension and Profit Sharing Plan. Filed as Exhibit No. 14-1 to
Amendment No. 7 to for N-1A in 1992. File No. 33-13247.
(b) Defined Contribution Trust, Filed as Exhibit No. 14-2 to
Amendment No. 7 to for N-1A in 1992. File No. 33-13247.
(c) Money Purchase Pension Adoption Agreement, Filed as
Exhibit No. 14-3 to Amendment No. 7 to for N-1A in 1992.
File No. 33-13247.
(d) Profit Sharing Adoption Agreement, Filed as Exhibit No.
14-4 to Amendment No. 7 to for N-1A in 1992. File No.
33-13247.
d
<PAGE>
(15) Not applicable.
(16) Computation of Performance.
The Average Annual Total Return since the inception of the Idaho
Tax-Exempt Fund through November 30, 1996 is computed to be 6.70%, for
Sextant Growth Fund 7.41%, for Sextant Bond Income Fund 4.23%, for
Sextant International Fund 15.09%, and for Sextant Short-Term Bond Fund
5.06%.
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person or persons are directly or indirectly controlled by or under common
control with the Registrant.
e
<PAGE>
NUMBER OF HOLDERS OF SECURITIES
As of February 13, 1997 the following information is furnished for Saturna
Investment Trust:
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares 43 Sextant Bond Income Fund
54 Sextant Short-Term Bond Fund
159 Sextant Growth Fund
47 Sextant International Fund
247 Idaho Tax-Exempt Fund
INDEMNIFICATION
There is no provision for indemnification of the officers and trustees of the
Trust except as provided the Agreement and Declaration of Trust of Saturna
Investment Trust, which provisions are set forth below. The provisions of
Article IV, Section 1 and Article XI of Trust of the Registrant previously filed
as Exhibit 1 to this Registration Statement are incorporated herein by
reference.
In the performance of his duties as Trustee, each Trustee shall not be
personally liable to the Trust or its shareowners for any monetary damages
for any breach of duty as a Trustee, provided that this limitation shall not
be construed as limiting the liability of the Trustee for (l) any breach of
the Trustee's duty of loyalty to the Trust or its shareowners, (2) acts or
omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (3) for the unlawful payment of dividends or
redemption of shares, or (4) for any transaction from which the Trustee
derives an improper personal benefit.
f
<PAGE>
The Trustees, officers, employees and agents of the Trust are indemnified by
the Trust for the fines, judgments and costs of suit, with respect to actions
brought against them in their capacity as agents of the Trust or against them
on behalf of the Trust. However, no Trustee or officer will be protected from
liability for acts of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
The Trust may purchase and maintain insurance on behalf of any current or
past Trustee, officer, agent or employee against any liability asserted
against such person or incurred by him by reason of such capacity or status,
provided, that no such insurance may be maintained if such would indemnify
such person for willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
The Trustees, officers and agents of the Trust have no power to bind any past
or present shareowner to any Fund of the Trust solely by reason that the
shareowner is an owner of the beneficial interest in any Fund. Each such
shareowner shall be entitled to indemnification from the Trust for any
recovery against him solely by reason of his capacity and status as a
shareowner.
The Trustees may provide in agreements of the Trust provisions setting forth,
to the extent considered necessary, the limitations of liabilities of the
Trust to the assets of shareowners, officers, agents and employees of the
Trust. The Investment Advisory Agreement, Distribution Agreement, Custodian
Agreement and Transfer Agent agreement of the Trust contain such a provision.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Directors, officers and controlling person of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities
g
<PAGE>
and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The answer to this item is disclosed in Part A and Part B of the Form N-1A under
"Management of the Trust."
PRINCIPAL UNDERWRITERS
Investors National Corporation, 1300 N. State Street, Bellingham, Washington
98225, a wholly-owned subsidiary of Saturna Capital Corporation, acts as
distributor for the Funds without compensation. The primary business of
Investors National Corporation is retail discount brokerage. As of February 10,
1997, Investors National Corporation owned 33,898.579 shares of Sextant
Short-Term Bond Fund, and 5,433.968 shares of Sextant Bond Income Fund. The
following table sets forth information with respect to each director and
executive officer of Investors National Corporation.
h
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
- ------------------ --------------------- ---------------------
Nicholas Kaiser Director & President President, Trustee
1300 State St.
Bellingham WA 98225
Meredith Ross Director & Vice President
1300 State St. & Secretary
Bellingham WA 98225
Phelps McIlvaine Director & Treasurer Vice President
1300 State St.
Bellingham WA 98225
</TABLE>
LOCATION OF ACCOUNTS AND RECORDS
With the exception of those records maintained by the Custodian bank, all
records of the Trust are physically in the possession of the Trust and
maintained at the offices of Saturna Capital Corporation, 1300 N. State Street,
Bellingham, Washington 98225.
MANAGEMENT SERVICES
There are no management-related contracts in which service is provided to the
Trust other than those discussed in Parts A and B of this Form N-1A.
UNDERTAKINGS
The Fund hereby undertakes pursuant to Section 16(c) of the 1940 Act, that, in
the event of shareholder application pursuant to such Section, it will assist
such shareholders as set forth in such Section.
i
<PAGE>
The Fund hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Fund's latest annual report to shareholders, upon
request and without charge.
j
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Amendment to
Registration Statement to be duly signed on its behalf by the undersigned
thereunto duly authorized in the City of Bellingham, State of Washington, on the
19th day of March, 1997. Registrant further represents that this Amendment is
filed solely for one or more of the purposes specified in paragraph (b)(1) of
Rule 485 and that the Amendment meets applicable conditions set forth therein.
SATURNA INVESTMENT TRUST
By /S/ NICHOLAS F. KAISER
----------------------------
Nicholas F. Kaiser, President
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to Registration Statement has
been signed below by the following persons in the capacities and on the date
indicated.
SIGNATURE TITLE DATE
- ---------- --------------- ------------------
/S/ NICHOLAS F. KAISER President MARCH 19, 1997
- ---------------------- (principal Executive ------------------
Nicholas F. Kaiser Officer); Trustee
/S/TERESA K. ANDERSON Treasurer MARCH 19, 1997
- --------------------- (principal Financial ------------------
Teresa K. Anderson Officer)
** Gary Goldfogel All other Trustees MARCH 19, 1997
** John E. Love ------------------
** John S. Moore
**
** By/S/ NICHOLAS F. KAISER
Nicholas F. Kaiser, President,
Attorney-in-fact
SEXTANT MUTUAL FUNDS
November 30, 1996
Fellow Shareowners:
After the strong gains of 1995, the 1996 markets should have been weak. Interest
rates rose during the first nine months, and corporate earnings growth is
slowing. Yet for the 12 months ending November 30, 1996 , the S&P 500 Index
jumped 27.9%, the NASDAQ Composite Index climbed 22.4%, and the Salomon Bros.
Broad Investment-Grade Bond Index provided a 6.0% total return.
Our caution, based on historical patterns, was misplaced for most of 1996.
Tremendous inflows of individual and institutional retirement money drove all
market sectors up, as the public focuses on long-term investing to build their
retirement funds. While a sharp July correction showed the market's
vulnerability, the rebound through a startlingly-strong November proves the
faith investors have in equities to deliver superior total returns. An estimated
$208 billion poured into stock mutual funds in the first 11 months of 1996, 60%
above the previous full-year record in 1993. The 1996 stock market favored
momentum investing, rather than Saturna Capital's more value-oriented style.
The no-load Sextant Funds are designed to address a broad spectrum of investment
needs. All stress low operating expenses and employ a "fulcrum" advisory fee
structure that rewards or penalizes Saturna Capital for investment results.
Beginning with the September month-end, the four Funds are paying increased or
decreased monthly advisory fees depending on relative performance over the prior
12 months. For the fiscal year ended November 30, 1996, comparative total
returns are:
Sextant Fund Total Return vs. Morningstar
Short-Term Bond 4.85% Short-Term Bonds
Bond Income 4.04% Long-Term Bonds
Growth 6.74% Domestic Growth
International 18.16% Foreign Stock
For the year, the high-quality Sextant bond funds slightly underperformed their
Morningstar peer categories. There is an anchor role for bonds in most
portfolios. With a 6.3% income yield for the year, Short-Term Bond Fund is a
great alternate to money-market funds as a place for investing your cash
reserves.
