File  No.    33-13247


SECURITIES  AND  EXCHANGE  COMMISSION
WASHINGTON,  D.C.    20549

FORM  N-1A

REGISTRATION  STATEMENT  UNDER
THE  SECURITIES  ACT  OF  1933
POST-EFFECTIVE  AMENDMENT  NO.  16

REGISTRATION  STATEMENT  UNDER
THE  INVESTMENT  COMPANY  ACT  OF  1940
POST-EFFECTIVE  AMENDMENT  NO.  16

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

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

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

Pandora  Larner
1300  North  State  Street
Bellingham,  Washington  98225-4730
(Name  and  Address  of  Agent  for  Service)

It is proposed that this filing will become effective:  ______  Immediately upon
filing  pursuant to paragraph  (b) of rule 485 ___X__ on March 26, 1998 pursuant
to paragraph (b) of Rule 485
------
______  60  days  after  filing  pursuant  to  paragraph  (a)(1)  of  Rule 485
______  on  _______pursuant  to  paragraph  (a)(1)  of  rule  485
______  75  days  after  filing  pursuant  to  paragraph  (a)(2)  of  Rule 485
___            _    on                pursuant to paragraph (a)(2) of rule 485
---          ---

If appropriate, check the following box:
____  this  post-effective  amendment  designates  a new  effective  date  for a
previously filed post-effective amendment.

The above  issuer  has  registered  an  indefinite  number  of shares  under the
Securities Act of 1933 pursuant to Rule 24f-2 of the  Investment  Company Act of
1940.  No filing  fee is due  because  of  reliance  on Rule  24f-2.  The Notice
required by such Rule for the fiscal year ended  November  30, 1997 was filed on
February 11, 1998. <PAGE>

                         CROSS  REFERENCE  SHEET

 PART  A                                                   PROSPECTUS CAPTIONS
 -------                                                   -------------------

1.    Cover  Page                                             About the Trust;
                                    Expenses

2.    Synopsis                                                    Not Required

3.    Condensed  Financial Information          Expenses; Financial Highlights

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

5.    Management  of  the  Fund                              Trust Management,
                                                          Investment  Adviser

6.    Capital  Stock  and  Other  Securities          Capital Stock; Dividends

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

8.    Redemption  or  Repurchase                          How to Redeem Shares

9.    Pending  Legal  Proceedings                               Not Applicable

                             STATEMENT OF ADDITIONAL
                                                     -------------------------
PART  B                                                   INFORMATION CAPTIONS
-------                                                   --------------------

10.    Cover  Page                                                  Cover Page

11.    Table  of  Contents                                   Table of Contents

12.   General Information and History          General Information and History
<PAGE>



13.    Investment  Objectives  &  Policies               Investment Objectives
                                                                and  Policies;
                                                          Portfolio  Turnover;
                            Investment Considerations


14.    Management  of  the  Registrant                 Management of the Trust

15.    Control  Persons  and  Principal                   Principal Holders of
Securities
            Holders  of  Securities

16.    Investment  Advisory  and  Other                    Investment Advisory
          Services                                          and Other Services

17.    Brokerage  Allocation  and  Other                  Brokerage Allocation
           Practices                                        Portfolio Turnover

18.    Capital  Stock  and  Other  Securities                   Not Applicable

19.    Purchase,  Redemptions  and  Pricing           Purchase, Redemption and
          of  Securities  Being  Offered                 Pricing of Securities
                                        Being  Offered

20.    Tax  Status                                                  Tax Status

21.    Underwriters                                             Not Applicable

22.    Calculations  of  Performance  Data                    Performance Data

23.    Financial  Statements                              Financial Statements
<PAGE>














PART  A


PROSPECTUS



<PAGE>
SATURNA  INVESTMENT  TRUST  OFFERS  FOUR
 NO-LOAD  SEXTANT  FUNDS:
SEXTANT GROWTH FUND seeks  long-term  growth through  investment in U.S.  common
stocks SEXTANT  INTERNATIONAL  FUND seeks long-term growth through investment in
foreign stocks SEXTANT  SHORT-TERM BOND FUND seeks capital  stability and a high
level of current income by investing in short-term debt securities  SEXTANT BOND
INCOME FUND seeks a high level of current  income by investing in long-term debt
securities

You should read this Prospectus before  invest-ing in the Funds.  Please read it
carefully  and  keep  it  for  future  reference.   A  Statement  of  Additional
Information  dated March 26, 1998,  was filed with the  Securities  and Exchange
Commission and is incorporated by reference into this Prospectus. You may obtain
a  free  copy  at  the  SEC  website   (www.sec.gov)   or  the  Saturna  website
(www.saturna.com), or by contacting:

Saturna  Capital
1300  N.  State  Street
Bellingham,  WA  98225
800/  SATURNA    [800/  728-8762]
E-MAIL:  SEXTANT@SATURNA.COM
   

Neither  the  Securities  and  Exchange  Commission  nor  any state securities
commission has approved or disap-proved of these securities or passed upon the
adequacy  or  accuracy of this prospectus.  Any representation to the contrary
is  a  criminal  offense.
    
Sextant  Mutual  Funds
(Graphic  Omitted)



From
(Graphic  Omitted)
SATURNA  CAPITAL
Mutual  Funds


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


PROSPECTUS
March  26,  1998
<PAGE>
                                       2
Expenses
The table  illustrates each Fund's operating  expenses for the fiscal year ended
Nov. 30, 1997. The Sextant Funds impose no sales load on purchases or reinvested
dividends,  no "12b-1" fees, nor any deferred sales load upon redemption.  There
are no redemption fees or exchange fees.

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

<CAPTION>

   

                                      Sextant         Sextant          Sextant          Sextant
                                      Growth          International    Short-Term       Bond Income
                                      Fund            Fund             Bond  Fund       Fund
                                      ----            ----             ----------       ----


<S>                                   <C>             <C>              <C>              <C>


Advisory fee (1) (after waivers) (2)  0.61%            0.90%            0.21%           0.00%
12b-1 Expenses                        NONE             NONE             NONE            NONE
Other Expenses                        0.43%            0.61%            0.39%           0.47%
Total Fund Operating Expenses         1.04%            1.51%            0.60%           0.47%
</TABLE>



<TABLE>

<CAPTION>

FOR  EXAMPLE:


<S>                          <C>         <C>   <C>   <C>  <C>

Each Fund estimates paying    1 year --  $ 11  $ 16  $ 6  $ 6
these expenses on a $1,000    3 years--  $ 34  $ 50  $20  $20
investment, assuming a 5%     5 years--  $ 60  $ 88  $35  $35
net annual return:           10 years--  $137  $199  $79  $79

<FN>

(1)  Each Sextant Fund pays an Investment Advisory and Administrative Services
Fee  of  0.60%  annually.    This  fee  is
 then  subject  to  a  performance  adjustment (plus or minus) of up to 0.30%.
 (2)  The Adviser voluntarily waives its advisory fee to limit the expenses of
the two Sextant bond funds to 0.60% annually  through March 31, 1999.  Moreover,
it waives  its bond fund fee  entirely  when  assets  are less than $2  million.
Earn-ings  credits allow the Funds'  custodian to waive fees for all four Funds.
Without these limitations and with the maxi-mum performance adjustment, Advisory
fees of the bond  Funds  might be as high as  0.80%,  and Total  Fund  Operating
Expenses  1.20%.  The example  assumes a continuation  of the most recent year's
fees and limits for the 3, 5 and 10 year periods. 
</FN> 
</TABLE>



THIS  INFORMATION  IS TO HELP  YOU  UNDERSTAND  THE  VARIOUS  (BOTH  DIRECT  AND
INDIRECT) EXPENSES THAT AN INVESTOR BEARS. THIS TABLE IS NOT A REPRESENTATION OF
PAST OR FUTURE  EXPENSES.  ACTUAL  EXPENSES  ARE  LIKELY TO BE MORE OR LESS THAN
THOSE SHOWN. SEE FINANCIAL  HIGHLIGHTS AND INVESTMENT ADVISER FOR MORE DETAILS.
    
 <PAGE>
Financial Highlights
    

Selected data for a share of each of
the SEXTANT FUNDS follows.  These schedules for the year ended November 30, 1997
were audited by Tait, Weller & Baker, LLP, independent accountants, whose report
is  included  in the  Sextant  Mutual  Funds'  Annual  Report  (incorporated  by
reference into the Statement of Additional  Information).  Other auditors, whose
reports expressed unqualified opinions, audited prior year financial statements.
These schedules should be read with the other financial  statements and notes in
the Annual Report (available without charge from the Trust), which also includes
management's discussion of each Fund's performance.



(GRAPHIC  OMITTED)
SEXTANT  INTERNATIONAL  FUND

Selected data per share  outstanding  from September 28, 1995  (commencement  of
operations) through November 30, 1997.
<TABLE>

<CAPTION>


<S>                                                               <C>             <C>             <C>

-                                                                             -               -   Sept. 28, '95
-                                                                 Year Ended      Year Ended          (Inception)
                                                                                                  to
-                                                                 Nov. 30, '97    Nov. 30, '96    Nov. 30, '95
                                                                  --------------  --------------  ---------------
NET ASSET VALUE AT BEGINNING OF PERIOD                            $        5.87   $        4.99   $         5.00
                                                                  --------------  --------------  ---------------
    INCOME FROM INVESTMENT OPERATIONS
Net investment income                                                      0.06            0.03            (0.02)
Net gains or losses on securities (both realized and unrealized)           0.74            0.88             0.01
                                                                  --------------  --------------  ---------------
Total from investment operations                                           0.80            0.91            (0.01)
                                                                  --------------  --------------  ---------------
LESS DISTRIBUTIONS
Dividends (from net investment income)                                    (0.06)          (0.03)            0.00
Distributions (from capital gains)                                         0.00            0.00             0.00
                                                                  --------------  --------------  ---------------
Total distributions                                                       (0.06)          (0.03)            0.00
                                                                  --------------  --------------  ---------------
NET ASSET VALUE AT END OF PERIOD                                  $        6.61   $        5.87   $         4.99
                                                                  ==============  ==============  ===============
TOTAL RETURN                                                              13.58%          18.16%          (0.20)%
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------
Net assets ($000), end of period                                  $         881   $         695   $          328
Ratio of expenses to average net assets                                    1.51%           1.80%            0.49%
Ratio of net investment income to average net assets                       0.93%           0.60%          (0.38)%
Portfolio turnover rate                                                       9%             11%              12%
Average commission rate paid                                      $      0.0890   $      0.0827   $       0.0192

<FN>

 For the above periods,  all or a portion of the operating expenses were waived.
If costs had not been have waived and directly assumed,  the resulting  increase
to  expenses  per  share in the  period  would  have been  $.00,  $.03 and $.01,
respectively.  The  increase  to the ratio of  expenses  to average  monthly net
assets would be .00%, .50% and .21 %, respectively.

                                        *  not  annualized
</FN>

    
</TABLE>


2
<PAGE>
<PAGE>
(Graphic  omitted)
SEXTANT  GROWTH  FUND

Selected data per share outstanding throughout the year.

Note  that  the data  prior  to Sept.  28,  1995,  when the fund  operated  with
different investment objectives and fee arrangements, may not be meaningful.

   
<TABLE>

<CAPTION>




<S>                                 <C>      <C>      <C>       <C>       <C>      <C>      <C>      <C>      <C>      <C>

-                                     1997     1996      1995      1994     1993     1992     1991     1990     1989     1988
                                    -------  -------  --------  --------  -------  -------  -------  -------  -------  -------
NET ASSET VALUE AT BEGINNING        $ 7.92   $ 7.42   $  5.82   $  6.38   $ 5.93   $ 5.55   $ 4.93   $ 4.88   $ 4.88   $ 4.96
OF YEAR
INCOME FROM INVESTMENT OPERATIONS
Net investment income                (0.01)    0.00     (0.03)    (0.03)    0.01     0.01     0.04     0.27     0.28     0.30
Net gains or losses on securities
(both realized and unrealized)        2.41     0.50      1.82     (0.53)    0.45     0.38     0.60     0.01     0.00    (0.08)
                                    -------  -------  --------  --------  -------  -------  -------  -------  -------  -------
Total From Investment Operations      2.40     0.50      1.79     (0.56)    0.46     0.39     0.64     0.28     0.28     0.22
LESS DISTRIBUTIONS
Dividends (from net investment
income)                              (0.01)    0.00      0.00      0.00    (0.01)   (0.01)   (0.02)   (0.23)   (0.28)   (0.30)
Distributions (from capital gains)   (0.73)    0.00     (0.19)     0.00     0.00     0.00     0.00     0.00     0.00     0.00
                                    -------  -------  --------  --------  -------  -------  -------  -------  -------  -------
Total Distributions                  (0.74)    0.00     (0.19)     0.00    (0.01)   (0.01)   (0.02)   (0.23)   (0.28)   (0.30)
NET ASSET VALUE AT END
OF YEAR                             $ 9.58   $ 7.92   $  7.42   $  5.82   $ 6.38   $ 5.93   $ 5.55   $ 4.93   $ 4.88   $ 4.88
                                    =======  =======  ========  ========  =======  =======  =======  =======  =======  =======
TOTAL RETURN                         30.30%    6.74%    30.76%   (8.78)%    7.76%    7.01%   11.79%    7.37%    5.22%    5.12%
RATIOS/SUPPLEMENTAL DATA
----------------------------------
Net assets ($000), end of year      $2,188   $1,616   $ 1,137   $ 1,010   $1,425   $1,321   $  947   $   53   $1,356   $1,365
Ratio of expenses to average
net assets                            1.04%    0.95%     1.63%     1.50%    1.40%    1.60%    1.93%    1.06%    0.89%    0.25%
Ratio of net investment income       -0.12%    0.01%   (0.45)%   (0.43)%    0.15%    0.17%    0.60%    5.25%    5.60%    5.86%
to average net assets                   25%      32%       40%       12%      25%      46%      16%      29%      19%      20%
Portfolio turnover rate             $.0487   $.0458   $ .0572

<FN>
  For 1995 and for each of the above the years  prior to 1993,  all or a portion
of the operating  expenses were waived. If these costs had not been waived,  the
resulting  increase to expenses  per share in each of these years would be $.01,
$.01, $.05, .$.05,  $.10,  and$.16,  respectively.  The increase to the ratio of
expenses  to average  net assets  would have been 0.18%,  0.21%,  0.76%,  1.02%,
1.28%, and 2.02%, respectively. </FN>

</TABLE>

    
3
<PAGE>

(GRAPHIC  OMITTED)

<TABLE>

<CAPTION>

   
SEXTANT  BOND  INCOME  FUND
Selected data per share outstanding throughout each period.



                                                                                                3/1/93
                                                            Year Ended November 30,     (Inception) to
                                                            -----------------------


<S>                                                    <C>      <C>      <C>      <C>       <C>

-                                                        1997     1996     1995      1994    11/30/93
                                                       -------  -------  -------  --------  ----------
NET ASSET VALUE AT BEGINNING
OF PERIOD                                              $ 4.76   $ 4.91   $ 4.39   $  5.03   $    5.00
                                                       -------  -------  -------  --------  ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income                                    0.30     0.30     0.24      0.25        0.16
Net gains or losses on securities
(both realized and unrealized)                           0.07    (0.12)    0.52     (0.64)       0.04
                                                       -------  -------  -------  --------  ----------
Total From Investment Operations
LESS DISTRIBUTIONS
Dividends (from net investment income)                  (0.30)   (0.30)   (0.24)    (0.25)      (0.17)
Distributions (from capital gains)                       0.00    (0.03)    0.00      0.00       (0.00)
                                                       -------  -------  -------  --------  ----------
Total Distributions
NET ASSET VALUE AT END OF PERIOD                       $ 4.83   $ 4.76   $ 4.91   $  4.39   $    5.03
                                                       =======  =======  =======  ========  ==========
TOTAL RETURN                                             8.24%    4.04%   17.69%   (8.24)%       4.86%
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------
Net assets ($000), end of period                       $1,092   $1,201   $1,096   $ 1,456   $   1,662
Ratio of expenses to average net assets                  0.47%    0.63%    0.54%     0.41%       0.35%
Ratio of net investment income to average net assets     6.85%    5.96%    5.15%     5.48%       3.28%
Portfolio turnover rate                                    51%      75%      77%       74%         36%

<FN>

  For each of the above periods, all or a portion of the operating expenses were
waived. If these costs had not been waived, the resulting  increases to expenses
per share in each of the above periods would be $.03, $.03, $.22, $.13,and $.03,
respectively.  The  increase  to the ratio of  expenses  to average  monthly net
assets would be .63%, .70%, .60%, .51%, and 26%, respectively.
</FN>
    
</TABLE>

SEXTANT  SHORT-TERM  BOND  FUND
Selected  data  per  share  outstanding  throughout  the  period.
(GRAPHIC  OMITTED)
<TABLE>

<CAPTION>



<S>                                                               <C>             <C>             <C>

-                                                                             -               -   Sept. 28, '95
-                                                                 Year Ended      Year Ended          (Inception)
                                                                                                  to
-                                                                 Nov. 30, '97    Nov. 30, '96    Nov. 30, '95
                                                                  --------------  --------------  ---------------
NET ASSET VALUE AT BEGINNING OF PERIOD                            $        5.00   $        5.03   $         5.00
                                                                  --------------  --------------  ---------------
    INCOME FROM INVESTMENT OPERATIONS                                      0.27            0.25             0.03
Net investment income
Net gains or losses on securities (both realized and unrealized)          (0.01)          (0.03)            0.03
                                                                  --------------  --------------  ---------------
Total from investment operations                                           0.26            0.22             0.06
                                                                  --------------  --------------  ---------------
LESS DISTRIBUTIONS
Dividends (from net investment income)                                    (0.27)          (0.25)           (0.03)
Distributions (from capital gains)                                         0.00            0.00             0.00
                                                                  --------------  --------------  ---------------
Total distributions                                                       (0.27)          (0.25)           (0.03)
                                                                  --------------  --------------  ---------------
NET ASSET VALUE AT END OF PERIOD                                  $        4.99   $        5.00   $         5.03
                                                                  ==============  ==============  ===============
TOTAL RETURN
RATIOS/SUPPLEMENTAL DATA                                                   5.44%           4.85%            1.05%
----------------------------------------------------------------
Net assets ($000), end of period                                  $       2,508   $       2,016   $          878
Ratio of expenses to average net assets                                    0.60%           0.85%            0.23%
Ratio of net investment income to average net assets                       5.58%           6.30%            0.68%
Portfolio turnover rate                                                      47%            100%               0%
<FN>
  For the above periods, all or a portion of the operating expenses were waived.
If expenses had not been waived, the resulting increase to expenses per share in
the periods would have been $.02, $.02 and $.007, respectively.  The increase to
the ratio of expenses  to average  monthly  net assets  would be .40%,  .52% and
 .16%, respectively
</FN>
</TABLE>


4
<PAGE>
About  the  Sextant  Funds
The Sextant Funds provide basic elements in a balanced investment  program.  The
Funds  are  "no-load"  funds,  meaning  that  there  are no sales or  redemption
charges, nor do the Funds have any "12b-1" charges.

The SEXTANT GROWTH FUND and SEXTANT  INTER-NATIONAL  FUND seek long-term growth.
GROWTH FUND pursues its objective through  investment in common stocks and other
equity-type  secu-rities,  principally of U.S. issuers. The INTERNA-TIONAL FUND,
by contrast,  invests  pri-marily in a diversified  portfolio of foreign  common
stocks and other equity-type securi-ties.

SHORT-TERM  BOND FUND seeks to preserve  capital by investing in short-term debt
securi-ties. BOND INCOME FUND, which invests in longer-term debt securities, has
the potential for greater income but the risk of greater price fluctuation. Both
seek a high level of current income.

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

You purchase  shares without any sales charge or "load."  Because no charges are
deducted,  the entire  amount you pay for  shares is  in-vested  in the Fund you
choose.  Investment  Objectives and Policies SEXTANT GROWTH FUND seeks long-term
capital  appreciation.  The Fund invests primarily in a diversified portfolio of
U.S. common stocks,  securities  convertible  into common stocks,  and preferred
stocks.  It also may invest in other securities suited for the Fund's investment
objective.  It may invest in securities of smaller or newer companies as well as
those of  well-seasoned  companies  of any size.  The Fund is not  designed  for
investors  seeking  current income,  and does not ordinarily  invest in straight
debt  securities.  The policy of investing  for long-term  capital  appreciation
requires shareholder approval to change.

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

The Fund  diversifies  its  investments  among  several  countries  and does not
concentrate  in  any  particular  industry.  The  Fund  varies  its  investments
geographically  and by type of  securities  in  which  it  invests  based on the
ad-viser's  evaluation of economic,  market, and political trends throughout the
world. The adviser considers the relative  political and economic stability of a
company's home and operating  countries in evaluating the potential  rewards and
risks of an investment opportunity.  The Fund may invest in securities traded in
mature markets (such as Canada and the United Kingdom) in less developed markets
(for example,  Chile and Mexico),  and in emerging  markets (for example  Peru).
Investments  in foreign  securities,  especially  those in less  devel-oped  and
emerging  markets present  additional  risk.  (See Investment  Policies and Risk
Consid-erations.) 5
 <PAGE>
As a matter of operating  policy  (changeable by the
Board of  Trustees),  the Fund limits its  investments  to those  securities  of
foreign  issuers  that trade and settle in the U.S.  or to  American  Depository
Receipts  ("ADR's")  representing  shares  of  foreign  issuers.*foot1  ADRs are
receipts  typically  issued  by an  American  bank or trust  company  evidencing
ownership  of the  underlying  securities.  Positions  in these  securities  are
generally valued in U.S. dollars, and not in the same currency as the underlying
security into which they may be converted.

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

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

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

SEXTANT  BOND INCOME FUND seeks to provide a high level of current  income.  The
Fund invests primarily in marketable long-term debt securi-ties. As an operating
policy  (changeable  by the Board of Trustees),  the Fund normally  main-tains a
dollar-weighted  average effective  matur-ity in excess of ten years.  foot2 The
"effective  maturity" of a debt  instrument is the weighted  average period over
which the Adviser  expects the  principal to be paid. It differs from the stated
maturity in that it estimates the effect of expected  principal  prepayments and
call provisions.

