Sextant Mutual Funds
(Graphic Omitted)
Fellow Shareowners:
Its likely to be some time before the Sextant Funds have a year as good as 1997.
Fueled by falling interest and inflation rates, the markets soared ahead for
another strong year. For the 12 months ended November 30, 1997, the Dow Jones
Industrials were up 22.2%, the S&P 500 28.5%, and the Russell 2000 gained
23.2%.Its likely to be some time before the Sextant Funds have a year as good as
1997. Fueled by falling interest and inflation rates, the markets soared ahead
for another strong year. For the 12 months ended November 30, 1997, the Dow
Jones Industrials were up 22.2%, the S&P 500 28.5%, and the Russell 2000 gained
23.2%.
The public continues to focus on long-term mutual funds to build retirement
assets. The 1997 stock market rewarded value investors, and the Sextant Funds'
emphasis on the financial, cyclical, technology, and service sectors brought
excess returns to all Funds. The public continues to focus on long-term mutual
funds to build retirement assets. The 1997 stock market rewarded value
investors, and the Sextant Funds' emphasis on the financial, cyclical,
technology, and service sectors brought excess returns to all Funds. 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. The four Funds pay
increased or decreased monthly advisory fees depending on relative performance
over the prior 12 months. For the fiscal year ended November 30, 1997,
comparative total returns and percentile category rankings (1 is best) are: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. The
four Funds pay increased or decreased monthly advisory fees depending on
relative performance over the prior 12 months. For the fiscal year ended
November 30, 1997, comparative total returns and percentile category rankings (1
is best) are:
Sextant Fund Total Return vs. Morningstar Total Return
------------- ------------- --------------- ------------
RankSextant Fund Total Return vs. Morningstar Total Return
--------------- ------------- --------------- ------------
Rank
--
Short-Term Bond 5.44% Short-Term Bonds 5.56% 42Short-Term
Bond 5.44% Short-Term Bonds 5.56% 42
Bond Income 8.27% Long-Term Bonds 7.74% 37Bond Income
8.27% Long-Term Bonds 7.74% 37
Growth 30.30% Domestic Growth 20.56% 7Growth 30.30%
Domestic Growth 20.56% 7
International 13.58% Foreign Stock -3.22% 15International 13.58% Foreign Stock
- - -3.22% 15 For the year, the high-quality Sextant bond funds both outperformed
their peers. There is an anchor role for bonds in most portfolios, especially if
we begin to experience deflation. With its 2 to 3 year portfolio maturity,
Short-Term Bond Fund is a great alternative to money-market funds for investing
your cash reserves. Bond Income Fund's long (15 year) average portfolio maturity
boosted its total return in a year of falling interest rates.For the year, the
high-quality Sextant bond funds both outperformed their peers. There is an
anchor role for bonds in most portfolios, especially if we begin to experience
deflation. With its 2 to 3 year portfolio maturity, Short-Term Bond Fund is a
great alternative to money-market funds for investing your cash reserves. Bond
Income Fund's long (15 year) average portfolio maturity boosted its total return
in a year of falling interest rates. Our value approach to investing helped the
Growth Fund dramatically. The Fund provided a total return of 30.3%, almost 10%
above the average Morningstar domestic growth fund and putting the Fund in the
top 7% of this category.Our value approach to investing helped the Growth Fund
dramatically. The Fund provided a total return of 30.3%, almost 10% above the
average Morningstar domestic growth fund and putting the Fund in the top 7% of
this category. We created Sextant International Fund to invest in non-US
equities, believing it unwise to insulate oneself from foreign events and
opportunities. While 1997 was a year focused on the excess risks in foreign
investing, we are pleased that the 13.6% return earned by the International Fund
in its second year again outdistanced the Foreign Stock category.
<PAGE>
Sextant International confines its investments to stocks easily traded in the
US, such as ADR's, and these tend to be the larger companies worldwide. Little
of the portfolio was subject to the Asian financial meltdown, and our emphasis
continues on European and Canadian issues.We created Sextant International Fund
to invest in non-US equities, believing it unwise to insulate oneself from
foreign events and opportunities. While 1997 was a year focused on the excess
risks in foreign investing, we are pleased that the 13.6% return earned by the
International Fund in its second year again outdistanced the Foreign Stock
category. Sextant International confines its investments to stocks easily traded
in the US, such as ADR's, and these tend to be the larger companies worldwide.
Little of the portfolio was subject to the Asian financial meltdown, and our
emphasis continues on European and Canadian issues. Further information on each
Fund is found in the following 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. In the
footnotes, you will notice another unusual feature of the Sextant funds: on
average, 20% of each Sextant Fund is owned by the trustees, officers, and their
immediate families. We invite you to continue investing your money with
ours.Further information on each Fund is found in the following 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. In the footnotes, you will notice another unusual feature of
the Sextant funds: on average, 20% of each Sextant Fund is owned by the
trustees, officers, and their immediate families. We invite you to continue
investing your money with ours.
RESPECTFULLY,
RESPECTFULLY,
NICHOLAS KAISER, PRESIDENT PHELPS MCILVAINE, VICE PRESIDENT
(Manager, Sextant Growth; (Manager, Sextant Bond Income;
Sextant International ) Sextant Short-Term Bond)
(Graphic Omitted)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
Saturna Investment Trust
We have audited the accompanying statement of assets and liabilities of the
Sextant Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Growth Fund and
Sextant International Fund, each a series of the Saturna Investment Trust,
including the schedules of investments as of November 30, 1997, and the related
statements of operations and changes in net assets and the financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. The financial statements and financial highlights presented for the year
ended November 30, 1996 and prior were audited by other auditors whose report
dated December 18, 1996, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian. Our audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our
opinion the 1997 financial statements and financial highlights referred to above
present fairly, in all material respects, the financial position of Sextant
Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Growth Fund and Sextant
International Fund, as of November 30, 1997, the results of their operations,
the changes in their net assets and their financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
December 12, 1997
<PAGE>
SEXTANT SHORT-TERM BOND FUND
1997 ANNUAL REPORT
November 30, 1997
INVESTMENTS
(Graphics Omitted)
<TABLE>
<CAPTION>
Rating* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
- - ------------------------ --------------------------------- ----------------- ------------ -------------
APPLIANCES (4.3%)
<S> <C> <C> <C> <C>
A- Whirlpool 9.50% 6/15/2000 $ 100,000 $ 106,790
AUTO MANUFACTURING (4.3%)
BBB General Motors 9.625% 12/1/2000 100,000 108,563
BANKING (6.3%)
A- Bankers Trust-NY 9.50% 6/14/2000 75,000 80,302
BBB+ First Interstate Bank 8.625% 4/1/1999 75,000 77,040
------------ -------------
SUB-TOTAL 150,000 157,342
FINANCE (14.3%)
AA- Associates Corp NA 8.35% 12/22/1998 100,000 102,050
A Deluxe Corp. 8.55% 2/15/2001 50,000 53,242
AA- Norwest Financial 7.25% 3/15/2000 100,000 101,537
A Travelers Property & Casualty 6.75% 4/15/2001 100,000 101,026
------------ -------------
SUB-TOTAL 350,000 357,855
ELECTRIC UTILITY (10.6%)
A+ Mississippi Power Co. 6.625% 8/1/2000 60,000 59,676
A Pacific Gas & Electric 6.75% 12/1/2000 100,000 100,254
A- Public Service Enterprise Group 8.75% 7/1/1999 100,000 105,288