Unfortunately, our conservative approach to stock-picking meant the Growth Fund
significantly underperformed the Morningstar Domestic Growth category. As
long-term investors, we know that current investing fads will pass, and remain
<PAGE>
convinced that our strategies will provide good results over time. Meanwhile,
when the Growth Fund is underperforming, Saturna Capital automatically slashes
its advisory fee to help improve Fund total returns.
Our experience is that investors should look outside the U.S. for a material
portion of their portfolio, being unwise to insulate oneself from foreign events
and opportunities. We created Sextant International Fund to invest in non-U.S.
equities, and are pleased that the 18.16% return earned by the Fund in its first
year outdistanced the Foreign Stock category and earns Saturna Capital a modest
bonus for above-average performance.
Further information on each Fund's performance is found in the Management
Discussion sections of this report. Our portfolio managers welcome your comments
and suggestions. Only with your help can we be certain that we are meeting your
investment needs - our primary objective.
Respectfully,
Nicholas Kaiser, President Phelps McIlvaine, Vice President
(Manager, Sextant Growth; (Manager, Sextant Bond Income;
Sextant International ) Sextant Short-Term Bond)
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareowners
of Saturna Investment Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules 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 Sextant Short-Term Bond Fund,
Sextant Bond Income Fund, Sextant Growth Fund and Sextant International Fund,
four of the series of Saturna Investment Trust, hereafter referred to as the
"Trust" at November 30, 1996, the results of their operations, the changes in
their net assets, and the financial highlights, for the periods indicated, 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, and the
application of alternative auditing procedures where confirmations were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUS /S/LLB
Seattle, Washington
December 18, 1996
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
1996 Annual Report SEXTANT SHORT-TERM BOND FUND
- --------------------------------------------------
INVESTMENTS
November 30, 1996
RATING* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
- --------------------------------------------------------------------------------
APPLIANCES (5.5%)
<S> <C> <C> <C>
A- Whirlpool 9.5% 6/15/2000 $ 100,000 $ 110,412
BANKING (15.%)
A- Bankers Trust-NY 9.5% 6/14/2000 75,000 82,366
A- Chase Manhattan 9.05% 2/1/2002 40,000 39,775
BBB+ First Interstate Bank 8.625% 4/1/1999 75,000 78,984
AA- Norwest Financial 6.23% 9/1/1998 100,000 100,424
---------- ----------
290,000 301,549
CONSUMER FINANCE (7.2%)
AA- Associates Corp NA 8.35% 12/22/1998 100,000 104,414
A- GMAC 5.95% 12/28/1998 40,000 39,987
---------- ----------
140,000 144,401
ELECTRIC UTILITY (10.3%)
A Pacific Gas & Electric 6.75% 12/01/2000 100,000 100,656
A- Public Service
Enterprise Group 8.75% 7/1/1999 100,000 106,231
---------- ----------
200,000 206,887
FOOD (4.%)
BBB+ Supervalue 7.25% 7/15/1999 80,000 81,612
GAS DISTRIBUTION (5.9%)
A+ Consolidated Natural Gas 5.875% 10/1/1998 120,000 118,877
INVESTMENT FINANCE (11.3%)
BBB+ Finovia Capital 5.98% 2/27/2001 75,000 73,940
BBB Salomon Inc. 6.70% 12/1/1998 100,000 100,968
A- Smith Barney Holding 7.98% 3/1/2000 50,000 52,562
---------- ----------
225,000 227,470
PHOTOGRAPHY (4.7%)
A Eastman Kodak Corp. 7.25% 4/15/1997 95,000 95,301
RETAILING (8.9%)
BBB Limited 8.875% 8/15/1999 75,000 78,867
BBB+ Dayton Hudson 7.50% 3/1/1999 100,000 102,362
---------- ----------
175,000 181,229
TOABACCO (4.0%)
A Phillip Morris 9.75% 02/15/00 75,000 80,883
TRANSPORTATION (2%)
A+ CSX Transportation 7.05% 3/15/98 40,000 40,420
U.S. GOVERNMENT (17.6%)
AAA U.S. Treasury Note 7.00% 4/15/99 150,000 154,453
AAA Federal Farm Credit Bank 6.32% 4/1/99 200,000 200,328
---------- ----------
350,000 354,781
TOTAL INVESTMENTS (96.4%) (Cost = $1,939,387) $1,890,000 $1,943,822
========== ----------
Other Assets (net of liabilities) (3.6%) 72,976
----------
Total Net Assets (100%) $2,016,798
==========
<FN>
*Ratings are the lesser of S&P or Moody's (unaudited)
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT SHORT-TERM BOND FUND 1996 ANNUAL REPORT
- ---------------------------------------------------
STATEMNT OF ASSETS AND LIABILITIES
As of November 30, 1996
ASSETS
<S> <C>
Bond investments (cost $1,939,387) $ 1,943,822
Cash 37,528
Interest receivable 38,334
--------------
Total Assets 2,019,684
--------------
LIABILITIES
Payable to affiliate 2,886
--------------
Total Liabilities 2,886
--------------
NET ASSETS $2,016,798
==============
Fund shares outstanding 403,341
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, without par) $2,033,467
Undistributed net investment income (loss) 22
Accumulated net realized gain (loss) on investments (21,126)
Unrealized net appreciation on investments 4,435
--------------
Net Assets applicable to Fund shares outstanding $2,016,798
==============
NET ASSET VALUE PER SHARE $5.00
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For year ended November 30, 1996
INVESTMENT INCOME
<S> <C> <C>
Interest income $ 180,119
Amortization of bond premiums (29,263)
Accretion 111
Miscellaneous 20
------------
Gross investment income $ 150,987
EXPENSES
Investment adviser and administration fee 15,583
Professional fees 6,649
Custodian Fees 2,635
Filing and registration fees 2,149
Printing and postage 1,276
Other expenses 673
------------
Total gross expenses 28,965
Less earnings credits (2,635)
Less advisory fee waived (8,375)
------------
Net expenses 17,955
-----------
Net investment income 133,032
-----------
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 2,490,566
Less cost of securities sold based on
identified cost 2,511,692
------------
Realized net gain (loss) (21,126)
-----------
UNREALIZED GAIN (LOSS) ON INVESTMENTS
End of period 4,435
Beginning of period 3,737
------------
Increase in unrealized gain for the period 698
-----------
Net realized and unrealized gain on investments (20,428)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $112,604
===========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OF SEXTANT AND ANCHOR OMITTED)
1996 ANNUAL REPORT SEXTANT SHORT-TERM BOND FUND
- -----------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year ended Year ended
Nov. 29, 1996 Nov. 30, 1995
-------------- -------------
INCREASE IN NET ASSETS
<S> <C> <C>
OPERATION:
Net investment Income $ 133,032 $ 4,320
Net realized gain (loss) on investments (21,126) -
Net increase in unrealized appreciation 698 3,737
---------- ---------
Net increase in net assets from operations 112,604 8,057
---------- ---------
DIVIDENDS TO SHAREOWNERS FROM:
Net investment income (133,010) (4,320)
---------- ---------
Capital gains distributions - -
---------- ---------
FUND SHARE TRANSACTIONS:
Proceeds from sales of shares 3,700,165 892,239
Value of shares issued in reinvestment of
dividends 129,365 4,321
---------- ---------
3,829,530 896,560
Cost of shares redeemed (2,670,058) (22,565)
---------- ---------
Net Increase in net assets from share
transactions 1,159,472 873,995
---------- ---------
Total increase in net assets 1,139,066 877,732
NET ASSETS
Beginning of period 877,732 -
---------- ---------
End of period $2,016,798 $877,732
========== =========
Shares of the Fund Sold and Redeemed
Number of shares sold 740,752 178,249
Number of shares issued in reinvestment of
dividends 26,037 862
Number of shares redeemed (538,054) (4,505)
---------- ---------
Net Increase in Number of Shares Outstanding 228,735 174,606
========== =========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT SHORT-TERM BOND FUND 1996 ANNUAL REPORT
- ---------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout the period:
For the year Sept. 28. '95 (incep-
ended Nov. 30, '96 tion) to Nov. 30 '95*
------------------ ---------------------
<S> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $5.03 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.25 0.03
Net gains or losses on securities
(both realized and unrealized) (0.03) 0.03
------ ------
Total From Investment Operations 0.22 0.06
LESS DISTRIBUTIONS
Dividends (from net investment income) ($0.25) ($0.03)
Distributions (from capital gains) 0.00 0.00
------ ------
Total Distributions (0.25) (0.03)
NET ASSET VALUE AT END OF PERIOD $5.00 $5.03
TOTAL RETURN 4.85% 1.05%
RATIOS / SUPPLEMENTAL DATA
Net assets ($000), end of period $2,016 $878
Ratio of expenses to average net assets+ 0.85% 0.23%
Ratio of net investment income to average
net assets+ 6.30% 0.68%
Portfolio turnover rate 100% 0%
<FN>
+ For the above period, all or a portion of the operating expenses were waived.
