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. 16
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
POST-EFFECTIVE AMENDMENT NO. 16
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 upon
filing pursuant to paragraph (b) of rule 485 ___X__ on March 26, 1998 pursuant
to 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, 1997 was filed on
February 11, 1998. <PAGE>
CROSS REFERENCE SHEET
PART A PROSPECTUS CAPTIONS
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1. Cover Page About the Trust;
Expenses
2. Synopsis Not Required
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 invest-ing in the Funds. Please read it
carefully and keep it for future reference. A Statement of Additional
Information dated March 26, 1998, 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]
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disap-proved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
Sextant Mutual Funds
(Graphic Omitted)
From
(Graphic Omitted)
SATURNA CAPITAL
Mutual Funds
NO-LOAD,
NO SALES CHARGE,
NO 12B-1
PROSPECTUS
March 26, 1998
<PAGE>
2
Expenses
The table illustrates each Fund's operating expenses for the fiscal year ended
Nov. 30, 1997. 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.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Sextant Sextant Sextant Sextant
Growth International Short-Term Bond Income
Fund Fund Bond Fund Fund
---- ---- ---------- ----
<S> <C> <C> <C> <C>
Advisory fee (1) (after waivers) (2) 0.61% 0.90% 0.21% 0.00%
12b-1 Expenses NONE NONE NONE NONE
Other Expenses 0.43% 0.61% 0.39% 0.47%
Total Fund Operating Expenses 1.04% 1.51% 0.60% 0.47%
</TABLE>
<TABLE>
<CAPTION>
FOR EXAMPLE:
<S> <C> <C> <C> <C> <C>
Each Fund estimates paying 1 year -- $ 11 $ 16 $ 6 $ 6
these expenses on a $1,000 3 years-- $ 34 $ 50 $20 $20
investment, assuming a 5% 5 years-- $ 60 $ 88 $35 $35
net annual return: 10 years-- $137 $199 $79 $79
<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, 1999. Moreover,
it waives its bond fund fee entirely when assets are less than $2 million.
Earn-ings credits allow the Funds' custodian to waive fees for all four Funds.
Without these limitations and with the maxi-mum 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>
THIS 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.
<PAGE>
Financial Highlights
Selected data for a share of each of
the SEXTANT FUNDS follows. These schedules for the year ended November 30, 1997
were audited by Tait, Weller & Baker, LLP, independent accountants, whose report
is included in the Sextant Mutual Funds' Annual Report (incorporated by
reference into the Statement of Additional Information). Other auditors, whose
reports expressed unqualified opinions, audited prior year financial statements.
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 per share outstanding from September 28, 1995 (commencement of
operations) through November 30, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - - - Sept. 28, '95
- - Year Ended Year Ended (Inception)
to
- - Nov. 30, '97 Nov. 30, '96 Nov. 30, '95
-------------- -------------- ---------------
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>
2
<PAGE>
<PAGE>
(Graphic omitted)
SEXTANT GROWTH FUND
Selected data per share outstanding throughout the year.
Note that the data prior to Sept. 28, 1995, when the fund operated with
different investment objectives and fee arrangements, may not be meaningful.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- -------- -------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE AT BEGINNING $ 7.92 $ 7.42 $ 5.82 $ 6.38 $ 5.93 $ 5.55 $ 4.93 $ 4.88 $ 4.88 $ 4.96
OF YEAR
INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.01) 0.00 (0.03) (0.03) 0.01 0.01 0.04 0.27 0.28 0.30
Net gains or losses on securities
(both realized and unrealized) 2.41 0.50 1.82 (0.53) 0.45 0.38 0.60 0.01 0.00 (0.08)
------- ------- -------- -------- ------- ------- ------- ------- ------- -------
Total From Investment Operations 2.40 0.50 1.79 (0.56) 0.46 0.39 0.64 0.28 0.28 0.22
LESS DISTRIBUTIONS
Dividends (from net investment
income) (0.01) 0.00 0.00 0.00 (0.01) (0.01) (0.02) (0.23) (0.28) (0.30)
Distributions (from capital gains) (0.73) 0.00 (0.19) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- -------- -------- ------- ------- ------- ------- ------- -------
Total Distributions (0.74) 0.00 (0.19) 0.00 (0.01) (0.01) (0.02) (0.23) (0.28) (0.30)
NET ASSET VALUE AT END
OF YEAR $ 9.58 $ 7.92 $ 7.42 $ 5.82 $ 6.38 $ 5.93 $ 5.55 $ 4.93 $ 4.88 $ 4.88
======= ======= ======== ======== ======= ======= ======= ======= ======= =======
TOTAL RETURN 30.30% 6.74% 30.76% (8.78)% 7.76% 7.01% 11.79% 7.37% 5.22% 5.12%
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------
Net assets ($000), end of year $2,188 $1,616 $ 1,137 $ 1,010 $1,425 $1,321 $ 947 $ 53 $1,356 $1,365
Ratio of expenses to average
net assets 1.04% 0.95% 1.63% 1.50% 1.40% 1.60% 1.93% 1.06% 0.89% 0.25%
Ratio of net investment income -0.12% 0.01% (0.45)% (0.43)% 0.15% 0.17% 0.60% 5.25% 5.60% 5.86%
to average net assets 25% 32% 40% 12% 25% 46% 16% 29% 19% 20%
Portfolio turnover rate $.0487 $.0458 $ .0572
<FN>
For 1995 and for each of the above 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 $.01,
$.01, $.05, .$.05, $.10, and$.16, 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%, and 2.02%, respectively. </FN>
</TABLE>
3
<PAGE>
(GRAPHIC OMITTED)
<TABLE>
<CAPTION>
SEXTANT BOND INCOME FUND
Selected data per share outstanding throughout each period.
3/1/93
Year Ended November 30, (Inception) to
-----------------------
<S> <C> <C> <C> <C> <C>
- - 1997 1996 1995 1994 11/30/93
------- ------- ------- -------- ----------
NET ASSET VALUE AT BEGINNING
OF PERIOD $ 4.76 $ 4.91 $ 4.39 $ 5.03 $ 5.00
------- ------- ------- -------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.30 0.24 0.25 0.16
Net gains or losses on securities
(both realized and unrealized) 0.07 (0.12) 0.52 (0.64) 0.04
------- ------- ------- -------- ----------
Total From Investment Operations
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.30) (0.30) (0.24) (0.25) (0.17)
Distributions (from capital gains) 0.00 (0.03) 0.00 0.00 (0.00)
------- ------- ------- -------- ----------
Total Distributions
NET ASSET VALUE AT END OF PERIOD $ 4.83 $ 4.76 $ 4.91 $ 4.39 $ 5.03
======= ======= ======= ======== ==========
TOTAL RETURN 8.24% 4.04% 17.69% (8.24)% 4.86%
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets ($000), end of period $1,092 $1,201 $1,096 $ 1,456 $ 1,662
Ratio of expenses to average net assets 0.47% 0.63% 0.54% 0.41% 0.35%
Ratio of net investment income to average net assets 6.85% 5.96% 5.15% 5.48% 3.28%
Portfolio turnover rate 51% 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, $.03, $.22, $.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.
</FN>
</TABLE>
SEXTANT SHORT-TERM BOND FUND
Selected data per share outstanding throughout the period.
(GRAPHIC OMITTED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - - - Sept. 28, '95
- - Year Ended Year Ended (Inception)
to
- - Nov. 30, '97 Nov. 30, '96 Nov. 30, '95
-------------- -------------- ---------------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 5.00 $ 5.03 $ 5.00
-------------- -------------- ---------------
INCOME FROM INVESTMENT OPERATIONS 0.27 0.25 0.03
Net investment income
Net gains or losses on securities (both realized and unrealized) (0.01) (0.03) 0.03
-------------- -------------- ---------------
Total from investment operations 0.26 0.22 0.06
-------------- -------------- ---------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.27) (0.25) (0.03)
Distributions (from capital gains) 0.00 0.00 0.00
-------------- -------------- ---------------
Total distributions (0.27) (0.25) (0.03)
-------------- -------------- ---------------
NET ASSET VALUE AT END OF PERIOD $ 4.99 $ 5.00 $ 5.03
============== ============== ===============
TOTAL RETURN
RATIOS/SUPPLEMENTAL DATA 5.44% 4.85% 1.05%
- ----------------------------------------------------------------
Net assets ($000), end of period $ 2,508 $ 2,016 $ 878
Ratio of expenses to average net assets 0.60% 0.85% 0.23%
Ratio of net investment income to average net assets 5.58% 6.30% 0.68%
Portfolio turnover rate 47% 100% 0%
<FN>
For the above periods, all or a portion of the operating expenses were waived.
If expenses 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
</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 INTER-NATIONAL FUND seek long-term growth.
GROWTH FUND pursues its objective through investment in common stocks and other
equity-type secu-rities, principally of U.S. issuers. The INTERNA-TIONAL FUND,
by contrast, invests pri-marily in a diversified portfolio of foreign common
stocks and other equity-type securi-ties.
SHORT-TERM BOND FUND seeks to preserve capital by investing in short-term debt
securi-ties. 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 portfo-lio 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 in-vested 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 con-vertible 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
ad-viser'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 and the United Kingdom) in less developed markets
(for example, Chile and Mexico), and in emerging markets (for example Peru).
Investments in foreign securities, especially those in less devel-oped and
emerging markets present additional risk. (See Investment Policies and Risk
Consid-erations.) 5
<PAGE>
As a matter of operating policy (changeable by the
Board of Trustees), the Fund 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.*foot1 ADRs are
receipts typically issued 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 Fund's policy of seeking long-term capital appreciation by investing in a
diversified port-folio of foreign securities requires shareholder approval to
change.
SEXTANT SHORT-TERM BOND FUND seeks to provide a high level of current income,
consis-tent 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 securi-ties. As an operating
policy (changeable by the Board of Trustees), the Fund normally main-tains a
dollar-weighted average effective matur-ity in excess of ten years. foot2 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.