------------ -------------
SUB-TOTAL 260,000 265,218
FOOD (5.8%)
A+ H.J. Heinz Co. 6.75% 10/15/1999 65,000 65,260
BBB+ Supervalue 7.25% 7/15/1999 80,000 80,632
------------ -------------
SUB-TOTAL 145,000 145,892
OIL & GAS (3.0%)
A- Fina Oil & Chemical 6.875% 7/15/2001 75,000 76,050
INVESTMENT FINANCE (13.0%)
AA- Merrill Lynch & Co. 6.00% 1/15/2001 100,000 99,080
A+ Morgan Stanley 9.375% 6/15/2001 50,000 54,665
BBB Salomon Bros. 6.70% 12/1/1998 100,000 99,930
BBB+ Finovia Capital 5.98% 2/27/2001 75,000 73,070
------------ -------------
SUB-TOTAL 325,000 326,745
RETAILING (11.4%)
BBB Limited 8.875% 8/15/1999 75,000 77,670
BBB+ Dayton Hudson 7.50% 3/1/1999 100,000 101,350
A J.C. Penny & Co. 9.05% 3/1/2001 100,000 107,350
------------ -------------
SUB-TOTAL 275,000 286,370
TOBACCO (3.2%)
A Phillip Morris 9.25% 2/15/2000 75,000 79,058
U.S. GOVERNMENT (20.2%)
AAA U.S. Treasury Note 6.75% 4/30/2000 200,000 204,125
AAA U.S. Treasury Note 6.25% 4/30/2001 300,000 303,609
------------ -------------
SUB-TOTAL 500,000 507,734
TOTAL INVESTMENTS (96.4%) (Cost = $2,412,154) $ 2,355,000 $ 2,417,617
================= ============
Other Assets (net of liabilities) (3.6%) 90,671
---------------------------------
TOTAL NET ASSETS (100%) $ 2,508,288
=================================
<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>
(Graphics Omitted)
1997 ANNUAL REPORT
SEXTANT SHORT-TERM BOND FUND
----------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1997
ASSETS
<S> <C>
Bond investments (cost $2,412,154) $2,417,617
Cash 43,321
Interest receivable 49,186
-----------
Total Assets 2,510,124
-----------
LIABILITIES
Other Liabilities 1,836
-----------
Total Liabilities 1,836
-----------
NET ASSETS $2,508,288
===========
Fund shares outstanding 502,530
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, without par value) $2,525,356
Accumulated net realized gain (loss) on investments (22,531) Unrealized net
appreciation on investments 5,463
-----------
Net Assets applicable to Fund shares outstanding $2,508,288
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 4.99
===========
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For year ended November 30, 1997
INVESTMENT INCOME
<S> <C> <C>
Interest income $ 153,602 -
Amortization of bond premiums (19,176) -
Accretion 71 -
-----------
Gross investment income - $134,497
EXPENSES
Investment adviser and administration fee 13,245 -
Professional fees 4,969 -
Filing and registration fees 1,520 -
Printing and postage 1,111 -
Other expenses 816 -
-----------
Total gross expenses 21,661 -
---------
Less advisory fee waived (8,609) -
-----------
Net expenses - 13,052
---------
Net investment income - 121,445
---------
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 1,001,078 -
Less cost of securities sold based on identified cost 1,002,483 -
-----------
Realized net gain (loss) - (1,405)
---------
UNREALIZED GAIN (LOSS) ON INVESTMENTS
End of period 5,463 -
Beginning of period 4,435 -
-----------
Increase in unrealized gain for the period - 1,028
---------
Net realized and unrealized gain (loss) on investments - (377)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS - $121,068
=========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
(Graphics Omitted)
SEXTANT SHORT-TERM BOND FUND
- - -------------------------------
1997 ANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Year ended
Nov. 30, 1997 Nov. 30, 1996
--------------- ---------------
INCREASE IN NET ASSETS
FROM OPERATIONS
<S> <C> <C>
Net investment Income $ 121,445 $ 133,032
Net realized (loss) on investments (1,405) (21,126)
Net increase in unrealized appreciation 1,028 698
--------------- ---------------
Net increase in net assets from operations 121,068 112,604
--------------- ---------------
DIVIDENDS TO SHAREOWNERS FROM
Net investment income (121,530) (133,010)
Capital gains distributions - -
--------------- ---------------
(121,530) (133,010)
--------------- ---------------
FUND SHARE TRANSACTIONS
Proceeds from sales of shares 1,321,409 3,700,165
Value of shares issued in reinvestment of dividends 120,427 129,365
--------------- ---------------
1,441,836 3,829,530
Cost of shares redeemed (949,884) (2,670,058)
--------------- ---------------
Net Increase in net assets from share transactions 491,952 1,159,472
--------------- ---------------
Total increase in net assets 491,490 1,139,066
NET ASSETS
Beginning of period 2,016,798 877,732
--------------- ---------------
End of period $ 2,508,288 $ 2,016,798
=============== ===============
Shares of the Fund Sold and Redeemed
Number of shares sold 265,939 740,752
Number of shares issued in reinvestment of dividends 24,218 26,037
--------------- ---------------
290,157 766,789
Number of shares redeemed (190,967) (538,054)
--------------- ---------------
Net Increase in Number of Shares Outstanding 99,190 228,735
=============== ===============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
(Graphic Omitted)
SEXTANT SHORT-TERM BOND FUND
----------------------------
1997 ANNUAL REPORT
- - --------------------
FINANCIAL HIGHLIGHTS
- - ------------------------------------------
<TABLE>
<CAPTION>
Selected data per share of capital stock outstanding throughout the period:
For the Year Ended November 30
--------------------------------
1997
--------------------------------
NET ASSET VALUE AT BEGINNING OF PERIOD $5.00
--------------------------------
<S> <C>
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.27
Net gains or losses on securities
(both realized and unrealized) (0.01)
--------------------------------
Total from investment operations 0.26
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.27)
Distributions (from capital gains) 0.00
--------------------------------
Total distributions (0.27)
NET ASSET VALUE AT END OF PERIOD $ 4.99
================================
0.01
TOTAL RETURN 5.44%
RATIOS / SUPPLEMENTAL DATA
- - ----------------------------------------------------------------------------
Net assets ($000), end of period $ 2,508
Ratio of expenses to average net assets 0.60%
Ratio of net investment income to average net assets 5.58%
Portfolio turnover rate 47%
Selected data per share of capital stock outstanding throughout the period:
Sept. 28. '95 (incep-
1996 tion) to Nov. 30 '95*
----------------------- -----------------------
NET ASSET VALUE AT BEGINNING OF PERIOD $5.03 $5.00
----------------------- -----------------------
<S> <C> <C>
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
======================= =======================
0.01 0.01
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 periods, all or a portion of the operating expenses were waived. If expensess had not
been waived,
the resulting increase to expenses per share in the periods would have been $.02, $.02 and $.007,
respectively.
The increase to the ratio of expenses to average monthly net assets would
be .40%, .52% and .16%, respectively.
* not annualized
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
Fiscal Year 1997
For the fiscal year ended November 28, 1997, the Sextant Short-Term Bond Fund
returned 5.44% to its shareholders. The price moved within a narrow $4.91 to
$5.01 range, or less than 2%. The Fund has performed well, meeting its
objectives of high current income and capital stability. Factors Affecting Past
Performance Nearly perfect economic conditions continued through 1997. Receeding
inflation, stable monetary policy and reduced government deficits boosted the
real returns provided fixed income investors. Positive real rates of return,
high equity valuations, and the Asian financial crisis are now persuading
investors to allocate more money to the US bond market. Despite all of these
positive factors, short-term interest rates actually rose in March, and the
Fund's NAV dropped 1 for the year. The average effective maturity of the Fund
remains close to 21/2 years. The majority of the portfolio is invested in
high-grade corporate paper, with the balance in US Treasury and bullet US Agency
paper. Yield spreads to corporates and agencies were narrow at the start of the
year, then widened slightly because of the foreign demand for US Treasuries. The
Fund added yield to the portfolio by investing in high coupon, callable paper.