If costs had not been waived, the resulting increase to expenses per share in
the period would have been $.02 and $.007. The increase to the ratio of expenses
to average monthly net assets would be .52% and .16%, respectively.
* not annualized
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
(Graphic omitted)
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
FISCAL YEAR 1996
During its first full fiscal year, the Sextant Short-Term Bond Fund provided a
total return of 4.85%. Net asset value fell to $5.00 on November 30,1996 from
$5.03. Current income averaged 6.30% of average net assets, substantially higher
than money market mutual funds. Total assets grew 130%. The objective of the
Fund is to provide a high level of current income consistent with the
preservation of capital. The Fund NAV moved within a narrow range, $5.08 to
$4.91, during the year. The Fund has performed well, within its investment
guidelines.
FACTORS AFFECTING PERFORMANCE
Inflation in the United States remained at relatively low levels throughout the
year. On 11/29/96 short rates (under one year), were 20 to 35 basis points lower
than a year earlier, reflecting the 0.25% easing to 5.25% in January by the
Federal Reserve Bank. However, rates beyond one year were 20 to 25 basis points
higher than one year earlier reflecting the continued economic expansion. The
average effective maturity of the Fund remained close to two and one half years
throughout the fiscal year. The NAV was therefore slightly lower at year end.
The Sextant Short-Term Bond Fund invested a large percentage of the portfolio in
high grade corporate paper and the balance in U.S. Government Agency or Treasury
paper. Yield spreads to Corporates and Agencies were narrow at the start of the
period and narrowed further over the year. The Fund added yield to the portfolio
by investing in high coupon, callable paper. Also the Fund invested in the
corporate debt of major retailers and credit card companies when those areas of
the market
<PAGE>
(GRAPHIC OF SEXTANT AND ANCHOR OMITTED)
1996 ANNUAL REPORT SEXTANT SHORT-TERM BOND FUND
- ----------------------------------------------------------
were cheap.
LOOKING FORWARD
Short term interest rates are heavily influenced by the monetary policies of the
Federal Reserve Bank. At this point, the Federal Reserve has been able to
maintain an even keel policy due to the unusually balanced nature of the current
economic expansion. Should the expansion falter, short-term rates can be
expected to move lower. Credit spreads will have difficulty narrowing further.
Both of these factors will be positive influences for the Sextant Short-Term
Bond Fund.
PERFORMANCE FEE COMPUTATION
The Sextant Short Term Bond Fund has calculated its performance fee on a
comparison of the Fund's 12-month return to the return of the Morningstar High
Quality Corporate Bond Index. On 10/31/96, Morningstar changed their method of
rating Mutual Funds. The new comparable Category for the Sextant Short Term Bond
Fund is "Short-Term Bond". This is defined as a portfolio that "focuses on
corporate and other investment grade issues with an average duration of more
than one year or an effective average maturity of more than one year but less
than four years."
COMPARISON TO INDEX
Comparison of any fund to an index must be made bearing in mind that the index
is unmanaged, and EXPENSE-FREE. On the other hand, the fund likely will (1) be
actively managed, (2) have an objective other than mirroring the index, such as
limiting risk, (3) bear transaction and other costs, (4) stand ready to buy and
sell its securities to shareholders on a daily basis, and (5) provide a wide
range of services. The following graph compares $10,000 invested in the Fund at
its inception, compared to a similar amount invested in the Salomon Brothers
2-year Treasury Benchmark. The graph shows that the investment at 9/30/95 would
have risen to $10,592 in the Fund and $10,745 in the Index. The relatively short
history of the Fund limit the usefulness of this comparison.
Past performance is not indicative of future results.
SEXTANT SHORT-TERM BOND FUND VS. SALOMON 2-YR TREASURY
Average Annual Returns
- ----------------------
One Year 4.85%
Since Inception 5.06%
Date Short-Term Bond Fund Salomon 2-yr Treasury
Sept-95 $10,000 $10,000
Nov-96 $10,592 $10,745
(Graph Omitted)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT BOND INCOME FUND 1996 ANNUAL REPORT
- --------------------------------------------
INVESTMENTS
November 30, 1996
Rating* Issuer Coupon/Maturity Face Amount Market Value
- --------------------------------------------------------------------------------
AUTOMOTIVE (4.3%)
<S> <C> <C> <C>
A- General Motors 8.125% 4/15/2016 $ 50,000 $ 51,866
BANKING (4.1%)
A- Comerica Bank 7.125% 12/1/2013 50,000 48,584
BEVERAGES (4.7%)
A- Seagram Co. Ltd 8.35% 1/15/2022 50,000 55,859
BUILDING (7.8%)
A+ Lowes Corp 7.00% 10/15/2023 50,000 46,953
A- Corning Glass 8.875% 3/15/2016 40,000 46,250
--------- ---------
90,000 93,203
ELECTRIC UTILITIES (20.6%)
A+ Alabama Power 7.75% 2/1/2023 50,000 50,625
BBB Commonwealth Edison 7.50% 7/1/2013 50,000 51,428
BBB New Orleans Public Service 8.00% 3/1/2023 50,000 50,584
A Southern California Edison 6.90% 10/1/2018 50,000 47,967
BBB Texas Utilities 8.50% 8/1/2024 45,000 47,286
--------- ---------
245,000 247,890
ELECTRONICS (4.0%)
BBB+ Phillips Electronics 7.25% 8/15/2013 50,000 48,753
FOOD (4.2%)
BBB Nabisco Holdings 7.55% 6/15/2015 50,000 50,563
INVESTMENT FINANCE (12.2%)
A Dean Witter Discover 6.75% 10/15/2013 50,000 47,764
A+ Morgan Stanley Group 7.50% 2/1/2024 50,000 49,234
BBB+ Paine Webber Group 7.625% 2/15/2014 50,000 49,953
--------- ---------
150,000 146,951
PAPER PRODUCTS (4.3%)
BBB- Georgia Pacific 7.70% 6/15/2015 50,000 51,453
RETAILING (4.0%)
BBB+ Rite Aid Corporation 6.875% 8/15/2013 50,000 48,266
TELECOMMUNICATIONS (4.1%)
A+ US West Communications 7.20% 11/10/2026 50,000 48,594
U.S. GOVERNMENT OBLIGATIONS (19.2%)
AAA U.S. Treasury Bond 7.50% 11/15/2016 100,000 111,578
AAA U.S. Treasury Bond 8.125% 8/15/2019 100,000 119,203
--------- ---------
200,000 230,781
TOTAL INVESTMENTS (93.5%) Cost = $1,145,398 $1,085,000 1,122,763
============ ---------
Other Assets (net of liabilities) (6.5%) 78,160
---------
Total Net Assets (100%) $1,200,923
==========
<FN>
*Ratings are the lesser of S&P or Moody's (unaudited)
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
1996 ANNUAL REPORT SEXTANT BOND INCOME FUND
- ----------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout the period:
Period
3/1/93 (In-
Year ended Nov.30, ception)to
-------------------
<S> <C> <C> <C> <C>
1996 1995 1994 11/30/93*
---- ---- ---- ---------
NET ASSET VALUE AT BEGINNING OF PERIOD $4.91 $4.39 $5.03 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.24 0.25 0.16
Net gains or losses on securities
(both realized and unrealized) (0.12) 0.52 (0.64) 0.04
----- ----- ----- -----
Total From Investment Operations 0.18 0.76 (0.39) 0.20
LESS DISTRIBUTIONS
Dividends (from net investment income)
Non-taxable - (0.236) (0.25) (0.167)
Taxable (0.30) (0.004)
Distributions (from capital gains) (0.03) 0.00 0.00 (0.003)
----- ----- ----- -----
Total Distributions (0.33) (0.24) (0.25) (0.17)
NET ASSET VALUE AT END OF PERIOD $4.76 $4.91 $4.39 $5.03
TOTAL RETURN 4.04% 17.69% (8.24)% 4.86%
RATIOS/SUPPLEMENTAL DATA
Net assets ($000), end of period $1,201 $1,096 $1,456 $1,662
Ratio of expenses to average net assets+ 0.63% 0.54% 0.41% 0.35%
Ratio of net investment income to
average net assets + 5.96% 5.15% 5.48% 3.28%
Portfolio turnover rate 75% 77% 74% 36%
<FN>
+ For each of the above periods, all or a portion of the operating expenses
were waived. If these costs had not been waived, the resulting increases to
expenses per share in each of the above periods would be $.03, $0.22,
$0.13,and $.03 respectively. The increase to the ratio of expenses to
average monthly net assets would be .70%, .60%, .51%, and 26%, respectively.
