IDAHO TAX-EXEMPT FUND
MAY 31, 1997 REPORT
MORNINGSTAR MUTUAL FUNDS CONTINUES TO AWARD ITS TOP "FIVE-STAR" RATING TO
==============================================================================
IDAHO TAX-EXEMPT FUND AS OF MAY 31, 1997. THE MORNINGSTAR RATING IS A WIDELY
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RESPECTED MEASURE OF RISK-ADJUSTED PERFORMANCE.* THE FUND'S MANAGERS ARE
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PROUD THIS ACCOMPLISHMENT AND WORK HARD TO CONTINUE EXCELLENT RESULTS.
==============================================================================
Fellow Shareowners:
For the twelve month period ending 5/31/97, our Idaho Tax-Exempt Fund provided
shareholders with a total return of 6.53%. The current 30-day yield on your
Fund is 4.9%, tax-free. This is the equivalent of 8.83% of taxable income to
top-bracket Idaho taxpayers.
The last six months have been an unusual experience. Despite the lowest
unemployment rates in twenty years and strong economic growth, inflation
continues to subside. Last March, the Federal Reserve Bank of New York raised
the Federal Funds rate and yet interest rates across the yield curve are now
lower. The bond market is gaining confidence in the notion that continuous
economic growth does not necessarily lead to rising inflation.
For the next twelve months, we expect the "Goldilocks" economy will continue
to be "not too hot and not too cold." Interest rates will remain relatively
stable. This means less inherent price risk for bonds and solid reliable
returns for bond holders. It is worth remembering that there are times when
the return from bonds can exceed the return from the stock market. Should the
economy or the stock market falter, the stable prices and income advantage of
bonds will look very appealing.
As always, our staff and 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. We appreciate your investing with
us.
NICHOLAS KAISER, PHELPS MCILVAINE,
PRESIDENT VICE PRESIDENT, PORTFOLIO MANAGER
June 19, 1997
__________________
*Morningstar's proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change each month, and are calculated
from a fund's 3 and 5-year average annual returns with sales charge
adjustments (if any) and a risk factor that reflects performance relative to
three month Treasury bill returns. Ten per cent of the funds in a Morningstar
investment category receive five stars. From time to time the adviser has
waived all or a portion of fees or expenses, resulting in higher returns.
Naturally, past performance may not indicate future results.
IDAHO TAX-EXEMPT FUND
MAY 31, 1997 SEMI-ANNUAL REPORT
INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RATING* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
- ---------------------------- --------------------------------- -------------------- ------------ -------------
<S> <C> <C> <C> <C>
Airport (2.2%) -
AAA Boise City Idaho Airport
- - Revenue COP 5.4% 8/1/2011 $ 115,000 $ 113,792
Electric Power (3.4%)-
AAA Idaho Falls
- - Electric Revenue 6.75% due 4/1/2019 160,000 170,776
General Obligations (32.9)%
AA Ada and Canyon Counties
- - Joint School Dist #2 Meridian 5.5% due 7/30/2000 150,000 150,301
A- Bannock County Jail Bond 6.00% due 9/1/2012 100,000 101,636
AAA Boise City ID UTGO ISD 5.50% due 7/30/2011 95,000 95,734
AA- " 5.50% due 7/30/2016 150,000 146,187
AAA Canyon County ISD #132 5.40% due 7/30/2011 100,000 99,910
AAA Canyon County ID. SCD #132 5.40% due 7/30/2012 100,000 99,360
A Canyon County SD#135 Notus 5.90% due 8/1/2005 50,000 51,012
- - " 6.00% due 8/1/2006 50,000 51,160
- - " 6.00% due 8/1/2007 50,000 51,197
AAA Cassia, Twin Falls & Oneida GO 5.375% 8/15/2015 75,000 74,260
AAA Gooding County (Wendell)