Also, the Fund invested in the corporate debt of selected banks, utilities and
finance companies when these areas were cheap. As the economy has continued to
grow at a modest pace these companies have prospered and their debt has
performed well in the market.
<PAGE>
1997 ANNUAL REPORT
SEXTANT SHORT-TERM BOND FUND
- - -------------------------------
(Graphics Omitted)
Looking Forward
In 1998 we expect modest economic expansion. The Federal Reserve could lower
short-term rates by as much as a full percent, letting the yield curve steepen.
With long bond values inflated by foreign buyers, the yield curve flat and long
rates at historic lows, we see little upside potential in the long end of the
bond market. As foreign credit problems subside, long rates should rise back
toward 6.00%. A steepening yield curve and falling short-term rates mean we
should keep the portfolio's maturity close to 3 years. Credit spreads can also
narrow as rates fall. Performance Fee The Sextant Short-Term Bond Fund
calculates its management fee based on a comparison of the Fund's return to the
return of the Morningstar Category 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". As the 12-month return of the Fund was
within 1% of the average, no adjustment to the basic 0.60% advisory fee were
made for the month of December 1997. Comparison to Index When comparing any fund
to an index, remember that the index is unmanaged AND EXPENSE-FREE. Unlike the
index, 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 Gov/Corp Investment Grade Bond Index for
maturities between one and three years. The graph shows that a $10,000
investment made on 11/30/95 would have risen to $11,173 in the Fund and $11,418
in the Index. The 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
(Graph Omitted)
<PAGE>
November 30, 1997
1997 ANNUAL REPORT
SEXTANT BOND INCOME FUNDSEXTANT BOND INCOME FUND
- - ------------------------------------------------------
(Graphic Omitted)
INVESTMENTS
<TABLE>
<CAPTION>
RATING* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
- - ------------------------------ ---------------------------- ----------------- ----------- ------------
BANKING (18.7%)
<S> <C> <C> <C> <C>
A- Chase Manhatten-Sub Notes 7.125% 6/15/2009 50,000 51,542
A Citicorp 7.25% 10/15/2011 50,000 52,295
A- Comercia Bank 7.125% 12/1/2013 50,000 49,828
AA- Norwest Financial Inc. 6.85% 7/15/2009 50,000 50,560
----------- ------------
SUB-TOTAL 200,000 204,225
BEVERAGES (5.2%)
A- Seagram Co. Ltd 8.35% 1/15/2022 50,000 56,315
BUILDING (4.4%)
A+ Lowes Corp 7.00% 10/15/2023 50,000 47,665
ELECTRIC UTILITIES (13.5%)
A Alabama Power 7.75% 2/1/2023 50,000 50,285
BBB Commonwealth Edison 7.50% 7/1/2013 50,000 50,065
A+ Southern California Edison 6.90% 10/1/2018 50,000 47,520
----------- ------------
SUB-TOTAL 150,000 147,870
ELECTRONICS (4.6%)
A- Phillips Electronics 7.25% 8/15/2013 50,000 50,350
FOOD (4.8%)
BBB- Nabisco Holdings 7.55% 6/15/2015 50,000 52,250
INSURANCE (4.9%)
A Allstate 7.50% 6/15/2013 50,000 53,465
INVESTMENT FINANCE (13.9%)
A Bear Sterns Co.s Inc. 7.00% 3/01/2007 50,000 50,765
A Dean Witter Discover 6.75% 10/15/2013 50,000 48,940
BBB Paine Webber Group 7.625% 2/15/2014 50,000 52,500
----------- ------------
SUB-TOTAL 150,000 152,205
OIL & GAS (4.3%)
A Texaco Capital 8.625% 6/30/2010 40,000 46,744
PAPER PRODUCTS (4.8%)
BBB- Georgia Pacific 7.70% 6/15/2015 50,000 52,170
RETAILING (9.2%)
A Gap 6.90% 9/15/2007 50,000 51,480
A- Rite Aid 6.875% 8/15/2013 50,000 49,200
----------- ------------
SUB-TOTAL 100,000 100,680
TELECOMMUNICATIONS (4.6%)
A+ GTE 6.90% 11/01/2008 50,000 50,500
TOTAL INVESTMENTS (92.9%) Cost = $908,876 $ 990,000 1,014,439
=========== -----------
Other Assets (net of liabilities) (7.1%) 77,800
----------------------------
Total Net Assets (100%) $ 1,092,239
============================
<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>
(Graphic Omitted)
1997 ANNUAL REPORT
SEXTANT BOND INCOME FUND
- - ------------------------------------------------------
<TABLE>
<CAPTION>
Selected data per share of capital stock outstanding throughout each period.
Data prior to September 28, 1995 may not be meaningful, as the fund operated with different
investment objectives and fee arrangements.
Year ended November 30,
- - --------------------------------------------------------------------------------
1997 1996 1995
------------- ------- -------
NET ASSET VALUE AT BEGINNING OF PERIOD $4.76 $4.91 $4.39
------------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
<S> <C> <C> <C>
Net investment income 0.30 0.30 0.24
Net gains or losses on securities
(both realized and unrealized) 0.07 (0.12) 0.52
------------- ------- -------
Total from investment operations 0.37 0.18 0.76
LESS DISTRIBUTIONS
Dividends (from net investment income)
Non-taxable (0.24) (0.25) (0.17)
Taxable (0.30) (0.30)
Distributions (from capital gains) 0.00 (0.03) 0.00
------------- ------- -------
Total distributions (0.30) (0.33) (0.24)
NET ASSET VALUE AT END OF PERIOD $ 4.83 $ 4.76 $ 4.91
============= ======= =======
TOTAL RETURN 8.24% 4.04% 17.69%
RATIOS / SUPPLEMENTAL DATA
- - --------------------------------------------------------------------------------
Net assets ($000), end of period $ 1,092 $1,201 $1,096
Ratio of expenses to average net assets 0.47% 0.63% 0.54%
Ratio of net investment income to average net assets 6.85% 5.96% 5.15%
Portfolio turnover rate 51% 75% 77%
Selected data per share of capital stock outstanding throughout each period.
Data prior to September 28, 1995 may not be meaningful, as the fund operated
with different investment objectives and fee arrangements. 3/1/93 (In-
Year ended November 30, Period 3/1/93 (Inception ) to
- - --------------------------------------------------------------------------------------------
1994 11/30/93*
-------- -----------
NET ASSET VALUE AT BEGINNING OF PERIOD $5.03 $5.00
-------- -----------
INCOME FROM INVESTMENT OPERATIONS
<S> <C> <C>
Net investment income 0.25 0.16
Net gains or losses on securities
(both realized and unrealized) (0.64) 0.04
-------- -----------
Total from investment operations (0.39) 0.20
LESS DISTRIBUTIONS
Dividends (from net investment income)
Non-taxable
Taxable
Distributions (from capital gains) 0.00 (0.00)
-------- -----------
Total distributions (0.25) (0.17)
NET ASSET VALUE AT END OF PERIOD $ 4.39 $ 5.03
======== ===========
TOTAL RETURN (8.24)% 4.86%
RATIOS / SUPPLEMENTAL DATA
- - --------------------------------------------------------------------------------------------
Net assets ($000), end of period $ 1,456 $ 1,662
Ratio of expenses to average net assets 0.41% 0.35%
Ratio of net investment income to average net assets 5.48% 3.28%
Portfolio turnover rate 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, $.03, $0.22, $0.13,and $.03 respectively. The increase
to the ratio of expenses to average monthly net assets would be .63%,
.70%, .60%, .51%, and 26%, respectively.