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

Under normal market  conditions,  the Sextant  Short-Term  Bond Fund and Sextant
Bond  Income Fund each  invests at least 65% of its assets in "bonds,"  meaning:
Marketable  debt  securities  payable in U.S.  dollars,  rated  within the three
highest grades assigned by Moody's Investors Service,  Inc. (Aaa, Aa or A) or by
Standard & Poor's  Cor-poration  (AAA, AA or A); - U.S.  Government  securities;
High quality  commercial  paper; and - Bank  obligations,  including  repurchase
agreements foot3 A repurchase  agreement  involves the sale of securities to the
Fund,  with the concurrent  agreement of the seller to repurchase the securities
at the same price plus an amount equal to an agreed-upon interest rate, within a
specified  time.  In the event of a bankruptcy or other default of a seller of a
repurchase  agreement,  the Fund could experience both delays in liquidating the
underlying  securities and losses. of banks, having total assets in excess of $1
billion.

These  Funds may not invest in a security  rated at time of  purchase  below the
fourth highest grade assigned by Moody's (Baa) or S&P (BBB).  Considered  medium
grade, these secu-rities  represent obligations of issuers with less capacity to
pay interest and repay  principal  than those rated more highly.  Investment  in
these debt securities  involves somewhat greater investment risk,  including the
possibility  of  issuer  default  or  bankruptcy.  An  economic  downturn  could
adversely  affect the value of  outstanding  bonds and the ability of issuers to
repay  principal  and  interest.  During a period of adverse  economic  changes,
including  a  period  of  rising  interest  rates,  issuers  of such  bonds  may
experience difficulty in servicing 6
<PAGE>
 their principal and interest payment
obligations.

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

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

Investment  Policies  and  Risk  Considerations
   
Investing in securities  entails both market risk and risk of price variation in
individual securi-ties. By diversifying its investments, a Fund reduces the risk
of owning one or a few  indi-vidual  securities.  There can be no guarantee that
the investment objectives of any Fund will be realized.      Sextant Growth Fund
and  Sextant  International  Fund  Both of these  Funds may  invest  in  smaller
companies.  Smaller companies involve higher investment risks in that they often
have limited product lines, markets and resources, or their securities may trade
less  frequently  and have  greater  price  fluctuation  than  those  of  larger
companies.  These factors may be particularly  applicable in smaller or emerging
foreign markets.

Investing in foreign securities or instruments  involves risks and opportunities
not  typically  associated  with  investing in U.S.  securities.  These  include
fluctuations in exchange rates of foreign  currencies;  less public  information
with  respect  to issuers  of  securities;  less  governmen-tal  supervision  of
exchanges, issuers, brokers; lack of uniform accounting, auditing, and financial
reporting  standards.  There  is also a risk of  adverse  political,  social  or
diplomatic  developments  that could affect  investments.  See the  Statement of
Additional  Information  for a more complete  discussion  of foreign  investment
risks.  Sextant  Short-Term  Bond Fund and  Sextant  Bond  Income Fund The risks
inherent in the  Short-Term  Bond Fund and Bond Income Fund depend  primarily on
the terms and quality of the obligations in each Fund's portfolio, as well as on
market conditions.  Interest rate fluctuations  affect a Fund's net asset value,
but not the income received by the Fund from its portfolio securi-ties.  Because
prices and yields on debt  securi-ties  vary over  time,  the Fund's  yield also
varies.  All  Funds  Under  unusual  circumstances  a  Sextant  Fund may adopt a
temporary  defensive position and invest without limitation in high-quality debt
obligations, U.S. government debt obligations or cash equivalents.

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

Except as explained above, the policies  outlined in this section are changeable
the Board of Trustees.  Each Fund has additional restrictions as outlined in the
Statement of Additional Information.


Investment  Results
You receive a financial report showing the in-vestments,  income and expenses of
each Fund every six  months.  You may obtain  current  share  values any time by
calling 888 / 732-6262.
 <PAGE>
How To Buy Shares

   

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

    

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

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

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

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

   

The  Sextant  Funds  offer  several  optional  plans  and  services,   including
retirement plans and free Individual Retirement Accounts.  Ma-terials describing
these plans and applications may be obtained from the Adviser.

Other plans offered by the Funds:
-  Automatic  investment  plan
- Systematic  with-drawal plan to provide regular payments to you - The right to
exchange your shares without charge for any other Saturna fund

The  Funds  may  be  appropriate  for  a  wide  range  of  investors,  including
corporations,  partner-ships,  associations and other organizations.  Trusts and
fiduci-aries may establish ac-counts. You also may make investments as custodian
for minor children under the Uni-form Gifts [or Transfers] to Minors Act of your
state of residence.

    


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

    

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

    

There are several methods you may choose to redeem shares.

WRITTEN  REQUEST

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

You  may  redeem  shares  by  a  written  request, with these payment options:
8
<PAGE>


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

-  Redemption  check (no  minimum)  sent as  directed  if the  signature(s)  are
guaranteed. If proceeds are to be sent to other than the reg-istered owner(s) at
the last  address,  the  signa-tures  on the request  must be  guaran-teed  by a
national  bank  or  trust  com-pany  or by a  member  of a  national  securities
exchange.

    

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

    

TELEPHONE  REQUEST

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

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

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

- ACH transfer ($100 minimum) with proceeds trans-ferred to your bank account as
desig-nated on your application. The ACH authorization must be received at least
two weeks before ACH can be used.

- Exchange ($25 minimum) for shares of any other Fund for which Saturna  Capital
is ad-viser.  If the exchange is your initial  in-vest-ment  into this Fund, the
new account  au-to-matically has the same registration as your original account.
An exchange is considered a closing capital transaction for tax purposes.

- Federal  funds wire ($5000  minimum).  Proceeds  may be wired only to the bank
pre-viously  designated,  or as directed  in a prior  written  instruction  with
signatures guar-an-teed, as explained above.

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

CHECK  WRITING

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

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

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

The Funds use the price carried by the com-posite tape of all national exchanges
after 4 p.m. New York time to determine the value of stocks in their portfolios.
Securities traded on a national exchange or the national over-the- 9

 <PAGE>

counter  market  system are valued at the last sale price or, in the  absence of
any sale on that date,  the closing bid price.  Other  securities  traded in the
over-the-counter  market are valued at the last bid price.  Securities for which
there are no readily  available market quotations and other assets are valued at
their fair value as deter-mined in good faith by the Board of Trustees.

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

Trust  Management

   

Saturna  Investment  Trust  is  managed by a Board of Trustees, currently:  A.
Herbert  Ershig,  Gary Goldfogel, John E. Love, John S. Moore, and Nicholas F.
Kaiser.    The  Trustees  establish  policies,  as  well as review and approve
contracts  and  their  continuance.    The  Trustees  also elect the officers,
determine the amount of any dividend or capital gain distribution and serve on
any  committees  of  the Trust.  For other information concerning the officers
and  Trus-tees,  see  the  State-ment  of  Additional  Informa-tion.

    

Investment  Adviser

   

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

    

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

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

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

 <PAGE>

-  SEXTANT  GROWTH  FUND:
"Domestic  Growth  Funds"
-  SEXTANT  INTERNATIONAL  FUND:
"Foreign  Stock  Funds"
-  SEXTANT  BOND  INCOME  FUND:
"Long-Term  Bond  Funds"
-  SEXTANT  SHORT-TERM  BOND  FUND:
"Short-Term  Bond  Funds"

Each Fund pays its own taxes, brokerage com-missions,  trustees' fees, legal and
accounting  fees,  insurance,  expenses  incurred in  comply-ing  with state and
federal  laws  regulating  the issue and sale of its  shares,  and  mailing  and
printing  costs for  prospec-tuses,  reports  and  notices to  shareowners,  and
certain other ex-penses.

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

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

   

 The Adviser voluntarily limits expenses of Bond
Income  Fund and  Short-Term  Bond Fund to 0.60%  through  March 31,  1999.  The
Adviser entirely waives its fee as to either of these Funds when assets are less
than $2  mil-lion.  A waiver  has the  effect of  subsidizing  the yield for the
period it is in effect.

Saturna Capital Corporation acts as investment adviser to three other investment
companies:  Idaho Tax-Exempt Fund (another series of the Trust,  offered through
another prospec-tus) with assets of $5 million; Amana Income Fund ($20 million);
and Amana Growth Fund ($9 million).  The advisory fee for Idaho  Tax-Exempt Fund
is .50% annually;  the Amana Funds have an annual  advisory and  administra-tion
fee of .95%. Saturna also manages indi-vidual private accounts.

    

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

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

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

Each Fund is divided  into  shares of  beneficial  interest,  with equal  voting
rights. All shares are fully paid, non-assessable,  transferable and have rights
of  redemption,  and are not  subject  to  preemptive  rights.  The Trust is not
required to hold annual shareowner meetings, but special meetings are called for
such purposes as elect-ing or removing Trustees,  changing fundamental policies,
or voting on approval of an advisory contract. On issues relating solely to a 11

<PAGE>

 single Fund,  only the  shareowners  of that Fund are entitled to vote.

   

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

    

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

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

   

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

    

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

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

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

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

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

To compute  average  annual total return of a Fund for any specified  period (i)
assume an  investment  made on the  first day of the  period  and  reinvest  all
div-idends paid during the period in addi-tional shares and then (ii) divide the
ending balance (i.e., the number of shares now held multiplied by the ending net
asset value) by the beginning  balance.  For a more complete  description of the
method of compu-tation, see the Statement of Ad-ditional Infor-mation.
12

<PAGE>

(GRAPHIC  OMITTED)  INVESTMENT  APPLICATION  for q Sextant GROWTH FUND q Sextant
INTERNATIONAL FUND q Sextant BOND INCOME FUND q Sextant SHORT-TERM BOND FUND

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

ACCOUNT  TYPE  AND  NAME
q  Individual
                    First                    Middle Initial               Last

Social  Security  Number                                         Date of Birth

q    Joint  with
                    First                    Middle Initial               Last

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

q    Gifts  to  Minor                                        as  Custodian for
               Name  of  Custodian                               Name of Minor
                 q  Uniform  Gifts  to  Minors  Act
      under  the                        q  Uniform  Transfers
     State          to  Minors  Act          Minor's Soc. Sec. No.     Minor's
Birthdate

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


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

MAILING
ADDRESS          Street                                      Apt., Suite, Etc.


          City                                    State                    ZIP

TELEPHONE    (          )                                        (          )
             -          -                                        -          -
               Daytime                                                  Home

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


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

   

E-MAIL
Please send duplicate confirmations and notices to my e-mail address:

    

ACH  TELEPHONE  TRANSFER  PRIVILEGE
q To transfer funds by ACH at no charge to or from my (our) bank account, I (we)
authorize  electronic fund transfers through the Automated  Clearing House (ACH)
for my (our) bank account desig-nated. Please attach a voided check.

AUTOMATIC  INVESTMENT  PLAN
q Invest $ _______  into this  Fund on the  _____  day of each  month  (the 15th
unless another date is chosen) by ACH transfer from my (our) bank account.  This
plan may be canceled at any time. Please attach a voided check.

CHECK WRITING PRIVILEGE ($500 per check minimum) ($10 checkbook charge) q I (We)
hereby  request  the  Custodian  to  honor  checks  drawn by me (us) on my (our)
account  sub-ject  to  acceptance  by the  Trust,  with  payment  to be  made by
redeeming  sufficient  shares in my (our) account.  None of the custodian  bank,
Saturna  Capital  Corporation,  nor any  Sextant  Mu-tual  Fund shall  incur any
liability to me (us) for honoring such checks,  for redeeming shares to pay such
checks, or for returning checks which are not accepted.

q  Single  Signature  Authority  --  Joint  Accounts  Only:  (CHECKS FOR JOINT
   --------------------------------------------------------
ACCOUNTS REQUIRE BOTH SIGNATURES UNLESS THIS BOX IS MARKED TO AUTHORIZE CHECKS
  ----
WITH A SINGLE  SIGNATURE).  By our  signatures  below,  we agree to permit check
redemptions  upon the single  signature of a joint owner.  The  signature of one
joint  owner is on behalf of himself  and as  attorney in fact on behalf of each
other  joint owner by  appointment.  We hereby  agree with each other,  with the
Funds and with  Saturna  Capital  Corporation  that all moneys now or  hereafter
invested in our account  are and shall be owned as Joint  Tenants  with Right of
Survivorship, and not as Tenants in Common.

The  undersigned  warrants(s)  that I (we)  have  full  authority  to make  this
Application,  am (are) of  legal  age,  and  have  received  and read a  current
Prospectus and agree to be bound by its terms. Unless this sentence is struck, I
(we) certify,  under penalties of perjury,  that I (we) am not subject to backup
withholding  under the  provisions  of  section  3406(a)(1)(C)  of the  Internal
Revenue  Code.  This  appli-cation  is not  effective  until it is received  and
accepted by the Trust.


    Date                                Signature of Individual (or Custodian)


 Date                                    Signature of Joint Registrant, if any
<PAGE>


PLEASE  SAVE  THIS  QUICK  GUIDE  TO
THE  SEXTANT  MUTUAL  FUNDS

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

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

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

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

   

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

    

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

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

<PAGE>





                                    PART B



                      STATEMENT OF ADDITIONAL INFORMATION






<PAGE>


                           SATURNA INVESTMENT TRUST

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



                             1300 N. State Street
                         Bellingham, Washington 98225

                                 360-734-9900
                                  800-SATURNA


                      STATEMENT OF ADDITIONAL INFORMATION

   

                                March 26, 1998

The Sextant Funds are series of Saturna  Investment  trust (the  "Trust").  Each
series of the Trust  represents  shares of  beneficial  interest  in a  separate
portfolio of securities and other assets,  with its own objectives and policies.
This  Statement  of  Additional  Information  is  not a  Prospectus.  It  merely
furnishes  additional  information  that should be read in conjunction  with the
Funds'  pro-spectus dated March 26, 1998. A free Fund prospectus may be obtained
by telephoning the numbers above,  writing the Funds at the address shown above,
or downloading an electronic copy from ERROR! BOOKMARK NOT DEFINED..
    
 1
<PAGE>



                               TABLE OF CONTENTS



                                                  Page

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

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

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

The Trust has five  separate  Funds,  four of which are  offered as the  Sextant
Funds through this Prospectus and Statement of Additional  Information:  Sextant
Growth Fund (formerly known as Northwest Growth Fund),  Sextant Bond Income Fund
(formerly known as Washington  Tax-Exempt Fund), Sextant International Fund, and
Sextant  Short-Term  Bond  Fund.  The  remaining  Fund,  Idaho  Tax-Exempt  Fund
(initially  known as the Idaho  Extended  Maturity  Tax-Exempt  Fund) is offered
through a separate Prospectus and Statement of Additional Information.
                      INVESTMENT OBJECTIVES AND POLICIES
This section is provided only for the purpose of expanding or outlining  certain
policies and re-strictions not thoroughly covered in the Prospectus.

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

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

Under  normal  market  conditions,  the Fund expects to be  substantially  fully
invested  in the types of  securities  described  in the  preceding  paragraphs.
However,  to the  extent  that  investments  meeting  the  Fund's  criteria  for
investment are not available or when the Adviser considers a temporary defensive
investment  position  advisable,  the  Fund may  invest  without  limitation  in
high-quality  corporate debt obligations or U.S. government  obligations or hold
cash or cash equivalents. 3 <PAGE>

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

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

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

The Fund  diversifies  its  investments  among  several  countries  and does not
concentrate  in  any  particular  industry.  The  Fund  varies  its  investments
geographically  and by type of  securities  in  which  it  invests  based on the
adviser's  evaluation of economic,  market,  and political trends throughout the
world. The adviser considers the relative  political and economic stability of a
company's  home  country in  evaluating  the  potential  rewards and risks of an
investment  opportunity.  The Fund may  invest  in  securities  traded in mature
markets  (such as  Canada,  Japan and the  United  Kingdom),  in less  developed
markets (for example,  Mexico),  and in emerging  markets (for  example,  Peru).
Investments  in  foreign  securities,  especially  those in less  developed  and
emerging markets present additional risk. (See "Investment Considerations.")

Although the Fund may invest throughout the world outside the U.S. and determine
that it is in the best interest of the Fund and  shareholders  to keep assets in
those countries in which the Fund is investing,  as a matter of operating policy
(that can be changed by the Board of Trustees),  the Fund  presently  limits its
investments to those  securities of foreign  issuers that are traded and settled
in  the  U.S.  or to  American  Depository  Receipts  ("ADR's")  that  represent
underlying shares of foreign issuers. (ADR's are receipts typically issued by an
American bank or trust company  evidencing  ownership of the underlying  foreign
securities.) Positions in these securities are generally valued in U.S. dollars,
they are not  necessarily  denominated  in the same  currency as the  underlying
security  into  which  they  may be  converted.  The  Fund  may  invest  in both
"sponsored" and  "unsponsored"  ADR's. In a sponsored ADR, the issuer  typically
pays some or all of the  expenses  of the  depository  and agrees to provide its
regular shareholder communications to ADR holders. An unsponsored ADR is created
independently of the issuer of the underlying security.  Unsponsored ADR holders
generally pay the expenses of the depository and do not have an undertaking from
the issuer of the underlying security to furnish shareholder communications.
(See also "Investment Considerations" below.)

4
<PAGE>

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

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

SEXTANT SHORT-TERM BOND FUND seeks capital stability and a high level of current
income.  The Fund pursues this  objective by investing  primarily in  marketable
short-term debt securities.

Under normal circumstances, the Fund's dollar-weighted average maturity does not
exceed three years.

SEXTANT  BOND INCOME  FUND seeks high  current  income.  The Fund  pursues  this
objective by investing primarily in marketable long-term debt securities.  As an
operating  policy  that may be changed by the Board of  Trustees,  under  normal
market  conditions  the  Fund  maintains  a  dollar-weighted  average  effective
maturity in excess of ten years.

The risks and investment  returns offered in these Funds depend primarily on the
terms and quality of the  obligations  in that Fund's  portfolio,  as well as on
market conditions.  Interest rate fluctuations  affect a Fund's net asset value,
but not the income received by the Fund from its portfolio securities.  However,
because prices and yields on debt  securities  vary over time, no specific yield
on shares of a Fund can be assured.

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

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

The  "effective  maturity" of a debt  instrument is the weighted  average period
over which the Adviser  expects the  principal  to be paid.  It differs from the
stated  maturity  in  that  it  estimates  the  effect  of  expected   principal
prepayments and call provisions. With respect to mortgage backed securities such
as GNMA securities,  the effective  maturity is likely to be substantially  less
than the stated maturity of the mortgages in the underlying  pools. With respect
to obligations  with call  provisions,  the effective  maturity is typically the
next call date on which the obligation  reasonably may be expected to be called.
Securities  without  prepayment or call  provisions  generally have an effective
maturity  equal to their  stated  maturity.  During  periods of rising  interest
rates,  the  effective  maturity  of mortgage  backed  securities  and  callable
obligations  may  increase  substantially  because they become less likely to be
prepaid, which may result in greater net asset value fluctuation. 5 <PAGE>

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

-      Marketable straight-debt securities of domestic issuers, and of foreign
issuers  payable  in  U.S.  dollars,  rated at the time of purchase within the
three  highest  grades assigned by Moody's Investors Service, Inc. ("Moody's")
(Aaa,  Aa  or  A)  or  by  Standard  &  Poor's Corporation ("S&P") (AAA, AA or
A)*foot1  Please  refer  to  the  Appendix  for  a  discussion  of  ratings.


-          U.S.  Government  Securities;


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

- Bank obligations, including repurchase agreements foot2 A repurchase agreement
involves the sale of securities to the Fund,  with the  concurrent  agreement of
the seller to repurchase  the  securities at the same price plus an amount equal
to an  agreed-upon  interest  rate,  within a specified  time. In the event of a
bankruptcy  or other  default of a seller of a  repurchase  agreement,  the Fund
could  experience  both delays in  liquidating  the  underlying  securities  and
losses.
 of  banks,  having  total  assets  in  excess  of  $1  billion.

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

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

Among the  Government  Securities  the Funds may  purchase  are those  issued by
Government  National Mortgage  Association  ("GNMA"),  Federal National Mortgage
Association  ("FNMA") and other agencies.  Securities such as these represent an
interest in a pool of mortgages insured in whole or in part by other agencies or
the U.S. Treasury, depending on the terms of the issue. These issues may or may
not represent the guarantee of the U.S. Treasury.
6
<PAGE>

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

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

Medium grade (Baa or BBB) debt  securities are  obligations of issuers with less
capacity to pay  interest  and repay  principal  than those  rated more  highly.
Investment in these debt securities  involves somewhat greater  investment risk,
including the possibility of issuer default or

bankruptcy. An economic downturn could adversely affect the value of outstanding
bonds and the  ability of  issuers to repay  principal  and  interest.  During a
period of adverse economic changes, including a period of rising interest rates,
issuers of such bonds may experience difficulty in servicing their principal and
interest payment obligations.

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

Investing in securities  entails both market risk and risk of price variation in
individual securities.  This is true even for debt securities issued by the U.S.
Government.  By  diversifying  its  invest-ments,  each Fund may reduce the risk
associated with owning one or a few individual securities. There is no assurance
that any Fund will achieve its investment objectives.

