File No.  33-13247
                         SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                                  FORM N-1A

                        REGISTRATION STATEMENT UNDER
                         THE SECURITIES ACT OF 1933
                       POST-EFFECTIVE AMENDMENT NO. 15

                        REGISTRATION STATEMENT UNDER
                     THE INVESTMENT COMPANY ACT OF 1940
                      POST-EFFECTIVE AMENDMENT NO. 15

                          SATURNA INVESTMENT TRUST
                     (Exact Name of Registrant as Specified in Charter)

                           1300 North State Street
                      Bellingham, Washington 98225-4730
                          (Address of Principal Executive Offices)

               Registrant's Telephone Number - (360) 734-9900
   

                              Pandora Larner
                          1300 North State Street
                      Bellingham, Washington 98225-4730
                           (Name and Address of Agent for Service)
    
It is  proposed  that this  filing will  become  effective:  ______  Immediately
uponfiling  pursuant  to  paragraph  (b) of rule 485  ___X__ on March  26,  1997
pursuantto  paragraph  (b) of Rule 485 ______ 60 days after  filing  pursuant to
paragraph(a)(1) of Rule 485
 ______ on _______pursuant  to  paragraph  (a)(1) of rule 485
______ 75 days after filing  pursuant to  paragraph  (a)(2) of Rule 485
 ___ _ on pursuant to  paragraph  (a)(2) of rule 485 If  appropriate,  check the
following  box: ____ this  post-effective  amendment  designates a new effective
date for a  previously  filed  post-effective  amendment.  The above  issuer has
registered  an  indefinite  number of shares  under the  Securities  Act of 1933
pursuant to Rule 24f-2 of the  Investment  Company Act of 1940. No filing fee is
due because of reliance on Rule 24f-2.  The Notice required by such Rule for the
fiscal year ended November 30, 1996 was filed on January 21, 1997.

<PAGE>





                           CROSS REFERENCE SHEET

 PART A                                      PROSPECTUS CAPTIONS

1.  Cover Page                               About the Trust;
                                             Expenses

2.  Synopsis                                 Expenses

3.  Condensed Financial Information          Expenses; Financial
                                             Highlights

4.  General Description of Registrant        About the Trust,
                              Investment Objectives
                            and Policies; Investment
                                Policies and Risk
                                             Considerations

5.  Management of the Fund                   Trust Management,
                               Investment Adviser

6.  Capital Stock and Other Securities       Capital Stock; Dividends

7.  Purchase of Securities Being Offered     Net Asset Value,
                                How to Buy Shares

8.  Redemption or Repurchase                 How to Redeem Shares

9.  Pending Legal Proceedings                Not Applicable

                             STATEMENT OF ADDITIONAL
PART B                                      INFORMATION CAPTIONS

10.  Cover Page                             Cover Page

11.  Table of Contents                      TABLE OF CONTENTS

12.  General Information and History        General Information and
                                            History



<PAGE>


13.  Investment Objectives & Policies      INVESTMENT OBJECTIVES
                                           AND POLICIES;
                               PORTFOLIO TURNOVER;
                                           INVESTMENT
                                           CONSIDERATIONS

14.  Management of the Registrant          MANAGEMENT OF THE TRUST

15.  Control Persons and Principal         PRINCIPAL HOLDERS OF
                                           SECURITIES
            Holders of Securities

16.  Investment Advisory and Other         INVESTMENT ADVISORY
          Services                         AND OTHER SERVICES

17.  Brokerage Allocation and Other        BROKERAGE ALLOCATION
           Practices                       PORTFOLIO TURNOVER

18.  Capital Stock and Other Securities    Not Applicable

19.  Purchase, Redemptions and Pricing     PURCHASE, REDEMPTION AND
          of Securities Being Offered      PRICING OF SECURITIES
                                           BEING OFFERED

20.  Tax Status                            TAX STATUS

21.  Underwriters                          Not Applicable

22.  Calculations of Performance Data      PERFORMANCE DATA

23.  Financial Statements                  FINANCIAL STATEMENTS


<PAGE>




                                  PART A


                                PROSPECTUS



<PAGE>



SATURNA INVESTMENT TRUST OFFERS FOUR
 NO-LOAD SEXTANT FUNDS:

  SEXTANT GROWTH FUND seeks long-term  growth through  investment in U.S. common
  stocks SEXTANT INTERNATIONAL FUND seeks long-term growth through investment in
  foreign stocks SEXTANT SHORT-TERM BOND FUND seeks capital stability and a high
  level of current income by investing in short-term debt securities
 SEXTANT  BOND INCOME FUND seeks a high level of current  income by investing in
 long-term debt securities
   
You should read this Prospectus  before  investing in the Funds.  Please read it
carefully  and  keep  it  for  future  reference.   A  Statement  of  Additional
Information  dated March 26, 1997,  was filed with the  Securities  and Exchange
Commission and is incorporated by reference into this Prospectus. You may obtain
a  free  copy  at  the  SEC  website   (www.sec.gov)   or  the  Saturna  website
(www.saturna.com), or by contacting:
    

                           SATURNA CAPITAL
                         1300 N. STATE STREET
                         BELLINGHAM, WA 98225
                      800/ SATURNA [800/ 728-8762]
                      E-MAIL: SEXTANT@SATURNA.COM


THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES  AUTHORITY NOR HAS THE COMMISSION OR
ANY STATE AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                           [GRAPHIC OMITTED]

SEXTANT MUTUAL FUNDS
                           [GRAPHIC OMITTED]



FROM
                           [GRAPHIC OMITTED]
                           SATURNA CAPITAL
                             MUTUAL FUNDS


                              NO-LOAD,
                          NO SALES CHARGE,
                               NO 12B-1


                              PROSPECTUS
                            March 26, 1997


<PAGE>



EXPENSES
   
The table  illustrates each Fund's operating  expenses for the fiscal year ended
Nov. 30, 1996. The Sextant Funds impose no sales load on purchases or reinvested
dividends,  no "12b-1" fees, nor any deferred sales load upon redemption.  There
are no redemption fees or exchange fees.

    
<TABLE>
<CAPTION>
   
                  ANNUAL FUND OPERATING EXPENSES
               (as a percentage of average net assets)
<S>                              <C>             <C>           <C>         <C>
                                 Sextant         Sextant       Sextant     Sextant
                                 Growth          International Short-Term  Bond Income
                                 Fund            Fund          Bond Fund   Fund
                                 ------           ------       ------     ------
            (1)            (2)
Advisory fee (after waivers)      0.60%             0.62%       0.34%       0.00%
12b-1 Expenses                    NONE              NONE        NONE        NONE
Other Expenses                    0.35%             1.18%       0.51%       0.63%
Total Fund Operating Expenses     0.95%             1.80%       0.85%       0.63%
</TABLE>
<TABLE>
<CAPTION>
    FOR EXAMPLE:
<S>                           <C>       <C>       <C>      <C>         <C>
Each Fund estimates
paying these expenses         1 year--    $10      $19       $9          $7
on a $1000 investment,        3 years--   $32      $61      $28         $21
assuming a 5% net             5 years--   $56     $106      $50         $37
annual return:               10 years--  $127     $242     $113         $84


<FN>
(1) Each Sextant Fund pays an Investment  Advisory and  Administrative  Services
  Fee of 0.60%  annually.  This fee is then subject to a performance  adjustment
  (plus or minus) of up to 0.30%.
 (2) The Adviser  voluntarily  waives its  advisory fee to limit the expenses of
  the two Sextant bond funds to 0.60% annually through March 31, 1998. Moreover,
  it waives its fee  entirely  when  assets are less than $2  million.  Earnings
  credits allow the Funds'  custodian to waive fees for all four Funds.  Without
  these limitations and with the maximum performance  adjustment,  Advisory fees
  of the bond Funds might be as high as 0.80%, and Total Fund Operating Expenses
  1.20%.  The example  assumes a continuation of the most recent year's fees and
  limits for the 3, 5 and 10 year periods.
</FN>
</TABLE>
The preceding information is to help you understand the various (both direct and
indirect) expenses that an investor bears. This table is not a representation of
past or future  expenses.  Actual  expenses  are  likely to be more or less than
those shown.     

See FINANCIAL HIGHLIGHTS and INVESTMENT ADVISER for more details.
                                   1
<PAGE>

   
FINANCIAL HIGHLIGHTS

Selected data for a share of each of the SEXTANT FUNDS follows.  These schedules
were audited by Price Waterhouse LLP, independent  accountants,  whose report is
included in the Sextant Mutual Funds' Annual Report  (incorporated  by reference
into the Statement of Additional  Information).  These schedules  should be read
with the other  financial  statements and notes in the Annual Report  (available
without charge from the Trust), which also includes  management's  discussion of
each Fund's performance.

    
[GRAPHIC OMITTED]
SEXTANT INTERNATIONAL FUND

Selected  data  for a share  of  SEXTANT  INTERNATIONAL  FUND  outstanding  from
September 28, 1995 (commencement of operations) through November 30, 1996.

<TABLE>
<CAPTION>
   
<S>                                              <C>             <C>
                                                                Sept.28,'95
                                                 Year Ended       (Inception)
                                                 Nov.30,'96       Nov.30,'95*
                                                 -----------       -----------
NET ASSET VALUE AT BEGINNING OF PERIOD             $4.99            $5.00
    INCOME FROM INVESTMENT OPERATIONAS
    Net investment income                           0.03            (0.02)
    Net gains or losses on securities (both         0.88             0.01
                                                    ----             ----
    realized and unrealized)
Total from investment operations                    0.91            (0.01)
    LESS DISTRIBUTIONS
    Dividends (from net investment income)         (0.03)            0.00
    Distributions (from capital gains)              0.00             0.00
                                                    ----             ----
Total distributions                                (0.03)            0.00
NET ASSET VALUE AT END OF PERIOD                   $5.87            $4.99

TOTAL RETURN                                       18.16%           (0.20)%

RATIOS / SUPPLEMENTAL DATA
Net assets ($000), end of period                    $695             $328
Ratio of expenses to average net assets +           1.80%             0.49%
Ratio of net investment income to average net
assets +                                            0.60%           (0.38)%
Portfolio turnover rate                               11%               12%
Average commission rate paid                      $0.0827            $0.0192

 <FN>

    + For the above  periods,  all or a portion of the  operating  expenses were
    waived.  If  costs  had not been  have  waived  and  directly  assumed,  the
    resulting  increase to expenses per share in the period would have been $.03
    and $.01,  respectively.  The  increase  to the ratio of expenses to average
    monthly net assets would be .50% and .21%, respectively.
                                      * no annualized

    
</FN>
</TABLE>

                                    2

<PAGE>


[GRAPHIC OMITTED]
   
SEXTANT GROWTH FUND
Selected data for a share of SEXTANT  GROWTH FUND.  The  following  schedule for
each of the seven  years  ended  November  30,  1996 has been  audited  by Price
Waterhouse LLP, independent accountants, whose report thereon is included in the
Annual  Report.  The data for each of the two years in the period ended November
30,  1989 and for the period  September  4, 1987  (commencement  of  operations)
through November 30, 1987 were audited by other  independent  accountants  whose
report dated January 19, 1990 expressed an unqualified opinion on those data.
    

<TABLE>
<CAPTION>
   

<S>                    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>     <C>
                                                                                   Sept 4,'87
                                                                                (commencement
                                                                               of operations)
                                   For Year Ended November 30,                        to Nov.
                       --------------------------------------------------
                       1996   1995   1994   1993   1992   1991   1990   1989   1988   30 1987
                       ----   ----   ----   ----   ----   ----   ----   ----   ----   -------
NET ASSET VALUE AT BEGINNING
  OF PERIOD           $7.42  $5.82  $6.38  $5.93  $5.55  $4.93  $4.88  $4.88   $4.96   $5.00
  INCOME FROM INVESTMENT
   OPERATIONS
  Net investment       0.00 (0.03)  (0.03)  0.01   0.01   0.04   0.27   0.28    0.30    0.06
  income
  Net gains or losses on securities
  (both realized
  and unrealized       0.50   1.82  (0.53)  0.45   0.38   0.60   0.01   0.00   (0.08)  (0.04)
                       ----   ----   ----   ----   ----   ----   ----   ----    ----    ----
Total from investment
  operatiions          0.50   1.79  (0.56)  0.46   0.39   0.64   0.28   0.28    0.22    0.02

  LESS DISTRIBUTIONS
  Dividends (from net investment
  income)              0.00   0.00   0.00  (0.01) (0.01) (0.02) (0.23) (0.28)  (0.30)  (0.06)
  Distributions (from
  capital gains)       0.00  (0.19)  0.00   0.00   0.00   0.00   0.00   0.00    0.00    0.00
                       ----   ----   ----   ----   ----   ----   ----   ----   ----    ----
Total Distributions    0.00  (0.19)  0.00  (0.01) (0.01) (0.02) (0.23) (0.28)  (0.30)  (0.06)
NET ASSET VALUE AT END
  OF PERIOD           $7.92  $7.42  $5.82  $6.38  $5.93  $5.55  $4.93  $4.88   $4.88   $4.96
TOTAL RETURN          6.74% 30.76% (8.78)% 7.76%  7.01%  11.79%  7.37%  5.22%   5.12%   2.17%

RATIOS/SUPPLEMENTAL DATA
Net assets ($000),
 end of period       $1,616 $1,137  $1,010 $1,425 $1,321   $947    $53  $1,356  $1,365  $315

Ratio of expenses to average
 net assets +         0.95%  1.63%  1.50%  1.40%   1.60%  1.93%   1.06%  0.89%  0.25%  .06%*
Ratio of net investment
 income to average
 net assets+          0.01% (0.45)%(0.43)% 0.15%   0.17%  0.60%   5.25%  5.60%  5.86%  .85%*

Portfolio turnover rate 32%     40%   12%    25%     46%    16%     29%    19%    20%    0%

Average commission
rate paid             $.0458  $.0572
<FN>


+ For 1996, 1995 and for each of the above years prior to 1992, all or a portion
of the operating  expenses were waived. If these costs had not been waived,  the
resulting  increase to expenses per share in each of the above  periods would be
$.01, $.01, $.05, .$.05, $.10, $.16, and $.02, respectively. The increase to the
ratio of  expenses to average net assets  would have been 0.18%,  0.21%,  0.76%,
1.02%, 1.28%, 2.02%, and 0.17%, respectively.
                                                         * not annualized
    
</FN>
</TABLE>

Fund shareowners changed the Fund's investment  objectives on September 28, 1995
and on  October  12,  1990.  Consequently,  data  prior to 1995 in this table is
unlikely to be indicative of future operations of this Fund.

                                  3

<PAGE>

   
SEXTANT BOND INCOME FUND
Selected data for a share of Sextant Bond Income Fund  outstanding from March 1,
1993 (commencement of operations) through November 30, 1996.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S>                                           <C>     <C>    <C>      <C>
                                                                       Sept 28, 95
                                              YEAR ENDED NOVEMBER 30,  (inception) to
                                              -------------------------
                                              1996    1995   1994      NOV. 30,'95*

NET ASSET VALUE AT BEGINNING OF PERIOD        $4.91   $4.39  $5.03     $5.00
    INCOME FROM INVESTMENT OPERATIONS
    Net investment income                      0.30    0.24   0.25      0.16
    Net gains or losses on securities (both   (0.12)   0.52  (0.64)     0.04
       realized                               -----   -----  -----     -----
  Total from investment operations             0.18    0.76  (0.39)     0.20
    LESS DISTRIBUTIONS
    Dividends (from net investment income)    (0.30)  (0.24) (0.25)   (0.167)
    Distributions (from capital gains)        (0.03)   0.00   0.00    (0.003)
                                              -----   -----  -----     -----
Total distributions                           (0.33)  (0.24) (0.25)    (0.17)
NET ASSET VALUE AT END OF PERIOD              $4.76   $4.91  $4.39     $5.03
TOTAL RETURN                                  4.04%  17.69%  (8.24)%    4.86%
RATIOS / SUPPLEMENTAL DATA
Net assets ($000), end of period            $1,201  $1,096  $1,456    $1,662
Ratio of expenses to average net assets +     0.63%   0.54%   0.41%     0.35%
Ratio of net investment income to average net 5.96%   5.15%   5.48%     3.28%
assets +
Portfolio turnover rate                        75%     77%     74%       36%
<FN>
  + For the above  periods,  all or a portion  of the  operating  expenses  were
    waived. If these costs had not been have waived,  the resulting  increase to
    expenses per share in each of the above periods would be $.03, $0.22,  $0.13
    and $.03,  respectively.  The  increase  to the ratio of expenses to average
    monthly net assets would be .70%, .60%, .51% and .26%, respectively.
                                                             * not annualized
</FN>
    
</TABLE>
SEXTANT SHORT-TERM BOND FUND
   
Selected  data for a share of  Sextant  Short-Term  Bond Fund  outstanding  from
September 28, 1995 (commencement operations) through November 30, 1996.
[GRAPHIC OMITTED)
<TABLE>
<CAPTION>
<S>                                                <C>           <C>
                                                   FOR THE YEAR  SEPT.28.'95 (Incep-
                                               ENDED NOV.30,'96  TION)TO NOV. 30'95*
                                               ----------------       --------------

NET ASSET VALUE AT BEGINNING OF PERIOD             $5.03          $5.00
    INCOME FROM INVESTMENT OPERATIONS
    Net investment income                           0.25           0.03
    Net gains or losses on securities (both        (0.03)          0.03
     realized and unrealized                       ------         ------
   Total from investment operations                 0.22           0.06
    LESS DISTRIBUTIONS
    Dividends (from net investment income)         (0.25)         (0.03)
    Distributions (from capital gains)              0.00           0.00
                                                   ------         ------
Total Distributions                                (0.25)         (0.03)
NET ASSET VALUE AT END OF PERIOD                   $5.00          $5.03
TOTAL RETURN                                        4.85%          1.05%
RATIOS / SUPPLEMENTAL DATA
Net assets ($000), end of period                  $2,016           $878
Ratio of expenses to average net assets +           0.85%          0.23%
Ratio of net investment income to average           6.30%          0.68%
net assets +
Portfolio turnover rate                              100%             0%
<FN>
  +For the above period, all or a portion of the operating expenses were waived.
   If costs had not been waived, the resulting increase to expenses per share in
   the  period  would  have been $.02 and $.007.  The  increase  to the ratio of
   expenses to average monthly net assets would be .52% and .16%,  respectively.
   * not annualized
</FN>
    
</TABLE>
                                    4

<PAGE>



ABOUT THE SEXTANT FUNDS

   
The Sextant Funds provide basic elements in a balanced investment  program.  The
Funds  are  "no-load"  funds,  meaning  that  there  are no sales or  redemption
charges,  nor do the Funds have any "12b-1" charges. The SEXTANT GROWTH FUND and
SEXTANT  INTERNATIONAL  FUND seek  long-term  growth.  GROWTH  FUND  pursues its
objective through investment in common stocks and other equity-type  securities,
principally  of U.S.  issuers.  The  INTERNATIONAL  FUND,  by contrast,  invests
primarily  in a  diversified  portfolio  of  foreign  common  stocks  and  other
equity-type  securities.  SHORT-TERM  BOND FUND  seeks to  preserve  capital  by
investing in  short-term  debt  securities.  BOND INCOME FUND,  which invests in
longer-term debt  securities,  has the potential for greater income but the risk
of greater price fluctuation. Both seek a high level of current income.

Mutual  funds  enable you to invest as you might do for  yourself if you had the
time,  experience and resources to research and diversify your own  investments.
Mutual  funds sell their own shares to the public and invest the  proceeds  in a
securities  portfolio.  The value of each  fund's own shares  fluctuates  as the
value of its portfolio securities fluctuates over time.

You purchase  shares without any sales charge or "load."  Because no charges are
deducted,  the  entire  amount you pay for  shares is  invested  in the Fund you
choose.

INVESTMENT OBJECTIVES AND POLICIES

SEXTANT  GROWTH FUND seeks  long-term  capital  appreciation.  The Fund  invests
primarily  in  a  diversified  portfolio  of  U.S.  common  stocks,   securities
convertible  into common  stocks,  and preferred  stocks.  It also may invest in
other securities  suited for the Fund's investment  objective.  It may invest in
securities  of  smaller  or newer  companies  as well as those of  well-seasoned
companies of any size.  The Fund is not designed for investors  seeking  current
income,  and does not ordinarily invest in straight debt securities.  The policy
of investing for long-term capital appreciation requires shareholder approval to
change.

SEXTANT  INTERNATIONAL  FUND'S seeks long-term capital appreciation by investing
in a  diversified  portfolio  of foreign  common  stocks  and other  equity-type
securities  (such as  securities  convertible  into common  stock and  preferred
stocks).  The  Fund  normally  invests  at  least  65% of its  total  assets  in
securities of non-U.S.  issuers.  The Fund is not designed for investors seeking
current income.
    


The  Fund  diversifies  its  investments  among  several
countries and does not concentrate in any particular  industry.  The Fund varies
its  investments  geographically  and by type of  securities in which it invests
based on the adviser's  evaluation  of economic,  market,  and political  trends
throughout the world. The adviser considers the relative  political and economic
stability  of a  company's  home  and  operating  countries  in  evaluating  the
potential rewards and risks of an investment opportunity. The Fund may invest in
securities traded in mature markets (such as Canada an
                                    5

<PAGE>
Mexico), and in emerging markets (for example Peru).
Investments  in  foreign  securities,  especially those in less developed  and
emerging  markets present additional risk.  (See INVESTMENT  POLICIES AND RISK
CONSIDERATIONS.)
   
As a matter of operating policy (changeable by the Board of Trustees),  the Fund
presently  limits its  investments to those  securities of foreign  issuers that
trade and  settle  in the U.S.  or to  American  Depository  Receipts  ("ADR's")
representing shares of foreign issuers.*

The Fund's policy of seeking  long-term  capital  appreciation by investing in a
diversified  portfolio of foreign securities  requires  shareholder  approval to
change.

SEXTANT  SHORT-TERM  BOND FUND seeks to provide a high level of current  income,
consistent  with the  preservation  of capital.  The Fund  invests  primarily in
marketable  short-term debt securities.  Under normal  circumstances  the Fund's
dollar-weighted average maturity does not exceed three years.

Short-Term  Bond Fund is  appropriate  for  investors  who seek  yields that are
typically higher than are usually  available from money market  instruments with
relatively  stable  prices  and  shorter  maturities.  They also want less price
fluctuation  than is likely  from a  longer-term  fund,  such as the Bond Income
Fund. In contrast to money market funds,  Short-Term  Bond Fund does not seek to
maintain a fixed net asset value,  and an investor may receive more or less than
the price paid for his shares at redemption.

SEXTANT  BOND INCOME FUND seeks to provide a high level of current  income.  The
Fund invests primarily in marketable long-term debt securities.  As an operating
policy  (changeable  by the Board of Trustees),  the Fund  normally  maintains a
dollar-weighted average effective maturity in excess of ten years.+

Bond  Income  Fund seeks a higher  level of  current  income  than is  generally
available from a  shorter-term  fund. It has greater levels of interest rate and
other risks associated with investment in longer-term securities.

Under normal market  conditions,  the Sextant  Short-Term  Bond Fund and Sextant
Bond Income Fund each invests at least 65% of its assets in "bonds," meaning:

o Marketable debt securities payable in U.S. dollars, rated within the three
  highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa or A) or
  by Standard & Poor's Corporation (AAA, AA or A);

o U.S. Government securities;

o High quality commercial paper; and

o Bank obligations,  including  repurchase  agreements** of banks,  having total
  assets in excess of $1 billion.


*ADRs are  receipts  typically  issured  by an  American  bank or trust  company
evidencing ownership of the underlying securities. Positions in these securities
are  generally  valued  in U.S.  dollars,  and not in the same  currency  as the
underlying security into which they may be converted.

+The "effective  maturity" of a debt  instrument is the weighted  average period
over which the Adviser  expects the  principal  to be paid.  It differs from the
stated  maturity  in that it  estimates  the effect of expected  principal  pre-
payments and call provisions.

**A repurchase  agreement involves the sales of securities to the Fund, with the
concurrent agreement of the seller to repurchase the securites at the same price
plus an amount equal to an agreed-upon  interest rate,  within a specified time.
In the  event of a  bankruptcy  or other  default  of a seller  of a  repurchase
agreement, the Fund could


    
                                  6
<PAGE>


These  Funds may not invest in a security  rated at time of  purchase  below the
fourth highest grade assigned by Moody's (Baa) or S&P (BBB).  Considered  medium
grade, these securities  represent  obligations of issuers with less capacity to
pay interest and repay  principal  than those rated more highly.  Investment  in
these debt securities  involves somewhat greater investment risk,  including the
possibility  of  issuer  default  or  bankruptcy.  An  economic  downturn  could
adversely  affect the value of  outstanding  bonds and the ability of issuers to
repay  principal  and  interest.  During a period of adverse  economic  changes,
including  a  period  of  rising  interest  rates,  issuers  of such  bonds  may
experience   difficulty  in  servicing  their  principal  and  interest  payment
obligations.

   

Should a security's rating fall below the qualifying  minimum for purchase,  the
adviser  is not  required  to  dispose  of it,  but  considers  that  factor  in
connection with deciding whether to hold it in the Fund's portfolio.

Short-Term  Bond  Fund's  policy  of  seeking  a high  level of  current  income
consistent with the  preservation of capital  requires  shareholder  approval to
change.  Similarly,  the Bond Income  Fund's  policy of pursuing a high level of
current income requires shareholder approval to change.



INVESTMENT POLICIES AND RISK CONSIDERATIONS

Investing in securities  entails both market risk and risk of price variation in
individual securities. By diversifying its investments,  a Fund reduces the risk
of owning one or a few individual securities. There can be no guarantee that the
investment objectives of any Fund will be realized.
    
SEXTANT GROWTH FUND AND SEXTANT  INTERNATIONAL FUND

Both of these Funds may invest in smaller  companies.  Smaller companies involve
higher  investment risks in that they often have limited product lines,  markets
and resources,  or their  securities may trade less  frequently and have greater
price  fluctuation  than  those  of  larger  companies.  THESE  FACTORS  MAY  BE
PARTICULARLY APPLICABLE IN SMALLER OR EMERGING FOREIGN MARkets.
   