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:
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 Cor-poration (AAA, AA or A); - U.S. Government securities;
High quality commercial paper; and - Bank obligations, including repurchase
agreements foot3 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. of banks, having total assets in excess of $1
billion.
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 secu-rities 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 6
<PAGE>
their principal and interest payment
obligations.
Should a security's rating fall below the quali-fying 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 In-come 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 securi-ties. By diversifying its investments, a Fund reduces the risk
of owning one or a few indi-vidual 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 governmen-tal 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 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 securi-ties. Because
prices and yields on debt securi-ties vary over time, the Fund's yield also
varies. All Funds Under unusual circumstances a Sextant Fund 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 in-vestments, income and expenses of
each Fund every six months. You may obtain current share values any time by
calling 888 / 732-6262.
<PAGE>
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 unac-companied 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 applica-tion. 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 (mini-mum wire purchase $500), though typically wiring banks
charge you a fee for this service. Call for details before request-ing 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, ex-pressed 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 histori-cal record of all
transactions.
The Sextant Funds offer several optional plans and services, including
retirement plans and free Individual Retirement Accounts. Ma-terials describing
these plans and applications may be obtained from the Adviser.
Other plans offered by the Funds:
- - Automatic investment plan
- - Systematic with-drawal plan to provide regular payments to you - 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, partner-ships, associations and other organizations. Trusts and
fiduci-aries may establish ac-counts. You also may make investments as custodian
for minor children under the Uni-form 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 in-vestments 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 redemp-tion.
The
Funds normally pay for shares redeemed or exchanged within three days after a
proper instruction is received. To allow time for clear-ing, redemption of
investments made by check may be re-stricted 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:
8
<PAGE>
- - Redemption check (no minimum) sent to registered owner(s).
- - Redemption check (no minimum) sent as directed if the signature(s) are
guaranteed. If proceeds are to be sent to other than the reg-istered owner(s) at
the last address, the signa-tures on the request must be guaran-teed by a
national bank or trust com-pany or by a member of a national securities
exchange.
- - Federal funds wire ($5000 minimum). The proceeds may be wired to any bank
desig-nated 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:
- - Redemption check (no minimum) sent to registered owner(s).
- - ACH transfer ($100 minimum) with proceeds trans-ferred to your bank account as
desig-nated on your application. The ACH authorization must be received at least
two weeks before ACH can be used.
- - Exchange ($25 minimum) for shares of any other Fund for which Saturna Capital
is ad-viser. If the exchange is your initial in-vest-ment into this Fund, the
new account au-to-matically has the same registration as your original account.
An exchange is considered a closing capital transaction for tax purposes.
- - Federal funds wire ($5000 minimum). Proceeds may be wired only to the bank
pre-viously designated, or as directed in a prior written instruction with
signatures guar-an-teed, 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 per-son making the request, (2) the name and address of the
regis-tered 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 be-lieved 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 re-ceipt. 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 as-sets, less liabilities, by
(ii) the number of shares out-standing. The Funds compute their net as-set
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 redemp-tions
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 com-posite 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- 9
<PAGE>
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 deter-mined 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 quali-ties. Prices are
ad-justed 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.
Trust Management
Saturna Investment Trust is managed by a Board of Trustees, currently: A.
Herbert Ershig, 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 Trus-tees, see the State-ment of Additional Informa-tion.
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. Sharehold-ers owning more
than 10% of the common stock are: Nicholas F. Kaiser, Vern M. Clemenson,
Phelps S. McIlvaine, James D. Winship, and Brian A. Anderson. The directors
are Nicholas Kaiser (President), Phelps S. McIlvaine (Vice President), and
Markell F. Kaiser (Treasurer).
Each Fund pays the Adviser an Investment Advisory and Administrative Services
Fee. The Fee covers compensation for portfolio man-agement as well as certain
administrative serv-ices 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 de-pending 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
invest-ment return (change in net asset value plus all distributions reinvested)
for the one year period through that month outperforms or underper-forms 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 an-nual rate of .10% of the
Fund's average daily net assets for the preceding year. If the outper-formance
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 adjust-ment 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
an-nual 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: 10
<PAGE>
- - 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"
Each Fund pays its own taxes, brokerage com-missions, trustees' fees, legal and
accounting fees, insurance, expenses incurred in comply-ing with state and
federal laws regulating the issue and sale of its shares, and mailing and
printing costs for prospec-tuses, reports and notices to shareowners, and
certain other ex-penses.
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 en-gaged 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 dis-tributor 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, 1999. The
Adviser entirely waives its fee as to either of these Funds when assets are less
than $2 mil-lion. 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 prospec-tus) with assets of $5 million; Amana Income Fund ($20 million);
and Amana Growth Fund ($9 million). The advisory fee for Idaho Tax-Exempt Fund
is .50% annually; the Amana Funds have an annual advisory and administra-tion
fee of .95%. Saturna also manages indi-vidual private accounts.
Nicholas
Kaiser, primary manager of the Growth and International Funds, has managed
mutual funds since 1976. Phelps McIlvaine, primary 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 accor-dance 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 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
op-erations on September 4, 1987. The current in-vestment advisory agreements of
the Sextant Funds became effective in connection with changes in their
objectives approved at a share-holder 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 purposes as elect-ing or removing Trustees, changing fundamental policies,
or voting on approval of an advisory contract. On issues relating solely to a 11
<PAGE>
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 pro-portion to the number of shares owned.
Each Fund distributes its net investment in-come and net realized capital gains
(if any) to shareowners. The Growth Fund and Inter-national 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 re-ceive 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 in-vest-ments. A Fund is relieved of federal income taxes on
amounts it dis-tributes.
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 divi-dends 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 (originat-ing from dividends, taxable interest and certain
other types of gains). Fund distri-butions may be subject to state and lo-cal
taxes.
To avoid being subject to a 31% federal with-holding 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 distri-butions
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 con-sider 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) di-viding 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
div-idends paid during the period in addi-tional 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 compu-tation, see the Statement of Ad-ditional Infor-mation.
12
<PAGE>
(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 Other
Indicate name of corporation, other organization or fiduciary capacity.
Tax Identification 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.)
E-MAIL
Please send duplicate confirmations and notices to my e-mail address:
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 desig-nated. 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 sub-ject 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 Mu-tual 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 appli-cation 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 consoli-dated statements are available.
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 divi-dends at the end of November. Fund prices are available on electronic
quotation systems, recorded daily at 888 / 732-6262, 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, 1998
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' pro-spectus dated March 26, 1998. A free Fund prospectus may be obtained
by telephoning the numbers above, writing the Funds at the address shown above,
or downloading an electronic copy from ERROR! BOOKMARK NOT DEFINED..
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
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 connec-tion 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 ap-proval 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.
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 re-strictions 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. 3 <PAGE>
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.
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
applicable 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.)
4
<PAGE>
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.
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:
- - 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)*foot1 Please refer to the Appendix for a discussion of ratings.
- - U.S. Government Securities;
- - 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
- - Bank obligations, including repurchase agreements foot2 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.
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 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.
6
<PAGE>
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 invest-ments, 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 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, 7
<PAGE>
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 con-tractual restric-tions on resale or are
otherwise not readily marketable); nor invest in oil, gas or other min-eral
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 in-vest 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 invest-ment companies, and (ii) other securities, except that with
respect to any one issuer in an amount more than 5% of ei-ther Fund's total
assets, and no more than 10% of the Fund's voting securities of any one is-suer.
In addition, the Funds shall not purchase real estate; real estate limited
partnerships (excepting master limited partnerships that are pub-licly traded on
a na-tional security ex-change or NASDAQ's National Market System); com-modities
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 un-der-writer except that they may pur-chase 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 com-pany for the pur-pose 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 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 pur-chase securities of any issuer in excess of 5% of the Fund's
total assets or pur-chase more than 10% of the outstanding voting securities of
any is-suer; or concentrate its in-vestments 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 to-gether 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 invest-ments 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 ex-ceed 2% of the
value of the Fund's net assets, may be warrants which are not listed on the New
York or 8
<PAGE>
American Stock Exchange. Warrants acquired in units or at-tached 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 ap-proval of the holders of the majority of the
outstanding shares of the respective Fund. Objectives and poli-cies 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
accord-ing 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.
The portfolio turnover rate of the Sextant Growth Fund
(previously Northwest Growth Fund) for the fiscal years ended November 30, 1997,
1996, and 1995, was 25%, 32%, and 40% respectively.
The portfolio turnover rate of the Sextant Bond Income Fund (previously
Washington Tax-Exempt Fund) for the fiscal years ended November 30, 1997, 1996
and 1995 was 51%, 75%, and 77%, respectively.
Portfolio turnover for the Sextant Short-Term Bond Fund for the fiscal year
ended November 30, 1997, 1996 and the period September 28, 1995 (inception)
through November 30, 1995, was 47%, 100% and 0%, respectively. Portfolio
turnover for the Sextant International Fund for the fiscal year ended November
30, 1997, 1996 and the period September 28, 1995 (inception) through November
30, 1995, was 9%, 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.
9
<PAGE>
Certain factors should be taken into account before using Total Return and
Current Yield information as a basis for comparison with alternative
investments. No ad-justment 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, 1997 was 30.30%. Average annual total
return from April 1, 1987 (inception of the predecessor fund) through November
30, 1997 was 16.28%. 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. Performance figures for the
Sextant Growth Fund for the period from October 12, 1990 to September 28, 1995
reflect the Fund's investment objective at that time of Northwest growth stocks.
The total return of the Sextant Bond Income Fund for the one year period ended
November 30, 1997 was 8.24%. Average annual total return for the period March 1,
1993 (inception) through November 30, 1997, was 6.92%. Performance figures for
the Sextant Bond Income Fund for the period from inception to September 28, 1995
reflect the Fund's investment objective at that time of Washington State
municipal bonds.