* not annualized
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT BOND INCOME FUND 1996 ANNUAL REPORT
- -----------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1996
ASSETS
<S> <C>
Bond investments (cost $1,145,398) $1,122,763
Cash 56,564
Interest receivable 21,646
Insurance deposit 400
------------
Total Assets 1,201,373
------------
LIABILITIES
Payable to affiliate 450
------------
Total Liabilities 450
------------
NET ASSETS $1,200,923
============
Fund shares outstanding 252,383
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized,
without par) 1,294,714
Undistributed net investment loss (1,057)
Accumulated net realized gain (loss) on
investments (70,099)
Unrealized net depreciation on
investments (22,635)
------------
Net Assets applicable to Fund shares $1,200,923
============
NET ASSET VALUE PER SHARE $4.76
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended November 30, 1996
INVESTMENT INCOME
<S> <C> <C>
Interest income 80,065
Amortization of bond premiums (1,964)
Accretion 55
-----------
Gross investment income $78,156
EXPENSES
Investment adviser and administration fee 6,640
Professional fees 3,055
Printing and postage 1,449
Filing and registration fees 1,255
Other expenses 856
Custodial fees 739
-----------
Total gross expenses 13,994
Less earnings credits (739)
Less advisory fee waived (6,640)
-----------
Net expenses 6,615
----------
Net investment income 71,541
----------
NET REALIZED GAIN ON INVESTMENTS
Proceeds from sales 808,214
Less cost of securities sold based on
identified cost 800,856
----------
Realized net gain (loss) 7,358
----------
UNREALIZED GAIN (LOSS) ON INVESTMENTS
End of period (22,635)
Beginning of period 12,631
----------
Increase in unrealized gain for the period (35,266)
----------
Net realized and unrealized gain on
investments (27,908)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $43,633
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OF SEXTANT AND SAILBOAT OMITTED)
1996 ANNUAL REPORT SEXTANT BOND INCOME FUND
- ------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year ended Year ended
Nov. 30, 1996 Nov. 30,1995
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 71,541 $ 57,535
Net realized gain (loss) on investments 7,358 (15,110)
Net increase (decrease) in unrealized appreciation (35,266) 170,684
----------- ----------
Net increase (decrease) in net assets from operations 43,633 213,109
----------- ----------
DIVIDENDS TO SHAREOWNERS FROM:
Net investment income (72,347) (57,308)
----------- ----------
Capital gains distributions (7,240 -
----------- ----------
FUND SHARE TRANSACTIONS:
Proceeds from sales of shares 303,624 623,415
Value of shares issued in reinvestment of dividends 77,813 52,937
----------- ----------
381,437 676,352
Cost of shares redeemed (240,384) (1,192,060)
----------- ----------
Net increase (decrease) in net assets from
share transactions 141,053 (515,708)
----------- ----------
Total increase (decrease) in net assets 105,099 (359,907)
NET ASSETS
Beginning of period 1,095,824 1,455,731
----------- ----------
End of period $1,200,923 $1,095,824
=========== ===========
(Including undistributed net investment income of
($1,057) at Nov. 30,1996 and ($251) for Nov. 30,1995)
Shares of the Fund Sold and Redeemed
Number of shares sold 65,268 165,574
Number of shares issued in reinvestment
of dividends 16,726 11,132
Number of shares redeemed (52,815) (285,218)
----------- -----------
Net Increase (Decrease) in Number of Shares Outstanding 29,179 (108,512)
=========== ===========
</TABLE>
<PAGE>
(GRAPHIC OMITTED)
SEXTANT BOND INCOME FUND 1996 ANNUAL REPORT
- ------------------------------------------------
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
FISCAL YEAR 1996
In the fiscal year ending November 29,1996, the Sextant Bond Income Fund
returned 4.04% to its shareholders. Its net asset value fell to $4.76 from $4.91
during the fiscal year. Total assets increased 10%. The Fund's performance in
fiscal 1996 was based on its portfolio restrictions: taxable investment grade
debt with an average effective portfolio maturity of at least ten years. Since
the change in investment objective on 9/28/95, the average effective portfolio
maturity has remained close to 20 years. The longer the average maturity of the
Fund, the greater will be the expected price appreciation or depreciation. For
the three month period ending 11/30/96, rates have fallen substantially. And for
the period, Sextant Bond Income Fund ranked in the top 1% of Morningstar
Long-Term Bond Funds for performance. The Fund is intended to be used in
conjunction with the Sextant Short Term Bond Fund. By allocating assets between
the two Funds, an investor can create the average maturity of his own design.
FACTORS AFFECTING PERFORMANCE
The most important factors affecting the performance of this Fund are the
exceptionally long effective average maturity of the portfolio and the direction
of long term rates. Of the 234 Funds grouped in the Morningstar Long Term Bond
Category, only five have an average portfolio maturity over fourteen years.
Under the Morningstar rating system, the Sextant Fund rating will reflect the
higher risks associated with such a longer average maturity. For the year, long
term interest rates rose slightly from 11/30/95 to 11/29/96. This explains the
lower NAV in the Fund. Also, lower rated corporate bonds (BBB- and below)
outperformed higher grade paper (BBB+ and above) as investment managers sought
yield despite narrowing spreads. This narrowing favored investors using lower
credit quality bonds. The Sextant Bond Income Fund invested primarily in high
grade corporate paper and U.S. Treasury issues.
LOOKING FORWARD
Inflation has remained at historically low levels all year. With the modest rate
of expansion and high level of competition in the economy no acceleration is
expected in 1997. The overall direction of interest rates has been relatively
flat over the last four years with long rates moving between 8% to 6%. On two
occasions long rates have slipped below 6% temporarily. In 1997 rates can move
below 6% again. With so little additional yield available in lower rated paper,
it will be difficult for the lower rated paper to perform as well as higher
quality paper. A move to lower rates and a preference for high quality paper are
both very favorable for the Sextant Bond Income Fund.
<PAGE>
PERFORMANCE FEE COMPUTATION
The Sextant Bond Income Fund originally calculated its performance fee based on
a comparison of the Fund's 12-month return to the return of the Morningstar High
Quality Corporate Bond Index. On 10/31/96, Morningstar changed their method of
rating Mutual Funds. The new Category for the Sextant Bond Income Fund is
Morningstar Long-Term Bond. As indicated above, the performance comparison
between the Sextant Bond Income Fund and this index will be heavily influenced
by the movement of interest rates.
COMPARISON OF INDEX
Comparison of any fund to an index must be made bearing in mind that the index
is unmanaged, and expense-free. On the other hand, the fund likely will (1) be
actively managed, (2) have an objective other than mirroring the index, such as
limiting risk, (3) bear transaction and other costs, (4) stand ready to buy and
sell its securities to shareholders on a daily basis, and (5) provide a wide
range of services. The graph below compares $10,000 invested in the Fund at its
inception, compared to a similar amount invested in The Salomon Brothers Broad
Investment-Grade Bond Index. The graph shows that the investment at the
beginning of March, 1993 would have risen to $11,682 in the Fund and $12,752 in
the Index. The relatively short history of the Fund, and the change in
investment policy, limit the usefulness of this comparison. Past performance is
not indicative of future results.
