Idaho Tax-Exempt Fund Summary Prospectus

Idaho Tax-Exempt Fund

Ticker Symbol: NITEX

March 28, 2018

SUMMARY PROSPECTUS

Before you invest, you may want to review Idaho Tax-Exempt Fund's prospectus, which contains more information about the Fund and its risks. You can find the Fund's prospectus and other information about the Fund, including the statement of additional information and most recent reports to shareowners, online at www.saturna.com/prospectus. You can also get this information at no cost by calling 1-800-728-8762 or by sending an email request to info@saturna.com. The Fund's prospectus and statement of additional information, both dated March 28, 2018, are incorporated by reference into this Summary Prospectus.


Idaho Tax-Exempt Fund

NITEX

Investment Objective

Idaho Tax-Exempt Fund seeks to provide income free from federal income, federal alternative minimum, and Idaho state income taxes. Preservation of capital is a secondary objective.

Fees and Expenses

This section describes the fees and expenses that you may pay if you buy and hold shares of the Idaho Tax-Exempt Fund.

Shareowner Fees

None.

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fee

0.50%

Other Expenses

0.17%

Total Annual Fund Operating Expenses

0.67%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although actual costs may be higher or lower, based on these assumptions, your costs would be:

1 Year

3 Years

5 Years

10 Years

$68

$214

$373

$835

When you buy shares through a financial intermediary, that intermediary may charge a transaction fee or commission which is not reflected in the expenses table or example. Purchases and redemptions of Fund shares will be made at the daily net asset value established by the Fund (before imposition of a commission).

Portfolio Turnover

The Fund may pay transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 19.80% of the average value of its portfolio.

Principal Investment Strategies

Idaho Tax-Exempt Fund invests in debt securities issued by the State of Idaho and its political subdivisions. These municipal bonds, notes, and commercial paper may be in various forms, including general obligation bonds, revenue bonds, mortgage bonds, certificates of participation, local improvement district bonds, and refunding bonds.

The Fund buys investment grade bonds, meaning those rated "Baa" or higher by a national bond rating agency (e.g., Moody's Investors Service), or, if unrated, of equivalent quality in the opinion of the adviser, considered at the time of purchase. At least 40% of bonds that the Fund buys must be rated "A" or higher or, if unrated, of equivalent quality, on a similar basis. Factors used in bond evaluations include such information as the bond district's financial position, population size, employment trends, economic activity, and diversification. The portfolio's dollar-weighted average effective maturity is expected to range between 6 and 15 years. In accordance with the fundamental investment policies of the Fund, under normal circumstances, at least 80% of net assets are invested in debt securities generating income exempt from both federal and Idaho income tax.

Principal Risks of Investing

Market risk: The value of the Fund's shares rises and falls as the market value of the securities in which the Fund invests goes up and down. The market value of securities will fluctuate, sometimes significantly and unpredictably, with stocks generally being more volatile than bonds. When you redeem your shares, they may be worth more or less than what you paid for them. Only consider investing in the Fund if you are willing to accept the risk that you may lose money.

Investment strategy risk: Because the Fund concentrates its investments primarily in Idaho municipal securities, its investments are susceptible to factors adversely affecting Idaho. These factors include economic and financial trends as well as political conditions in Idaho and its political subdivisions. Investing primarily in Idaho bonds means the Fund is less diversified than some other types of mutual funds. Concentrating investments in a single state or a small number of security issues may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

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


Idaho Tax-Exempt Fund

NITEX

Interest rate risk: Investing in bonds includes the risk that as interest rates rise, bond prices will fall. Conversely, during periods of declining interest rates bond prices generally rise, but bond issuers may call or prepay the bond and reissue debt at lower interest rates. The longer a bond's maturity, the more sensitive the bond is to interest rate changes.

Credit risk: Investing in bonds includes the risk that an issuer will not pay interest or principal when due, or the issuer may default altogether. If an issuer's credit quality is perceived to decline, the value and liquidity of the issuer's bonds may also decline.

Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If the Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, the Fund may lose money on its investments. As a result, the Fund may be unable to achieve its objective.

Performance

Annual Total Return

The following bar chart presents the calendar year total returns of the Fund before taxes. The bar chart provides an indication of the risks of investing in the Fund by showing changes in performance from year to year. A fund's past performance (before and after taxes) is not a guarantee of how a fund will perform in the future.

Performance data current to the most recent month-end and quarter-end are available on www.idahotaxexemptfund.com.

Idaho Tax-Exempt Fund Annual Total Returns

Best Quarter

Q1 2009

4.79%

Worter

Q3 2008

-3.97%

Average Annual Total Returns

The table below presents the average annual returns for the International Fund and provides an indication of the risks of investing in the Fund by showing how the Fund's average annual returns for 1, 5, and 10 years compare to those of a broad-based market index.

Periods ended December 31, 2017

 

1 Year

5 Year

10 Year

Return before taxes

3.87%

2.00%

3.23%

Return after taxes on distributions

3.87%

1.99%

3.22%

Return after taxes on distributions and sale of Fund shares

3.19%

1.98%

2.80%

S&P Idaho Municipal Index (reflects no deduction for fees, expenses or taxes)

5.06%

3.64%

4.92%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates but do not reflect the impact of any state or local taxes. Actual after-tax returns depend on an investor's tax situation and likely differ from those shown. After-tax illustrations are not relevant to retirement plans, corporations, trusts, or other investors that are taxed at special rates.

In loss periods, the average after-tax total return may be higher than average annual total return because of an assumed deduction of losses from other income.


Idaho Tax-Exempt Fund

NITEX

Investment Adviser

Saturna Capital Corporation is Idaho Tax-Exempt Fund's investment adviser.

Portfolio Manager

Mr. Phelps McIlvaine, a vice president of Saturna Capital Corporation, is the person primarily responsible for the day-to-day management of the Idaho Tax-Exempt Fund, which he has managed since 1995. Mr. Patrick Drum MBA, CFA, a portfolio manager and fixed income analyst of Saturna Capital Corporation, is the deputy portfolio manager, a role he assumed in 2015.

Purchase and Sale of Fund Shares

You may open an account and purchase shares by sending a completed application, a photocopy of a government-issued identity document, and a check made payable to the Idaho Tax-Exempt Fund.

The minimum intitial investment is $1,000 (for tax-sheltered accounts, there is no minimum).

Shareowners may purchase additional shares at any time in minimum amounts of $25.

Shareowners may redeem shares on any business day by several methods:

Written request

Write:   Idaho Tax-Exempt Fund
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

Telephone request

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

Online

Visit: www.idahotaxexemptfund.com

Tax Information

The Fund's distribution of dividends paid from investments in Idaho bonds are generally not subject to federal or Idaho state income taxes. Interest on certain bonds, such as revenue bonds, may be subject to the federal alternative minimum income tax (AMT). Bonds subject to AMT do not count as satisfying the Fund's requirement to invest 80% of its net assets in debt securities generating tax-exempt income. Any ordinary income dividends or capital gain distributions you receive from the Fund may be subject to federal, state, and local income taxes.

Financial Intermediary Compensation

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.


# # #

Idaho Tax-Exempt Fund

Ticker Symbol: NITEX

Prospectus

March 28, 2018

Please read this Prospectus and keep it for future reference. It is designed to provide important information and to help investors decide if the Fund's goals match their own.

Neither the Securities and Exchange Commission nor any state securities authority has approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Idaho Tax-Exempt Fund is a series of Saturna Investment Trust.


Table of Contents:

Idaho Tax-Exempt Fund Summary 3
Investment Objectives 6
Principal Investment Strategies 6
Principal Risks 6
Investment Information 7
Investment Adviser 7
Fund Share Pricing 8
Purchase and Sale of Fund Shares 8
Purchase and Sale of Fund Shares Through Financial Intermediaries 9
Distributions 9
Frequent Trading Policy 9
Tax Consequences 10
Distribution Arrangements 10
Financial Highlights 11

2


Idaho Tax-Exempt Fund

NITEX

Investment Objective

Idaho Tax-Exempt Fund seeks to provide income free from federal income, federal alternative minimum, and Idaho state income taxes. Preservation of capital is a secondary objective.

Fees and Expenses

This section describes the fees and expenses that you may pay if you buy and hold shares of the Idaho Tax-Exempt Fund.

Shareowner Fees

None.

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fee

0.50%

Other Expenses

0.17%

Total Annual Fund Operating Expenses

0.67%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although actual costs may be higher or lower, based on these assumptions, your costs would be:

1 Year

3 Years

5 Years

10 Years

$68

$214

$373

$835

When you buy shares through a financial intermediary, that intermediary may charge a transaction fee or commission which is not reflected in the expenses table or example. Purchases and redemptions of Fund shares will be made at the daily net asset value established by the Fund (before imposition of a commission).

Portfolio Turnover

The Fund may pay transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 19.80% of the average value of its portfolio.

Principal Investment Strategies

Idaho Tax-Exempt Fund invests in debt securities issued by the State of Idaho and its political subdivisions. These municipal bonds, notes, and commercial paper may be in various forms, including general obligation bonds, revenue bonds, mortgage bonds, certificates of participation, local improvement district bonds, and refunding bonds.

The Fund buys investment grade bonds, meaning those rated "Baa" or higher by a national bond rating agency (e.g., Moody's Investors Service), or, if unrated, of equivalent quality in the opinion of the adviser, considered at the time of purchase. At least 40% of bonds that the Fund buys must be rated "A" or higher or, if unrated, of equivalent quality, on a similar basis. Factors used in bond evaluations include such information as the bond district's financial position, population size, employment trends, economic activity, and diversification. The portfolio's dollar-weighted average effective maturity is expected to range between 6 and 15 years. In accordance with the fundamental investment policies of the Fund, under normal circumstances, at least 80% of net assets are invested in debt securities generating income exempt from both federal and Idaho income tax.

Principal Risks of Investing

Market risk: The value of the Fund's shares rises and falls as the market value of the securities in which the Fund invests goes up and down. The market value of securities will fluctuate, sometimes significantly and unpredictably, with stocks generally being more volatile than bonds. When you redeem your shares, they may be worth more or less than what you paid for them. Only consider investing in the Fund if you are willing to accept the risk that you may lose money.

Investment strategy risk: Because the Fund concentrates its investments primarily in Idaho municipal securities, its investments are susceptible to factors adversely affecting Idaho. These factors include economic and financial trends as well as political conditions in Idaho and its political subdivisions. Investing primarily in Idaho bonds means the Fund is less diversified than some other types of mutual funds. Concentrating investments in a single state or a small number of security issues may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

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

3


Idaho Tax-Exempt Fund

NITEX

Interest rate risk: Investing in bonds includes the risk that as interest rates rise, bond prices will fall. Conversely, during periods of declining interest rates bond prices generally rise, but bond issuers may call or prepay the bond and reissue debt at lower interest rates. The longer a bond's maturity, the more sensitive the bond is to interest rate changes.

Credit risk: Investing in bonds includes the risk that an issuer will not pay interest or principal when due, or the issuer may default altogether. If an issuer's credit quality is perceived to decline, the value and liquidity of the issuer's bonds may also decline.

Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If the Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, the Fund may lose money on its investments. As a result, the Fund may be unable to achieve its objective.

Performance

Annual Total Return

The following bar chart presents the calendar year total returns of the Fund before taxes. The bar chart provides an indication of the risks of investing in the Fund by showing changes in performance from year to year. A fund's past performance (before and after taxes) is not a guarantee of how a fund will perform in the future.

Performance data current to the most recent month-end and quarter-end are available on www.idahotaxexemptfund.com.

Idaho Tax-Exempt Fund Annual Total Returns

Best Quarter

Q1 2009

4.79%

Worter

Q3 2008

-3.97%

Average Annual Total Returns

The table below presents the average annual returns for the International Fund and provides an indication of the risks of investing in the Fund by showing how the Fund's average annual returns for 1, 5, and 10 years compare to those of a broad-based market index.

Periods ended December 31, 2017

 

1 Year

5 Year

10 Year

Return before taxes

3.87%

2.00%

3.23%

Return after taxes on distributions

3.87%

1.99%

3.22%

Return after taxes on distributions and sale of Fund shares

3.19%

1.98%

2.80%

S&P Idaho Municipal Index (reflects no deduction for fees, expenses or taxes)

5.06%

3.64%

4.92%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates but do not reflect the impact of any state or local taxes. Actual after-tax returns depend on an investor's tax situation and likely differ from those shown. After-tax illustrations are not relevant to retirement plans, corporations, trusts, or other investors that are taxed at special rates.

In loss periods, the average after-tax total return may be higher than average annual total return because of an assumed deduction of losses from other income.

4


Idaho Tax-Exempt Fund

NITEX

Investment Adviser

Saturna Capital Corporation is Idaho Tax-Exempt Fund's investment adviser.

Portfolio Manager

Mr. Phelps McIlvaine, a vice president of Saturna Capital Corporation, is the person primarily responsible for the day-to-day management of the Idaho Tax-Exempt Fund, which he has managed since 1995. Mr. Patrick Drum MBA, CFA, a portfolio manager and fixed income analyst of Saturna Capital Corporation, is the deputy portfolio manager, a role he assumed in 2015.

Purchase and Sale of Fund Shares

You may open an account and purchase shares by sending a completed application, a photocopy of a government-issued identity document, and a check made payable to the Idaho Tax-Exempt Fund.

The minimum intitial investment is $1,000 (for tax-sheltered accounts, there is no minimum).

Shareowners may purchase additional shares at any time in minimum amounts of $25.