* not annualized
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
(Graphic Omitted)
SEXTANT BOND INCOME FUND
1997 ANNUAL REPORT
- - --------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1997
ASSETS
<S> <C>
Bond investments (cost $1,010,470) $1,014,439
Cash 55,134
Interest receivable 22,325
Insurance deposit 400
-----------
Total Assets 1,092,298
-----------
LIABILITIES
Other liabilities 59
-----------
Total Liabilities 59
-----------
NET ASSETS $1,092,239
===========
Fund shares outstanding 226,348
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, without par value) 1,170,086
Accumulated net realized gain (loss) on investments (81,816) Unrealized net
depreciation on investments 3,969
-----------
Net Assets applicable to Fund shares outstanding $1,092,239
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 4.83
===========
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended November 30, 1997
INVESTMENT INCOME
<S> <C> <C>
Interest income 79,709 -
Amortization of bond premiums (1,803) -
Accretion 446 -
---------
Gross investment income - $ 78,352
EXPENSES
Investment adviser and administration fee 6,805 -
Professional fees 2,842 -
Printing and postage 586 -
Filing and registration fees 983 -
Other expenses 650 -
---------
Total gross expenses 11,866 -
---------
Less advisory fee waived (6,805) -
--------- ---------
Net expenses - 5,061
--------- ---------
Net investment income - 73,291
--------- ---------
NET REALIZED GAIN ON INVESTMENTS
Proceeds from sales 662,852 -
Less cost of securities sold based on identified cost 674,569 -
--------- ---------
Realized net gain (loss) - (11,717)
--------- ---------
UNREALIZED GAIN (LOSS) ON INVESTMENTS
End of period 3,969 -
Beginning of period (22,635) -
--------- ---------
Increase in unrealized gain for the period - 26,604
--------- ---------
Net realized and unrealized gain on investments - 14,887
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 88,178
=========
</TABLE>
<PAGE>
(Graphic Omitted)
1997 ANNUAL REPORT
- - --------------------
SEXTANT BOND INCOME FUND
- - ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Year ended
Nov. 30, 1997 Nov. 30, 1996
--------------- ---------------
INCREASE IN NET ASSETS
OPERATIONS
<S> <C> <C>
Net investment income $ 73,291 $ 71,541
Net realized gain (loss) on investments (11,717) 7,358
Net increase in unrealized appreciation (depreciation) 26,604 (35,266)
--------------- ---------------
Net increase in net assets from operations 88,178 43,633
--------------- ---------------
DIVIDENDS TO SHAREOWNERS FROM
Net investment income (73,332) (72,347)
Capital gains distributions - (7,240)
--------------- ---------------
(73,332) (79,587)
--------------- ---------------
FUND SHARE TRANSACTIONS
Proceeds from sales of shares 65,272 303,624
Value of shares issued in reinvestment of dividends 71,910 77,813
--------------- ---------------
137,182 381,437
Cost of shares redeemed (260,712) (240,384)
--------------- ---------------
Net increase (decrease) in net assets from share transactions (123,530) 141,053
--------------- ---------------
Total increase (decrease) in net assets (108,684) 105,099
NET ASSETS
Beginning of period 1,200,923 1,095,824
--------------- ---------------
End of period $ 1,092,239 $ 1,200,923
=============== ===============
Shares of the Fund Sold and Redeemed
Number of shares sold 14,054 65,268
Number of shares issued in reinvestment of dividends 15,448 16,726
--------------- ---------------
29,502 81,994
Number of shares redeemed (55,536) (52,815)
--------------- ---------------
Net Increase (Decrease) in Number of Shares Outstanding (26,034) 29,179
=============== ===============
</TABLE>
<PAGE>
(Graphic Omitted)
SEXTANT BOND INCOME FUND
- - ------------------------------------------------------
1997 ANNUAL REPORT
- - --------------------
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
Fiscal Year 1997
For the fiscal year ending November 28, 1997, the Sextant Bond Income Fund
returned 8.24% to its shareowners. The net asset value gained 7 to $4.83. The
majority of the Fund's performance comes from its long average effective
portfolio maturity. The average maturity of the portfolio remained close to 20
years for most of the year, only recently decreasing to 14.9 years. Long-term
interest rates fell late in the year, which pushed up the prices of the
long-term investment grade securities in the Fund. Factors Affecting Past
Performance Nearly perfect economic conditions continued through 1997. Receeding
inflation, stable Federal Reserve Bank policy and reduced government deficits
boosted the real (i.e., inflation adjusted) returns available in the fixed
income market. These high real rates of return and high equity valuations have
finally persuaded investors to allocate more money to the US bond market. The
strong US dollar and low overseas interest rates have maintained the foreign
investors' appetite for US bonds. Late in 1997, the Asian crisis caused a flight
to quality in the US Treasury market, forcing bond prices substantially higher.
Despite all of these positive factors, long-term interest rates fell only twenty
to thirty basis points. Rates are clearly at both relatively and absolutely low
levels. All of these factors combined with the long effective average maturity
of the portfolio boosted the return of the Fund. This, in large part, explains
the modestly higher NAV for the Fund. Late in the year, after rates had fallen,
and a substantial flattening of the yield curve, the average maturity of the
portfolio was cut to 14.9 years. This shift resulted in a slightly higher yield
for the fund and lower price risk profile. Sextant Bond Income Fund continues to
invest a large percentage of the portfolio in high grade corporate paper and the
balance in US Treasury and bullet US Agency paper. Looking Forward In 1998 we
expect a more modest rate of economic expansion. We expect the US dollar to
weaken slightly and the high level of domestic and international competition to
continue. With deflation being whispered about, the Federal Reserve will have
the opportunity to lower short-term interest rates and the yield curve will
steepen. The overall direction of interest rates has been relatively flat over
the last four years with long rates moving between 8% to 6%. We expect the range
of long term rates to move modestly lower and establish a new range of 7.50% to
5.50% over the next few years. On two previous occasions long-term rates have
slipped below 6%, as they are now. This time, the move has been caused by the
Asian financial crisis. As this crisis subsides, we expect long rates to rise
back toward 6.00% and the yield curve to resume a steeper, more normal slope.
This transition and a Federal Reserve policy ease will favor shorter maturities
and are key reasons to reduce the average maturity of the Fund. If the Federal
Reserve continues their current policy with Fed Funds at 5.50%, there are few
lasting reasons to invest in extremely long maturites that yield only 5.75%.
This situation limits the performance of the longer maturities. In conclusion,
we expect total returns for long investment-grade bonds in 1998 will remain
between zero and plus ten percent.
<PAGE>
1997 ANNUAL REPORT
SEXTANT BOND INCOME FUNDSEXTANT BOND INCOME FUND
- - ------------------------------------------------------
(Graphic Omitted)
Performance Fee
The Sextant Bond Income Fund calculates its management fee based on a comparison
of the Fund's return, to the return of the Morningstar Long-Term Bond Category.