    

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

Investment  in  Foreign  Securities

Investors should understand and carefully consider the risks involved in foreign
investing.  Investing in foreign  securities or  instruments  involves risks and
opportunities not typically associated with investing in U.S. securities.  These
include:  fluctuations  in  exchange  rates  of  foreign  currencies;   possible
imposition of exchange control  regulation or currency  restrictions  that would
prevent cash from being brought back to the U.S.; less public  information  with
respect to issuers of securities;  less  governmental  supervision of exchanges,
issuers, brokers; lack of uniform accounting,  auditing, and financial reporting
standards;  lack of uniform trading  practices;  less liquidity or greater price
volatility in foreign  markets;  possible  imposition of foreign taxes;  or less
advantageous legal, operational, and financial protections applicable to foreign
custodial  arrangements.  There is also a risk of  expropriation or confiscatory
taxation,  seizure or  nationalization of foreign bank deposits or other assets,
establishment of exchange controls, 7

<PAGE>

 adoption of foreign government  restrictions,  or adverse political,  social or
diplomatic developments that could affect investment in these nations.

Short-Term  Bond  Fund  and  Bond  Income  Fund

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

The risks  inherent in these Funds depend  primarily on the terms and quality of
the  obligations  in that  Fund's  portfolio,  as well as on market  conditions.
Interest rate  fluctuations  affect a Fund's net asset value, but not the income
received by the Fund from its portfolio securities. However, because

yields on debt  securities  available  for purchase by a Fund vary over time, no
specific yield on shares of a Fund can be assured.

INVESTMENT  RESTRICTIONS.   In  addition  to  the  restrictions  stated  in  the
Prospectus, the Funds shall not purchase securities on margin or sell securities
short or purchase or write put or call options; purchase "restricted securities"
(those which are subject to legal or con-tractual restric-tions on resale or are
otherwise  not readily  marketable);  nor invest in oil,  gas or other  min-eral
exploration  leases  and  programs.  The Funds  shall not make  loans to others,
except  for the  purchase  of  debt  securities,  or  entering  into  repurchase
agreements.  The Funds shall not in-vest in  securities so as to not comply with
Subchapter M of the Code, in that  generally at the close of each quarter of the
tax year,  at least 50% of the value of each Fund's total assets is  represented
by (i) cash and cash  items,  government  securities,  and  securities  of other
regulated  invest-ment  companies,  and (ii) other securities,  except that with
respect to any one  issuer in an amount  more than 5% of  ei-ther  Fund's  total
assets, and no more than 10% of the Fund's voting securities of any one is-suer.
In addition,  the Funds shall not  purchase  real  estate;  real estate  limited
partnerships (excepting master limited partnerships that are pub-licly traded on
a na-tional security ex-change or NASDAQ's National Market System); com-modities
or commodity contracts; issue senior securities;  provided, however, that a fund
may borrow money for extraordinary or emergency  purposes and then only if after
such borrowing there is asset coverage of at least 300% for all such borrowings;
nor act as a securities  un-der-writer except that they may pur-chase securities
directly  from the issuer for  investment  purposes.  Also, no Fund of the Trust
shall purchase or retain securities of any issuer if the officers or trustees of
the Trust or its adviser own more than one-half of one percent of the securities
of such  issuer;  invest in any  com-pany  for the  pur-pose  of  management  or
exercising control. No Fund of the Trust shall invest in the securities of other
open-end   investment   companies,   except   in   connection   with  a  merger,
consolidation,  acquisition, or reorganization or by purchase in the open market
where no commission  or profit to a sponsor or dealer  results from the purchase
other than the customary broker's commission.

No Fund shall  pur-chase  securities of any issuer in excess of 5% of the Fund's
total assets or pur-chase more than 10% of the outstanding  voting securities of
any is-suer;  or concentrate its in-vestments in a single industry beyond 25% of
the total  value of the  Fund;  or  invest  more  than 10% of its  assets in the
securities  of issuers  which  to-gether  have a record of less than three years
continuous  operation.  No  Fund  purchases  securities  if it  has  outstanding
borrowings  exceeding 5% of its net assets. No Fund's  invest-ments in warrants,
valued  at the  lower of cost or  market,  shall  exceed  5% of the value of the
Fund's net assets.  Included  within that  amount,  but not to ex-ceed 2% of the
value of the Fund's net assets,  may be warrants which are not listed on the New
York or 8

<PAGE>

American  Stock  Exchange.    Warrants  acquired  in  units  or  at-tached  to
securities  may  be  deemed  to  be  without  value.

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

would be forced to sell  securities at a time when it might not  otherwise  have
done so, or to forego exercising the rights.

Investment  objectives  and  certain  policies  of each of the  Funds may not be
changed  without  the prior  ap-proval  of the  holders of the  majority  of the
outstanding  shares of the respective  Fund.  Objectives and poli-cies which are
considered  fundamental  and  subject to change  only by prior  approval  of the
shareowners include:  (1) the primary and any secondary  investment  objectives;
(2) the  classification of the Trust as an open-end  management  company and the
sub-classification  of each of the Funds as a diversified  company;  and (3) the
policies listed under "Investment Restrictions."
                              PORTFOLIO TURNOVER
The Funds have no restrictions on portfolio turnover and buy or sell investments
accord-ing  to the  Adviser's  assessment  of the  market and the  economy.  The
figures regarding turnover in the following  paragraph's  reflect the operations
of certain Funds under their  previous  objectives.  The portfolio  turnover for
these Funds  under  their  present  policies  is not  expected to be  materially
different, however.

   

 The portfolio turnover rate of the Sextant Growth Fund
(previously Northwest Growth Fund) for the fiscal years ended November 30, 1997,
1996, and 1995, was 25%, 32%, and 40% respectively.

The  portfolio  turnover  rate  of the  Sextant  Bond  Income  Fund  (previously
Washington  Tax-Exempt  Fund) for the fiscal years ended November 30, 1997, 1996
and 1995 was 51%, 75%, and 77%, respectively.

Portfolio  turnover  for the  Sextant  Short-Term  Bond Fund for the fiscal year
ended  November 30, 1997,  1996 and the period  September  28, 1995  (inception)
through  November  30,  1995,  was  47%,  100% and 0%,  respectively.  Portfolio
turnover for the Sextant  International  Fund for the fiscal year ended November
30, 1997, 1996 and the period  September 28, 1995  (inception)  through November
30, 1995, was 9%, 11% and 12%, respectively.     

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

9
<PAGE>

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

   

 The Sextant  Growth  Fund's total return for
the one year period  ended  November 30, 1997 was 30.30%.  Average  annual total
return from April 1, 1987 (inception of the predecessor  fund) through  November
30, 1997 was  16.28%.  Performance  figures for the Sextant  Growth Fund for the
period prior to October 12, 1990 reflect the Fund's investment objective at that
time of tax-free income and capital  preservation.  Performance  figures for the
Sextant  Growth Fund for the period from October 12, 1990 to September  28, 1995
reflect the Fund's investment objective at that time of Northwest growth stocks.

The total  return of the Sextant  Bond Income Fund for the one year period ended
November 30, 1997 was 8.24%. Average annual total return for the period March 1,
1993 (inception)  through November 30, 1997, was 6.92%.  Performance figures for
the Sextant Bond Income Fund for the period from inception to September 28, 1995
reflect  the  Fund's  investment  objective  at that  time of  Washington  State
municipal bonds.

The total return of the Sextant  Short-Term Bond Fund and Sextant  International
Fund for the  one-year  period  ended  November  30,  1997 was 5.44% and 13.58%,
respectively.  Average  annual total  returns for the period  September 28, 1995
(inception) through November 30, 1997 was 5.24% and 14.41%, respectively.

    

Average  annual  Total  Return  quotations for various periods illustrated are
                 -------------
computed  by  find-ing  the average  annual  compounded  rate of return over the
period  quoted  that would  equate the  initial  amount  invested  to the ending
redeemable value according to the following formula:
          P  (1  +  T)n      =      ERV

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

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

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

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

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

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

10

<PAGE>

Where: a = dividends and interest earned during the period; b = expenses accrued
for the period (net of  reimbursement);  c = the average  daily number of shares
outstanding during the period that were entitled to receive  dividends;  and d =
the maximum offering price per share  (equivalent to Net Asset Value for no-load
funds) on the last day of the period.

   

The yield on Sextant Bond Income Fund for the 30-day  period ended  November 30,
1997 was 6.09%. The yield on Sextant  Short-Term Bond Fund for the 30-day period
ended November 30, 1997 was 5.40%.

    

In advertising and sales  literature,  a Fund may compare its  performance  with
that of other mutual funds,  indexes or averages of other mutual funds,  indexes
or data, and other competing investment and deposit products. The composition of
these indexes or averages  differs from that of the Funds.  Comparison of a Fund
to  an  alternative   investment  should  be  made  with  consideration  of  the
differences in features and expected performance of the investments.

All of the indexes and  averages  noted below are  obtained  from the  indicated
sources  or  reporting  services,  which  the  Trust  believes  to be  generally
accurate.  A Fund may also note its mention or recognition in other  newspapers,
magazines  or  media  from  time  to  time.   However,   the  Trust  assumes  no
responsibility for the accuracy of such data. Among the newspapers and magazines
that might mention the Trust or the Funds are:

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


The Funds may also  compare  themselves  to the Consumer  Price Index,  a widely
recognized measure of inflation, and to other indexes and averages such as:

Dow Jones Industrials New York stock Exchange  Composite Index Standard & Poor's
500 Stock Index American Stock  Exchange  Composite  Index Standard & Poor's 400
Industrials  NASDAQ  Composite  Wilshire  5000 NASDAQ  Industrials  Russell 2000
Lipper  General Equity Fund Average  Lipper  Capital  Appreciation  Fund Average
Lipper Equity Funds Average  Lipper Growth Funds Average  Lipper Growth & Income
Fund Average  Lipper Small  Company  Growth Fund Average  Lipper  Balanced  Fund
Average  Lipper  Equity  Income  Fund  Average   Ibbotson  Common  Stocks  Index
Morningstar Mutual Fund Indices


11
<PAGE>


The indexes and averages are measures of  performance of stocks and mutual funds
that are classified, calculated and published by these independent services. The
Funds may also use comparative  performance as computed in a ranking by these or
other independent services.

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

                            MANAGEMENT OF THE TRUST
Information  concerning  Trustees and Officers of the Trust and their  principal
occupations for the past five years is shown below:
   
A.  HERBERT  ERSHIG,    -  Trustee
          22  Shorewood  Drive,  Bellingham,  WA  98225.
Retired.
President, Ershings, Inc., Bellingham WA, industrial manufacturing, from 1960 to
1996.
    
GARY  A.  GOLDFOGEL,  MD  -  Trustee
          1500  N.  State  Street,  Bellingham,  WA  98225.
     Pathologist.  Whatcom  County  Medical  Examiner,  Bellingham  WA.

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

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

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

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

PANDORA  LARNER  -  Secretary
          1300  N.  State  Street,  Bellingham,  WA  98225.
     Saturna  Capital  Corporation,  October  1996  to  present.
     Medical  supervisor,  1991  to  1993.
     Housewife,  1994.

12
<PAGE>
     Clothing  sales  representative,  1995  to  Feb.  1996.
     Medical  receptionist/trainer,  Feb.  1996  to  Sept.  1996.
    

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


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

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


<TABLE>

<CAPTION>

   


<S>                  <C>         <C>                <C>                <C>                 <C>

                                 Pension or                            Total
                     Aggregate   Retirement                            Compensation
Name of              Compensa-   Benefits Accrued   Estimated Annual   From Registrant
Person;              tion From   As Part of Fund    Benefits Upon      and Fund Complex
Position             Registrant  Expenses           Retirement         Paid to Directors
-------------------  ----------  -----------------  -----------------  ------------------


A. HERBERT ERSHIG,     $ 400      $   0              $    0              $400
Trustee

GARY GOLDFOGEL,          400          0                   0               400
Trustee

JOHN E. LOVE,            400          0                   0               400
Trustee

JOHN S. MOORE,           400          0                   0               400
Trustee

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



The Board has  authority to establish an Executive  Committee  with the power to
act on behalf of the Board  between  meetings  and to exercise all powers of the
Trustees  in the  management  of the  Trust.  No  Executive  Committee  has been
established at this time. An Audit  Committee,  consisting of the  disinterested
directors,  meets to select  the  independent  accountant  and  review all audit
reports. There is no separate nominating committee.      As of February 24, 1998
officers,  trustees and their families as a group,  own the following  shares of
the Funds
               Percent  of
     Fund                           Shares  Owned          Outstanding
     ----                           -------------          -----------
     Sextant  Short-Term  Bond            66,051            17%
     Sextant  Bond  Income  Fund          67,733            26%
     Sextant  Growth  Fund                38,246            17%
     Sextant  International  Fund         37,307            28%
    
13

<PAGE>
                        PRINCIPAL HOLDERS OF SECURITIES
   
As of February 24, 1998 the shareholders of Sextant  Short-Term Bond Fund owning
5% or more were as follows:

      Name          Shares          Percentage
     ----          ------          ----------
     The  Heritage  Education  Trust,  Inc.
     Dr.  Mohammed  Jaghilt,  President          88,635          23.40%

     Robert  L.  Foote          60,745          16.04%

     Investors  National  Corporation.          35,806          9.45%

     Michael  McRory,  DDS  PS  Profit  SH
     DTD  7-29-80,  Michael  R.  McRory          26,737          7.06%

     Robert  J.  Nicholl  IRA  Rollover          20,068          5.29%

As of February 24, 1998 the  shareowners  with 5% or more of Sextant Bond Income
Fund were as follows:

     Name          Shares          Percentage
     ----          ------          ----------
     Nicholas  F.  Kaiser
     Markell  F.  Kaiser,  JT.  Ten.          45,643          17.62%

     Luzenia  B.  Redpath          34,891          13.47%

     Loie  E.  Haggen          20,398          7.87%

     David  K.  Heaps  IRA  Rollover          16,955          6.64%

     Ubaldina  Sanchez          15,588          6.01%

     Frederick  M.  Graham
     Mary  J.  Graham,  Jt.  Ten          15,033          5.80%

     Saturna  Capital  Corporation          13,657          5.27%

As  of February 24, 1998  the shareowners owning 5% or more of  Sextant Growth
Fund  were:

     Name                                    Shares          Percentage
     ----                                    ------          ----------
     Nicholas  F.  Kaiser  IRA  Rollover          18,810          8.24%

     Sutherland  Enterprises  Ltd.                12,617          5.52%
14
<PAGE>

As of  February  24,  1998  the  only  shareowners  with 5% or  more of  Sextant
International Fund were:

     Name          Shares          Percentage
     ----          ------          ----------
     Nicholas  F.  Kaiser  IRA  Rollover          23,817          18.15%

     Heritage  Education  Trust,  Inc.          9,667          7.36%

     Mar-Jac  Poultry  Inc.          7,555          5.75%

     Norman  H.  Bell  MD          7,177          5.46%

     Northwest  Eye  Clinic  Inc.  Employee
     Pension  Trust  #13  Frederick  Kaiser          7,028          5.35%
    
                    INVESTMENT  ADVISORY AND OTHER  SERVICES Each of the Sextant
Funds monthly pays the Adviser an Advisory and Administrative  Services Fee (the
"Base  Fee").  The Base  Fee  covers  certain  administrative  services  such as
portfolio accounting, shareholder and financial reporting, shareholder servicing
and transfer agency  services.  The Base Fee is also  compensation for portfolio
management,  advice and  recommendations on securities to be purchased,  held or
sold.  The Base Fee is computed at the annual rate of 0.60% of average daily net
assets of each Fund, and is paid monthly.  The Base Fee is subject to adjustment
up or down  depending on the  investment  performance  of the Fund relative to a
specified index (the "Performance Adjustment").

"Performance  Adjustment"  for Sextant Bond Income Fund and Sextant Short-Term
Bond  Fund

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

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

Performance  adjustment for Sextant Growth Fund and Sextant  International  Fund
For each month in which either of these Fund's total  investment  return (change
in net asset value plus all  distributions  reinvested)  for the one year period
through that month  outperforms or underperforms the total return of a specified
index for that period by 1% or more but less than 2%, the Base Fee is  increased
or decreased by the annual rate of .10% of the Fund's  average  daily net assets
for the preceding year. If the outperformance or  underperformance is 2% or more
but less than 4%, then the adjustment is at the annual 15 <PAGE>
 rate of .20%. If the  outperformance  or  underperformance  is 4% or more,  the
adjustment  is at an annual rate of .30%. No  Performance  Adjustment is payable
during  the first  year the  Agreement  is in  place.  Total  return  investment
performance as calculated and published by Morningstar, Inc. for selected groups
of mutual funds is used as the index for comparison  purposes.  The  comparative
Morningstar categories used are:

Sextant  Growth  Fund:    "DOMESTIC  GROWTH  FUNDS"

Sextant  International  Fund:  "FOREIGN  STOCK  FUNDS"

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

Sextant  Short-Term  Bond  Fund:      "SHORT-TERM  BOND  FUNDS"

In the event that a particular index is no longer available or otherwise becomes
unavailable or inappropriate, in the opinion of the Board of Trustees, the Board
may  select  another  to  replace  it.      The  Adviser  has  also  voluntarily
undertaken  to limit  expenses of Bond Income Fund and  Short-Term  Bond Fund to
0.60%  through March 31, 1999. A waiver may have the effect of  subsidizing  the
yield for the  period  it is in  effect.        Each  Fund  pays its own  taxes,
brokerage  commissions,  trustees' fees, legal and accounting  fees,  insurance,
expenses  incurred in complying with state and federal laws regulating the issue
and sale of its  shares,  and  mail-ing  and  printing  costs for  prospectuses,
reports and notices to share-owners.

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

For no additional charges,  the Adviser provides services as the transfer agent,
registrar and  dividend-pay-ing  agent for each Fund. As transfer agent, Saturna
furnishes to each shareowner a state-ment after each transaction,  an historical
statement at the end of each year showing all trans-actions during the year, and
Form  1099 tax  forms.  Saturna  also,  on  behalf  of the  Trust,  responds  to
shareowners' questions or correspondence.  Further, the transfer agent regularly
furnishes each Fund with current  shareowner lists and information  necessary to
keep the shares in balance with the Trust's records. The transfer agent performs
the mailing of financial  statements,  notices, and prospectuses to shareowners.
The transfer agent maintains records of contributions;  disbursements and assets
as  required  for  IRAs and  other  qualified  retirement  accounts.  Each  Fund
reimburses  Saturna for any  out-of-pocket  expense for forms and mailing  costs
used in performing its functions.

The laws and  regulations of various states set expense  limitations  for mutual
funds as a condition  for  registration  to offer and sell shares in that state.
Usually,  the expense  limitation  requires  reimbursement if, and to the extent
that, the aggregate  operating expenses including the advisory fee but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of a specified  percentage of the average net assets of a Fund for its
fiscal year. The only 16 <PAGE>
 state the adviser believes  maintains an expense
limitation  is  California,   which  limits   aggregate  annual  expenses  (with
exceptions)  to 2.5% of the first $30 million of average  net assets,  2% of the
next $70 million and 1.5% of the remaining average net assets.

National City Bank,  Indianapolis,  Indiana 46255 is the custodian of the Funds'
securities  and other  assets.  As  custodian,  the bank  holds in  custody  all
securities  and cash,  settles for all securities  transactions,  receives money
from sale of shares and on order of each Fund pays the  authorized  expenses  of
the Fund.  When Fund shares are redeemed by investors,  the proceeds are paid to
the  shareowner  by check drawn on the custodian  bank.      Tait,  Weller,  and
Baker, Eight Penn Center Plaza,  Philadelphia PA 19103 served as the independent
accountants  for the fiscal year  ending  November  30,  1997.  The  independent
accountants  conduct the annual audit of the Trust as of November 30 and prepare
the tax returns of each Fund.

Prior to  September  28,  1995,  under the  advisory  contracts  then in effect,
Sextant  Growth Fund and Sextant Bond Income Fund were  obligated to pay Saturna
Capital fees under management  contracts that are no longer in effect. Under the
former contracts, Northwest Growth Fund, predecessor to Sextant Growth Fund paid
Saturna  Capital  monthly an advisory fee at the rate of 0.75% of average  daily
net asset value annually. Similarly,  Washington Tax-Exempt Fund, predecessor to
Sextant  Bond  Income  Fund was  obligated  to pay  Saturna  Capital  monthly an
advisory  fee at the annual rate of 0.50% of the average  daily net assets up to
$250 million, 0.40% of assets be-tween $250 million and $1 billion, and 0.30% of
assets in excess of $1 billion. Under the former contracts, the Adviser received
a separate  fee as  compensation  for  services as transfer  agent and  dividend
disbursement  agent. Each Fund paid Saturna an annual fee of $1.10 per month per
shareowner  account  (plus  $.30 per  month  for  Funds  paying  dividends  more
frequently  than  once  per  quarter).  Each  Fund  reimbursed  Saturna  for any
out-of-pocket  expense  for forms and  mailing  costs  used in  perform-ing  its
functions. For the fiscal year ended November 30, 1997 and 1996, no Sextant fund
paid transfer agent fees.  For the fiscal year ended November 30, 1995,  Sextant
Growth  Fund,  (formerly  Northwest  Growth  Fund) paid  transfer  agent fees of
$1,272, and Sextant Bond Income Fund (formerly Washington  Tax-Exempt Fund) paid
$842.

For the fiscal year ended November 30, 1997, Sextant Growth Fund paid investment
adviser and administration fees of $11,819. For fiscal 1996, Sextant Growth Fund
paid  investment  adviser and  administration  fees of $7,540 and for the fiscal
year ending 1995,  Sextant Growth Fund paid $7,255,  a portion of which was paid
under the new contract  approved by shareholders  effective  September 28, 1995.
For fiscal 1994, under the former  contracts  Sextant Growth Fund paid $9,318 in
administrative and advisory fees, and no waiver or reimbursement was required.

For the fiscal year ended  November 30, 1997,  Sextant Bond Income Fund incurred
advisory expenses of $6,805 (all of which was waived by Saturna Capital). In the
fiscal year ended  November 30, 1996,  Sextant Bond Income Fund paid  investment
adviser  and  administration  fees of $6,640 (all of which was waived by Saturna
Capital).  For fiscal 1995, Sextant Bond Income Fund paid investment adviser and
administration  fees of  $5,838,  all of which was  waived  under the  adviser's
voluntary  expense  reimbursements.  For fiscal 1994, under the former contracts
Sextant  Bond Income Fund paid $8,394 in  administrative  and  advisory  fees of
which Saturna Capital waived or reimbursed $8,046.