Investing in foreign securities or instruments  involves risks and opportunities
not  typically  associated  with  investing in U.S.  securities.  These  include
fluctuations in exchange rates of foreign  currencies;  less public  information
with  respect  to  issuers  of  securities;  less  governmental  supervision  of
exchanges, issuers, brokers; lack of uniform accounting, auditing, and financial
reporting  standards.  There  is also a risk of  adverse  political,  social  or
diplomatic  developments  that could  affect  investments.See  the  STATEMENT OF
ADDITIONAL  INFORMATION  for a more complete  discussion  of foreign  investment
risks.

SEXTANT SHORT-TERM BOND FUND AND SEXTANT BOND INCOME FUND

The risks  inherent  in the  Short-Term  Bond Fund and Bond  Income  Fund depend
primarily on the terms and quality of the


---------------------------------
experience both delays in liquidating the underlying securities and lossses.

                                  7

<PAGE>

obligations in each Fund's  portfolio,
as well as on market conditions.  Interest rate fluctuations affect a Fund's net
asset  value,  but not the  income  received  by the  Fund  from  its  portfolio
securities.  Because  prices and yields on debt  securities  vary over time, the
Fund's yield also varies.

ALL FUNDS

Under  unusual  circumstances  any of the  Sextant  Funds may adopt a  temporary
defensive   position  and  invest  without   limitation  in  high-quality   debt
obligations, U.S. government debt obligations or cash equivalents.

The Sextant Funds are all  "diversified."  No Fund invests more than 5% of total
assets in the  securities of any one issuer,  nor more than 25% of its assets in
any particular industry (other than U.S. Government securities).

Except as explained above, the policies  outlined in this section are changeable
the Board of Trustees.  Each Fund has additional restrictions as outlined in the
STATEMENT OF ADDITIONAL INFORMATION.



INVESTMENT RESULTS

You receive a financial report showing the  investments,  income and expenses of
each Fund every six  months.  You may obtain  current  share  values any time by
calling 888 / 732-6262.

HOW TO BUY SHARES

You may open an account and purchase  shares by sending a completed  application
with a check for  $1,000 or more ($25 under a group or  retirement  plan) to the
Fund of your choice.  The Funds do not accept  initial orders  unaccompanied  by
payment  nor by  telephone.  The price you  receive is the net asset  value next
determined  after  receipt of a purchase  order.  There are no sales  charges or
loads.

You may purchase  additional  shares at any time in minimum amounts of $25. Once
your account is open, purchases can be made by check, ACH, or wire.

You may authorize the use of the Automated Clearing House ("ACH") to purchase or
redeem shares by completing  the  appropriate  section of the  application.  The
authorization must be received at least two weeks before ACH can be used. To use
ACH to purchase or redeem shares, simply call your Fund. You also may wire money
to purchase shares (minimum wire purchase $500),  though  typically wiring banks
charge you a fee for this service.  Call for details before requesting your bank
to wire funds.

Each time you  purchase or redeem  shares,  you receive a statement  showing the
details of the transaction as well as the current number and value of shares you
hold.  Share balances are computed in full and fractional  shares,  expressed to
three decimal places.

At the end of each calendar year, you receive a complete annual statement, which
you should  retain for tax  purposes  and a  complete  historical  record of all
transactions.

The  Sextant  Funds  offer  several  optional  plans  and  services,   including
retirement plans and free Individual  Retirement Accounts.  Ma-

                               8
<PAGE>

terials describing these plans and applications may be obtained from
the Adviser.

Other plans offered by the Funds:
o automatic investment plan,
o a systematic  withdrawal  plan to provide  regular  payments to you, and o the
right to exchange your shares without charge for any other Saturna fund.

The  Funds  may  be  appropriate  for  a  wide  range  of  investors,  including
corporations,  partnerships,  associations and other organizations. Accounts may
be  established  by trusts and  fiduciaries.  You also may make  investments  as
custodian for minor  children  under the Uniform Gifts [or  Transfers] to Minors
Act of your state of residence.



HOW TO REDEEM SHARES

You may redeem  your  shares on any  business  day of the  Funds.  The Funds pay
redemptions in U.S.  dollars,  and the amount you receive is the net asset value
per share next determined after receipt of your redemption  request.  The amount
received  depends  on the value of the  investments  in that Fund at the time of
your redemption. The amount you receive may be more or less than the cost of the
shares you are redeeming. A redemption constitutes a sale for federal income tax
purposes, and you may realize a capital gain or loss on the redemption.

The Funds normally pay for shares redeemed or exchanged  within three days after
a proper  instruction  is received.  To allow time for  clearing,  redemption of
investments made by check may be restricted for up to ten calendar days.

There are several methods you may choose to redeem shares.

WRITTEN REQUEST

Write:   Sextant Mutual Funds
         Box 2838
         Bellingham WA 98227-2838
         Fax: 360 / 734-0755

You may redeem shares by a written request, with these payment options:

o  Redemption check (no minimum) sent to registered owner(s).

o Redemption  check  (no  minimum)  sent as  directed  if the  signature(s)  are
  guaranteed.  If proceeds are to be sent to other than the registered  owner(s)
  at the last  address,  the  signatures  on the request must be guaranteed by a
  national  bank or  trust  company  or by a  member  of a  national  securities
  exchange.

o Federal  funds wire ($5000  minimum).  The  proceeds  may be wired to any bank
  designated  in the request if the  signature(s)  are  guaranteed  as explained
  above.

TELEPHONE REQUEST

Call:    800 / 728-8762 or
         360 / 734-9900

You may redeem shares by telephone request, with these payment options:

o  Redemption check (no minimum) sent to registered owner(s).

o ACH transfer ($100 minimum) with proceeds  transferred to your bank account as
  designated  on your  application.  The ACH  authorization  must be received at
  least two weeks before ACH can be used.

o Exchange ($25 minimum) for shares of any other Fund for which Saturna  Capital
  is adviser. If the exchange is your initial investment into this Fund, the new

                                   9
<PAGE>
  account  automatically has the same registration as your original account.  An
  exchange is considered a closing capital transaction for tax purposes.

o Federal  funds wire ($5000  minimum).  Proceeds  may be wired only to the bank
  previously  designated,  or as directed in a prior  written  instruction  with
  signatures guaranteed, as explained above.

For  telephone  requests  the Funds  endeavor to confirm that  instructions  are
genuine and may be liable for losses if they do not. The caller must provide (1)
the name of the  person  making  the  request,  (2) the name and  address of the
registered owner(s), (3) the account number, (4) the amount to be withdrawn, and
(5) the method for payment of the proceeds. The Funds also may require a form of
personal identification,  and provide written confirmation of transactions.  The
Funds are not responsible for the results of  transactions  reasonably  believed
genuine.

CHECK WRITING

You may also redeem shares in your account by drawing checks on your account for
amounts of $500 or more.

Your Fund can mail you a small book of blank checks for a $10 fee.  These checks
may be payable to any payee.  Checks are  redeemed  at the net asset  value next
determined  after  receipt.  If you wish to use this feature,  request the Check
Writing  Privilege on the application.  Note that, as with any redemption,  each
check is a closing capital transaction for tax reporting purposes.

NET ASSET VALUE

Each Fund  computes its net asset value per share each  business day by dividing
(i) the value of all of its securities and other assets,  less  liabilities,  by
(ii) the number of shares outstanding.  The Funds compute their net asset values
as of the close of trading on the New York Stock Exchange  (generally 4 p.m. New
York time) on each day the Exchange is open for trading.  The Funds'  shares are
not priced on any customary  national  business holiday that securities  markets
are closed. The net asset value applicable to purchases or redemptions of shares
of each Fund is the net asset value next computed after receipt of a purchase or
redemption order.

The Funds use the price carried by the composite tape of all national  exchanges
after 4 p.m. New York time to determine the value of stocks in their portfolios.
Securities traded on a national exchange or the national over-the-counter market
system are valued at the last sale price or, in the  absence of any sale on that
date, the closing bid price.  Other  securities  traded in the  over-the-counter
market  are  valued at the last bid  price.  Securities  for which  there are no
readily  available  market  quotations and other assets are valued at their fair
value as determined in good faith by the Board of Trustees.

Because daily bid prices are not available for many bond issues, the Funds use a
matrix of bond yields for various maturities and qualities.  Prices are adjusted
for  factors  unique  to each  bond  that  are  known  to the  adviser,  such as
marketability and odd-lot discounts.  To verify its knowledge of market factors,
the adviser periodically obtains appraisals from independent sources.

                               10
<PAGE>
TRUST MANAGEMENT

Saturna Investment Trust is managed by a Board of Trustees, currently:  Gary
Goldfogel, John E. Love, John S. Moore, and Nicholas F. Kaiser.  The Trustees
establish policies, as well as review and approve contracts and their
continuance.  The Trustees also elect the officers, determine the amount of any
dividend or capital gain distribution and serve on any committees of the Trust.
For other information concerning the officers and Trustees, see the STATEMENT OF
ADDITIONAL INFORMATION..


INVESTMENT ADVISER

Saturna Capital Corporation, 1300 N. State Street, Bellingham, Wash. 98225 (the
"Adviser") is the Investment Adviser to the Trust.  The Adviser is a Washington
State corporation formed in July 1989.  Shareholders owning more than 10% of the
common stock are: Nicholas F. Kaiser, Phelps S. McIlvaine, James D. Winship, and
Brian A. Anderson.  The directors are Nicholas Kaiser (President), Phelps S.
McIlvaine (Vice President), Brian A. Anderson (Vice President), Meredith L. Ross
(Secretary), and Markell F. Kaiser (Treasurer).

Each Fund pays the Adviser an Investment  Advisory and  Administrative  Services
Fee. The Fee covers  compensation  for  portfolio  management as well as certain
administrative  services  such  as  portfolio  accounting  and  reporting,   and
shareholder  servicing.  The base  portion  of the Fee is 0.60% of  average  net
assets of each Fund per  annum,  payable  monthly.  This base Fee is  subject to
adjustment  up or down  depending  on the  investment  performance  of each Fund
relative to a specified Morningstar index.

For each month in which  either  GROWTH  FUND's or  INTERNATIONAL  FUND's  total
investment return (change in net asset value plus all distributions  reinvested)
for the one year period  through that month  outperforms  or  underperforms  the
total  return of a  specified  index for that period by 1% or more but less than
2%, the base Fee is  increased  or  decreased  by the annual rate of .10% of the
Fund's average daily net assets for the preceding year. If the outperformance or
underperformance  is 2% or more but less than 4%, then the  adjustment is at the
annual rate of .20%. If the  outperformance or  underperformance  is 4% or more,
the adjustment is at an annual rate of .30%.

For each month in which  either BOND  INCOME  FUND's or  SHORT-TERM  BOND FUND's
total  investment  return  (change  in net asset  value  plus all  distributions
reinvested)  for  the  one  year  period  through  that  month   outperforms  or
underperforms  the total  return of a  specified  index for that period by 1% or
more but less than 2%, the Base Fee is increased or decreased by the annual rate
of .10% of the Fund's  average daily net assets for the  preceding  year. If the
outperformance or  underperformance is 2% or more, then the adjustment is at the
annual rate of .20%.

Selected total return investment performance as published by Morningstar, Inc.
is the index used for comparison purposes.  For each Fund, the Morningstar
category used is:

O SEXTANT GROWTH FUND:
   "DOMESTIC GROWTH FUNDS"
O SEXTANT  INTERNATIONAL FUND:
   "FOREIGN STOCK FUNDS"
o SEXTANT BOND INCOME FUND:
   "LONG-TERM BOND FUNDS"
o SEXTANT SHORT-TERM BOND FUND:
   "SHORT-TERM BOND FUNDS"

                                      11
<PAGE>
Each Fund pays its own taxes, brokerage  commissions,  trustees' fees, legal and
accounting  fees,  insurance,  expenses  incurred  in  complying  with state and
federal  laws  regulating  the issue and sale of its  shares,  and  mailing  and
printing costs for prospectuses, reports and notices to shareowners, and certain
other expenses.

The Adviser  furnishes  office space,  facilities and  equipment,  personnel and
clerical and bookkeeping  services to conduct the business of the Funds, as well
as other expenses.

The  Adviser's   subsidiary,   Investors  National  Corporation  ("INC"),  is  a
broker-dealer  engaged in a general  brokerage  business  and  conducts  all its
transactions  on an agency  basis for "deep  discount"  commissions.  Most stock
brokerage  for the Trust is  conducted  through  INC.  The Adviser may  allocate
brokerage  to any broker in return for  research  or  services  and for  selling
shares of any Fund.  Investors National  Corporation acts as distributor for the
Funds without compensation.

The Adviser  voluntarily limits expenses of Bond Income Fund and Short-Term Bond
Fund to 0.60% through March 31, 1998. The Adviser  entirely waives its fee as to
either of these  Funds when  assets are less than $2  million.  A waiver has the
effect of subsidizing the yield for the period it is in effect.

Saturna Capital Corporation acts as investment adviser to three other investment
companies:  Idaho Tax-Exempt Fund (another series of the Trust,  offered through
another prospectus) with assets of $5 million;  Amana Income Fund ($15 million);
and Amana Growth Fund ($6 million).  The advisory fee for Idaho  Tax-Exempt Fund
is .50% annually; the Amana Funds have an annual advisory and administration fee
of .95%. Saturna also manages individual private accounts.

Nicholas  Kaiser,  primary manager of the Growth and  International  Funds,  has
managed mutual funds since 1976.  Phelps  McIlvaine,  manager of Bond Income and
Short-Term Bond Funds,  entered the investment business in 1976 and managed bond
hedge funds from 1987 to 1993.  He managed the  predecessor  to Bond Income Fund
from 1994, and manages Idaho Tax-Exempt Fund, another series of the Trust.

Employees of the Adviser,  including Fund  managers,  are permitted to engage in
securities  transactions  for their own  accounts in  accordance  with a code of
ethics that, among other provisions, requires advance approval of all trades and
disclosure of all holdings.


CAPITAL STOCK; DIVIDENDS

Saturna  Investment  Trust,  an  open-end  "series  trust"  was  organized  as a
Washington Business Trust on February 20, 1987. The Trust is an open-end "series
trust" that now offers five  separate  Funds:  the four Sextant  Funds and Idaho
Tax-Exempt  (a fund  investing  in municipal  securities  in the State of Idaho,
offered through a separate  prospectus).  The Trust, formerly known as Northwest
Investors Trust,  began operations on September 4, 1987. The current  investment
advisory  agreements  of the Sextant Funds became  effective in connection  with
changes in their objectives  approved at a shareholder  meeting on September 28,
1995.

Each Fund is divided  into  shares of  beneficial  interest,  with equal  voting
rights. All shares are fully paid, non-assessable,  transferable and have rights
of  redemption,  and are not  subject  to  preemptive  rights.  The Trust is not
required to hold annual shareowner meetings, but special meetings are called for
such pur-

                                    12

<PAGE>
poses as electing or removing Trustees, changing fundamental policies, or voting
on approval of an advisory contract. On issues relating solely to a single Fund,
only the shareowners of that Fund are entitled to vote.

All  dividends  and  distributions  for each  Fund are  distributed  pro rata to
shareowners in proportion to the number of shares owned.

Each Fund  distributes its net investment  income and net realized capital gains
(if any) to shareowners.  The Growth Fund and International Fund expect to pay a
dividend from net investment income annually,  at the end of November.  The bond
funds pay dividends from investment income daily and reinvest or distribute them
monthly.  Dividends from capital gains, if any, are declared and paid at the end
of November.

Both dividends and capital gains  distributions are automatically  reinvested in
additional  full and  fractional  shares of the Fund that  pays  them,  unless a
shareholder has elected to receive either or both in cash.

The Funds qualify as regulated  investment  companies under the Internal Revenue
Code, which requires  distribution of substantially  all net income and realized
net gains on investments.  A Fund is relieved of federal income taxes on amounts
it distributes.

At year-end,  the Funds report to you and the IRS the amount of each  redemption
you made during the year,  as well as the amount of  dividends  and capital gain
distributed to you. Each Fund accounts for its  distributions  as either taxable
capital gains  (originating from net realized gains on portfolio  transactions),
or taxable income  (originating  from  dividends,  taxable  interest and certain
other  types of  gains).  Fund  distributions  may be subject to state and local
taxes.

To avoid  being  subject  to a 31%  federal  withholding  tax on  dividends  and
distributions,   you  must  furnish  your   correct   Social   Security  or  Tax
Identification Number.

Shareowners  who are not U.S.  taxpayers may be subject to a 30% withholding tax
under U.S. provisions applicable to foreign investors,  unless a reduced rate or
exemption is provided under a tax treaty.  However,  capital gain  distributions
paid by the Funds are not subject to foreign withholding.


PERFORMANCE DATA

The  Funds  may  publish  current  yield  and  average  annual  total  return in
advertisements  or other  publications.  In  comparing  a Fund  investment  with
alternatives,   you  should  consider  differences  between  the  Fund  and  the
alternative  investment,  and the periods and methods used in calculation of the
returns.  Of course,  past  results  are not  necessarily  indicative  of future
performance.

The Funds' compute current yield by (i) dividing net investment  income over the
rolling  30 day  period  for which the yield is being  computed  by the  average
number of shares eligible to receive  dividends for the period and (ii) dividing
that  figure  by the  Fund's  net  asset  value per share on the last day of the
period, and then (iii) annualizing the results.

To compute  average  annual total return of a Fund for any specified  period (i)
assume an  investment  made on the  first day of the  period  and  reinvest  all
dividends  paid during the period in additional  shares and then (ii) divide the
ending balance (I.E., the number of shares now held multiplied by the ending net
asset value) by the beginning  balance.  For a more complete  description of the
method of

                                  13

<PAGE>
computation, see the STATEMENT OF ADDITIONAL INFORMATION.
    
<PAGE>

                                  14


[GRAPHIC OMITTED]
    INVESTMENT APPLICATION for
    q Sextant GROWTH FUND
    q Sextant INTERNATIONAL FUND
    q Sextant BOND INCOME FUND
    q Sextant SHORT-TERM BOND FUND

Mail application and check to:                   For assistance, call:
   SATURNA INVESTMENT TRUST                   (800) SATURNA  or  (360) 734-9900
   Box 2838, Bellingham WA 98227-2838                        FAX (360) 734-0755

ACCOUNT TYPE AND NAME
  q Individual
              -----------------------------------------------------------------
                           First             Middle Initial               Last

  Social Security Number                             Date of Birth
                        -----------------------                   -------------

  q  Joint with
               ----------------------------------------------------------------
                           First             Middle Initial               Last

   Joint Owner's Social Security Number
                                        ---------------------------------------
   (Joint accounts are presumed to be "Joint Tenancy with Right of Survivorship"
                         unless otherwise indicated)

  q  Gifts to Minor                     AS CUSTODIAN FOR
                   --------------------                 -----------------------
                    Name of Custodian                            Name of Minor
                        q UNIFORM GIFTS TO MINORS ACT
        UNDER THE     q UNIFORM TRANSFERS                             /   /
                ------                     -------------------  ---------------
                State  TO MINORS ACT     Minor's Soc. Sec. No. Minor's Birthdate

  q ther
        ---------------------------------------      --------------------------
     Indicate name of corporation, other organization  Tax Indentification
     or fiduciary capacity.                             number
     If a trust, include name(s) of trustees and date
         of trust instruments.

-------------------------------------------------------------------------------
        Name(s of  person(s)  authorized  to  transact  business  for the  above
         entity.

MAILING
       ------------------------------------------------------------------------
ADDRESS   Street                                  Apt., Suite, Etc.
       ------------------------------------------------------------------------
          City                               State                        ZIP

TELEPHONE  (  )                         (     )
           ----------------------------       ---------------------------------
              Daytime                             Home

CITIZENSHIP    q  U.S.     q   Resident Alien    q  Non-Resident Alien
                                                                     ----------
                                                                       Country
INITIAL INVESTMENT  $
                    ------------
   
Make check payable to the Fund being purchased (minimum $1000).
    

<PAGE>

   
TELEPHONE REDEMPTION PRIVILEGES
  You automatically  have telephone  redemption by check and telephone  exchange
  privileges  unless you strike this line.  Each Fund  endeavors to confirm that
  instructions are genuine and it may be liable for losses if it
 does not.
  (Procedures may include requiring a form of personal identification.  The Fund
  also provides written confirmation of transactions.)

ACH TELEPHONE TRANSFER PRIVILEGE
  q To transfer funds by ACH at no charge to or from my
     (our) bank account, I (we) authorize  electronic fund transfers through the
     Automated Clearing House (ACH) for my (our) bank account designated. PLEASE
     ATTACH A VOIDED CHECK.

AUTOMATIC INVESTMENT PLAN
  q  Invest $        into this Fund on the       day of each  month  (the 15th
            --------                      -------
     unless  another date is chosen) by ACH transfer from my (our) bank account.
     This plan may be canceled at any time. PLEASE ATTACH A VOIDED CHECK.

CHECK WRITING PRIVILEGE  ($500 per check  minimum)($10  checkbook  charge)

    qI(We)hereby  request the  Custodian  to honor  checks drawn by me(us) on my
     (our) account  subject to acceptance by the Trust,  with payment to be made
     by redeeming  sufficient  shares in my(our) account.  None of the custodian
     bank, Saturna Capital Corporation,  nor any Sextant Mutual Fund shall incur
     any liability to me (us) for honoring such checks,  for redeeming shares to
     pay such checks, or for returning checks which are not accepted.

    q SINGLE SIGNATURE AUTHORITY -- JOINT ACCOUNTS ONLY:  (CHECKS FOR
      -------------------------------------------------
        JOINT  ACCOUNTS  REQUIRE  BOTH  SIGNATURES  UNLESS THIS BOX IS MARKED TO
        AUTHORIZE CHECKS WITH A SINGLE  SIGNATURE).  By our signatures below, we
        agree to permit check  redemptions  upon the single signature of a joint
        owner.  The  signature of one joint owner is on behalf of himself and as
        attorney in fact on behalf of each other joint owner by appointment.  We
        hereby agree with each other,  with the Funds and with  Saturna  Capital
        Corporation that all moneys now or hereafter invested in our account are
        and shall be owned as Joint Tenants with Right of Survivorship,  and not
        as Tenants in Common.
    
The  undersigned  warrants(s)  that I (we)  have  full  authority  to make  this
Application,  am (are) of  legal  age,  and  have  received  and read a  current
Prospectus and agree to be bound by its terms. Unless this sentence is struck, I
(we) certify,  under penalties of perjury,  that I (we) am not subject to backup
withholding  under the  provisions  of  section  3406(a)(1)(C)  of the  Internal
Revenue  Code.  This  application  is not  effective  until it is  received  and
accepted by the Trust.

-------------------------         ---------------------------------------------
    Date                            Signature of Individual (or Custodian)

-------------------------         ---------------------------------------------
    Date                            Signature of Joint Registrant, if any



<PAGE>

   



                      PLEASE SAVE THIS QUICK GUIDE TO

                    THE SEXTANT MUTUAL FUNDS

ACCOUNTS
       Open your  account by sending a completed  application,  indicating  your
       Fund selection.  For convenience,  you may have your account consolidated
       with  others  of your  household  or other  group.  We  appoint a trained
       representative  to whom  you  may  refer  all  questions  regarding  your
       account(s). Extra forms are needed for certain accounts, such as IRA's.

INVESTMENTS
        Initial  investments are $1,000 or more ($25 under a group or retirement
        plan), and must be accompanied by an application. Additional investments
        may be made for $25 or more at any time. There are no sales  commissions
        or other charges.

REDEMPTIONS
        You may sell your  shares any time.  As with  purchases,  you may choose
        from several methods including telephone, written instructions, ACH, and
        checkwriting.  You are paid the market  price for your shares on the day
        we  receive  your  instructions,  and  there are no  redemption  fees or
        charges. If we receive your redemption request by one p.m. Pacific time,
        your check is normally mailed to you the same day.

STATEMENTS
        On the date of each transaction, you are mailed a confirmation,  showing
        the details of the transaction and your new account balance. At year-end
        and at selected  points during the year we mail a statement  showing all
        transactions  for  the  period.  Monthly  consolidated   statements  are
        available for an extra fee.

DIVIDENDS AND PRICES
        Sextant  Bond  Income  Fund and  Sextant  Short-Term  Bond Fund  declare
        dividends  daily and pay them monthly.  Sextant  Growth Fund and Sextant
        International Fund pay dividends at the end of November. Fund prices are
        recorded daily at 888/732-6262 and on the Internet at www.saturna.com.

FREE RETIREMENT PLANS
        Saturna  Capital offers a defined  contribution  Profit-Sharing  / Money
        Purchase plan and an Individual  Retirement Account.  There are no extra
        fees or charges for these plans.

FOR MORE INFORMATION
        You may consult the applicable  pages of this  prospectus for additional
        details on the Sextant Funds and their shareholder services. Please call
        800 / SATURNA (800/728-8762) with any questions.


    
<PAGE>









                                     PART B



                 STATEMENT OF ADDITIONAL INFORMATION








<PAGE>



                    SATURNA INVESTMENT TRUST

                            SEXTANT GROWTH FUND
                          SEXTANT BOND INCOME FUND
                         SEXTANT INTERNATIONAL FUND
                        SEXTANT SHORT-TERM BOND FUND



                              1300 N. State Street
                          Bellingham, Washington 98225

                                  360-734-9900
                                   800-SATURNA
   

               STATEMENT OF ADDITIONAL INFORMATION
                                 March 26, 1997

The Sextant Funds are series of Saturna  Investment  Trust (the  "Trust").  Each
series of the Trust  represents  shares of  beneficial  interest  in a  separate
portfolio of securities and other assets,  with its own objectives and policies.
This  Statement  of  Additional  Information  is  not a  Prospectus.  It  merely
furnishes  additional  information  that should be read in conjunction  with the
Funds'  prospectus  dated March 26, 1997. A free Fund prospectus may be obtained
by  telephoning  the numbers  above or writing  the Funds at the  address  shown
above.