SEXTANT BOND INCOME FUND VS. SALOMON BROS BROAD INVESTMENT
GRADE BOND INDEX
Average Annual Returns
- ----------------------
One Year
4.04%
Since Inception
Date Bond Income Fund Salomon BIG Index
Feb-93 $10,000 $10,000
Nov-93 $10,397 $10,534
Nov-94 $9,540 $10,214
Nov-95 $11,228 $12,032
Nov-96 $11,682 $12,752
(Graph Omitted)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT GROWTH FUND 1996 ANNUAL REPORT
- --------------------------------------------
INVESTMENTS
NUMBER MARKET
ISSUE OF SHARES COST VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
BANKING (8.0%)
Washington Mutual Savings Bank 3,000 $ 44,124 $130,500
CONSTRUCTION (5.3%)
BMC West* 4,500 54,533 53,437
Butler Manufacturing 1,000 31,071 31,875
--------- --------
85,604 85,312
COMPUTERS (13.1%)
Adobe Systems 1,200 50,490 47,400
Hewlett-Packard 800 42,650 43,100
Microsoft* 400 14,897 62,750
Oracle 1,200 37,879 58,800
--------- --------
145,916 212,050
ELECTRONICS (9.6%)
FLIR Systems 2,500 27,611 34,063
Gasonix International 3,000 31,631 32,250
Merix 1,000 31,822 16,250
Micron Technology 1,000 32,312 33,125
Motorola 700 40,511 38,763
--------- --------
163,887 154,451
INVESTMENTS (13.0%)
Franklin Resources 800 13,562 57,200
McDonald & Co. 2,000 34,347 61,000
Schwab, Charles 3,025 9,117 91,506
-------- --------
57,026 209,706
MEDICAL (8.9%)
Genentech* 1,000 37,225 54,125
Ligand Pharmaceuticals 4,000 49,132 48,250
Rotech Medical 2,400 33,976 40,800
-------- --------
120,333 143,175
METAL ORES (3.4%)
Cyprus Amax Minerals 2,200 54,541 54,450
OIL & GAS PRODUCTION (7.4%)
Atlantic Richfield 450 51,620 62,606
Noble Drilling 3,000 21,322 57,750
-------- --------
72,942 120,356
PAPER & PRODUCTS (1.1%)
Boise Cascade 600 15,409 18,600
POLLUTION CONTROL (2.7%)
Ionics 900 36,864 43,425
RETAIL (5.3%)
Nordstrom 1,000 37,703 43,500
Albertson's 1,200 26,255 41,850
--------- --------
63,958 85,350
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
1996 ANNUAL REPORT SEXTANT GROWTH FUND
- ---------------------------------------------
INVESTMENTS, CONTINUED
NUMBER MARKET
ISSUE OF SHARES COST VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STEEL (1.7%)
Schnitzer Steel Industries 1.000 $ 29.500 $ 27,375
TRANSPORTATION (11.2%)
Airborne Freight 3,000 69,116 64,500
Fritz Companies* 4,000 51,640 60,500
Trinity Industries 1,600 55,282 55,200
---------- ----------
176,038 180,200
TOTAL INVESTMENTS (90.7%) 52,475 $1,066,142 $1,464,950
=========== ===========
Other Assets (net of liabilities) (9.3%) 150,606
---------
Total Net Assets (100%) $1,615,556
===========
<FN>
*non-income producing
</FN>
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected data per share of capital stock
outstanding throughout the period: Sept.4, '87
(commencement of
For Year Ended November 30, operations) to
------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 Nov.30'87
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------
OPERATIONS
Net Investment Income 0.00 (0.03) (0.03) 0.01 0.01 0.04 0.27 0.28 0.30 0.06
Net gains or losses on securities
(both realized and
unrealized 0.50 1.82 (0.53) 0.45 0.38 0.60 0.01 0.00 (0.08) (0.04)
----- ----- ------ ----- ----- ----- ----- ----- ------ ------
Total From Investment Operations 0.50 1.79 (0.56) 0.46 0.39 0.64 0.28 0.28 0.22 0.02
LESS DISTRIBUTIONS
Dividends (from net investment
income) 0.00 0.00 0.00 (0.01)(0.01) (0.02)(0.23)(0.28) (0.30) (0.06)
Distributions (from
capital gains) 0.00 (0.19) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Distributions 0.00 (0.19) 0.00 (0.01)(0.01) (0.02)(0.23)(0.28) (0.30) (0.06)
NET ASSET VALUE AT END OF PERIOD $7.92 $7.42 $5.82 $6.38 $5.93 $5.55 $4.93 $4.88 $4.88 $4.96
TOTAL RETURN 6.74% 30.76% (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 $1,616 $1,137 $1,010 $1,425 $1,321 $947 $53 $1,356 $1,365 $315
Ratio of expenses to average
net assets+ 0.95% 1.63% 1.50% 1.40% 1.60% 1.93% 1.06% 0.89% 0.25% .06%*
Ratio of net investment income
to average net assets+ 0.01% (0.45)(0.43)% 0.15% 0.17% 0.60% 5.25% 5.60% 5.86% .85%*
Portfolio turnover rate 32% 40% 12% 25% 46% 16% 29% 19% 20% 0%
Average commission rate paid $.0458 $.0572
<FN>
+ For 1996, 1995 and for each of the above years prior to 1992, all or a
portion of the operating 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, $.01, $.05, .$.05, $.10, $.16, and $.02,
respectively. The increase to the ratio of expenses to average net assets
would have been 0.18%, 0.21%, 0.76%, 1.02%, 1.28%, 2.02%, and 0.17%,
respectively. *not annualized
</FN>
</TABLE>
(GRAPHIC OMITTED)
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT GROWTH FUND 1996 ANNUAL REPORT
- --------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1996
ASSETS
<S> <C>
Common stock investments (cost $1,066,142) $1,464,950
Cash 319,386
Receivable for Security Sales 64,905
Dividends receivable 1,044
Insurance deposit 1,214
-----------
Total Assets 1,851,499
-----------
LIABILITIES
Payable for Security Purchases 229,367
Payable to affiliate: 6,576
-----------
Total Liabilities 235,943
-----------
NET ASSETS $1,615,556
=============
Fund shares outstanding 203,875
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized,
without par) 1,235,582
Undistributed net investment income (loss) (9,305)
Accumulated net realized gain on investments (9,529)
Unrealized net appreciation on investments 398,808
-----------
Net Assets applicable to Fund shares
outstanding $1,615,556
===========
NET ASSET VALUE PER SHARE $7.92
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For year ended November 30, 1996
INVESTMENT INCOME
<S> <C> <C>
Dividends $11,896
---------
Gross investment income $11,896
EXPENSES
Investment adviser and administration fe 7,540
Custodial fees 2,271
Professional fees 1,720
Printing and postage 1,134
Filing and registration fees 792
Other expenses 595
---------
Total gross expenses 14,052
---------
Less earnings credits (2,271)
---------
Net expenses 11,781
---------
Net investment income $115
---------
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 371,082
Less cost of securities sold based on
identified cost 376,770
----------
Realized net gain (5,688)
---------
UNREALIZED GAIN ON INVESTMENTS
End of period 398,808
Beginning of period 289,014
----------
Increase in unrealized gain for the period 109,794
---------
Net realized and unrealized gain on
investments 104,106
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $104,221
=============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
1996 ANNUAL REPORT SEXTANT GROWTH FUND
- -----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year ended Year ended
Nov. 29, 1996 Nov. 30, 1995
------------- -------------
INCREASE IN NET ASSETS
<S> <C> <C>
OPERATIONS:
Net investment Income $ 115 $ (4,386)
Net realized gain (loss) on investments (5,688) 54,724
Net increase in unrealized appreciation 109,794 214,185
----------- -----------
Net increase in net assets from operations 104,221 264,523
----------- -----------
DIVIDENDS TO SHAREOWNERS FROM:
Net investment income - -
----------- -----------
Capital gains distributions - (28,392)
----------- -----------
FUND SHARE TRANSACTIONS:
Proceeds from sales of shares 676,224 306,751
Value of shares issued in reinvestment of dividends - 28,060
----------- -----------
676,224 334,811
Cost of shares redeemed (301,892) (444,025)
----------- -----------
Net Increase in net assets from share transactions 374,332 (109,214)
----------- -----------
Total increase in net assets 478,553 126,917
NET ASSETS
Beginning of period 1,137,003 1,010,086
----------- -----------
End of period $1,615,556 $1,137,003
=========== ===========
(Including undistributed net investment income
of ($9,305) for Nov. 30, 1996 and ($9,420)
for Nov. 30,1995)
Shares of the Fund Sold and Redeemed
Number of shares sold 90,055 43,111
Number of shares issued in reinvestment of dividends - 3,782
Number of shares redeemed (39,396) (67,343)
----------- ------------
Net Increase (Decrease) in Number of Shares Outstanding 50,659 (20,450)
=========== ============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
(GRAPHIC OMITTED)
SEXTANT GROWTH FUND 1996 ANNUAL REPORT
- --------------------------------------------
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
FISCAL YEAR 1996
During the year ended November 30, 1996, the Fund's total return to its
shareholders was +6.74%. The Fund's net asset value per share rose to $7.92 from
$7.42. Total assets increased 42% to $1.6 million.