This category is defined as a portfolio that "focuses on corporate and other
investment grade issues with an average duration of more than six years or an
effective average maturity of more than ten years". With this maturity criteria,
the performance comparison between the Sextant Bond Income Fund and this index
will be heavily influenced by the movement of interest rates. For the twelve
month period ending 11/28/97, the Fund ranked in the 37th percentile out of 82
funds in the Morningstar "Long Term Bond" Category. Comparison to Index When
comparing any fund to an index, remember 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 high current
income, (3) bear transaction and other costs, (4) stand ready to buy and sell
its securities to shareowners 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 a $10,000 investment made at
the beginning of the fund's operations in March 1993 would have risen to $12,648
in the Fund and $13,718 in the Index. The short history of the Fun, and its 1995
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
(Graph Omitted)
<PAGE>
SEXTANT GROWTH FUND
1997 ANNUAL REPORT
- - --------------------
November 30, 1997
(Graphic Omitted)
INVESTMENTS
<TABLE>
<CAPTION>
NUMBER MARKET
ISSUE OF SHARES COST VALUE
- - ------------------------------- --------- -------- --------
<S> <C> <C> <C>
Common Stocks
BANKING (9.5%)
Washington Mutual Savings Bank 3,000 $ 44,124 $207,375
CONSTRUCTION (1.5%)
Butler Manufacturing 1,000 31,071 33,875
COMPUTERS (15.5%)
Adobe Systems 1,200 50,490 50,400
Award Software International 2,500 29,148 27,188
3Com 1,225 29,726 44,406
Hewlett-Packard 800 42,650 48,850
Mylex 10,000 102,435 80,000
Netscape Communications 1,000 43,448 28,500
Oracle 1,800 37,879 59,963
-------- --------
SUB-TOTAL 335,776 339,307
ELECTRONICS (8.1%)
Advanced Micro Devices 2,000 76,778 43,625
FLIR Systems 2,500 27,611 49,375
Gasonix International 3,000 31,631 39,750
Motorola 700 40,511 44,013
-------- --------
SUB-TOTAL 176,531 176,763
INVESTMENTS (12.9%)
McDonald & Co. 4,000 34,347 107,750
Schwab, Charles 4,537 9,117 174,958
-------- --------
SUB-TOTAL 43,464 282,708
MACHINERY (2.5%)
Regal Beloit 2,000 52,106 54,375
MEDICAL (7.7%)
Atria Communities 3,500 49,091 58,844
Genentech* 1,000 37,225 58,375
Ligand Pharmaceuticals 4,000 49,132 51,000
-------- --------
SUB-TOTAL 135,448 168,219
METAL ORES (1.8%)
Cyprus Amax Minerals 2,200 54,541 40,287
OIL & GAS PRODUCTION (7.5%)
Atlantic Richfield 900 51,620 73,350
Noble Drilling 3,000 21,322 90,187
-------- --------
SUB-TOTAL 72,942 163,537
PAPER & PRODUCTS (2.3%)
Boise Cascade 1,500 47,431 50,531
POLLUTION CONTROL (1.5%)
Ionics 900 36,864 33,187
RETAIL (2.4%)
Albertson's 1,200 26,255 53,250
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
1997 ANNUAL REPORT
SEXTANT GROWTH FUND
- - ---------------------
(Graphic Omitted)
INVESTMENTS, CONTINUED
<TABLE>
<CAPTION>
ISSUE NUMBER MARKET
OF SHARES COST VALUE
- - ------------------------------------------------- --------- --------
TRANSPORTATION (16.9%)
<S> <C> <C> <C>
Airborne Freight 3,000 69,116 191,062
Fritz Companies* 4,000 51,640 52,750
Halter Marine Group 834 9,967 23,248
Trinity Industries 1,600 45,315 72,600
Wisconsin Central Transport 1,000 32,250 30,125
---------- -------
SUB-TOTAL 208,288 369,785
UTILITIES (2.0)
Washington Water Power 2,000 37,078 42,750
TOTAL INVESTMENTS (92.1%) $1,301,919 $2,015,949
========== ==========
Other Assets (net of liabilities) (7.9%) 172,418
----------
TOTAL NET ASSETS (100%) $2,188,367
==========
<FN>
* non-income producing
</FN>
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
Selected data per share of capital stock outstanding throughout the year.
Note that data prior to Sept. 28, 1995, when the fund operated with different investment objectives and fee
arrangements,
may not be meaningful
For Year Ended November 30,
-----------------------------
1997 1996 1995 1994 1993 1992 1991
----------------------------- ------- -------- -------- ------- ------- -------
NET ASSET VALUE AT BEGINNING
<S> <C> <C> <C> <C> <C> <C> <C>
OF YEAR $ 7.92 $ 7.42 $ 5.82 $ 6.38 $ 5.93 $ 5.55 $ 4.93
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (0.01) 0.00 (0.03) (0.03) 0.01 0.01 0.04
Net gains or losses on securities
(both realized and unrealized) 2.41 0.50 1.82 (0.53) 0.45 0.38 0.60
----------------------------- ------- -------- -------- ------- ------- -------
Total From Investment Operations 2.40 0.50 1.79 (0.56) 0.46 0.39 0.64
LESS DISTRIBUTIONS
Dividends (from net
investment income) (0.01) 0.00 0.00 0.00 (0.01) (0.01) (0.02)
Distributions (from capital gains) (0.73) 0.00 (0.19) 0.00 0.00 0.00 0.00
----------------------------- ------- -------- -------- ------- ------- -------
Total Distributions (0.74) 0.00 (0.19) 0.00 (0.01) (0.01) (0.02)
NET ASSET VALUE AT END OF YEAR $ 9.58 $ 7.92 $ 7.42 $ 5.82 $ 6.38 $ 5.93 $ 5.55
============================= ======= ======== ======== ======= ======= =======
TOTAL RETURN 30.30% 6.74% 30.76% (8.78)% 7.76% 7.01% 11.79%
RATIOS / SUPPLEMENTAL DATA
- - ------------------------------------
Net assets ($000), end of year $ 2,188 $1,616 $ 1,137 $ 1,010 $1,425 $1,321 $ 947
Ratio of expenses to average
net assets 1.04% 0.95% 1.63% 1.50% 1.40% 1.60% 1.93%
Ratio of net investment income to
average net assets -0.12% 0.01% (0.45)% (0.43)% 0.15% 0.17% 0.60%
Portfolio turnover rate 25% 32% 40% 12% 25% 46% 16%
Average commission rate paid $ .0487 $.0458 $ .0572
1990 1989 1988
------- ------- -------
NET ASSET VALUE AT BEGINNING
<S> <C> <C> <C>
OF YEAR $ 4.88 $ 4.88 $ 4.96
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.27 0.28 0.30
Net gains or losses on securities
(both realized and unrealized) 0.01 0.00 (0.08)
------- ------- -------
Total From Investment Operations 0.28 0.28 0.22
LESS DISTRIBUTIONS
Dividends (from net
investment income) (0.23) (0.28) (0.30)
Distributions (from capital gains) 0.00 0.00 0.00
------- ------- -------
Total Distributions (0.23) (0.28) (0.30)
NET ASSET VALUE AT END OF YEAR $ 4.93 $ 4.88 $ 4.88
======= ======= =======
TOTAL RETURN 7.37% 5.22% 5.12%
RATIOS / SUPPLEMENTAL DATA
- - ------------------------------------
Net assets ($000), end of year $ 53 $1,356 $1,365
Ratio of expenses to average
net assets 1.06% 0.89% 0.25%
Ratio of net investment income to
average net assets 5.25% 5.60% 5.86%
Portfolio turnover rate 29% 19% 20%
Average commission rate paid
<FN>
For 1996, 1995 and the years prior to 1993, 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 these years would
be $.00, $.01, $.01, $.05, .$.05, $.10, and $.16, respectively.