Shareowners may redeem shares on any business day by several methods:

Written request

Write:   Idaho Tax-Exempt Fund
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

Telephone request

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

Online

Visit: www.idahotaxexemptfund.com

Tax Information

The Fund's distribution of dividends paid from investments in Idaho bonds are generally not subject to federal or Idaho state income taxes. Interest on certain bonds, such as revenue bonds, may be subject to the federal alternative minimum income tax (AMT). Bonds subject to AMT do not count as satisfying the Fund's requirement to invest 80% of its net assets in debt securities generating tax-exempt income. Any ordinary income dividends or capital gain distributions you receive from the Fund may be subject to federal, state, and local income taxes.

Financial Intermediary Compensation

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information.

5


Investment Objectives

Idaho Tax-Exempt Fund seeks to provide income free from federal income, federal alternative minimum, and Idaho state income taxes. Preservation of capital is a secondary objective.

There can be no guarantee that the particular investment objectives of the Fund will be realized. These investment objectives may only be changed with approval by vote of a majority of the outstanding shares of the Fund.

Principal Investment Strategies

Under normal circumstances, at least 80% of net assets are invested in debt securities generating income exempt from both federal and Idaho income tax.

The Fund buys investment grade bonds, meaning those rated "Baa" or higher by a national bond rating agency (e.g., Moody's Investors Service) or, if unrated, of equivalent quality in the opinion of the adviser, considered at the time of purchase. At least 40% of bonds that the Fund buys must be rated "A" or higher or, if unrated, of equivalent quality, on a similar basis.

Up to 60% of total assets of the Fund can be invested in non-rated bonds. The adviser will purchase only those nonrated bonds that it believes are liquid and can be sold at the value consistent with that used for net asset value purposes.

The Fund may, from time to time, take temporary defensive positions that are inconsistent with the Fund's investment strategies in attempting to respond to adverse market, economic, political, or other conditions. Temporary defensive positions may protect principal in adverse market conditions but could reduce returns if security prices are increasing. Taking a temporary defensive position may keep the Fund from attaining its investment objective.

Principal Risks

As with any investment in a mutual fund, the value of a Fund's shares rises and falls as the market value of the securities in which the Fund invests goes up and down. When you redeem your shares, they may be worth more or less than what you paid for them. Before you invest in a Fund, you should carefully evaluate the Fund's investment risk in light of your investment goals. Only consider investing in the Fund if you are willing to accept the risk that you may lose money. An investment in the Fund held for longer periods over full market cycles typically provides the best potential for favorable investment returns. The Fund's principal investment strategies include the following principal investment risks.

Market risk: The market value of securities will fluctuate, sometimes significantly and unpredictably, with stocks generally being more volatile than bonds. The securities markets are also susceptible to data imprecision, technology malfunctions, operational errors, and similar factors that may adversely affect a single issuer, a group of issuers, an industry, or the market as a whole. A slow growing economy or a recessionary environment may adversely impact securities markets and prices of securities in which the Fund invests. Economies and financial markets throughout the world are becoming increasingly interconnected. As a result, events or conditions that impact the economies or securities markets may adversely impact the Fund even if it is not invested primarily in those economies or markets.

Investment strategy risk: Because the Fund concentrates its investments primarily in Idaho municipal securities, its investments are susceptible to factors adversely affecting Idaho. These factors include economic and financial trends as well as political conditions in Idaho and its political subdivisions. Investing primarily in Idaho bonds means the Fund is less diversified than some other types of mutual funds. Concentrating investments in a single state or a small number of security issues may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

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

Interest rate risk: Investing in bonds includes the risk that as interest rates rise, bond prices will fall. The longer a bond's maturity, the more sensitive the bond is to interest rate changes. A bond's sensitivity to interest rate changes often is measured by a bond's duration. As levels of interest rates fluctuate, bonds with longer duration generally have larger price changes than bonds with shorter duration.

A wide variety of market factors can cause interest rates to rise, including central bank monetary policy, rising inflation, and changes in general economic conditions. Interest rates are currently extremely low, even negative, as government policies artificially inflate bond prices. Future changes in governments, and their fiscal and monetary policies could lessen bond prices.

Call risk: Bonds with embedded callable options also contain an element of prepayment or call risk. When interest rates decline, issuers can retire their debt and reissue bonds at a lower interest rate. This hurts investors because yields available for reinvestment will have declined and upward price mobility on callable bonds is generally limited by the call price.

Credit risk: Investing in bonds includes the risk that an issuer will not pay interest or principal when due, or the issuer may default altogether. If an issuer's credit quality is perceived to decline, the value and liquidity of the issuer's bonds may also decline. The perceived credit of a bond issuer, and hence the price of its bonds, varies for many reasons, including profits of a business, the willingness of government units to pay their obligations, and unforeseen liabilities such as increased pension plan obligations resulting from low interest rate earnings assumptions.

6


Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If the Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, the Fund may lose money on its investments. The risk of loss may increase depending on the size and frequency of redemptions and whether redemptions occur during market turmoil or declining prices. The Fund may be unable to sell its less liquid securities at its desired price. The purchase price and subsequent valuation of less liquid securities typically reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists. Reduced liquidity may result from a drop in overall market trading volume, an inability to find a ready buyer, or legal restrictions on the securities' resale.

Operational Risk

Cybersecurity risk: The risk of a cybersecurity incident arises as a result of an overall increase in deliberate attacks and the rapidly evolving nature of such attacks. Such an attack may seek to gain unauthorized access to electronic systems for purposes of obtaining nonpublic personally identifiable information or proprietary information or causing operational disruption. Saturna cannot control the cybersecurity systems of third party service providers or issuers and, therefore, a cybersecurity incident that impacts a company with which Saturna or the Fund does business may also impact Fund shareowners. While Saturna has established internal risk management measures designed to identify, protect against, detect, respond to, and recover from cybersecurity incidents, no program can guarantee that all threats and vulnerabilities have been eliminated. There currently is no insurance policy available to cover all of the potential risk of loss that may result from or is associated with a cyber attack. Unless specifically agreed by Saturna Capital separately or as may be required by law, Saturna and the Fund are neither guarantors against, nor obligors for, any damages resulting from a cyber-related incident.

Please refer to the Trust's Statement of Additional Information for further details about the risks of investing in the Fund.

Investment Information

Shareowners receive a financial report showing the investment returns, portfolios, income, and expenses of the Fund every six months. A copy of the audited financial statements of the Fund for the period ended November 30, 2017, in the Fund's Annual Report, is available on request. Investors may obtain current share prices daily on financial information websites, by calling toll-free 1-800-728-8762, on electronic quotation systems (symbol: NITEX), and at
www.idahotaxexemptfund.com.

This prospectus, financial reports, performance information, proxy voting records, and other useful information are also available at www.idahotaxexemptfund.com. Portfolio holdings are provided each month-end online (see the Statement of Additional Information for a description of portfolio disclosure policies).

Investment Adviser

Saturna Capital Corporation, 1300 N. State Street, Bellingham, Washington 98225 is the Fund's investment adviser and administrator. Founded in 1989, Saturna Capital Corporation has approximately $3.7 billion in assets under management as of December 31, 2017. It is also the adviser to other funds of the Saturna Investment Trust, the Amana Mutual Funds Trust, and to separately managed accounts. A wholly-owned subsidiary in Malaysia manages separate accounts and investment funds. Another wholly-owned subsidiary, Saturna Environmental Corporation, owns an environmental education camp.

Mr. Phelps McIlvaine, a vice president of Saturna Capital since 1994, has been the manager of the Idaho Tax-Exempt Fund since 1995. He also manages the Sextant Short-Term Bond Fund and the Sextant Bond Income Fund, and co-manages the Sextant Core Fund.

Mr. Patrick Drum, MBA, CFA, CFP®, deputy portfolio manager of Idaho Tax-Exempt Fund, joined Saturna Capital in 2014. He is also portfolio manager of Saturna Sustainable Bond Fund and Amana Participation Fund and deputy portfolio manager of Sextant Short-Term Bond Fund, Sextant Bond Income Fund, and Sextant Global High Income Fund. From 2007 to 2014, Mr. Drum was a senior portfolio manager with UBS Financial Services specializing in the investment of non-US fixed income portfolios employing an ESG screening process.

See the Statement of Additional Information for a discussion of their compensation, other accounts managed, and ownership of the Idaho Tax-Exempt Fund. Portfolio managers may maintain substantial positions in Saturna mutual funds and generally do not purchase individual securities for their own accounts.

Advisory Fee
The Fund pays a monthly advisory fee at the annual rate of 0.50% of the average daily net assets up to $250 million, 0.40% of assets between $250 million and $1 billion, and 0.30% of assets in excess of $1 billion. For the fiscal year ended November 30, 2017, the aggregate advisory fee paid was 0.50% of average net assets.

A discussion regarding the basis for the Board of Trustee's renewing the advisory contract is available in the Fund's Annual Report published for the fiscal year ended November 30, 2017.

Fund Share Pricing

The Fund computes its daily share price (net asset value) using market prices as of the close of trading on the New York Stock Exchange (generally 4 p.m. Eastern time). Fund shares are not priced on the days when New York Stock Exchange trading is closed (typically weekends and US national holidays). Bonds and other fixed-income securities are valued at prices supplied by one or more independent pricing services, which generally reflect valuations provided by securities broker-dealers and analysis conducted by the independent pricing service. Securities for which there are no sales are valued at the latest bid price. Occasionally there may be days without a readily available market price for a security. These may happen when trading in a security is

7


suspended, the market on which a security is principally traded closes early, or trading volume is insufficent to produce a reliable quoted or computed price. When this occurs, a fair value for such security is determined in good faith using fair value procedures approved by and administered under the supervision of the Board of Trustees. Using fair value to price a security may result in a value different from the security's most recent closing price and from the prices used by other mutual funds to calculate their share prices.

Additional information about portfolio security valuation, including foreign securities, is contained in the Fund's Statement of Additional Information (SAI).

Purchase and Sale of Fund Shares

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, street address, date of birth, and other information that will allow us to identify you. For most accounts, we will ask for a photocopy of your driver's license or other identifying documents.

You may open an account and purchase shares by sending a completed application, a photocopy of a government-issued identity document, and a check made payable to the Idaho Tax-Exempt Fund. The minimum intitial investment is $1,000 (for tax-sheltered accounts, there is no minimum). The Fund does not accept initial orders via telephone or unaccompanied by payment.

The price applicable to purchases and redemptions of Fund shares is the price next computed after receipt of a purchase or redemption request in proper order by the Fund's transfer agent (Saturna Capital Corporation). There are no sales charges or loads. The Fund may reject purchases for any reason, such as excessive trading. In addition, anti-money laundering regulations limit the acceptance of third-party checks and money orders.

Shareowners may purchase additional shares at any time in minimum amounts of $25. Once an account is open, purchases can be made by check, by electronic funds transfer, or by wire. With prior authorization, orders can be entered at www.saturna.com.

Shareowners may authorize the purchase or redemption of shares via electronic funds transfer ("EFT") by completing the appropriate section of the application. The authorization must be received at least two weeks before EFT can be used. To use EFT to purchase or redeem shares, simply call 800-728-8762 (800-SATURNA). Investors also may wire money to purchase shares, though the wiring bank typically charges a fee for this service. Please notify Saturna Capital when you are wiring money.

Each time shares are purchased or redeemed, a confirmation is sent showing the details of the transaction as well as the current number and value of shares held. Share balances are computed in full and fractional shares, expressed to three decimal places.

Shareowners may request a redemption of all or part of their investment on any business day of the Fund. The Fund pays redemption proceeds in US dollars, and the amount per share received is the price next determined after receipt of a redemption request in proper order. The amount received depends on the value of the investments of the Fund on that day and may be more or less than the cost of the shares being redeemed.

To allow time for the clearing of funds used to purchase shares being redeemed, payment for shares redeemed may be restricted for up to 14 calendar days.

There are several methods you may choose to redeem shares:

Written request

Write:   Idaho Tax-Exempt Fund
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

You may redeem shares by a written request and choose one of the following options for the proceeds:

  • Redemption check (no minimum)
  • Federal funds wire ($5,000 minimum)

Note: Signatures on written requests, such as payments directed to a third party, may need to be guaranteed by a national bank or trust company, or by a member of a national securities exchange.

Prevailing rates apply to federal funds wires and expedited courier service for redemption checks. Delivery times cannot be guaranteed by the Fund.

Telephone request

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

Unless Saturna is notified in advance that you do not want this privilege, you may redeem shares by a telephone request and choose one of the following options for the proceeds:

  • Redemption check (no minimum) sent to registered owner(s) at the account address of record. Note: Redemption checks sent to other than registered owners may require a written request with a signature guarantee.
  • Electronic Funds Transfer ($100 minimum) with proceeds transferred to your bank account as designated by the EFT authorization on your application. The transfer agent must receive the EFT authorization at least two weeks before EFT transfer can be used.
  • Exchange (in at least the minimum initial amount established by the Fund being purchased) for shares of any other Fund for which Saturna Capital Corporation is adviser. If the exchange is your initial investment into this Fund, the new account will automatically have the same registration as your original account.

8


For telephone requests, the Fund will endeavor to confirm that instructions are genuine. The caller must provide:

  • the name of the person making the request,
  • the name and address of the registered owner(s),
  • the account number,
  • the amount to be redeemed, and
  • the method for remittance of the proceeds.