The total return of the Sextant Short-Term Bond Fund and Sextant International
Fund for the one-year period ended November 30, 1997 was 5.44% and 13.58%,
respectively. Average annual total returns for the period September 28, 1995
(inception) through November 30, 1997 was 5.24% and 14.41%, respectively.
Average annual Total Return quotations for various periods illustrated are
-------------
computed by find-ing 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 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
10
<PAGE>
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,
1997 was 6.09%. The yield on Sextant Short-Term Bond Fund for the 30-day period
ended November 30, 1997 was 5.40%.
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:
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 Average
Lipper Equity Funds Average Lipper Growth Funds Average Lipper Growth & Income
Fund Average Lipper Small Company Growth Fund Average Lipper Balanced Fund
Average Lipper Equity Income Fund Average Ibbotson Common Stocks Index
Morningstar Mutual Fund Indices
11
<PAGE>
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:
A. HERBERT ERSHIG, - Trustee
22 Shorewood Drive, Bellingham, WA 98225.
Retired.
President, Ershings, Inc., Bellingham WA, industrial manufacturing, from 1960 to
1996.
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, Ph.D. - 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 LARNER - Secretary
1300 N. State Street, Bellingham, WA 98225.
Saturna Capital Corporation, October 1996 to present.
Medical supervisor, 1991 to 1993.
Housewife, 1994.
12
<PAGE>
Clothing sales representative, 1995 to Feb. 1996.
Medical receptionist/trainer, 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 ex-penses (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> <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
- ------------------- ---------- ----------------- ----------------- ------------------
A. HERBERT ERSHIG, $ 400 $ 0 $ 0 $400
Trustee
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 February 24, 1998
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 66,051 17%
Sextant Bond Income Fund 67,733 26%
Sextant Growth Fund 38,246 17%
Sextant International Fund 37,307 28%
13
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of February 24, 1998 the shareholders of Sextant Short-Term Bond Fund owning
5% or more were as follows:
Name Shares Percentage
---- ------ ----------
The Heritage Education Trust, Inc.
Dr. Mohammed Jaghilt, President 88,635 23.40%
Robert L. Foote 60,745 16.04%
Investors National Corporation. 35,806 9.45%
Michael McRory, DDS PS Profit SH
DTD 7-29-80, Michael R. McRory 26,737 7.06%
Robert J. Nicholl IRA Rollover 20,068 5.29%
As of February 24, 1998 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. 45,643 17.62%
Luzenia B. Redpath 34,891 13.47%
Loie E. Haggen 20,398 7.87%
David K. Heaps IRA Rollover 16,955 6.64%
Ubaldina Sanchez 15,588 6.01%
Frederick M. Graham
Mary J. Graham, Jt. Ten 15,033 5.80%
Saturna Capital Corporation 13,657 5.27%
As of February 24, 1998 the shareowners owning 5% or more of Sextant Growth
Fund were:
Name Shares Percentage
---- ------ ----------
Nicholas F. Kaiser IRA Rollover 18,810 8.24%
Sutherland Enterprises Ltd. 12,617 5.52%
14
<PAGE>
As of February 24, 1998 the only shareowners with 5% or more of Sextant
International Fund were:
Name Shares Percentage
---- ------ ----------
Nicholas F. Kaiser IRA Rollover 23,817 18.15%
Heritage Education Trust, Inc. 9,667 7.36%
Mar-Jac Poultry Inc. 7,555 5.75%
Norman H. Bell MD 7,177 5.46%
Northwest Eye Clinic Inc. Employee
Pension Trust #13 Frederick Kaiser 7,028 5.35%
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 .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 15 <PAGE>
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, 1999. 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 mail-ing and printing costs for prospectuses,
reports and notices to share-owners.
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.
For no additional charges, the Adviser provides services as the transfer agent,
registrar and dividend-pay-ing agent for each Fund. As transfer agent, Saturna
furnishes to each shareowner a state-ment after each transaction, an historical
statement at the end of each year showing all trans-actions 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 transfer agent performs
the mailing of financial statements, notices, and prospectuses to shareowners.
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 16 <PAGE>
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. Tait, Weller, and
Baker, Eight Penn Center Plaza, Philadelphia PA 19103 served as the 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 be-tween $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 dividends more
frequently than once per quarter). Each Fund reimbursed Saturna for any
out-of-pocket expense for forms and mailing costs used in perform-ing its
functions. For the fiscal year ended November 30, 1997 and 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, 1997, Sextant Growth Fund paid investment
adviser and administration fees of $11,819. For fiscal 1996, Sextant Growth Fund
paid investment adviser and administration fees of $7,540 and for the fiscal
year ending 1995, Sextant Growth Fund paid $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, 1997, Sextant Bond Income Fund incurred
advisory expenses of $6,805 (all of which was waived by Saturna Capital). In 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, 1997, Sextant Short-Term Bond Fund
incurred advisory expenses of $13,245 and 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 17 <PAGE>
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, 1997 Sextant International
Fund incurred advisory expenses of $7,537 and 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 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 in-formation
about the general level of commissions paid by similar mutual funds for
compara-ble 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 af-filiate 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 1997, 1996, and 1995, Sextant
Growth Fund paid $1,967 $2,536,and $3,188 in brokerage commissions to Investors
National Corporation. For the fiscal year of 1997, Sextant International Fund
paid $872 is 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 1997, 1996,and 1995 Sextant Bond Income Fund paid $147, $49 and
$0, in brokerage commissions to Investors National Corporation. For the fiscal
year ended November 18 <PAGE>
30, 1997 brokerage commissions to Investors National Corporations for Sextant
Short Term Bond Fund was $ 392 and 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 respectively.
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
ex-planation 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 ex-change 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 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 re-quired 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 provi-sions of the Internal Revenue Code
applicable to regulated investment companies, which re-lieve 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. 19 <PAGE>
The amount of investment income and capital gains, if any, available for
distri-bution by a Fund in the future cannot be predicted due to continually
changing eco-nomic 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 dis-tributions 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 ad-vising 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 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
Infor-mation. The financial statements and selected per share data and ratios
dated November 30, 1997, together with the report of independent accountants
dated December 12, 1997, are considered a part of the Statement of Additional
Information and are in-corporated by reference. 20 <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 princi-pal 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 sus-ceptibility 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:
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.
21
<PAGE>
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
cir-cumstances 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.
22
<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
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
21. Underwriters Not Applicable
2
<PAGE>
22. Calculations of Performance Data Performance Data
23. Financial Statements Financial Statements
3
<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, 1998
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' pro-spectus dated March 26, 1998. A free Fund prospectus may be obtained
by telephoning the numbers above, writing the Funds at the address shown above,
or downloading an electronic copy from ERROR! BOOKMARK NOT DEFINED.. 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
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 connec-tion 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 ap-proval 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.
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 re-strictions 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. 3 <PAGE>
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.
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
applicable 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.)
4
<PAGE>
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.
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:
- - 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)*foot1 Please refer to the Appendix for a discussion of ratings.
- - U.S. Government Securities;
- - 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
- - Bank obligations, including repurchase agreements foot2 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.
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 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.
6
<PAGE>
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 invest-ments, 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 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, 7 <PAGE>
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 con-tractual restric-tions on resale or are
otherwise not readily marketable); nor invest in oil, gas or other min-eral
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 in-vest 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 invest-ment companies, and (ii) other securities, except that with
respect to any one issuer in an amount more than 5% of ei-ther Fund's total
assets, and no more than 10% of the Fund's voting securities of any one is-suer.
In addition, the Funds shall not purchase real estate; real estate limited
partnerships (excepting master limited partnerships that are pub-licly traded on
a na-tional security ex-change or NASDAQ's National Market System); com-modities
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 un-der-writer except that they may pur-chase 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 com-pany for the pur-pose 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 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 pur-chase securities of any issuer in excess of 5% of the Fund's
total assets or pur-chase more than 10% of the outstanding voting securities of
any is-suer; or concentrate its in-vestments 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 to-gether 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 invest-ments 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 ex-ceed 2% of the
value of the Fund's net assets, may be warrants which are not listed on the New
York or 8 <PAGE>
American Stock Exchange. Warrants acquired in units or at-tached 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 ap-proval of the holders of the majority of the
outstanding shares of the respective Fund. Objectives and poli-cies 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
accord-ing 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.
The portfolio turnover rate of the Sextant Growth Fund
(previously Northwest Growth Fund) for the fiscal years ended November 30, 1997,
1996, and 1995, was 25%, 32%, and 40% respectively.
The portfolio turnover rate of the Sextant Bond Income Fund (previously
Washington Tax-Exempt Fund) for the fiscal years ended November 30, 1997, 1996
and 1995 was 51%, 75%, and 77%, respectively.
Portfolio turnover for the Sextant Short-Term Bond Fund for the fiscal year
ended November 30, 1997, 1996 and the period September 28, 1995 (inception)
through November 30, 1995, was 47%, 100% and 0%, respectively. Portfolio
turnover for the Sextant International Fund for the fiscal year ended November
30, 1997, 1996 and the period September 28, 1995 (inception) through November
30, 1995, was 9%, 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.
9
<PAGE>
Certain factors should be taken into account before using Total Return and
Current Yield information as a basis for comparison with alternative
investments. No ad-justment 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, 1997 was 30.30%. Average annual total
return from April 1, 1987 (inception of the predecessor fund) through November
30, 1997 was 16.28%. 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. Performance figures for the
Sextant Growth Fund for the period from October 12, 1990 to September 28, 1995
reflect the Fund's investment objective at that time of Northwest growth stocks.
The total return of the Sextant Bond Income Fund for the one year period ended
November 30, 1997 was 8.24%. Average annual total return for the period March 1,
1993 (inception) through November 30, 1997, was 6.92%. Performance figures for
the Sextant Bond Income Fund for the period from inception to September 28, 1995
reflect the Fund's investment objective at that time of Washington State
municipal bonds.