The increase to the ratio of expenses to average net assets would have been
.00%, .18%, 0.21%, 0.76%, 1.02%, 1.28%, and 2.02%,
respectively.
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
SEXTANT GROWTH FUND
1997 ANNUAL REPORT
- - --------------------
(Graphic Omitted)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1997
ASSETS
<S> <C>
Common stock investments (cost $1,301,919) $2,015,949
Cash 177,201
Dividends receivable 1,423
Insurance deposit 1,214
-----------
Total Assets 2,195,787
-----------
LIABILITIES
Other Liabilities 7,420
-----------
Total Liabilities 7,420
-----------
NET ASSETS $2,188,367
===========
Fund shares outstanding 228,245
===========
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, without par) 1,474,407
Accumulated net realized gain on investments (70)
Unrealized net appreciation on investments 714,030
-----------
Net Assets applicable to Fund shares outstanding $2,188,367
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 9.57
===========
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For year ended November 30, 1997
INVESTMENT INCOME
<S> <C> <C>
Dividends $ 17,551 -
--------
Gross investment income - $ 17,551
EXPENSES
Investment adviser and administration fee 11,819 -
Professional fees 4,476 -
Printing and postage 1,100 -
Filing and registration fees 1,700 -
Other expenses 949 -
--------
Total gross expenses 20,044 -
---------
Net expenses - 20,044
-------- ---------
Net investment loss - $ (2,493)
-------- ---------
NET REALIZED GAIN ON INVESTMENTS
Proceeds from sales 420,143 -
Less cost of securities sold based on identified cost 248,305 -
-------- ---------
Realized net gain - 171,838
-------- ---------
UNREALIZED GAIN ON INVESTMENTS
End of period 714,030 -
Beginning of period 398,808 -
-------- ---------
Increase in unrealized gain for the period - 315,222
-------- ---------
Net realized and unrealized gain on investments 487,060
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $484,567
========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
SEXTANT GROWTH FUNDSEXTANT GROWTH FUND
1997 ANNUAL REPORT
- - --------------------
STATEMENT OF CHANGES IN NET ASSETS
(Graphic Omitted)
<TABLE>
<CAPTION>
Year ended Year ended
Nov. 30, 1997 Nov. 30, 1996
--------------- ---------------
INCREASE IN NET ASSETS
OPERATIONS:
<S> <C> <C>
Net investment Income $ (2,654) $ 115
Net realized gain (loss) on investments 171,838 (5,688)
Net increase in unrealized appreciation 315,388 109,794
--------------- ---------------
Net increase in net assets from operations 484,572 104,221
--------------- ---------------
DIVIDENDS TO SHAREOWNERS FROM:
Net investment income (1,105) -
Capital gains distributions (162,378) -
--------------- ---------------
(163,483) -
--------------- ---------------
FUND SHARE TRANSACTIONS:
Proceeds from sales of shares 407,623 676,224
Value of shares issued in reinvestment of dividends 161,233 -
--------------- ---------------
568,856 676,224
Cost of shares redeemed (317,129) (301,892)
--------------- ---------------
Net Increase in net assets from share transactions 251,727 374,332
--------------- ---------------
Total increase in net assets 572,816 478,553
NET ASSETS
Beginning of period 1,615,556 1,137,003
--------------- ---------------
End of period $ 2,188,372 $ 1,615,556
=============== ===============
Shares of the Fund Sold and Redeemed
Number of shares sold 45,282 90,055
Number of shares issued in reinvestment of dividends 16,830 -
--------------- ---------------
62,112 90,055
Number of shares redeemed (37,742) (39,396)
--------------- ---------------
Net Increase in Number of Shares Outstanding 24,370 50,659
=============== ===============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
SEXTANT GROWTH FUNDSEXTANT GROWTH FUND
1997 ANNUAL REPORT
- - --------------------
(Graphic Omitted)
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
FISCAL YEAR 1997
During the year ended November 30, 1997, the Fund's total return to its
shareholders was +30.3%. The Fund's net asset value per share rose to $9.58 from
$7.92, in addition to capital gains distributions of 73 per share.
Total assets increased 35% to $2.2 million.
FACTORS AFFECTING PERFORMANCE
In September 1995, the Fund's shareholders voted to broaden its objective from
that of investing in growth companies linked only to the Northwest. The Fund
now seeks long-term growth through investment in common stocks of companies
with major operations throughout the United States.
The Sextant Growth Fund follows an value investment approach, favoring
medium-sized companies with good businesses and future prospects. The Fund's
portfolio did exceptionally well in 1997, outperforming the market indices and
most other growth funds. The banking and investments sectors did the best,
and we recorded strong gains in computers, electronics and medical stocks as
well.
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. We expect the domestic computer, communications and
bio-tech sectors to continue to provide good long-term growth prospects, while
knowing that they are subject to higher volatility.
We don't expect the high gains of the last few years to continue, and
investors should anticipate that stock returns will decline to historical
levels of below 10%. Stocks are now priced relatively high as a multiple of
expected earnings. While recent corporate earnings reports are generally
positive, but we must expect that Asia's financial restructuring and
deflationary forces will work to restrain near-term earnings growth of America's
corporations.
PERFORMANCE FEE COMPUTATION
The Sextant Growth Fund calculates its performance fee on a comparison of the
Fund's 12-month return to the return of the Morningstar "Domestic Growth"
category. This index is well matched to the characteristics of the Sextant
Growth Fund. At November 30, 1997, the one-year return for this index was
20.56%. As the Fund outperformed the Morningstar benchmark by more than 4%,
the Fund paid an increased 0.90% (annualized) advisory fee for the month of
December 1997. Adjustments to the basic 0.60% advisory fee are made in a similar
manner each month.
<PAGE>
1997 ANNUAL REPORT
SEXTANT GROWTH FUNDSEXTANT GROWTH FUND
- - ------------------------------------------
(Graphic Omitted)
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 $21,515 in the Fund and
$35,365 in the Index. The changes in investment objective during the life of the
Fund limit the usefulness of this comparison. And past performance is not
indicative of future results.