    

                                    1



<PAGE>




                    TABLE OF CONTENTS



                                                                 Page

General Information and History......................................2
Investment Objectives and Policies...................................3
Investment Considerations............................................7
Portfolio Turnover...................................................9
Performance Data ...................................................10
Management of the Trust.............................................12
Principal Holders of Securities.....................................15
Investment Advisory and Other Services..............................16
Brokerage Allocation................................................19
Purchase, Redemption and Pricing of Securities Being Offered........20
Tax Status..........................................................21
Financial Statements................................................22
Appendix............................................................23


                      GENERAL INFORMATION AND HISTORY


Saturna  Investment  Trust (the "Trust") is a business trust formed  pursuant to
RCW 23.90 of the laws of the  State of  Washington  to  operate  as an  open-end
management  company.  When formed on February 20, 1987,  the name was  Northwest
Investors  Tax-Exempt  Business Trust. The Trust's name was changed to Northwest
Investors  Trust on October 12, 1990.  Most  recently,  in  connection  with the
formation  of the  Sextant  Funds,  the  Trust's  name was  changed  to  Saturna
Investment Trust on September 28, 1995.

The  Declaration  of Trust permits the trustees to issue an unlimited  number of
full and  fractional  shares in any Fund of the Trust.  The Trust may  establish
additional  Funds in the future by approval of the Trustees.  All shares have no
par  value  and  when  issued  are  fully  paid and  non-assessable  and have no
preemptive, conversion, or sinking fund rights.


                                     2

<PAGE>
The Trust has five  separate  Funds,  four of which are  offered as the  Sextant
Funds through this Prospectus and Statement of Additional  Information:  Sextant
Growth Fund (formerly known as Northwest Growth Fund),  Sextant Bond Income Fund
(formerly known as Washington  Tax-Exempt Fund), Sextant International Fund, and
Sextant  Short-Term  Bond  Fund.  The  remaining  Fund,  Idaho  Tax-Exempt  Fund
(initially  known as the Idaho  Extended  Maturity  Tax-Exempt  Fund) is offered
through a separate Prospectus and Statement of Additional Information.

                     INVESTMENT OBJECTIVES AND POLICIES

This section is provided only for the purpose of expanding or outlining  certain
policies and restrictions not thoroughly covered in the Prospectus.

SEXTANT GROWTH FUND seeks  long-term  growth.  The Fund invests in common stocks
and  other  equity-type  securities.  Although  income  is  considered  when  an
investment is considered, the Fund is not designed for investors seeking income.
The Fund  pursues its  objective by  investing  primarily  in common  stocks and
securities  convertible  into common stocks and preferred  stocks,  but may also
invest in other securities that are suited to the Fund's investment  objectives.
The Fund ordinarily does not invest in straight-debt securities.

The Fund may invest in securities of smaller or newer companies as well as those
of  well-seasoned  companies  of any  size.  Smaller  companies  involve  higher
investment  risks in that they often have  limited  product  lines,  markets and
resources,  or their securities may trade less frequently and have greater price
fluctuation  than  those  of  larger   companies.   Although  the  Fund  invests
principally in securities of U.S.  issuers,  it may invest up to 5% of its total
assets  (valued  at the time of  investment)  in foreign  securities,  including
foreign  government  obligations and foreign equity and debt securities that are
traded in the U.S. (See the discussion of international investing under "Sextant
International Fund" and "Investment Considerations" below.)

Under  normal  market  conditions,  the Fund expects to be  substantially  fully
invested  in the types of  securities  described  in the  preceding  paragraphs.
However,  to the  extent  that  investments  meeting  the  Fund's  criteria  for
investment are not available or when the Adviser considers a temporary defensive
investment  position  advisable,  the  Fund may  invest  without  limitation  in
high-quality  corporate debt obligations or U.S. government  obligations or hold
cash or cash equivalents.

SEXTANT  INTERNATIONAL  FUND'S  objective  is  long  term  growth  by  investing
primarily  in a  diversified  portfolio  of  foreign  common  stocks  and  other
equity-type  securities  (e.g.  securities  convertible  into common  stocks and
preferred  stocks.)  The  Fund  ordinarily  does  not  invest  in  straight-debt
securities. Under normal market conditions, the Fund invests at least 65% of its
total assets (taken at market value at time of investment) in foreign securities
(securities of non-U.S.  issuers).  The Fund ordinarily invests in securities of
at  least  three  countries  outside  the  U.S.  However,  to  the  extent  that
investments meeting the Fund's criteria for investment are not available or when
the Adviser considers a temporary defensive  investment position advisable,  the
Fund may invest  without  limitation in  high-quality  debt  obligations or U.S.
government obligations or hold cash or cash equivalents.

                                     3

<PAGE>

Although  income is considered in the selection of  securities,  the Fund is not
designed for investors whose primary  investment  objective is income.  The Fund
pursues its  objective by investing  primarily in common  stocks and  securities
convertible into common stocks, but may also invest in other securities that are
suited to the Fund's investment objectives,  including preferred stocks and debt
securities.

The Fund may invest in securities of smaller or newer companies as well as those
of  well-seasoned  companies  of any  size.  Smaller  companies  involve  higher
investment  risks in that they often have  limited  product  lines,  markets and
resources,  or their securities may trade less frequently and have greater price
fluctuation  than those of larger  companies.  These factors may be particularly
applic able in smaller or emerging foreign markets.

The Fund  diversifies  its  investments  among  several  countries  and does not
concentrate  in  any  particular  industry.  The  Fund  varies  its  investments
geographically  and by type of  securities  in  which  it  invests  based on the
adviser's  evaluation of economic,  market,  and political trends throughout the
world. The adviser considers the relative  political and economic stability of a
company's  home  country in  evaluating  the  potential  rewards and risks of an
investment  opportunity.  The Fund may  invest  in  securities  traded in mature
markets  (such as  Canada,  Japan and the  United  Kingdom),  in less  developed
markets (for example,  Mexico),  and in emerging  markets (for  example,  Peru).
Investments  in  foreign  securities,  especially  those in less  developed  and
emerging markets present additional risk. (See "Investment Considerations.")    
Although the Fund may invest throughout the world outside the U.S. and determine
that it is in the best interest of the Fund and  shareholders  to keep assets in
those countries in which the Fund is investing,  as a matter of operating policy
(that can be changed by the Board of Trustees),  the Fund  presently  limits its
investments to those  securities of foreign  issuers that are traded and settled
in  the  U.S.  or to  American  Depository  Receipts  ("ADR's")  that  represent
underlying shares of foreign issuers. (ADR's are receipts typically issued by an
American bank or trust company  evidencing  ownership of the underlying  foreign
securities.) Positions in these securities are generally valued in U.S. dollars,
they are not  necessarily  denominated  in the same  currency as the  underlying
security  into  which  they  may be  converted.  The  Fund  may  invest  in both
"sponsored" and  "unsponsored"  ADR's. In a sponsored ADR, the issuer  typically
pays some or all of the  expenses  of the  depository  and agrees to provide its
regular shareholder communications to ADR holders. An unsponsored ADR is created
independently of the issuer of the underlying security.  Unsponsored ADR holders
generally pay the expenses of the depository and do not have an undertaking from
the issuer of the  underlying  security to furnish  shareholder  communications.
(See also "Investment Considerations" below.)

The  Fund  may  invest  in  securities   denominated   in  various   currencies.
Accordingly,  a change in the value of such  currency  against  the U.S.  dollar
results in a corresponding  change in the U.S. dollar value of the Fund's assets
denominated  in that  currency.  Such  changes  also  affect the Fund's  income.
Generally,  when a given currency  appreciates  against the dollar (that is, the
dollar weakens) the value of the Fund's securities  denominated in that currency
rises. When a given currency depreciates against the dollar (that is, the dollar
strengthens)  the value of the Fund's  securities  denominated  in that currency
would be expected to decline.

    


                                    4

<PAGE>
The dividends and interest  payable on certain of the Fund's  foreign  portfolio
securities may be subject to foreign withholding taxes, thereby reducing the net
amount of income  available  for  distribution  to the  Fund's  shareholders.  A
shareholder  otherwise  subject to U.S.  federal  income  taxes may,  subject to
various limitations, be entitled to claim a credit or deduction for U.S. federal
income tax purposes  for his or her  proportionate  share of such foreign  taxes
paid by the Fund.

SEXTANT SHORT-TERM BOND FUND seeks capital stability and a high level of current
income.  The Fund pursues this  objective by investing  primarily in  marketable
short-term   debt   securities.   Under   normal   circumstances,   the   Fund's
dollar-weighted average maturity does not exceed three years.

SEXTANT  BOND INCOME  FUND seeks high  current  income.  The Fund  pursues  this
objective by investing primarily in marketable long-term debt securities.  As an
operating  policy  that may be changed by the Board of  Trustees,  under  normal
market  conditions  the  Fund  maintains  a  dollar-weighted  average  effective
maturity in excess of ten years.     The risks and investment returns offered in
these Funds depend primarily on the terms and quality of the obligations in that
Fund's portfolio,  as well as on market  conditions.  Interest rate fluctuations
affect a Fund's net asset  value,  but not the income  received by the Fund from
its portfolio securities.  However, because prices and yields on debt securities
vary over time, no specific yield on shares of a Fund can be assured.

    

Short-Term  Bond  Fund  is
appropriate  for investors  who seek yields that are  typically  higher than are
usually available from money market  instruments.  By limiting itself to shorter
maturities,  Short-Term Bond Fund should provide less net asset fluctuation than
shareholders  might  expect from a  longer-term  bond fund,  such as Bond Income
Fund.

Bond  Income  Fund is for  investors  who seek a higher  level of income than is
generally  available from a shorter-term fund, yet who can accept greater levels
of interest  rate and other risks  associated  with  investment  in  longer-term
securities.

The  "effective  maturity" of a debt  instrument is the weighted  average period
over which the Adviser  expects the  principal  to be paid.  It differs from the
stated  maturity  in  that  it  estimates  the  effect  of  expected   principal
prepayments and call provisions. With respect to mortgage backed securities such
as GNMA securities,  the effective  maturity is likely to be substantially  less
than the stated maturity of the mortgages in the underlying  pools. With respect
to obligations  with call  provisions,  the effective  maturity is typically the
next call date on which the obligation  reasonably may be expected to be called.
Securities  without  prepayment or call  provisions  generally have an effective
maturity  equal to their  stated  maturity.  During  periods of rising  interest
rates,  the  effective  maturity  of mortgage  backed  securities  and  callable
obligations  may  increase  substantially  because they become less likely to be
prepaid, which may result in greater net asset value fluctuation.


                                     5

<PAGE>
   
Under normal market conditions, each of Sextant Short-Term Bond Fund and Sextant
Bond Income Fund invests at least 65% of the value of its total assets (taken at
market value at the time of investment) in "bonds," meaning:

      o     Marketable straight-debt securities of domestic issuers, and of
            foreign  issuers  payable  in  U.S.  dollars,  rated at the time of
            purchase within  the  three  highest  grades  assigned  by Moody's
            Investors Service, Inc. ("Moody's") (Aaa, Aa or A) or by Standard &
            Poor's Corporation ("S&P") (AAA, AA or A)*

      o     U.S. Government Securities;

      o     Commercial  paper rated  Prime-1 by Moody's or A-1 by S&P at time of
            purchase, or, if unrated, issued or guaranteed by a corporation with
            any  outstanding  debt rated Aa or better by Moody's or AA or better
            by S&P; and

      o     Bank obligations,  including repurchase agreements+ of banks, having
            total assets in excess of $1 billion.
    
These  Funds  may  also  invest  in  other  debt  securities   (including  those
convertible  into,  or carrying  warrants to  purchase,  common  stocks or other
equity interests, and privately placed debt securities).  However, the Funds may
not  invest in a security  rated at time of  purchase  below the fourth  highest
grade  assigned  by  Moody's  (Baa)  or  S&P  (BBB).  Debt  rated  Baa or BBB is
considered  "medium grade," though still generally accepted as investment grade.
(See "Appendix" for more information regarding ratings of debt securities.)

U.S.  Government  Securities  include:  (i) bills,  notes,  bonds and other debt
securities,  differing as to maturity and rates of interest,  that are issued by
and are direct obligations of the U.S. Treasury;  and (ii) other securities that
are issued or guaranteed as to principal and interest by the U.S.  Government or
by its agencies or  instrumentalities.  U.S. Government Securities are generally
accepted as being among the safest debt  securities  with  respect to the timely
payment of principal and interest (but not any premium paid on their  purchase),
but generally  bear a lower rate of interest  than  corporate  debt  securities.
However,  they are  subject to market risk like other debt  securities,  and the
Funds' shares fluctuate in value.

Among the  Government  Securities  the Funds may  purchase  are those  issued by
Government  National Mortgage  Association  ("GNMA"),  Federal National Mortgage
Association ("FNMA") and other agencies. Securities such as these represent an
interest in a pool of mortgages insured

----------------------------
*Please refer to the Appendix for a discussion of ratings.

+ A repurchase  agreement  involves the sale of securities to the Fund, with the
concurrent  agreement of the seller to  repurchase  the  securities  at the same
price plus an amount equal to an agreed-upon  interest rate,  within a specified
time.  In the event of a bankruptcy or other default of a seller of a repurchase
agreement,  the Fund could  experience both delays in liquidating the underlying
securities and losses.

                                    6
<PAGE>



in whole or in part by other agencies or
the U.S. Treasury, depending on the terms of the issue. These issues may or
may not represent the guarantee of the U.S. Treasury.

These  "mortgage-backed"  debt securities are entitled to interest and principal
payments on mortgages in the pool as they are paid.  During periods of declining
interest  rates there is an increased  likelihood  that these  mortgages will be
prepaid,  resulting in a loss of the benefit of holding the  instrument  to full
term, and loss of any premium the Fund may have paid to buy the security.

The Funds  may also  invest in  floating  rate  instruments  which  provide  for
periodic adjustments in coupon interest rates that are automatically reset based
on changes in amount and direction of specified  market  interest  rates. To the
extent such  instruments are subject to lifetime or periodic  interest rate caps
or floors,  such  instruments may experience  greater price volatility than debt
instruments without such features.

Medium grade (Baa or BBB) debt  securities are  obligations of issuers with less
capacity to pay  interest  and repay  principal  than those  rated more  highly.
Investment in these debt securities  involves somewhat greater  investment risk,
including the possibility of issuer default or bankruptcy.  An economic downturn
could adversely affect the value of outstanding bonds and the ability of issuers
to repay principal and interest.  During a period of adverse  economic  changes,
including  a  period  of  rising  interest  rates,  issuers  of such  bonds  may
experience   difficulty  in  servicing  their  principal  and  interest  payment
obligations.

Some issuers of debt securities  choose not to have their  securities rated by a
rating service. The Funds may invest in unrated securities that in the adviser's
opinion are  comparable to securities  having at least a medium grade rating and
are suitable for investment by the Funds.

                         INVESTMENT CONSIDERATIONS

Investing in securities  entails both market risk and risk of price variation in
individual securities.  THIS IS TRUE EVEN FOR DEBT SECURITIES ISSUED BY THE U.S.
GOVERNMENT.  By  diversifying  its  investments,  each Fund may  reduce the risk
associated with owning one or a few individual securities. There is no assurance
that any Fund will achieve its investment objectives.

The Growth Fund and the  International  Fund may invest in securities of smaller
or newer  companies  as well as those of  well-seasoned  companies  of any size.
Smaller  companies  involve  higher  investment  risks in that they  often  have
limited product lines, markets and resources, or their securities may trade less
frequently and have greater price  fluctuation  than those of larger  companies.
These  factors may be  particularly  applicable  in smaller or emerging  foreign
markets.

INVESTMENT IN FOREIGN SECURITIES

Investors should understand and carefully consider the risks involved in foreign
investing.  Investing in foreign  securities or  instruments  involves risks and
opportunities not typically associated with investing in U.S. securities.  These
include:  fluctuations  in  exchange  rates  of  foreign  currencies;   possible
imposition of exchange control regulation or currency restrictions

                                   7
<PAGE>


that  would  prevent  cash from  being  brought  back to the U.S.;  less  public
information with respect to issuers of securities; less governmental supervision
of  exchanges,  issuers,  brokers;  lack of uniform  accounting,  auditing,  and
financial reporting standards; lack of uniform trading practices; less liquidity
or greater price volatility in foreign markets;  possible  imposition of foreign
taxes;  or less  advantageous  legal,  operational,  and  financial  protections
applicable  to  foreign  custodial  arrangements.   There  is  also  a  risk  of
expropriation or confiscatory  taxation,  seizure or  nationalization of foreign
bank deposits or other assets,  establishment of exchange controls,  adoption of
foreign  government  restrictions,  or adverse  political,  social or diplomatic
developments that could affect investment in these nations.

SHORT-TERM BOND FUND AND BOND INCOME FUND
   
Many factors may cause the value of a  shareholder's  investment  in the Fund to
fluctuate  in value.  The value of each  Fund's  portfolio  normally  fluctuates
inversely with changes in market interest rates. Generally, when market interest
rates rise the prices of bonds  fall;  when rates fall,  bond  prices  generally
rise. In addition,  there is a risk that the issuer of a bond or other  security
fails to make timely payments of principal and interest.

The risks  inherent in these Funds depend  primarily on the terms and quality of
the  obligations  in that  Fund's  portfolio,  as well as on market  conditions.
Interest rate  fluctuations  affect a Fund's net asset value, but not the income
received by the Fund from its portfolio securities.  However,  because yields on
debt  securities  available  for purchase by a Fund vary over time,  no specific
yield on shares of a Fund can be assured.  INVESTMENT RESTRICTIONS.  In addition
to the  restrictions  stated in the  Prospectus,  the Funds  shall not  purchase
securities on margin or sell  securities  short or purchase or write put or call
options;  purchase "restricted  securities" (those which are subject to legal or
contractual restrictions on resale or are otherwise not readily marketable); nor
invest in oil, gas or other mineral  exploration leases and programs.  The Funds
shall not make loans to others,  except for the purchase of debt securities,  or
entering into repurchase agreements. The Funds shall not invest in securities so
as to not comply with  Subchapter M of the Code, in that  generally at the close
of each quarter of the tax year,  at least 50% of the value of each Fund's total
assets is represented  by (i) cash and cash items,  government  securities,  and
securities of other regulated investment  companies,  and (ii) other securities,
except  that with  respect to any one issuer in an amount more than 5% of either
Fund's total assets, and no more than 10% of the Fund's voting securities of any
one issuer. In addition,  the Funds shall not purchase real estate;  real estate
limited  partnerships  (excepting master limited  partnerships that are publicly
traded on a national  security  exchange or NASDAQ's  National  Market  System);
commodities or commodity contracts; issue senior securities;  provided, however,
that a fund may borrow money for  extraordinary  or emergency  purposes and then
only if after such  borrowing  there is asset  coverage of at least 300% for all
such  borrowings;  nor act as a  securities  underwriter  except  that  they may
purchase securities directly from the issuer for investment  purposes.  Also, no
Fund of the Trust  shall  purchase  or retain  securities  of any  issuer if the
officers or  trustees of the Trust or its adviser own more than  one-half of one
percent of the securities of such issuer;  invest in any company for the purpose
of management or  exercising  control.  No Fund of the Trust shall invest in the
securities of other open-end investment  companies,  except in connection with a
    

                                     8

<PAGE>


merger,consolidation,  acquisition, or reorganization or by purchase in the open
market  where no  commission  or profit to a sponsor or dealer  results from the
purchase other than the customary broker's commission.

No Fund shall  purchase  securities  of any issuer in excess of 5% of the Fund's
total assets or purchase more than 10% of the outstanding  voting  securities of
any issuer;  or concentrate  its  investments in a single industry beyond 25% of
the total  value of the  Fund;  or  invest  more  than 10% of its  assets in the
securities  of issuers  which  together  have a record of less than three  years
continuous  operation.  No  Fund  purchases  securities  if it  has  outstanding
borrowings  exceeding 5% of its net assets.  No Fund's  investments in warrants,
valued  at the  lower of cost or  market,  shall  exceed  5% of the value of the
Fund's net  assets.  Included  within that  amount,  but not to exceed 2% of the
value of the Fund's net assets,  may be warrants which are not listed on the New
York or  American  Stock  Exchange.  Warrants  acquired  in units or attached to
securities may be deemed to be without value.

Notwithstanding  the above,  the Funds may purchase  securities  pursuant to the
exercise of subscription rights,  provided that such purchase does not result in
the Fund's ceasing to be a diversified investment company. Japanese and European
corporations  frequently issue additional capital stock by means of subscription
rights  offerings to existing  shareholders at a price  substantially  below the
market price of the shares.  The failure to exercise such rights would result in
a Funds'  interest in the issuing  company  being  diluted.  The market for such
rights is not well  developed in all cases and,  accordingly,  the Funds may not
always  realize the full value on the sale of rights.  The exception  applies in
cases where the limits set forth in the investment  restrictions would otherwise
be exceed by  exercising  rights or would have already been exceeded as a result
of fluctuations in the market value of the Funds' portfolio  securities with the
result that the Fund would be forced to sell  securities at a time when it might
not otherwise have done so, or to forego exercising the rights.

Investment  objectives  and  certain  policies  of each of the  Funds may not be
changed  without  the prior  approval  of the  holders  of the  majority  of the
outstanding  shares of the  respective  Fund.  Objectives and policies which are
considered  fundamental  and  subject to change  only by prior  approval  of the
shareowners include:  (1) the primary and any secondary  investment  objectives;
(2) the  classification of the Trust as an open-end  management  company and the
sub-classification  of each of the Funds as a diversified  company;  and (3) the
policies listed under "Investment Restrictions."

                             PORTFOLIO TURNOVER

The Funds have no restrictions on portfolio turnover and buy or sell investments
according to the Adviser's assessment of the market and the economy. The figures
regarding  turnover  in the  following  paragraph's  reflect the  operations  of
certain Funds under their previous objectives.  The portfolio turnover for these
Funds under their present  policies is not expected to be materially  different,
however.

                                     9

<PAGE>
   
The portfolio  turnover rate of the Sextant  Growth Fund  (previously  Northwest
Growth Fund) for the fiscal years ended  November 30, 1996,  1995, and 1994, was
32%, 40%, and 12%, respectively.

The  portfolio  turnover  rate  of the  Sextant  Bond  Income  Fund  (previously
Washington  Tax-Exempt  Fund) for the fiscal years ended November 30, 1996, 1995
and 1994 was 75%, 77%, and 74%, respectively.

Portfolio  turnover  for the  Sextant  Short-Term  Bond Fund for the fiscal year
ended November 30, 1996 and the period  September 28, 1995  (inception)  through
November 30, 1995,  was 100% and 0%,  respectively.  Portfolio  turnover for the
Sextant  International  Fund for the fiscal year ended November 30, 1996 and the
period  September 28, 1995  (inception)  through  November 30, 1995, was 11% and
12%, respectively.

                              PERFORMANCE DATA

The figures regarding yield and total return in the following paragraphs reflect
the operations of certain Funds under their previous  objectives.  Consequently,
no inference as to future performance of the Sextant Growth Fund or Sextant Bond
Income Fund should be drawn.

Certain  factors  should be taken into  account  before  using Total  Return and
Current  Yield   information  as  a  basis  for  comparison   with   alternative
investments.  No  adjustment  is made for taxes  payable on  distributions.  The
performance  for any given past period is not an  indication  of future rates of
return or yield on its shares.

The Sextant  Growth  Fund's total return for the one year period ended  November
30, 1996 was 6.74%. Average annual total return from April 1, 1987 (inception of
the predecessor fund) through November 30, 1996 was 7.41%.  Performance  figures
for the Sextant Growth Fund for the period prior to October 12, 1990 reflect the
Fund's  investment  objective  at  that  time of  tax-free  income  and  capital
preservation.

The total return of the Sextant Bond Income Fund (formerly Washington Tax-Exempt
Fund) for the one year period ended November 30, 1996 was 4.04%.  Average annual
total return for the period March 1, 1993  (commencement of operations)  through
November 30, 1996, was 4.23%.

The total return of the Sextant  Short-Term Bond Fund and Sextant  International
Fund for the  one-year  period  ended  November  30,  1996 was 4.85% and 18.16%,
respectively.  Average  annual total  returns for the period  September 28, 1995
(commencement  of  operations)  through  November 30, 1996 was 5.06% and 15.09%,
respectively.  Average  annual  TOTAL  RETURN  quotations  for  various  periods
illustrated are computed by finding the average annual compounded rate of return
over the period  quoted  that would  equate the initial  amount  invested to the
ending redeemable value according to the following formula:

                                   10

<PAGE>

            P (1 + T)n   =   ERV

Where
            P = a  hypothetical  initial  Payment  of $1,000 T = average  annual
            Total return n = Number of years ERV =Ending Redeemable Value of the
            $1,000 payment
                  made at the beginning of the period.
    
To solve for average Total Return, the formula is as follows:

            T  =  (ERV/P) 1/n  - 1

The Funds  utilize the  following  procedures in  determining  yield.  The yield
calculation is based on a 30 day period and is computed by the following formula
using the compounded semi-annual APR:

      Nominal Yield = [ [ [ ( (a-b) / ( c*d ) ) + 1 ] -1 ] /30 ] * 360

      Compounded Semi-Annual APR = [ [ 1 + [ Nominal Yield / 2 ] ] 2  ] - 1

Where: a = dividends and interest earned during the period; b = expenses accrued
for the period (net of  reimbursement);  c = the average  daily number of shares
outstanding during the period that were entitled to receive  dividends;  and d =
the maximum offering price per share  (equivalent to Net Asset Value for no-load
funds) on the last day of the period.
   