Online

Visit: www.idahotaxexemptfund.com

To initiate transactions online, shareowners must first complete an Online Access and E-Delivery form available on www.idahotaxexemptfund.com or by calling toll-free 1-800-728-8762. When accessing their account, users must provide the username and password, and possible security prompts.

As the transfer agent, Saturna may also require a form of personal identification. Neither the transfer agent nor the Fund will be responsible for the results of transactions they reasonably believe genuine.

The shares and/or uncashed checks of redemptions, dividends, or distributions may be transferred to your state of residence if no activity occurs within your account during an "inactivity period" specified in your state's laws. The shareowner's last known address of record determines which state has jurisdiction. Some states, such as Texas, allow shareowners to designate a representative to receive escheatment (transfer) notifications if their account is being transfered to a state government.

The Fund may restrain any account and suspend account services when: the Fund believes that there may exist a dispute between the registered or beneficial account owners; the Fund believes that a transaction may be fraudulent; in cases of abusive or threatening conduct or suspected illegal activity; or if the Fund is unable to verify the identity of the person(s) or entity opening an account or requesting a transaction.

The Fund has up to seven days to pay proceeds to shareowners who redeem shares, however it normally sends redemption proceeds within one day. The Fund's investment team continually monitors portfolio liquidity and adjusts the Fund's cash levels based on market outlook, portfolio and investor transactions, and other relevant criteria. Unlike many mutual funds, the Idaho Tax-Exempt Fund does not maintain a bank line of credit that could be used to meet short-term liquidity needs. There can be no assurance that the Fund will be able manage liquidity successfully in all market environments. Under stressed conditions, the Fund may not pay redemption proceeds in a timely fashion.

The Funds reserve the right to change the terms of purchasing shares and services offered.

Purchase and Sale of Fund Shares Through Financial Intermediaries

The Fund has authorized financial intermediaries (such as securities brokers or dealers, retirement plan recordkeepers, banks and trust companies) to receive purchase, redemption, and exchange orders on behalf of the Fund. These authorized intermediaries may designate other intermediaries to receive such orders. The Fund will be deemed to have received a purchase, redemption, or exchange order when an authorized intermediary (or its designee) receives the transaction request in good order.

If you purchase shares through an intermediary, the transfer agent may not have your account information. If so, you must contact your intermediary to perform transactions. Investors should be aware that intermediaries might have policies different than the Fund's policies regarding purchases, redemptions, or exchanges and these may be in addition to or in place of the Fund's policies. For more information about these restrictions and policies, please contact your broker, retirement plan administrator, or other intermediary.

Distributions

The Fund intends to distribute its net investment income and net realized capital gains, if any, to its shareowners. The Fund accounts for its distributions as taxable capital gains (originating from net realized gains on portfolio transactions), taxable income (originating from dividends, taxable interest, and certain other types of gains), or tax-exempt income (originating from interest on municipal bonds). Income dividends are declared daily and reinvested or distributed (paid) monthly. Distributions from capital gains are paid annually, typically by the end of the year.

Both dividends and capital gain distributions are paid in additional full and fractional shares of the Fund owned. At your option, you may receive dividends and/or capital gain distributions greater than $10 in cash. Dividends or capital gains in amounts less than $10 will be reinvested. If you do not indicate any choice on your application, your dividends will be reinvested. You are notified of each dividend and capital gain distribution at the end of the month when paid.

Returned dividend checks and dividend checks that remain uncashed for six months will be automatically reinvested into your account and invested in additional shares of the Fund owned; future dividends in such accounts will continue to be reinvested until the shareowner is located or the account is closed.

9


Frequent Trading Policy

The Fund is intended for long-term investment and does not permit rapid trading. The Fund's Board of Trustees has adopted a frequent trading policy that attempts to identify and limit rapid trading. Rapid trading may lead to higher portfolio turnover, which may negatively affect performance or increase costs, thereby adversely affecting other shareowners.

To the extent reasonably practicable, the Fund monitors trading in its shares in an effort to identify trading patterns that appear to indicate frequent purchases and redemptions that might violate the Frequent Trading Policy. If the Fund, the transfer agent, or the Fund's manager, based on the information available, believes that it has identified a pattern of such trading (whether directly through the Fund, indirectly through an intermediary, or otherwise), it may, in its sole discretion, temporarily or permanently bar future purchases of shares of the Fund (or any other fund managed by the adviser) by the account holder, or any accounts under common control (such as those advised by an investment manager or any other type of asset allocator).

In making such a judgment, factors considered may include the size of the trades, the frequency and pattern of trades, the methods used to communicate orders, and other factors considered relevant.

Although this process involves judgments that are inherently subjective, the Fund seeks to make decisions that are consistent with the interests of the Fund's shareowners. The Fund reserves the right to refuse or revoke any purchase order for any reason the Fund, the transfer agent, or the Fund's manager believes to be contrary to the Frequent Trading Policy.

The Fund often receives orders through financial intermediaries who trade Fund shares through omnibus accounts (i.e., a single account in which the transactions of individual shareowners are combined). When possible, the Fund obtains contractual agreements with intermediaries to enforce the Fund's redemption policies and relies on intermediaries to have reasonable procedures in place to detect and prevent excessive trading or market timing of Fund shares. The Fund cannot always identify all intermediaries or detect or prevent trading that violates the Frequent Trading Policy through intermediaries and omnibus accounts. Some intermediaries trade shares of several funds and cannot always enforce the Fund's policies.

Tax Consequences

The Fund declares and pays exempt-interest dividends from its net investment income, which are exempt from federal and Idaho state income taxes. Distributions of short-term capital gains and gains characterized as market discount are taxable as ordinary income. Such distributions and any capital gain distributions may be subject to income tax, whether they are paid in cash or reinvested in additional Fund shares.

An exchange of the Fund's shares for shares of another fund will be treated as a sale of the Fund's shares and any gain on the transaction may be subject to federal income tax.

Shareowners receive quarterly statements. The year-end statement should be retained for tax accounting. As transfer agent, Saturna Capital Corporation keeps each account's entire investment transaction history and helps shareowners maintain the tax records needed to determine reportable capital gains and losses as well as dividend income.

Each February, the transfer agent reports to each shareowner (consolidated by taxpayer ID) and to the IRS the amount of each redemption transaction and the amount of income dividends and capital gains distributions. Dividend amounts represent the proportionate share the shareowner is to report on a tax return for the year. The Fund expects that its distributions will consist primarily of tax-exempt income dividends, but it may invest a portion of its assets in securities that generate income dividends that are not exempt from federal or Idaho income tax. Income dividends exempt from federal tax may be subject to state and local income tax. Any capital gains distributed by the Fund may be taxable.

Tax regulations require reporting cost basis information to you and the Internal Revenue Service on Form 1099-B. This information is reported using a cost basis method selected by you or, in the event no cost basis method was selected, our default method (FIFO — First In, First Out). Please note that the cost basis information reported to you may not always be the same as what you report on your tax return as different rules may apply. You should save your transaction records to make sure the information reported on your tax return is accurate.

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

Distribution Arrangements

The Idaho Tax-Exempt Fund intends to comply with with the concept of Clean Shares as defined by the United States Securities and Exchange Commission. Clean Shares are characterized by a lack of any ongoing distribution expenses, sub-transfer agency, or recordkeeping fees, and that financial intermediaries transact shares solely on an agency basis. When you purchase Clean Shares through a financial intermediary, such as a broker-dealer or financial adviser, you may be charged a transaction fee or commission to purchase the shares.

Shares of the Idaho Tax-Exempt Fund are Clean Shares.

Shares may be purchased and sold through intermediaries, such as broker-dealers and retirement plan administrators, having agreements with the Funds. These intermediaries may require the adviser/distributor to the Funds to share revenues to compensate the intermediaries for their services. Any such payments could be characterized as "revenue sharing." An intermediary's receipt or expectation of receipt of revenue sharing payments could influence an intermediary's recommendation of the Funds. You should review your intermediary's compensation practices for that information. For more information, see the Funds' Statement of Additional Information.

10


Financial Highlights

This table can help you understand the Fund's financial performance. The top section reflects financial results for a single Fund share. The total returns represent the rate that an investor earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions and without regard to income taxes. Tait, Weller & Baker, LLP, independent registered public accounting firm for the Fund, audited this information. Their report and the Fund's financial statements are in the Fund's annual report (available free upon request from the Fund at www.idahotaxexemptfund.com or by calling 800-728-8762).

 

For the year ended November 30,

Selected data per share of outstanding capital stock throughout each year:

2017

2016

2015

2014

2013

Net asset value at beginning of year

$5.29

$5.48

$5.51

$5.36

$5.68

Income from investment operations

    Net investment income

0.13

0.14

0.15

0.16

0.16

    Net gains (losses) on securities (both realized and unrealized)

0.08

(0.19)

(0.03)

0.15

(0.31)

Total from investment operations

0.21

(0.05)

0.12

0.31

(0.15)

Less distributions

    Dividends (from net investment income)

(0.13)

(0.14)

(0.15)

(0.16)

(0.16)

    Distributions (from capital gains)

-

0.00A

0.00A

0.00A

(0.01)

Total distributions

(0.13)

(0.14)

(0.15)

(0.16)

(0.17)

 

Net asset value at end of year

$5.37

$5.29

$5.48

$5.51

$5.36

 

Total return

3.90%

(0.95)%

2.21%

5.83%

(2.70)%

 

Ratios / supplemental data

Net assets ($000), end of year

$17,474

$17,997

$17,420

$16,721

$15,492

Ratio of expenses to average net assets

    Before transfer agent fee waiver and custodian fee credits

0.67%

0.67%

0.67%

0.65%

0.66%

    After transfer agent fee waiver

0.66%

0.66%

0.66%

0.63%

0.64%

    After transfer agent fee waiver and custodian fee credits

0.65%

0.65%

0.66%

0.63%

0.64%

Ratio of net investment income after fee waiver and custodian credits to average net assets

2.33%

2.54%

2.66%

2.85%

2.88%

Portfolio turnover rate

20%

15%

7%

5%

9%

A Amount is less than $0.01

11


Additional information about the Fund's investments is available in the Fund's annual and semi-annual shareowner reports. The Fund's annual report includes a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. The Statement of Additional Information contains additional information and is incorporated in this Prospectus by reference. To request a free copy of the Statement of Additional Information, any reports or other information associated with Idaho Tax-Exempt Fund, and to make shareowner inquiries, please contact us at:

Saturna Investment Trust – Idaho Tax-Exempt Fund
1300 N. State St., Bellingham, WA 98225
1-800-SATURNA [1-800-728-8762]
www.idahotaxexemptfund.com

The Statement of Additional Information, the Annual and Semi-Annual Reports, this Prospectus, and other documents are available to download from our website,
www.idahotaxexemptfund.com, and/or from your financial intermediary.

Information about the Fund (including the SAI) can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. (call 202-551-8090 for information). Reports and other information about the Fund are also available on the SEC's EDGAR database (http://www.sec.gov), and copies may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-1520 or sending email to publicinfo@sec.gov.

Idaho Tax-Exempt Fund is a series of Saturna Investment Trust.

(logo omitted)

Saturna Capital
1300 N. State Street
Bellingham, WA 98225
1-800-728-8762
www.saturna.com

Saturna Investment Trust's Investment Company Act file number is 811-05071.

Idaho Tax-Exempt Fund Annual Report November 30, 2017

IDAHO TAX-EXEMPT FUND

ANNUAL REPORT

November 30, 2017


Performance Summary (as of December 31, 2017) (unaudited)

Average Annual Returns (before any taxes paid by shareowners)

 

1 Year

3 Year

5 Year

10 Year

15 Year

Expense Ratio

Idaho Tax-Exempt Fund

3.87%

1.81%

2.00%

3.23%

3.20%

0.67%¹

S&P Idaho Municipal Bond Index

5.06%

3.46%

3.64%

4.92%

5.03%

n/a

Muni Single State Intermediate Category Average²

3.59%

1.96%

1.97%

3.38%

3.36%

0.98%

Performance data quoted in this report represents past performance, is before any taxes payable by shareowners, and is no guarantee of future results. Current performance may be higher or lower than that stated herein. Performance current to the most recent month-end is available by calling toll-free 1-800-728-8762 or visiting www.idahotaxexemptfund.com. Average annual total returns are historical and include change in share value as well as reinvestment of dividends and capital gains, if any. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Please consider an investment's objectives, risks, charges, and expenses carefully before investing. To obtain this and other important information about the Idaho Tax-Exempt Fund in a prospectus or summary prospectus, ask your financial advisor, visit www.idahotaxexemptfund.com, or call toll free 1-800-728-8762. Please read the prospectus or summary prospectus carefully before investing.

A note about risk: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with the Fund, please see the Fund's prospectus or summary prospectus.

¹ By regulation, the expense ratio shown in this table is as stated in the Fund's most recent prospectus, which is dated June 2, 2017, and incorporates results for the fiscal year ended November 30, 2016. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

² Source: Morningstar December 31, 2017. Morningstar, Inc. is an independent fund performance monitor. Category returns are determined monthly from total returns by Morningstar, by category as determined by Morningstar. Category average expense ratios are determined by Morningstar from prospectus level data reported by funds in the category.

On the cover: A rainbow over Shoshone Falls.

2 November 30, 2017 Annual Report

(logo omitted)

Fellow Shareowners:

The 2017 Tax Cuts and Jobs Act does not alter the tax exemption on interest paid by municipal bonds. The after-tax yield and tax exemption on municipal bond income remain potent reasons to invest in tax-exempt municipal bonds. The elimination of the tax exemption for advance refunding bonds will reduce the forward supply of municipal bonds adding support to the prices of existing municipal bonds.