The total return of the Sextant Short-Term Bond Fund and Sextant International
Fund for the one-year period ended November 30, 1997 was 5.44% and 13.58%,
respectively. Average annual total returns for the period September 28, 1995
(inception) through November 30, 1997 was 5.24% and 14.41%, respectively.
Average annual Total Return quotations for various periods illustrated are
-------------
computed by find-ing 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 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
10
<PAGE>
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, 1997 was 6.09%. The yield on Sextant
Short-Term Bond Fund for the 30-day period ended November 30, 1997 was 5.40%.
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:
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 Average
Lipper Equity Funds Average Lipper Growth Funds Average Lipper Growth & Income
Fund Average Lipper Small Company Growth Fund Average Lipper Balanced Fund
Average Lipper Equity Income Fund Average Ibbotson Common Stocks Index
Morningstar Mutual Fund Indices
11
<PAGE>
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:
A. HERBERT ERSHIG, - Trustee
22 Shorewood Drive, Bellingham, WA 98225.
Retired.
President, Ershings, Inc., Bellingham WA, industrial manufacturing, from 1960 to
1996.
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, Ph.D. - 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 LARNER - Secretary
1300 N. State Street, Bellingham, WA 98225.
Saturna Capital Corporation, October 1996 to present.
Medical supervisor, 1991 to 1993.
Housewife, 1994.
12
<PAGE>
Clothing sales representative, 1995 to Feb. 1996.
Medical receptionist/trainer, 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 ex-penses (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> <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
- ------------------- ---------- ----------------- ----------------- ------------------
A. HERBERT ERSHIG, $ 400 $ 0 $ 0 $400
Trustee
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 February 24, 1998
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 66,051 17%
Sextant Bond Income Fund 67,733 26%
Sextant Growth Fund 38,246 17%
Sextant International Fund 37,307 28%
13
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of February 24, 1998 the shareholders of Sextant Short-Term Bond Fund owning
5% or more were as follows:
Name Shares Percentage
---- ------ ----------
The Heritage Education Trust, Inc.
Dr. Mohammed Jaghilt, President 88,635 23.40%
Robert L. Foote 60,745 16.04%
Investors National Corporation. 35,806 9.45%
Michael McRory, DDS PS Profit SH
DTD 7-29-80, Michael R. McRory 26,737 7.06%
Robert J. Nicholl IRA Rollover 20,068 5.29%
As of February 24, 1998 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. 45,643 17.62%
Luzenia B. Redpath 34,891 13.47%
Loie E. Haggen 20,398 7.87%
David K. Heaps IRA Rollover 16,955 6.64%
Ubaldina Sanchez 15,588 6.01%
Frederick M. Graham
Mary J. Graham, Jt. Ten 15,033 5.80%
Saturna Capital Corporation 13,657 5.27%
As of February 24, 1998 the shareowners owning 5% or more of Sextant Growth
Fund were:
Name Shares Percentage
---- ------ ----------
Nicholas F. Kaiser IRA Rollover 18,810 8.24%
Sutherland Enterprises Ltd. 12,617 5.52%
14
<PAGE>
As of February 24, 1998 the only shareowners with 5% or more of Sextant
International Fund were:
Name Shares Percentage
---- ------ ----------
Nicholas F. Kaiser IRA Rollover 23,817 18.15%
Heritage Education Trust, Inc. 9,667 7.36%
Mar-Jac Poultry Inc. 7,555 5.75%
Norman H. Bell MD 7,177 5.46%
Northwest Eye Clinic Inc. Employee
Pension Trust #13 Frederick Kaiser 7,028 5.35%
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 .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 15
<PAGE>
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, 1999. 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 mail-ing and printing costs for prospectuses,
reports and notices to share-owners.
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.
For no additional charges, the Adviser provides services as the transfer agent,
registrar and dividend-pay-ing agent for each Fund. As transfer agent, Saturna
furnishes to each shareowner a state-ment after each transaction, an historical
statement at the end of each year showing all trans-actions 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 transfer agent performs
the mailing of financial statements, notices, and prospectuses to shareowners.
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 16
<PAGE>
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. Tait, Weller, and
Baker, Eight Penn Center Plaza, Philadelphia PA 19103 served as the 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 be-tween $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 dividends more
frequently than once per quarter). Each Fund reimbursed Saturna for any
out-of-pocket expense for forms and mailing costs used in perform-ing its
functions. For the fiscal year ended November 30, 1997 and 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, 1997, Sextant Growth Fund paid investment
adviser and administration fees of $11,819. For fiscal 1996, Sextant Growth Fund
paid investment adviser and administration fees of $7,540 and for the fiscal
year ending 1995, Sextant Growth Fund paid $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, 1997, Sextant Bond Income Fund incurred
advisory expenses of $6,805 (all of which was waived by Saturna Capital). In 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, 1997, Sextant Short-Term Bond Fund
incurred advisory expenses of $13,245 and 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 17 <PAGE>
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, 1997 Sextant International
Fund incurred advisory expenses of $7,537 and 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 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 in-formation
about the general level of commissions paid by similar mutual funds for
compara-ble 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 af-filiate 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 1997, 1996, and 1995, Sextant
Growth Fund paid $1,967 $2,536,and $3,188 in brokerage commissions to Investors
National Corporation. For the fiscal year of 1997, Sextant International Fund
paid $872 is 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 1997, 1996,and 1995 Sextant Bond Income Fund paid $147, $49 and
$0, in brokerage commissions to Investors National Corporation. For the fiscal
year ended November 18 <PAGE>
30, 1997 brokerage commissions to Investors National Corporations for Sextant
Short Term Bond Fund was $ 392 and 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 respectively.
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
ex-planation 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 ex-change 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 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 re-quired 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 provi-sions of the Internal Revenue Code
applicable to regulated investment companies, which re-lieve 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. 19 <PAGE>
The amount of investment income and capital gains, if any, available for
distri-bution by a Fund in the future cannot be predicted due to continually
changing eco-nomic 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 dis-tributions 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 ad-vising 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 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
Infor-mation. The financial statements and selected per share data and ratios
dated November 30, 1997, together with the report of independent accountants
dated December 12, 1997, are considered a part of the Statement of Additional
Information and are in-corporated by reference. 20 <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 princi-pal 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 sus-ceptibility 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:
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.
21
<PAGE>
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
cir-cumstances 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.
22
<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
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
21. Underwriters Not Applicable
2
<PAGE>
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 State-ment of Additional
Information dated March 26, 1998 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:
(Graphic Omitted)
SATURNA CAPITAL
1300 N. STATE STREET
BELLINGHAM, WA 98225
800/ SATURNA [800/ 728-8762]
E-mail: [email protected]
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disap-proved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
(Graphic Omitted)
IDAHO
TAX-EXEMPT FUND
NO-LOAD,
NO SALES CHARGE,
NO 12B-1
PROSPECTUS
March 26, 1998
<PAGE>
2
EXPENSES
The table illustrates Fund operating expenses for the fiscal year ended November
30, 1997. The Fund imposes no sales load on purchases or reinvested divi-dends,
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) 0.34%
12b-1 Expenses NONE
Other Expenses 0.46%
Total Fund Operating Expenses 0.80%*
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-- $106
* 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,
1999. 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.
This 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.
<PAGE>
FINANCIAL HIGHLIGHTS
(Graphic Omitted)
Selected data for a
share of IDAHO TAX-EXEMPT FUND outstanding throughout each period. The schedule
for the year ended November 30, 1997 was audited by Tait Well and Baker, LLP
independent accountants, whose report is included in the Fund's Annual Report
(incorporated by reference into the Statement of Additional Infor-ma-tion).
Other auditors, whose reports expressed unqualified opinions, audited prior year
financial statements. 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>
For Year Ended November 30
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE AT BEGINNING
OF YEAR $ 5.25 $ 5.28 $ 4.76 $ 5.23 $ 5.16 $ 5.10 $ 5.03 $ 5.07 $ 4.98 $ 5.03
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.26 0.27 0.26 0.27 0.25 0.28 0.30 0.33 0.35 0.35
Net gains or losses on securities
(both realized and unrealized) 0.03 (0.03) 0.52 (0.46) 0.12 0.09 0.07 (0.04) 0.09 (0.05)
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
Total From Investment Operations 0.29 0.24 0.78 (0.19) 0.37 0.37 0.37 0.29 0.44 0.30
LESS DISTRIBUTIONS
Dividends (from net investment
income) (0.26) (0.27) (0.26) (0.27) (0.25) (0.29) (0.30) (0.33) (0.35) (0.35)
Distributions (from capital gains) 0.00 0.00 0.00 (0.01) (0.05) (0.03) 0.00 0.00 0.00 0.00
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
Total Distributions (0.26) (0.27) (0.26) (0.28) (0.30) (0.31) (0.30) (0.33) (0.35) (0.35)
NET ASSET VALUE AT END
OF YEAR $ 5.28 $ 5.25 $ 5.28 $ 4.76 $ 5.23 $ 5.16 $ 5.10 $ 5.03 $ 5.07 $ 4.98
======= ======= ======= ======== ======= ======= ======= ======= ======= =======
TOTAL RETURN 5.69% 4.66% 16.68% (3.76)% 7.35% 7.49% 7.63% 5.94% 9.17% 6.45%
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------
Net assets ($000), end of year $5,255 $5,064 $5,220 $ 6,841 $7,367 $5,808 $3,803 $2,540 $ 808 $ 335
Ratio of expenses to average
net assets 0.80% 0.79% 0.75% 0.75% 0.75% 0.75% 0.75% 0.97% 0.90% 0.28%
Ratio of net investment income
to average net assets 4.99% 5.10% 5.07% 5.28% 4.79% 5.64% 6.08% 6.74% 6.51% 6.58%
Portfolio turnover rate 20% 10% 28% 36% 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, $.016, $.007, 07, $.009,
$.008, $.02, $.02, $.05, $.10, $.19, and $.01 respectively. The increase to the
ratio of expenses to average daily net assets would be .16%, .27%, .26%, .14%,
.18%, .17%, .54%, 1.01%, 1.25%, 2.24%, and .11%, respectively.