- - School Dist. #232 6.00% due 8/1/2008 55,000 56,528
AAA Kootenai County
- - School District #273 6.00% due 8/1/2012 100,000 102,783
AAA Madison County
- - School District #321 5.60% due 2/1/2010 150,000 152,316
AA Payette County 6.50% due 7/31/2008 80,000 84,802
AA School District #372 6.75% due 7/31/2009 155,000 165,894
- - " 6.75% due 7/31/2010 100,000 106,505
AAA Teton County ID UTGO 5.50% due 8/01/2012 75,000 76,016
------------ -------------
- - SUB-TOTAL - 1,635,000 1,665,601
Housing (9.0%)
AA Idaho Housing Authority
- - Single Fam Mortgage, B-1 6.85% due 7/1/2012 110,000 111,691
AA Idaho Housing Authority
- - Refunding Ser A 6.15% due 7/1/2024 150,000 151,466
AA Idaho Housing Authority
- - Single Fam Mort Mezz-E-1 6.60% due 7/1/2011 110,000 113,413
AA Idaho Housing Authority
- - Single Fam Mort Rev Ser B1 8.125% due 7/1/2019 5,000 5,094
- - " 8.00% due 1/1/2020 25,000 25,566
AA Idaho Housing Authority
Single Fam Mort SR Ser C1 7.70% due 7/1/2017 50,000 50,540
-------------------- ------------
- - SUB-TOTAL - 450,000 457,770
Irrigation (4.1%)
AA Boise Kuna Irr. Dist. 6.00% due 7/1/2008 200,000 208,040
Medical/Hospitals (4.5%)
A Idaho Health Facility 6.25% due 12/1/2012 175,000 182,446
AA St. Alphonsus Medical Center 6.25% due 12/1/2022 45,000 46,112
------------ -------------
- - SUB-TOTAL - 220,000 228,558
Real Estate (6.5%)
A Idaho Falls Redevel. Agency Rev. 8.05% due10/1/2006 100,000 111,608
- - " 8.125% due 10/1/2008 100,000 111,930
AAA Idaho St Bldg Authority Ser C 5.70% due 9/1/2007 100,000 104,034
------------ -------------
- - SUB-TOTAL - 300,000 327,572
</TABLE>
<PAGE>
May 31, 1997 SEMI-Annual Report IDAHO TAX-EXEMPT FUND
INVESTMENTS, CONTINUED
<TABLE>
<CAPTION>
RATING* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
- ----------------------- ---------------------------------------- ------------------- ------------ -------------
<S> <C> <C> <C> <C>
Roads (4.1%)
A Payette L.I.D. 7.60% due 5/1/2005 30,000 30,089
A Post Falls, Kootenai County 7.00% due 4/15/1998 10,000 9,964
- - L.I.D. #91-1 7.20% due 4/15/1999 15,000 14,967
- - " 7.40% due 4/15/2000 15,000 14,961
- - " 7.60% due 4/15/2001 15,000 14,994
- - " 7.75% due 4/15/2002 20,000 19,995
- - " 7.95% due 4/15/2003 20,000 20,024
- - " 7.95% due 4/15/2004 20,000 20,057
- - " 7.95% due 4/15/2005 20,000 20,037
- - " 7.95% due 4/15/2006 20,000 20,035
- - " 7.95% due 4/15/2007 20,000 20,034
------------ -------------
- - SUB-TOTAL - 205,000 205,157
State Education (16.1%)
AAA Boise St. Univ. 6.20% due 4/1/2010 200,000 210,760
AAA Fee Revenue 6.30% due 4/1/2014 100,000 103,780
A- Idaho State University
- - Student Fee Revenue 6.40% due 4/1/2014 250,000 263,050
AAA University of Idaho
- - Student Fee Revenue 5.60% due 4/1/2015 185,000 185,286
A- University of Idaho
- - Fee Revenue 6.85% due 4/1/2016 50,000 53,523
------------ -------------
- - SUB-TOTAL - 785,000 816,399
Sewer (3.5%)
A Troy Sewer Revenue 7.00% due 2/1/1998 10,000 10,032
- - " 7.10% due 2/1/1999 10,000 10,131
- - " 7.20% due 2/1/2000 10,000 10,199
- - " 7.30% due 2/1/2001 10,000 10,330
- - " 7.40% due 2/1/2002 10,000 10,325
- - " 7.50% due 2/1/2003 10,000 10,334
- - " 7.60% due 2/1/2004 10,000 10,311
- - " 7.70% due 2/1/2005 15,000 15,507
- - " 7.80% due 2/1/2006 15,000 15,551
- - " 7.90% due 2/1/2007 15,000 15,565
- - " 8.00% due 2/1/2008 15,000 15,571
- - " 8.00% due 2/1/2009 20,000 20,786
- - " 8.00% due 2/1/2010 20,000 20,801
------------ -------------
- - SUB-TOTAL - 170,000 175,443
Water Supply (11.0%)
A- American Falls Res. 7.25% due 5/1/2004 70,000 74,796
- - Ref. Series A 7.625% due 5/1/2021 150,000 161,367
A McCall Water Rev., Ser 1994 6.25% due 9/1/2008 200,000 209,032
A McCall Water Revenue 6.375% due 9/1/2014 70,000 73,117