For high-income earners in high-tax states, the new $10,000 limit on the deductibility of property, income, or sales taxes may eliminate a significant portion of a valuable deduction. The $750,000 principal cap on the deductibility of mortgage interest may increase the after-tax cost of high-end residential property ownership. The elimination of the deductibility of interest on home equity loans may also reduce the incentive to invest more in homes. Combined, these new laws may lead to softer high-end home prices to offset the new higher after-tax cost of ownership. To the extent the new law affects home prices, the law may impact tax revenues based on property values. The impact of a higher threshold on the alternative minimum tax and the doubling of the standard deduction are unclear for the municipal bond market.

Taxes factor significantly in interstate competition for commerce, economic prosperity, and taxpayer migration. The new tax law may motivate some homeowners, prospective home buyers, and young families to consider locating to lower tax states, eroding the tax base of higher tax states. In general, the impact of the new tax bill on high-tax states like California and Oregon may be a credit negative. Given Idaho's well-balanced, regionally competitive tax structure, exceptional business climate, and low relative cost of living, the new laws are likely a credit positive for Idaho, which is already experiencing one of the nation's fastest growing populations. The new tax law requires municipal bond investors to be even more aware of the increasing divergence in states' credit quality.

Credit quality for Pacific Northwest states continues to improve. Conning Municipal Credit Research's October 2017 "State of the States Report," identifies Idaho as the second most creditworthy state. Idaho ranks fifth in economic debt-to-personal income and tenth for highest general fund reserves. Idaho has an unemployment rate below 3% and the third highest home price appreciation (a leading indicator of credit quality). With one of the nation's most attractive business climates, Idaho investors may rest assured the state continues to thrive.

Idaho continues to offer discriminating investors the opportunity to invest in high quality tax-exempt securities in an exceptionally creditworthy state.

Respectfully,

(photo omitted)

Jane Carten,
President

(photo omitted)

Phelps McIlvaine,
Vice President, Portfolio Manager

Annual Report November 30, 2017 3

Performance Summary (unaudited)

Average Annual Returns (as of November 30, 2017)

 

1 Year

5 Year

10 Year

Expense Ratio¹

Idaho Tax-Exempt Fund

3.90%

1.61%

3.18%

0.67%

S&P Idaho Municipal Bond Index

5.00%

3.24%

4.79%

n/a

Growth of $10,000

Idaho Tax-Exempt Fund Growth of $10,000

Comparison of any mutual fund to a market index must be made bearing in mind that the Index is unmanaged and expense-free. Conversely, the fund will (1) be actively managed; (2) have an objective other than mirroring the index, such as limiting risk; (3) bear transaction and other costs; (4) stand ready to buy and sell its securities to shareowners on a daily basis; and (5) provide a wide range of services. The graph compares $10,000 invested in the Fund on November 30, 2007, to an identical amount invested in the Standard & Poor's Idaho Municipal Bond Index, a broad-based index of Idaho municipal bond prices. The graph shows that an investment in the Fund would have risen to $13,682 versus $15,966 in the S&P Idaho Municipal Bond Index.

Past performance does not guarantee future results. The "Growth of $10,000" graph and "Average Annual Returns" performance table assume the reinvestment of dividends and capital gains. They do not reflect the deduction of taxes that a shareowner might pay on fund distributions or the redemption of fund shares.

¹ By regulation, the expense ratio for the Fund shown in this table is as stated in the Fund's most recent prospectus, which is dated June 2, 2017, and incorporates results for the fiscal year ended November 30, 2016. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

Fund Objective

Idaho Tax-Exempt Fund seeks to provide income free from federal income, federal alternative minimum, and Idaho state income taxes. Preservation of capital is a secondary objective.

Portfolio Diversification

% of Total Net Assets

 

General Obligation

54.7%

Idaho Tax-Exempt Fund Portfolio Diversification

State Education

15.5%

Real Estate

6.3%

Financial Services

6.0%

Water Supply

5.1%

Transportation

3.0%

Medical – Hospitals

2.9%

Pollution Control

2.0%

Other industries <1%

0.9%

Other assets (net of liabilities)

3.6%

 

Top 10 Holdings

% of Total Net Assets

Twin Falls Co ID SCD #414 Kimberly (5.00% due 09/15/2031)

4.6%

Boise ID ISD (Ada & Boise Cos) (5.00% due 08/01/2030)

4.2%

Boise State University ID Revenue (5.00% due 04/01/2032)

3.7%

Idaho Housing & Finance Rev (3.00% due 07/01/2036)

3.0%

University of Idaho Revenue (5.00% due 04/01/2032)

2.9%

Idaho State Building Authority (5.00% due 09/01/2032)

2.6%

Canyon Co ID SCD #134 Middleton (4.00% due 09/15/2028)

2.6%

Ada & Canyon Cos ID JSD #3 Kuna (4.00% due 08/15/2022)

2.5%

Idaho Bond Bank Authority (4.00% due 09/15/2032)

2.5%

Ada & Canyon Cos ID JSD #2 Meridian (5.00% due 08/15/2032)

2.2%

 

4 November 30, 2017 Annual Report

Discussion of Fund Performance (unaudited)

For the 12 months ended November 30, 2017, Idaho Tax-Exempt Fund returned 3.90%, which was higher than the 3.63% average annual return of its Morningstar Muni Single State Intermediate category peer group. For the five years ended November 30, 2017, the Fund provided an annualized total return of 1.61%, compared to the 1.54% annualized return for the Morningstar category peer group. The Fund's net operating expense ratio was 0.65%. For the year, the Fund's net assets fell 2.9% to $17.47 million. The Fund's net asset value per share rose modestly from $5.29 to $5.37. Over the one-year period, the Fund's outstanding shares declined 4% to 3.3 million.

Factors Affecting Past Performance

A year ago, tax-exempt bond investors were apprehensive about changes to income tax exemptions, deductions, and brackets. As a result, tax-exempt bonds underperformed relative to taxable bonds. However, the municipal bond market's fears were largely misplaced. The 2017 Tax Cuts and Jobs Act did not alter the income tax exemption for interest paid by municipal bonds and only modified the highest income tax rates slightly. Other provisions will lower the supply of new municipal bonds and improve the supply/demand balance for the entire market. Relieved of these concerns, the municipal bond market generally outperformed the US Treasury market through November 30, 2017.

The US Federal Reserve Bank, relying on improving economic growth raised the federal funds rate target from 0.50% to 1.25%. The rate of personal consumption expenditures, while positive for the year, shows signs of slowing. These two forces combined to produce a substantial flattening of fixed income yield curves. For example, five-year US Treasury notes rose 0.31% in yield while the 30-year US Treasury yield declined -0.19%. Reflecting their outperformance for the year, five-year high-grade municipal bond yields fell -0.21%, while the 30-year municipal bond yields declined by an even larger -0.46%. The Fund's dollar-weighted average effective maturity remains near six years. While falling long-term rates benefit the Fund less than portfolios with longer average maturities, the Fund may be impacted less during periods of rising long-term rates.

For the year, Idaho's credit quality remained on solid ground. In October 2017, Conning Municipal Credit Research ranked Idaho the second most creditworthy state. Idaho is supported by above average economic and population growth in the surrounding Pacific Northwest region.

Looking Forward

Short-term US yields will grind higher as the US Federal Reserve cautiously tightens policy amid a record supply of short-term US Treasury paper issued to finance expanding federal deficits. High public and private sector debt levels and Fed tightening will dampen inflation expectations, moderate economic growth, and weigh on long-term yields. The forces flattening the yield curve will persist. The US Federal Reserve has another 75 basis points before a flat or inverted yield curve develops. When that arrives, the Federal Open Market Committee will have good reason to pause as the effects of an inverted curve can take a year to manifest. Volatility may remain modest.

The invigorating growth effects of the new US tax law will have to overcome the retarding effects of greater debt-funded deficits, weak demographics, and tighter monetary policy. New limits on mortgage and home equity loan interest deductions may temper purchasing decisions in an overheated housing market. Limits on the deductibility of interest paid by corporations will raise the cost of corporate mergers, debt-funded equity buyback programs, and leverage in general. The higher after-tax cost of debt may have a moderating effect on business activity and inflation.

US state credit quality in general may have peaked as general fund tax revenue is failing to keep pace with rising costs for energy, health care, infrastructure, and pensions. Of these, only pension funding is constitutionally mandated. Pension funding is the most senior claim on general fund revenue. Eventually, diverting general fund revenue to pay pension liabilities could crowd out other essential state programs causing conflict between elected representatives, taxpayers, pension beneficiaries, and those who rely on state programs. Shareowners should expect to see these headlines soon and understand that Idaho is not in the same situation.

A large and lasting increase in yields remains a remote possibility absent real change in inflation expectations. If bond yields do increase, the diversification value of municipal bonds will improve. Higher bond yields have the potential to draw funds back to bonds from dividend-paying common stocks, reversing a dynamic caused by the Fed-induced yield famine. Idaho Tax-Exempt Fund chooses not to invest in US territories such as Puerto Rico, Guam, and the US Virgin Islands to boost income at the expense of creditworthiness. The Fund does not employ derivatives or other financial engineering tools to modify risk and return.

For those seeking a conservative investment vehicle, the Idaho Tax-Exempt Fund offers a portfolio of high-grade issues intended to provide income exempt from federal income, federal alternative minimum, and Idaho state income taxes. The Fund may purchase carefully vetted, nonrated Idaho bonds.

Bond Quality Diversification

(unaudited)

% of Total Net Assets

 

Rated Aaa

28.4%

Idaho Tax-Exempt Fund Bond Quality Diversification

Rated Aa1

21.4%

Rated Aa2

3.9%

Rated Aa3

13.1%

Rated A1

7.5%

Rated A2

4.9%

Rated A3

1.2%

Not rated

16.0%

Other assets (net of liabilities)

3.6%

Credit ratings are determined by Moody's Investors Service, a Nationally Recognized Statistical Rating Organization. If Moody's does not rate a particular security, that security is categorized as not rated.

 

Annual Report November 30, 2017 5

 

Schedule of Investments

As of November 30, 2017

Tax-Exempt Municipal Bonds- 96.4%

Coupon / Maturity

Face Amount

Market Value

Percentage of Assets

 

Financial Services

 
 

    Idaho Bond Bank Authority

4.00% due 09/15/2019

$90,000

$91,858

0.5%

    Idaho Bond Bank Authority

4.00% due 09/15/2032

405,000

433,281

2.5%

    Idaho Housing & Finance Rev

3.00% due 07/01/2036

550,000

529,436

3.0%

 
 

1,045,000

1,054,575

6.0%

 

General Obligation

 
 

    Ada & Canyon Cos ID JSD #2 Meridian

5.00% due 08/15/2032

325,000

381,063

2.2%

    Ada & Canyon Cos ID JSD #3 Kuna

5.00% due 09/15/2019

240,000

242,494

1.4%

    Ada & Canyon Cos ID JSD #3 Kuna

4.00% due 08/15/2022

400,000

439,268

2.5%

    Ada & Canyon Cos ID JSD #3 Kuna

4.00% due 09/15/2027

100,000

114,434

0.6%

    Adams & Washington Cos ID JSD #432

4.00% due 08/15/2019

100,000

100,484

0.6%

    Bingham Co ID SCD #52 Snake HS

4.00% due 09/01/2020

250,000

255,000

1.5%

    Bingham Co ID SCD #52 Snake HS

4.00% due 09/01/2027

200,000

204,000

1.2%

    Boise ID ISD (Ada & Boise Cos)

5.00% due 08/01/2030

600,000

729,204

4.2%

    Bonneville & Bingham Cos JSD #93

5.00% due 09/15/2029

250,000

284,757

1.6%

    Bonneville & Bingham Cos JSD #93

5.00% due 09/15/2031

200,000

227,610

1.3%

    Bonneville Co ID SCD #91

3.75% due 09/15/2032

285,000

297,936

1.7%

    Bonneville Co ID SCD #91 (Defeased)

4.00% due 09/15/2026

15,000

16,469

0.1%

    Bonneville Co ID SCD #91 (Undefeased)