</FN>
</TABLE>
2
<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 sec-ondary objective of attempting to preserve capital.
The Fund's fundamental policy is to in-vest at least 80% of net as-sets in
securities generating in-come exempt from federal income tax, in-cluding the
alternative minimum tax. Under normal market condi-tions, at least 65% of total
assets are invested in debt securities generating in-come 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 pro-vides 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 mar-ket risk and risk of price variation in
individual securi-ties. There is no guarantee that the Fund's in-vestment
objectives will be realized.
The risks inherent in the Fund depend primar-ily 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 "non-diversified" and in-vests primarily in municipal
securities of a sin-gle state, its investments are more sus-ceptible 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 there-from, the ability to preserve
capital, and the Fund's liquidity would all be adversely affected.
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
re-duced, the market for municipal securities, and consequently the Fund's share
value, may be adversely affected. 3 <PAGE>
Among Idaho's leading industries are agricul-ture, forest products, tourism, and
elec-tronic equipment. Locally oriented indus-tries include retail trade,
finance, insur-ance, real estate, trans-porta-tion, com-munica-tions, utilities,
government and construction. A more complete discus-sion is available in the
Statement of Additional Infor-mation.
4
<PAGE>
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
rat-ing 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
Ad-viser. 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 equiva-lent qual-ity in the
opinion of the Adviser. The Fund re-quires commercial pa-per 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 in-vested in non-rated bonds. Note
that bonds issued by the State of Idaho and its municipali-ties are often
smaller is-sues in total dollars, typically being issued by relatively small
Idaho commu-ni-ties to finance local government pro-jects. 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
credit-wor-thiness of the issuer, generally, rated bonds have greater market
recog-nition 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 elimi-nation of
certain under-writing expenses to the municipality.
Investors can expect the weighted average port-folio maturity to range between 6
and 15 years. Usually, shorter maturity bonds provide lower current yields,
while a matu-rity beyond 15 years implies greater current yield but increased
risk to capital from interest rate in-creases.
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 avail-able in
the market when de-livery 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 settle-ment, 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.
During uncertain market or economic condi-tions, the Idaho Tax-Exempt Fund may
adopt a temporary, defensive position and invest more than 20% of assets in cash
or equivalents, govern-ment se-cu-ri-ties, unaffiliated money-market mutual
funds, and other debt securities having an "A" rating or better. While such
de-fensive 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 cer-tain other
restrictions, as outlined in the Statement of Additional Information.
INVESTMENT RESULTS
You receive a financial report showing the in-vest-ments, 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 ini-tial orders unaccom-panied 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 ac-count is open, purchases can be made by check, ACH, or wire.
You may authorize the use of the Automated Clearing House ("ACH") to pur-chase
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, ex-pressed 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 histori-cal record of all
transactions.
Optional plans offered by the Fund:
- - Automatic investment plan
- - Systematic withdrawal plan to provide regular payments to you - The right to
exchange your shares without charge for any other Saturna fund 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 after receipt of your redemption request. The amount
re-ceived depends on the value of the investments in the Fund at the time of
your re-demption. 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 clear-ing, re-demption of
investments made by check may be re-stricted 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:
- - Redemption check (no minimum) sent to registered owner(s).
- - Redemption check (no minimum) sent as directed if the signature(s) are
guaranteed. If pro-ceeds are to be sent to other than the reg- 5
<PAGE>
istered
owner(s) at the last address, the signa-tures on the request must be guaranteed
by a national bank or trust company or by a member of a national securities
exchange.
- - Federal funds wire ($5000 minimum). The proceeds may be wired to any bank
desig-nated in the re-quest 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:
- - Redemption check (no minimum) sent to registered owner(s).
- - ACH transfer ($100 minimum) with proceeds trans-ferred to your bank account as
desig-nated on your application. The ACH authori-zation must be received at
least two weeks before ACH can be used.
- - Exchange ($25 minimum) for shares of any other Fund for which Saturna Capital
is ad-viser. If the ex-change is your initial in-vest-ment into this Fund, the
new account au-to-matically has the same registration as your original account.
An exchange is considered a closing capital transaction for tax purposes.
- - Federal funds wire ($5000 minimum). Pro-ceeds may be wired only to the bank
previ-ously designated, or as directed in a prior written instruction with
signatures guar-anteed, as explained above.
For telephone requests, the Fund en-deavors to confirm that instructions are
genuine and may be liable for losses if it does not. The caller must provide (1)
the name of the person mak-ing the request, (2) the name and address of the
regis-tered 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 writ-ten confirmation of transactions. The
Fund is 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.
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 re-deemed at the net asset value next
de-termined after re-ceipt. If you wish to use this feature, request the Check
Writing Privi-lege on the application. 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 liabili-ties, by
(ii) the number of shares outstanding. The Fund computes its net as-set value as
of the close of trading on the New York Stock Ex-change (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 cus-tomary national business holiday that security 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
re-demption order.
Since daily bid prices are not available for many municipal bond issues, the
Fund val-ues securi-ties using matrices of municipal bond yields for various
ma-turities and qualities. Prices are ad-justed for factors unique to each bond.
To verify its knowledge of market fac-tors, the adviser periodically obtains
appraisals from independent sources.
TRUST MANAGEMENT
Saturna Investment Trust is managed by a Board of Trustees, currently: A.
Herbert Ershig, Gary A.
6
<PAGE>
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
State-ment of Additional Information.
INVESTMENT ADVISER
Saturna Capital Corporation, 1300 N. State Street, Bellingham, WA 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, Vern M. Clemenson,
Phelps S. McIlvaine, James D. Winship, and Brian A. Anderson. The directors
of the Adviser are Nicholas Kaiser (President), Phelps S. McIlvaine (Vice
Presi-dent), 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 be-tween $250 million and
$1 billion, and 0.30% of assets in ex-cess of $1 billion. Through March 31,
1999, the Adviser has voluntarily waived its fee and reimburses the Fund as
nec-essary to limit total Fund expenses to 0.80% of average annual net assets. A
waiver has the effect of subsidizing the yield for the period it is in effect.
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 pro-spectuses,
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, ($20 million) and Amana Growth Fund ($9 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 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 the
Sextant Bond Income and Short-Term Bond Funds. 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 or-ga-nized as a
Washington Business Trust on February 20, 1987. The Trust now offers five
sep-a-rate 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 7 <PAGE>
separate prospectus available from the Adviser. The Trust began operations on
September 4, 1987. The Fund's current investment advisory agreement became
effective on its approval by share-owners on October 12, 1990.
The Fund is divided into shares of bene-fi-cial inter-est, with equal vot-ing
rights. All shares are fully paid, non-assess-able, trans-ferable, have rights
of redemp-tion, and are not sub-ject to pre-emptive 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.
All divi-dends and distributions are distributed pro rata to share-owners in
proportion to 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 rein-vested 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 tax-able divi-dends and
capital gain distributed to you. The Fund accounts for its distributions as
either taxable capital gains (originat-ing 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
lo-cal taxes.
To avoid being subject to a 31% federal with-holding 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 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
perfor-mance.
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.
The Fund also may quote a taxable equivalent yield, which is the equivalent
amount an inves-tor must earn before deducting fed-eral and any applicable Idaho
income taxes (at rates stated in the quotation), to equal the Fund's 30-day
cur-rent yield.
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
div-idends paid during the period in addi-tional 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 Ad-ditional Information. 8 <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 /
----------
/
State to Minors Act Minor's S. S. No. Minor's
Birthdate
q Other
Indicate name of corporation, other organization or fiduciary capacity.
Tax Identification 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
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.)
E-MAIL
Please send duplicate confirmations and notices to my e-mail address:
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.
qSingle 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 application forms may be
required.
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, 1998
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, 1998. 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 following 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, and 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 to expand certain policies and re-strictions 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
in-vestments 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 re-spect 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
require-ments that at the end of each quarter at least 50% of total assets is
repre-sented by (a) cash or equivalents, (b) U. S. gov-ern-ment securities, (c)
securities of other regulated investment compa-nies, and (d) other securities,
if, as to any one is-suer, the value of such issuer's securities does not
ex-ceed 5% of the Fund's total assets and 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 en-gaged in the same or simi-lar 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 <PAGE>
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
in-vestments in investment companies generally. It is anticipated that shares of
such invest-ment 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 ap-proval of the holders of the majority of the outstanding
shares of the Fund. Objectives and poli-cies 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 is-sued 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 war-ranted 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 insti-tution 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 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 4 <PAGE>
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 pro-vided 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
securi-ties 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 recog-nized 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 computa-tion 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;
(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 case 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 pay-ment of interest, in the opinion of the bond issuer's 5 <PAGE>
counsel, is exempt from Federal and Idaho State income tax. General
descriptions 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
- ---------------
matu-rity 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 commer-cial paper is, in most cases, backed by letters of
credit, lending agreements, note repur-chase agreements, or other credit
facility agreements offered by banks and other institu-tions.
Municipal notes and commercial paper obligations are usually issued in the
following cir-cumstances: (a) When borrowing is in anticipation of long-term
financing, the paper is gen-erally 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
se-cured by income and revenues derived by the city from the project and from
the sale of the rev-enue 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 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. The full
faith and credit of the taxing districts back TANs. The State of Idaho is also
autho-rized 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 obliga-tion 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 fis-cal 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 out-standing 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 lo-cal 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 6 <PAGE>
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 pro-jects including, but not limited to, electric, gas, water and
- ------
sewer systems, highways, bridges, and tunnels, airport facilities, colleges
- ----
and universities, hospitals, and health, conven-tion, 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. The revenues of the
- --
particular utility or system secure them. 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 hous-ing 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 dis-tricts, irrigation districts, and cities.