For the fiscal  year ended  November  30,  1997,  Sextant  Short-Term  Bond Fund
incurred advisory expenses of $13,245 and for the fiscal year ended November 30,
1996 and the period  September 28, 1995  (inception)  through November 30, 1995,
Sextant Short-Term Bond Fund paid Saturna 17 <PAGE>
 Capital  investment adviser
and  administration  fees of  $15,583  (of which  $8,375  was  waived)  and $605
(entirely waived), respectively.

Similarly,  for the fiscal year ended  November 30, 1997  Sextant  International
Fund incurred advisory expenses of $7,537 and for the fiscal year ended November
30, 1996 and the period  September  28, 1995  (inception)  through  November 30,
1995,  Sextant  International  Fund paid Saturna Capital  investment adviser and
administration fees of $3,148 and $296, respectively.     
                             BROKERAGE ALLOCATION
The  placing  of  purchase  and  sale  orders  as  well  as the  negotiation  of
commissions  is  performed  by the  Adviser  and is  reviewed  by the  Board  of
Trustees.  The  Adviser  may  allocate  brokerage  to any  broker in return  for
research or services  and for  selling  shares of any Fund.  Brokers may provide
research or statistical  material to the Adviser,  but this  information is only
supplemental to the research and other  statistics and material  accumulated and
maintained through the Adviser's own efforts. Any such supplemental  information
may or may not be of value or used in making investment  decisions for the Trust
or any other account serviced by the Adviser.

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

The Adviser's  subsidiary,  Investors  National  Corporation,  is qualified as a
broker-dealer  to engage in a general  brokerage  business.  Investors  National
Corporation  conducts all its  transactions  on an agency basis for  established
"deep  discount"  commissions;  it does not make  markets,  "deal," or  maintain
inventories of securities.  Most stock and US Government  bond brokerage for the
Trust is conducted  through  Investors  National  Corporation,  and the Board of
Trustees has given permission for the Adviser to so direct. As this brokerage is
conducted through an af-filiate of the Adviser,  the Trustees adopted procedures
reasonably  designed to ensure that such  brokerage fees are reasonable and fair
compared to remuneration  received by other brokers in comparable  transactions.
The Trustees receive detailed quarterly  monitoring reports and review brokerage
procedures at least annually.     For fiscal years 1997, 1996, and 1995, Sextant
Growth Fund paid $1,967 $2,536,and $3,188 in brokerage  commissions to Investors
National  Corporation.  For the fiscal year of 1997, Sextant  International Fund
paid $872 is brokerage  commissions to Investors National  Corporation.  For the
year ended  November 30, 1996 and the period  September 28, 1995  (inception) to
November 30, 1995, Sextant International Fund paid $1,562 and $266, respectively
in commissions to Investors National Corporation.  This represented 100% of each
Fund's commissions and aggregate brokerage transactions for each of these years.

For fiscal years 1997, 1996,and 1995 Sextant Bond Income Fund paid $147, $49 and
$0, in brokerage commissions to Investors National  Corporation.  For the fiscal
year ended November 18 <PAGE>

30, 1997 brokerage  commissions to Investors  National  Corporations for Sextant
Short Term Bond Fund was $ 392 and for the fiscal year ended  November  30, 1996
and the period September 28, 1995 (inception) through November 30, 1995, Sextant
Short-Term Bond Fund paid $98 and $0 in commissions respectively.
    
         PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED See How to
Buy Shares,  How to Redeem Shares and Net Asset Value in the  Prospectus  for an
ex-planation about the ways to purchase or redeem shares.

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

Net asset value per share is determined by dividing the value of all  securities
and other assets, less liabilities, by the number of shares outstanding. The net
asset  value is  determined  for each Fund as of the close of trading on the New
York Stock Exchange (generally 4 p.m. New York time) on each day the Exchange is
open for  trading.  The  Exchange  is  generally  closed  on:  New  Year's  Day,
Washington's  Birthday/President's  Day, Good Friday, Memorial Day, Independence
Day (observance), Labor Day, Thanksgiving Day and Christmas Holiday.
                                  TAX STATUS
Saturna  Investment  Trust is organized  as a "series"  investment  company.  At
present only the Funds and Idaho Tax-Exempt Fund are offered,  but the Trust may
create in the future additional funds with different investment objectives. Each
Fund is a separate  economic  entity with separate  assets and  liabilities  and
separate income streams.  The shareowners of each separate Fund may look only to
that  Fund  for  income,  capital  gain or  loss,  redemption,  liquidation,  or
termination.  Each Fund has separate  arrangements  with the Adviser.  Assets of
each Fund are segregated. The creditors and shareowners of each Fund are limited
to the assets of that Fund for recovery of charges,  expenses  and  liabilities.
Each Fund  conducts  separate  voting on issues  relating  solely to that  Fund,
except as  re-quired  by the  Investment  Company  Act.  The tax  status and tax
consequences  to shareowners  of each separate Fund differs,  depending upon the
investment objectives,  operations, income, gain or loss, and distributions from
each Fund.

Each Fund intends to  distribute  to  shareowners  substantially  all of its net
investment  income and net realized capital gains, if any, and to comply,  as it
has  since  inception,  with  the  provi-sions  of  the  Internal  Revenue  Code
applicable  to  regulated  investment  companies,  which  re-lieve  the Funds of
federal income taxes on the amounts so distributed.  For Sextant Growth Fund and
Sextant   International   Fund,   dividends  from  net  investment   income  and
distribution  of any  capital  gains are made at the end of the  fiscal  year in
November.  The Sextant  Bond Income  Fund and Sextant  Short-Term  Bond Fund pay
dividends from net investment income daily,  which are reinvested or distributed
at each month-end. Distribution of any net realized capital gains is made at the
end of the fiscal year in November. 19 <PAGE>

The amount of  investment  income  and  capital  gains,  if any,  available  for
distri-bution  by a Fund in the future  cannot be predicted  due to  continually
changing eco-nomic conditions and market prices.

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

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

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

If you do not furnish the  transfer  agent with a valid  Social  Security or Tax
Identification  Number and in certain  other  circumstances,  we are required to
withhold  31% of  dividend  income.  Income  dividends  to  shareowners  who are
nonresident  aliens may be subject to a 30% United States  withholding tax under
the  existing  provisions  of the code  applicable  to foreign  individuals  and
entities  unless a reduced rate of  withholding  or a  withholding  exemption is
provided  under  applicable  treaty  law. If the IRS  determines  that the Trust
should be fined or penalized for  inaccurate or missing or otherwise  inadequate
reporting of a Tax  Identification  Number, the amount of the IRS fee or penalty
is directly assessed to the shareowner account involved.
                             FINANCIAL STATEMENTS
   
The most recent audited annual report  accompanies  this Statement of Additional
Infor-mation.  The financial  statements  and selected per share data and ratios
dated  November 30, 1997,  together with the report of  independent  accountants
dated  December 12, 1997,  are  considered a part of the Statement of Additional
Information and are in-corporated by reference.      20 <PAGE>

                                   APPENDIX
                                 BOND RATINGS

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

BOND  RATINGS

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

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

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

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

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

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

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

AA Debt  rated  AA has a very  strong  capacity  to pay  interest  and to  repay
principal, and differs from the higher rated issues only in small degree.
21
<PAGE>


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

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

COMMERCIAL  PAPER  RATINGS

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

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

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

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

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

AA This designation indicates that the degree of safety regarding timely payment
is  very  strong.   Those  issues  determined  to  possess  overwhelming  safety
characteristics are denoted with a plus (+) sign.
22
<PAGE>
CROSS  REFERENCE  SHEET

 PART  A                                                   PROSPECTUS CAPTIONS
 -------                                                   -------------------

1.    Cover  Page                                              About the Fund;
                                        Expenses

2.    Synopsis                                                  Not Applicable

3.    Condensed  Financial  Information                    Expenses;
                                        Financial  Highlights

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

5.    Management  of  the  Fund                              Trust Management,
                                        Investment  Adviser

6.    Capital  Stock  and  Other  Securities                    Capital Stock;
                                        Dividends

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

8.    Redemption  or  Repurchase                          How to Redeem Shares

9.    Pending  Legal  Proceedings                               Not Applicable
1


<PAGE>
                                   STATEMENT  OF  ADDITIONAL
                                   -------------------------
PART  B                                                            INFORMATION
-------                                                            -----------
CAPTIONS
--------

10.    Cover  Page                                                  Cover Page

11.    Table  of  Contents                                   Table of Contents

12.    General  Information  and  History                  General Information
                                        History

13.    Investment  Objectives  &  Policies               Investment Objectives
                                        and  Policies;
                                        Portfolio  Turnover;
                                        Investment
                                        Considerations

14.    Management  of  the  Registrant                 Management of the Trust

15.    Control  Persons  and  Principal                   Principal Holders of
            Holders  of  Securities                                 Securities

16.    Investment  Advisory  and  Other                    Investment Advisory
          Services                                          and Other Services

17.    Brokerage  Allocation  and  Other                  Brokerage Allocation
           Practices                                        Portfolio Turnover

18.    Capital  Stock  and  Other  Securities                   Not Applicable

19.    Purchase,  Redemptions  and  Pricing           Purchase, Redemption and
          of  Securities  Being  Offered                 Pricing of Securities
                                        Being  Offered

20.    Tax  Status                                                  Tax Status

21.    Underwriters                                             Not Applicable
2
<PAGE>

22.    Calculations  of  Performance  Data                    Performance Data

23.    Financial  Statements                              Financial Statements
3
<PAGE>






                                    PART B



                      STATEMENT OF ADDITIONAL INFORMATION






<PAGE>


                           SATURNA INVESTMENT TRUST

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



                             1300 N. State Street
                         Bellingham, Washington 98225

                                 360-734-9900
                                  800-SATURNA


                      STATEMENT OF ADDITIONAL INFORMATION
   
                                March 26, 1998

The Sextant Funds are series of Saturna  Investment  trust (the  "Trust").  Each
series of the Trust  represents  shares of  beneficial  interest  in a  separate
portfolio of securities and other assets,  with its own objectives and policies.
This  Statement  of  Additional  Information  is  not a  Prospectus.  It  merely
furnishes  additional  information  that should be read in conjunction  with the
Funds'  pro-spectus dated March 26, 1998. A free Fund prospectus may be obtained
by telephoning the numbers above,  writing the Funds at the address shown above,
or  downloading  an electronic  copy from ERROR!  BOOKMARK NOT DEFINED..       1
<PAGE>



                               TABLE OF CONTENTS



                                                  Page

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

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

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

The Trust has five  separate  Funds,  four of which are  offered as the  Sextant
Funds through this Prospectus and Statement of Additional  Information:  Sextant
Growth Fund (formerly known as Northwest Growth Fund),  Sextant Bond Income Fund
(formerly known as Washington  Tax-Exempt Fund), Sextant International Fund, and
Sextant  Short-Term  Bond  Fund.  The  remaining  Fund,  Idaho  Tax-Exempt  Fund
(initially  known as the Idaho  Extended  Maturity  Tax-Exempt  Fund) is offered
through a separate Prospectus and Statement of Additional Information.
                      INVESTMENT OBJECTIVES AND POLICIES
This section is provided only for the purpose of expanding or outlining  certain
policies and re-strictions not thoroughly covered in the Prospectus.

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

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

Under  normal  market  conditions,  the Fund expects to be  substantially  fully
invested  in the types of  securities  described  in the  preceding  paragraphs.
However,  to the  extent  that  investments  meeting  the  Fund's  criteria  for
investment are not available or when the Adviser considers a temporary defensive
investment  position  advisable,  the  Fund may  invest  without  limitation  in
high-quality  corporate debt obligations or U.S. government  obligations or hold
cash or cash equivalents. 3 <PAGE>

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

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

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

The Fund  diversifies  its  investments  among  several  countries  and does not
concentrate  in  any  particular  industry.  The  Fund  varies  its  investments
geographically  and by type of  securities  in  which  it  invests  based on the
adviser's  evaluation of economic,  market,  and political trends throughout the
world. The adviser considers the relative  political and economic stability of a
company's  home  country in  evaluating  the  potential  rewards and risks of an
investment  opportunity.  The Fund may  invest  in  securities  traded in mature
markets  (such as  Canada,  Japan and the  United  Kingdom),  in less  developed
markets (for example,  Mexico),  and in emerging  markets (for  example,  Peru).
Investments  in  foreign  securities,  especially  those in less  developed  and
emerging markets present additional risk. (See "Investment Considerations.")

Although the Fund may invest throughout the world outside the U.S. and determine
that it is in the best interest of the Fund and  shareholders  to keep assets in
those countries in which the Fund is investing,  as a matter of operating policy
(that can be changed by the Board of Trustees),  the Fund  presently  limits its
investments to those  securities of foreign  issuers that are traded and settled
in  the  U.S.  or to  American  Depository  Receipts  ("ADR's")  that  represent
underlying shares of foreign issuers. (ADR's are receipts typically issued by an
American bank or trust company  evidencing  ownership of the underlying  foreign
securities.) Positions in these securities are generally valued in U.S. dollars,
they are not  necessarily  denominated  in the same  currency as the  underlying
security  into  which  they  may be  converted.  The  Fund  may  invest  in both
"sponsored" and  "unsponsored"  ADR's. In a sponsored ADR, the issuer  typically
pays some or all of the  expenses  of the  depository  and agrees to provide its
regular shareholder communications to ADR holders. An unsponsored ADR is created
independently of the issuer of the underlying security.  Unsponsored ADR holders
generally pay the expenses of the depository and do not have an undertaking from
the issuer of the underlying security to furnish shareholder communications.
(See also "Investment Considerations" below.)

4
<PAGE>

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

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

SEXTANT SHORT-TERM BOND FUND seeks capital stability and a high level of current
income.  The Fund pursues this  objective by investing  primarily in  marketable
short-term debt securities.

Under normal circumstances, the Fund's dollar-weighted average maturity does not
exceed three years.

SEXTANT  BOND INCOME  FUND seeks high  current  income.  The Fund  pursues  this
objective by investing primarily in marketable long-term debt securities.  As an
operating  policy  that may be changed by the Board of  Trustees,  under  normal
market  conditions  the  Fund  maintains  a  dollar-weighted  average  effective
maturity in excess of ten years.

The risks and investment  returns offered in these Funds depend primarily on the
terms and quality of the  obligations  in that Fund's  portfolio,  as well as on
market conditions.  Interest rate fluctuations  affect a Fund's net asset value,
but not the income received by the Fund from its portfolio securities.  However,
because prices and yields on debt  securities  vary over time, no specific yield
on shares of a Fund can be assured.

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

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

The  "effective  maturity" of a debt  instrument is the weighted  average period
over which the Adviser  expects the  principal  to be paid.  It differs from the
stated  maturity  in  that  it  estimates  the  effect  of  expected   principal
prepayments and call provisions. With respect to mortgage backed securities such
as GNMA securities,  the effective  maturity is likely to be substantially  less
than the stated maturity of the mortgages in the underlying  pools. With respect
to obligations  with call  provisions,  the effective  maturity is typically the
next call date on which the obligation  reasonably may be expected to be called.
Securities  without  prepayment or call  provisions  generally have an effective
maturity  equal to their  stated  maturity.  During  periods of rising  interest
rates,  the  effective  maturity  of mortgage  backed  securities  and  callable
obligations  may  increase  substantially  because they become less likely to be
prepaid, which may result in greater net asset value fluctuation. 5 <PAGE>

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

-      Marketable straight-debt securities of domestic issuers, and of foreign
issuers  payable  in  U.S.  dollars,  rated at the time of purchase within the
three  highest  grades assigned by Moody's Investors Service, Inc. ("Moody's")
(Aaa,  Aa  or  A)  or  by  Standard  &  Poor's Corporation ("S&P") (AAA, AA or
A)*foot1  Please  refer  to  the  Appendix  for  a  discussion  of  ratings.


-          U.S.  Government  Securities;


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

- Bank obligations, including repurchase agreements foot2 A repurchase agreement
involves the sale of securities to the Fund,  with the  concurrent  agreement of
the seller to repurchase  the  securities at the same price plus an amount equal
to an  agreed-upon  interest  rate,  within a specified  time. In the event of a
bankruptcy  or other  default of a seller of a  repurchase  agreement,  the Fund
could  experience  both delays in  liquidating  the  underlying  securities  and
losses.
 of  banks,  having  total  assets  in  excess  of  $1  billion.

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

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

Among the  Government  Securities  the Funds may  purchase  are those  issued by
Government  National Mortgage  Association  ("GNMA"),  Federal National Mortgage
Association  ("FNMA") and other agencies.  Securities such as these represent an
interest in a pool of mortgages insured in whole or in part by other agencies or
the U.S. Treasury, depending on the terms of the issue. These issues may or may
not represent the guarantee of the U.S. Treasury.
6
<PAGE>

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

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

Medium grade (Baa or BBB) debt  securities are  obligations of issuers with less
capacity to pay  interest  and repay  principal  than those  rated more  highly.
Investment in these debt securities  involves somewhat greater  investment risk,
including the possibility of issuer default or

bankruptcy. An economic downturn could adversely affect the value of outstanding
bonds and the  ability of  issuers to repay  principal  and  interest.  During a
period of adverse economic changes, including a period of rising interest rates,
issuers of such bonds may experience difficulty in servicing their principal and
interest payment obligations.

Some issuers of debt securities  choose not to have their  securities rated by a
rating service. The Funds may invest in unrated securities that in the adviser's
opinion are  comparable to securities  having at least a medium grade rating and
are suitable for investment by the Funds.
                           INVESTMENT CONSIDERATIONS
   
Investing in securities  entails both market risk and risk of price variation in
individual securities.  This is true even for debt securities issued by the U.S.
Government.  By  diversifying  its  invest-ments,  each Fund may reduce the risk
associated with owning one or a few individual securities. There is no assurance
that any Fund will achieve its investment  objectives.       The Growth Fund and
the International Fund may invest in securities of smaller or newer companies as
well as those of well-seasoned  companies of any size. Smaller companies involve
higher  investment risks in that they often have limited product lines,  markets
and resources,  or their  securities may trade less  frequently and have greater
price  fluctuation  than  those  of  larger  companies.  These  factors  may  be
particularly applicable in smaller or emerging foreign markets.

Investment  in  Foreign  Securities

Investors should understand and carefully consider the risks involved in foreign
investing.  Investing in foreign  securities or  instruments  involves risks and
opportunities not typically associated with investing in U.S. securities.  These
include:  fluctuations  in  exchange  rates  of  foreign  currencies;   possible
imposition of exchange control  regulation or currency  restrictions  that would
prevent cash from being brought back to the U.S.; less public  information  with
respect to issuers of securities;  less  governmental  supervision of exchanges,
issuers, brokers; lack of uniform accounting,  auditing, and financial reporting
standards;  lack of uniform trading  practices;  less liquidity or greater price
volatility in foreign  markets;  possible  imposition of foreign taxes;  or less
advantageous legal, operational, and financial protections applicable to foreign
custodial  arrangements.  There is also a risk of  expropriation or confiscatory
taxation,  seizure or  nationalization of foreign bank deposits or other assets,
establishment of exchange controls, 7 <PAGE>

 adoption of foreign government  restrictions,  or adverse political,  social or
diplomatic developments that could affect investment in these nations.

Short-Term  Bond  Fund  and  Bond  Income  Fund

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

The risks  inherent in these Funds depend  primarily on the terms and quality of
the  obligations  in that  Fund's  portfolio,  as well as on market  conditions.
Interest rate  fluctuations  affect a Fund's net asset value, but not the income
received by the Fund from its portfolio securities. However, because

yields on debt  securities  available  for purchase by a Fund vary over time, no
specific yield on shares of a Fund can be assured.

INVESTMENT  RESTRICTIONS.   In  addition  to  the  restrictions  stated  in  the
Prospectus, the Funds shall not purchase securities on margin or sell securities
short or purchase or write put or call options; purchase "restricted securities"
(those which are subject to legal or con-tractual restric-tions on resale or are
otherwise  not readily  marketable);  nor invest in oil,  gas or other  min-eral
exploration  leases  and  programs.  The Funds  shall not make  loans to others,
except  for the  purchase  of  debt  securities,  or  entering  into  repurchase
agreements.  The Funds shall not in-vest in  securities so as to not comply with
Subchapter M of the Code, in that  generally at the close of each quarter of the
tax year,  at least 50% of the value of each Fund's total assets is  represented
by (i) cash and cash  items,  government  securities,  and  securities  of other
regulated  invest-ment  companies,  and (ii) other securities,  except that with
respect to any one  issuer in an amount  more than 5% of  ei-ther  Fund's  total
assets, and no more than 10% of the Fund's voting securities of any one is-suer.
In addition,  the Funds shall not  purchase  real  estate;  real estate  limited
partnerships (excepting master limited partnerships that are pub-licly traded on
a na-tional security ex-change or NASDAQ's National Market System); com-modities
or commodity contracts; issue senior securities;  provided, however, that a fund
may borrow money for extraordinary or emergency  purposes and then only if after
such borrowing there is asset coverage of at least 300% for all such borrowings;
nor act as a securities  un-der-writer except that they may pur-chase securities
directly  from the issuer for  investment  purposes.  Also, no Fund of the Trust
shall purchase or retain securities of any issuer if the officers or trustees of
the Trust or its adviser own more than one-half of one percent of the securities
of such  issuer;  invest in any  com-pany  for the  pur-pose  of  management  or
exercising control. No Fund of the Trust shall invest in the securities of other
open-end   investment   companies,   except   in   connection   with  a  merger,
consolidation,  acquisition, or reorganization or by purchase in the open market
where no commission  or profit to a sponsor or dealer  results from the purchase
other than the customary broker's commission.