FACTORS AFFECTING PERFORMANCE
The Fund began operations as a growth stock fund in December 1990 (prior to that
time it had been invested in short-term Idaho municipal bonds, and the
performance during that period is not relevant). In September, 1995, the Fund's
shareholders voted to broaden its objective from that of investing primarily in
growth companies linked only to the Northwest. Following the change, the Fund
seeks long-term growth through investment in common stocks of companies with
major operations in the United States. Additionally, the new advisory contract
resulted in lower expenses to shareholders. The Sextant Growth Fund follows an
value investment approach, favoring medium-sized companies with good businesses
and future prospects. However, the stock market for the last year tended to
favor larger companies and those with rapid earnings momentum, and often
disregarded fundamental investment values. As a result, the Fund under-performed
most market indices.
LOOKING FORWARD
The Fund will continue to favor solid companies, especially in the technology,
financial and cyclical areas. With a steady economy, these sectors are expected
to perform well. For the portfolio`s securities, both the Price/Earnings and
Price/Book ratios are under those of similar funds while an above-average 24%
five-year earnings growth rate indicates a good probability of long-term price
appreciation.
PERFORMANCE FEE COMPUTATION
The Sextant Growth Fund has calculated its performance fee on a comparison of
the Fund's 12-month return to the return of the Morningstar Growth Stock Index.
On 10/31/96, Morningstar changed their method of rating Mutual Funds. The new
comparable Category for the Sextant Growth Fund is "Domestic Growth." This index
is well matched to the characteristics of the Sextant Growth Fund. At November
30, 1996, the one-year return for this index was 20.24%. As the Fund
underperformed the Morningstar benchmark by more than 4%, the Fund paid a
lowered 0.30% (annualized) advisory fee for the month of December 1996.
Adjustments to the basic 0.60% advisory fee are made in a similar manner each
month.
<PAGE>
(GRAPHIC OMITTED)
1996 ANNUAL REPORT SEXTANT GROWTH FUND
- -------------------------------------------
COMPARISON TO INDEX
The line graph compares Sextant Growth Fund's performance to that of a
broad-based stock market index, the Standard & Poor's 500 Index. To be
comparable, the S&P 500 Index data includes reinvested income. Comparison of any
fund to an index must be made bearing in mind that the index is unmanaged, and
expense-free. On the other hand the fund likely will (1) be actively managed,
(2) have an objective other than mirroring the index, such as limiting risk, (3)
bear transaction and other costs, (4) stand ready to buy and sell its securities
to shareholders on a daily basis, and (5) provide a wide range of services. The
following graph compares $10,000 invested in the Fund at its inception, compared
to a similar amount invested in Standard & Poor's 500 Index. The graph shows
that the investment at inception would have risen to $16,511 in the Fund and
$27,520 in the Index. The changes in investment objective during the life of the
Fund limit the usefulness of this comparison. And fortunately, past performance
is not indicative of future results.
SEXTANT GROWTH FUND VS. S&P 500 INDEX
Average Annual Returns
- ----------------------
One Year 6.74%
Five Years 7.98%
Since Inception 7.41%
Date Sextant Growth S&P 500 Index
Dec-90 $10,000 $10,000
Nov-96 $16,511 $27,520
(Graph omitted)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT INTERNATIONAL FUND 1996 ANNUAL REPORT
- ---------------------------------------------------
NUMBER MARKET
ISSUE OF SHARES COST VALUE COUNTRY
- --------------------------------------------------------------------------------
COMMON STOCKS
<S> <C> <C> <C> <C>
BANKING AND FINANCIAL (15.9%)
Australia & New Zealand Bank ADR 500 10,875 16,313 Australia
Aegon NV ADR 300 11,513 16,875 Netherlands
Banco Bilbao Vizcaya ADS 400 15,505 20,200 Spain
Banco de A. Edwards ADS 500 10,907 9,250 Chile
Banco Latinoamericano de Export S. 200 9,325 9,775 Panama
Hutchison Whampoa ADR 500 17,826 19,375 Hong Kong
Toronto Dominion Bank 700 18,159 18,637 Canada
------- -------
94,110 110,425
BUILDING MATERIALS (3.2%)
C R H plc ADR 300 15,661 15,525 Ireland
Hanson plc ADR 1,000 7,865 6,750 United Kingdom
------ ------
23,526 22,275
CHEMICALS (2.3%)
Phone Poulenc SA ADR 500 15,859 16,187 France
COMPUTERS (2.4%)
Olicom A/S 900 16,246 16,425 Denmark
CONSUMER PRODUCTS (4.8%)
Gucci Group NV 200 10,925 14,675 Italy
Coca Cola FEMSA S.A. ADR 500 9,750 13,688 Mexico
Imperial Tobacco Group plc ADS 250 3,417 3,094 United Kingdom
Swedish Match ADS 50 1,895 1,650 Sweden
------ ------
25,987 33,107
CLOSED END COUNTRY FUNDS (8.8%)
Austria Fund 1,000 7,923 9,125 Austria
New Germany Fund 1,000 12,417 14,500 Germany
Irish Investment Fund 900 10,238 12,712 Ireland
Malaysia Fund 600 9,750 11,925 Malaysia
Singapore Fund 1,000 13,777 12,875 Singapore
------- -------
54,105 61,137
ELECTRICAL EQUIPMENT (3.4%)
ABB AB ADR 100 10,000 11,488 Sweden
Electrolux AB ADR 200 8,800 11,800 Sweden
------ -------
18,800 23,288
MEDICAL-DRUGS (4.9%)
Glaxo Wellcome plc ADR 400 9,800 13,150 United Kingdom
Novo-Nordisk A/S ADR 450 14,702 20,756 Denmark
------- -------
24,502 33,906
METALS & MINING (7.5%)
Barrick Gold 400 9,600 12,000 Canada
Broken Hill Proprietary ADR 400 11,700 11,850 Australia
Potash Corp of Saskatchewan 200 14,675 15,075 Canada
RTZ Corp PLC ADS 200 11,375 13,525 United Kingdom
------- -------
47,350 52,450
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
1996 ANNUAL REPORT SEXTANT INTERNATIONAL FUND
- -------------------------------------------------
INVESTMENTS, CONTINUED
NUMBER MARKET
ISSUE OF SHARES COST VALUE COUNTRY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OIL & GAS PRODUCTION (7.7%)
Numac Energy 2,000 8,853 8,625 Canada
Petroleum Geo-Services A/S 500 10,979 18,750 Norway
Total S.A. ADR 307 8,812 12,395 France
YPF SA ADS 600 12,344 13,950 Argentina
------- -------
40,988 53,720
PAPER PRODUCTS (2.8%)
Abitibi-Price 800 11,847 11,800 Canada
Aracruz Cellulose S.A. ADR 1,000 9,875 7,750 Brazil
------ ------
21,722 19,550
PHOTOGRAPHIC EQUIPMENT (3.3%)
Canon ADR 100 8,687 10,575 Japan
Fuji Photo Film ADR 400 10,050 12,600 Japan
------- -------
18,737 23,175
TELECOMMUNICATIONS (16.2%)
BCE Inc 450 15,830 22,556 Canada
British Sky Broadcasting ADS 300 11,063 15,675 United Kingdom
Cable & Wireless plc ADS 600 13,021 14,475 Hong Kong
PT Indosat ADR 300 10,584 8,287 Indonesia
Telebras ADS 300 15,051 22,725 Brazil
Telecom Corp New Zealand ADS 150 10,050 12,619 New Zealand
Telefonica de Espana ADS 250 10,250 16,500 Spain
------- -------
85,849 112,837
TRANSPORTATION (5.2%)
British Airways 150 10,931 14,888 United Kingdom
Canadian Pacific Ltd. 500 8,164 13,750 Canada
KLM Royal Dutch Airlines 300 10,650 7,838 Nethderlands
------- ------
29,745 36,476
UTILITIES-ELECTRIC (2.7%)
Enersis S.A. ADR 400 10,100 11,950 Chile
Korea Electric Power ADR 400 9,500 7,050 Korea
------ ------
19,600 19,000
UTILITIES-GAS (2.7%)
Transport de Gas del Sur SA ADR 1,500 18,808 18,562 Argentina
TOTAL INVESTMENTS (93.8%) $555,935 $652,520
========= ========
Other Assets (net of liabilities) (6.2%) 42,974
------
Total Net Assets (100%) $695,494
========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT INTERNATIONAL FUND 1996 ANNUAL REPORT
- ----------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1996
ASSETS
<S> <C>
Common stock investments (cost $555,934) $652,520
Cash 44,566
Dividends receivable 507
--------
Total Assets 697,593
LIABILITIES
Payable to affiliate 2,099
--------
Total Liabilities 2,099
--------
NET ASSETS $695,494
========
Fund Shares Outstanding 118,537
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, without par) 606,399
Undistributed net investment income (loss) (1,138)
Accumulated net realized gain (loss) on investments (6,353)