4.00% due 09/15/2026

35,000

37,678

0.2%

    Boundary County ID SCD #101

4.00% due 08/15/2021

240,000

241,301

1.4%

    Canyon Co ID SCD #134 Middleton

4.00% due 09/15/2028

400,000

446,668

2.6%

    Canyon Co ID SCD #135 Notus

3.25% due 09/15/2031

290,000

301,119

1.7%

    Canyon Co ID SCD #135 Notus

3.25% due 09/15/2032

170,000

176,518

1.0%

    Canyon Co ID SCD #139 Vallivue

5.00% due 09/15/2024

260,000

295,511

1.7%

    Cariboo Franklin Bannock JSD #148

3.25% due 09/15/2035

300,000

308,103

1.8%

    Cassia Oneida Twin Falls JSD #151

3.375% due 09/15/2034

160,000

162,667

0.9%

    Fremont & Madison Cos ID JSD #215

4.00% due 08/15/2019

200,000

201,092

1.1%

    Fremont & Madison Cos ID JSD #215

4.125% due 08/15/2024

130,000

130,742

0.7%

    Jefferson & Madison SCD #251 Rigby

4.25% due 09/01/2024

100,000

100,727

0.6%

    Kootenai Co ID SCD #271 CDA

4.00% due 09/15/2025

165,000

180,048

1.0%

    Kootenai Co ID SCD #273

4.00% due 08/15/2031

265,000

290,917

1.7%

    Kootenai-Shoshone ID Area Libraries

4.25% due 08/01/2021

220,000

221,199

1.3%

    Latah Co ID SCD #281 Moscow Ser B

4.00% due 08/15/2027

100,000

111,001

0.6%

    Latah Co ID SCD #281 Moscow Ser B

4.00% due 08/15/2028

200,000

221,092

1.3%

    Latah Nez Perce Clearwater JSD #283

4.50% due 08/15/2027

190,000

193,108

1.1%

    Meridian Co. Id. SDC #321

5.00% due 9/15/2035

250,000

296,057

1.7%

    Owyhee & Elmore Cos ID JSD #365

4.00% due 08/15/2027

350,000

351,911

2.0%

    Twin Falls & Gooding Cos JSD #412 R

4.125% due 09/01/2023

50,000

54,244

0.3%

    Twin Falls & Gooding Cos JSD #412 N

4.125% due 09/01/2023

50,000

54,036

0.3%

    Twin Falls Co ID SCD #411

4.00% due 09/15/2027

170,000

188,720

1.1%

    Twin Falls Co ID SCD #411

4.25% due 09/15/2030

300,000

331,956

1.9%

    Twin Falls Co ID SCD #411 Series A

4.25% due 09/15/2031

100,000

110,128

0.6%

    Twin Falls Co ID SCD #411

4.75% due 09/15/2039

200,000

224,056

1.3%

    Twin Falls Co ID SCD #414 Kimberly

5.00% due 09/15/2031

670,000

801,876

4.6%

    Valley & Adams Cos ID JSD #421

3.00% due 08/01/2026

220,000

226,369

1.3%

 
 

8,750,000

9,551,563

54.7%

 

Medical/Hospitals

 
 

    Idaho Health Rev St. Luke's

6.75% due 11/01/2037

200,000

208,864

1.2%

    Idaho Health Rev Trinity Health Grp

3.25% due 12/01/2028

300,000

304,923

1.7%

 
 

500,000

513,787

2.9%

 

Continued on next page.

The accompanying notes are an integral part of these financial statements.

6 November 30, 2017 Annual Report

 

Schedule of Investments

As of November 30, 2017

Tax-Exempt Municipal Bonds- 96.4%

Coupon / Maturity

Face Amount

Market Value

Percentage of Assets

 

Municipal Leases

 
 

    Nez Perce County ID COPS

4.50% due 02/01/2021

$150,000

$150,363

0.9%

 
 

150,000

150,363

0.9%

 

Pollution Control

 
 

    Caldwell ID Sewer Revenue

4.50% due 09/01/2019

100,000

104,836

0.6%

    Idaho Bond Bank Authority

4.30% due 09/01/2022

20,000

20,044

0.1%

    Idaho Bond Bank Authority (Undefeased)

4.125% due 09/15/2023

20,000

20,042

0.1%

    Moscow ID Sewer Revenue

4.45% due 05/01/2028

200,000

201,864

1.2%

 
 

340,000

346,786

2.0%

 

Power Generation

 
 

    Idaho Falls ID Electric Revenue

6.75% due 04/01/2019

5,000

5,081

0.0%A

 
 

5,000

5,081

0.0%A

 

Real Estate

 
 

    Boise City Urban Renewal Lease Rev

5.00% due 12/15/2032

300,000

342,816

1.9%

    Idaho State Building Authority

5.00% due 09/01/2031

200,000

224,694

1.3%

    Idaho State Building Authority

5.00% due 09/01/2032

400,000

449,004

2.6%

    Post Falls ID LID SPA

5.00% due 05/01/2021

90,000

90,202

0.5%

 
 

990,000

1,106,716

6.3%

 

State Education

 
 

    Boise State University ID Revenue

5.00% due 04/01/2028

125,000

146,250

0.8%

    Boise State University ID Revenue

5.00% due 04/01/2032

560,000

655,889

3.7%

    Idaho State University Rev

4.00% due 04/01/2027

170,000

187,976

1.1%

    Idaho State University Rev

4.00% due 04/01/2030

245,000

264,421

1.5%

    Idaho State University Rev

3.00% due 04/01/2031

250,000

249,177

1.4%

    Idaho State University Rev

3.00% due 04/01/2032

160,000

158,522

0.9%

    North Idaho College Dormitory Rev

4.00% due 11/01/2030

285,000

309,949

1.8%

    University of Idaho Revenue

5.00% due 04/01/2028

225,000

240,041

1.4%

    University of Idaho Revenue

5.00% due 04/01/2032

455,000

500,555

2.9%

 
 

2,475,000

2,712,780

15.5%

 

Transportation

 
 

    Boise ID Airport Park Fac Rev

3.00% due 09/01/2028

210,000

212,373

1.2%

    Idaho Housing & Finance Rev

4.60% due 07/15/2023

250,000

255,010

1.5%

    Idaho Housing & Finance Rev

5.00% due 07/15/2027

50,000

52,705

0.3%

 
 

510,000

520,088

3.0%

 

Water Supply

 
 

    Chubbuck ID Water Revenue

4.00% due 09/01/2025

155,000

162,854

0.9%

    Payette Lakes Rec Wtr & Swr Rev

4.00% due 08/01/2034

255,000

271,700

1.6%

    Pocatello ID Water Revenue

4.50% due 02/01/2024

100,000

100,509

0.6%

    Pocatello ID Water Revenue

4.75% due 02/01/2026

350,000

351,918

2.0%

 
 

860,000

886,981

5.1%

 
 

Total investments

(Cost $16,643,861)

$15,625,000

16,848,720

96.4%

Other assets (net of liabilities)

   

625,491

3.6%

Total net assets

   

$17,474,211

100.0%

A Amount is less than 0.05%

The accompanying notes are an integral part of these financial statements.

Annual Report November 30, 2017 7

 

Statement of Assets and Liabilities

As of November 30, 2017

 

Assets

    Investments in securities, at value
    (Cost $16,643,861 )

$16,848,720

    Cash

491,409

    Interest receivable

168,058

    Prepaid expenses

1,075

    Insurance reserve premium

801

        Total assets

17,510,063

Liabilities

    Accrued audit expenses

10,500

    Payable for Fund shares redeemed

10,185

    Accrued advisory fees

7,342

    Distributions payable

5,352

    Accrued other expenses

974

    Accrued trustee expenses

704

    Accrued Chief Compliance Officer expense

697

    Accrued retirement plan custodial fees

98

        Total liabilities

35,852

Net assets

$17,474,211

 

Analysis of net assets

    Paid-in capital (unlimited shares authorized, without par value)

$17,329,047

    Undistributed tax-exempt income

3,051

    Accumulated net realized loss

(62,746)

    Unrealized net appreciation on investments

204,859

Net assets applicable to Fund shares outstanding

$17,474,211

 

Fund shares outstanding

3,254,120

 

Net asset value, offering and redemption price per share

$5.37

 

Statement of Operations

Year ended November 30, 2017

 

Investment income

    Interest income

$519,341

        Total investment income

519,341

Expenses

    Investment adviser fees

87,145

    Audit fees

9,782

    Chief Compliance Officer expenses

5,081

    Trustee fees

3,525

    Other expenses

2,254

    Filing and registration fees

2,036

    Printing and postage

2,021

    Transfer agent fees

1,909

    Legal fees

1,794

    Custodian fees

834

    Retirement plan custodial fees

49

        Total gross expenses

116,430

    Less transfer agent fees waived

(1,909)

    Less custodian fee credits

(834)

        Net expenses

113,687

Net investment income

$405,654

 
 

Net realized loss from investments

$(62,746)

Net increase in unrealized appreciation on investments

304,617

Net gain on investments

$241,871

 

Net increase in net assets resulting from operations

$647,525

The accompanying notes are an integral part of these financial statements.

8 November 30, 2017 Annual Report

 

Statements of Changes of Net Assets

Year ended November 30, 2017

Year ended November 30, 2016

Increase (decrease) in net assets from operations

From operations

    Net investment income

$405,654

$458,468

    Net realized gain (loss) on investments

(62,746)

3,909

    Net increase (decrease) in unrealized appreciation

304,617

(650,064)

            Net increase (decrease) in net assets

647,525

(187,687)

Distributions to shareholders from

    Net investment income

(405,654)

(458,714)

    Capital gains distributions

-

(4,857)

            Total distributions

(405,654)

(463,571)

Capital share transactions

    Proceeds from sales of shares

2,980,462

1,730,524

    Value of shares issued in reinvestment of dividends

340,869

396,892

    Cost of shares redeemed

(4,086,060)

(899,482)

            Total capital share transactions

(764,729)

1,227,934

Total increase (decrease) in net assets

(522,858)

576,676

 

Net assets

Beginning of year

17,997,069

17,420,393

End of year

17,474,211

17,997,069

 

Undistributed tax-exempt income

$3,051

$3,051

 

Shares of the Fund sold and redeemed

    Number of shares sold

555,996

312,922

    Number of shares issued in reinvestment of dividends

63,317

71,952

    Number of shares redeemed

(766,934)

(162,472)

Net increase (decrease) in number of shares outstanding

(147,621)

222,402

 

Financial Highlights

For the year ended November 30,

Selected data per share of outstanding capital stock throughout each year:

2017

2016

2015

2014

2013

Net asset value at beginning of year

$5.29

$5.48

$5.51

$5.36

$5.68

Income from investment operations

    Net investment income

0.13

0.14

0.15

0.16

0.16

    Net gains (losses) on securities (both realized and unrealized)

0.08

(0.19)

(0.03)

0.15

(0.31)

Total from investment operations

0.21

(0.05)

0.12

0.31

(0.15)

Less distributions

    Dividends (from net investment income)

(0.13)

(0.14)

(0.15)

(0.16)

(0.16)

    Distributions (from capital gains)

-

0.00A

0.00A

0.00A

(0.01)

Total distributions

(0.13)

(0.14)

(0.15)

(0.16)

(0.17)

 

Net asset value at end of year

$5.37

$5.29

$5.48

$5.51

$5.36

 

Total return

3.90%

(0.95)%

2.21%

5.83%

(2.70)%

 

Ratios / supplemental data

Net assets ($000), end of year

$17,474

$17,997

$17,420

$16,721

$15,492

Ratio of expenses to average net assets

    Before transfer agent fee waiver and custodian fee credits

0.67%

0.67%

0.67%

0.65%

0.66%

    After transfer agent fee waiver

0.66%

0.66%

0.66%

0.63%

0.64%

    After transfer agent fee waiver and custodian fee credits

0.65%

0.65%

0.66%

0.63%

0.64%

Ratio of net investment income after fee waiver and custodian credits to average net assets

2.33%

2.54%

2.66%

2.85%

2.88%

Portfolio turnover rate

20%

15%

7%

5%

9%

A Amount is less than $0.01

The accompanying notes are an integral part of these financial statements.

Annual Report November 30, 2017 9

Notes To Financial Statements

Note 1 – Organization

Saturna Investment Trust (the "Trust") was established under Washington State Law as a business trust on February 20, 1987. The Trust is registered as an open-end, diversified management company under the Investment Company Act of 1940, as amended. In addition to Idaho Tax-Exempt Fund (the "Fund"), eight portfolios have been created to date: Sextant Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Core Fund, Sextant Global High Income Fund, Sextant Growth Fund, Sextant International Fund, Saturna Sustainable Equity Fund, and Saturna Sustainable Bond Fund (each, a "Fund", and collectively, the "Funds"). The other eight portfolios are distributed through separate prospectuses and the results of those Funds are contained in separate reports.

The Idaho Tax-Exempt Fund was first authorized to sell shares of beneficial interest on September 4, 1987.

The Fund is an investment company and accordingly follows the investment accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services – Investment Companies.

Investment risks:

The value of Fund shares rises and falls as the value of the bonds in which the Fund invests goes up and down. The risks inherent in the Fund depend primarily on the terms and quality of the obligations in the Fund's portfolio, as well as on market conditions. When interest rates rise, bond prices fall. When interest rates fall, bond prices go up. Bonds with longer maturities, such as those held by the Fund, usually are more sensitive to interest rate changes than bonds with shorter maturities. Only consider investing in the Fund if you are willing to accept the risk that you may lose money.

The Fund entails credit risk, which is the possibility that a bond will not be able to pay interest or principal when due. If the credit quality of a bond is perceived to decline, investors will demand a higher yield, which means a lower price on that bond to compensate for the higher level of risk. If a security held by the Fund defaults on payment of interest or principal, the Fund's income, ability to preserve capital, and liquidity would all be adversely affected.

Fund investments are susceptible to factors adversely affecting Idaho, such as political, economic, and financial trends unique to this relatively small state. Investing only in Idaho bonds means that the Fund's investments are more concentrated than other mutual funds, and relatively few bond price changes may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

The Fund is vulnerable to income 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.

Note 2 – Significant Accounting Policies

The following is a summary of the significant accounting policies, in conformity with accounting principles generally accepted in the United States of America, which are consistently followed by the Fund in the preparation of its financial statements.

Security valuation:

Debt securities are valued using bid-side valuations provided by an independent service. The service determines valuations using factors such as yields or prices of bonds of comparable quality, type of issue, coupon maturity, ratings, trading activity, and general market conditions. In the absence of a valuation from an independent service for a security, a fair value for such security is determined in good faith by or under the direction of the Board of Trustees.

Security transactions are recorded on trade date. Realized gains and losses on sales of securities are recorded on the identified cost basis.