The yield on Sextant Bond Income Fund for the 30-day  period ended  November 30,
1996 was 6.3%. The yield on Sextant  Short-Term  Bond Fund for the 30-day period
ended November 30, 1996 was 7.1%. In advertising  and sales  literature,  a Fund
may compare its performance with that of other mutual funds, indexes or averages
of other mutual  funds,  indexes or data,  and other  competing  investment  and
deposit products. The composition of these indexes or averages differs from that
of the Funds.  Comparison of a Fund to an alternative  investment should be made
with  consideration  of the differences in features and expected  performance of
the  investments.   All of the indexes and averages noted below are obtained
from the indicated sources or reporting services, which the Trust believes to be
generally  accurate.  A Fund may also note its mention or  recognition  in other
newspapers,  magazines or media from time to time. However, the Trust assumes no
responsibility for the accuracy of such data. Among the newspapers and magazines
that might mention the Trust or the Funds are:
    
                                       11
<PAGE>


                   Barron's               Money
                   Business Week          Mutual Fund Letter
                   Changing Times         Morningstar
                   Consumer Reports       New York Times
                   Consumer Digest        Pensions and Investment
                   Financial World        USA Today
                   Forbes                 US News and World Report
                   Fortune                Wall Street Journal
                   Investors Daily


The Funds may also  compare  themselves  to the Consumer  Price Index,  a widely
recognized measure of inflation, and to other indexes and averages such as:
   
       Dow Jones Industrials New York stock Exchange  Composite Index Standard &
       Poor's 500 Stock Index American Stock Exchange Composite Index Standard &
       Poor's 400 Industrials  NASDAQ Composite Wilshire 5000 NASDAQ Industrials
       Russell  2000  Lipper   General   Equity  Fund  Average   Lipper  Capital
       Appreciation Fund Lipper Equity Funds Average
           Average                        Lipper Growth & Income Fund Average
       Lipper Growth Funds Average        Lipper Balanced Fund Average
       Lipper Small  Company  Growth Fund Ibbotson Common Stocks Index
           Average
       Lipper Equity Income Fund Average
       Morningstar Mutual Fund Indices
    
The indexes and averages are measures of  performance of stocks and mutual funds
that are classified, calculated and published by these independent services. The
Funds may also use comparative  performance as computed in a ranking by these or
other independent services.

A Fund may also cite its  rating or other  mention  by  Morningstar  or  another
entity.   Morningstar's   ratings  are  based  on  risk-adjusted   total  return
performance,  as computed by  Morningstar  by subtracting a Fund's risk score as
computed by  Morningstar,  from the fund's total return  score.  This  numerical
score is then translated into rating categories.

                          MANAGEMENT OF THE TRUST

Information  concerning  Trustees and Officers of the Trust and their  principal
occupations for the past five years is shown below:
   
GARY A. GOLDFOGEL, MD - Trustee
            1500 N. State Street, Bellingham, WA 98225.
      Pathologist. Whatcom County Medical Examiner, Bellingham WA.

NICHOLAS    KAISER,  MBA,  CFA - President  and Trustee * 1300 N. State  Street,
            Bellingham, WA 98225.


                                  12

<PAGE>



      President of Saturna Capital Corporation, since July 1989.
      President of Unified  Management  Corporation,  Indianapolis IN,
       investment advisers and brokers, from 1976 through June 1989.
    
JOHN E. LOVE, Trustee
            Box 188, Garfield, Washington 99130
      Owner, J.E. Love Co., international  agricultural equipment manufacturer,
      Garfield, WA
      Director, Bank of Whitman, Colfax, Wash.
      Rear Admiral, U.S. Navy, Retired.
   
JOHN S. MOORE, PhD - Trustee
            College of Business and Economics, Western Washington University,
            Bellingham, WA 98225-9077
      Professor of Business Administration

PHELPS S. MCILVAINE - Vice President
            1300 N. State Street, Bellingham, WA 98225.
      Vice President and Director Saturna Capital Corporation,  January 1994 to
      present.
      Bond Arbitrage Trader, Hickey Financial, Chicago Illinois 1987-1994

PANDORA M. LARNER - Secretary
            1300 N. State Street, Bellingham, WA 98225.
      Saturna Capital Corporation, October 1996 to present.
      Medical supervisor, 1991 to 1993.
      Housewife, 1994.
      Clothing sales representative, 1995 to Feb. 1996.
      Medical receptionist, Feb. 1996 to Sept. 1996.

TERESA K. ANDERSON, CMA., MBA - Treasurer
            1300 N. State Street, Bellingham, WA 98225.
      Assistant  Treasurer,  Saturna  Capital  Corporation,  December, 1993  to
            present.
      Student prior to December, 1993.
    

*  Nicholas  Kaiser is an  "interested  person"  of the Trust as  defined in the
Investment Company Act of 1940.

   
The  Trust  pays   disinterested   trustees   $100  per  meeting   attended  and
reimbursement of travel expenses (pro-rata to each Fund). Mr. Kaiser receives no
compensation  from the Trust,  nor are the other  officers of the Trust paid for
their duties with the Trust.
    
                                      13

<PAGE>

<TABLE>
<CAPTION>
   
<S>                  <C>          <C>              <C>               <C>
                                  Pension or                         Total
                     Aggregate    Retirement                         Compensation
Name of              Compensa-    Benefits Accrued Estimated Annual  From Registrant
Person;              tion From    As Part of Fund  Benefits Upon     and Fund Complex
POSITION             REGISTRANT   EXPENSES         RETIREMENT        PAID TO DIRECTORS
-------------------------------------------------------------------------------
GARY GOLDFOGEL,           $400         $0           $0               $400
Trustee

JOHN E. LOVE,              400          0            0                400
Trustee

JOHN S. MOORE,             400          0            0                400
Trustee

NICHOLAS F. KAISER,          0          0            0                  0
Trustee
    
</TABLE>

   
The Board has  authority to establish an Executive  Committee  with the power to
act on behalf of the Board  between  meetings  and to exercise all powers of the
Trustees  in the  management  of the  Trust.  No  Executive  Committee  has been
established at this time. An Audit  Committee,  consisting of the  disinterested
directors,  meets to select  the  independent  accountant  and  review all audit
reports.  There is no separate  nominating  committee.  As of November  30, 1996
officers,  trustees and their families as a group,  own the following  shares of
the Funds


                                   Percent of
                FUND            SHARES OWNED       OUTSTANDING
                ----            ------------       -----------
        Sextant Short-Term Bond     88,347               14%
        Sextant Bond Income Fund    69,409               30%
        Sextant Growth Fund         23,793               14%
        Sextant International Fund  32,618               32%

    
                                      14



<PAGE>



                      PRINCIPAL HOLDERS OF SECURITIES
   
As of February 7, 1997 the  shareholders of Sextant  Short-Term Bond Fund owning
5% or more were as follows:

        NAME                                 SHARES                  PERCENTAGE
        ----                                -------                  ----------
        SAAR Foundation, Inc.               93,692                      23.19%

        Robert L. Foote                     57,503                      14.23%

        Investors National Corporation.     31,891                       7.89%

        Henry D. Klein                      31,682                       7.84%

        Evelyn C. Heaps                     27,552                       6.82%

        Michael McRory, DDS Pension Plan    20,249                       5.01%

As of February 7, 1997 the  shareowners  with 5% or more of Sextant  Bond Income
Fund were as follows:

        NAME                                 SHARES                  PERCENTAGE
        ----                                 ------                  -----------
        Nicholas F. Kaiser
        Markell F. Kaiser, Jt. Ten.         45,630                      17.88%

        Carol Lingow, Guardian
        FBO Robert C. Schmidt               27,658                      10.84%

        Luzenia B. Redpath                  26,821                      10.51%

        Loie E. Haggen                      17,156                       6.72%

        Saturna Capital Corporation         17,024                       6.67%

        Patricia A Kust IRA Rollover        16,333                       6.40%

        David K. Heaps IRA Rollover         15,906                       6.23%

        Frederick M. Graham
        Mary J. Graham, Jt. Ten             14,104                       5.52%

                                        15

<PAGE>

As of February 7, 1997 the shareowners  owning 5% or more of Sextant Growth Fund
were:

        NAME                                 SHARES                  PERCENTAGE
        ----                                 ------                  ----------
        Nicholas F. Kaiser IRA Rollover     17,448                       8.14%

        Sutherland Enterprises Ltd.         11,712                       5.46%

As of  February  7,  1997  the  only  shareowners  with 5% or  more  of  Sextant
International Fund were:

        NAME                                 SHARES                  PERCENTAGE
        ----                                 ------                  ----------
        Nicholas F. Kaiser IRA Rollover     23,613                      20.22%

        Heritage Education Trust, Inc.       9,584                       8.20%

        Robert F. Kaiser IRA Rollover        8,995                       7.70%

        Norman H. Bell MD                    7,116                       6.09%

        Northwest Eye Clinic Inc. Employee
        Pension Trust #13 Frederick Kaiser   6,968                       5.96%

        Elaine C. Oberleitner Trust
        Kathryn Oberleitner, Kurt            6,043                       5.17%

        Kathryn D. Oberleitner               5,867                       5.02%
    
                   INVESTMENT ADVISORY AND OTHER SERVICES

Each  of  the  Sextant   Funds   monthly   pays  the  Adviser  an  Advisory  and
Administrative Services Fee (the "Base Fee").

The  Base  Fee  covers  certain   administrative   services  such  as  portfolio
accounting,  shareholder  and  financial  reporting,  shareholder  servicing and
transfer  agency  services.  The Base  Fee is also  compensation  for  portfolio
management,  advice and  recommendations on securities to be purchased,  held or
sold.  The Base Fee is computed at the annual rate of 0.60% of average daily net
assets of each Fund, and is paid monthly.  The Base Fee is subject to adjustment
up or down  depending on the  investment  performance  of the Fund relative to a
specified index (the "Performance Adjustment").

"PERFORMANCE ADJUSTMENT" FOR SEXTANT BOND INCOME FUND AND SEXTANT SHORT-TERM
BOND FUND

For each month in which either of these Funds' total  investment  return (change
in net asset value plus all  distributions  reinvested)  for the one year period
through that month  outperforms or underperforms the total return of a specified
index for that period by 1% or more but less than 2%, the Base Fee is  increased
or decreased by the annual rate of

                                     16


<PAGE>

 .10% of the Fund's  average  daily net assets
for the preceding year. If the outperformance or underperformance is 2% or more,
then the adjustment is at the annual rate of .20%.

No performance  adjustment is applicable  during the first year the Agreement is
in place.

PERFORMANCE ADJUSTMENT FOR SEXTANT GROWTH FUND AND SEXTANT INTERNATIONAL FUND

For each month in which either of these Fund's total  investment  return (change
in net asset value plus all  distributions  reinvested)  for the one year period
through that month  outperforms or underperforms the total return of a specified
index for that period by 1% or more but less than 2%, the Base Fee is  increased
or decreased by the annual rate of .10% of the Fund's  average  daily net assets
for the preceding year. If the outperformance or  underperformance is 2% or more
but less than 4%,  then the  adjustment  is at the annual  rate of .20%.  If the
outperformance or underperformance is 4% or more, the adjustment is at an annual
rate of .30%.

No  Performance  Adjustment is payable during the first year the Agreement is in
place.
   
Total return investment  performance as calculated and published by Morningstar,
Inc.  for selected  groups of mutual  funds is used as the index for  comparison
purposes. The comparative Morningstar categories used are:

Sextant Growth Fund:  "DOMESTIC GROWTH FUNDS"

Sextant  International Fund: "FOREIGN STOCK FUNDS"

Sextant Bond Income Fund:   "LONG-TERM BOND FUNDS"

Sextant Short-Term Bond Fund:   "SHORT-TERM BOND FUNDS"
    
In the event that a particular index is no longer available or otherwise becomes
unavailable or inappropriate, in the opinion of the Board of Trustees, the Board
may select another to replace it.

The Adviser has also  voluntarily  undertaken  to limit  expenses of Bond Income
Fund and Short-Term Bond Fund to 0.60% through March 31, 1998. A waiver may have
the effect of subsidizing the yield for the period it is in effect.

Each Fund pays its own taxes, brokerage  commissions,  trustees' fees, legal and
accounting  fees,  insurance,  expenses  incurred  in  complying  with state and
federal  laws  regulating  the issue and sale of its  shares,  and  mailing  and
printing costs for prospectuses, reports and notices to shareowners.

The Adviser  furnishes  office space,  facilities and  equipment,  personnel and
clerical and bookkeeping  services required to conduct the business of the Fund,
as well as transfer agency and certain other expenses.

                                   17

<PAGE>

For no additional charges,  the Adviser provides services as the transfer agent,
registrar and  dividend-paying  agent for each Fund. As transfer agent,  Saturna
furnishes to each shareowner a statement after each  transaction,  an historical
statement at the end of each year showing all transactions  during the year, and
Form  1099 tax  forms.  Saturna  also,  on  behalf  of the  Trust,  responds  to
shareowners' questions or correspondence.  Further, the transfer agent regularly
furnishes each Fund with current  shareowner lists and information  necessary to
keep the  shares  in  balance  with the  Trust's  records.  The  mailing  of all
financial  statements,  notices and  prospectuses to shareowners is performed by
the transfer  agent.  The transfer  agent  maintains  records of  contributions,
disbursements  and assets as required  for IRAs and other  qualified  retirement
accounts.  Each Fund reimburses Saturna for any out-of-pocket  expense for forms
and mailing costs used in performing its functions.
   
The laws and  regulations of various states set expense  limitations  for mutual
funds as a condition  for  registration  to offer and sell shares in that state.
Usually,  the expense  limitation  requires  reimbursement if, and to the extent
that, the aggregate  operating expenses including the advisory fee but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of a specified  percentage of the average net assets of a Fund for its
fiscal year. The only state the adviser believes maintains an expense limitation
is California,  which limits aggregate annual expenses (with exceptions) to 2.5%
of the first $30 million of average  net assets,  2% of the next $70 million and
1.5% of the remaining average net assets.  National City Bank,  Indianapolis,
Indiana 46255 is the  custodian of the Funds'  securities  and other assets.  As
custodian,  the bank holds in custody all securities  and cash,  settles for all
securities transactions, receives money from sale of shares and on order of each
Fund pays the authorized  expenses of the Fund. When Fund shares are redeemed by
investors,  the  proceeds  are  paid to the  shareowner  by  check  drawn on the
custodian  bank Price  Waterhouse,  LLP,  1001  Fourth  Avenue  Plaza,  Seattle,
Washington  98154 served as the  independent  accountants  for the Trust for the
fiscal year ending November 30, 1996.  Tait,  Weller and Baker,  Two Penn Center
Plaza,  Philadelphia,  PA 19102 have been  appointed by the Trustees to serve as
independent  accountants  for the fiscal  year ending  November  30,  1997.  The
independent  accountants conduct the annual audit of the Trust as of November 30
and prepare the tax returns of each Fund.
 Prior to September  28,  1995,  under the  advisory  contracts  then in effect,
Sextant  Growth Fund and Sextant Bond Income Fund were  obligated to pay Saturna
Capital fees under management  contracts that are no longer in effect. Under the
former contracts, Northwest Growth Fund, predecessor to Sextant Growth Fund paid
Saturna  Capital  monthly an advisory fee at the rate of 0.75% of average  daily
net asset value annually. Similarly,  Washington Tax-Exempt Fund, predecessor to
Sextant  Bond  Income  Fund was  obligated  to pay  Saturna  Capital  monthly an
advisory  fee at the annual rate of 0.50% of the average  daily net assets up to
$250 million,  0.40% of assets between $250 million and $1 billion, and 0.30% of
assets in excess of $1 billion. Under the former contracts, the Adviser received
a separate  fee as  compensation  for  services as transfer  agent and  dividend
disbursement  agent. Each Fund paid Saturna an annual fee of $1.10 per month per
shareowner account (plus $.30 per month for Funds paying

                                      18

<PAGE>
dividends  more
frequently  than  once  per  quarter).  Each  Fund  reimbursed  Saturna  for any
out-of-pocket  expense  for forms  and  mailing  costs  used in  performing  its
functions.  For the fiscal year ended  November 30,  1996,  no Sextant fund paid
transfer agent fees. For the fiscal year ended November 30, 1995, Sextant Growth
Fund,  (formerly  Northwest Growth Fund) paid transfer agent fees of $1,272, and
Sextant Bond Income Fund (formerly Washington Tax-Exempt Fund) paid $842.

For the fiscal year ended November 30, 1996, Sextant Growth Fund paid investment
adviser and administration  fees of $7,540. For fiscal 1995, Sextant Growth Fund
paid investment  adviser and  administration  fees of $7,255, a portion of which
was paid under the new contract approved by shareholders effective September 28,
1995.  For fiscal  1994,  under the former  contracts  Sextant  Growth Fund paid
$9,318 in  administrative  and advisory fees, and no waiver or reimbursement was
required.

For the fiscal  year ended  November  30,  1996,  Sextant  Bond Income Fund paid
investment adviser and administration fees of $6,640 (all of which was waived by
Saturna  Capital).  For fiscal 1995,  Sextant  Bond Income Fund paid  investment
adviser and  administration  fees of $5,838,  all of which was waived  under the
adviser's  voluntary expense  reimbursements.  For fiscal 1994, under the former
contracts  Sextant Bond Income Fund paid $8,394 in  administrative  and advisory
fees of which Saturna Capital waived or reimbursed $8,046.

For the fiscal year ended  November 30, 1996 and the period  September  28, 1995
(inception) through November 30, 1995, Sextant Short-Term Bond Fund paid Saturna
Capital investment  adviser and administration  fees of $15,583 (of which $8,375
was waived) and $605 (entirely waived), respectively.

Similarly,  for the fiscal year ended November 30, 1996 and the period September
28, 1995 (inception) through November 30, 1995, Sextant  International Fund paid
Saturna Capital investment adviser and administration fees of $3,148 and $296,
respectively.
    
                            BROKERAGE ALLOCATION

The  placing  of  purchase  and  sale  orders  as  well  as the  negotiation  of
commissions  is  performed  by the  Adviser  and is  reviewed  by the  Board  of
Trustees.  The  Adviser  may  allocate  brokerage  to any  broker in return  for
research or services  and for  selling  shares of any Fund.  Brokers may provide
research or statistical  material to the Adviser,  but this  information is only
supplemental to the research and other  statistics and material  accumulated and
maintained through the Adviser's own efforts. Any such supplemental  information
may or may not be of value or used in making investment  decisions for the Trust
or any other account serviced by the Adviser.

The primary consideration in effecting securities  transactions for each Fund is
to obtain the best price and  execution  which in the judgment of the Adviser is
attainable  at the time and  which  would  bring the best net  overall  economic
result to the Fund.  Factors  taken  into  account in the  selection  of brokers
include the price of the  security,  commissions  paid on the  transaction,  the
efficiency  and  cooperation  with  which  the  transaction  is  effected,   the
expediency of making settlement and the financial  strength and stability of the
broker. The Adviser may negotiate

                                   19

<PAGE>

commissions at a rate in excess of the amount
another  broker  would  have  charged  if it  determines  in good faith that the
overall net  economic  result is favorable  to the Fund.  The Adviser  evaluates
whether  brokerage  commissions are reasonable based upon available  information
about  the  general  level of  commissions  paid by  similar  mutual  funds  for
comparable services.

The Adviser's  subsidiary,  Investors  National  Corporation,  is qualified as a
broker-dealer  to engage in a general  brokerage  business.  Investors  National
Corporation  conducts all its  transactions  on an agency basis for  established
"deep discount" commissions; it does not make markets, "deal," or maintain

   
inventories of securities.  Most stock and US Government  bond brokerage for the
Trust is conducted  through  Investors  National  Corporation,  and the Board of
Trustees has given permission for the Adviser to so direct. As this brokerage is
conducted through an affiliate of the Adviser,  the Trustees adopted  procedures
reasonably  designed to ensure that such  brokerage fees are reasonable and fair
compared to remuneration  received by other brokers in comparable  transactions.
The Trustees receive detailed quarterly  monitoring reports and review brokerage
procedures at least annually.

For fiscal years 1996,  1995 and 1994,  Sextant Growth Fund paid $2,536,  $3,188
and $1,514 in brokerage commissions to Investors National  Corporation.  For the
year ended  November 30, 1996 and the period  September 28, 1995  (inception) to
November 30, 1995, Sextant International Fund paid $1,562 and $266, respectively
in commissions to Investors National Corporation.  This represented 100% of each
Fund's commissions and aggregate brokerage transactions for each of these years.

For fiscal years 1996,  1995 and 1994 Sextant Bond Income Fund paid $49, $0, and
$0 in brokerage  commissions to Investors National  Corporation.  For the fiscal
year ended  November  30, 1996 and the period  September  28,  1995  (inception)
through  November  30,  1995,  Sextant  Short-Term  Bond Fund paid $98 and $0 in
commissions to Investors National Corporation.
    

           PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
                                 OFFERED

See  HOW TO BUY  SHARES,  HOW TO  REDEEM  SHARES  and  NET  ASSET  VALUE  in the
Prospectus for an explanation about the ways to purchase or redeem shares.
   
In addition to normal  purchases or redemptions,  the shares of each Fund may be
exchanged  for shares of other Funds of Saturna  Investment  Trust.  Exchange is
made at no charge upon written  request or by telephone  if the  shareowner  has
previously  authorized telephone  privileges on the application.  A gain or loss
for federal tax purposes is normally  realized upon redemption of any shares for
the  purposes of an exchange as  described  above.  Net asset value per share is
determined  by  dividing  the value of all  securities  and other  assets,  less
liabilities,  by the  number  of  shares  outstanding.  The net  asset  value is
determined  for each  Fund as of the  close  of  trading  on the New York  Stock
Exchange  (generally  4 p.m. New York time) on each day the Exchange is open for
trading. The Exchange is generally closed on: New

                                     20

<PAGE>
Year's  Day,
Washington's  Birthday/President's  Day, Good Friday, Memorial Day, Independence
Day (observance), Labor Day, Thanksgiving Day and Christmas Holiday.

                                 TAX STATUS

Saturna  Investment  Trust is organized  as a "series"  investment  company.  At
present only the Funds and Idaho Tax-Exempt Fund are offered,  but the Trust may
create in the future additional funds with different investment objectives. Each
Fund is a separate  economic  entity with separate  assets and  liabilities  and
separate income streams.  The shareowners of each separate Fund may look only to
that  Fund  for  income,  capital  gain or  loss,  redemption,  liquidation,  or
termination.  Each Fund has separate  arrangements  with the Adviser.  Assets of
each Fund are segregated. The creditors and shareowners of each Fund are limited
to the assets of that Fund for recovery of charges,  expenses  and  liabilities.
Each Fund  conducts  separate  voting on issues  relating  solely to that  Fund,
except as  required  by the  Investment  Company  Act.  The tax  status  and tax
consequences  to shareowners  of each separate Fund differs,  depending upon the
investment objectives,  operations, income, gain or loss, and distributions from
each Fund. Each Fund intends to distribute to shareowners  substantially  all of
its net investment income and net realized capital gains, if any, and to comply,
as it has since  inception,  with the  provisions  of the Internal  Revenue Code
applicable to regulated investment companies, which relieve the Funds of federal
income taxes on the amounts so distributed.  For Sextant Growth Fund and Sextant
International Fund, dividends from net investment income and distribution of any
capital  gains are made at the end of the fiscal year in  November.  The Sextant
Bond  Income  Fund and  Sextant  Short-Term  Bond  Fund pay  dividends  from net
investment income daily,  which are reinvested or distributed at each month-end.
Distribution of any net realized  capital gains is made at the end of the fiscal
year in November.   The amount of investment  income and capital  gains,  if
any,  available for distribution by a Fund in the future cannot be predicted due
to continually changing economic conditions and market prices.
    
Dividends  and  distributions  from  capital  gains are normally  reinvested  in
additional  full and fractional  shares of the Fund.  The shares  purchased with
dividends  or  capital  gains  distributions  may be  redeemed  using any of the
methods for redemption of shares.

Distributions  and dividends  may be subject to federal,  state and local taxes.
Shareowners are taxed whether the shares automatically  purchased with dividends
and distributions are left in the Fund or are paid to the shareowner.

Shortly  after  the end of each  calendar  year  shareowners  are  mailed a Form
1099-DIV advising of the dividends paid the shareowner for the year.

If you do not furnish the  transfer  agent with a valid  Social  Security or Tax
Identification  Number and in certain  other  circumstances,  we are required to
withhold  31% of  dividend  income.  Income  dividends  to  shareowners  who are
nonresident  aliens may be subject to a 30% United States  withholding tax under
the existing provisions of the code applicable to foreign

                                      21

<PAGE>
individuals  and entities  unless a reduced rate of withholding or a withholding
exemption is provided under  applicable  treaty law. If the IRS determines  that
the Trust should be fined or penalized  for  inaccurate  or missing or otherwise
inadequate  reporting of a Tax Identification  Number, the amount of the IRS fee
or penalty is directly assessed to the shareowner account involved.

                            FINANCIAL STATEMENTS
   
The most recent audited annual report  accompanies  this Statement of Additional
Information.  The  financial  statements  and selected per share data and ratios
dated  November 30, 1996,  together with the report of  independent  accountants
dated  December 18, 1996,  are  considered a part of the Statement of Additional
Information and are incorporated by reference.
    


                                     22


<PAGE>



                                  APPENDIX


                                BOND RATINGS

   
GENERAL. Moody's and S&P's ratings represent their opinions as to quality of the
bonds which they undertake (for a fee) to rate. Such ratings are not an absolute
standard of quality.  A rating is not a  recommendation  to buy,  sell or hold a
bond because it does not take into account  market  value or  suitability  for a
particular investment purpose. Ratings may vary from service to service, and may
be changed, withdrawn or suspended without notice for a variety of reasons.
    
BOND RATINGS

MOODY'S INVESTORS SERVICES,  INC.,  describes its ratings for debt securities as
follows:

      AAA   Bonds which are rated AAA are judged to be of the best quality. They
            carry the  smallest  degree  of  investment  risk and are  generally
            referred to as "gilt edge."  Interest  payments  are  protected by a
            large,  or  exceptionally  stable  margin,  and principal is secure.
            Although the various protective  elements are likely to change, such
            changes  as can be  visualized  are  most  unlikely  to  impair  the
            fundamentally strong position of such issues.