Unrealized net appreciation on investments 96,586
--------
Net Assets applicable to Fund shares outstanding $695,494
========
NET ASSET VALUE PER SHARE $5.87
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended November 30, 1996
INVESTMENT INCOME
<S> <C> <C>
Dividends $12,196
Miscellaneous Income 9
------------
Gross investment income $12,205
EXPENSES
Investment adviser and administration fee 3,148
Custodial fees 2,521
Professional fees 1,696
Foreign taxes paid 1,593
Filing and registration fees 1,493
Other expenses 619
Printing and postage 586
------------
Total gross expenses 11,656
Less earnings credits (2,521)
Net expenses 9,135
-----------
Net investment income 3,070
-----------
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 46,327
Less cost of securities sold based on identified cost 51,496
------------
Realized net loss (5,169)
-----------
UNREALIZED GAIN ON INVESTMENTS
End of period 96,586
Beginning of period 2,178
------------
Increase in unrealized gain for the period 94,408
-----------
Net realized and unrealized gain on investments 89,239
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $92,309
===========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OF SEXTANT AND ICON OMITTED)
1996 ANNUAL REPORT SEXTANT INTERNATIONAL FUND
- ----------------------------------------------------
STATEMENT OF CHANGES IN NET ASSET
Period Sept. 28,
Year Ended 1995(inception)to
Nov 29 1996 Nov. 30, 1995
------------ --------------
INCREASE IN NET ASSETS
OPERATIONS:
<S> <C> <C>
Net investment Income $ 3,070 $ (1,140)
Net realized gain (loss) on investments (5,169) (1,184)
Net increase in unrealized appreciation 94,408 2,178
---------- ----------
Net increase(decrease) in net assets from operations 92,309 (146)
---------- ----------
DIVIDENDS TO SHAREOWNERS FROM:
Net investment income (3,068) -
Capital gains distributions - -
----------- ----------
FUND SHARE TRANSACTIONS:
Proceeds from sales of shares 440,062 328,284
Value of shares issued in reinvestment of dividends 3,068 -
----------- ----------
443,130 328,284
Cost of shares redeemed (165,015) -
----------- ----------
Net increase in net assets from share transactions 278,115 328,284
----------- ----------
Total increase in net assets 367,356 328,138
NET ASSETS
Beginning of period 328,138 -
----------- ----------
End of period $695,494 $328,138
=========== ==========
(Including undistributed net investment income of
($1,138) for Nov. 30,1996)
Shares of the Fund sold and redeemed
Number of shares sold 83,056 65,795
Number of shares issued in reinvestment of dividends 523 -
Number of shares redeemed (30,837) -
----------- ----------
Net Increase in Number of Shares Outstanding 52,742 65,795
=========== ==========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
<TABLE>
<CAPTION>
(GRAPHIC OMITTED)
SEXTANT INTERNATIONAL FUND 1996 ANNUAL REPORT
- ----------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout the period:
Sept. 28,'95
Year Ended (Inception) to
Nov. 30, '96 Nov. 30, '95*
------------ -------------
<S> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $4.99 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 (0.02)
Net gains or losses on securities
(both realized and unrealized) 0.88 0.01
---- ----
Total from investment operations 0.91 (0.01)
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.03) 0.00
Distributions (from capital gains) 0.00 0.00
---- ----
Total distributions (0.03) 0.00
NET ASSET VALUE AT END OF PERIOD $5.87 $4.99
TOTAL RETURN 18.16% (0.20)%
RATIOS/SUPPLEMENTAL DATA
Net assets ($000), end of period $695 $328
Ratio of expenses to average net assets+ 1.80% 0.49%
Ratio of net investment income to average net assets+ 0.60% (0.38)%
Portfolio turnover rate 11% 12%
Average commission rate paid $0.0827 $0.0192
<FN>
+ For the above periods, all or a portion of the operating expenses were
waived. If costs had not been have waived and directly assumed, the resulting
increase to expenses per share in the period would have been $.03 and $.01,
respectively. The increase to the ratio of expenses to average monthly net
assets would be .50% and .21 %, respectively.
* not annualized
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
(GRAPHIC OMITTED)
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
During its first full fiscal year, the Sextant International Fund provided a
total return of 18.16%. Net asset value per share rose to $5.87 on November 30,
1996 from $4.99 one year earlier. An income dividend of $.03 per share was paid
on November 29, 1996. Total assets increased 112%. The objective of the Fund is
to provide long-term growth through investment in foreign stocks. The Fund
performed well during its first full year, exceeding the 14.99% on the
comparable Morningstar Foreign Stock Index.
FACTORS AFFECTING PERFORMANCE
Investing in foreign securities includes exchange rate risks not present in
domestic securities. While almost all stock markets performed well in 1996, the
U.S. dollar generally strengthened in relation to its major trading partners,
thus reducing the returns on foreign investments.
LOOKING FORWARD
The Sextant International Fund is broadly invested in growth companies outside
the United
<PAGE>
(GRAPHIC OF SEXTANT AND ICON OMITTED)
1996 ANNUAL REPORT SEXTANT INTERNATIONAL FUND
- -------------------------------------------------
States. While foreign economies slowed in relation to the U.S. in 1996, we
expect that most of our portfolio securities will continue to show outstanding
growth in future years and the Fund will continue to perform well.
PERFORMANCE FEE COMPUTATION
The International Fund calculates its performance fee on a comparison of the
Fund's 12-month return to the return of the Morningstar Foreign Stock Index.
Because the Fund`s 12-month return outperformed this index by more than 2% and
less than 4% at November 30, 1996, the Fund paid a bonus 0.20% (annualized)
performance fee for the month of December 1996. Adjustments to the basic 0.60%
advisory fee are made in a similar manner each month.
COMPARISON TO INDEX
Comparison of any fund to an index must be made bearing in mind that the index
is unmanaged, and EXPENSE-FREE. On the other hand, the fund likely will (1) be
actively managed, (2) have an objective other than mirroring the index, such as
limiting risk, (3) bear transaction and other costs, (4)stand ready to buy and
sell its securities to shareholders on a daily basis, and (5) provide a wide
range of services. The following graph compares $10,000 invested in the Fund at
its inception, compared to a similar amount invested in the AMEX International
Index. This capitalization-weighted index averages 50 American Depository
Receipts (ADRs) of large world-wide companies, and reflects the types of
securities in which Sextant International Fund invests. The graph shows that the
investment of $10,000 at 9/30/95 would have risen to $11,792 in the Fund and
$12,046 in the Index. The relatively short history of the Fund limits the
usefulness of this comparison. Past performance is not indicative of future
results.
SEXTANT INTERNATIONAL FUND VS. AMEX INTERNATIONAL INDEX
Average Annual Returns
- ----------------------
One Year 18.16%
Since Inception 15,09%
Date International Fund AMEX Int'l Index
Sept-95 $10,000 $10,000
Nov-96 $11,792 $12,046
(GRAPH OMITTED)
<PAGE>
(GRAPHIC OMITTED)
NOTES TO FINANCIAL STATEMENTS
1996 ANNUAL REPORT
- -----------------------------------------------
Note 1 -Organization
Saturna Investment Trust (the "Trust") (formerly Northwest Investors 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. Five portfolio series have been
created to date: Sextant Bond Income Fund ("Bond Income"), Sextant Short-Term
Bond Fund ("Short-Term Bond"), Sextant Growth Fund ("Growth"), and Sextant
International Fund ("International") (collectively, the "Funds") and Idaho
Tax-Exempt Fund, distributed through a separate prospectus and the results of
which are contained in a separate report.