Share valuation:

The net asset value ("NAV") per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund's shares are not priced or traded on days the New York Stock Exchange is closed. The NAV is the offering and redemption price per share.

The Trustees have adopted certain policies and procedures with respect to frequent trading of Fund shares. The Fund is intended for long-term investment and does not permit rapid trading of its shares. The Fund cannot always identify all intermediaries, or detect or prevent trading that violates the Frequent Trading Policy through intermediaries or omnibus accounts.

Fair value measurements:

Accounting Standards Codification (ASC) 820 establishes a three-tier framework for measuring fair value based on a hierarchy of inputs. The hierarchy distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's investments and are summarized below.

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access.

Level 2 – Observable inputs other than quoted prices in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.

Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Trust's own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

10 November 30, 2017 Annual Report

Notes To Financial Statements (continued)

The following table is a summary of the inputs used as of November 30, 2017, in valuing the Fund's investments carried at value.

Fair Value Inputs

Level 1
Quoted Price

Level 2
Significant Observable Input

Level 3
Significant Unobservable Input

Total

 

Municipal Bonds¹

$-

$16,848,720

$-

$16,848,720

Total Assets

$-

$16,848,720

$-

$16,848,720

¹ See Schedule of Investments for industry breakout.

During the period ended November 30, 2017, the Fund had no transfers among Levels 1, 2, or 3.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

Income taxes:

The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareowners sufficient to relieve it from all or substantially all federal income taxes. As the Fund intends to meet requirements for tax-exempt income dividends, and the requirements of the Idaho Department of Revenue for income dividends exempt from Idaho state income tax, no income tax provisions are required.

The Fund recognizes the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. Management has analyzed the Fund's tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2014 – 2016), or expected to be taken in the Fund's 2017 tax return. The Fund identifies its major tax jurisdiction as US federal and foreign jurisdictions where the Fund makes significant investments; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

Reclassification of capital accounts:

Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting.

As of November 30, 2017, there were no reclassifications to the capital accounts.

Distributions to shareowners:

The Fund's dividends to shareowners from net investment income are paid daily and distributed on the last business day of each month.

Distributions of capital gains, if any, are made at least annually and as required to comply with federal excise tax requirements. Distributions to shareowners are determined in accordance with income tax regulations and are recorded on the ex-dividend date. Dividends are paid in shares of the Fund, at the net asset value on the payable date. Shareowners may elect to take distributions in cash if they total $10 or more.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

Other:

Interest income is recognized on an accrual basis. Premiums on securities purchased are amortized and discounts are accreted over the lives of the respective securities.

Annual Report November 30, 2017 11

Notes To Financial Statements (continued)

Note 3 – Transactions with Affiliated Persons

Under a contract approved by shareowners on September 28, 1995 and reviewed annually by the Board of Trustees, Saturna Capital Corporation provides investment advisory services and certain other administrative and distribution services to conduct the Fund's business. For such services, the Fund pays an annual fee equal to 0.50% of its average daily net assets. For the fiscal period ended November 30, 2017, the Fund incurred advisory fee expenses of $87,145. Expenses incurred by the Trust on behalf of the Fund (e.g., legal fees) are allocated to the Fund and the other Funds of the Trust on the basis of relative daily average net assets.

Saturna Capital also acts as transfer agent for the Fund, for which it did not receive any compensation during the fiscal period ended November 30, 2017. Saturna Capital has voluntarily elected to waive the transfer agent fee through November 30, 2018, to reduce the Fund's operating expenses. Such fees, had they been charged, would have totaled $1,909.

Saturna Brokerage Services, Inc. ("SBS"), a discount brokerage and subsidiary of Saturna Capital, is registered as a broker-dealer and acts as distributor for the Fund.

Saturna Trust Company ("STC"), a subsidiary of Saturna Capital, acts as a retirement plan custodian for Fund shareowners. For the fiscal period ended November 30, 2017, the Fund incurred retirement plan custodial fees of $49.

Mrs. Jane Carten serves as a trustee and president of the Trust. She is also a director and the president of Saturna Capital and Saturna Trust Company. She is not compensated by the Trust. For the fiscal year ended November 30, 2017, the Trust paid trustee compensation expenses of $32,000 which is included in the $38,260 of total expenses paid for the independent Trustees. The Fund paid $3,525 of these total expenses.

The officers of the Trust are paid by Saturna Capital, not the Trust, except the Chief Compliance Officer, who is partially compensated by the Trust. For the period ended November 30, 2017, the Fund incurred $5,081 in compensation for such services.

On November 30, 2017, the trustees, officers, and their immediate families as a group directly or indirectly owned 12.87% of the outstanding shares of the Fund.

Note 4 – Distributions to Shareowners

The tax characteristics of distributions paid during the fiscal periods ended November 30, 2017, and November 30, 2016, were as follows:

 

November 30, 2017

November 30, 2016

Tax-exempt income

$404,401

$458,714

Taxable income

1,253

-

Capital gain¹

$-

$4,857

¹ Long-Term Capital Gain dividend designated at 20% rate pursuant to Section 852(b)(3) of the Internal Revenue Code.

Note 5 – Federal Income Taxes

The cost basis of investments for federal income tax purposes at November 30, 2017 was as follows:

Cost of investments

$16,643,861

Gross unrealized appreciation

283,128

Gross unrealized depreciation

(78,269)

Net unrealized appreciation

$204,859

As of November 30, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed tax exempt income

$3,051

Tax accumulated earnings

3,051

Accumulated capital losses

(62,746)

Unrealized appreciation

204,859

Total accumulated earnings

$145,164

As of November 30, 2017, the Fund had capital loss carryforwards as follows, subject to regulation.

 

Carryforward

Expiration

Short-term loss carryforward

$62,746

Unlimited

 

$62,746

 

Note 6 – Investments

During the period ended November 30, 2017, the Fund purchased $3,290,100 of securities and sold/matured $3,782,665 of securities.

Note 7 – Custodian

Under the agreement in place with Bank of New York Mellon, custody fees are reduced by credits for cash balances. Such reduction for the period ended November 30, 2017, amounted to $834.

Note 8 – Subsequent Events

In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

The Funds declared the payment of a distribution to be paid on December 29, 2017, to all shareowners of record on December 28, 2017, as follows:

Tax-Free Income

$0.00997

Dividend income distribution paid by the Funds was accrued daily.

There were no other events or transactions during the period that materially impacted the amounts or disclosures in the Funds' financial statements.

12 November 30, 2017 Annual Report

Report of Independent Registered Public Accounting Firm

To the Shareholders of the Idaho Tax-Exempt Fund and Board of Trustees of Saturna Investment Trust,

We have audited the accompanying statements of assets and liabilities of Idaho Tax-Exempt Fund, a series of the Saturna Investment Trust (the "Trust"), including the schedule of investments as of November 30, 2017, and the related statement of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2017, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Idaho Tax-Exempt Fund as of November 30, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Philadelphia, Pennsylvania
January 29, 2018

/s/ Tait, Weller & Baker LLP
Tait, Weller & Baker LLP

Annual Report November 30, 2017 13

Expenses (unaudited)

All mutual funds have operating expenses. As an Idaho Tax-Exempt Fund shareowner, you incur ongoing costs, including management fees and other fund expenses such as shareowner reports (like this one). Operating expenses, which are deducted from a fund's gross earnings, directly reduce the investment return of a fund. Mutual funds (unlike other financial investments) only report their results after deduction of operating expenses.

With the Idaho Tax-Exempt Fund, unlike many mutual funds, you do not incur sales charges (loads) on purchases, reinvested dividends, or other distributions. You do not incur redemption fees or exchange fees. You may incur fees related to extra services requested by you for your account, such as bank wires. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

Example

The following example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (June 1, 2017, to November 30, 2017).

Actual Expenses

The first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you have invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. The Fund may charge for extra services (such as domestic bank wires, international bank wires, or overnight courier delivery of redemption checks) rendered on request, which you may need to estimate to determine your total expenses.

Hypothetical Example for Comparison Purposes

The second line provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio (based on the last six months) and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareowner reports of other mutual funds. You may wish to add other fees that are not included in the expenses shown in the table, such as charges for extra services like bank wires.

Please note that the expenses shown are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees (note that the Idaho Tax-Exempt Fund does not charge any such transactional costs). Therefore, the Hypothetical line is useful in comparing ongoing costs only, and may not help you determine the relative total costs of owning different funds.

 

Beginning Account Value
[June 1, 2017]

Ending Account Value
[November 30, 2017]

Expenses Paid During Period¹

Annualized Expense Ratio

Actual

$1,000.00

$1,000.20

$3.30

0.66%

Hypothetical (5% return before expenses)

$1,000.00

$1,021.77

$3.34

0.66%

¹ Expenses are equal to Idaho Tax-Exempt Bond Fund's annualized expense ratio of 0.66% (based on the most recent semi-annual period of June 1, 2017 through November 30, 2017) multiplied by the average account value over the period multiplied by 183/365 (to reflect the one-half year period).

14 November 30, 2017 Annual Report

Trustees and Officers (unaudited)

Name, Address, and Age

Position(s) Held with Trust and Number of Saturna Fund Portfolios Overseen

Principal occupation(s) during past 5 years, including Directorships

Other Directorships held by Trustee

Independent Trustees

(photo omitted)

Marina E. Adshade (50)
1300 N. State Street
Bellingham WA 98225

Independent Trustee (since 2017);
Nine

Professor of Economics, University of British Columbia, Vancouver and Simon Fraser University;

Author

None

(photo omitted)

Ronald H. Fielding, MA, MBA, CFA (68)
1300 N. State Street
Bellingham WA 98225

Independent Trustee (since 2009);
Thirteen

Director, ICI Mutual Insurance Company

Amana Mutual Funds Trust

(photo omitted)

Gary A. Goldfogel, MD (59)
1300 N. State Street
Bellingham WA 98225

Chairman (since 2017);
Independent Trustee (since 1995);
Nine

Medical Examiner (pathologist)

Owner, Avocet Environmental Testing (laboratory)

None

(photo omitted)

Jim V. McKinney (56)
1300 N. State Street
Bellingham WA 98225

Independent Trustee (since 2017);
Nine

Executive Director, Common Threads Northwest; President/CEO, Apple Mountain LLC, consulting and development; US Army Foreign Area Officer – Political/Military Advisor to US Army Central; Senior Defense Official, Defense Attaché, US Embassy Slovenia

None

(photo omitted)

Sarah E.D. Rothenbuhler (49)
1300 N. State Street
Bellingham WA 98225

Independent Trustee (since 2017);
Nine

CEO, Birch Equipment (industrial rentals and sales)

None

Interested Trustee

(photo omitted)

Jane K. Carten, MBA (42)
1300 N. State Street
Bellingham WA 98225

President, Trustee (since 2017);
Nine

President and Director,
Saturna Capital Corporation

Vice President and Director,
Saturna Trust Company

President,
Saturna Brokerage Services

None

 

Annual Report November 30, 2017 15

Trustees and Officers (continued)   (unaudited)

Name, Address, and Age

Position(s) Held with Trust and Number of Saturna Fund Portfolios Overseen

Principal occupation(s) during past 5 years, including Directorships

Other Directorships held by Trustee

Officers Who Are Not Trustees

(photo omitted)

Phelps S. McIlvaine (64)
1300 N. State Street
Bellingham, WA 98225

Vice President
(since 1994);
N/A

Vice President, Saturna Capital Corporation

Director, Vice President, and former Treasurer Saturna Brokerage Services

N/A

(photo omitted)

Christopher R. Fankhauser (45)
1300 N. State Street
Bellingham, WA 98225

Treasurer¹
(since 2002);
N/A

Chief Operations Officer, Saturna Capital Corporation

Vice President and Chief Operations Officer, Saturna Brokerage Services

Director, Vice President, and Chief Operations Officer, Saturna Trust Company

N/A

(photo omitted)

Michael E. Lewis (56)
1300 N. State Street
Bellingham, WA 98225

Chief Compliance Officer¹
(since 2012);
N/A

Chief Compliance Officer, Saturna Capital, Saturna Trust Company, and Affiliated Funds

N/A

(photo omitted)

Jacob A. Stewart (37)
1300 N. State Street
Bellingham, WA 98225

Anti-Money Laundering Officer¹
(since 2015);
N/A

Anti-Money Laundering Officer, Saturna Capital Corporation, Saturna Brokerage Services

Chief Compliance Officer, Saturna Brokerage Services

Bank Secrecy Act Officer, Saturna Trust Company

N/A

(photo omitted)

Nicholas F. Kaiser, MBA, CFA (71)
1300 N. State Street
Bellingham WA 98225

Secretary
(since 2017);
N/A

Chairman and Director,
Saturna Capital Corporation

Chairman, Director, and President, Saturna Trust Company

Former Director, Saturna Brokerage Services

Amana Mutual Funds Trust

Term of Office: each Trustee serves for the lifetime of the Trust or until they die, resign, are removed, or not re-elected by the shareowners. Each officer serves a one-year term subject to annual reappointment by the Trustees.

The Trust's Statement of Additional Information, available without charge upon request by calling Saturna Capital at 1-800-728-8762 and on the Funds' website, www.idahotaxexemptfund.com, includes additional information about the Trustees.

On November 30, 2017 the Trustees, officers, and their related accounts as a group owned 12.87% of the outstanding shares of the Fund.