A Ucon Water & Sewer Rev. Ref. 7.75% due 12/1/2002 35,000 36,462
------------ -------------
- - SUB-TOTAL 525,000 554,774
------------------- ------------
- - Total Investments (97.3%) Cost $4,795,970 $ 4,765,000 $ 4,923,882
------------
- - Other Assets (net of liabilities) (2.7%) - - 136,249
-------------
- - Total Net Assets (100%) - - $ 5,060,131
=============
<FN>
These unaudited bond ratings reflect the adviser's current rating of each bond,
as determined using Standard & Poor's and Moody's ratings.
</FN>
</TABLE>
<PAGE>
IDAHO TAX-EXEMPT FUND MAY 31,1997 SEMI-ANNUAL REPORT
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data per share of capital stock outstanding througout the period.
Six Months ended For Year Ended November 30
----------------------------
May 31, 1997 1996 1995 1994 1993
- ----------------------------------------------------- ------------------ ---------------------------- ------- --------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 5.25 $ 5.28 $ 4.76 $ 5.23
------------------ ---------------------------- ------- --------
Income from Investment Operations
Net investment income 0.13 0.27 0.26 0.27
Net gains or losses on securities
(both realized and unrealized) (0.07) (0.03) 0.52 (0.46)
------------------ ---------------------------- ------- --------
Total From Investment Operations 0.06 0.24 0.78 (0.19)
------------------ ---------------------------- ------- --------
Less Distributions
Dividends (from net investment income) (0.13) (0.27) (0.26) (0.27)
Distributions (from capital gains) 0.00 0.00 0.00 (0.01)
------------------ ---------------------------- ------- --------
Total Distributions (0.13) (0.27) (0.26) (0.28)
------------------ ---------------------------- ------- --------
Net asset value at end of period $ 5.18 $ 5.25 $ 5.28 $ 4.76
================== ============================ ======= ========
Total Return 1.21% 4.66% 16.68% (3.76)%
Ratios / Supplemental Data
Net assets ($000), end of period $ 5,060 $ 5,064 $5,220 $ 6,841
Ratio of expenses to average net assets 0.40% 0.79% 0.75% 0.75%
Ratio of net investment income to average net assets 2.54% 5.10% 5.07% 5.28%
Portfolio turnover rate 12% 10% 28% 36%
May 31, 1997 1992 1991 1990 1989 1988
- ----------------------------------------------------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 5.16 $ 5.10 $ 5.03 $ 5.07 $ 4.98 $ 5.03
------- -------- ------- ------- ------- -------
Income from Investment Operations
Net investment income 0.25 0.28 0.30 0.33 0.35 0.35
Net gains or losses on securities
(both realized and unrealized) 0.12 0.09 0.07 (0.04) 0.09 (0.05)
------- -------- ------- ------- ------- -------
Total From Investment Operations 0.37 0.37 0.37 0.29 0.44 0.30
------- -------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income) (0.25) (0.29) (0.30) (0.33) (0.35) (0.35)
Distributions (from capital gains) (0.05) (0.025) 0.00 0.00 0.00 0.00
------- -------- ------- ------- ------- -------
Total Distributions (0.30) (0.31) (0.30) (0.33) (0.35) (0.35)
------- -------- ------- ------- ------- -------
Net asset value at end of period $ 5.23 $ 5.16 $ 5.10 $ 5.03 $ 5.07 $ 4.98
======= ======== ======= ======= ======= =======
Total Return 7.35% 7.49% 7.63% 5.94% 9.17% 6.45%
Ratios / Supplemental Data
Net assets ($000), end of period $7,367 $ 5,808 $3,803 $2,540 $ 808 $ 335
Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.97% 0.90% 0.28%
Ratio of net investment income to average net assets 4.79% 5.64% 6.08% 6.74% 6.51% 6.58%
Portfolio turnover rate 31% 17% 15% 17% 13% 100%
<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, $.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 .11%, .27%, .26%, .14%, .18%, .17%, .54%, 1.01%, 1.25%, 2.24%, AND .11%, RESPECTIVELY.