Note 2 -Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Funds.
Investments:
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. 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. Cash dividends
from equity securities are recorded as income on the ex-dividend date. Expenses
incurred by the Trust on behalf of the Funds (e.g., professional fees) are
allocated to the Funds on the basis of relative daily average net assets. The
Adviser has agreed to certain limits on expenses, as described below.
Income taxes:
The Funds have elected to be taxed as regulated investment companies under the
Internal Revenue Code and distribute substantially all of their taxable net
investment income and realized net gains on investments. Thus, no provision for
Federal income taxes is required.
Dividends and distributions to shareowners:
Dividends and distributions to shareowners are recorded on the ex-dividend date.
For the Bond Income and Short-Term Bond, dividends are paid daily and
distributed on the last business day of each month. For the Growth and
International, dividends are payable at the end of each November. 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 September 28, 1995, Saturna Capital
Corporation provides investment advisory services and certain other
administrative and distribution services to conduct Trust business, including
shareholder servicing and transfer agency
<PAGE>
services. Each of the Funds pays the Adviser an Investment Advisory and
Administrative Services Fee (the "Base Fee") of .60% of average net assets per
annum, payable 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"). No performance adjustment is applicable
during the first year any Agreement is in place. The Adviser has voluntarily
undertaken to limit expenses of Bond Income and Short-Term Bond to 0.60% through
March 31, 1997 and waives its investment advisory and administrative fee as to
either Fund completely so long as assets of that Fund are less than $2 million.
For the year ended November 30, 1996, Bond Income and Short-Term Bond incurred
advisory expenses of $6,640 and $15,583, respectively. Growth and International
incurred advisory expenses of $7,540 and $3,148, respectively. In accordance
with the expense waiver, for the year ended November 30, 1996, Saturna Capital
waived all of the Bond Income advisory fee and $8,375 of that of Short-Term
Bond. In accordance with the Funds' custodian agreements with National City
Bank, for the year ended November 30, 1996, custodian fees for Bond Income,
Short-Term Bond, Growth, and International, were $739, $2,635, $2,271, and
$2,521, respectively. The custodian waived its fees for earnings credits, as
represented in the Statements of Operations. One trustee, who also serves as the
president of the Trust, is a director and president of the Adviser. The
unaffiliated trustees receive $100 per Board or committee meeting attended. On
November 30, 1996, the trustees, officers and their immediate families as a
group owned 26%, 8%, 13% and 26% of the outstanding shares of Bond Income,
Short-Term Bond, Growth and International, respectively. 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.
Investors National Corporation is the primary stockbroker used to effect
portfolio transactions for Growth and International, and paid $2,536 and $1,562,
respectively in commissions at deep-discount rates during the year ended
November 30, 1996.
Note 4 -Federal Income Taxes
At November 30, 1996, International had capital loss carryforwards of $6,353
which expire in 2004, Bond Income had capital loss carryforwards of $62,858
which expire in 2003 and Short-Term Bond had capital loss carryforwards of
$21,125 which expire in 2004, subject to regulation. 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
Short-Term Bond, Growth and International were $4,435, $398,808, and $96,586,
which consist of unrealized gains of $8,898, $429,314, and $111,338 and
unrealized losses of $4,463, $30,508, and $14,752, respectively. Additionally,
the net unrealized loss on investments for Bond Income of $22,635 comprised
unrealized gains of $7,747 and unrealized losses of $30,382. During the year
ended November 30, 1996, Bond Income purchased $901,724 of securities and
sold/matured $802,093. Comparable figures for Short-Term Bond are $3,623,163 and
$2,533,225; for Growth $697,108 and $376,770; and for International, $315,108
and $51,496. Included in the above amounts for Bond Income and Short-Term Bond
are purchases of $240,906 and $619,792 and sales of $104,008 and $1,083,918 of
U.S. Government securities, respectively.
<PAGE>
SEXTANT
MUTUAL FUNDS (GRAPHIC OMITTED)
(GRAPHIC OMITTED) SHORT-TERM BOND
(GRAPHIC OMITTED) BOND INCOME
(GRAPHIC OMITTED) GROWTH
(GRAPHIC OMITTED) INTERNATIONAL
( GRAPHIC OMITTED) SATURNA CAPITAL
MUTUAL FUNDS
1300 No. State Street
Bellingham WA 98225-4730
800/SATURNA
(800/728-8762)
www.saturna.com
ANNUAL REPORT
NOVEMBER 30, 1996
This report is issued for the information of the shareowners of the Funds. It is
not for the distribution to propective investors unless it is accompanied or
preceded by an effective prospectus relating to the securities of the Trust. The
Sextant Funds are series of Saturna Investment Trust.
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> <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
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 15 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 18, 1996, relating to the financial
statements and selected per share data and ratios (incorporated under the
heading to the financial statements and selected per share data and ratios
(Incorporated under the heading "Financial Highlights") appearing in the
November 30, 1996 Annual Report to Shareowners of The Saturna Investment Trust,
which is also incorporated by reference into the Registration Statement. We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectus and under the headings "Investment Advisory and Other Services" and
"Financial Statements" in the Statement of Additional Information.
Price Waterhouse LLP
/s/ Price Waterhouse LLP
Seattle, Washington
March 24, 1997
SATURNA INVESTMENT TRUST
POWER OF ATTORNEY
The undersigned Trustees of Saturna Investment Trust, a Massachusetts Business
Trust organized under the laws of the State of Washington, proposing to file
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, one or more amendments to the Registration Statement on Form N-1A and
related Amendments to the Registration Statement of the Trust under the
Investment Company Act of 1940 ("Amendments") do hereby separately and severally
appoint and constitute Nicholas F. Kaiser, whose signature appears below:
/S/ Nicholas F. Kaiser
---------------------------------
NICHOLAS F. KAISER
his true and lawful attorney for him and in his name, place and stead to sign in
the capacity of a Trustee of the Trust such Amendments and any and all
additional amendments thereto, and to file such amendments and all instruments
necessary or incidental thereto with the Securities and Exchange Commission
under such 1933 and 1940 Acts.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 19
th day of March, 1997.
- --------- -----
/S/ Gary A Goldfogel /S/ John E. Love
- -------------------- ---------------
Gary A. Goldfogel John E. Love
/s/ John S. Moore
- --------------------
John S. Moore
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE FUND AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000811860
<NAME> Saturna Investment Trust
<SERIES>
<NUMBER> 1
<NAME> Sextant Growth Fund
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-START> Dec-01-1995
<PERIOD-END> Nov-30-1996
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<INVESTMENTS-AT-COST> 1066142
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<REALIZED-GAINS-CURRENT> (5688)
<APPREC-INCREASE-CURRENT> 109794
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE FUND AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000811860
<NAME> Saturna Investment Trust
<SERIES>
<NUMBER> 5
<NAME> Idaho Tax Exempt Fund
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<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> Year
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE FUND AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000811860
<NAME> Saturna Investment Trust
<SERIES>
<NUMBER> 2
<NAME> Sextant Bond Income Fund
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-START> Dec-1-1995
<PERIOD-END> Nov-30-1996
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<ACCUMULATED-NII-PRIOR> (251)
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<INTEREST-EXPENSE> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE FUND AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000811860
<NAME> Saturna Investment Trust
<SERIES>
<NUMBER> 3
<NAME> Sextant International Fund
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-START> Dec-1-1995
<PERIOD-END> Nov-30-1996
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<NET-ASSETS> 695,494
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<NUMBER-OF-SHARES-SOLD> 83,056
<NUMBER-OF-SHARES-REDEEMED> (30,837)
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<PER-SHARE-NAV-BEGIN> 4.99
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<PER-SHARE-NAV-END> 5.87
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE FUND AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000811860
<NAME> Saturna Investment Trust
<SERIES>
<NUMBER> 4
<NAME> Sextant Short Term Bond Fund
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-START> Dec-01-1995
<PERIOD-END> Nov-30-1996
<EXCHANGE-RATE> 1
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<SHARES-COMMON-STOCK> 403341
<SHARES-COMMON-PRIOR> 174606
<ACCUMULATED-NII-CURRENT> 22
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4435
<NET-ASSETS> 2016798
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<DISTRIBUTIONS-OF-INCOME> (133010)
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<NUMBER-OF-SHARES-REDEEMED> (538054)
<SHARES-REINVESTED> 26037
<NET-CHANGE-IN-ASSETS> 228735
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-END> 5
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