      AA    Bonds  rated AA are judged to be of high  quality by all  standards.
            Together with the Aaa group,  they comprise what are generally known
            as  high-grade  bonds.  They are  rated  lower  than the best  bonds
            because margins of protection may not be as large as in Aaa bonds or
            fluctuation  of protective  elements may be of greater  amplitude or
            there may be other  elements  present  which may make the  long-term
            risks appear somewhat larger than in Aaa bonds.

      A     Bonds rated A possess many favorable  investment  attributes and are
            to be considered as upper medium grade  obligations.  Factors giving
            security to  principal  and interest are  considered  adequate,  but
            elements may be present which suggest a susceptibility to impairment
            sometime in the future.

      BAA   Bonds rated Baa are  considered as medium grade  obligations;  I.E.,
            they are  neither  highly  protected  nor poorly  secured.  Interest
            payments and principal  security appear adequate for the present but
            certain   protective   elements   may   be   lacking   or   may   be
            characteristically  unreliable  over any great length of time.  Such
            bonds lack outstanding  investment  characteristics and in fact have
            speculative characteristics as well.

STANDARD & POOR'S describes its rating for debt securities as follows:

                                       23

<PAGE>

      AAA   Debt rated AAA has the highest rating.  Capacity to pay interest and
            to repay principal is extremely strong.

      AA    Debt rated AA has a very  strong  capacity  to pay  interest  and to
            repay  principal,  and differs  from the higher rated issues only in
            small degree.

      A     Debt  rated  A has a  strong  capacity  to pay  interest  and  repay
            principal,  although it is somewhat more  susceptible to the adverse
            effect of changes and circumstances in economic conditions than debt
            in higher rated categories.

      BBB   Debt rated BBB is  regarded  as having an  adequate  capacity to pay
            interest and repay principal.  Whereas it normally exhibits adequate
            protection  parameters,  adverse  economic  conditions  or  changing
            circumstances  are more likely to lead to a weakened capacity to pay
            interest and repay principal for debt in this category than for debt
            in higher rated categories.

COMMERCIAL PAPER RATINGS

MOODY'S  INVESTORS  SERVICES,  INC.  employs  the  following  designations, all
investment grade

                        PRIME-1     Highest quality
                        PRIME-2     Higher quality
                        PRIME-3     High Quality

If an issuer  represents that its commercial paper is supported by the credit of
another  entity or entities,  Moody's  evaluates the financial  strength of that
affiliated entity as one factor in the total rating assessment.

STANDARD & POOR'S describes its rating and their meanings as follows:

      A     Issues  assigned  this  highest  rating are  regarded  as having the
            greatest  capacity for timely  payment.  Issues in this category are
            further  refined with the  designations  1, 2, and 3 to indicate the
            relative degree of safety.

      AA    This  designation  indicates  that the  degree of  safety  regarding
            timely  payment is very strong.  Those issues  determined to possess
            overwhelming  safety  characteristics  are  denoted  with a plus (+)
            sign.

                                     24


<PAGE>

CROSS REFERENCE SHEET

 PART A                                   PROSPECTUS CAPTIONS

1.  Cover Page                            About the Fund;
                                          Expenses

2.  Synopsis                              Not Applicable

3.  Condensed Financial Information       Expenses;
                                          Financial Highlights

4.  General Description of Registrant     About the Fund,
                              Investment Objectives
                            and Policies; Investment
                                          Policies and Risk
                                          Considerations

5.  Management of the Fund                Trust Management,
                                          Investment Adviser

6.  Capital Stock and Other Securities    Capital Stock;
                                          Dividends

7.  Purchase of Securities Being Offered  Net Asset Value,
                                          How to Buy Shares

8.  Redemption or Repurchase              How to Redeem Shares

9.  Pending Legal Proceedings             Not Applicable


                                       1

<PAGE>


                                   STATEMENT OF ADDITIONAL
PART B                                  INFORMATION CAPTIONS

10.  Cover Page                           Cover Page

11.  Table of Contents                    TABLE OF CONTENTS

12.  General Information and History      General Information and
                                          History

13.  Investment Objectives & Policies     INVESTMENT OBJECTIVES
                                          AND POLICIES;
                                          PORTFOLIO TURNOVER;
                                          INVESTMENT
                                          CONSIDERATIONS

14.  Management of the Registrant         MANAGEMENT OF THE TRUST

15.  Control Persons and Principal        PRINCIPAL HOLDERS OF
            Holders of Securities         SECURITIES

16.  Investment Advisory and Other        INVESTMENT ADVISORY
          Services                        AND OTHER SERVICES

17.  Brokerage Allocation and Other       BROKERAGE ALLOCATION
           Practices                      PORTFOLIO TURNOVER

18.  Capital Stock and Other Securities   Not Applicable

19.  Purchase, Redemptions and Pricing    PURCHASE, REDEMPTION AND
          of Securities Being Offered     PRICING OF SECURITIES
                                          BEING OFFERED

20.  Tax Status                           TAX STATUS

                                        2

<PAGE>

21.  Underwriters                         Not Applicable

22.  Calculations of Performance Data     PERFORMANCE DATA

23.  Financial Statements                 FINANCIAL STATEMENTS

                                        3

<PAGE>

      SATURNA INVESTMENT TRUST OFFERS IDAHO TAX-EXEMPT FUND,
                       A NO-LOAD MUTUAL FUND.

IDAHO TAX-EXEMPT FUND seeks income exempt from federal and Idaho
income taxes by investing in a portfolio of Idaho municipal securities.  The
secondary objective is to preserve capital.

   
You should read this  Prospectus  before  investing in the Fund.  Please read it
carefully  and  keep  it  for  future  reference.   A  Statement  of  Additional
Information dated March 26, 1997 has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. You may obtain
a  free  copy  at  the  SEC  website   (www.sec.gov)   or  the  Saturna  website
(www.saturna.com), or by contacting:

                           SATURNA CAPITAL
                        1300 N. STATE STREET
                        BELLINGHAM, WA 98225
                     800/ SATURNA [800/ 728-8762]
                       E-MAIL: IDAHO@SATURNA.COM





THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE  COM-MISSION OR ANY STATE SECURITIES  AUTHORITY NOR HAS THE COM-MISSION
OR ANY STATE AUTHORITY  PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.



[GRAPHIC OMITTED]
IDAHO TAX-EXEMPT FUND



FROM                       SATURNA CAPITAL
                          [GRAPHIC OMITTED]
                             MUTUAL FUNDS



                              NO-LOAD,
                          NO SALES CHARGE,
                               NO 12B-1

                             PROSPECTUS
                            March 26, 1997



    
                                     4


<PAGE>


EXPENSES

The table illustrates Fund operating expenses for the fiscal year ended November
30, 1996.  The Fund imposes no sales load on purchases or reinvested  dividends,
no "12b-1"  fees,  nor any  deferred  sales load upon  redemption.  There are no
redemption fees or exchange fees.    

                       ANNUAL FUND OPERATING EXPENSES
                     (as a percentage of average net assets)

Management and Administrative Fees (after waiver)      0.26%
12b-1 Expenses                                         NONE
Other Expenses                                         0.53%
Total Fund Operating Expenses                          0.79%*

FOR EXAMPLE:
    The Fund estimates paying              1 year --    $  8
    these expenses on a $1,000             3 years--    $ 26
    investment, assuming 5%                5 years--    $ 46
    annual return:                        10 years--    $105


           * The Adviser voluntarily limits operating expenses of the Fund. This
             limit, first adopted in October 1990, is 0.80% annually and extends
             through March 31, 1998. Without the limitation,  the management and
             administrative  fee would have been 0.50% and operating expenses of
             the Fund would have been 1.03%.  The example assumes a continuation
             of this expense cap for the 3, 5 and 10 year periods.


The preceding  information  is to help  understand  the various (both direct and
indirect) expenses that an investor bears. This table should not be considered a
representation  of past or future expenses.  Actual expenses may be more or less
than those shown.  See  FINANCIAL  HIGHLIGHTS  and  INVESTMENT  ADVISER for more
details.

                                      5
    
<PAGE>


FINANCIAL HIGHLIGHTS

   
[GRAPHIC OMITTED]
Selected data for a share of IDAHO TAX-EXEMPT FUND  outstanding  throughout each
priod.  The  schedule  for each of the seven years ended  November  30, 1996 was
audited  by Price  Waterhouse,  LLP  independent  accountants,  whose  report is
included  in the  Fund's  Annual  Report  (incorporated  by  reference  into the
Statement of Additional Information).  The data for each of the two years in the
period  ended   November  30,  1989  and  for  the  period   September  4,  1987
(commencement  of  operations)  through  November 30, 1987 were audited by other
independent  accountants  whose  report  dated  January  19, 1990  expressed  an
unqualified  opinion on those data.  This schedule should be read with the other
financial  statements and notes in the Annual Report  (available  without charge
from the  Fund),  which  also  includes  management's  discussion  of the Fund's
performance.     

<TABLE>
<CAPTION>
   

<S>                            <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
                                                                                                 Sept.4,'87
                                                                                                 (commence-
                                                                                                 ment of op-
                                         FOR YEAR ENDED NOVEMBER 30                              erations)to
                               ----------------------------------------------------------------
                               1996    1995    1994    1993    1992    1991    1990    1989    1988  Nov.30 87*
                               -----   -----   -----   -----   -----   -----   -----   -----   ----- ---------

NET ASSET VALUE AT
   BEGINNING OF PERIOD         $5.28   $4.76   $5.23   $5.16   $5.10   $5.03   $5.07   $4.98   $5.03   $5.00
   INCOME FROM INVESTMENT
      OPERATIONS
   Net investment income        0.27    0.26    0.27    0.25    0.28    0.30    0.33    0.35    0.35    0.02

   Net gains or losses on securities
      (both realized and
       unrealized)             (0.03)   0.52   (0.46)   0.12    0.09    0.07   (0.04)   0.09   (0.05)   0.02
                               -----   -----   -----   -----   -----   -----   -----    -----   -----   -----
Total from investment
      operations                0.24    0.78   (0.19)   0.37    0.37    0.37    0.29    0.44    0.30    0.04
   LESS  DISTRIBUTIONS
   Dividends (from net
   investment income)          (0.27)  (0.26)  (0.27)  (0.25)  (0.29)  (0.30)  (0.33)  (0.35)  (0.35)  (0.01)
   Distributions (from
      capital gains)            0.00    0.00   (0.01)  (0.05) (0.025)   0.00    0.00    0.00    0.00    0.00
                               -----   -----   -----   -----   -----   -----   -----   -----   -----   -----
Total distributions            (0.27)  (0.26)  (0.28)  (0.30)  (0.31)  (0.30)  (0.33)  (0.35)  (0.35)  (0.01)
NET ASSET VALUE AT END
   OF PERIOD                   $5.25   $5.28   $4.76   $5.23   $5.16   $5.10   $5.03   $5.07   $4.98   $5.03
                               =====   =====   =====   =====   =====   =====   =====   =====   =====   =====
TOTAL RETURN                    4.66%  16.68%  (3.76)%  7.35%   7.49%   7.63%   5.94%   9.17%   6.45%   3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets ($000), end
   of period                  $5,064  $5,220  $6,841  $7,367  $5,808  $3,803  $2,540    $808    $335     $29
Ratio of expenses to
   average net assets +         0.79%   0.75%   0.75%   0.75%   0.75%   0.75%   0.97%   0.90%   0.28%   0.11%
Ratio of net investment income
   to average net assets +      5.10%   5.07%   5.28%   4.79%   5.64%   6.08%   6.74%   6.51%   6.58%   0.56%
Portfolio turnover rate           10%     28%     36%     31%     17%     15%     13%    100%      0%     17%
<FN>
+ For each of the above years, all or a portion of the expenses were waived.  If
these costs had not been waived, the resulting increase to expenses per share in
each of the above periods would be $.01, $.016, $.007, $.009, $.008, $.02, $.02,
$.05, $.10, $.19, and $.01  respectively.  The increase to the ratio of expenses
to average daily net assets would be .27%, .26%, .14%, .18%, .17%, .54%,  1.01%,
1.25%, 2.24%, and .11%, respectively * Not annualized

</FN>
    
</TABLE>

                                   6


<PAGE>


ABOUT THE FUND

   
IDAHO  TAX-EXEMPT  FUND provides  investors the  opportunity  to receive  income
exempt from both  federal and Idaho  income  tax.  Preservation  of capital is a
secondary  objective.  The Fund is "no-load," meaning that there are no sales or
redemption charges, nor does the Fund have any "12b-1" charges.

Mutual  funds  enable you to invest as you might do for  yourself in you had the
time,  experience and resources to research and diversify your own  investments.
Mutual  funds sell their own shares to the public and invest the  proceeds  in a
securities portfolio. The value of the funds' own shares fluctuates as the value
of its securities portfolio changes over time.

You may purchase  shares without any sales charge or "load."  Because no charges
are deducted, the entire amount you pay for shares is invested in the Fund.


INVESTMENT OBJECTIVES AND POLICIES

The IDAHO  TAX-EXEMPT FUND seeks to provide monthly  dividends free from federal
income,  federal alternative minimum and Idaho state income taxes. The Fund does
have a secondary objective of attempting to preserve capital.

The  Fund's  fundamental  policy  is to  invest  at least  80% of net  assets in
securities  generating  income  exempt from federal  income tax,  including  the
alternative  minimum tax. Also, under normal market conditions,  at least 65% of
total assets are invested in debt securities generating income exempt from Idaho
income tax.  The Fund is  "non-diversified,"  meaning that it does not invest
in a wide range of  investments,  but limits its investments to a certain type -
debt securities issued by political subdivisions of the State of Idaho. The Fund
does invest in a broad portfolio of such  securities and provides  investors the
benefits of being diversified and limiting the risk associated with investing in
only a few  securities.  The Fund is  primarily  for  residents of Idaho who may
benefit from its policy of investing in securities  exempt from both federal and
Idaho state income taxes.
    


INVESTMENT POLICIES AND RISK CONSIDERATIONS
   
Investing in securities  entails both market risk and risk of price variation in
individual  securities.  There  is  no  guarantee  that  the  Fund's  investment
objectives will be realized.

The risks inherent in the Fund depend  primarily on the terms and quality of the
obligations in its  portfolio,  as well as on market  conditions.  Interest rate
fluctuations  affect the Fund's net asset value,  but not the income received by
the Fund  from its  portfolio  securities.  Because  prices  and  yields on debt
securities vary over time, the Fund's yield also varies.
    
Because  the  Fund  is  "nondiversified"  and  invests  primarily  in  municipal
securities of a single state,  its investments  are more  susceptible to factors
adversely  affecting that state.  These factors  include  economic and financial
trends, as well as political conditions in Idaho and its political subdivisions.
Note  that if any  issuer of  securities  held by the Fund is unable to meet its
financial  obligations,  the income derived  therefrom,  the ability to preserve
capital, and the Fund's liquidity would all be adversely affected.

                                     7

<PAGE>
   
The Fund is  vulnerable  to tax rate  changes,  either at the  Idaho or  federal
level, since part of municipal securities' value is derived from the recipient's
ability to exclude  interest  payments from  taxation.  Should this exclusion be
reduced, the market for municipal securities,  and consequently the Fund's share
value,  may  be  adversely  affected.   Among  Idaho's  leading  industries  are
agriculture,   forest  products,  tourism  and  electronic/computer   equipment.
Locally-oriented  industries  include  retail trade,  finance,  insurance,  real
estate, transportation,  communications, utilities, government and construction.
A more  complete  discussion  of these  factors is available in the Statement of
Additional  Information.   The Fund does not  purchase  high-yield  ("junk")
bonds.  The Fund  requires that at time of purchase a bond be rated at least "A"
or equivalent by a national  bond rating  agency  (Standard and Poor's,  Moody's
Investor's  Services,  or  equivalent),  or, if  non-rated,  to be of equivalent
quality in the opinion of the Adviser.  The Fund  requires  notes to be rated at
least MIG-2 by Moody's or SP-2 by Standard & Poor's,  or if non-rated,  to be of
equivalent quality in the opinion of the Adviser.  The Fund requires  commercial
paper to be rated at least  Prime-2 by Moody's or A-2 by Standard & Poor's,  or,
if non-rated, to be of equivalent quality in the opinion of the Adviser.
    
Up to 60% of total assets of the Fund can be invested in non-rated  bonds.  Note
that bonds issued by the State of Idaho and its municipalities are often smaller
issues in total  dollars,  typically  being  issued by  relatively  small  Idaho
communities to finance local government  projects.  Because of the smaller size,
the expense of obtaining a rating for the issuer is typically not undertaken. By
investing in non-rated  bonds,  the Adviser  believes it can often obtain higher
yields without a material sacrifice in quality.

Although  both rated and  non-rated  bonds are traded among dealers based on the
creditworthiness  of the  issuer,  generally,  rated bonds have  greater  market
recognition  and the market has more dealers than does the market for  non-rated
bonds. The Adviser will purchase only those non-rated bonds that it believes are
liquid and can be sold at about the value given for net asset value purposes.

The  Fund  occasionally  may  purchase  an  entire  issue  of a small  municipal
security,  resulting in a higher yield to the Fund as well as the elimination of
certain underwriting expenses to the municipality.

Investors can expect the weighted average portfolio  maturity to range between 6
and 15 years.  Usually,  shorter  maturity  bonds provide lower current  yields,
while a maturity  beyond 15 years  generally  implies  greater current yield but
increased risk to capital from interest rate increases.

The Fund may purchase municipal obligations on a delayed-delivery or when-issued
basis (I.E.,  securities  may be purchased with  settlement  taking place in the
future, often a month or more). The Fund only makes commitments to purchase such
obligations  with  the  intention  of  acquiring  the  securities.   Obligations
purchased on a when-issued  basis involve the risk that the yields  available in
the market when  delivery  takes place may be higher than those  obtained in the
transaction  itself, with the result that the market value of the securities may
be lower at settlement,  just as if the securities had actually been held in the
Fund's portfolio. Conversely, should rates decrease, the value will be higher by
a similar amount.

                                   8

<PAGE>

During  uncertain market or economic  conditions,  the Idaho Tax-Exempt Fund may
adopt a temporary, defensive position and invest more than 20% of assets in cash
or equivalents,  government securities,  unaffiliated money-market mutual funds,
and other debt securities  having an "A" rating or better.  While such defensive
investments may not contribute to the primary objective of tax-free income, they
do assist the secondary objective of capital preservation.
   
Shareowner  approval  is required  to change the Fund's  investment  objectives.
Except as explained above, all of the policies in this section can be changed by
a  majority  of the  Board  of  Trustees.  The Fund has  adopted  certain  other
restrictions, as outlined in the STATEMENT OF ADDITIONAL INFORMATION.



INVESTMENT RESULTS

You receive a financial report showing the  investments,  income and expenses of
the Fund every six months.  You may obtain  daily share  values by calling  888/
732-6262.



HOW TO BUY SHARES

You may open an account and purchase  shares by sending a completed  application
with a check for $1,000 or more ($25 under a group  plan) to the Fund.  The Fund
does not accept initial orders  unaccompanied  by payment nor by telephone.  The
price you  receive is the net asset  value next  determined  after  receipt of a
purchase order. There are no sales charges or loads.

You may purchase  additional  shares at any time in minimum amounts of $25. Once
your account is open, purchases can be made by check, ACH, or wire.

You may authorize the use of the Automated Clearing House ("ACH") to purchase or
redeem shares by completing  the  appropriate  section of the  application.  The
authorization must be received at least two weeks before ACH can be used. To use
ACH to purchase or redeem shares,  simply call the transfer agent.  You also may
wire money to purchase shares, though typically your wiring bank will charge you
a fee for this service.  Call for details  before  requesting  your bank to wire
funds.

Each time you  purchase or redeem  shares,  you receive a statement  showing the
details of the transaction as well as the current number and value of shares you
hold.  Share balances are computed in full and fractional  shares,  expressed to
three decimal places.

At the end of each calendar year, you receive a complete annual statement, which
you should  retain for tax  purposes  and a  complete  historical  record of all
transactions.

Optional plans offered by the Fund include:  (1) an automatic  investment  plan,
(2) a systematic withdrawal plan to provide regular payments to you, and (3) the
right to exchange your shares  without  charge for any other no-load mutual fund
for which Saturna Capital is the investment adviser.  Materials describing these
plans and applications may be obtained from the Adviser.




HOW TO REDEEM SHARES

You may  redeem  your  shares on any  business  day of the  Fund.  The Fund pays
redemptions in U.S.  dollars,  and the amount you receive is the net asset value
per share next determined

                                    9


<PAGE>
after receipt of your redemption  request.  The amount  received  depends on the
value of the investments in the Fund at the time of your redemption.  The amount
you receive may be more or less than the cost of the shares you are redeeming. A
redemption  constitutes  a sale for income tax  purposes,  and you may realize a
capital  gain or loss on the  redemption.  The Fund  normally  pays  for  shares
redeemed or exchanged within three days after a proper  instruction is received.
To allow  time for  clearing,  redemption  of  investments  made by check may be
restricted for up to ten calendar days.

    
There are several methods you may choose to redeem shares.

WRITTEN REQUEST

Write:   Idaho Tax-Exempt Fund
         Box 2838
         Bellingham WA 98227-2838
Fax:     360/734-0755
   
You may redeem shares by a written request, with these payment options:

o Redemption check (no minimum) sent to registered owner(s).

o Redemption  check  (no  minimum)  sent as  directed  if the  signature(s)  are
  guaranteed.  If proceeds are to be sent to other than the registered  owner(s)
  at the last  address,  the  signatures  on the request must be guaranteed by a
  national  bank or  trust  company  or by a  member  of a  national  securities
  exchange.

o Federal  funds wire ($5000  minimum).  The  proceeds  may be wired to any bank
  designated  in the request if the  signature(s)  are  guaranteed  as explained
  above.
    
TELEPHONE REQUEST

Call:    800-728-8762 or
         360-734-9900

You may redeem shares by telephone request, with these payment options:

o  Redemption check (no minimum) sent to registered owner(s).

o ACH transfer ($100 minimum) with proceeds  transferred to your bank account as
  designated  on your  application.  The ACH  authorization  must be received at
  least two weeks before ACH can be used.

o Exchange ($25 minimum) for shares of any other Fund for which Saturna  Capital
  is adviser. If the exchange is your initial investment into this Fund, the new
  account  automatically has the same registration as your original account.  An
  exchange is considered a closing capital transaction for tax purposes.

o Federal  funds wire ($5000  minimum).  Proceeds  may be wired only to the bank
  previously  designated,  or as directed in a prior  written  instruction  with
  signatures guaranteed, as explained above.

For  telephone  requests the Fund  endeavors to confirm  that  instructions  are
genuine and may be liable for losses if they do not. The caller must provide (1)
the name of the  person  making  the  request,  (2) the name and  address of the
registered owner(s), (3) the account number, (4) the amount to be withdrawn, and
(5) the  method  for  payment of the  proceeds.  The Fund may  require a form of
personal identification,  and provide written confirmation of transactions.  The
Fund is not  responsible  for the results of  transactions  reasonably  believed
genuine.


                                     10

<PAGE>

CHECK WRITING

You may also redeem shares in your account by drawing checks on your account for
amounts of $500 or more.
   
The Fund can mail you a small book of blank  checks for a $10 fee.  These checks
may be payable to any payee.  Checks are  redeemed  at the net asset  value next
determined  after  receipt.  If you wish to use this feature,  request the Check
Writing  Privilege on the application.  Note that, as with any redemption,  each
check is a closing capital transaction for tax reporting purposes.
    

NET ASSET VALUE

The Fund  computes  its net asset value per share each  business day by dividing
(i) the value of all of its securities and other assets,  less  liabilities,  by
(ii) the number of shares outstanding.  The Fund computes its net asset value as
of the close of trading on the New York Stock  Exchange  (generally  4 p.m.  New
York time) on each day the Exchange is open for trading.  The Fund's  shares are
not priced on any customary  national  business holiday that securities  markets
are closed.  The net asset value  applicable  to  purchases or  redemption's  of
shares of the Fund is the net asset  value  next  computed  after  receipt  of a
purchase or redemption order.

Since daily bid prices are not available  for many  municipal  bond issues,  the
Fund  values  securities  using  matrices of  municipal  bond yields for various
maturities and  qualities.  Prices are adjusted for factors unique to each bond.
To verify its  knowledge of market  factors,  the adviser  periodically  obtains
appraisals from independent sources.


TRUST MANAGEMENT
   
Saturna Investment Trust is managed by a Board of Trustees, currently:  Gary A.
Goldfogel, John E. Love, John S. Moore, and Nicholas F. Kaiser.  The Trustees
establish policies, as well as review and approve contracts and their
continuance.  The Trustees also elect the officers, determine the amount of any
dividend or capital gain distribution and serve on any committees of the Trust.
For other information concerning the officers and Trustees, see the STATEMENT OF
ADDITIONAL INFORMATION..


INVESTMENT ADVISER

Saturna Capital Corporation, 1300 N. State Street, Bellingham, Wash. 98225 (the
"Adviser") is the Investment Adviser to the Trust.  The Adviser is a Washington
State corporation formed in July 1989.  Shareholders owning more than 10% of the
common stock are: Nicholas F. Kaiser, Phelps S. McIlvaine, James D. Winship, and
Brian A. Anderson.  The directors of the Adviser are Nicholas Kaiser
(President), Phelps S. McIlvaine (Vice President), Brian A. Anderson (Vice
President), Meredith L. Ross (Secretary), and Markell F. Kaiser (Treasurer).
    
The Fund pays a monthly  advisory fee at the annual rate of 0.50% of the average
daily net assets up to $250 million, 0.40% of assets between $250 million and $1
billion,  and 0.30% of assets in excess of $1 billion.  Through  March 31, 1998,
the Adviser has voluntarily  waived its fee and reimburses the Fund as necessary
to limit total Fund expenses to 0.80% of average annual net assets. A waiver may
have the effect of subsidizing the yield for the period it is in effect.