During the year ended November 30, 2017, the Independent Trustees were each paid by the Trust: (1) $2,000 annual retainer plus $1,000 per board meeting attended (in person or by phone), plus reimbursement of travel expenses; (2) $250 for committee meetings; and (3) $250 per quarter for serving as chariman of the board or any committee.

Mrs. Carten is an Interested Trustee by reason of her positions with the Trust's adviser (Saturna Capital Corporation) and underwriter (Saturna Brokerage Services), and is the primary manager of the Saturna Sustainable Equity Fund portfolio. She is paid by Saturna Capital a salary, plus a bonus for each month the Saturna Sustainable Equity Fund portfolio earns a 4 or 5 star rating from Morningstar (see www.saturna.com). The officers are paid by Saturna Capital and not the Trust. As of November 30, 2017, all Saturna Capital employees list above as officers owned shares in one or more of the Saturna Investment Trust funds, with Mrs. Carten owning (directly or indirectly) over $0.5 million.

¹ Holds the same postion with Amana Mututal Funds Trust

16 November 30, 2017 Annual Report

Renewal of Investment Advisory Contract (unaudited)

During their meeting of September 16, 2017, the Trustees of Saturna Investment Trust discussed the continuance of the Investment Advisory and Administration Agreement between Idaho Tax-Exempt Fund (the "Fund") and Saturna Capital Corporation ("Saturna"). In considering the renewal of the agreement with Saturna, the Trustees discussed the nature, extent, and quality of the services provided by Saturna to the Trust and the Fund. The Trustees discussed Saturna's experience, ability, and commitment to quality service through performing internally such functions as shareowner servicing, administration, accounting, marketing, and distribution – all in addition to investment management.

The Trustees took into consideration Saturna's continued avoidance of significant operational and compliance problems, plus its investments in infrastructure, information management systems, personnel, training, and investor education materials, all designed to provide high quality investor services and meet investor needs. They recognized Saturna's efforts to recruit and retain increasingly qualified, experienced, and specialized staff and improve the capital base on which Saturna operates, which the Trustees believe is important to the long-term success of the Fund. They appreciate Saturna's focus on investors and its efforts to avoid potential conflicts of interest.

The Trustees considered the investment performance of the Fund over time, including the Fund's average annual total returns relative to its benchmark for the one-, three-, five-, and ten-year periods, all as of July 31, 2017. The Trustees also considered comparative information published by Morningstar Inc. ("Morningstar"), an independent data service provider that, among other things, ranks mutual fund performance within categories comprised of similarly managed funds. The Trustees considered and discussed at length the Fund's performance relative to its Morningstar category for the one-, three-, five- and ten-year periods ended July 31, 2017. The Trustees also considered the Fund's Morningstar performance rankings (one through five stars) for the one-, three-, five- and ten-year periods, ended as of July 31, 2017, and the Fund's performance ranking relative to the Fund's category selected by Lipper, Inc. for the same period.

With respect to long-term (10-year) performance, the Trustees found that the average annual total return of the Fund for the 10-year period ended on July 31, 2017, was equal to its Morningstar category average. The Trustees considered the short- and medium-term performance of the Fund, noting that the Fund's average annual total return for the one-, three-, and five-year period ended on July 31, 2017 was below its Morningstar category average.

The Trustees noted the risk-averse investment style and other factors, which can affect the Fund's performance relative to its broader Morningstar category. The Trustees also noted certain differences between the Fund and the peer funds within its Morningstar category, including differences in investment strategies and asset size. The Trustees found that Saturna continued to manage the Fund in a manner that is designed to be risk-averse and attractive to long-term investors. The Trustees discussed and considered the efforts of Saturna to make additional resources available to assist in managing the Fund. The Trustees also considered Saturna's focus on improving investment performance without incurring materially higher levels of risk.

The Trustees also considered the performance and expenses of the Fund as compared to smaller group of funds with similar assets and investment objectives and strategies. The Trustees considered these comparative performance expense data, along with the comparative data published by Morningstar and the Fund's performance relative to its benchmark, to evaluate the Fund's performance over near-term and long-term time periods.

The Trustees also reviewed the fees and expenses of the Fund and considered the components of the Fund's operating expenses. The Trustees noted the steps that Saturna has undertaken to maintain competitive levels of Fund operating expenses. They noted the significant sponsorship of the Fund by Saturna evidenced, in part, by certain fees and expenses paid by Saturna out of its own resources and the Trustees appreciated Saturna's efforts help make the Fund more widely available and less expensive than would otherwise be the case without Saturna's efforts.

The Trustees recognized that the Fund remains relatively small and there have not been opportunities to consider economies of scale. The Trustees appreciated that Saturna continues to operate the Fund, often times at considerable costs to itself.

The Trustees reviewed Saturna's financial information and discussed the issue of Saturna's profitability as related to management and administration of the Trust. They discussed the reasonableness of Saturna's profitability as part of their evaluation of whether the advisory fees bear a reasonable relationship to the mix of services provided by Saturna, including the nature, extent, and quality of such services.

The Trustees considered and compared the fees charged by Saturna to other types of accounts, including non-mutual fund advisory clients. The Trustees noted the differences between the full range of services Saturna provides to the Fund, including investment advisory services, transfer agency services, administrative and other services, as compared to the investment advisory services provided to the other advisory accounts.

The Trustees considered potential benefits to Saturna's other business lines from acting as investment adviser to the Fund, but also recognized that Saturna's other business lines benefit the Fund. The Trustees considered whether there are other potential benefits to Saturna in continuing to manage the Fund and the Trustees found that there were no material benefits other than Saturna's receipt of advisory fees.

The Trustees concluded that the fees paid by the Fund to Saturna were, from an arm's-length bargaining perspective, reasonable and in the best interest of the Fund and its shareowners in light of the services provided, comparative performance, expense and advisory fee information, costs of services provided, profits to be realized, and benefits derived or to be derived by Saturna from its relationship with the Fund. Following this discussion, the Trustees unanimously agreed to renew the agreement of Idaho Tax-Exempt Fund with Saturna Capital Corporation.

Annual Report November 30, 2017 17

Except for this legend, this page has been left blank intentionally.

18 November 30, 2017 Annual Report

Availability of Portfolio Information

(1) The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.

(2) The Fund's Form N-Q is available on the SEC's website at
www.sec.gov and at www.idahotaxexemptfund.com.

(3) The Fund's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800/SEC-0330.

(4) The Fund makes a complete schedule of portfolio holdings after the end of each month available to investors at www.idahotaxexemptfund.com.

 

Availability of Proxy Voting Information

(1) A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (a) without charge, upon request, by calling Saturna Capital at 1-800-728-8762; (b) on the Fund's website at www.idahotaxexemptfund.com; and (c) on the SEC's website at www.sec.gov.

(2) Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (a) without charge, upon request, by calling Saturna Capital at 1-800-728-8762; (b) on the Fund's website at www.idahotaxexemptfund.com; and (c) on the SEC's website at www.sec.gov.

Householding Policy

To reduce expenses, we may mail only one copy of the Fund's prospectus, each annual and semi-annual report, and proxy statement when necessary, to those addresses shared by two or more accounts. If you wish to receive individual and/or more copies of these documents, please call us at 1-800-728-8762 or write to us at Saturna Capital/Idaho Tax-Exempt Fund, P.O. Box N, Bellingham, WA 98227. We will begin sending you individual copies 30 days after receiving your request.

If you are currently receiving multiple copies and wish to receive only one copy, please call us at 1-800-728-8762 or write to us at Saturna Capital/Idaho Tax-Exempt Fund, P.O. Box N, Bellingham, WA 98227. We will begin sending you a single copy with subsequent report mailings.

 

Privacy Statement

At Saturna Capital and the Idaho Tax-Exempt Fund, we understand the importance of maintaining the privacy of your financial information. We want to assure you that we protect the confidentiality of any personal information that you share with us. In addition, we do not sell information about our current or former customers.

In the course of our relationship, we gather certain nonpublic information about you, including your name, address, investment choices, and account information. We do not disclose your information to unaffiliated third parties unless it is necessary to process a transaction; service your account; deliver your account statements, shareholder reports and other information; or as required by law. When we disclose information to unaffiliated third parties, we require a contract to restrict the companies' use of customer information and from sharing or using it for any purposes other than performing the services for which they were required.

We may share information within the Saturna Capital family of companies in the course of informing you about products or services that may address your investing needs.

We maintain our own technology resources to minimize the need for any third party services, and restrict access to information within Saturna. We maintain physical, electronic, and procedural safeguards to guard your personal information. If you have any questions or concerns about the security or privacy of your information please call us at 1-800-728-8762.

Annual Report November 30, 2017 19

www.idahotaxexemptfund.com

This report is issued for the information of the shareowners of the Idaho Tax-Exempt Fund. It is not authorized for distribution to prospective investors unless it is accompanied or preceded by an effective prospectus relating to the securities of the Fund, a series of Saturna Investment Trust.

(logo omitted)
1300 N. State Street
Bellingham, WA 98225
www.saturna.com
1-800-728-8762

Saturna Brokerage Services, Distributor

Idaho Tax-Exempt Fund Semi-Annual Report May 31, 2018

IDAHO TAX-EXEMPT FUND

SEMI-ANNUAL REPORT

May 31, 2018


Performance Summary (as of June 30, 2018)

Average Annual Returns (before any taxes paid by shareowners)

 

1 Year

3 Year

5 Year

10 Year

15 Year

Expense Ratio

Idaho Tax-Exempt Fund

0.74%

1.65%

2.41%

3.19%

2.91%

0.67%¹

S&P Idaho Municipal Bond Index

1.49%

2.96%

4.10%

4.86%

4.77%

n/a

Muni Single State Intermediate Category Average²

0.51%

1.78%

2.45%

3.33%

3.11%

0.98%

Performance data quoted in this report represents past performance, is before any taxes payable by shareowners, and is no guarantee of future results. Current performance may be higher or lower than that stated herein. Performance current to the most recent month-end is available by calling toll-free 1-800-728-8762 or visiting www.idahotaxexemptfund.com. Average annual total returns are historical and include change in share value as well as reinvestment of dividends and capital gains, if any. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Please consider an investment's objectives, risks, charges, and expenses carefully before investing. To obtain this and other important information about the Idaho Tax-Exempt Fund in a prospectus or summary prospectus, ask your financial advisor, visit www.idahotaxexemptfund.com, or call toll free 1-800-728-8762. Please read the prospectus or summary prospectus carefully before investing.

A note about risk: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with the Fund, please see the Fund's prospectus or summary prospectus.

¹ By regulation, the expense ratio shown in this table is as stated in the Fund's most recent prospectus, which is dated March 28, 2018, and incorporates results for the fiscal year ended November 30, 2017. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

² Source: Morningstar June 30, 2018. Morningstar, Inc. is an independent fund performance monitor. Category returns are determined monthly from total returns by Morningstar, by category as determined by Morningstar. Category average expense ratios are determined by Morningstar from prospectus level data reported by funds in the category.

On the cover: Canoe resting on the shore at Redfish Lake.

2 May 31, 2018 Semi-Annual Report

(logo omitted)

Fellow Shareowners:

The 2017 Jobs and Tax Cut Act's $10,000 limit on the deductibility of property, income, and sales taxes could disproportionately affect high income earners in states with high overall tax burdens such as New York, California, New Jersey, and Illinois. These states experienced some of the highest emigration in the nation from 2010-2017. Eroding tax bases are damaging to a state's creditworthiness. On the other hand, high tax burden states may benefit from the US Supreme Court's Janus v. AFSCME decision against the non-consenting extraction of union member agency fees. The Janus decision now requires union members in non-right-to-work states to actively consent to paying union agency fees. In existing right-to-work states, the transition away from the previous mandatory collection of agency fees reduced union membership, agency fee revenue, and union political influence. As the balance of political power shifts towards state governments, state legislatures may eventually gain more control over wage and benefit negotiations and discretionary general fund spending, both credit positives. Nationally, state credit is weakening as spending on pensions, expanded health care, and education exceeded recent revenue growth.

As evidenced by one of the highest population growth rates, lowest state unemployment rates, highest personal income growth rates, and rising but affordable home prices, Idaho's tax code and business climate have proven to be attractive on a regional and national scale. With a well-balanced tax structure and established right-to-work laws, Idaho will continue to benefit from both the Jobs and Tax Cut Act and the Janus decision, as more neighbors in high overall tax burden states go looking for a less expensive place to live. Regionally, the five states of the Pacific Northwest continue to outperform the nation. Idaho, in particular, has rebuilt unassigned general fund assets and reserves, grown unrestricted net assets, adequately funded state pensions, and even held general fund expenditures slightly above inflation. Conning Municipal Credit Research's October May 2018 "State of the States Report," identifies Idaho as the third most creditworthy state.

US monetary policy tightening will be joined by European central bank policy normalization by the end of the year. This will likely dampen inflation expectations, push up short term rates, and flatten yield curves. Despite a recent uptick in short term US inflation expectations, the long-term yields remain anchored in place. Record high debt to GDP ratios, weak demographics, low productivity, acrimonious trade negotiations, rising borrowing costs, a strengthening US dollar, and wider credit spreads may act as disinflationary forces.

Without a lasting change in long-term inflation expectations, the current tightening cycle offers a valuable opportunity for income investors to allocate more assets to bonds as short and medium-term yields rise. As tax burdens inexorably rise to meet the ever-increasing demand for public services, the fundamental motive to own municipal bonds remains strong. Idaho offers discerning investors an exceptionally strong credit profile that is now available with higher yields.