</FN>
</TABLE>
<PAGE>
MAY 31,1997 SEMI-ANNUAL REPORT IDAHO TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of May 31, 1997
<S> <C> <C>
Assets
Municipal Bond investments (cost $4,795,970) $4,923,882
Cash 47,906
Interest receivable 88,305
Insurance deposit 800
-----------
Total Assets - $5,060,893
----------
Liabilities
Payable to affiliate 762
-----------
Total Liabilities - 762
----------
Net Assets - $5,060,131
==========
Fund shares outstanding - 977,265
Analysis of Net Assets
Paid in capital (unlimited shares authorized, no par value) 4,973,341
Undistributed net investment income (loss) 84
Accumulated net realized gain (loss) on investments (55,920)
Unrealized net appreciation on investments 142,626
-----------
Net Assets applicable to Fund shares outstanding $5,060,131
===========
Net Asset Value per share - $ 5.18
==========
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For six months ended May 31, 1997
<S> <C> <C>
Investment income
Interest income $151,578
Amortization of bond premiums (3,756)
Accretion 512
---------
Gross investment income - $148,334
Expenses
Investment adviser and administration fee 12,424
Professional fees 6,049
Printing and postage 2,201
Shareowner servicing 2,173
Filing and registration fees 793
Custodian Fees 751
Other expenses 745
---------
Total gross expenses 25,136
Less earnings credits (751)
Less advisory fee waived (4,507)
---------
Net expenses - 19,878
---------
Net investment income - 128,456
---------
Net realized gain (loss) on investments
Proceeds from sales 572,456
Less cost of securities sold based on identified cost 558,868
---------
Realized net gain (loss) - 13,588
---------
Unrealized gain (loss) on investments
End of period 142,626
Beginning of period 225,804
---------
Decrease in unrealized gain for the period - (83,178)
--------- ---------
Net realized and unrealized gain on investments - (30,935)
--------- ---------
Net increase in net assets resulting from operations - $ 58,866
=========
</TABLE>
<PAGE>
IDAHO TAX-EXEMPT FUND MAY 31, 1997 SEMI-ANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS Six Months ended Year ended
May 31, 1997 Nov 30, 1996
----------------- -------------
Operations:
Net investment income 128,456 252,695
Net realized (loss) gain on investments 13,588 (5,514)
Net increase (decrease) in unrealized appreciation (83,178) (25,421)
----------------- -------------
Net increase (decrease) in net assets 58,866 221,760
----------------- -------------
Dividends to Shareowners From:
Net investment income (128,456) (252,571)
----------------- -------------
Capital gains distributions - -
----------------- -------------
Fund Share Transactions:
Proceeds from sales of shares 379,893 837,937
Value of shares issued in reinvestment of dividends 97,198 191,502
----------------- -------------
477,091 1,029,439
Cost of shares redeemed (411,604) (1,154,708)
----------------- -------------
Net increase (decrease) in net assets from share transactions 65,487 (125,269)
----------------- -------------
Total increase (decrease) in net assets (4,103) (156,080)
Net Assets
Beginning of period 5,064,234 5,220,314
----------------- -------------
End of period 5,060,131 5,064,234
================= =============
Shares of the Fund Sold and Redeemed
Number of shares sold 74,899 162,231
Number of shares issued in reinvestment of dividends 18,756 36,855
Number of shares redeemed (81,033) (223,206)
----------------- -------------
Net Increase (Decrease) in Number of Shares Outstanding 12,622 (24,120)
================= =============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1-Organization
Saturna Investment Trust, (formerly Northwest Investors Trust) (the "Trust")
was established under Washington State Law as a Business Trust on February 20,
1987. The Trust is registered as a no-load, open-end series invest-ment
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 sig-nificant accounting policies followed by
the Fund.