                                    11

<PAGE>
   
Under the  Fund's  investment  advisory  agreement  the Fund pays its own taxes,
brokerage  commissions  (if any),  trustees'  fees,  legal and accounting  fees,
insurance,  transfer  agent,  registrar  and  dividend  disbursing  agent  fees,
expenses  incurred in complying with state and federal laws regulating the issue
and sale of its shares, and mailing and printing costs for prospectuses, reports
and notices to shareowners.  The Adviser furnishes office space,  facilities and
equipment,  personnel and clerical and bookkeeping  services required to conduct
the Fund's  business.  Saturna Capital  Corporation  acts as the Fund's transfer
agent, maintaining all shareowner records.

Saturna Capital  Corporation acts as investment  adviser to six other investment
companies,  the four  Sextant  Funds:  Growth ($2  million),  International  ($1
million),  Bond Income ($1 million) and Short-Term Bond ($2 million), as well as
Amana Income Fund, ($15 million) and Amana Growth Fund ($6 million).
    
Each  of  the  Sextant  Funds  pays  the  Adviser  an  Investment  Advisory  and
Administrative  Services Fee computed at the annual rate of 0.60% of average net
assets  of each  Fund  and  paid  monthly.  Each  Fund's  Fee is  subject  to an
adjustment  (up to a maximum  adjustment  of 0.30% in two of the Funds)  that is
determined  by that  Fund's  total  return  performance  relative to a specified
index. The advisory fee for both of the Amana Funds is .95%.
   
Saturna also manages individual  advisory accounts.  The Adviser's  wholly-owned
subsidiary,  Investors  National  Corporation,  is a discount brokerage firm and
acts as distributor for the Fund without compensation.  The Adviser is permitted
to place  brokerage  transactions  through  the  affiliate,  and the Adviser may
allocate  brokerage  to any broker in return for  research or  services  and for
selling shares of any Fund. Phelps  McIlvaine,  primary manager of the Fund,
entered the  investment  business in 1976 and managed bond hedge funds from 1987
to 1993.  He also manages two of the Sextant  Funds (Bond Income and  Short-Term
Bond).  Employees of the Adviser,  including  Fund  managers,  are  permitted to
engage in securities  transactions  for their own accounts in accordance  with a
code of ethics that,  among other  provisions,  requires advance approval of all
trades and disclosure of all holdings.


CAPITAL STOCK;   DIVIDENDS

Saturna  Investment  Trust,  an  open-end  "series  trust"  was  organized  as a
Washington Business Trust on February 20, 1987. The Trust is an open-end "series
trust" that now offers five separate Funds:  Idaho  Tax-Exempt Fund and the four
Sextant  Funds (the Sextant  Funds  provide the basic  elements of an investment
program  and are  offered  through  a  separate  prospectus  available  from the
Adviser).  The  Trust  (formerly  known  as  Northwest  Investors  Trust)  began
operations  on  September  4,  1987.  The  Fund's  current  investment  advisory
agreement became effective on its approval by shareowners on October 12, 1990.

The Fund is divided  into  shares of  beneficial  interest,  with  equal  voting
rights. All shares are fully paid, non-assessable,  transferable, have rights of
redemption,  and are not subject to preemptive rights. The Trust is not required
to hold annual shareowner meetings, but special meetings are called for electing
or removing Trustees, changing fundamental policies, or voting on approval of an
advisory  contract.  On  issues  relating  solely  to a  single  Fund,  only the
shareowners of that Fund are entitled to vote.

                                    12

<PAGE>

All dividends and  distributions  are  distributed  pro rata to  shareowners  in
proportion to the number of shares owned.

The Fund  distributes  all its net  investment  income and net realized  capital
gains (if any) to shareowners.  The Fund pays dividends from  investment  income
daily and  reinvests or  distributes  them monthly.  Distributions  from capital
gains (if any) are paid at the end of November.

Both dividends and capital gains  distributions are automatically  reinvested in
additional  full and fractional  shares of the Fund,  unless you have elected to
receive either or both in cash.

The Fund qualifies as a regulated  investment company under the Internal Revenue
Code, which requires it to distribute  substantially all net income and realized
net gains on  investments.  The Fund is then relieved of paying  federal  income
taxes on amounts it distributes.

At year-end,  the Fund reports to you and the IRS the amount of each  redemption
you made during the year, as well as the amount of taxable dividends and capital
gain  distributed  to you.  The Fund  accounts for its  distributions  as either
taxable  capital  gains  (originating  from  net  realized  gains  on  portfolio
transactions),  or taxable income (originating from dividends,  taxable interest
and  certain  other  types of  gains) or  tax-exempt  income  (originating  from
interest on municipal  bonds).  Fund  distributions  may be subject to state and
local taxes.

To avoid being subject to a 31% federal withholding tax on taxable dividends and
distributions,   you  must  furnish  your   correct   Social   Security  or  Tax
Identification Number.

PERFORMANCE DATA

The  Fund  may  publish  current  yield  and  average  annual  total  return  in
advertisements or in information furnished to publications and to investors.  In
any  comparison of the Fund's return with that of alternative  investments,  you
should consider differences between the Fund and the alternative investment, the
periods and methods used in calculation of the returns,  and the effect of taxes
on the investments.  Of course,  past results are not necessarily  indicative of
future performance.

The Fund computes  current yield by (i) dividing net investment  income over the
rolling  30 day  period  for which the yield is being  computed  by the  average
number of shares eligible to receive  dividends for the period and (ii) dividing
that  figure  by the  Fund's  net  asset  value per share on the last day of the
period, and then (iii) annualizing the results.

The Fund also may  quote a taxable  equivalent  yield,  which is the  equivalent
amount an investor must earn before  deducting  federal and any applicable Idaho
income  taxes (at rates  stated in the  quotation),  to equal the Fund's  30-day
current yield.

To compute the Fund's average  annual total return for any specified  period (i)
assume an  investment  made on the  first day of the  period  and  reinvest  all
dividends  paid during the period in additional  shares and then (ii) divide the
ending balance (I.E., the number of shares now held multiplied by the ending net
asset value) by the beginning  balance.  For a more complete  description of the
method of computation, see the STATEMENT OF ADDITIONAL INFORMATION.


                                       13
    
<PAGE>




                                 IDAHO TAX-EXEMPT FUND
                                 INVESTMENT APPLICATION

Mail application and check to:                           For assistance, call:
   IDAHO TAX-EXEMPT FUND                        (800)SATURNA  or (360) 734-9900
   Box 2838, Bellingham WA 98227-2838                        FAX (360) 734-0755

ACCOUNT TYPE AND NAME
  q Individual
             ------------------------------------------------------------------
                 First                  Middle Initial               Last

  Social Security Number                              Date of Birth
                       -----------------------------               ------------

  q Joint with
              -----------------------------------------------------------------
                 First                  Middle Initial               Last

    Joint Owner's Social Security Number
                                       ----------------------------------------
   (Joint accounts are presumed to be "Joint Tenancy with Right of Survivorship"
    unless otherwise indicated)

  q Gifts to Minor                      AS CUSTODIAN FOR
                  ----------------------                -----------------------
                    Name of Custodian                            Name of Minor
                qUNIFORM GIFTS TO MINORS ACT
   UNDER THE    qUNIFORM TRANSFERS TO                                /    /
            -----   MINORS ACT             -------------      -----------------
            State                       Minor's S. S. No.     Minor's Birthdate

  q Other
         --------------------------------------       -------------------------
   Indicate  name of  corporation,  other  organization  Tax  Identification  or
   fiduciary capacity.  If a trust,  include Number name(s) of trustees and date
   of trust instruments.


-------------------------------------------------------------------------------
   Name(s) of person(s) authorized to transact business for the bove entity.

MAILING------------------------------------------------------------------------
ADDRESS   Street                                  Apt., Suite, Etc.


       ------------------------------------------------------------------------
          City                           State                        ZIP

TELEPHONE  (  )                         (     )
           ----------------------       ---------------------------------------
              Daytime                             Home

INITIAL INVESTMENT  $
                    -----------------------
Make check payable to Idaho Tax-Exempt Fund (minimum $1000).


<PAGE>


TELEPHONE REDEMPTION PRIVILEGES
  You automatically  have telephone  redemption by check and telephone  exchange
  privileges unless you strike this line. The Fund will endeavor to confirm that
  instructions  are  genuine  and it may be  liable  for  losses if it does not.
  (Procedures  may  include  requiring a form of  personal  identification,  and
  providing written confirmation of transactions.)
   
ACH TELEPHONE TRANSFER PRIVILEGE
  q To transfer funds by ACH at no charge to or from my
    (our) bank account,  I (we) authorize  electronic fund transfers through the
    Automated Clearing House (ACH) for my (our) bank account designated.  PLEASE
    ATTACH A VOIDED CHECK.

AUTOMATIC INVESTMENT PLAN
  q Invest $           into this Fund on the          day of
           ------------                     ----------
    each month (the 15th unless another date is chosen) by ACH transfer from my
    (our) bank account.  This plan may be canceled at any time.  PLEASE ATTACH A
    VOIDED CHECK.

CHECK WRITING PRIVILEGE  ($500 per check  minimum) ($10  checkbook  charge)

  q I(We)hereby request the Custodian to honor checks drawn by me(us) on my(our)
    account  subject  to  acceptance  by the Trust,  with  payment to be made by
    redeeming sufficient shares in my (our) account. None of the custodian bank,
    Saturna Capital  Corporation,  nor Saturna  Investment Trust shall incur any
    liability to me(us) for honoring such checks,  for  redeeming  shares to pay
    such checks, or for returning checks which are not accepted.

   q SINGLE  SIGNATURE  AUTHORITY  -- JOINT  ACCOUNTS  ONLY:  (CHECKS  FOR JOINT
     ACCOUNTS  REQUIRE  BOTH  SIGNATURES  UNLESS THIS BOX IS MARKED TO AUTHORIZE
     CHECKS  WITH A SINGLE  SIGNATURE).  By our  signatures  below,  we agree to
     permit check  redemptions  upon the single  signature of a joint owner. The
     signature  of one joint  owner is on behalf of himself  and as  attorney in
     fact on behalf of each other joint owner by  appointment.  We hereby  agree
     with each other,  with the Trust and with Saturna Capital  Corporation that
     all moneys now or hereafter  invested in our account are and shall be owned
     as Joint Tenants with Right of Survivorship, and not as Tenants in Common.
    
The  undersigned  warrants(s)  that I (we)  have  full  authority  to make  this
Application,  am (are) of  legal  age,  and  have  received  and read a  current
Prospectus and agree to be bound by its terms. Unless this sentence is struck, I
(we) certify,  under penalties of perjury,  that I (we) am not subject to backup
withholding  under the  provisions  of  section  3406(a)(1)(C)  of the  Internal
Revenue  Code.  This  application  is not  effective  until it is  received  and
accepted by the Trust.


-------------------         ---------------------------------------------------
    Date                     Signature of Individual (or Custodian)


-------------------         ---------------------------------------------------
    Date                     Signature of Joint Registrant, if any



<PAGE>


                      PLEASE SAVE THIS QUICK GUIDE TO


                      IDAHO TAX-EXEMPT FUND

ACCOUNTS
      Open your  account by sending a  completed  application  to the Fund.  For
      convenience,  you may have your account  consolidated  with others of your
      household or other group. We will appoint a representative to whom you may
      refer all questions  regarding your  account(s).  Extra forms will be sent
      for certain accounts.

INVESTMENTS
      Initial  investments  are  $1,000  or more and must be  accompanied  by an
      application.  Additional  investments  may be made  for $25 or more at any
      time. There are no sales commissions or other charges.

REDEMPTIONS
      You may sell your shares any time. As with purchases,  you may choose from
      several   methods   including   telephone,   written   instructions,   and
      checkwriting. You will be paid the market price for your shares on the day
      we receive your instructions, and there are no redemption fees or charges.
      If we receive your redemption request by one p.m. Pacific time, your check
      is normally mailed to you the same day.

STATEMENTS
      On the date of each  transaction,  you are mailed a confirmation,  showing
      the details of the transaction and your account  balance.  At year-end and
      at  selected  points  during  the  year we mail a  statement  showing  all
      transactions for the period. Monthly consolidated statements are available
      for an extra fee.
   
DIVIDENDS AND PRICES
      The Fund declares  dividends daily and pays them monthly.  Fund prices are
      recorded daily at 888/732-6262 and on the Internet at www.saturna.com.

FOR MORE INFORMATION
      You may consult the  applicable  pages of this  prospectus  for additional
      details on the Fund and its shareholder services. Please call 800/ SATURNA
      (800/728-8762) with any questions.
    


<PAGE>










                                     PART B



                 STATEMENT OF ADDITIONAL INFORMATION








<PAGE>




                        SATURNA INVESTMENT TRUST

                           IDAHO TAX-EXEMPT FUND



                              1300 N. State Street
                          Bellingham, Washington 98225

                                  360-734-9900
                                   800-SATURNA
   

                    STATEMENT OF ADDITIONAL INFORMATION
                                 March 26, 1997

Idaho Tax-Exempt Fund (the "Fund") is a series of Saturna  Investment Trust (the
"Trust").  The Fund is a series of the Trust and represents shares of beneficial
interest in a separate  portfolio of securities  and other assets,  with its own
objectives  and  policies.  This  Statement of Additional  Information  is not a
Prospectus.  It merely furnishes  additional  information that should be read in
conjunction  with the  Fund's  prospectus  dated  March  26,  1997.  The  Fund's
prospectus  may be obtained free of charge by  telephoning  the numbers above or
writing the Fund at the address shown above.
     




<PAGE>




                                   TABLE OF CONTENTS



                                                                 Page

General Information and History......................................3
Investment Objectives and Policies...................................3
Investment Considerations............................................8
Portfolio Turnover..................................................11
Performance Data ...................................................11
Management of the Trust.............................................13
Principal Holders of Securities.....................................15
Investment Advisory and Other Services..............................15
Brokerage Allocation................................................16
Purchase, Redemption and Pricing of Securities Being Offered........17
Tax Status..........................................................17
Financial Statements................................................18
Appendix............................................................19


                                   2

<PAGE>




                      GENERAL INFORMATION AND HISTORY


Saturna  Investment  Trust (the "Trust") is a business trust formed  pursuant to
RCW 23.90 of the laws of the  State of  Washington  to  operate  as an  open-end
management  company.  When formed on February 20, 1987,  the name was  Northwest
Investors  Tax-Exempt  Business Trust. The Trust's name was changed to Northwest
Investors  Trust on October 12, 1990.  Most  recently,  in  connection  with the
formation of a new series of funds and reorganization and realignment of certain
existing  series,  the Trust's name was changed to Saturna  Investment  Trust on
September 28, 1995.

The  Declaration  of Trust permits the trustees to issue an unlimited  number of
full and  fractional  shares in any Fund of the Trust.  The Trust may  establish
additional Funds in the future by approval of the Trustees. All shares will have
no par value and when issued will be fully paid and non-assessable and will have
no preemptive, conversion, or sinking fund rights.

The  Trust  has five  separate  Funds,  the Fund  (initially  known as the Idaho
Extended  Maturity  Tax-Exempt Fund) and four others which are offered through a
separate Prospectus and Statement of Additional Information: Sextant Growth Fund
(formerly  known as Northwest  Growth Fund),  Sextant Bond Income Fund (formerly
known as Washington  Tax-Exempt Fund),  Sextant  International Fund, and Sextant
Short-Term Bond Fund.

                     INVESTMENT OBJECTIVES AND POLICIES

This section is provided only for the purpose of expanding or outlining  certain
policies and restrictions not thoroughly covered in the Prospectus.

The  primary  investment  objective  of the Fund is to obtain a return of income
from  debt  securities  issued  by or on  behalf  of the  State  of Idaho or any
political subdivision,  agency, or instrumentality  thereunder,  the income from
which is exempt from both federal and Idaho State income taxes,  and the federal
alternative  minimum  tax.  The  secondary  objective  is to preserve the Fund's
capital.

To achieve its objectives,  the Fund invests primarily in Idaho bonds. Financial
conditions and the diversification  requirements of Subchapter M of the Internal
Revenue  Code of 1986 (the  "Code")  may  require  investment  in cash and other
securities  from  time to time,  the  income  from  which may be  taxable.  Such
investments  will only exceed 20% of the Fund's net assets on a temporary basis,
such as significant  adverse  economic,  political or other  circumstances  that
require immediate action to avoid losses.

The Fund is  "non-diversified."  This means that with respect to at least 75% of
total  assets,  greater  than 5% may be  invested in the  securities  of any one
issuer. However, the Fund is required to meet Internal Revenue Code requirements
that at the end of each quarter at least 50% of total assets is  represented  by
(a) cash or  equivalents,  (b) U. S.  government  securities,  (c) securities of
other regulated investment  companies,  and (d) other securities,  if, as to any
one  issuer,  the value of such  issuer's  securities  does not exceed 5% of the
Fund's total assets and


                                   3

<PAGE>

such issuer's  securities held by the Fund represent not
more than 10% of the outstanding  voting securities of such issuer.  The balance
of the Fund may be  invested in other  securities  if not more than 25% of total
assets are invested in the securities of any one issuer,  or two or more issuers
engaged in the same or similar trade or business.

The Adviser may direct  investments  in other  tax-exempt  investment  companies
which do not  concentrate  their  investments in Idaho Bonds,  but  nevertheless
yield income which is exempt from both federal  income and  alternative  minimum
taxation. Such income may be taxable at the state level. It is the policy of the
Fund not to  devote  more  than 5% of its  total  assets  to any one  investment
company,  nor to devote  greater than 10% of its total assets to  investments in
investment companies generally. It is anticipated that shares of such investment
companies may be obtained by an  affiliated  broker/dealer,  Investors  National
Corporation (the  "Distributor"),  which has agreed to act as agent for the Fund
and not  charge a  commission  or  receive  any  compensation  on  purchases  of
securities  made on behalf of the Fund.  The  purchase  of  securities  of other
investment  companies  may result in the Fund's  shareowners  paying  investment
advisory fees twice on the same assets.

Investment  objectives  and  certain  policies  of the Fund  may not be  changed
without the prior  approval of the  holders of the  majority of the  outstanding
shares of the Fund. Objectives and policies which are considered fundamental and
subject to change only by prior  approval of the  shareowners  include:  (1) the
primary and secondary investment  objectives;  (2) the 80% of net assets minimum
investment in tax-exempt income  securities;  (3) the classification of the Fund
as an open-end  management company and the  sub-classification  of the Fund as a
non-diversified   company;   and  (4)  the  policies  listed  under  "Investment
Restrictions."  However, the mix of investments between (1) cash and cash items;
(2) government  securities;  (3) securities of other investment  companies;  (4)
securities in rated and non-rated bonds; (5) short and long maturities,  and the
length of time investment positions are held; and (6) other debt securities, are
considered  management  decisions and may be altered  without  prior  shareowner
approval.  Management has delegated to an affiliate, Saturna Capital Corporation
(the "Adviser"), management the Fund's investments.

NON-RATED  BONDS.  Management  and the  Adviser  believe  that  many of the debt
securities issued by the State of Idaho or the political subdivisions,  agencies
or  instrumentalities  thereunder  are small  issues in total  dollars,  and are
typically issued by smaller communities or  instrumentalities to obtain capital.
Because of the small size of such issues,  the expense of obtaining a rating for
the issued  obligation  (the  "Bond") is  typically  not  undertaken.  Without a
rating,  investors must rely solely on their own analysis and  investigation  to
determine  investment  risk and  worth  of such  Bonds.  Since  the cost of such
analysis and investigation is typically not considered warranted due to the size
of such issues,  despite a higher return typically available from such non-rated
Bonds,  issues  of  non-rated  Bonds  generally  do not  have a  trading  market
consisting of as many dealers as comparable  rated  issuers.  Occasionally,  the
financial  institution lending the funds to a municipality receives the Bond and
holds it until  maturity.  As a  result,  although  trading  markets  exist  for
non-rated Bonds, generally the number of dealers participating in the market are
fewer than that which exists for rated Bonds.  Although all rated and  non-rated
Bonds are traded on the basis of dealers'  perception  of  credit-worthiness,  a
non-rated  Bond having  greater  recognition  among  dealers  will have a market
consisting of a

                                    4


<PAGE>
greater  number of dealers than will the market for a Bond not having as great a
recognition.  Management  anticipates  that  investment in non-rated  Bonds will
occur  only when the  Adviser to the Fund  believes  the credit of the issuer of
such non-rated Bonds is such so as to warrant an investment without unreasonable
risk to the  preservation of capital and which is sufficiently  recognized among
the market dealers so as to provide ready  marketability  of the investment.  In
the  opinion  of  Management  and the  Adviser,  such  non-rated  Bonds  will be
comparable  to rated  Bonds  having an "A"  rating.  Experience  of the  Adviser
indicates that  investments in certain good quality  non-rated  Bonds are liquid
and can be sold within seven days at or near the value given for  computing  net
asset value.

Management  and the Adviser  believe  that there exist both rated and  non-rated
Bonds  that  constitute  good  investments  that  will  promote  the  investment
objectives  of the  Fund.  Purchases  of Bonds on behalf of the Fund may be made
directly from the issuer. Some purchases are by sealed bid with the entire issue
being awarded to the lowest  interest rate that is bid. Most issuers are willing
to negotiate a rate directly with the managing underwriter and/or purchaser.  In
this  instance,  the Adviser will deal in good faith to arrive at a  competitive
rate.

In  contemplating  the rate at which to bid a Bond, the Adviser may consider the
opinions and  evaluations of independent  broker/dealers  specializing  in Idaho
municipal bonds.  Such brokers may also be requested to render their opinions as
to the value of the Fund's investment securities portfolio,  including rated and
non-rated  Bonds.  The  Fund and  Adviser  may  consider  such  evaluations  and
valuation services provided by such independent  brokers in determining where it
effects  transactions in investment  securities and the amount of commissions to
be paid such broker.

INVESTMENTS.  The  Fund  invests  at  least  40% of total  assets  in  municipal
securities rated "A" or better by Moody's Investors Service, Inc. ("Moody's") or
Standard  and Poor's  ("S&P").  The Fund invests more heavily in rated Bonds for
various purposes,  including (a) diversification or greater liquidity,  (b) when
the difference in returns between rated and non-rated Bonds is not material,  or
(c) when  interest  rates are expected to  increase.  SEE THE  "APPENDIX"  FOR A
DESCRIPTION OF BOND RATINGS.

Under normal market  conditions the Fund may invest up to 60% of total assets in
non-rated Bonds only when the Adviser believes the credit of the issuer warrants
an investment  without  unreasonable risk to the preservation of capital and the
Bonds are sufficiently  recognized among the market dealers so as to provide the
ready  marketability  of the  investment.  The  Fund  employs  the  services  of
independent broker/dealers specializing in municipal bonds to assist the Adviser
in both (1)  determining the purchase price of rated and non-rated Bonds and (2)
valuing the rated and non-rated Bonds for net asset value computation purposes.

In  evaluating  Bonds,  the Adviser  analyzes the extent of  investment  risk by
policies that include:

(1)The extent of unemployment within the assessment district for the issuer of a
   Bond  and the  extent  to  which  this may  affect  repayment  of the Bond at
   maturity;


                                     5



<PAGE>
(2)The extent to which the real property within the assessment district is owned
   by a small number of persons or entities and the relative  economic  strength
   of such  persons  or  entities  which  may  affect  repayment  of the Bond at
   maturity;

(3)The  financial  position of the  political  subdivision,  including,  but not
   limited to, the extent of its existing indebtedness.

These limitations and policies are considered primarily at the time of purchase.
The sale of a Bond is not  mandated  in the  event  of a  subsequent  change  in
circumstances.  Indeed,  Bonds are commonly held until  maturity,  when the Bond
will be redeemed  for its full face value,  assuming no  defaults.  Nonetheless,
both  rated  and  non-rated  Bonds may be sold  prior to  maturity  for  various
purposes, such as a desire for greater liquidity or to preserve capital.

The Fund invests  predominantly in municipal  obligations issued by the State of
Idaho  or  any  political   subdivision,   agency  or  instrumentality   thereof
("Municipality"). These municipal obligations generally include Municipal bonds,
Municipal notes, Municipal commercial paper, and any other obligation from which
the payment of interest,  in the opinion of the bond issuer's counsel, is exempt
from  Federal  and  Idaho  State  income  tax.  A general  description  of these
investments are:

MUNICIPAL BONDS are debt  obligations  issued to obtain funds for various public
   purposes such as construction of public facilities (e.g., airports, highways,
   bridges, and schools).  Maturities of municipal bonds at the time of issuance
   may range from one year to 30 years or more.

MUNICIPAL NOTES are short-term  obligations of municipalities,  generally with a
   maturity ranging from six months to three years. The principal types of notes
   include tax, bond, and revenue anticipation notes and project notes.

MUNICIPAL COMMERCIAL PAPER refers to short-term  obligations of  municipalities,
   which may be issued at a discount.  Such paper is likely to be issued to meet
   seasonal  working capital needs of the  Municipality or interim  construction
   financing. Municipal commercial paper is, in most cases, backed by letters of
   credit,  lending  agreements,  note  repurchase  agreements,  or other credit
   facility agreements offered by banks and other institutions.