The property must be specially benefited by the im-provements constructed out of
the proceeds of the bonds, generally within a local improve-ment 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 antic-ipate 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. In addition, the
is-suer may have a corresponding right to prepay the principal amount prior to
maturity.
INVESTMENT CONSIDERATIONS
Investing in securities entails both mar-ket risk and risk of price variation
in individ-ual securities. This is true even for debt securities issued by
the U.S. Government. By diversifying its invest-ments,
7
<PAGE>
the Fund may reduce the risk associated with owning one or a few indi-vi-du-al
securi-ties. 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 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. 8
<PAGE>
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. In addition, such immigration brings a demand for
increased infrastructure and the financing to fund it. Any such increase in
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 con-tractual restric-tions on resale or are
otherwise not readily marketable); nor invest in oil, gas or other min-eral
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 in-vest 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 invest-ment
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 is-suer. In addition, the Fund shall not
purchase real estate; real estate limited partnerships (excepting master limited
partnerships that are pub-licly traded on a na-tional security ex-change or
NASDAQ's National Market System); com-modities 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 un-der-writer except that they may pur-chase securities directly from
the issuer for investment purposes. No Fund will purchase securities if it has
outstanding borrowings exceeding 9 <PAGE>
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 com-pany
for the pur-pose of management or exercising control. The Fund shall not invest
in the securities of other investment companies, except by purchase where no
commis-sion or profit results.
PORTFOLIO TURNOVER
The Fund places no restrictions on portfolio turnover and will buy or sell
investments accord-ing 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,
1997, 1996, and 1995was 12%, 10%, and 28%, 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 ad-justment 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, 1997 was 5.69%.
Average annual total return for the three-year period through November 30, 1997
was 8.88%, for the five-year period 5.93% and for the ten-year period 6.50%.
Average annual Total Return quotations for various periods illustrated are
-------------
computed by find-ing 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 fed-eral alternative minimum tax as clearly defined in the ad.
The advertised tax-exempt portion 10 <PAGE>
of the standardized yield will then be divided by the inverse of the stated
effec-tive 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, 1997 was
4.27%. The equivalent after-tax yield was 7.69% for Idaho residents with taxable
incomes of $270,000, based on a 1997 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:
11
<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 Industrials Russell 2000
Lipper General Equity Fund Average Lipper Capital Appreciation Fund Average
Lipper Equity Funds Average Lipper Growth Funds Average Lipper Growth & Income
Fund Average Lipper Small Company Growth Fund Average Lipper Balanced Fund
Average Lipper Equity Income Fund Average Ibbotson Common Stocks Index
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:
A. HERBERT ERSHIG - Trustee
22 Shorewood Drive, Bellingham, WA. 98225.
Retired.
President, Ershings, Inc., Bellingham WA, industrial manufacturing, from 1960 to
1996.
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, Ph.D. - Trustee
College of Business and Economics, Western Washington University,
12
<PAGE>
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 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 ex-penses (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> <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
- ------------------- ----------- ----------------- ----------------- -----------------
A. HERBERT ERSHIG $ 400 $ 0 $ 0 $400
Trustee
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 13 <PAGE>
of the disinterested directors, meets to select the independent accountant and
review all audit reports.
As of February 24, 1998, officers, trustees and their families as a group owned
no shares of the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of February 24, 1998, 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 be-tween $250
million and $1 billion, and 0.30% of assets in excess of $1 billion. Through
March 31, 1999, 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,
fur-nishes 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 condi-tion for registration to offer and sell shares in that state.
Usually, the expense limitation re-quires 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 transfer agent performs the mailing of financial statements, notices, and
prospectuses to shareowners.
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 14 <PAGE>
for any out-of-pocket expense for forms and mailing costs used in performing its
functions. For the fiscal year ended November 30, 1997, the Fund paid transfer
agent fees of $4,050.
For the fiscal year ended November 30, 1997, the Fund paid $25,451 in investment
adviser and administration fees, of which the adviser waived $8,311. For the
fiscal year ending November 30, 1996, the Fund was required to pay $24,540, of
which Saturna Capital waived $11,923. For fiscal year 1995, the comparable
figures were $30,862 and $14,048.
National City Bank, Indianapolis, Indiana 46255 is the custodian of the Fund's
securities and other as-sets. 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 autho-rized 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.
Tait, Weller and Baker, Eight Penn Center Plaza, Philadelphia PA 19103 served 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 1997, 1996, and 1995 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 per-formed 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 sup-plemental 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 transac-tion, 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 in-formation
about the general level of commissions paid by similar mutual funds for
compara-ble 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. For brokerage conducted through an af-filiate 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 15 <PAGE>
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
ex-planation 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 re-quired 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 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 distri-bution by a Fund of the Trust in the future cannot be
predicted due to continually changing eco-nomic conditions and market prices.
16
<PAGE>
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 dis-tributions 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
Infor-mation. The financial statements and selected per share data and ratios
dated November 30, 1997, together with the report of independent accountants
dated December 12, 1997, are considered a part of the Statement of Additional
Information and are in-corporated by reference. 17 <PAGE>
<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 matu-rity 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 princi-pal 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 sus-ceptibility 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.
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
18
<PAGE>
changes and cir-cumstances 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 mar-gins 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 inter-est. 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
(iii) Conservative 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 normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earning trends and cov-erage ratios, while sound, will be more subject to
variation. Capitalization characteris-tics, 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 over-whelming safety
characteristics are denoted with a plus (+) designation.
19
<PAGE>
A-2 The A-2 designation indicates capacity for timely payment is satisfactory.
However, the rela-tive 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. 20 <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, 1997:
Report of Tait, Weller & Baker, LLP, Independent Accountants. For each portfolio
of the Fund: Statement of Assets and Liabilities as of November 30, 1997.
Statement of Operations - Year ended November 30, 1997. Statement of Changes in
Net Assets - years ended November 30, 1996 and November 30, 1997. Investments -
November 30, 1997. Financial Highlights - November 30, 1997. 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: foot1 Items marked with an asterisk
(*) are incorporated by reference from exhibits previously filed.
- - *(a) Agreement and Declaration of Trust of Northwest Investors
Tax-Exempt Business Trust, filed February 20, 1987 with Secretary 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.
a
<PAGE>
*(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.
b
<PAGE>
*(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 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.
(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
c
<PAGE>
(11) (a) Consent of Tait, Weller & Baker 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.
(15) Not applicable.
(16) Computation of Performance.
The Average Annual Total Return since the inception of the Idaho Tax-Exempt Fund
through November 30, 1997 is computed to be 6.50%, for Sextant Growth Fund
16.28%, for Sextant Bond Income Fund 6.92%, for Sextant International Fund
14.41%, and for Sextant Short-Term Bond Fund 5.24%.
d
<PAGE>
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>
<PAGE>
Number of Holders of Securities
- -----------------------------------
As of February 25, 1998 the following information is furnished for Saturna
Investment Trust:
(1) (2)
Title of Class Number of Record Holders
---------------- ---------------------------
Shares 37 Sextant Bond Income Fund
66 Sextant Short-Term Bond Fund
193 Sextant Growth Fund
76 Sextant International Fund
241 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.
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 f
<PAGE>
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 because 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 and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a
g
<PAGE>
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,
1998, Investors National Corporation owned 35,806.196 shares of Sextant
Short-Term Bond Fund, and 5,792.117 shares of Sextant Bond Income Fund.
The following table sets forth information with respect to each director and
executive officer of Investors National Corporation.
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
h
<PAGE>
Meredith Ross Director & Vice President None
1300 State St. & Secretary
Bellingham WA 98225
Phelps McIlvaine Director & Treasurer Vice President
1300 State St.
Bellingham WA 98225
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.
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. i <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
20th day of March, 1998. 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 20, 1998
------------------------ --------------
Nicholas F. Kaiser (principal Executive
Officer); Trustee
/s/Teresa K. Anderson Treasurer March 20, 1998
----------------------- --------------
Teresa K. Anderson (principal Financial
Officer)
** Gary Goldfogel All other Trustees March 20, 1998
--------------
** John E. Love
** John S. Moore
** A. Herbert Ershig
** By/s/ Nicholas F. Kaiser
-------------------------
Nicholas F. Kaiser, President,
Attorney-in-fact
<PAGE>
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. Period
3/1/93 (In-
Year ended November 30, ception) to
- --------------------------------------------------------------------------------------------
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
<PAGE>
ITE
(Graphic Omitted)
IDAHO TAX-EXEMPT FUND
NOVEMBER 30, 1997 REPORT
MORNINGSTAR MUTUAL FUNDS HAS AWARDED ITS SECOND HIGHEST "FOUR-STAR" RATING TO
IDAHO TAX-EXEMPT FUND AS OF NOVEMBER 30, 1997. THE MORNINGSTAR RATING IS A
WIDELY RESPECTED MEASURE OF RISK-ADJUSTED PERFORMANCE.* THE FUND'S MANAGERS ARE
PROUD OF THIS ACCOMPLISHMENT AND WORK HARD TO CONTINUE EXCELLENT RESULTS.
Fellow Shareowners:
For the twelve month period ending November 30, 1997, our Idaho Tax-Exempt Fund
provided shareholders with a total return of 5.69%. The current 30-day yield on
your Fund is 4.27%, tax-free. This is the equivalent of 7.69% of taxable income
to top-bracket Idaho taxpayers.
If there is one outstanding theme in the U.S. economy for 1997, it has to be
balance. Production and consumption had never been more closely synchronized.
This produced remarkably stable prices for many goods and services. Also, the
strong US Dollar, the growing crisis in Asia and worldwide competition continue
to reduce domestic inflation. As a result, the US bond market and the Federal
Reserve are beginning to trust that continuous growth will not lead to rising
inflation. Long-term interest rates have moved lower for most of 1997 and we
expect them to move even lower in 1998.