No Fund shall  pur-chase  securities of any issuer in excess of 5% of the Fund's
total assets or pur-chase more than 10% of the outstanding  voting securities of
any is-suer;  or concentrate its in-vestments in a single industry beyond 25% of
the total  value of the  Fund;  or  invest  more  than 10% of its  assets in the
securities  of issuers  which  to-gether  have a record of less than three years
continuous  operation.  No  Fund  purchases  securities  if it  has  outstanding
borrowings  exceeding 5% of its net assets. No Fund's  invest-ments in warrants,
valued  at the  lower of cost or  market,  shall  exceed  5% of the value of the
Fund's net assets.  Included  within that  amount,  but not to ex-ceed 2% of the
value of the Fund's net assets,  may be warrants which are not listed on the New
York or 8 <PAGE>

American  Stock  Exchange.    Warrants  acquired  in  units  or  at-tached  to
securities  may  be  deemed  to  be  without  value.

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

would be forced to sell  securities at a time when it might not  otherwise  have
done so, or to forego exercising the rights.

Investment  objectives  and  certain  policies  of each of the  Funds may not be
changed  without  the prior  ap-proval  of the  holders of the  majority  of the
outstanding  shares of the respective  Fund.  Objectives and poli-cies which are
considered  fundamental  and  subject to change  only by prior  approval  of the
shareowners include:  (1) the primary and any secondary  investment  objectives;
(2) the  classification of the Trust as an open-end  management  company and the
sub-classification  of each of the Funds as a diversified  company;  and (3) the
policies listed under "Investment Restrictions."
                              PORTFOLIO TURNOVER
The Funds have no restrictions on portfolio turnover and buy or sell investments
accord-ing  to the  Adviser's  assessment  of the  market and the  economy.  The
figures regarding turnover in the following  paragraph's  reflect the operations
of certain Funds under their  previous  objectives.  The portfolio  turnover for
these Funds  under  their  present  policies  is not  expected to be  materially
different, however.

   

The portfolio turnover rate of the Sextant Growth Fund
(previously Northwest Growth Fund) for the fiscal years ended November 30, 1997,
1996, and 1995, was 25%, 32%, and 40% respectively.

The  portfolio  turnover  rate  of the  Sextant  Bond  Income  Fund  (previously
Washington  Tax-Exempt  Fund) for the fiscal years ended November 30, 1997, 1996
and 1995 was 51%, 75%, and 77%, respectively.

Portfolio  turnover  for the  Sextant  Short-Term  Bond Fund for the fiscal year
ended  November 30, 1997,  1996 and the period  September  28, 1995  (inception)
through  November  30,  1995,  was  47%,  100% and 0%,  respectively.  Portfolio
turnover for the Sextant  International  Fund for the fiscal year ended November
30, 1997, 1996 and the period  September 28, 1995  (inception)  through November
30, 1995, was 9%, 11% and 12%, respectively.     
                               PERFORMANCE DATA
The figures regarding yield and total return in the following paragraphs reflect
the operations of certain Funds under their previous  objectives.  Consequently,
no inference as to future performance of the Sextant Growth Fund or Sextant Bond
Income Fund should be drawn.

9
<PAGE>

Certain  factors  should be taken into  account  before  using Total  Return and
Current  Yield   information  as  a  basis  for  comparison   with   alternative
investments.  No  ad-justment  is made for taxes payable on  distributions.  The
performance  for any given past period is not an  indication  of future rates of
return or yield on its shares.    
 The Sextant  Growth  Fund's total return for
the one year period  ended  November 30, 1997 was 30.30%.  Average  annual total
return from April 1, 1987 (inception of the predecessor  fund) through  November
30, 1997 was  16.28%.  Performance  figures for the Sextant  Growth Fund for the
period prior to October 12, 1990 reflect the Fund's investment objective at that
time of tax-free income and capital  preservation.  Performance  figures for the
Sextant  Growth Fund for the period from October 12, 1990 to September  28, 1995
reflect the Fund's investment objective at that time of Northwest growth stocks.

The total  return of the Sextant  Bond Income Fund for the one year period ended
November 30, 1997 was 8.24%. Average annual total return for the period March 1,
1993 (inception)  through November 30, 1997, was 6.92%.  Performance figures for
the Sextant Bond Income Fund for the period from inception to September 28, 1995
reflect  the  Fund's  investment  objective  at that  time of  Washington  State
municipal bonds.

The total return of the Sextant  Short-Term Bond Fund and Sextant  International
Fund for the  one-year  period  ended  November  30,  1997 was 5.44% and 13.58%,
respectively.  Average  annual total  returns for the period  September 28, 1995
(inception) through November 30, 1997 was 5.24% and 14.41%, respectively.
    
Average  annual  Total  Return  quotations for various periods illustrated are
                 -------------
computed  by  find-ing  the average  annual  compounded  rate of return over the
period  quoted  that would  equate the  initial  amount  invested  to the ending
redeemable value according to the following formula:
          P  (1  +  T)n      =      ERV

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

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

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

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

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

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

10
<PAGE>

Where: a = dividends and interest earned during the period; b = expenses accrued
for the period (net of  reimbursement);  c = the average  daily number of shares
outstanding during the period that were entitled to receive  dividends;  and d =
the maximum offering price per share  (equivalent to Net Asset Value for no-load
funds) on the last day of the period.

   
The yield on Sextant Bond Income Fund
for the 30-day  period ended  November 30, 1997 was 6.09%.  The yield on Sextant
Short-Term Bond Fund for the 30-day period ended November 30, 1997 was 5.40%.
    

In advertising and sales  literature,  a Fund may compare its  performance  with
that of other mutual funds,  indexes or averages of other mutual funds,  indexes
or data, and other competing investment and deposit products. The composition of
these indexes or averages  differs from that of the Funds.  Comparison of a Fund
to  an  alternative   investment  should  be  made  with  consideration  of  the
differences in features and expected performance of the investments.

All of the indexes and  averages  noted below are  obtained  from the  indicated
sources  or  reporting  services,  which  the  Trust  believes  to be  generally
accurate.  A Fund may also note its mention or recognition in other  newspapers,
magazines  or  media  from  time  to  time.   However,   the  Trust  assumes  no
responsibility for the accuracy of such data. Among the newspapers and magazines
that might mention the Trust or the Funds are:

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


The Funds may also  compare  themselves  to the Consumer  Price Index,  a widely
recognized measure of inflation, and to other indexes and averages such as:

Dow Jones Industrials New York stock Exchange  Composite Index Standard & Poor's
500 Stock Index American Stock  Exchange  Composite  Index Standard & Poor's 400
Industrials  NASDAQ  Composite  Wilshire  5000 NASDAQ  Industrials  Russell 2000
Lipper  General Equity Fund Average  Lipper  Capital  Appreciation  Fund Average
Lipper Equity Funds Average  Lipper Growth Funds Average  Lipper Growth & Income
Fund Average  Lipper Small  Company  Growth Fund Average  Lipper  Balanced  Fund
Average  Lipper  Equity  Income  Fund  Average   Ibbotson  Common  Stocks  Index
Morningstar Mutual Fund Indices


11
<PAGE>


The indexes and averages are measures of  performance of stocks and mutual funds
that are classified, calculated and published by these independent services. The
Funds may also use comparative  performance as computed in a ranking by these or
other independent services.

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

                            MANAGEMENT OF THE TRUST
Information  concerning  Trustees and Officers of the Trust and their  principal
occupations for the past five years is shown below:
   
A.  HERBERT  ERSHIG,    -  Trustee
          22  Shorewood  Drive,  Bellingham,  WA  98225.
Retired.
President, Ershings, Inc., Bellingham WA, industrial manufacturing, from 1960 to
1996.
    
GARY  A.  GOLDFOGEL,  MD  -  Trustee
          1500  N.  State  Street,  Bellingham,  WA  98225.
     Pathologist.  Whatcom  County  Medical  Examiner,  Bellingham  WA.

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

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

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

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

PANDORA  LARNER  -  Secretary
          1300  N.  State  Street,  Bellingham,  WA  98225.
     Saturna  Capital  Corporation,  October  1996  to  present.
     Medical  supervisor,  1991  to  1993.
     Housewife,  1994.

12
<PAGE>
     Clothing  sales  representative,  1995  to  Feb.  1996.
     Medical  receptionist/trainer,  Feb.  1996  to  Sept.  1996.
    

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


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

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


<TABLE>

<CAPTION>

   


<S>                  <C>         <C>                <C>                <C>                 <C>

                                 Pension or                            Total
                     Aggregate   Retirement                            Compensation
Name of              Compensa-   Benefits Accrued   Estimated Annual   From Registrant
Person;              tion From   As Part of Fund    Benefits Upon      and Fund Complex
Position             Registrant  Expenses           Retirement         Paid to Directors
-------------------  ----------  -----------------  -----------------  ------------------


A. HERBERT ERSHIG,     $ 400      $   0              $    0              $400
Trustee

GARY GOLDFOGEL,          400          0                   0               400
Trustee

JOHN E. LOVE,            400          0                   0               400
Trustee

JOHN S. MOORE,           400          0                   0               400
Trustee

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



The Board has  authority to establish an Executive  Committee  with the power to
act on behalf of the Board  between  meetings  and to exercise all powers of the
Trustees  in the  management  of the  Trust.  No  Executive  Committee  has been
established at this time. An Audit  Committee,  consisting of the  disinterested
directors,  meets to select  the  independent  accountant  and  review all audit
reports. There is no separate nominating committee.      As of February 24, 1998
officers,  trustees and their families as a group,  own the following  shares of
the Funds
               Percent  of
     Fund                           Shares  Owned          Outstanding
     ----                           -------------          -----------
     Sextant  Short-Term  Bond            66,051            17%
     Sextant  Bond  Income  Fund          67,733            26%
     Sextant  Growth  Fund                38,246            17%
     Sextant  International  Fund         37,307            28%
    
13

<PAGE>
                        PRINCIPAL HOLDERS OF SECURITIES
   
As of February 24, 1998 the shareholders of Sextant  Short-Term Bond Fund owning
5% or more were as follows:

      Name          Shares          Percentage
     ----          ------          ----------
     The  Heritage  Education  Trust,  Inc.
     Dr.  Mohammed  Jaghilt,  President          88,635          23.40%

     Robert  L.  Foote          60,745          16.04%

     Investors  National  Corporation.          35,806          9.45%

     Michael  McRory,  DDS  PS  Profit  SH
     DTD  7-29-80,  Michael  R.  McRory          26,737          7.06%

     Robert  J.  Nicholl  IRA  Rollover          20,068          5.29%

As of February 24, 1998 the  shareowners  with 5% or more of Sextant Bond Income
Fund were as follows:

     Name          Shares          Percentage
     ----          ------          ----------
     Nicholas  F.  Kaiser
     Markell  F.  Kaiser,  JT.  Ten.          45,643          17.62%

     Luzenia  B.  Redpath          34,891          13.47%

     Loie  E.  Haggen          20,398          7.87%

     David  K.  Heaps  IRA  Rollover          16,955          6.64%

     Ubaldina  Sanchez          15,588          6.01%

     Frederick  M.  Graham
     Mary  J.  Graham,  Jt.  Ten          15,033          5.80%

     Saturna  Capital  Corporation          13,657          5.27%

As  of February 24, 1998  the shareowners owning 5% or more of  Sextant Growth
Fund  were:

     Name          Shares          Percentage
     ----          ------          ----------
     Nicholas  F.  Kaiser  IRA  Rollover          18,810          8.24%

     Sutherland  Enterprises  Ltd.          12,617          5.52%
14
<PAGE>

As of  February  24,  1998  the  only  shareowners  with 5% or  more of  Sextant
International Fund were:

     Name          Shares          Percentage
     ----          ------          ----------
     Nicholas  F.  Kaiser  IRA  Rollover          23,817          18.15%

     Heritage  Education  Trust,  Inc.          9,667          7.36%

     Mar-Jac  Poultry  Inc.          7,555          5.75%

     Norman  H.  Bell  MD          7,177          5.46%

     Northwest  Eye  Clinic  Inc.  Employee
     Pension  Trust  #13  Frederick  Kaiser          7,028          5.35%
    
                    INVESTMENT  ADVISORY AND OTHER  SERVICES Each of the Sextant
Funds monthly pays the Adviser an Advisory and Administrative  Services Fee (the
"Base  Fee").  The Base  Fee  covers  certain  administrative  services  such as
portfolio accounting, shareholder and financial reporting, shareholder servicing
and transfer agency  services.  The Base Fee is also  compensation for portfolio
management,  advice and  recommendations on securities to be purchased,  held or
sold.  The Base Fee is computed at the annual rate of 0.60% of average daily net
assets of each Fund, and is paid monthly.  The Base Fee is subject to adjustment
up or down  depending on the  investment  performance  of the Fund relative to a
specified index (the "Performance Adjustment").

"Performance  Adjustment"  for Sextant Bond Income Fund and Sextant Short-Term
Bond  Fund

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

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

Performance  adjustment for Sextant Growth Fund and Sextant  International  Fund
For each month in which either of these Fund's total  investment  return (change
in net asset value plus all  distributions  reinvested)  for the one year period
through that month  outperforms or underperforms the total return of a specified
index for that period by 1% or more but less than 2%, the Base Fee is  increased
or decreased by the annual rate of .10% of the Fund's  average  daily net assets
for the preceding year. If the outperformance or  underperformance is 2% or more
but less than 4%, then the adjustment is at the annual 15

<PAGE>
 rate of .20%. If the  outperformance  or  underperformance  is 4% or more,  the
adjustment  is at an annual rate of .30%. No  Performance  Adjustment is payable
during  the first  year the  Agreement  is in  place.  Total  return  investment
performance as calculated and published by Morningstar, Inc. for selected groups
of mutual funds is used as the index for comparison  purposes.  The  comparative
Morningstar categories used are:

Sextant  Growth  Fund:    "DOMESTIC  GROWTH  FUNDS"

Sextant  International  Fund:  "FOREIGN  STOCK  FUNDS"

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

Sextant  Short-Term  Bond  Fund:      "SHORT-TERM  BOND  FUNDS"

In the event that a particular index is no longer available or otherwise becomes
unavailable or inappropriate, in the opinion of the Board of Trustees, the Board
may select another to replace it.

   

 The  Adviser  has  also  voluntarily
undertaken  to limit  expenses of Bond Income Fund and  Short-Term  Bond Fund to
0.60%  through March 31, 1999. A waiver may have the effect of  subsidizing  the
yield for the period it is in effect.

    

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

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

For no additional charges,  the Adviser provides services as the transfer agent,
registrar and  dividend-pay-ing  agent for each Fund. As transfer agent, Saturna
furnishes to each shareowner a state-ment after each transaction,  an historical
statement at the end of each year showing all trans-actions during the year, and
Form  1099 tax  forms.  Saturna  also,  on  behalf  of the  Trust,  responds  to
shareowners' questions or correspondence.  Further, the transfer agent regularly
furnishes each Fund with current  shareowner lists and information  necessary to
keep the shares in balance with the Trust's records. The transfer agent performs
the mailing of financial  statements,  notices, and prospectuses to shareowners.
The transfer agent maintains records of contributions;  disbursements and assets
as  required  for  IRAs and  other  qualified  retirement  accounts.  Each  Fund
reimburses  Saturna for any  out-of-pocket  expense for forms and mailing  costs
used in performing its functions.

The laws and  regulations of various states set expense  limitations  for mutual
funds as a condition  for  registration  to offer and sell shares in that state.
Usually,  the expense  limitation  requires  reimbursement if, and to the extent
that, the aggregate  operating expenses including the advisory fee but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of a specified  percentage of the average net assets of a Fund for its
fiscal year. The only 16
<PAGE> 
state the adviser believes  maintains an expense
limitation  is  California,   which  limits   aggregate  annual  expenses  (with
exceptions)  to 2.5% of the first $30 million of average  net assets,  2% of the
next $70 million and 1.5% of the remaining average net assets.

National City Bank,  Indianapolis,  Indiana 46255 is the custodian of the Funds'
securities  and other  assets.  As  custodian,  the bank  holds in  custody  all
securities  and cash,  settles for all securities  transactions,  receives money
from sale of shares and on order of each Fund pays the  authorized  expenses  of
the Fund.  When Fund shares are redeemed by investors,  the proceeds are paid to
the  shareowner  by check drawn on the custodian  bank.      Tait,  Weller,  and
Baker, Eight Penn Center Plaza,  Philadelphia PA 19103 served as the independent
accountants  for the fiscal year  ending  November  30,  1997.  The  independent
accountants  conduct the annual audit of the Trust as of November 30 and prepare
the tax returns of each Fund.

Prior to  September  28,  1995,  under the  advisory  contracts  then in effect,
Sextant  Growth Fund and Sextant Bond Income Fund were  obligated to pay Saturna
Capital fees under management  contracts that are no longer in effect. Under the
former contracts, Northwest Growth Fund, predecessor to Sextant Growth Fund paid
Saturna  Capital  monthly an advisory fee at the rate of 0.75% of average  daily
net asset value annually. Similarly,  Washington Tax-Exempt Fund, predecessor to
Sextant  Bond  Income  Fund was  obligated  to pay  Saturna  Capital  monthly an
advisory  fee at the annual rate of 0.50% of the average  daily net assets up to
$250 million, 0.40% of assets be-tween $250 million and $1 billion, and 0.30% of
assets in excess of $1 billion. Under the former contracts, the Adviser received
a separate  fee as  compensation  for  services as transfer  agent and  dividend
disbursement  agent. Each Fund paid Saturna an annual fee of $1.10 per month per
shareowner  account  (plus  $.30 per  month  for  Funds  paying  dividends  more
frequently  than  once  per  quarter).  Each  Fund  reimbursed  Saturna  for any
out-of-pocket  expense  for forms and  mailing  costs  used in  perform-ing  its
functions. For the fiscal year ended November 30, 1997 and 1996, no Sextant fund
paid transfer agent fees.  For the fiscal year ended November 30, 1995,  Sextant
Growth  Fund,  (formerly  Northwest  Growth  Fund) paid  transfer  agent fees of
$1,272, and Sextant Bond Income Fund (formerly Washington  Tax-Exempt Fund) paid
$842.

For the fiscal year ended November 30, 1997, Sextant Growth Fund paid investment
adviser and administration fees of $11,819. For fiscal 1996, Sextant Growth Fund
paid  investment  adviser and  administration  fees of $7,540 and for the fiscal
year ending 1995,  Sextant Growth Fund paid $7,255,  a portion of which was paid
under the new contract  approved by shareholders  effective  September 28, 1995.
For fiscal 1994, under the former  contracts  Sextant Growth Fund paid $9,318 in
administrative and advisory fees, and no waiver or reimbursement was required.

For the fiscal year ended  November 30, 1997,  Sextant Bond Income Fund incurred
advisory expenses of $6,805 (all of which was waived by Saturna Capital). In the
fiscal year ended  November 30, 1996,  Sextant Bond Income Fund paid  investment
adviser  and  administration  fees of $6,640 (all of which was waived by Saturna
Capital).  For fiscal 1995, Sextant Bond Income Fund paid investment adviser and
administration  fees of  $5,838,  all of which was  waived  under the  adviser's
voluntary  expense  reimbursements.  For fiscal 1994, under the former contracts
Sextant  Bond Income Fund paid $8,394 in  administrative  and  advisory  fees of
which Saturna Capital waived or reimbursed $8,046.

For the fiscal  year ended  November  30,  1997,  Sextant  Short-Term  Bond Fund
incurred advisory expenses of $13,245 and for the fiscal year ended November 30,
1996 and the period  September 28, 1995  (inception)  through November 30, 1995,
Sextant Short-Term Bond Fund paid Saturna 17 <PAGE>
 Capital  investment adviser
and  administration  fees of  $15,583  (of which  $8,375  was  waived)  and $605
(entirely waived), respectively.

Similarly,  for the fiscal year ended  November 30, 1997  Sextant  International
Fund incurred advisory expenses of $7,537 and for the fiscal year ended November
30, 1996 and the period  September  28, 1995  (inception)  through  November 30,
1995,  Sextant  International  Fund paid Saturna Capital  investment adviser and
administration fees of $3,148 and $296, respectively.     
                             BROKERAGE ALLOCATION
The  placing  of  purchase  and  sale  orders  as  well  as the  negotiation  of
commissions  is  performed  by the  Adviser  and is  reviewed  by the  Board  of
Trustees.  The  Adviser  may  allocate  brokerage  to any  broker in return  for
research or services  and for  selling  shares of any Fund.  Brokers may provide
research or statistical  material to the Adviser,  but this  information is only
supplemental to the research and other  statistics and material  accumulated and
maintained through the Adviser's own efforts. Any such supplemental  information
may or may not be of value or used in making investment  decisions for the Trust
or any other account serviced by the Adviser.

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

The Adviser's  subsidiary,  Investors  National  Corporation,  is qualified as a
broker-dealer  to engage in a general  brokerage  business.  Investors  National
Corporation  conducts all its  transactions  on an agency basis for  established
"deep  discount"  commissions;  it does not make  markets,  "deal," or  maintain
inventories of securities.  Most stock and US Government  bond brokerage for the
Trust is conducted  through  Investors  National  Corporation,  and the Board of
Trustees has given permission for the Adviser to so direct. As this brokerage is
conducted through an af-filiate of the Adviser,  the Trustees adopted procedures
reasonably  designed to ensure that such  brokerage fees are reasonable and fair
compared to remuneration  received by other brokers in comparable  transactions.
The Trustees receive detailed quarterly  monitoring reports and review brokerage
procedures at least annually.     For fiscal years 1997, 1996, and 1995, Sextant
Growth Fund paid $1,967 $2,536,and $3,188 in brokerage  commissions to Investors
National  Corporation.  For the fiscal year of 1997, Sextant  International Fund
paid $872 is brokerage  commissions to Investors National  Corporation.  For the
year ended  November 30, 1996 and the period  September 28, 1995  (inception) to
November 30, 1995, Sextant International Fund paid $1,562 and $266, respectively
in commissions to Investors National Corporation.  This represented 100% of each
Fund's commissions and aggregate brokerage transactions for each of these years.