Municipal  notes and  commercial  paper  obligations  are usually  issued in the
following  circumstances:  (a) When  borrowing is in  anticipation  of long-term
financing,  the  paper  is  generally  referred  to as bond  anticipation  notes
("BAN").  Cities are authorized to issue revenue bond  anticipation  notes.  The
maturity  date cannot  exceed five years from the date of issue.  Payment can be
extended  for not more than  three  years  from their  maturity  date.  BANs are
secured by income and revenues derived by the city from the project and from the
sale of the revenue  bonds in  anticipation  of which the notes are issued.  (b)
Borrowings  to level  temporary  shortfalls  in revenue  occasioned by irregular
receipts of taxes are generally  referred to as tax anticipation  notes ("TAN").
Taxing districts,  including counties,  any political  subdivision of the state,
any municipal corporation,  school districts, any quasi-municipal corporation or
any other public corporation  authorized to levy taxes, are authorized to borrow
money and issue a TAN.  The TANs  must  mature no longer  than one year from the
date of issue and are issued in


                                  6


<PAGE>
anticipation  of  collection  of taxes in the
current fiscal year. The taxing district is limited to an amount equal to 75% of
the taxes  levied in the  current  fiscal year and not yet  collected.  TANs are
backed by the full faith and credit of the taxing districts.  The State of Idaho
is also  authorized  to issue a TAN in  anticipation  of income or revenue  from
taxes,  but is forbidden by its  constitution  to engage in deficit  spending or
long-term  borrowing.  The term of the obligation is the shorter of 12 months or
to the end of the fiscal year.  Likewise,  the borrowed amount cannot exceed 75%
of the income or revenue from taxes which the State tax  commission or other tax
collection agency certifies is reasonably anticipated to be collected during the
current fiscal year.

Municipal  bonds  include  debt  obligations  issued to obtain funds for various
public  purposes,  including the  construction of public  facilities.  Municipal
bonds may be used to refund outstanding obligations, to obtain funds for general
operating expenses,  or for lending public or private institutions funds for the
construction  of educational  facilities,  hospitals,  or housing,  or for other
public  purposes.  The two  principal  classifications  of  municipal  bonds are
general  obligation and limited  obligation (or revenue) bonds.  Limited project
bonds are known as local improvement district ("LID") bonds.

GENERAL  OBLIGATION  BONDS ("GO  Bonds") are those  obligations  of an issuer to
   which the full faith and credit of the municipality is pledged.  The proceeds
   from GO Bonds are used for a wide variety of public uses, including,  but not
   limited  to,  public  facilities  such as the  structure  or  improvement  of
   schools,  highways,  and roads, water and sewer systems, and facilities for a
   variety of public purposes.  A GO Bond is paid from AD VALOREM property taxes
   or  from  other  tax  sources.  Many  types  of  obligations  may be  general
   obligations  of a municipality  whether or not they are incurred  through the
   issuance  of bonds.  GO Bonds  may be  incurred  in the form of a  registered
   warrant,  conditional  sales  contract,  or  other  instrument  in  which  an
   unconditional and unlimited promise to pay from AD VALOREM taxes is made.

REVENUE BONDS may be issued to fund a wide variety of revenue-producing  capital
   projects  including,  but not  limited  to,  electric,  gas,  water and sewer
   systems,  highways,  bridges, and tunnels,  airport facilities,  colleges and
   universities,  hospitals, and health, convention,  recreational,  and housing
   facilities. Although the principal security of these bonds varies, generally,
   revenue  bonds are payable from a debt  service  reserve  fund,  the cash for
   which is derived from the operation of the particular  utility or enterprise.
   Revenue bonds are not general  obligations.  They are secured by the revenues
   of the  particular  utility or system.  They can be issued by  agencies  of a
   state and can also be issued by political  subdivisions  including  counties,
   cities, towns, water districts,  sewer districts,  irrigation districts, port
   districts, and housing authorities.

The Fund will invest in revenue bonds with a coverage factor between net revenue
to the annual  debt  service of a minimum of 1 to 1.25.  Only issues that have a
debt service  reserve fund balance equal to the average annual debt service will
be purchased.

LOCAL  IMPROVEMENT  DISTRICT  ("LID")  bonds are secured by  assessments  levied
   against the properties  benefited by the  improvements  constructed  with the
   proceeds of the bonds. This type of financing is available to counties, water
   and/or sewer districts, highway districts,

                                       7


<PAGE>
   irrigation  districts and cities. The property must be specially benefited by
   the  improvements  constructed  out of the  proceeds of the bonds,  generally
   within a local improvement district.

PRIVATE ACTIVITY BONDS,  including  Industrial  Development  Bonds ("IDB"),  are
   commonly  issued by public  authorities  but generally are not secured by any
   taxing power. Rather, they are secured by the revenues derived from the lease
   or rental payments received by the industrial user, and the credit quality of
   such Municipal  Bonds is usually  directly  related to the credit standing of
   the  user  of  the  facilities.   Since  1986  there  have  been  substantial
   limitations on new issues of municipal  bonds to finance  privately  operated
   facilities.  To the extent such municipal  bonds would  generate  income that
   might be taxed under federal  alternative  minimum tax  provisions,  the Fund
   does not invest in Private  Activity bonds. The Fund does not anticipate that
   greater  than 5% of the  Fund's  total  assets  will be  invested  in Private
   Activity Bonds.

The Fund may purchase certain variable or floating rate obligations in which the
interest rate is adjusted at predesignated periodic intervals (variable rate) or
when there is a change in the market rate of interest on which the interest rate
payable on the obligation is based  (floating  rate).  Variable or floating rate
obligations  may include a demand  feature that entitles the purchaser to demand
prepayment of the principal  amount prior to stated  maturity.  Also, the issuer
may have a corresponding right to prepay the principal amount prior to maturity.

                         INVESTMENT CONSIDERATIONS

Investing in securities  entails both market risk and risk of price variation in
individual securities.  THIS IS TRUE EVEN FOR DEBT SECURITIES ISSUED BY THE U.S.
GOVERNMENT.  By  diversifying  its  investments,  the Fund may  reduce  the risk
associated with owning one or a few individual securities.  However, there is no
assurance that the Fund will achieve its investment objectives.

Many factors may cause the value of a  shareholder's  investment  in the Fund to
fluctuate in value.  The value of the Fund's  portfolio will normally  fluctuate
inversely with changes in market interest rates. Generally, when market interest
rates rise the price of municipal  bonds held in the Fund will fall;  when rates
fall, the price of such bonds will generally rise. In addition,  there is a risk
that the issuer of a municipal  bond or other  security will fail to make timely
payments of principal and interest.  Interest rate  fluctuations will affect the
Fund's  net  asset  value,  but not the  income  received  by the Fund  from its
portfolio securities.  However,  because yields on debt securities available for
purchase by the Fund vary over time, no specific yield on shares of the Fund can
be assured.

Because the Fund  concentrates  its  investments  in a single state,  there is a
greater risk of fluctuation in the values of its portfolio  securities than with
mutual funds the investments of which are more geographically diverse. Investors
should carefully consider the investment risks of such concentration. The Fund's
share prices can be affected by political and economic  developments  within and
by the financial  condition of the State of Idaho,  its public  authorities  and
political subdivisions. The following information may be relevant in considering
an  investment  in the Fund,  but is not  intended  to provide  all  information
relevant to such an investment.  Discussions  concerning the financial health of
the State government might not be

                                     8

<PAGE>

relevant to municipal  obligations issued by a
political subdivision.  In addition,  general economic conditions may or may not
affect issuers of the obligations of the State.

Idaho is located in the Northwestern  portion of the United States,  bordered by
Washington, Oregon, Nevada, Utah, Wyoming, Montana and Canada. Idaho consists of
approximately  84,000 square miles of varied terrain.  The terrain and access to
outdoor activities such as boating,  fishing,  hunting and skiing,  make tourism
and recreation a major, growing industry in the State.

Although  located  in the arid  West,  Idaho has  significant  water  resources,
including  26,000 miles of rivers and streams and more than 2,000 natural lakes.
The drop in  elevation of rivers like the Snake  permit  hydropower  production,
allowing the State some of the lowest electricity rates in the nation.

The State has a broadly based economy,  ranging from mining and timber resources
to agricultural lands which are irrigated by a series of man-made reservoirs and
irrigation  systems.  More than four  million  acres are  irrigated in the Snake
River Basin.

Traditionally,  Idaho has been an agricultural  State.  Livestock,  beef,  dairy
cattle  and sheep are  important  to the  economy,  while the major  food  crops
include  potatoes,  wheat,  barley,  sugar  beets,  seed crops and fruit.  Major
manufacturing  industries  include food processing,  forest products,  phosphate
processing,  computer components and electronics. Mining also has been important
in the  development of the State with phosphate  rock,  silver,  lead,  zinc and
molybdenum among the resources mined. Mining activity is dependent on the market
prices of products  and over the past few years with  depressed  prices,  mining
activity has been declining, and may not improve.

In the past, the State's economy has often behaved counter to national  economic
trends. In spite of the national  difficulties in the 1970's,  the State enjoyed
economic growth for most years in the decade.  The State's  economy  experienced
weaker than average  economic  performance  during the first half of the 1980's.
Idaho's economy turned up in 1988, and has continued above the national rates.

Much of the State's economic  behavior is explained in terms of Idaho's changing
mix of industries and markets. In recent years,  non-agricultural employment has
grown more rapidly,  with Idaho's  electronics and machinery  industry,  service
sector,  tourism,  and government  sectors among leading areas.  Mining has been
particularly  weak, with forest products,  food processing and chemical products
sectors among the weaker sectors. The shift from industries dependent on natural
resources  should make the State less sensitive to events in  international  and
national markets.

Idaho has benefited from recent population exodus from California. The shift has
helped make the state among the fastest growing economies in the nation. However
impressive  this may  sound,  it is  important  to bear in mind that Idaho has a
relatively  small population and percentages are easily changed by the influx of
relatively  few people.  Also,  such  immigration  brings a demand for increased
infrastructure and the financing to fund it. Any such increase in

                                     9

<PAGE>
infrastructure  would require that economic  growth be maintained to support it,
and if growth is not maintained economic problems could develop.

The State  operates  under an  annual  budget  system  that  coincides  with the
July-June  fiscal  year.  The State  Division  of  Financial  Management  in the
Governor's  office, in connection with the Governor prepares the proposed budget
for the ensuing  year and the Governor  submits this budget to the  Legislature.
The State  must  operate  on a  balanced  budget,  in  accordance  with  revenue
projections.  Following the legislative  process,  appropriation  bills for each
department or agency are submitted to the House and Senate for approval and then
sent to the Governor for signature. The Governor has "line-item veto" power. The
appropriations   constitute  the  limit  for  each   department  or  agency  for
expenditures.

The State may not incur  long-term  debt,  and,  consequently,  the  funding for
projects requiring such debt is done through cities, instrumentalities, agencies
and political subdivisions of the State.

The State derives its revenues  substantially  from three sources:  personal and
corporate  income taxes,  sales taxes and motor fuel taxes,  of which the income
taxes  provide  approximately  half.  The balance of State  revenue  came from a
variety of minor taxes.

INVESTMENT  RESTRICTIONS.   In  addition  to  the  restrictions  stated  in  the
Prospectus,  the Fund shall not purchase securities on margin or sell securities
short or purchase or write put or call options; purchase "restricted securities"
(those which are subject to legal or contractual  restrictions  on resale or are
otherwise  not  readily  marketable);  nor invest in oil,  gas or other  mineral
exploration leases and programs. The Fund shall not make loans to others, except
for the purchase of debt securities, or entering into repurchase agreements. The
Fund shall not invest in securities so as to not comply with Subchapter M of the
Code,  in that  generally at the close of each quarter of the tax year, at least
50% of the value of the Fund's total assets is  represented by (i) cash and cash
items,  government  securities,  and  securities of other  regulated  investment
companies, and (ii) other securities, except that with respect to any one issuer
in an amount more than 5% of the Fund's  total  assets,  and no more than 10% of
the Fund's voting securities of any one issuer. In addition,  the Fund shall not
purchase real estate; real estate limited partnerships (excepting master limited
partnerships  that are  publicly  traded  on a  national  security  exchange  or
NASDAQ's  National Market  System);  commodities or commodity  contracts;  issue
senior  securities;  provided,  however,  that  a  fund  may  borrow  money  for
extraordinary or emergency  purposes and then only if after such borrowing there
is asset  coverage  of at  least  300%  for all  such  borrowings;  nor act as a
securities  underwriter except that they may purchase  securities  directly from
the issuer for investment  purposes.  No Fund will purchase securities if it has
outstanding  borrowings  exceeding 5% of its net assets Also, the Fund shall not
purchase or retain  securities  of any issuer if the officers or trustees of the
Trust or its adviser own more than one-half of one percent of the  securities of
such issuer;  invest in any company for the purpose of  management or exercising
control.  The Fund  shall  not  invest  in the  securities  of other  investment
companies, except by purchase where no commission or profit results.

                                     10

<PAGE>

                             PORTFOLIO TURNOVER
   
The Fund  places no  restrictions  on  portfolio  turnover  and will buy or sell
investments  according to the Adviser's  appraisal of the factors  affecting the
market and the economy.  The portfolio  turnover rate of the Fund for the fiscal
years  ended  November  30,  1996,  1995,  and  1994  was  10%,  28%,  and  36%,
respectively.

                              PERFORMANCE DATA

Average  annual  Total  Return and Current  Yield  information  may be useful to
investors in reviewing the Fund's performance.  However,  certain factors should
be taken into account  before using the  information  as a basis for  comparison
with  alternative  investments.  No  adjustment  is made for  taxes  payable  on
distributions. The performance for any given past period is not an indication of
future rates of return or yield on its shares.

The  Fund's  total  return for the one year ended  November  30,  1996 was 4.66%
Average annual total return for the three year period through  November 30, 1996
was 5.53%,  for the five year  period  then ended  6.28% and for the period from
October 30, 1987 (inception of the Fund) through November 30, 1996, 6.70%.
    
Average  annual TOTAL RETURN  quotations  for various  periods  illustrated  are
computed by finding the average annual compounded rate of return over the period
quoted that would equate the initial  amount  invested to the ending  redeemable
value according to the following formula:
            P (1 + T)n   =   ERV

Where
            P = a  hypothetical  initial  Payment  of $1,000 T = average  annual
            Total  return n = Number of years ERV = Ending  Redeemable  Value of
            the $1,000 payment
                  made at the beginning of the period.

To solve for average Total Return, the formula is as follows:

            T  =  (ERV/P) 1/n  - 1

The Fund intends to advertise the tax exempt and/or taxable  equivalent yield to
investors.
   (a)The advertised  tax-exempt yield will be the dollar weighted average yield
      to maturity or call. In determining whether each security in the portfolio
      will use yield to maturity or yield to call, the lesser of the two will be
      selected.
   (b)In determining the advertised  taxable  equivalent yield the effective tax
      rate will first be calculated and so stated. It may include federal income
      tax,  state  income tax,  and federal  alternative  minimum tax as clearly
      defined in the ad. The advertised tax exempt portion

                                          11




<PAGE>
      of the  standardized  yield  will then be  divided  by the  inverse of the
      stated  effective tax rate and increased by any taxable yield to determine
      the taxable equivalent yield.

The Fund  utilizes the  following  procedures in  determining  yield.  The yield
calculation is based on a 30 day period and is computed by the following formula
using the compounded semi-annual APR:

      Nominal Yield = [ [ [ ( (a-b) / ( c*d ) ) + 1 ] -1 ] /30 ] * 360
   
      Compounded  Semi-Annual  APR = [ [ 1 + [ Nominal Yield / 2 ] ] 2 ] - 1 
Where: a = dividends and interest earned during the period; b = expenses accrued
for the period (net of  reimbursement);  c = the average  daily number of shares
outstanding during the period that were entitled to receive  dividends;  and d =
the maximum offering price per share  (equivalent to Net Asset Value for no-load
funds) on the last day of the period. The Fund's tax-exempt yield for the 30-day
period ended  November 30, 1996 was 4.74%.  The equivalent  after-tax  yield was
8.54% for Idaho  residents  with taxable  incomes of  $265,000,  based on a 1996
combined effective federal and Idaho tax rate of 44.5%. In advertising and sales
literature,  the Fund may  compare  its  performance  with that of other  mutual
funds,  indexes or averages of other mutual  funds,  indexes or data,  and other
competing  investment and deposit products.  The composition of these indexes or
averages differs from that of the Fund. Comparison of the Fund to an alternative
investment should be made with  consideration of the differences in features and
expected  performance of the  investments.  All of the indexes and averages
noted below will be obtained from the indicated  sources or reporting  services,
which the Trust  believes to be generally  accurate.  The Fund may also note its
mention or  recognition  in other  newspapers,  magazines  or media from time to
time. However, the Fund assumes no responsibility for the accuracy of such data.
Among the newspapers and magazines that might mention the Funds are: 


                   Barron's               Money
                   Business Week          Mutual Fund Letter
                   Changing Times         Morningstar
                   Consumer Reports       New York Times
                   Consumer Digest        Pensions and Investment
                   Financial World        USA Today
                   Forbes                 US News and World Report
                   Fortune                Wall Street Journal
                   Investors Daily
    
The  Fund  may  also  compare  itself  to the  Consumer  Price  Index,  a widely
recognized measure of inflation, and to other indexes and averages such as:

                                     12


<PAGE>
   

     Dow Jones  Industrials  New York stock Exchange  Composite Index Standard &
     Poor's 500 Stock Index American Stock Exchange  Composite  Index Standard &
     Poor's 400 Industrials  NASDAQ  Composite  Wilshire 5000 NASDAQ  Industrial
     Russell 2000 Lipper General Equity Fund Average Lipper Capital Appreciation
     Fund Lipper Equity Funds Average
           Average                      Lipper Growth & Income Fund Average
     Lipper Growth Funds Average        Lipper Balanced Fund Average
     Lipper Small Company Growth        Ibbotson Common Stocks Index
           Fund Average
     Lipper Equity Income Fund Average
     Morningstar Mutual Fund Indices
    
The indexes and averages are measures of  performance of stocks and mutual funds
that are classified, calculated and published by these independent services. The
Fund may also use  comparative  performance as computed in a ranking by these or
other independent services.

A Fund may also cite its  rating or other  mention  by  Morningstar  or  another
entity.   Morningstar's   ratings  are  based  on  risk-adjusted   total  return
performance,  as computed by Morningstar by subtracting the Fund's risk score as
computed by  Morningstar,  from the fund's total return  score.  This  numerical
score is then translated into rating categories.

                          MANAGEMENT OF THE TRUST

Information  concerning  Trustees and Officers of the Trust and their  principal
occupations for the past five years is shown below:
   
GARY A. GOLDFOGEL, MD - Trustee
            1500 N. State Street, Bellingham, WA 98225.
      Pathologist. Whatcom County Medical Examiner, Bellingham WA.

NICHOLAS    KAISER,  MBA,  CFA - President  and Trustee * 1300 N. State  Street,
            Bellingham, WA 98225.
      President of Saturna Capital  Corporation,  since July 1989.  President of
      Unified Management  Corporation,  Indianapolis IN, investment advisers and
      brokers, from 1976 through June 1989.

JOHN E. LOVE - Trustee
            Box 188, Garfield, Washington 99130
      Owner, J.E. Love Co., international  agricultural equipment manufacturer,
            Garfield, WA
      Director, Bank of Whitman, Colfax, Wash.
      Rear Admiral, U.S. Navy, Retired.

JOHN S. MOORE, PhD - Trustee
            College of Business and Economics, Western Washington University,
            Bellingham, WA 98225-9077
      Professor of Business Administration


                                     13


<PAGE>
PANDORA M. LARNER - Secretary
            1300 N. State Street, Bellingham, WA 98225.
      Saturna Capital Corporation, October 1996 to present.
      Medical supervisor, 1991 to 1993.
      Housewife, 1994 to 1995.
      Clothing sales representative, 1995 to Feb. 1996.
      Medical receptionist, Feb. 1996 to Sept. 1996.

TERESA K. ANDERSON, CMA.,  MBA - Treasurer
            1300 N. State Street, Bellingham, WA 98225.
      Assistant  Treasurer,  Saturna  Capital  Corporation,  December,  1993  to
            present.
      Full time student prior to 1993.
    

*  Nicholas  Kaiser is an  "interested  person"  of the Trust as  defined in the
Investment Company Act of 1940.

   
The Trust pays disinterested trustees $100  per meeting attended  and
reimbursement of travel expenses (pro-rata to each Fund). Mr. Kaiser receives no
compensation from the Trust,  nor are the other officers of the Trust paid for
their duties with the Trust.
<TABLE>
<CAPTION>

<S>                      <C>          <C>                <C>               <C>
                                      Pension or                           Total
                         Aggregate    Retirement                           Compensation
Name of                  Compensa-    Benefits Accrued   Estimated Annual  From Registrant
Person;                  tion From    As Part of Fund    Benefits Upon     and Fund Complex
POSITION                 REGISTRANT   EXPENSES           RETIREMENT        PAID TO DIRECTORS
GARY A. GOLDFOGEL        $400          $0                $0                $400
Trustee

JOHN E. LOVE,             400           0                 0                 400
Trustee

JOHN S. MOORE,            400           0                 0                 400
Trustee

NICHOLAS F. KAISER,         0           0                 0                   0
Trustee
    
</TABLE>
   
The Board has  authority to establish an Executive  Committee  with the power to
act on behalf of the Board  between  meetings  and to exercise all powers of the
Trustees  in the  management  of the  Trust.  No  Executive  Committee  has been
established at this time. An Audit  Committee,  consisting of the  disinterested
directors,  meets to select  the  independent  accountant  and  review all audit
reports.  As of February 12, 1997,  officers,  trustees and their  families as a
group owned no shares of the Fund.     


                                      14


<PAGE>
                      PRINCIPAL HOLDERS OF SECURITIES
   
As of February 12, 1997, no one person is known to own more than 5% of the fund.

                   INVESTMENT ADVISORY AND OTHER SERVICES

The Fund is  obligated  to pay Saturna  Capital  monthly an advisory  fee at the
annual rate of 0.50% of the average daily net assets up to $250  million,  0.40%
of assets between $250 million and $1 billion, and 0.30% of assets in excess of
 $1  billion.  Through  March 31,  1998,  Saturna is  voluntarily  obligated  to
reimburse the Fund monthly if  non-extraordinary  expenses exceed an annual rate
of 0.80% of  average  daily net asset  value,  subject  to  cancellation  by the
adviser on 30 days' notice. The Fund pays its own taxes,  brokerage  commissions
(if  any),  trustees'  fees,  legal and  accounting  fees,  insurance  premiums,
custodian,  transfer  agent,  registrar  and  dividend  disbursing  agent  fees,
expenses  incurred in complying with state and federal laws regulating the issue
and sale of its shares, and mailing and printing costs for prospectuses, reports
and  notices  to  shareowners.  The  Adviser,  at its own  expense  and  without
additional  cost to the Fund,  furnishes  office space,  office  facilities  and
equipment, personnel (including executive officers) and clerical and bookkeeping
services  required  to  conduct  the  business  of the  Fund.   The laws and
regulations  of various  states set expense  limitations  for mutual  funds as a
condition for registration to offer and sell shares in that state.  Usually, the
expense  limitation  requires  reimbursement  if,  and to the extent  that,  the
aggregate  operating expenses including the advisory fee but generally excluding
interest, taxes, brokerage commissions and extraordinary expenses, are in excess
of a  specified  percentage  of the  average net assets of a Fund for its fiscal
year.  The only state the adviser  believes  maintains an expense  limitation is
California,  which limits aggregate annual expenses (with exceptions) to 2.5% of
the first $30 million of average net assets, 2% of the next $70 million and 1.5%
of the remaining average net assets.
    
Saturna  Capital  Corporation  provides  services  as  the  transfer  agent  and
dividend-paying  agent for each Fund. As transfer  agent,  Saturna  furnishes to
each shareowner a statement after each transaction,  an historical  statement at
the end of each year showing all transactions during the year, and Form 1099 tax
forms. Saturna also, on behalf of the Trust, responds to shareowners'  questions
or  correspondence.  Further,  the transfer agent regularly  furnishes each Fund
with current  shareowner  lists and information  necessary to keep the shares in
balance  with the  Trust's  records.  The mailing of all  financial  statements,
notices and prospectuses to shareowners is performed by the transfer agent.
   
As compensation for services as transfer agent and dividend  disbursement agent,
the Fund pays Saturna an annual fee of $1.10 per month per  shareowner  account,
which the Trustees have  determined is no more than the cost of performing  such
services.  The Fund reimburses  Saturna for any out-of-pocket  expense for forms
and mailing costs used in performing  its  functions.  For the fiscal year ended
November 30, 1996, the Fund paid transfer agent fees of $4,232.
    
                                     15


<PAGE>
   
For the fiscal year ended November 30, 1996, the Fund paid $24,540 in investment
adviser and  administration  fees, of which the adviser waived $11,923.  For the
fiscal year ending  November 30, 1995, the Fund was required to pay $30,862,  of
which Saturna  Capital  waived  $14,048.  For fiscal year 1994,  the  comparable
figures were  $36,251 and $10,190.  National  City Bank,  Indianapolis,  Indiana
46255 is the custodian of the Fund's  securities and other assets. As custodian,
the bank holds in custody all  securities  and cash,  settles for all securities
transactions,  receives  money from sale of shares and on order of the Fund pays
the authorized expenses of the Fund. When Fund shares are redeemed by investors,
the proceeds are paid to the  shareowner by check drawn on the  custodian  bank.
Price  Waterhouse,  LLP,  1001 Fourth Avenue Plaza,  Seattle,  Washington  98154
served as the  independent  accountants for the Trust for the fiscal year ending
November 30, 1996. Tait,  Weller and Baker, Two Penn Center Plaza,  Philadelphia
PA 19102 have been appointed by the Trustees to serve as independent accountants
for the fiscal  year ending  November  30,  1997.  The  independent  accountants
conduct  the annual  audit of the Trust as of  November  30 and  prepare the tax
returns of the Fund.



                            BROKERAGE ALLOCATION

For fiscal years 1996,  1995, and 1994,  Idaho Tax-Exempt Fund paid no brokerage
commissions.
    
BROKERAGE POLICIES

The  placing  of  purchase  and  sale  orders  as  well  as the  negotiation  of
commissions, if any, is performed by the Adviser and is reviewed by the Board of
Trustees.  The  Adviser  may  allocate  brokerage  to any  broker in return  for
research or services  and for  selling  shares of the Fund.  Brokers may provide
research or statistical  material to the Adviser,  but this  information is only
supplemental to the research and other  statistics and material  accumulated and
maintained through the Adviser's own efforts. Any such supplemental  information
may or may not be of value or used in making  investment  decisions for the Fund
or any other account serviced by the Adviser.