Sextant Growth Fund vs. S&P 500 Index
(Graph Omitted)
<PAGE>
SEXTANT INTERNATIONAL FUNDSEXTANT INTERNATIONAL FUND
1997 ANNUAL REPORT
- - --------------------
November 30, 1997
(Graphic Omitted)
INVESTMENTS
<TABLE>
<CAPTION>
NUMBER MARKET
ISSUE OF SHARES COST VALUE COUNTRY
- - ----------------------------------- --------- ------ ------ --------------
Common Stocks
BANKING AND FINANCIAL (16.4%)
<S> <C> <C> <C> <C>
Australia & New Zealand Bank ADR 500 10,875 17,000 Australia
Aegon NV ADR 306 11,512 26,010 Netherlands
Banco Bilbao Vizcaya ADS 1,200 15,505 35,850 Spain
Banco Latinoamericano de Export SA 200 9,325 8,125 Panama
Hutchison Whampoa ADR 500 17,826 16,625 Hong Kong
ING Groep N.V. ADS 400 18,257 16,300 Netherlands
Toronto Dominion Bank 700 18,159 24,894 Canada
------ ------
SUB-TOTAL - 101,459 144,804 -
BUILDING MATERIALS (3.5%)
C R H plc ADR 300 15,661 17,850 Ireland
Hanson plc ADR 500 12,090 13,000 United Kingdom
------ ------
SUB-TOTAL - 27,751 30,850 -
CHEMICALS (2.6%)
Phone Poulenc SA ADR 508 15,859 22,797 France
COMPUTERS (6.6%)
Business Objects SA ADS 2,000 19,570 21,750 France
Dassault Systems SA ADR 400 13,875 10,400 France
Olicom A/S 900 16,245 25,875 Denmark
------ ------
SUB-TOTAL - 49,690 58,025 -
CONSUMER PRODUCTS (3.8%)
Gucci Group NV 200 10,925 8,137 Italy
Coca Cola FEMSA S.A. ADR 500 9,750 25,719 Mexico
------ ------
SUB-TOTAL - 20,675 33,856 -
CLOSED END COUNTRY FUNDS (5.2%)
Austria Fund 1,000 7,923 10,062 Austria
New Germany Fund 1,022 12,417 13,733 Germany
Irish Investment Fund 900 10,238 14,231 Ireland
Singapore Fund 1,000 13,777 7,875 Singapore
------ ------
SUB-TOTAL - 44,355 45,901 -
ELECTRICAL EQUIPMENT (1.4%)
ABB AB ADR 100 10,000 12,400 Sweden
MEDICAL-DRUGS (5.2%)
Glaxo Wellcome plc ADR 400 9,800 18,275 United Kingdom
Novo-Nordisk A/S ADR 450 14,702 27,647 Denmark
------ ------
SUB-TOTAL - 24,502 45,922 -
METALS & MINING (3.7%)
Broken Hill Proprietary ADR 400 11,700 7,300 Australia
Potash Corp of Saskatchewan 200 14,675 15,737 Canada
Rio Tinto plc ADS 200 11,375 9,800 United Kingdom
------ ------
SUB-TOTAL - 37,750 32,837 -
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
1997 ANNUAL REPORT
SEXTANT INTERNATIONAL FUNDSEXTANT INTERNATIONAL FUND
- - --------------------------------------------------------
INVESTMENTS, CONTINUED
<TABLE>
<CAPTION>
NUMBER MARKET
ISSUE OF SHARES COST VALUE COUNTRY
- - ---------------------------------------- --------- ------ ------ ---------------
OIL & GAS PRODUCTION (8.6%)
<S> <C> <C> <C> <C>
Numac Energy* 2,000 8,853 7,750 Canada
Petroleum Geo-Services A/S* 500 10,979 32,156 Norway
Total S.A. ADR 307 8,813 16,137 France
YPF SA ADS 600 12,345 20,137 Argentina
------ ------
SUB-TOTAL 40,990 76,180 -
PAPER PRODUCTS (2.1%)
Abitibi-Consolidated 800 11,847 10,400 Canada
Fletcher Challenge Forests ADR 24 316 225 New Zealand
Fletcher Challenge Paper ADR 600 12,623 7,800 New Zealand
------ ------
SUB-TOTAL 24,786 18,425 -
PHOTOGRAPHIC EQUIPMENT (4.4%)
Canon ADR 200 23,427 24,100 Japan
Fuji Photo Film ADR 400 10,050 14,350 Japan
------ ------
SUB-TOTAL 33,477 38,450 -
REAL ESTATE (2.9%)
Intrawest 1,500 26,218 25,313 Canada
TELECOMMUNICATIONS (14.7%)
BCE Inc 900 15,830 27,281 Canada
British Sky Broadcasting ADS 300 11,063 13,388 United Kingdom
Cable & Wireless plc ADS 600 13,021 16,163 Hong Kong
PT Indosat ADR 300 10,584 6,713 Indonesia
Telebras ADS 300 15,051 31,500 Brazil
Telecom Corp New Zealand ADS 300 10,050 12,300 New Zealand
Telefonica de Espana ADS 250 10,250 21,625 Spain
------ ------
SUB-TOTAL 85,849 128,970 -
TRANSPORTATION (8.2%)
British Airways ADS 150 10,931 13,725 United Kingdom
Canadian Pacific Ltd. 500 8,164 14,156 Canada
Daimler-Benz ADS 250 16,406 17,656 Germany
Desc SA ADR 700 19,649 26,338 Mexico
------ ------
SUB-TOTAL 55,150 71,875 -
UTILITIES-ELECTRIC (3.3%)
Enersis S.A. ADR 400 10,100 11,950 Chile
Energy Group plc ADS 400 14,390 17,100 United Kingdom
------ ------
SUB-TOTAL 24,490 29,050 -
UTILITIES-GAS (1.8%)
Transport de Gas del Sur SA ADR 1,500 18,807 16,031 Argentina
TOTAL INVESTMENTS (94.4%) $641,808 $831,686 -
=============== ========
Other Assets (net of liabilities) (5.6%) 49,468 -
--------
TOTAL NET ASSETS (100%) $881,154 -
========
<FN>
* Non-income producing security
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
SEXTANT INTERNATIONAL FUND
1997 ANNUAL REPORT
- - --------------------
(Graphic Omitted)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1997
ASSETS
<S> <C>
Common stock investments (cost $641,808) $831,686
Cash 49,286
Dividends receivable 2,530
---------
883,502
Total Assets
LIABILITIES
Other Liabilities 2,348
---------
2,348
---------
Total Liabilities
NET ASSETS $881,154
=========
Fund Shares Outstanding 133,385
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, without par value) 705,129
Accumulated net realized gain (loss) on investments (13,853) Unrealized net
appreciation on investments 189,878
---------
Net Assets applicable to Fund shares outstanding $881,154
=========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 6.61
=========
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended November 30, 1997
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign taxes paid) $ 18,754 -
Miscellaneous Income 59 -
--------
Gross investment income - $18,813
EXPENSES
Investment adviser and administration fee 7,537 -
Professional fees 1,741 -
Filing and registration fees 765
Other expenses 521 -
Printing and postage 420 -
--------
Total gross expenses 10,984 -
--------
Net expenses - 10,984
-------- --------
Net investment income - 7,829
-------- --------
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 66,895 -
Less cost of securities sold based on identified cost 74,395 -
-------- --------
Realized net loss - (7,500)
-------- --------
UNREALIZED GAIN ON INVESTMENTS
End of period 189,878 -
Beginning of period 96,586 -
-------- --------
Increase in unrealized gain for the period - 93,292
-------- --------
Net realized and unrealized gain on investments - 85,792
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS - $93,621
========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
1997 ANNUAL REPORT
SEXTANT INTERNATIONAL FUNDSEXTANT INTERNATIONAL FUND
- - --------------------------------------------------------
(Graphic Omitted)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
Nov 30 1997 Nov 29 2996
------------- -------------
INCREASE IN NET ASSETS
OPERATIONS:
<S> <C> <C>
Net investment Income $ 7,829 $ 3,070
Net realized (loss) on investments (7,500) (5,169)
Net increase in unrealized appreciation 93,292 94,408
------------- -------------
Net increase in net assets from operations 93,621 92,309
------------- -------------
DIVIDENDS TO SHAREOWNERS FROM
Net investment income (7,831) (3,068)
Capital gains distributions - -
------------- -------------
(7,831) (3,068)
------------- -------------
FUND SHARE TRANSACTIONS
Proceeds from sales of shares 274,408 440,062
Value of shares issued in reinvestment of dividends 7,831 3,068
------------- -------------
282,239 443,130
Cost of shares redeemed (182,369) (165,015)
------------- -------------
Net increase in net assets from share transactions 99,870 278,115
------------- -------------
Total increase in net assets 185,660 367,356
NET ASSETS
Beginning of period 695,494 328,138
------------- -------------
End of period $ 881,154 $ 695,494
============= =============
Shares of the Fund sold and redeemed
Number of shares sold 45,878 83,056
Number of shares issued in reinvestment of dividends 1,184 523
------------- -------------
47,062 83,579
Number of shares redeemed (32,214) (30,837)
------------- -------------
Net Increase in Number of Shares Outstanding 14,848 52,742
============= =============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
SEXTANT INTERNATIONAL FUNDSEXTANT INTERNATIONAL FUND
1997 ANNUAL REPORT
- - --------------------
(Graphic Omitted)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data per share of capital stock outstanding throughout the period:
Sept. 28, '95
Year Ended Year Ended (Inception) to
Nov. 30, '97 Nov. 30, '96 Nov. 30, '95*
------------ ------------ -------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $5.87 $4.99 $5.00
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06 0.03 (0.02)
Net gains or losses on securities
(both realized and unrealized) 0.74 0.88 0.01
---- ---- ----
Total from investment operations 0.80 0.91 (0.01)
---- ---- ------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.06) (0.03) 0.00
Distributions (from capital gains) 0.00 0.00 0.00
---- ---- ----
Total distributions (0.06) (0.03) 0.00
------ ------ ----
NET ASSET VALUE AT END OF PERIOD $6.61 $5.87 $4.99
===== ===== =====
TOTAL RETURN 13.58% 18.16% (0.20)%
RATIOS/SUPPLEMENTAL DATA
- - -------------------------
Net assets ($000), end of period $881 $695 $328
Ratio of expenses to average net assets 1.51% 1.80% 0.49%
Ratio of net investment income to average net assets 0.93% 0.60% (0.38)%
Portfolio turnover rate 9% 11% 12%
Average commission rate paid $0.0890 $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 $.00, $.03 and $.01, respectively. The
increase to the ratio of expenses to
average monthly net assets would be .00%, .50% and .21 %, respectively.