For fiscal years 1997, 1996,and 1995 Sextant Bond Income Fund paid $147, $49 and
$0, in brokerage commissions to Investors National  Corporation.  For the fiscal
year ended November 18 <PAGE>

30, 1997 brokerage  commissions to Investors  National  Corporations for Sextant
Short Term Bond Fund was $ 392 and for the fiscal year ended  November  30, 1996
and the period September 28, 1995 (inception) through November 30, 1995, Sextant
Short-Term Bond Fund paid $98 and $0 in commissions respectively.
    
         PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED See How to
Buy Shares,  How to Redeem Shares and Net Asset Value in the  Prospectus  for an
ex-planation about the ways to purchase or redeem shares.

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

Net asset value per share is determined by dividing the value of all  securities
and other assets, less liabilities, by the number of shares outstanding. The net
asset  value is  determined  for each Fund as of the close of trading on the New
York Stock Exchange (generally 4 p.m. New York time) on each day the Exchange is
open for  trading.  The  Exchange  is  generally  closed  on:  New  Year's  Day,
Washington's  Birthday/President's  Day, Good Friday, Memorial Day, Independence
Day (observance), Labor Day, Thanksgiving Day and Christmas Holiday.
                                  TAX STATUS
Saturna  Investment  Trust is organized  as a "series"  investment  company.  At
present only the Funds and Idaho Tax-Exempt Fund are offered,  but the Trust may
create in the future additional funds with different investment objectives. Each
Fund is a separate  economic  entity with separate  assets and  liabilities  and
separate income streams.  The shareowners of each separate Fund may look only to
that  Fund  for  income,  capital  gain or  loss,  redemption,  liquidation,  or
termination.  Each Fund has separate  arrangements  with the Adviser.  Assets of
each Fund are segregated. The creditors and shareowners of each Fund are limited
to the assets of that Fund for recovery of charges,  expenses  and  liabilities.
Each Fund  conducts  separate  voting on issues  relating  solely to that  Fund,
except as  re-quired  by the  Investment  Company  Act.  The tax  status and tax
consequences  to shareowners  of each separate Fund differs,  depending upon the
investment objectives,  operations, income, gain or loss, and distributions from
each Fund.

Each Fund intends to  distribute  to  shareowners  substantially  all of its net
investment  income and net realized capital gains, if any, and to comply,  as it
has  since  inception,  with  the  provi-sions  of  the  Internal  Revenue  Code
applicable  to  regulated  investment  companies,  which  re-lieve  the Funds of
federal income taxes on the amounts so distributed.  For Sextant Growth Fund and
Sextant   International   Fund,   dividends  from  net  investment   income  and
distribution  of any  capital  gains are made at the end of the  fiscal  year in
November.  The Sextant  Bond Income  Fund and Sextant  Short-Term  Bond Fund pay
dividends from net investment income daily,  which are reinvested or distributed
at each month-end. Distribution of any net realized capital gains is made at the
end of the fiscal year in November. 19 <PAGE>

The amount of  investment  income  and  capital  gains,  if any,  available  for
distri-bution  by a Fund in the future  cannot be predicted  due to  continually
changing eco-nomic conditions and market prices.

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

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

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

If you do not furnish the  transfer  agent with a valid  Social  Security or Tax
Identification  Number and in certain  other  circumstances,  we are required to
withhold  31% of  dividend  income.  Income  dividends  to  shareowners  who are
nonresident  aliens may be subject to a 30% United States  withholding tax under
the  existing  provisions  of the code  applicable  to foreign  individuals  and
entities  unless a reduced rate of  withholding  or a  withholding  exemption is
provided  under  applicable  treaty  law. If the IRS  determines  that the Trust
should be fined or penalized for  inaccurate or missing or otherwise  inadequate
reporting of a Tax  Identification  Number, the amount of the IRS fee or penalty
is directly assessed to the shareowner account involved.
                             FINANCIAL STATEMENTS
   
The most recent audited annual report  accompanies  this Statement of Additional
Infor-mation.  The financial  statements  and selected per share data and ratios
dated  November 30, 1997,  together with the report of  independent  accountants
dated  December 12, 1997,  are  considered a part of the Statement of Additional
Information and are in-corporated by reference.      20 <PAGE>

                                   APPENDIX
                                 BOND RATINGS

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

BOND  RATINGS

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

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

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

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

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

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

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

AA Debt  rated  AA has a very  strong  capacity  to pay  interest  and to  repay
principal, and differs from the higher rated issues only in small degree.
21
<PAGE>


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

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

COMMERCIAL  PAPER  RATINGS

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

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

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

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

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

AA This designation indicates that the degree of safety regarding timely payment
is  very  strong.   Those  issues  determined  to  possess  overwhelming  safety
characteristics are denoted with a plus (+) sign.
22
<PAGE>
CROSS  REFERENCE  SHEET

 PART  A                                                   PROSPECTUS CAPTIONS
 -------                                                   -------------------

1.    Cover  Page                                              About the Fund;
                                        Expenses

2.    Synopsis                                                  Not Applicable

3.    Condensed  Financial  Information                    Expenses;
                                        Financial  Highlights

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

5.    Management  of  the  Fund                              Trust Management,
                                        Investment  Adviser

6.    Capital  Stock  and  Other  Securities                    Capital Stock;
                                        Dividends

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

8.    Redemption  or  Repurchase                          How to Redeem Shares

9.    Pending  Legal  Proceedings                               Not Applicable
1


<PAGE>
                                   STATEMENT  OF  ADDITIONAL
                                   -------------------------
PART  B                                                            INFORMATION
-------                                                            -----------
CAPTIONS
--------

10.    Cover  Page                                                  Cover Page

11.    Table  of  Contents                                   Table of Contents

12.    General  Information  and  History                  General Information
                                        History

13.    Investment  Objectives  &  Policies               Investment Objectives
                                        and  Policies;
                                        Portfolio  Turnover;
                                        Investment
                                        Considerations

14.    Management  of  the  Registrant                 Management of the Trust

15.    Control  Persons  and  Principal                   Principal Holders of
            Holders  of  Securities                                 Securities

16.    Investment  Advisory  and  Other                    Investment Advisory
          Services                                          and Other Services

17.    Brokerage  Allocation  and  Other                  Brokerage Allocation
           Practices                                        Portfolio Turnover

18.    Capital  Stock  and  Other  Securities                   Not Applicable

19.    Purchase,  Redemptions  and  Pricing           Purchase, Redemption and
          of  Securities  Being  Offered                 Pricing of Securities
                                        Being  Offered

20.    Tax  Status                                                  Tax Status

21.    Underwriters                                             Not Applicable
2
<PAGE>

22.    Calculations  of  Performance  Data                    Performance Data

23.    Financial  Statements                              Financial Statements
3
<PAGE>




*




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

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

You  should read this Prospectus before investing in the Fund.  Please read it
carefully  and  keep  it  for  future  reference.   A State-ment of Additional
Information  dated  March  26,  1998  has  been  filed with the Securities and
Exchange  Commission  and  is  incorporated by reference into this Prospectus.
You  may  obtain  a  free copy at the SEC website (www.sec.gov) or the Saturna
website  (www.saturna.com),  or  by  contacting:
(Graphic  Omitted)

                                SATURNA CAPITAL
                             1300 N. STATE STREET
                             BELLINGHAM, WA  98225
                         800/ SATURNA  [800/ 728-8762]
                           E-mail: idaho@saturna.com



   

Neither  the  Securities  and  Exchange  Commission  nor  any  state  securities
commission has approved or disap-proved  of these  securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

    


(Graphic  Omitted)
IDAHO
TAX-EXEMPT  FUND


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

                                  PROSPECTUS
   
                                March 26, 1998
<PAGE>
2

EXPENSES
The table illustrates Fund operating expenses for the fiscal year ended November
30, 1997. The Fund imposes no sales load on purchases or reinvested  divi-dends,
no "12b-1" fees, nor any deferred sales load upon redemption.
There are no redemption fees or exchange fees.

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

Management  and  Administrative  Fees  (after  waiver)            0.34%
12b-1  Expenses          NONE
Other  Expenses            0.46%
Total  Fund  Operating  Expenses            0.80%*

FOR  EXAMPLE:
The  Fund  estimates  paying            1  year    --                $    8
these  expenses  on  a  $1,000            3  years--                $  26
investment,  assuming  5%            5  years--                $  46
annual  return:          10  years--                $106

* The Adviser  voluntarily  limits  operating  expenses of the Fund. This limit,
first adopted in October 1990, is 0.80%  annually and extends  through March 31,
1999.  Without the limitation,  the management and administrative fee would have
been 0.50% and operating expenses of the Fund would have been 1.03%. The example
assumes a  continuation  of this  expense cap for the 3, 5 and 10 year  periods.
     This  information  is to help  understand  the  various  (both  direct  and
indirect) expenses that an investor bears. This table should not be considered a
representation  of past or future expenses.  Actual expenses may be more or less
than those shown.  See  Financial  Highlights  and  Investment  Adviser for more
details. 
<PAGE> 
FINANCIAL HIGHLIGHTS 
   
 (Graphic Omitted)
Selected data for a
share of IDAHO TAX-EXEMPT FUND outstanding  throughout each period. The schedule
for the year ended  November  30, 1997 was  audited by Tait Well and Baker,  LLP
independent  accountants,  whose report is included in the Fund's  Annual Report
(incorporated  by reference  into the  Statement of  Additional  Infor-ma-tion).
Other auditors, whose reports expressed unqualified opinions, audited prior year
financial  statements.  This  schedule  should be read with the other  financial
statements  and notes in the Annual Report  (available  without  charge from the
Fund), which also includes management's discussion of the Fund's performance.
<TABLE>

<CAPTION>
                           For Year Ended November 30
                                    -----------------------------------------------------------------------------------------
<S>                                 <C>      <C>      <C>      <C>       <C>      <C>      <C>      <C>      <C>      <C>

-                                     1997     1996     1995      1994     1993     1992     1991     1990     1989     1988
                                    -------  -------  -------  --------  -------  -------  -------  -------  -------  -------
NET ASSET VALUE AT BEGINNING
OF YEAR                             $ 5.25   $ 5.28   $ 4.76   $  5.23   $ 5.16   $ 5.10   $ 5.03   $ 5.07   $ 4.98   $ 5.03
                                    -------  -------  -------  --------  -------  -------  -------  -------  -------  -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income                 0.26     0.27     0.26      0.27     0.25     0.28     0.30     0.33     0.35     0.35
Net gains or losses on securities
(both realized and unrealized)        0.03    (0.03)    0.52     (0.46)    0.12     0.09     0.07    (0.04)    0.09    (0.05)
                                    -------  -------  -------  --------  -------  -------  -------  -------  -------  -------
Total From Investment Operations      0.29     0.24     0.78     (0.19)    0.37     0.37     0.37     0.29     0.44     0.30
LESS DISTRIBUTIONS
Dividends (from net investment
income)                              (0.26)   (0.27)   (0.26)    (0.27)   (0.25)   (0.29)   (0.30)   (0.33)   (0.35)   (0.35)
Distributions (from capital gains)    0.00     0.00     0.00     (0.01)   (0.05)   (0.03)    0.00     0.00     0.00     0.00
                                    -------  -------  -------  --------  -------  -------  -------  -------  -------  -------
Total Distributions                  (0.26)   (0.27)   (0.26)    (0.28)   (0.30)   (0.31)   (0.30)   (0.33)   (0.35)   (0.35)
NET ASSET VALUE AT END
OF YEAR                             $ 5.28   $ 5.25   $ 5.28   $  4.76   $ 5.23   $ 5.16   $ 5.10   $ 5.03   $ 5.07   $ 4.98
                                    =======  =======  =======  ========  =======  =======  =======  =======  =======  =======
TOTAL RETURN                          5.69%    4.66%   16.68%   (3.76)%    7.35%    7.49%    7.63%    5.94%    9.17%    6.45%
RATIOS/SUPPLEMENTAL DATA
----------------------------------
Net assets ($000), end of year      $5,255   $5,064   $5,220   $ 6,841   $7,367   $5,808   $3,803   $2,540   $  808   $  335
Ratio of expenses to average
net assets                            0.80%    0.79%    0.75%     0.75%    0.75%    0.75%    0.75%    0.97%    0.90%    0.28%
Ratio of net investment income
to average net assets                 4.99%    5.10%    5.07%     5.28%    4.79%    5.64%    6.08%    6.74%    6.51%    6.58%
Portfolio turnover rate                 20%      10%      28%       36%      31%      17%      15%      17%      13%     100%
<FN>

  For each of the above years, all or a portion of the expenses were waived.  If
these costs had not been waived, the resulting increase to expenses per share in
each of the above periods would be $.01, $.01, $.016,  $.016,  $.007, 07, $.009,
$.008, $.02, $.02, $.05, $.10, $.19, and $.01 respectively.  The increase to the
ratio of expenses to average daily net assets would be .16%,  .27%,  .26%, .14%,
 .18%, .17%, .54%, 1.01%, 1.25%, 2.24%, and .11%, respectively.
    
</FN>
</TABLE>


2
<PAGE>



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

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

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

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

The  Fund's  fundamental  policy is to  in-vest  at least 80% of net  as-sets in
securities  generating  in-come exempt from federal  income tax,  in-cluding the
alternative minimum tax. Under normal market condi-tions,  at least 65% of total
assets are  invested in debt  securities  generating  in-come  exempt from Idaho
income tax.

The Fund is  "non-diversified,"  meaning that it does not invest in a wide range
of  investments,  but limits its investments to a certain type - debt securities
issued by political  subdivisions of the State of Idaho. The Fund does invest in
a broad  portfolio of such  securities  and pro-vides  investors the benefits of
being  diversified and limiting the risk associated with investing in only a few
securities.  The Fund is primarily  for  residents of Idaho who may benefit from
its policy of investing in  securities  exempt from both federal and Idaho state
income taxes.

INVESTMENT  POLICIES  AND  RISK  CONSIDERATIONS
Investing in securities entails both mar-ket risk and risk of price variation in
individual  securi-ties.  There  is no  guarantee  that the  Fund's  in-vestment
objectives will be realized.

The risks inherent in the Fund depend primar-ily on the terms and quality of the
obligations in its  portfolio,  as well as on market  conditions.  Interest rate
fluctuations  affect the Fund's net asset value,  but not the income received by
the Fund  from its  portfolio  securities.  Because  prices  and  yields on debt
securities vary over time, the Fund's yield also varies.

Because  the Fund is  "non-diversified"  and  in-vests  primarily  in  municipal
securities of a sin-gle state, its investments are more  sus-ceptible to factors
adversely  affecting that state.  These factors  include  economic and financial
trends, as well as political conditions in Idaho and its political subdivisions.
Note  that if any  issuer of  securities  held by the Fund is unable to meet its
financial  obligations,  the income derived there-from,  the ability to preserve
capital, and the Fund's liquidity would all be adversely affected.

The Fund is  vulnerable  to tax rate  changes,  either at the  Idaho or  federal
level, since part of municipal securities' value is derived from the recipient's
ability to exclude  interest  payments from  taxation.  Should this exclusion be
re-duced, the market for municipal securities, and consequently the Fund's share
value, may be adversely affected. 3 <PAGE>

Among Idaho's leading industries are agricul-ture, forest products, tourism, and
elec-tronic  equipment.  Locally  oriented  indus-tries  include  retail  trade,
finance, insur-ance, real estate, trans-porta-tion, com-munica-tions, utilities,
government  and  construction.  A more complete  discus-sion is available in the
Statement of Additional Infor-mation.

4
<PAGE>
The Fund does not purchase  high-yield ("junk") bonds. The Fund requires that at
time of purchase a bond be rated at least "A" or  equivalent  by a national bond
rat-ing  agency  (Standard  and  Poor's,   Moody's   Investor's   Services,   or
equivalent), or, if non-rated, to be of equivalent quality in the opinion of the
Ad-viser.  The Fund requires notes to be rated at least MIG-2 by Moody's or SP-2
by Standard & Poor's,  or if  non-rated,  to be of  equiva-lent  qual-ity in the
opinion of the  Adviser.  The Fund  re-quires  commercial  pa-per to be rated at
least Prime-2 by Moody's or A-2 by Standard & Poor's, or, if non-rated, to be of
equivalent quality in the opinion of the Adviser.

Up to 60% of total assets of the Fund can be in-vested in non-rated bonds.  Note
that  bonds  issued  by the  State of Idaho  and its  municipali-ties  are often
smaller  is-sues in total dollars,  typically  being issued by relatively  small
Idaho  commu-ni-ties  to  finance  local  government  pro-jects.  Because of the
smaller size,  the expense of obtaining a rating for the issuer is typically not
undertaken.  By investing in non-rated  bonds, the Adviser believes it can often
obtain higher yields without a material sacrifice in quality.

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

The  Fund  occasionally  may  purchase  an  entire  issue  of a small  municipal
security, resulting in a higher yield to the Fund as well as the elimi-nation of
certain under-writing expenses to the municipality.

Investors can expect the weighted average port-folio maturity to range between 6
and 15 years.  Usually,  shorter  maturity  bonds provide lower current  yields,
while a matu-rity  beyond 15 years implies  greater  current yield but increased
risk to capital from interest rate in-creases.

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

During uncertain market or economic  condi-tions,  the Idaho Tax-Exempt Fund may
adopt a temporary, defensive position and invest more than 20% of assets in cash
or equivalents,  govern-ment  se-cu-ri-ties,  unaffiliated  money-market  mutual
funds,  and other debt  securities  having an "A"  rating or better.  While such
de-fensive  investments may not contribute to the primary  objective of tax-free
income, they do assist the secondary objective of capital preservation.

Shareowner approval is required to change the Fund's investment objectives.

Except as explained above, all of the policies in this section can be changed by
a  majority  of the  Board of  Trustees.  The Fund has  adopted  cer-tain  other
restrictions, as outlined in the Statement of Additional Information.



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

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

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

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

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

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

Optional plans offered by the Fund:
-          Automatic  investment  plan
- Systematic  withdrawal plan to provide regular  payments to you - The right to
exchange  your  shares  without  charge  for any other  Saturna  fund  Materials
describing these plans and applications may be obtained from the Adviser.

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

The Fund normally pays for shares redeemed or exchanged  within three days after
a proper  instruction is received.  To allow time for clear-ing,  re-demption of
investments made by check may be re-stricted for up to ten calendar days.

There are several methods you may choose to redeem shares.

WRITTEN  REQUEST

Write:          Idaho  Tax-Exempt  Fund
     Box  2838
     Bellingham  WA  98227-2838
Fax:          360  /  734-0755

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

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

-  Redemption  check (no  minimum)  sent as  directed  if the  signature(s)  are
guaranteed.  If pro-ceeds are to be sent to other than the reg- 5
<PAGE>
 istered
owner(s) at the last address,  the signa-tures on the request must be guaranteed
by a national  bank or trust  company  or by a member of a  national  securities
exchange.

- Federal  funds wire ($5000  minimum).  The  proceeds  may be wired to any bank
desig-nated  in the re-quest if the  signature(s)  are  guaranteed  as explained
above.

TELEPHONE  REQUEST

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

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

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

- ACH transfer ($100 minimum) with proceeds trans-ferred to your bank account as
desig-nated  on your  application.  The ACH  authori-zation  must be received at
least two weeks before ACH can be used.

- Exchange ($25 minimum) for shares of any other Fund for which Saturna  Capital
is ad-viser.  If the ex-change is your initial  in-vest-ment into this Fund, the
new account  au-to-matically has the same registration as your original account.
An exchange is considered a closing capital transaction for tax purposes.

- Federal  funds wire ($5000  minimum).  Pro-ceeds may be wired only to the bank
previ-ously  designated,  or as directed  in a prior  written  instruction  with
signatures guar-anteed, as explained above.

For telephone  requests,  the Fund en-deavors to confirm that  instructions  are
genuine and may be liable for losses if it does not. The caller must provide (1)
the name of the person  mak-ing  the  request,  (2) the name and  address of the
regis-tered  owner(s),  (3) the account number,  (4) the amount to be withdrawn,
and (5) the method for payment of the  proceeds.  The Fund may require a form of
personal identification,  and provide writ-ten confirmation of transactions. The
Fund is not  responsible  for the results of  transactions  reasonably  believed
genuine.

CHECK  WRITING

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

The Fund can mail you a small book of blank  checks for a $10 fee.  These checks
may be payable to any payee.  Checks are  re-deemed  at the net asset value next
de-termined after re-ceipt.  If you wish to use this feature,  request the Check
Writing Privi-lege on the application.  As with any redemption,  each check is a
closing capital transaction for tax reporting purposes.

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

Since daily bid prices are not available  for many  municipal  bond issues,  the
Fund val-ues  securi-ties  using  matrices of municipal  bond yields for various
ma-turities and qualities. Prices are ad-justed for factors unique to each bond.
To verify its knowledge of market  fac-tors,  the adviser  periodically  obtains
appraisals from independent sources.

TRUST  MANAGEMENT
   
Saturna  Investment  Trust  is managed by a Board of Trustees, currently:   A.
Herbert  Ershig,  Gary  A.
6
<PAGE>
Goldfogel,  John E. Love, John S. Moore, and Nicholas F. Kaiser.  The Trustees
establish  policies,  as  well  as  review  and  approve  contracts  and their
continuance.    The  Trustees also elect the officers, determine the amount of
any  dividend  or capital gain distribution and serve on any committees of the
Trust.    For  other information concerning the officers and Trustees, see the
State-ment  of  Additional  Information.

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

The Fund pays a monthly  advisory fee at the annual rate of 0.50% of the average
daily net assets up to $250 million,  0.40% of assets  be-tween $250 million and
$1  billion,  and 0.30% of assets in ex-cess of $1  billion.  Through  March 31,
1999,  the Adviser has  voluntarily  waived its fee and  reimburses  the Fund as
nec-essary to limit total Fund expenses to 0.80% of average annual net assets. A
waiver has the effect of  subsidizing  the yield for the period it is in effect.
     Under the Fund's investment advisory agreement the Fund pays its own taxes,
brokerage  commissions  (if any),  trustees'  fees,  legal and accounting  fees,
insurance,  transfer  agent,  registrar  and  dividend  disbursing  agent  fees,
expenses  incurred in complying with state and federal laws regulating the issue
and sale of its  shares,  and  mailing  and  printing  costs for  pro-spectuses,
reports  and  notices  to  shareowners.  The  Adviser  furnishes  office  space,
facilities  and  equipment,  personnel  and  clerical and  bookkeeping  services
required to conduct the Fund's business. Saturna Capital Corporation acts as the
Fund's transfer agent, maintaining all shareowner records.