For the next twelve months, we expect the US economy to slow slightly. This
should give the Federal Reserve the opportunity to lower short term rates
modestly as well. All in all, another year of solid, reliable returns similar to
1997 seems like the most likely outcome for 1998.
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
December 9, 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.
<PAGE>
(Graphic Omitted)
IDAHO TAX-EXEMPT FUND
November 30, 1997 Annual Report
Investments
<TABLE>
<CAPTION>
Investments
RATING* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
<S> <C> <C> <C> <C>
AIRPORT PARKING (2.3%)
AAA Boise City ID Airport Rev COP 5.40% due 8/1/2011 $ 115,000 $ 117,852
ELECTRIC POWER (3.3%)
AAA Idaho Falls
- - Electric Revenue 6.75% due 4/1/2019 160,000 171,149
GENERAL OBLIGATIONS (38.4%)
AA Ada & Canyon Ctys ID - - -
- - JSD #2 Meridian 5.50% due 7/30/2011 150,000 154,933
A+ Bannock Cnty ID GO Jail 5.05% due 9/1/2012 95,000 92,472
A Bannock Cnty ID SD #25 - - -
- - Pocatello 5.25% due 8/1/2016 110,000 110,387
AAA Boise City ID GO ISD 5.50% due 7/30/2011 95,000 98,343
AA- " 5.50% due 7/30/2016 150,000 153,720
A Boise Cty ID SD #73 5.15% due 7/31/2010 125,000 123,577
AAA Canyon Cty ID SD #132 5.40% due 7/30/2011 100,000 102,870
- - " 5.40% due 7/30/2012 100,000 102,270
A Canyon Cty ID SD #135 Notus 5.90% due 8/1/2005 50,000 51,673
- - Series 1994 6.00% due 8/1/2006 50,000 51,805
- - " 6.00% due 8/1/2007 50,000 51,567
AAA Cassia, Twin Falls ID JSD #151 5.375% due 8/1/2013 85,000 86,454
- - " 5.375% due 8/1/2015 75,000 75,800
AAA Gooding Cty ID SD #232 - - -
- - Wendell 6.00% due 8/1/2008 55,000 57,100
AAA Kootenai Cty ID SD #273 6.00% due 8/1/2012 100,000 103,220
AAA Madison Cty ID SD #321 5.60% due 2/1/2010 150,000 154,878
AA Payette Cty ID SD #372 6.50% due 7/31/2008 80,000 88,032
New Plymouth 6.75% due 7/31/2009 155,000 171,523
- - " 6.75% due 7/31/2010 100,000 110,960
AAA Teton Cty ID SD #401 GO 5.50% due 8/1/2012 75,000 78,390
------------ -------------
- - SUB-TOTAL - 1,950,000 2,019,974
HOUSING (8.6%)
AA Idaho Housing Authority
- - Single Fam Mortgage, B-1 6.85% due 7/1/2012 110,000 113,445
AA Idaho Housing Authority
- - Refunding Ser A 6.15% due 7/1/2024 150,000 155,230
AA Idaho Housing Authority
- - Single Fam Mort Mezz-E-1 6.60% due 7/1/2011 105,000 108,319
AA Idaho Housing Authority
- - Single Fam Mort Rev Ser B1 8.125% due 7/1/2019 5,000 5,098
- - " 8.00% due 1/1/2020 25,000 25,537
AA Idaho Housing Authority -
- - Single Fam Mort SR Ser C1 7.70% due 7/1/2017 45,000 45,949
------------ -------------
- - SUB-TOTAL - 440,000 453,578
IRRIGATION (4.0%)
AA Boise Kuna Irr. Dist. 6.00% due 7/1/2008 200,000 210,360
MEDICAL/HOSPITALS (4.5%)
A Idaho Health Facility
- - St. Alphonsus Medical Center 6.25% due 12/1/2012 175,000 189,228
- - " 6.25% due 12/1/2022 45,000 47,592
------------ -------------
- - SUB-TOTAL - 220,000 236,820
REAL ESTATE (2.0%)
AAA Idaho St Bldg Authority Ser C 5.70% due 9/1/2007 100,000 105,618
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
IDAHO TAX-EXEMPT FUND
(Graphic Omitted)
November 30, 1997 Annual Report
Investments, Continued
<TABLE>
<CAPTION>
RATING* ISSUER COUPON/MATURITY FACE AMOUNT MARKET VALUE
<S> <C> <C> <C> <C>
ROADS (3.9%)
A Payette L.I.D. #89-1 7.60% due 5/1/2005 30,000 30,219
A Post Falls, Kootenai Cty 7.00% due 4/15/1998 10,000 9,981
- - L.I.D. #91-1 7.20% due 4/15/1999 15,000 14,980
- - " 7.40% due 4/15/2000 15,000 14,977
- - " 7.60% due 4/15/2001 15,000 14,991
- - " 7.75% due 4/15/2002 20,000 19,989
- - " 7.95% due 4/15/2003 20,000 20,001
- - " 7.95% due 4/15/2004 20,000 20,017
- - " 7.95% due 4/15/2005 20,000 20,008
- - " 7.95% due 4/15/2006 20,000 20,007
- - " 7.95% due 4/15/2007 20,000 20,006
------------ ------------
- - SUB-TOTAL - 205,000 205,176
STATE EDUCATION (15.9%)
AAA Boise State University 6.20% due 4/1/2010 200,000 214,522
- - Fee Revenue 6.30% due 4/1/2014 100,000 106,750
A- Idaho State University -
- - Student Fee Revenue 6.40% due 4/1/2014 250,000 269,000
AAA University of Idaho -
- - Student Fee Revenue 5.60% due 4/1/2015 185,000 191,771
A- University of Idaho -
- - Fee Revenue 6.85% due 4/1/2016 50,000 54,514
------------ ------------
- - SUB-TOTAL - 785,000 836,557
SEWER (3.4%)
A Troy ID, Sewer Revenue 7.00% due 2/1/1998 10,000 10,009
- - " 7.10% due 2/1/1999 10,000 10,134
- - " 7.20% due 2/1/2000 10,000 10,243
- - " 7.30% due 2/1/2001 10,000 10,352
- - " 7.40% due 2/1/2002 10,000 10,347
- - " 7.50% due 2/1/2003 10,000 10,355
- - " 7.60% due 2/1/2004 10,000 10,336
- - " 7.70% due 2/1/2005 15,000 15,537
- - " 7.80% due 2/1/2006 15,000 15,574
- - " 7.90% due 2/1/2007 15,000 15,585
- - " 8.00% due 2/1/2008 15,000 15,591
- - " 8.00% due 2/1/2009 20,000 20,808
- - " 8.00% due 2/1/2010 20,000 20,821
------------ ------------
- - SUB-TOTAL - 170,000 175,692
WATER SUPPLY (10.7%)
A- American Falls ID Reservoir 7.25% due 5/1/2004 70,000 75,512
- - Ref. Series A 7.625% due 5/1/2021 150,000 163,590
A McCall Water Rev., Ser 1994 6.25% due 9/1/2008 200,000 213,500
A McCall Water Revenue 6.375% due 9/1/2014 70,000 73,869
A Ucon Water & Sewer Rev. Ref. 7.75% due 12/1/2002 35,000 36,441
------------ ------------
- - SUB-TOTAL - 525,000 562,912
TOTAL INVESTMENTS (97.0%) Cost = $4,887,562 $ 4,870,000 $ 5,095,688
==================== ------------
Other Assets (net of liabilities) (3.0%) - - 159,310
------------
TOTAL NET ASSETS (100%) $ 5,254,998
============
<FN>
*These unaudited bond ratings reflect the adviser's current rating of each bond,
as determined using Standard & Poors and Moody's ratings.
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
(Graphic Omitted)
IDAHO TAX-EXEMPT FUND
November 30, 1997 Annual Report
Financial Highlights
<TABLE>
<CAPTION>
Financial Highlights
Selected data per share of capital stock outstanding throughout the year:
For Year Ended November 30
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF YEAR $ 5.25 $ 5.28 $ 4.76 $ 5.23 $ 5.16 $ 5.10 $ 5.03 $ 5.07 $ 4.98 $ 5.03
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.26 0.27 0.26 0.27 0.25 0.28 0.30 0.33 0.35 0.35
Net gains or losses on securities
(both realized and unrealized) 0.03 (0.03) 0.52 (0.46) 0.12 0.09 0.07 (0.04) 0.09 (0.05)
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
Total From Investment Operations 0.29 0.24 0.78 (0.19) 0.37 0.37 0.37 0.29 0.44 0.30
LESS DISTRIBUTIONS
Dividends (from net investment
income) (0.26) (0.27) (0.26) (0.27) (0.25) (0.29) (0.30) (0.33) (0.35) (0.35)
Distributions (from capital gains) 0.00 0.00 0.00 (0.01) (0.05) (0.03) 0.00 0.00 0.00 0.00
------- ------- ------- -------- ------- ------- ------- ------- ------- -------
Total Distributions (0.26) (0.27) (0.26) (0.28) (0.30) (0.31) (0.30) (0.33) (0.35) (0.35)
NET ASSET VALUE AT END
OF YEAR $ 5.28 $ 5.25 $ 5.28 $ 4.76 $ 5.23 $ 5.16 $ 5.10 $ 5.03 $ 5.07 $ 4.98
======= ======= ======= ======== ======= ======= ======= ======= ======= =======
TOTAL RETURN 5.69% 4.66% 16.68% (3.76)% 7.35% 7.49% 7.63% 5.94% 9.17% 6.45%
RATIOS / SUPPLEMENTAL DATA
- ------------------------------------
Net assets ($000), end of year $5,255 $5,064 $5,220 $ 6,841 $7,367 $5,808 $3,803 $2,540 $ 808 $ 335
Ratio of expenses to average
net assets 0.80% 0.79% 0.75% 0.75% 0.75% 0.75% 0.75% 0.97% 0.90% 0.28%
Ratio of net investment income
to average net assets 4.99% 5.10% 5.07% 5.28% 4.79% 5.64% 6.08% 6.74% 6.51% 6.58%
Portfolio turnover rate 20% 10% 28% 36% 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 .16%, .27%, .26%, .14%, .18%,
.17%, .54%, 1.01%, 1.25%, 2.24%, and .11%, respectively.