The primary  consideration in effecting securities  transactions for the Fund is
to obtain the best price and  execution  which in the judgment of the Adviser is
attainable  at the time and  which  would  bring the best net  overall  economic
result to the Fund.  Factors  taken  into  account in the  selection  of brokers
include the price of the  security,  commissions  paid on the  transaction,  the
efficiency  and  cooperation  with  which  the  transaction  is  effected,   the
expediency of making settlement and the financial  strength and stability of the
broker. The Adviser may negotiate  commissions at a rate in excess of the amount
another  broker  would  have  charged  if it  determines  in good faith that the
overall net  economic  result is favorable  to the Fund.  The Adviser  evaluates
whether  brokerage  commissions are reasonable based upon available  information
about  the  general  level of  commissions  paid by  similar  mutual  funds  for
comparable services.

                                         16


<PAGE>
The Adviser's  subsidiary,  Investors  National  Corporation,  is qualified as a
broker-dealer  to engage in a general  brokerage  business.  Investors  National
Corporation  conducts all its  transactions  on an agency basis for  established
"deep  discount"  commissions;  it does not make  markets,  "deal," or  maintain
inventories of securities.  For brokerage  conducted through an affiliate of the
Adviser, the Trustees have adopted procedures reasonably designed to ensure that
any brokerage fees are reasonable and fair compared to remuneration  received by
other brokers in  comparable  transactions.  The Trustees are provided  detailed
quarterly monitoring reports and review the procedures at least annually.

          PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
                                 OFFERED

See  HOW TO BUY  SHARES,  HOW TO  REDEEM  SHARES  and  NET  ASSET  VALUE  in the
Prospectus for an explanation about the ways to purchase or redeem shares.

In addition to normal  purchases or redemptions,  the shares of each Fund may be
exchanged for shares of other Funds of Saturna  Investment Trust when additional
Funds are offered. Exchange will be made at no charge upon written request or by
telephone if the shareowner has previously  authorized  telephone  privileges on
the  application.  A gain or loss for federal tax purposes will be realized upon
redemption of any shares for the purposes of an exchange as described above.

Net asset value per share is determined by dividing the value of all  securities
and other assets, less liabilities, by the number of shares outstanding. The net
asset  value is  determined  for each Fund as of the close of trading on the New
York Stock Exchange (generally 4 p.m. New York time) on each day the Exchange is
open for  trading.  The  Exchange  is  generally  closed  on:  New  Year's  Day,
Washington's  Birthday/President's  Day, Good Friday, Memorial Day, Independence
Day (observance), Labor Day, Thanksgiving Day and Christmas Holiday.

                                 TAX STATUS

Saturna  Investment  Trust is organized  as a "series"  investment  company.  At
present  only the Fund and the  Sextant  Funds  are  offered,  but the Trust may
create in the future additional Funds with different investment objectives. Each
Fund is a separate  economic  entity with separate  assets and  liabilities  and
separate income streams.  The shareowners of each separate Fund may look only to
that  Fund  for  income,  capital  gain or  loss,  redemption,  liquidation,  or
termination.  Each Fund has separate  arrangements  with the Adviser.  Assets of
each Fund are segregated. The creditors and shareowners of each Fund are limited
to the assets of that Fund for recovery of charges,  expenses  and  liabilities.
Each Fund  conducts  separate  voting on issues  relating  solely to that  Fund,
except as  required  by the  Investment  Company  Act.  The tax  status  and tax
consequences  to shareowners  of each separate Fund will differ,  depending upon
the investment objectives,  operations,  income, gain or loss, and distributions
from each Fund.

Each Fund intends to  distribute  to  shareowners  substantially  all of its net
investment  income and net realized capital gains, if any, and to comply,  as it
has since inception, with the provisions of the Internal Revenue Code applicable
to regulated investment companies, which relieve the

                                         17


<PAGE>
Funds of federal income taxes on the amounts so  distributed.  The Fund declares
dividends  from  net  investment   tax-exempt  income  daily,  payable  at  each
month-end. Net investment taxable income, if any, is declared as a dividend only
at month-end. Distribution of any capital gains is made at the end of the fiscal
year in November.

The  amount of  investment  income  and  capital  gains,  if any,  which will be
available  for  distribution  by a Fund of the  Trust in the  future  cannot  be
predicted due to continually changing economic conditions and market prices.

Dividends  and  distributions  from  capital  gains are normally  reinvested  in
additional  full and fractional  shares of the Fund.  The shares  purchased with
dividends  or  capital  gains  distributions  may be  redeemed  using any of the
methods for redemption of shares.

Distributions  and dividends  may be subject to federal,  state and local taxes.
Shareowners  will be taxed  whether  the  shares  automatically  purchased  with
dividends  and  distributions  are  left  in the  Fund  or are  redeemed  by the
shareowner.

Interest  received  upon the  obligations  of the  State  of Idaho or  political
subdivisions  thereof are exempt from income tax in the State of Idaho. An Idaho
Income Tax  ruling  provides  a  pass-through  of the  tax-exempt  character  of
interest  received  by  a  regulated  investment  company,  such  as  the  Idaho
Tax-Exempt Fund, upon distribution to shareholders.

Shortly  after  the end of each  calendar  year  shareowners  are  mailed a Form
1099-DIV advising of the dividends paid the shareowner for the year.

If you do not furnish the  transfer  agent with a valid  Social  Security or Tax
Identification  Number and in certain  other  circumstances,  we are required to
withhold 31% of income from your account. Dividends distributions to shareowners
who are nonresident aliens may be subject to a 30% United States withholding tax
under the existing  provisions of the code applicable to foreign individuals and
entities  unless a reduced rate of  withholding  or a  withholding  exemption is
provided  under  applicable  treaty  law. If the IRS  determines  that the Trust
should be fined or penalized for  inaccurate or missing or otherwise  inadequate
reporting of a Tax  Identification  Number, the amount of the IRS fee or penalty
will be directly assessed to the shareowner account involved.

                            FINANCIAL STATEMENTS
   
The most recent audited annual report  accompanies  this Statement of Additional
Information.  The  financial  statements  and selected per share data and ratios
dated  November 30, 1996,  together with the report of  independent  accountants
dated  December 18, 1996,  are  considered a part of the Statement of Additional
Information and are incorporated by reference. 
    



                                       18

<PAGE>



                                  APPENDIX


                                BOND RATINGS

   
GENERAL. Moody's and S&P's ratings represent their opinions as to quality of the
municipal  bonds which they undertake (for a fee) to rate.  Such ratings are not
an absolute  standard of quality.  Consequently,  a municipal bond with the same
maturity,  coupon,  and ratings may have different  yields while municipal bonds
having the same maturity and coupon,  but with different  ratings,  may have the
same yield.
    
BOND RATINGS

MOODY'S       INVESTORS   SERVICES,   INC.,   describes  its  ratings  for  debt
              securities as follows:


      AAA     Bonds  which are rated  AAA are  judged to be of the best quality.
              They  carry  the  smallest degree  of  investment  risk  and  are
              generally  referred  to  as  "gilt  edge."  Interest payments  are
              protected  by  a  large,  or  exceptionally  stable  margin, and
              principal is secure.  While the various  protective  elements  are
              likely  to change,  such  changes  as can be  visualized  are most
              unlikely  to impair  the  fundamentally  strong  position  of such
              issues.

      AA      Bonds which are rated AA are  judged to be of high  quality by all
              standards.  Together with the Aaa group,  they  comprise  what are
              generally known as  high-grade  bonds.  They are rated  lower than
              the best bonds because margins of protection  may not be as large
              as in the Aaa securities or fluctuation of protective elements may
              be of greater  amplitude, or there may be other  elements  present
              which may make the long-term risks appear somewhat larger than the
              Aaa securities.

      A       Bonds  which  are  rated  A  possess  many  favorable   investment
              attributes  and  are  being   considered  as  upper   medium-grade
              obligations. Factors giving security to principal and interest are
              considered  adequate,  but elements may be present which suggest a
              susceptibility to impairment sometime in the future.


STANDARD & POOR'S describes its rating for debt securities as follows:


      AAA     Bonds  which are rated AAA have the  highest  rating  assigned  by
              Standard & Poor's. Capacity to repay interest and to pay principal
              is extremely strong.

                                        19


<PAGE>
      AA      Bonds  which  are  rated  AA have a very  strong  capacity  to pay
              interest and to repay principal,  and differ from the higher rated
              issues only in small degree.

      A       Bonds which are rated A have a strong capacity to pay interest and
              repay  principal,  although they are somewhat more  susceptible to
              the  adverse  effect of  changes  and  circumstances  in  economic
              conditions than bonds in higher rated categories.

NOTES

MOODY'S INVESTORS  SERVICES,  INC., describes its ratings for municipal notes as
              follows

      MIG-1   The MIG-1  designation  denotes  best  quality.  There is  present
              strong  protection by established cash flows,  superior  liquidity
              support,  or  demonstrated  broad-based  access to the  market for
              refinancing.

       MIG-2  The MIG-2  designation  denotes  high  quality,  with  margins for
              protection ample though not as large as that for MIG-1.

STANDARD & POOR'S describes its rating for municipal notes as follows:

      SP-1    The SP-1 rating  denotes a very  strong or strong  capacity to pay
              principal  and  interest.   Those  issues  determined  to  possess
              overwhelming  safety  characteristics  will be  given  a plus  (+)
              designation.

      SP-2    The SP-2 rating denotes a  satisfactory  capacity to pay principal
              and interest.

COMMERCIAL PAPER

MOODY'S INVESTORS SERVICES, INC., describes its ratings for commercial paper as
              follows

      PRIME-1 Issuers rated PRIME-1, or related supporting institutions,  have a
              superior   capacity  for   repayment  of   short-term   promissory
              obligations. Prime-1 repayment capacity will normally be evidenced
              by the following characteristics:  (i) Leading market positions in
              well-established  industries.  (ii)High  rates of  return on funds
              employed (iiiConservative  capitalization structures with moderate
              reliance on debt and a ample asset protection.  (iv) Broad margins
              in  earnings,  coverage  of  fixed  financial  charges,  and  high
              internal cash generation.  (v) Well-established  access to a range
              of financial markets and assured sources of alternate liquidity.

      PRIME-2 Issuers rated PRIME-2, or related supporting institutions,  have a
              strong   capacity   for   repayment   of   short-term   promissory
              obligations. This will

                                       20


<PAGE>
              normally  be  evidenced  by  many of the
              characteristics  cited  above,  but to a  lesser  degree.  Earning
              trends and coverage ratios,  while sound,  will be more subject to
              variation.    Capitalization    characteristics,    while    still
              appropriate,  may be more affected by external  conditions.  Ample
              alternate liquidity is maintained.

STANDARD & POOR'S describes its rating for commercial paper as follows:

      A-1     The A-1 designation  indicates that the degree of safety regarding
              timely  payment  is strong.  Those  issues  determined  to possess
              overwhelming  safety  characteristics  are denoted with a plus (+)
              designation.
      A-2     The A-2  designation  indicates  capacity  for  timely  payment is
              satisfactory.  However,  the  relative  degree of safety is not as
              high as for issues designated A-1.

Under  normal  market  conditions,  the Fund does not  anticipate  investing  in
Moody's  rated bonds below A or Moody's rated notes below MIG 2 or Moody's rated
commercial  paper  below  Prime-2.  Similarly,  the  Fund  does  not  anticipate
investing  in S&P rated bonds below A or S&P rated notes below SP-2 or S&P rated
commercial paper below A-2.

                                        21

<PAGE>



                                  PART C



                             OTHER INFORMATION



<PAGE>

FINANCIAL STATEMENTS AND EXHIBITS

(a)  Financial Statements
   
    There  is  incorporated  into  Part B of  this  Registration  Statement  the
    following financial  information in the Annual Report to shareowners for the
    fiscal year ended November 30, 1996:

        Report of Price Waterhouse LLP, Independent Accountants.
        For each portfolio of the Fund:
          Statement of Assets and Liabilities as of November 30, 1996. Statement
          of Operations - Year ended November 30, 1996.  Statement of Changes in
          Net Assets - years ended November
            30, 1995 and November 30, 1996.
          Investments - November 30, 1996.
          Financial Highlights
        Notes to Financial Statements

        Also incorporated by reference is the Discussion of Fund
        Performance (Unaudited) for each Fund of the Trust

        A copy of each of the Annual Reports for the Trust are
        included as Exhibits A-1 and A-2

     Included in Part C:

        Consent of Independent Accountants.
    
(b)  Exhibits included with this filing:+

(1)    *(a) Agreement and Declaration of Trust of Northwest Investors
       Tax-Exempt Business Trust, filed February 20, 1987 with
       Secretary
------------------------------

+Items marked with an asterisk (*) are  incorporated  by reference from exhibits
 previously filed.

                                   a




<PAGE>
       of State of Washington.  Incorporated by Reference.
       Filed as Exhibit No. 1 to initial filing of Form N-1A in
       1987.  File No. 33-13247.

       *(b) Articles of Amendment to the Declaration of Trust of
       Northwest Investors Trust, as adopted by resolution of the
       Board of Trustees on November 24, 1992, filed with the
       Secretary of State of Washington December 1, 1992.
       Incorporated by Reference.  Filed as Exhibit No. 1(b) to
       Amendment No. 8 to Form N-1A dated December 21, 1992.

       *(c) Articles of Amendment to the Declaration of Trust of
       Northwest Investors Trust, as adopted by resolution of the
       Board of Trustees on July 10, 1995. Incorporated by
       Reference.  Filed as Exhibit No. 1-3 to Amendment No. 13 to
       Form N-1A dated July 11, 1995.

       *(d) Articles of Amendment to the Declaration of Trust of
       Saturna Investment Trust, as adopted by vote of the
       shareholders on September 28, 1995. Filed as Exhibit No. 1-4
       to Amendment No. 14 to Form N-1A dated March 29, 1996.

(2)*   Bylaws of Northwest Investors Trust, adopted by the Board of
       Trustees, July 21, 1992. Incorporated by Reference.  Filed as
       Exhibit No. 2 to Amendment No. 8 to Form N-1A dated December
       21, 1992.

(3)    Not applicable.

(4)    Not applicable.

(5)    *(a) Investment Advisory and Administrative Services Agreement
       for the series Sextant International Fund of Saturna
       Investment Trust, as approved by the Board of Trustees on July
       10, 1995 and shareholders on September 28, 1995.  Filed as
       Exhibit No. 5-1 to Amendment No. 14 to Form N-1A dated March
       29, 1996.
   
       *(b) Investment Advisory and Administrative Services Agreement
       for the series Sextant Growth Fund of Saturna Investment
       Trust, as approved by the Board of Trustees on July 10, 1995
       and shareholders on September 28, 1995.  Filed as Exhibit No.
       5-2 to Amendment No. 14 to Form N-1A dated March 29, 1996.
    
       *(c) Investment Advisory and Administrative Services Agreement
       for the series Sextant Bond Income Fund of Saturna Investment
       Trust, as approved by the Board of Trustees on July 10, 1995
       and shareholders on September 28, 1995.  Filed as Exhibit No.
       5-3 to Amendment No. 14 to Form N-1A dated March 29, 1996.

       *(d) Investment  Advisory and  Administrative  Services Agreement for the
       series  Sextant  Short-Term  Bond Fund of Saturna  Investment  Trust,  as
       approved by the Board of Trustees on July 10, 1995 and

                                    b


<PAGE>
   
       shareholders on September 28, 1995. Filed as
       Exhibit No. 5-4 to Amendment No. 14 to Form N-1A dated March
       29, 1996.
    
(6)    Not applicable.

(7)    Not applicable.
   
(8)*   Form of Custodian Agreement for each series of the Trust,
       between the Trust and National City Bank, Indiana.  Filed as
       Exhibit No. 8-1 to Amendment No. 14 to Form N-1A dated March
       29, 1996.
    
(9)*   Transfer Agent Agreement for the Northwest Investors Trust
       between the Trust and Saturna Capital Corporation, dated
       October 12.  Filed as Exhibit C to Proxy Statement dated
       September 21, 1990.  File No. 33-13247.

                                     c


<PAGE>
(10)   *(a) Opinion of Counsel dated 1987.  Incorporated by
       Reference.  Filed as Exhibit to initial filing of Form N-1A in
       1987.  File No. 33-13247.

       *(b) Opinion for Washington Tax-Exempt series. Incorporated by
       Reference.  Filed as Exhibit No. 10-2 to Amendment No. 8 to
       Form N-1A dated December 21, 1992.

       *(c) Opinion of Counsel of Barnes & Thornburg.  Filed as
       Exhibit 10-3 to Amendment No. 13 to Form N-1A dated July 11,
       1995

(11)   (a) Consent of Price Waterhouse LLP, Independent Auditors.
       Filed as Exhibit 11-1.

       (b) Copies of Powers of Attorney of Trustees of Saturna  Investment Trust
       attached as Exhibit 11-2.

(12)   Not applicable.

(13)   Not applicable.

(14)*  (a) Prototype Paired Defined Contribution Money Purchase
       Pension and Profit Sharing Plan. Filed as Exhibit No. 14-1 to
       Amendment No. 7 to for N-1A in 1992. File No. 33-13247.

       (b) Defined Contribution Trust, Filed as Exhibit No. 14-2 to
       Amendment No. 7 to for N-1A in 1992. File No. 33-13247.

       (c) Money Purchase Pension Adoption Agreement, Filed as
       Exhibit No. 14-3 to Amendment No. 7 to for N-1A in 1992.
       File No. 33-13247.

       (d) Profit Sharing Adoption Agreement, Filed as Exhibit No.
       14-4 to Amendment No. 7 to for N-1A in 1992. File No.
       33-13247.

                                        d


<PAGE>
(15)   Not applicable.

(16)   Computation of Performance.
   
       The  Average  Annual  Total  Return  since  the  inception  of the  Idaho
       Tax-Exempt  Fund through  November 30, 1996 is computed to be 6.70%,  for
       Sextant  Growth Fund  7.41%,  for  Sextant  Bond  Income Fund 4.23%,  for
       Sextant International Fund 15.09%, and for Sextant Short-Term Bond Fund
       5.06%.
    
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

No person or persons are directly or  indirectly  controlled  by or under common
control with the Registrant.

                                        e

<PAGE>


NUMBER OF HOLDERS OF SECURITIES
   
As of February  13, 1997 the  following  information  is  furnished  for Saturna
Investment Trust:
          (1)                      (2)
     TITLE OF CLASS           NUMBER OF RECORD HOLDERS

Shares                        43  Sextant Bond Income Fund
                              54  Sextant Short-Term Bond Fund
                             159  Sextant Growth Fund
                              47  Sextant International Fund
                             247  Idaho Tax-Exempt Fund
    
INDEMNIFICATION

There is no provision  for  indemnification  of the officers and trustees of the
Trust  except as provided  the  Agreement  and  Declaration  of Trust of Saturna
Investment  Trust,  which  provisions  are set forth below.  The  provisions  of
Article IV, Section 1 and Article XI of Trust of the Registrant previously filed
as  Exhibit  1  to  this  Registration  Statement  are  incorporated  herein  by
reference.

   In the  performance  of his  duties as  Trustee,  each  Trustee  shall not be
   personally  liable to the Trust or its shareowners  for any monetary  damages
   for any breach of duty as a Trustee,  provided that this limitation shall not
   be construed  as limiting the  liability of the Trustee for (l) any breach of
   the Trustee's  duty of loyalty to the Trust or its  shareowners,  (2) acts or
   omissions  not in good  faith  or which  involve  intentional  misconduct  or
   knowing  violation  of law,  (3) for the  unlawful  payment of  dividends  or
   redemption  of shares,  or (4) for any  transaction  from  which the  Trustee
   derives an improper personal benefit.

                                       f


<PAGE>
   The Trustees,  officers, employees and agents of the Trust are indemnified by
   the Trust for the fines, judgments and costs of suit, with respect to actions
   brought against them in their capacity as agents of the Trust or against them
   on behalf of the Trust. However, no Trustee or officer will be protected from
   liability for acts of willful  misfeasance,  bad faith,  gross  negligence or
   reckless disregard of the duties involved in the conduct of his office.

   The Trust may  purchase  and  maintain  insurance on behalf of any current or
   past  Trustee,  officer,  agent or employee  against any  liability  asserted
   against such person or incurred by him by reason of such  capacity or status,
   provided,  that no such  insurance may be maintained if such would  indemnify
   such person for willful misfeasance,  bad faith, gross negligence or reckless
   disregard of the duties involved in the conduct of his office.

   The Trustees, officers and agents of the Trust have no power to bind any past
   or  present  shareowner  to any Fund of the Trust  solely by reason  that the
   shareowner  is an owner of the  beneficial  interest  in any Fund.  Each such
   shareowner  shall be  entitled  to  indemnification  from the  Trust  for any
   recovery  against  him  solely  by  reason of his  capacity  and  status as a
   shareowner.

   The Trustees may provide in agreements of the Trust provisions setting forth,
   to the extent  considered  necessary,  the  limitations of liabilities of the
   Trust to the assets of  shareowners,  officers,  agents and  employees of the
   Trust. The Investment Advisory Agreement,  Distribution Agreement,  Custodian
   Agreement and Transfer Agent agreement of the Trust contain such a provision.

   Insofar as indemnification  for liability arising under the Securities Act of
   1933 may be permitted to Directors,  officers and  controlling  person of the
   Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
   has been advised that in the opinion of the Securities

                                        g


<PAGE>
   and  Exchange
   Commission such  indemnification is against public policy as expressed in the
   Act  and  is,  therefore,  unenforceable.  In  the  event  that a  claim  for
   indemnification  against  such  liabilities  (other  than the  payment by the
   Registrant of expenses incurred or paid by a Director, officer or controlling
   person of the  Registrant in the  successful  defense of any action,  suit or
   proceeding)  is asserted by such Director,  officer or controlling  person in
   connection with the securities being registered,  the Registrant will, unless
   in the  opinion of its  counsel  the matter has been  settled by  controlling
   precedent, submit to a court of appropriate jurisdiction the question whether
   such  indemnification  by it is against public policy as expressed in the Act
   and will be governed by the final adjudication of such issue.

BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

The answer to this item is disclosed in Part A and Part B of the Form N-1A under
"Management of the Trust."

PRINCIPAL UNDERWRITERS
   
Investors National  Corporation,  1300 N. State Street,  Bellingham,  Washington
98225,  a  wholly-owned  subsidiary  of  Saturna  Capital  Corporation,  acts as
distributor  for  the  Funds  without  compensation.  The  primary  business  of
Investors National Corporation is retail discount brokerage.  As of February 10,
1997,   Investors  National  Corporation  owned  33,898.579  shares  of  Sextant
Short-Term  Bond Fund,  and  5,433.968  shares of Sextant Bond Income Fund.  The
following  table sets  forth  information  with  respect  to each  director  and
executive officer of Investors National Corporation. 
    

                                      h



<PAGE>
<TABLE>
<CAPTION>
   
<S>                      <C>                      <C>

Name and Principal       Positions and Offices    Positions and Offices
BUSINESS ADDRESS            WITH DISTRIBUTOR         WITH REGISTRANT
------------------       ---------------------    ---------------------
Nicholas Kaiser          Director & President          President, Trustee
1300 State St.
Bellingham WA 98225

Meredith Ross            Director & Vice President
1300 State St.           & Secretary
Bellingham WA 98225

Phelps McIlvaine         Director & Treasurer          Vice President
1300 State St.
Bellingham WA 98225
    
</TABLE>

LOCATION OF ACCOUNTS AND RECORDS
   
With the  exception of those  records  maintained  by the  Custodian  bank,  all
records  of the  Trust  are  physically  in the  possession  of  the  Trust  and
maintained at the offices of Saturna Capital Corporation,  1300 N. State Street,
Bellingham, Washington 98225.
    
MANAGEMENT SERVICES

There are no  management-related  contracts in which  service is provided to the
Trust other than those discussed in Parts A and B of this Form N-1A.

UNDERTAKINGS

The Fund hereby  undertakes  pursuant to Section 16(c) of the 1940 Act, that, in
the event of shareholder  application  pursuant to such Section,  it will assist
such shareholders as set forth in such Section.

                                     i

<PAGE>

The Fund  hereby  undertakes  to furnish  each  person to whom a  prospectus  is
delivered with a copy of the Fund's latest annual report to  shareholders,  upon
request and without charge.

                                     j



<PAGE>

                             SIGNATURES
   

Pursuant to the  requirements  of the  Securities Act of 1933 and the Investment
Company  Act  of  1940  the   Registrant  has  duly  caused  this  Amendment  to
Registration  Statement  to be duly  signed  on its  behalf  by the  undersigned
thereunto duly authorized in the City of Bellingham, State of Washington, on the
19th day of March,  1997.  Registrant  further represents that this Amendment is
filed  solely for one or more of the purposes  specified in paragraph  (b)(1) of
Rule 485 and that the Amendment meets applicable conditions set forth therein.

                    SATURNA INVESTMENT TRUST

                    By   /S/ NICHOLAS F. KAISER
                         ----------------------------
                         Nicholas F. Kaiser, President

      Pursuant  to the  requirements  of the  Securities  Act of  1933  and  the
Investment  Company Act of 1940,  this Amendment to  Registration  Statement has
been signed below by the  following  persons in the  capacities  and on the date
indicated.

 SIGNATURE              TITLE                    DATE
----------              ---------------          ------------------
/S/ NICHOLAS F. KAISER  President                 MARCH 19, 1997
----------------------  (principal Executive     ------------------
   Nicholas F. Kaiser   Officer); Trustee


/S/TERESA K. ANDERSON   Treasurer                 MARCH 19, 1997
---------------------   (principal Financial     ------------------
   Teresa K. Anderson   Officer)


** Gary Goldfogel      All other Trustees         MARCH 19, 1997
** John E. Love                                  ------------------
** John S. Moore
**

    
     **   By/S/ NICHOLAS F. KAISER
               Nicholas F. Kaiser, President,
               Attorney-in-fact