   

Saturna Capital  Corporation acts as investment  adviser to six other investment
companies,  the four  Sextant  Funds:  Growth ($2  million),  International  ($1
million),  Bond Income ($1 million) and Short-Term Bond ($2 million), as well as
Amana Income Fund, ($20 million) and Amana Growth Fund ($9 million).
    

Each  of  the  Sextant  Funds  pays  the  Adviser  an  Investment  Advisory  and
Administrative  Services Fee computed at the annual rate of 0.60% of average net
assets  of each  Fund  and  paid  monthly.  Each  Fund's  Fee is  subject  to an
adjustment  (up to a maximum  adjustment  of 0.30% in two of the Funds)  that is
determined  by that  Fund's  total  return  performance  relative to a specified
index. The advisory fee for both of the Amana Funds is .95%.

Saturna also manages individual  advisory accounts.  The Adviser's  wholly-owned
subsidiary,  Investors  National  Corporation,  is a brokerage  firm and acts as
distributor for the Fund without compensation. The Adviser is permitted to place
brokerage  transactions  through the  affiliate,  and the  Adviser may  allocate
brokerage  to any broker in return for  research  or  services  and for  selling
shares of any Fund.

   
Phelps McIlvaine,  primary manager of the Fund, entered the investment  business
in 1976 and  managed  bond hedge  funds from 1987 to 1993.  He also  manages the
Sextant Bond Income and  Short-Term  Bond Funds.       Employees of the Adviser,
including Fund managers, are permitted to engage in securities  transactions for
their own  accounts  in  accordance  with a code of  ethics  that,  among  other
provisions,  requires  advance  approval  of all  trades and  disclosure  of all
holdings.

CAPITAL  STOCK;  DIVIDENDS
Saturna  Investment  Trust,  an open-end  "series  trust" was  or-ga-nized  as a
Washington  Business  Trust on  February  20,  1987.  The Trust now offers  five
sep-a-rate Funds:  Idaho Tax-Exempt Fund and the four Sextant Funds. The Sextant
Funds  provide  the basic  elements  of an  investment  program  and are offered
through a 7 <PAGE>
  separate prospectus  available from the Adviser. The Trust began operations on
September 4, 1987.  The Fund's  current  investment  advisory  agreement  became
effective on its approval by share-owners on October 12, 1990.

The Fund is divided into shares of  bene-fi-cial  inter-est,  with equal vot-ing
rights. All shares are fully paid, non-assess-able,  trans-ferable,  have rights
of  redemp-tion,  and are not sub-ject to pre-emptive  rights.  The Trust is not
required to hold annual shareowner meetings, but special meetings are called for
electing or  removing  Trustees,  changing  fundamental  policies,  or voting on
approval of an advisory contract.

All divi-dends and  distributions  are  distributed  pro rata to share-owners in
proportion to shares owned.

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

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

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

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

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

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

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

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

To compute  average  annual total return of a Fund for any specified  period (i)
assume an  investment  made on the  first day of the  period  and  reinvest  all
div-idends paid during the period in addi-tional shares and then (ii) divide the
ending balance (i.e., the number of shares now held multiplied by the ending net
asset value) by the beginning  balance.  For a more complete  description of the
method of computation, see the Statement of Ad-ditional Information. 8 <PAGE>


                             IDAHO TAX-EXEMPT FUND
                            INVESTMENT APPLICATION

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

ACCOUNT  TYPE  AND  NAME
q  Individual
                    First                    Middle Initial               Last

Social  Security  Number                              Date of Birth___________

q  Joint  with
                    First                    Middle Initial               Last

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

q  Gifts  to  Minor                                        as  Custodian  for
               Name  of  Custodian                               Name of Minor
               qUniform  Gifts  to  Minors  Act
 under  the              qUniform Transfers                                  /
                                                                    ----------
/
     State          to  Minors  Act              Minor's S. S. No.     Minor's
Birthdate

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


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

MAILING
ADDRESS          Street                                      Apt., Suite, Etc.


          City                                    State                    ZIP

TELEPHONE    (          )                                        (          )
             -          -                                        -          -
               Daytime                                                  Home

INITIAL  INVESTMENT    $
Make  check  payable  to  Idaho  Tax-Exempt  Fund  (minimum  $1000).
<PAGE>
TELEPHONE  REDEMPTION  PRIVILEGES
You  automatically  have  telephone  redemption by check and telephone  exchange
privileges  unless you strike this line.  The Fund will endeavor to confirm that
instructions  are  genuine  and it may be  liable  for  losses  if it does  not.
(Procedures  may  include  requiring  a form  of  personal  identification,  and
providing written confirmation of transactions.)

   
E-MAIL
Please  send  duplicate  confirmations  and  notices  to  my  e-mail  address:
    

ACH  TELEPHONE  TRANSFER  PRIVILEGE
q To transfer funds by ACH at no charge to or from my (our) bank account, I (we)
authorize  electronic fund transfers through the Automated  Clearing House (ACH)
for my (our) bank account designated. Please attach a voided check.

AUTOMATIC  INVESTMENT  PLAN
q Invest $ _______  into this  Fund on the  _____  day of each  month  (the 15th
unless another date is chosen) by ACH transfer from my (our) bank account.  This
plan may be canceled at any time. Please attach a voided check.

CHECK WRITING PRIVILEGE ($500 per check minimum) ($10 checkbook charge) q I (We)
hereby  request  the  Custodian  to  honor  checks  drawn by me (us) on my (our)
account subject to acceptance by the Trust, with payment to be made by redeeming
sufficient  shares in my (our)  account.  None of the  custodian  bank,  Saturna
Capital  Corporation,  nor Saturna Investment Trust shall incur any liability to
me (us) for honoring such checks,  for redeeming  shares to pay such checks,  or
for returning checks which are not accepted.

qSingle  Signature  Authority  --  Joint  Accounts  Only:    (CHECKS FOR JOINT
 --------------------------------------------------------
ACCOUNTS REQUIRE BOTH SIGNATURES UNLESS THIS BOX IS MARKED TO AUTHORIZE CHECKS
 ------
WITH A SINGLE  SIGNATURE).  By our  signatures  below,  we agree to permit check
redemptions  upon the single  signature of a joint owner.  The  signature of one
joint  owner is on behalf of himself  and as  attorney in fact on behalf of each
other  joint owner by  appointment.  We hereby  agree with each other,  with the
Trust and with  Saturna  Capital  Corporation  that all moneys now or  hereafter
invested in our account  are and shall be owned as Joint  Tenants  with Right of
Survivorship, and not as Tenants in Common.

The  undersigned  warrants(s)  that I (we)  have  full  authority  to make  this
Application,  am (are) of  legal  age,  and  have  received  and read a  current
Prospectus and agree to be bound by its terms. Unless this sentence is struck, I
(we) certify,  under penalties of perjury,  that I (we) am not subject to backup
withholding  under the  provisions  of  section  3406(a)(1)(C)  of the  Internal
Revenue  Code.  This  application  is not  effective  until it is  received  and
accepted by the Trust.


    Date                                Signature of Individual (or Custodian)


    Date                                 Signature of Joint Registrant, if any
<PAGE>
                        PLEASE SAVE THIS QUICK GUIDE TO

                             IDAHO TAX-EXEMPT FUND

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

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

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

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

DIVIDENDS  AND  PRICES
The Fund  declares  dividends  daily  and pays them  monthly.  Fund  prices  are
recorded daily at 888 / 732-6262 and on the Internet at www.saturna.com.

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







                                    PART B



                      STATEMENT OF ADDITIONAL INFORMATION





<PAGE>


                           SATURNA INVESTMENT TRUST

                             IDAHO TAX-EXEMPT FUND



                             1300 N. State Street
                         Bellingham, Washington 98225

                                 360-734-9900
                                  800-SATURNA


                      STATEMENT OF ADDITIONAL INFORMATION
   
                                March 26, 1998

Idaho Tax-Exempt Fund (the "Fund") is a series of Saturna  Investment Trust (the
"Trust").  The Fund is a series of the Trust and represents shares of beneficial
interest in a separate  portfolio of securities  and other assets,  with its own
objectives  and  policies.  This  Statement of Additional  Information  is not a
Prospectus.  It merely furnishes  additional  information that should be read in
conjunction  with the  Fund's  prospectus  dated  March  26,  1998.  The  Fund's
prospectus  may be obtained free of charge by  telephoning  the numbers above or
writing the Fund at the address shown above.      <PAGE>


                               TABLE OF CONTENTS



                                                  Page

General  Information  and  History          3
Investment  Objectives  and  Policies          3
Investment  Considerations          8
Portfolio  Turnover          11
Performance  Data          11
Management  of  the  Trust          13
Principal  Holders  of  Securities          15
Investment  Advisory  and  Other  Services          15
Brokerage  Allocation          16
Purchase,  Redemption  and  Pricing  of  Securities  Being  Offered         17
Tax  Status          17
Financial  Statements          18
Appendix          19
2
<PAGE>
                        GENERAL INFORMATION AND HISTORY
Saturna  Investment Trust (the "Trust") is a business trust formed following RCW
23.90  of the  laws  of the  State  of  Washington  to  operate  as an  open-end
management  company.  When formed on February 20, 1987,  the name was  Northwest
Investors  Tax-Exempt  Business Trust. The Trust's name was changed to Northwest
Investors  Trust  on  October  12,  1990,  and to  Saturna  Investment  Trust on
September 28, 1995.

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

The  Trust  has five  separate  Funds,  the Fund  (initially  known as the Idaho
Extended  Maturity  Tax-Exempt Fund) and four others which are offered through a
separate Prospectus and Statement of Additional Information: Sextant Growth Fund
(formerly  known as Northwest  Growth Fund),  Sextant Bond Income Fund (formerly
known as Washington  Tax-Exempt Fund),  Sextant  International Fund, and Sextant
Short-Term Bond Fund.
                      INVESTMENT OBJECTIVES AND POLICIES
This section is provided only to expand certain policies and  re-strictions  not
thoroughly covered in the Prospectus.

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

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

The Fund is "non-diversified."  This means that with re-spect to at least 75% of
total  assets,  greater  than 5% may be  invested in the  securities  of any one
issuer.   However,   the  Fund  is  required  to  meet  Internal   Revenue  Code
require-ments  that at the end of each  quarter at least 50% of total  assets is
repre-sented by (a) cash or equivalents,  (b) U. S. gov-ern-ment securities, (c)
securities of other regulated investment  compa-nies,  and (d) other securities,
if,  as to any one  is-suer,  the  value of such  issuer's  securities  does not
ex-ceed 5% of the Fund's total assets and such issuer's  securities  held by the
Fund represent not more than 10% of the  outstanding  voting  securities of such
issuer.  The balance of the Fund may be invested in other securities if not more
than 25% of total assets are invested in the  securities  of any one issuer,  or
two or more issuers en-gaged in the same or simi-lar trade or business.

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

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

NON-RATED  BONDS.  Management  and the  Adviser  believe  that  many of the debt
securities issued by the State of Idaho or the political subdivisions,  agencies
or  instrumentalities  thereunder  are small  issues in total  dollars,  and are
typically issued by smaller communities or  instrumentalities to obtain capital.
Because of the small size of such issues,  the expense of obtaining a rating for
the is-sued  obligation  (the "Bond") is  typically  not  undertaken.  Without a
rating,  investors must rely solely on their own analysis and  investigation  to
determine  investment  risk and  worth  of such  Bonds.  Since  the cost of such
analysis and  investigation  is typically not  considered  war-ranted due to the
size of such  issues,  despite a higher  return  typically  available  from such
non-rated  Bonds,  issues of  non-rated  Bonds  generally  do not have a trading
market consisting of as many dealers as comparable rated issuers.  Occasionally,
the financial insti-tution lending the funds to a municipality receives the Bond
and holds it until  maturity.  As a result,  although  trading markets exist for
non-rated Bonds, generally the number of dealers participating in the market are
fewer than that which exists for rated Bonds.  Although all rated and  non-rated
Bonds are traded on the basis of dealers'  perception  of  credit-worthiness,  a
non-rated  Bond having  greater  recognition  among  dealers  will have a market
consisting  of a greater  number of dealers  than will the market for a Bond not
having  as  great a  recognition.  Management  anticipates  that  investment  in
non-rated Bonds will occur only when the Adviser to the Fund believes the credit
of the issuer of such  non-rated  Bonds is such so as to  warrant an  investment
without   unreasonable  risk  to  the  preservation  of  capital  and  which  is
sufficiently  recognized  among  the  market  dealers  so  as to  provide  ready
marketability  of the investment.  In the opinion of Management and the Adviser,
such  non-rated  Bonds will be  comparable  to rated Bonds having an "A" rating.
Experience of the Adviser  indicates  that  investments  in certain good quality
non-rated  Bonds are  liquid  and can be sold  within  seven days at or near the
value given for computing net asset value.

Management  and the Adviser  believe  that there exist both rated and  non-rated
Bonds  that  constitute  good  investments  that  will  promote  the  investment
objectives of the Fund. Purchases of 4 <PAGE>

Bonds on behalf of the Fund may be made directly from the issuer. Some purchases
are by sealed bid with the entire  issue  being  awarded to the lowest  interest
rate that is bid. Most issuers are willing to negotiate a rate directly with the
managing underwriter and/or purchaser.  In this instance,  the Adviser will deal
in good faith to arrive at a competitive rate.

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

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

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

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

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

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

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

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

The Fund invests  predominantly in municipal  obligations issued by the State of
Idaho  or  any  political   subdivision,   agency  or  instrumentality   thereof
("Municipality"). These municipal obligations generally include Municipal bonds,
Municipal notes, Municipal commercial paper, and any other obligation from which
the pay-ment of interest, in the opinion of the bond issuer's 5 <PAGE>

counsel,  is  exempt  from  Federal  and  Idaho  State  income  tax.   General
descriptions  of  these  investments  are:

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

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

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

Municipal  notes and  commercial  paper  obligations  are usually  issued in the
following  cir-cumstances:  (a) When borrowing is in  anticipation  of long-term
financing,  the  paper is  gen-erally  referred  to as bond  anticipation  notes
("BAN").  Cities are authorized to issue revenue bond  anticipation  notes.  The
maturity  date cannot  exceed five years from the date of issue.  Payment can be
extended  for not more than  three  years  from their  maturity  date.  BANs are
se-cured  by income and  revenues  derived by the city from the project and from
the sale of the rev-enue  bonds in  anticipation  of which the notes are issued.
(b) Borrowings to level temporary  shortfalls in revenue occasioned by irregular
receipts of taxes are generally  referred to as tax anticipation  notes ("TAN").
Taxing districts,  including counties,  any political  subdivision of the state,
any municipal corporation,  school districts, any quasi-municipal corporation or
any other public corporation  authorized to levy taxes, are authorized to borrow
money and issue a TAN.  The TANs  must  mature no longer  than one year from the
date of issue  and are  issued in  anticipation  of  collection  of taxes in the
current fiscal year. The taxing district is limited to an amount equal to 75% of
the taxes  levied in the  current  fiscal year and not yet  collected.  The full
faith and credit of the taxing  districts  back TANs. The State of Idaho is also
autho-rized to issue a TAN in anticipation of income or revenue from taxes,  but
is  forbidden  by its  constitution  to engage in deficit  spending or long-term
borrowing. The term of the obliga-tion is the shorter of 12 months or to the end
of the fiscal year.  Likewise,  the  borrowed  amount  cannot  exceed 75% of the
income or  revenue  from  taxes  which the  State  tax  commission  or other tax
collection agency certifies is reasonably anticipated to be collected during the
current fis-cal year.

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

General  obligation  bonds  ("GO Bonds") are those obligations of an issuer to
--------------------------
which  the full faith and credit of the municipality is pledged.  The proceeds
--
from  GO  Bonds  are  used  for  a  wide
variety of public uses, including, but not limited to, public facilities such as
the structure or improvement of schools,  highways,  and roads,  water and sewer
systems, and facilities for a 6 <PAGE>
 variety of public purposes. A GO Bond is
paid from ad valorem  property  taxes or from other tax  sources.  Many types of
obligations may be general obligations of a municipality whether or not they are
incurred  through the issuance of bonds. GO Bonds may be incurred in the form of
a registered warrant,  conditional sales contract,  or other instrument in which
an unconditional and unlimited promise to pay from ad valorem taxes is made.

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

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

Local  Improvement  District  ("LID")  bonds are secured by assessments levied
----------------------------
against  the  properties  benefited  by  the improvements constructed with the
---
proceeds of the bonds.  This type of financing is available to counties, water
---
and/or sewer districts,  highway dis-tricts,  irrigation districts,  and cities.
The property must be specially benefited by the im-provements constructed out of
the proceeds of the bonds, generally within a local improve-ment district.

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

The Fund may purchase certain variable or floating rate obligations in which the
interest rate is adjusted at predesignated periodic intervals (variable rate) or
when there is a change in the market rate of interest on which the interest rate
payable on the obligation is based  (floating  rate).  Variable or floating rate
obligations  may include a demand  feature that entitles the purchaser to demand
prepayment of the principal  amount prior to stated maturity.  In addition,  the
is-suer may have a corresponding  right to prepay the principal  amount prior to
maturity.
                           INVESTMENT CONSIDERATIONS
Investing  in securities entails both mar-ket risk and risk of price variation
in  individ-ual  securities.   This is true even for debt securities issued by
the  U.S.  Government.    By  diversifying  its  invest-ments,
7
<PAGE>

the Fund may reduce the risk associated  with owning one or a few  indi-vi-du-al
securi-ties.  However,  there is no  assurance  that the Fund will  achieve  its
investment objectives.

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

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

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

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

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

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

In the past, the State's economy has often behaved counter to national  economic
trends. In spite of the national  difficulties in the 1970's,  the State enjoyed
economic growth for most years in the decade.  The State's  economy  experienced
weaker than average  economic  performance  during the first half of the 1980's.
Idaho's economy turned up in 1988, and has continued above the national rates. 8
<PAGE>


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

Idaho has benefited from recent population exodus from California. The shift has
helped make the state among the fastest growing economies in the nation. However
impressive  this may  sound,  it is  important  to bear in mind that Idaho has a
relatively  small population and percentages are easily changed by the influx of
relatively  few  people.  In  addition,  such  immigration  brings a demand  for
increased  infrastructure  and the  financing  to fund it. Any such  increase in
infrastructure  would require that economic  growth be maintained to support it,
and if growth is not maintained economic problems could develop.

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

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

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

INVESTMENT  RESTRICTIONS.   In  addition  to  the  restrictions  stated  in  the
Prospectus,  the Fund shall not purchase securities on margin or sell securities
short or purchase or write put or call options; purchase "restricted securities"
(those which are subject to legal or con-tractual restric-tions on resale or are
otherwise  not readily  marketable);  nor invest in oil,  gas or other  min-eral
exploration leases and programs. The Fund shall not make loans to others, except
for the purchase of debt securities, or entering into repurchase agreements. The
Fund shall not in-vest in  securities  so as to not comply with  Subchapter M of
the Code,  in that  generally at the close of each  quarter of the tax year,  at
least 50% of the value of the Fund's total assets is represented by (i) cash and
cash items, government securities, and securities of other regulated invest-ment
companies, and (ii) other securities, except that with respect to any one issuer
in an amount more than 5% of the Fund's  total  assets,  and no more than 10% of
the Fund's voting securities of any one is-suer. In addition, the Fund shall not
purchase real estate; real estate limited partnerships (excepting master limited
partnerships  that are  pub-licly  traded on a na-tional  security  ex-change or
NASDAQ's  National Market System);  com-modities or commodity  contracts;  issue
senior  securities;  provided,  however,  that  a  fund  may  borrow  money  for
extraordinary or emergency  purposes and then only if after such borrowing there
is asset  coverage  of at  least  300%  for all  such  borrowings;  nor act as a
securities un-der-writer except that they may pur-chase securities directly from
the issuer for investment  purposes.  No Fund will purchase securities if it has
outstanding borrowings exceeding 9 <PAGE>

5% of its net assets Also,  the Fund shall not purchase or retain  securities of
any issuer if the officers or trustees of the Trust or its adviser own more than
one-half of one percent of the securities of such issuer; invest in any com-pany
for the pur-pose of management or exercising control.  The Fund shall not invest
in the  securities of other  investment  companies,  except by purchase where no
commis-sion or profit results.
                              PORTFOLIO TURNOVER
The Fund  places no  restrictions  on  portfolio  turnover  and will buy or sell
investments  accord-ing to the Adviser's  appraisal of the factors affecting the
market and the economy.

   

The portfolio  turnover rate of the Fund for the fiscal years ended November 30,
1997, 1996, and 1995was 12%, 10%, and 28%, respectively.
                               PERFORMANCE DATA
Average  annual  Total  Return and Current  Yield  information  may be useful to
investors in reviewing the Fund's performance.  However,  certain factors should
be taken into account  before using the  information  as a basis for  comparison
with  alternative  investments.  No  ad-justment  is made for taxes  payable  on
distributions. The performance for any given past period is not an indication of
future rates of return or yield on its shares.

The Fund's  total  return for the one year ended  November  30,  1997 was 5.69%.
Average annual total return for the three-year  period through November 30, 1997
was 8.88%, for the five-year period 5.93% and for the ten-year period 6.50%.

    

Average  annual  Total  Return  quotations for various periods illustrated are
                 -------------
computed  by  find-ing  the average  annual  compounded  rate of return over the
period  quoted  that would  equate the  initial  amount  invested  to the ending
redeemable value according to the following formula:
          P  (1  +  T)n      =      ERV

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

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

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

The Fund intends to advertise the tax exempt and/or taxable  equivalent yield to
investors.