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
(Graphic Omitted)
IDAHO TAX-EXEMPT FUND
November 30, 1997 Annual Report
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds (cost $4,887,562) $5,095,688
Cash 196,274
Interest receivable 90,862
Insurance deposit 801
-----------
Total Assets 5,383,625
-----------
LIABILITIES
Payable for securities purchased 124,434
Other Liabilities 4,193
-----------
Total Liabilities 128,627
-----------
NET ASSETS $5,254,998
===========
FUND SHARES OUTSTANDING 995,307
ANALYSIS OF NET ASSETS
Paid in capital (unlimited shares authorized, no par value) 5,068,912
Accumulated net realized gain (loss) on investments (22,040)
Unrealized net appreciation on investments 208,126
-----------
Net Assets applicable to Fund shares outstanding $5,254,998
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 5.28
===========
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest income $299,389
Amortization of bond premiums (6,767)
Accretion 1,053
Miscellaneous Income 22
---------
Gross investment income $293,697
EXPENSES
Investment adviser and administration fee 25,451
Professional fees 12,790
Shareowner servicing 4,050
Printing and postage 4,284
Filing and registration fees 446
Other expenses 1,900
---------
Total gross expenses 48,921
Less advisory fee waived (8,311)
---------
Net expenses - 40,610
---------
Net investment income - 253,087
---------
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales 986,338
Less cost of securities sold based on identified cost 938,871
---------
Realized net loss - 47,467
--------- ---------
UNREALIZED GAIN (LOSS) ON INVESTMENTS
End of period 208,126
Beginning of period 225,804
---------
Decrease in unrealized gain for the period - (17,678)
--------- ---------
Net realized and unrealized gain on investments - 29,789
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS - $282,876
=========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
(Graphic Omitted)
IDAHO TAX-EXEMPT FUND
November 30, 1997 Annual Report
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
INCREASE IN NET ASSETS Year ended Year ended
Nov. 30, 1997 Nov. 30, 1996
--------------- ---------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 253,087 $ 252,695
Net realized gain on investments 47,467 (5,514)
Net (decrease) in unrealized appreciation (17,678) (25,421)
--------------- ---------------
Net increase in net assets 282,876 221,760
--------------- ---------------
DIVIDENDS TO SHAREOWNERS FROM
Net investment income (253,388) (252,571)
Capital gains distributions - -
--------------- ---------------
(253,388) (252,571)
--------------- ---------------
FUND SHARE TRANSACTIONS
Proceeds from sales of shares 661,445 837,937
Value of shares issued in reinvestment of dividends 190,941 191,502
--------------- ---------------
852,386 1,029,439
Cost of shares redeemed (691,110) (1,154,708)
--------------- ---------------
Net increase in net assets from share transactions 161,276 (125,269)
--------------- ---------------
Total increase in net assets 190,764 (156,080)
NET ASSETS
Beginning of period 5,064,234 5,220,314
--------------- ---------------
End of period $ 5,254,998 $ 5,064,234
=============== ===============
Shares of the Fund Sold and Redeemed
Number of shares sold 126,666 162,231
Number of shares issued in reinvestment of dividends 36,545 36,855
--------------- ---------------
163,211 199,086
Number of shares redeemed (132,545) (223,206)
--------------- ---------------
Net Increase (Decrease) in Number of Shares Outstanding 30,666 (24,120)
=============== ===============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
Discussion of Fund Performance
(unaudited)
For the twelve month period ending November 28, 1997 Idaho Tax Exempt Fund
returned shareholders +5.69%, slightly better than the 4.88% in 1996. On
November 28, 1997 the thirty day SEC yield for the Fund was 4.27%, compared to
4.74% on November 29, 1996. The share price at November 28, 1997 was 5.28
compared to 5.25 at the beginning of the fiscal year.
Overall in 1997, we saw the yield curve flatten. Long rates fell modestly and
short rates remained little changed. Interest rate volatility continued to
decline in 1997. A flatter yield curve and falling rate volatility are both
signs that the market believes the steady erosion in domestic inflation will
continue into 1998. The financial turmoil in Asia has recently caused a classic
"flight -to-quality"which pushes US bond prices up and moves US rates lower.
This crisis is serious and will take time to resolve. The spread between
municipal securities and US treasuries has been narrow most of the year and only
recently widened in response to foreign buying of US Treasuries. However, we
expect this spread to remain at the narrow end of its usual range. All of these
factors argue of high single digit positive returns from the ITE portfolio in
1998.
The primary objective of the Fund is income exempt from federal and Idaho
personal income taxes. As the yield advantage in lower rated paper has decreased
we have selectively reduced our exposure to the lower rated sector of Idaho
paper from 23% to 19% of the portfolio. This has allowed us to continue to
achieve high income while reducing credit risk.
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 6.5 years,
slightly less than the 7.13 years at the beginning of the fiscal year. We remain
optimistic that interest rates can move lower in 1998, but we do not believe
that extending beyond the intermediate sector of the yield curve represents the
best risk/return balance for the Fund.
The Idaho economy has slowed and leveled off. The State of Idaho is usually
ranked in the lowest ten states in the country for personal income. This is a
major competitive advantage for attracting new business. Recently, however Idaho
has dropped two places in the National rankings for personal income. Weakness in
potato prices and the effects of the financial turmoil in the Far East on
Idaho's high technology companies will keep the Idaho economy on a leash for a
while longer. But the government of Idaho has recently adopted a similar legal
framework to the State of Delaware in order to encourage new businesses to
incorporate in Idaho. Idaho's superior quality of life, reasonable land values
and competitively priced labor makes the State a strong competitor for new
business development in the years ahead.
High state income taxes in Idaho creates a substantial appetite among investors
for local tax-exempt paper. Idaho municipal paper benefits from the imbalance
between the number of buyers and the number of issues sold within the state.
This imbalance is especially important in weak markets when Idaho paper may
outperform issues from other states. Idaho's record of repaying municipal debt
remains in unblemished condition and this also adds to investors' appetite for
this high quality paper.
Though the Fund does not try to "beat" the Lehman Brothers Index or any other
specific index, the Fund's returns , considering the lower price fluctuation,
compares well to that of the Index for the fiscal year, as shown in the
accompanying chart.
<PAGE>
(Graphic Omitted)
IDAHO TAX-EXEMPT FUND
November 30, 1997 Annual Report
The Line 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).
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 is 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.
However, maintaining the stability of capital is an objective of the portfolio,
so we believe the Fund has performed well considering its investment
restrictions.
The graph shows that $10,000 invested in the Idaho Tax Exempt Fund at the end of
September 1987 would have grown to $ 19,057at the end of November 1997. 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 $ 23,462. (Graph
Omitted) <PAGE>
November 30, 1997 Annual Report
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
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:
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 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.
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.
<PAGE>
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 year ended November 30, 1997, the Fund incurred advisory fee
expenses of $25,451.
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, 1998. Accordingly, for the year ended November
30, 1997, Saturna Capital waived $8,311 of the advisory fee.
In accordance with the Fund's agreement with its custodian bank, National City
Bank, for the year ended November 30, 1997, custodian fees incurred by the Fund,
amounted to $1,420.
One trustee also serves as president of the Trust and is a di-rector 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 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
fiscal year ended November 30, 1997, the Fund paid such a fee of $4,050.
Unaffiliated trustees receive a fee of $100 per meeting attended. On November
30, 1997, 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, 1997, the Fund had capital loss carryforwards of $22,451 which
expire in 2003. 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 unreal-ized appreciation of investments for the
Fund of $208,126 com-prised gross unrealized gains of $212,446 and gross
unrealized losses of $4,320.
During the year ended November 30, 1997, the Fund pur-chased $1,176,500 of
securities and sold/matured $986,339 of securities.
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
Idaho Tax-Exempt Fund
We have audited the accompanying statement of assets and liabilities of the
Idaho Tax-Exempt Fund, a series of shares 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
audit. 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 16, 1996, expressed an unqualified opinion on those statements.
We conducted our audit 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 and brokers. 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 audit provides 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 Idaho Tax-Exempt Fund as of
November 30, 1997, the results of its operations, the changes in net assets and
the financial highlights for the year then ended, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
December 12, 1997
<PAGE>
(Graphic Omitted)
Web: http://www.saturna.com
E-mail: [email protected]
Saturna Capital
MUTUAL FUNDS
(Graphic Omitted)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.
IDAHO
TAX-EXEMPT FUND
(Graphic Omitted)
A Portfolio of Saturna Investment Trust
ANNUAL REPORT
NOVEMBER 30, 1997
Exhibit 11-a
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. 16 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 12, 1997, 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, 1997 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.
Tait, Weller and Baker LLP
/s/ Tait, Weller & Baker LLP
Philadelphia PA
March 19, 1998
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
20thday of March, 1998.
--- -----
/s/ Gary A. Goldfogel /s/ John E. Love
- ------------------------------ ----------------
Gary A. Goldfogel John E. Love
/s/ John S. Moore /s/ A. Herbert ERshig
- -------------------- ---------------------
John S. Moore A. Herbert Ershig
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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</LEGEND>
<CIK> 0000811860
<NAME> SATURNA INVESTMENT TRUST
<SERIES>
<NUMBER> 5
<NAME> IDAHO TAX EXEMPT FUND
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<CIK> 0000811860
<NAME> SATURNA INVESTMENT TRUST
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<CIK> 0000811860
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