* not annualized
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
DISCUSSION OF FUND PERFORMANCE
(UNAUDITED)
During its second fiscal year, the Sextant International Fund provided a total
return of 13.58%. Total assets increased 27%, and the Fund remains small. The
objective of the Fund is to provide long-term growth through investment in
foreign stocks. Factors Affecting Performance Investing in foreign securities
includes risks not present in domestic securities. For example, many Asian
markets simply crumbled in 1997 as their long-running "economic miracle" both
crashed and burned. Fortunately, Sextant International has concentrated on
European and Canadian companies and avoided much of the pain. The U.S. dollar
generally strengthened in relation to its major trading partners, also reducing
the returns on foreign investments. Because the Fund invests only in securities
easily traded in the US (larger worldwide companies), it also avoided the severe
declines of many emerging markets and smaller overseas companies. Looking
Forward The Sextant International Fund is broadly invested in growth companies
outside the United
<PAGE>
1997 ANNUAL REPORT
SEXTANT INTERNATIONAL FUNDSEXTANT INTERNATIONAL FUND
- - --------------------------------------------------------
(Graph Omitted)
States. While many foreign economies slowed dramatically in 1997, we expect that
our portfolio securities will continue to show good 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 4% at November
30, 1997, the Fund paid a bonus 0.30% (annualized) performance fee for the month
of December 1997. 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 worldwide 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 $13,393 in the Fund and $13,123 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
(Graph Omitted)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Graphic Omitted)
- - ------------------
1997 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 invest-ment 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 sig-nificant accounting policies followed by
the Funds.
INVESTMENTS:
Securities traded on a national ex-change 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 quo-tations are
valued using a matrix 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. Interest income is
increased by accretion only for bonds underwritten as original issue discounts.
Market dis-counts are recorded as realized gains upon disposition. Cash
dividends from equity secu-rities are recorded as income on the ex-div-idend
date. Expenses incurred by the Trust on be-half 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 ex-penses, as described
below.
INCOME TAXES:
The Funds have elected to be taxed as regulated investment companies under the
Internal Revenue Code and distribute sub-stantially all of their taxable net
invest-ment income and realized net gains on in-vest-ments. Thus, no provision
for Federal income taxes is required.
DIVIDENDS AND DISTRIBUTIONS TO SHAREOWNERS:
Dividends and distributions to share-owners are recorded on the ex-dividend
date. For the Bond Income and Short-Term Bond, div-idends 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 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 September 28, 1995, Saturna Capital
Corporation provides investment ad-vi-sory services and certain other
adminis-tra-tive and distribution services to conduct Trust busi-ness, 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"). The Adviser has voluntarily undertaken to
limit expenses of Bond Income and Short-Term Bond to 0.60% through March 31,
1998 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, 1997, Bond Income and Short-Term Bond incurred advisory
expenses of $6,805 and $13,245, respectively. Growth and International incurred
advisory expenses of $11,819 and $7,537, respectively. In accordance with the
expense waiver, for the year ended November 30, 1997, Saturna Capital waived all
of the Bond Income advisory fee and $8,609 of that of Short-Term Bond. In
accordance with the Funds' custodian agreements with National City Bank, for the
year ended November 30, 1997, custodian fees for Bond Income, Short-Term Bond,
Growth, and International, were $803, $2,182, $2,386, and $2,713, respectively.
The custodian waived its fees for earnings credits. One trustee, who also serves
as the president of the Trust, is a di-rector and president of the Adviser. The
four unaffiliated trustees receive $100 per Board or committee meeting attended.
On January 16, 1998, the trustees, officers and their immediate families as a
group owned 26.1%, 12.3%, 16.5% and 27.5% 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 sub-si-diary of Saturna Capital Corporation) is itself
registered as a broker-dealer and acts as dis-tributor without compensation.
Investors National Corporation is the primary stockbroker used to effect
portfolio transactions for Growth and International, and paid $1,967 and $872,
respectively in commissions at deep-discount rates during the year ended
November 30, 1997.
Note 4 -Federal Income Taxes
At November 30, 1997, International had capital loss carryforwards of $13,853
which expire in 2004, Bond Income had capital loss carryforwards of $72,931
which expire in 2004 and Short-Term Bond had capital loss carryforwards of
$22,531 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, 1997, the net unrealized gain on investments for Bond Income,
Short-Term Bond, Growth and International were $3,969, $5,463, $315,222, and
$189,878, which consist of unrealized gains of $13,445, $12,504, $806,836, and
$227,388, and unrealized losses of $9,476, $7,039, $92,640, and $37,510,
respectively.
During the year ended November 30, 1997, Bond Income pur-chased $540,998 of
securities and sold/matured $662,852. Comparable figures for Short-Term Bond are
$1,494,356 and $1,001,078; for Growth $484,083 and $420,143; and for
International, $1,176,500 and $986,339. Included in the above amounts for Bond
Income and Short-Term Bond are purchases of $39,581 and $736,728 and sales of
$272,639 and $489,052 of U.S. Government securities, respectively.
<PAGE>
SEXTANT MUTUAL FUNDS
(Graphic Omitted)
SHORT-TERM BOND SHORT-TERM BOND
(Graphic Omitted)
BOND INCOMEBOND INCOME
(Graphic Omitted)
GROWTHGROWTH
(Graphic Omitted)
INTERNATIONALINTERNATIONAL
(Graphic Omitted)
Saturna Capital
(Graphic Omitted)
Mutual Funds
1300 N. State Street
Bellingham, WA 98225-4730
800/SATURNA
(800/728-8762)
www.saturna.com
This report is issued for the information of the shareowners of the Funds. 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 Trust. The Sextant Funds are a series of Saturna Investment Trust.
ANNUAL REPORT
November 30, 1997