(a) The advertised tax-exempt yield will be the dollar weighted average yield to
maturity or call. In determining whether each security in the portfolio will use
yield to maturity or yield to call, the lesser of the two will be selected.  (b)
In determining the advertised  taxable  equivalent  yield the effective tax rate
will first be calculated and so stated. It may include federal income tax, state
income tax, and fed-eral alternative minimum tax as clearly defined in the ad.
The advertised tax-exempt portion 10 <PAGE>

of the  standardized  yield will then be  divided  by the  inverse of the stated
effec-tive  tax rate and increased by any taxable yield to determine the taxable
equivalent yield.

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

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

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

Where: a = dividends and interest earned during the period; b = expenses accrued
for the period (net of  reimbursement);  c = the average  daily number of shares
outstanding during the period that were entitled to receive  dividends;  and d =
the maximum offering price per share  (equivalent to Net Asset Value for no-load
funds) on the last day of the period.

   
The Fund's  tax-exempt  yield for the 30-day period ended  November 30, 1997 was
4.27%. The equivalent after-tax yield was 7.69% for Idaho residents with taxable
incomes of $270,000,  based on a 1997 combined  effective  federal and Idaho tax
rate of 44.5%.     

In advertising and sales  literature,  the Fund may compare its performance with
that of other mutual funds,  indexes, or averages of other mutual funds, indexes
or data, and other competing investment and deposit products. The composition of
these indexes or averages differs from that of the Fund.  Comparison of the Fund
to  an  alternative   investment  should  be  made  with  consideration  of  the
differences in features and expected performance of the investments.

All of the indexes and averages  noted below will be obtained from the indicated
sources  or  reporting  services,  which  the  Trust  believes  to be  generally
accurate. The Fund may also note its mention or recognition in other newspapers,
magazines,   or  media  from  time  to  time.  However,   the  Fund  assumes  no
responsibility for the accuracy of such data. Among the newspapers and magazines
that might mention the Funds are:

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


The  Fund  may  also  compare  itself  to the  Consumer  Price  Index,  a widely
recognized measure of inflation, and to other indexes and averages such as:
11
<PAGE>


Dow Jones Industrials New York stock Exchange  Composite Index Standard & Poor's
500 Stock Index American Stock  Exchange  Composite  Index Standard & Poor's 400
Industrials  NASDAQ  Composite  Wilshire  5000 NASDAQ  Industrials  Russell 2000
Lipper  General Equity Fund Average  Lipper  Capital  Appreciation  Fund Average
Lipper Equity Funds Average  Lipper Growth Funds Average  Lipper Growth & Income
Fund Average  Lipper Small  Company  Growth Fund Average  Lipper  Balanced  Fund
Average  Lipper  Equity  Income  Fund  Average   Ibbotson  Common  Stocks  Index
Morningstar Mutual Fund Indices

The indexes and averages are measures of  performance of stocks and mutual funds
that are classified,  calculated,  and published by these independent  services.
The Fund may also use comparative  performance as computed in a ranking by these
or other independent services.

A Fund may also cite its  rating or other  mention  by  Morningstar  or  another
entity.   Morningstar's   ratings  are  based  on  risk-adjusted   total  return
performance,  as computed by Morningstar by subtracting the Fund's risk score as
computed by  Morningstar,  from the fund's total return  score.  This  numerical
score is then translated into rating categories.
                            MANAGEMENT OF THE TRUST
Information  concerning  Trustees and Officers of the Trust and their  principal
occupations for the past five years is shown below:
   
A.  HERBERT  ERSHIG  -  Trustee
          22  Shorewood  Drive,  Bellingham,  WA.    98225.
Retired.
President, Ershings, Inc., Bellingham WA, industrial manufacturing, from 1960 to
1996.
    
GARY  A.  GOLDFOGEL,  MD  -  Trustee
          1500  N.  State  Street,  Bellingham,  WA  98225.
Pathologist.    Whatcom  County  Medical  Examiner,  Bellingham  WA.

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

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

JOHN  S.  MOORE,  Ph.D.  -  Trustee
          College  of  Business  and Economics, Western Washington University,
12
<PAGE>

          Bellingham,  WA  98225-9077
     Professor  of  Business  Administration.

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

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

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

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

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

<CAPTION>



<S>                  <C>          <C>                <C>                <C>                <C>   <C>  <C>

                                  Pension or                            Total
                     Aggregate    Retirement                            Compensation
Name of              Compensa-    Benefits Accrued   Estimated Annual   From Registrant
Person;              tion From    As Part of Fund    Benefits Upon      and Fund Complex
Position             Registrant   Expenses           Retirement         Paid to Directors
-------------------  -----------  -----------------  -----------------  -----------------
A. HERBERT ERSHIG    $       400  $               0  $               0            $400
Trustee

GARY A. GOLDFOGEL            400                  0                  0             400
Trustee

JOHN E. LOVE                 400                  0                  0             400
Trustee

JOHN S. MOORE,               400                  0                  0             400
Trustee

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




The Board has  authority to establish an Executive  Committee  with the power to
act on behalf of the Board  between  meetings  and to exercise all powers of the
Trustees  in the  management  of the  Trust.  No  Executive  Committee  has been
established at this time. An Audit Committee, consisting 13 <PAGE>

of the disinterested directors, meets to select the independent accountant and
review  all  audit  reports.
   
As of February 24, 1998, officers,  trustees and their families as a group owned
no shares of the Fund.

                        PRINCIPAL HOLDERS OF SECURITIES
As of February 24, 1998, no one person is known to own more than 5% of the fund.

                    INVESTMENT ADVISORY AND OTHER SERVICES The Fund is obligated
to pay Saturna  Capital  monthly an advisory  fee at the annual rate of 0.50% of
the average daily net assets up to $250 million,  0.40% of assets  be-tween $250
million  and $1 billion,  and 0.30% of assets in excess of $1  billion.  Through
March 31, 1999,  Saturna is voluntarily  obligated to reimburse the Fund monthly
if  non-extraordinary  expenses  exceed an annual rate of 0.80% of average daily
net asset value, subject to cancellation by the adviser on 30 days' notice.     
The Fund pays its own taxes,  brokerage  commissions  (if any),  trustees' fees,
legal and  accounting  fees,  insurance  premiums,  custodian,  transfer  agent,
registrar and dividend  disbursing  agent fees,  expenses  incurred in complying
with state and federal  laws  regulating  the issue and sale of its shares,  and
mailing and printing costs for prospectuses, reports and notices to shareowners.
The  Adviser,  at its own  expense  and  without  additional  cost to the  Fund,
fur-nishes office space, office facilities, and equipment,  personnel (including
executive  officers) and clerical and bookkeeping  services  required to conduct
the business of the Fund.

The laws and  regulations of various states set expense  limitations  for mutual
funds as a condi-tion for  registration  to offer and sell shares in that state.
Usually,  the expense limitation  re-quires  reimbursement if, and to the extent
that, the aggregate  operating expenses including the advisory fee but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of a specified  percentage of the average net assets of a Fund for its
fiscal year. The only state the adviser believes maintains an expense limitation
is California,  which limits aggregate annual expenses (with exceptions) to 2.5%
of the first $30 million of average  net assets,  2% of the next $70 million and
1.5% of the  remaining  average net  assets.       Saturna  Capital  Corporation
provides services as the transfer agent and dividend-paying agent for each Fund.
As transfer agent,  Saturna  furnishes to each shareowner a statement after each
transaction,  an  historical  statement  at the end of  each  year  showing  all
transactions  during the year, and Form 1099 tax forms.  Saturna also, on behalf
of the Trust, responds to shareowners' questions or correspondence. Further, the
transfer agent regularly  furnishes each Fund with current  shareowner lists and
information  necessary to keep the shares in balance  with the Trust's  records.
The transfer agent performs the mailing of financial  statements,  notices,  and
prospectuses to shareowners.

As compensation for services as transfer agent and dividend  disbursement agent,
the Fund pays Saturna an annual fee of $1.10 per month per  shareowner  account,
which the Trustees have  determined is no more than the cost of performing  such
services. The Fund reimburses Saturna 14 <PAGE>

for any out-of-pocket expense for forms and mailing costs used in performing its
functions.  For the fiscal year ended  November 30, 1997, the Fund paid transfer
agent fees of $4,050.

For the fiscal year ended November 30, 1997, the Fund paid $25,451 in investment
adviser and  administration  fees, of which the adviser waived  $8,311.  For the
fiscal year ending  November 30, 1996, the Fund was required to pay $24,540,  of
which Saturna  Capital  waived  $11,923.  For fiscal year 1995,  the  comparable
figures were $30,862 and $14,048.

National City Bank,  Indianapolis,  Indiana 46255 is the custodian of the Fund's
securities  and other  as-sets.  As  custodian,  the bank holds in  custody  all
securities  and cash,  settles for all securities  transactions,  receives money
from sale of shares and on order of the Fund pays the  autho-rized  expenses  of
the Fund.  When Fund shares are redeemed by investors,  the proceeds are paid to
the shareowner by check drawn on the custodian bank.

Tait, Weller and Baker, Eight Penn Center Plaza, Philadelphia PA 19103 served as
independent  accountants  for the fiscal  year ending  November  30,  1997.  The
independent  accountants conduct the annual audit of the Trust as of November 30
and prepare the tax returns of the Fund.
                             BROKERAGE ALLOCATION
For fiscal years 1997,  1996, and 1995 Idaho  Tax-Exempt  Fund paid no brokerage
commissions.
    
BROKERAGE  POLICIES

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

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

The Adviser's  subsidiary,  Investors  National  Corporation,  is qualified as a
broker-dealer  to engage in a general  brokerage  business.  Investors  National
Corporation  conducts all its  transactions  on an agency basis for  established
"deep  discount"  commissions;  it does not make  markets,  "deal," or  maintain
inventories of securities.  For brokerage conducted through an af-filiate of the
Adviser, the Trustees have adopted procedures reasonably designed to ensure that
any brokerage fees are reasonable and fair compared to remuneration  received by
other brokers in comparable 15 <PAGE>

transactions.  The Trustees are provided detailed quarterly monitoring reports
and  review  the  procedures  at  least  annually.
         PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED See How to
Buy Shares,  How to Redeem Shares and Net Asset Value in the  Prospectus  for an
ex-planation about the ways to purchase or redeem shares.

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

Net asset value per share is determined by dividing the value of all  securities
and other assets, less liabilities, by the number of shares outstanding. The net
asset  value is  determined  for each Fund as of the close of trading on the New
York Stock Exchange (generally 4 p.m. New York time) on each day the Exchange is
open for  trading.  The  Exchange  is  generally  closed  on:  New  Year's  Day,
Washington's  Birthday/President's  Day, Good Friday, Memorial Day, Independence
Day (observance), Labor Day, Thanksgiving Day and Christmas Holiday.
                                  TAX STATUS
Saturna  Investment  Trust is organized  as a "series"  investment  company.  At
present,  only the Fund and the  Sextant  Funds are  offered,  but the Trust may
create in the future additional Funds with different investment objectives. Each
Fund is a separate  economic  entity with separate  assets and  liabilities  and
separate income streams.  The shareowners of each separate Fund may look only to
that  Fund  for  income,  capital  gain or  loss,  redemption,  liquidation,  or
termination.  Each Fund has separate  arrangements  with the Adviser.  Assets of
each Fund are segregated. The creditors and shareowners of each Fund are limited
to the assets of that Fund for recovery of charges,  expenses,  and liabilities.
Each Fund  conducts  separate  voting on issues  relating  solely to that  Fund,
except as  re-quired  by the  Investment  Company  Act.  The tax  status and tax
consequences  to shareowners  of each separate Fund will differ,  depending upon
the investment objectives,  operations,  income, gain or loss, and distributions
from each Fund.

Each Fund intends to  distribute  to  shareowners  substantially  all of its net
investment  income and net realized capital gains, if any, and to comply,  as it
has since inception, with the provisions of the Internal Revenue Code applicable
to regulated  investment  companies,  which relieve the Funds of federal  income
taxes on the  amounts  so  distributed.  The Fund  declares  dividends  from net
investment  tax-exempt income daily,  payable at each month-end.  Net investment
taxable  income,   if  any,  is  declared  as  a  dividend  only  at  month-end.
Distribution  of any  capital  gains  is made at the end of the  fiscal  year in
November.

The  amount of  investment  income  and  capital  gains,  if any,  which will be
available  for  distri-bution  by a Fund of the  Trust in the  future  cannot be
predicted due to continually changing eco-nomic conditions and market prices.
16
<PAGE>


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

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

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

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

If you do not furnish the  transfer  agent with a valid  Social  Security or Tax
Identification  Number and in certain  other  circumstances,  we are required to
withhold 31% of income from your account. Dividends distributions to shareowners
who are nonresident aliens may be subject to a 30% United States withholding tax
under the existing  provisions of the code applicable to foreign individuals and
entities  unless a reduced rate of  withholding  or a  withholding  exemption is
provided  under  applicable  treaty  law. If the IRS  determines  that the Trust
should be fined or penalized for  inaccurate or missing or otherwise  inadequate
reporting of a Tax  Identification  Number, the amount of the IRS fee or penalty
will be directly assessed to the shareowner account involved.
                             FINANCIAL STATEMENTS
   
The most recent audited annual report  accompanies  this Statement of Additional
Infor-mation.  The financial  statements  and selected per share data and ratios
dated  November 30, 1997,  together with the report of  independent  accountants
dated  December 12, 1997,  are  considered a part of the Statement of Additional
Information and are in-corporated by reference.      17 <PAGE>

<PAGE>
                                   APPENDIX
                                 BOND RATINGS

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

BOND  RATINGS

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


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

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

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


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


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

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

A Bonds  which  are rated A have a strong  capacity  to pay  interest  and repay
principal,  although they are somewhat more susceptible to the adverse effect of
18

<PAGE>
changes and cir-cumstances in economic conditions than bonds in higher
rated categories.

NOTES

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

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

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

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

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

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

COMMERCIAL  PAPER

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

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

PRIME-2 Issuers rated PRIME-2, or related supporting institutions, have a strong
capacity for repayment of short-term promissory obligations.  This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earning  trends and  cov-erage  ratios,  while  sound,  will be more  subject to
variation. Capitalization characteris-tics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

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

A-1 The A-1  designation  indicates that the degree of safety  regarding  timely
payment is strong.  Those  issues  determined  to possess  over-whelming  safety
characteristics are denoted with a plus (+) designation.
19
<PAGE>
A-2 The A-2 designation  indicates  capacity for timely payment is satisfactory.
However,  the rela-tive degree of safety is not as high as for issues designated
A-1.

Under  normal  market  conditions,  the Fund does not  anticipate  investing  in
Moody's  rated bonds below A or Moody's rated notes below MIG 2 or Moody's rated
commercial  paper  below  Prime-2.  Similarly,  the  Fund  does  not  anticipate
investing  in S&P rated bonds below A or S&P rated notes below SP-2 or S&P rated
commercial paper below A-2. 20 <PAGE>






                                    PART C



                               OTHER INFORMATION
<PAGE>

Financial  Statements  and  Exhibits
------------------------------------
   
(a)  Financial  Statements

There is incorporated into Part B of this  Registration  Statement the following
financial  information in the Annual Report to  shareowners  for the fiscal year
ended November 30, 1997:

Report of Tait, Weller & Baker, LLP, Independent Accountants. For each portfolio
of the Fund:  Statement  of Assets and  Liabilities  as of  November  30,  1997.
Statement of Operations - Year ended November 30, 1997.  Statement of Changes in
Net Assets - years ended November 30, 1996 and November 30, 1997.  Investments -
November 30, 1997.  Financial Highlights - November 30, 1997. Notes to Financial
Statements        Also  incorporated  by  reference  is the  Discussion  of Fund
Performance (Unaudited) for each Fund of the Trust

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

Included  in  Part  C:

Consent  of  Independent  Accountants.

(b)    Exhibits included with this filing: foot1 Items marked with an asterisk
(*)  are  incorporated  by  reference  from  exhibits  previously  filed.

-          *(a)  Agreement  and  Declaration  of  Trust of Northwest Investors
Tax-Exempt  Business Trust, filed February 20, 1987 with Secretary of State of
Washington.    Incorporated  by  Reference.  Filed as Exhibit No. 1 to initial
filing  of  Form  N-1A  in  1987.    File  No.  33-13247.

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

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

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

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

(3)          Not  applicable.

(4)          Not  applicable.

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

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

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

     *(d)  Investment  Advisory  and Administrative Services Agreement for the
series  Sextant  Short-Term Bond Fund of Saturna Investment Trust, as approved
by  the  Board  of Trustees on July 10, 1995 and shareholders on September 28,
1995.    Filed as Exhibit No. 5-4 to Amendment No. 14 to Form N-1A dated March
29,  1996.

(6)          Not  applicable.

(7)          Not  applicable.

(8)*     Form of Custodian Agreement for each series of the Trust, between the
Trust  and National City Bank, Indiana.  Filed as Exhibit No. 8-1 to Amendment
No.  14  to  Form  N-1A  dated  March  29,  1996.

(9)*        Transfer Agent Agreement for the Northwest Investors Trust between
the Trust and Saturna Capital Corporation, dated October 12.  Filed as Exhibit
C  to  Proxy  Statement  dated  September  21,  1990.    File  No.  33-13247.

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

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


     *(c)  Opinion of Counsel of Barnes & Thornburg.  Filed as Exhibit 10-3 to
Amendment  No.  13  to  Form  N-1A  dated  July  11,  1995
c
<PAGE>
   
(11)          (a)  Consent of Tait, Weller  & Baker LLP, Independent Auditors.
Filed  as  Exhibit  11-1.
         
     (b) Copies of Powers of Attorney of  Trustees of Saturna  Investment  Trust
attached as Exhibit 11-2.

(12)          Not  applicable.

(13)          Not  applicable.

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

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

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

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

(15)          Not  applicable.

(16)          Computation  of  Performance.
   
The Average Annual Total Return since the inception of the Idaho Tax-Exempt Fund
through  November  30,  1997 is computed  to be 6.50%,  for Sextant  Growth Fund
16.28%, for Sextant Bond Income Fund 6.92%, for Sextant International Fund
14.41%, and for Sextant Short-Term Bond Fund 5.24%.
    
d
<PAGE>
Persons  Controlled  by  or  Under  Common  Control  with  Registrant
---------------------------------------------------------------------

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


<PAGE>
Number  of  Holders  of  Securities
-----------------------------------

   
As of February  25, 1998 the  following  information  is  furnished  for Saturna
Investment Trust:
          (1)                                                  (2)
     Title  of  Class                              Number  of  Record  Holders
     ----------------                              ---------------------------

Shares          37          Sextant  Bond  Income  Fund
     66          Sextant  Short-Term  Bond  Fund
     193          Sextant  Growth  Fund
     76          Sextant  International  Fund
     241          Idaho  Tax-Exempt  Fund
    
Indemnification
---------------

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

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


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

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

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

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

Insofar as  indemnification  for liability  arising under the  Securities Act of
1933 may be  permitted to  Directors,  officers  and  controlling  person of the
Registrant pursuant to the foregoing  provisions,  or otherwise,  the Registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against  public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a

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

Business  and  Other  Connections  of  Investment  Adviser
----------------------------------------------------------

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

Principal  Underwriters
-----------------------
   
Investors National  Corporation,  1300 N. State Street,  Bellingham,  Washington
98225,  a  wholly-owned  subsidiary  of  Saturna  Capital  Corporation,  acts as
distributor  for  the  Funds  without  compensation.  The  primary  business  of
Investors National Corporation is retail discount brokerage.  As of February 10,
1998,   Investors  National  Corporation  owned  35,806.196  shares  of  Sextant
Short-Term Bond Fund, and 5,792.117 shares of Sextant Bond Income Fund.
    
The  following  table sets forth  information  with respect to each director and
executive officer of Investors National Corporation.

Name  and  Principal           Positions and Offices     Positions and Offices
Business  Address                    with  distributor         with registrant
-----------------                    -----------------         ---------------

Nicholas  Kaiser              Director & President          President, Trustee
1300  State  St.
Bellingham  WA  98225

h
<PAGE>
Meredith  Ross                    Director  &  Vice  President          None
1300  State  St.                    &  Secretary
Bellingham  WA  98225

Phelps  McIlvaine                 Director & Treasurer          Vice President
1300  State  St.
Bellingham  WA  98225

Location  of  Accounts  and  Records
------------------------------------

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

Management  Services
--------------------

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

Undertakings
------------

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

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

Pursuant to the  requirements  of the  Securities Act of 1933 and the Investment
Company  Act  of  1940  the   Registrant  has  duly  caused  this  Amendment  to
Registration  Statement  to be duly  signed  on its  behalf  by the  undersigned
thereunto duly authorized in the City of Bellingham, State of Washington, on the
20th day of March,  1998.  Registrant  further represents that this Amendment is
filed  solely for one or more of the purposes  specified in paragraph  (b)(1) of
Rule 485 and that the Amendment meets applicable conditions set forth therein.

                    SATURNA  INVESTMENT  TRUST

                    By          /s/  Nicholas  F.  Kaiser
                                -------------------------
                         Nicholas  F.  Kaiser,  President

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

 Signature          Title          Date
 ---------          -----          ----

      /s/  Nicholas  F. Kaiser          President               March 20, 1998
      ------------------------                                  --------------
          Nicholas  F.  Kaiser          (principal  Executive
               Officer);  Trustee

     /s/Teresa  K.  Anderson            Treasurer               March 20, 1998
     -----------------------                                    --------------
          Teresa  K.  Anderson          (principal  Financial
               Officer)

**  Gary  Goldfogel          All other Trustees                 March 20, 1998
                                                                --------------
**  John  E.  Love
**  John  S.  Moore
**  A.  Herbert  Ershig

     **          By/s/  Nicholas  F.  Kaiser
                   -------------------------
               Nicholas  F.  Kaiser,  President,
               Attorney-in-fact

<PAGE>