INVESTMENTS:
Fixed-income securities for which there are no publicly available market
quo-tations are valued using matrices based on maturity, quality, yield and
similar factors, which are compared periodically to multiple dealer bids and
ad-justed by the adviser under policies established by the Trustees.
The cost of securities is the same for accounting and Federal income tax
purposes. Securities trans-actions 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
con-stant yield-to-maturity basis from pur-chase date to maturity or call, as
appropriate.
Interest income is increased by accretion only for bonds underwritten as
original issue discounts. Market dis-counts are recorded as realized gains
upon disposition.
Expenses incurred by the Trust on be-half 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 ex-penses, as described below.
INCOME TAXES:
The Fund has elected to be taxed as a regulated investment company under the
Internal Revenue Code and distribute sub-stantially all of its taxable net
invest-ment income and realized net gains on in-vest-ments. Therefore, no
provision for Federal income taxes is required. Further, the Fund intends to
meet IRS requirements for tax-free income divi-dends, 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 share-owners are recorded on the ex-dividend
date. Div-idends are paid daily and distributed on the last business day of
each month. Shareowners electing to reinvest dividends and distributions
pur-chase 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 ad-vi-sory services and certain other
adminis-tra-tive and distribution services to conduct the Fund's busi-ness.
For such services, the Fund pays an annual fee equal to .50% of av-erage daily
net assets. For the six months ended May 31, 1997, the Fund incurred
advisory fee expenses of $12,424.
Saturna Capital has volunteered to reimburse the Fund to the extent that total
expenses of the Fund, (excluding interest, brokerage commis-sions and taxes)
exceeds .80% through March 31, 1997. Accordingly, for the six months ended
May 31, 1997, Saturna Capital waived $4,507 of the advisory fee.
In accordance with the Fund's agreement with its custodian, National City Bank
of Indiana, for the six months ended May 31, 1997, custodian fees incurred by
the Fund, amounted to $751.
One trustee is also a director and officer of Saturna Capital Corporation.
The Trust acts as a distributor of its own shares, except in those states in
which Investors National Corporation (a sub-si-diary of Saturna Capital
Corporation) is itself registered as a broker-dealer and acts as dis-tributor
without compensation. Saturna Capital Corporation acts as shareowner
servicing (transfer) agent for the Fund, for a monthly fee plus certain
expenses. For the six months ended May 31, 1997, the Fund paid such a fee of
$2,173.
The unaffiliated trustees receive a fee of $100 per meeting attended each, and
in the period ending May 31, 1997, such fees totalled $600.
Note 4-Investments
At May 31, 1997, the net unreal-ized appreciation of investments for the Fund
of $142,626 com-prised gross unrealized gains of $151,450 and gross unrealized
losses of ($8,824).
During the six months ended May 31, 1997, the Fund pur-chased $687,720 of
securities and sold/matured $572,456 of securities.
<PAGE>
IDAHO TAX-EXEMPT FUND
A PORTFOLIO OF SATURNA INVESTMENT TRUST
(GRAPHIC OMITTED)
SATURNA
CAPITAL
(GRAPHIC OMITTED)
MUTUAL FUNDS
1-800-/SATURNA
(800/728-8762)
([email protected])
SEMI-ANNUAL REPORT
MAY 31, 1997
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.