Respectfully,

(photo omitted)

Jane Carten,
President

(photo omitted)

Phelps McIlvaine,
Vice President, Portfolio Manager

Semi-Annual Report May 31, 2018 3

Performance Summary

Average Annual Returns (as of May 31, 2018)

 

1 Year

5 Year

10 Year

Expense Ratio¹

Idaho Tax-Exempt Fund

0.39%

1.97%

3.09%

0.67%

S&P Idaho Municipal Bond Index

1.34%

3.53%

4.76%

n/a

Growth of $10,000

Idaho Tax-Exempt Fund Growth of $10,000

Comparison of any mutual fund to a market index must be made bearing in mind that the Index is unmanaged and expense-free. Conversely, the fund will (1) be actively managed; (2) have an objective other than mirroring the index, such as limiting risk; (3) bear transaction and other costs; (4) stand ready to buy and sell its securities to shareowners on a daily basis; and (5) provide a wide range of services. The graph compares $10,000 invested in the Fund on November 30, 2007, to an identical amount invested in the Standard & Poor's Idaho Municipal Bond Index, a broad-based index of Idaho municipal bond prices. The graph shows that an investment in the Fund would have risen to $13,553 versus $15,934 in the S&P Idaho Municipal Bond Index.

Past performance does not guarantee future results. The "Growth of $10,000" graph and "Average Annual Returns" performance table assume the reinvestment of dividends and capital gains. They do not reflect the deduction of taxes that a shareowner might pay on fund distributions or the redemption of fund shares.

¹ By regulation, the expense ratio for the Fund shown in this table is as stated in the Fund's most recent prospectus, which is dated March 28, 2018, and incorporates results for the fiscal year ended November 30, 2017. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different fiscal periods.

Fund Objective

Idaho Tax-Exempt Fund seeks to provide income free from federal income, federal alternative minimum, and Idaho state income taxes. Preservation of capital is a secondary objective.

Portfolio Diversification

% of Total Net Assets

 

General Obligation

55.7%

Idaho Tax-Exempt Fund Portfolio Diversification

State Education

18.0%

Real Estate

6.4%

Financial Services

5.8%

Transportation

3.0%

Medical – Hospitals

3.0%

Water Supply

2.6%

Pollution Control

1.9%

Municipal Leases

0.7%

Other assets (net of liabilities)

2.9%

 

Top 10 Holdings

% of Total Net Assets

Twin Falls Co ID SCD #414 Kimberly (5.00% due 09/15/2031)

4.7%

Boise ID ISD (5.00% due 08/01/2030)

4.2%

Boise State University ID Revenue (5.00% due 04/01/2032)

3.8%

Teton Co, ID SCD #401 Driggs (4.00% due 09/15/2035)

3.2%

Sun Valley ID GO (3.35% due 09/15/2037)

3.0%

University of Idaho Revenue (5.00% due 04/01/2032)

2.9%

Idaho Housing & Finance Rev (3.00% due 07/01/2036)

2.8%

Idaho State Building Authority (5.00% due 09/01/2032)

2.6%

Canyon Co ID SCD #134 Middleton (4.00% due 09/15/2028)

2.6%

Ada & Canyon Cos ID JSD #3 Kuna (4.00% due 08/15/2022)

2.5%

 

4 May 31, 2018 Semi-Annual Report

 

Schedule of Investments

As of May 31, 2018

Tax-Exempt Municipal Bonds – 97.1%

Coupon / Maturity

Face Amount

Market Value

Percentage of Assets

 

Financial Services

 
 

    Idaho Bond Bank

4.00% due 09/15/2019

$90,000

$90,610

0.5%

    Idaho Bond Bank

4.00% due 09/15/2032

405,000

429,203

2.5%

    Idaho Housing & Finance Rev

3.00% due 07/01/2036

475,000

466,716

2.8%

 
   

986,529

5.8%

 

General Obligation

 
 

    Ada & Canyon Cos ID JSD #2 Meridian

5.00% due 08/15/2032

325,000

376,116

2.2%

    Ada & Canyon Cos ID JSD #3 Kuna

4.00% due 08/15/2022

400,000

431,208

2.5%

    Ada & Canyon Cos ID JSD #3 Kuna

4.00% due 09/15/2027

100,000

111,301

0.7%

    Adams & Washington Cos ID JSD #432

4.00% due 08/15/2019

100,000

100,462

0.6%

    Bingham Co ID SCD #52 Snake HS

4.00% due 09/01/2020

250,000

251,460

1.5%

    Bingham Co ID SCD #52 Snake HS

4.00% due 09/01/2027

200,000

201,168

1.2%

    Boise ID ISD

5.00% due 08/01/2030

600,000

712,002

4.2%

    Bonneville & Bingham Cos JSD #93

5.00% due 09/15/2031

200,000

221,800

1.3%

    Bonneville & Bingham Cos JSD #93

5.00% due 09/15/2029

250,000

277,790

1.6%

    Bonneville Co ID SCD #91

4.00% due 09/15/2026

15,000

16,154

0.1%

    Bonneville Co ID SCD #91

4.00% due 09/15/2026

35,000

37,088

0.2%

    Bonneville Co ID SCD #91

3.75% due 09/15/2032

285,000

292,709

1.7%

    Boundary County ID SCD #101

4.00% due 08/15/2021

240,000

241,166

1.4%

    Canyon Co ID SCD #134 Middleton

4.00% due 09/15/2028

400,000

437,748

2.6%

    Canyon Co ID SCD #135 Notus

3.25% due 09/15/2031

290,000

296,995

1.8%

    Canyon Co ID SCD #135 Notus

3.25% due 09/15/2032

170,000

173,650

1.0%

    Canyon Co ID SCD #139 Vallivue

5.00% due 09/15/2024

260,000

290,365

1.7%

    Cariboo Franklin Bannock JSD #148

3.25% due 09/15/2035

300,000

303,354

1.8%

    Cassia Oneida Twin Falls JSD #151

3.375% due 09/15/2034

160,000

161,395

1.0%

    Kootenai Co ID SCD # 271 UNREF

4.00% due 09/15/2025

125,000

133,560

0.8%

    Kootenai Co ID SCD #271 PREREF

4.00% due 09/15/2025

40,000

42,993

0.3%

    Kootenai Co ID SCD #273

4.00% due 08/15/2031

265,000

287,750

1.7%

    Kootenai-Shoshone ID Area Libraries

4.25% due 08/01/2021

220,000

220,898

1.3%

    Latah Co ID SCD #281 Moscow Ser B

4.00% due 08/15/2027

100,000

109,255

0.6%

    Latah Co ID SCD #281 Moscow Ser B

4.00% due 08/15/2028

200,000

217,994

1.3%

    Latah Nez Perce Clearwater JSD #283

4.50% due 08/15/2027

190,000

191,087

1.1%

    Meridian Co. Id. SDC #321

5.00% due 09/15/2037

250,000

291,113

1.7%

    Sun Valley ID GO

3.35% due 09/15/2037

500,000

505,820

3.0%

    Teton Co, ID SCD #401 Driggs

4.00% due 09/15/2035

500,000

539,450

3.2%

    Twin Falls & Gooding Cos JSD #412 N

4.125% due 09/01/2023

50,000

53,481

0.3%

    Twin Falls & Gooding Cos JSD #412 R

4.125% due 09/01/2023

50,000

53,269

0.3%

    Twin Falls Co ID SCD #411

4.00% due 09/15/2027

170,000

185,247

1.1%

    Twin Falls Co ID SCD #411

4.25% due 09/15/2030

300,000

327,594

1.9%

    Twin Falls Co ID SCD #411

4.75% due 09/15/2039

200,000

229,504

1.4%

    Twin Falls Co ID SCD #411 Series A

4.25% due 09/15/2031

100,000

108,775

0.6%

    Twin Falls Co ID SCD #414 Kimberly

5.00% due 09/15/2031

670,000

789,622

4.7%

    Valley & Adams Cos ID JSD #421

3.00% due 08/01/2026

220,000

225,014

1.3%

 
   

9,446,357

55.7%

 

Medical/Hospitals

 
 

    Idaho Health Rev St. Luke's

6.75% due 11/01/2037

200,000

203,980

1.2%

    Idaho Health Rev Trinity Health Grp

3.25% due 12/01/2028

300,000

304,131

1.8%

 
 

 

508,111

3.0%

 

Continued on next page.

 

The accompanying notes are an integral part of these financial statements.

Semi-Annual Report May 31, 2018 5

 

Schedule of Investments

As of May 31, 2018

Tax-Exempt Municipal Bonds – 97.1%

Coupon / Maturity

Face Amount

Market Value

Percentage of Assets

 

Municipal Leases

 
 

    Nez Perce County ID COPS

4.50% due 02/01/2021

$115,000

$115,260

0.7%

 
   

115,260

0.7%

 

Pollution Control

 
 

    Idaho Bond Bank

4.00% due 09/15/2033

135,000

146,127

0.9%

    Idaho Bond Bank Authority

4.00% due 09/15/2032

130,000

141,866

0.8%

    Idaho Bond Bank Authority

4.30% due 09/01/2022

20,000

20,040

0.1%

    Idaho Bond Bank Authority Undefease

4.125% due 09/15/2023

20,000

20,039

0.1%

 
   

328,072

1.9%

 

Real Estate

 
 

    Boise City Urban Renewal Lease Rev

5.00% due 12/15/2032

300,000

338,598

2.0%

    Idaho State Building Authority

5.00% due 09/01/2031

200,000

220,506

1.3%

    Idaho State Building Authority

5.00% due 09/01/2032

400,000

440,672

2.6%

    Post Falls ID LID SPA

5.00% due 05/01/2021

90,000

90,432

0.5%

 
   

1,090,208

6.4%

 

State Education

 
 

    Boise State University ID Revenue

5.00% due 04/01/2028

125,000

143,561

0.8%

    Boise State University ID Revenue

5.00% due 04/01/2032

560,000

645,165

3.8%

    Idaho State University

4.00% due 04/01/2027

170,000

184,117

1.1%

    Idaho State University

4.00% due 04/01/2030

245,000

260,560

1.5%

    Idaho State University Revenue

3.00% due 04/01/2031

250,000

246,582

1.5%

    Idaho State University Revenue

3.00% due 04/01/2032

160,000

156,970

0.9%

    Nez Perce CO ISD #1 Lewiston

5.00% due 09/15/2029

330,000

389,532

2.3%

    North Idaho College Dormitory Rev

4.00% due 11/01/2030

285,000

305,563

1.8%

    University of Idaho Revenue

5.00% due 04/01/2028

225,000

236,617

1.4%

    University of Idaho Revenue

5.00% due 04/01/2032

455,000

494,498

2.9%

 
   

3,063,165

18.0%

 

Continued on next page.

 

Bond Quality Diversification

% of Total Net Assets

 

Rated "AAA"

36.7%

Idaho Tax-Exempt Fund Bond Quality Diversification

Rated "AA+"

18.7%

Rated "AA"

16.6%

Rated "AA-"

2.8%

Rated "A+"

15.8%

Rated "A"

4.6%

Rated "A-"

1.2%

Not rated

0.7%

Other assets (net of liabilities)

2.9%

Credit ratings are the lesser of S&P Global Ratings or Moody's Investors Service. If neither S&P nor Moody's rate a particular security, that security is categorized as not rated (except for US Treasury securities and securities issued or backed by US agencies which inherit the credit rating for the US government). Ratings range from AAA (highest) to D (lowest). Bonds rated BBB or above are considered investment grade. Credit ratings BB and below are lower-rated securities (junk bonds). Ratings apply to the credit worthiness of the issuers of the underlying securities and not the fund or its shares. Ratings may be subject to change.

 

6 May 31, 2018 Semi-Annual Report The accompanying notes are an integral part of these financial statements.

 

Schedule of Investments

As of May 31, 2018

Tax-Exempt Municipal Bonds – 97.1%

Coupon / Maturity

Face Amount

Market Value

Percentage of Assets

 

Transportation

 
 

    Boise ID Airport Park Fac Rev

3.00% due 09/01/2028

210,000

210,899

1.2%

    Idaho Housing & Finance Rev

4.60% due 07/15/2023

250,000

250,897

1.5%

    Idaho Housing & Finance Rev

5.00% due 07/15/2027

50,000

51,784

0.3%

 
   

513,580

3.0%

 

Water Supply

 
 

    Chubbuck ID Water Revenue

4.00% due 09/01/2025

155,000

162,933

1.0%

    Payette Lakes Rec Wtr & Swr Rev

4.00% due 08/01/2034

$255,000

268,931

1.6%

 
   

431,864

2.6%

 
 

Total investments

(Cost $16,398,287)

 

$16,483,146

97.1%

Other assets (net of liabilities)

   

497,989

2.9%

Total net assets

   

$16,981,135

100.0%

 

The accompanying notes are an integral part of these financial statements.

Semi-Annual Report May 31, 2018 7

 

Statement of Assets and Liabilities

As of May 31, 2018

 

Assets

    Investments in securities, at value
    (Cost $16,398,287)

$16,483,146

    Cash

361,749

    Interest receivable

156,734

    Receivable for security sales

5,000

    Prepaid expenses

2,162

    Insurance reserve premium

801

        Total assets

17,009,592

Liabilities

    Payable for fund shares redeemed

10,635

    Accrued advisory fees

7,181

    Distributions payable

5,111

    Accrued audit expenses

2,042

    Accrued trustee expenses

1,901

    Accrued other expenses

1,086

    Accrued Chief Compliance Officer expenses

463

    Accrued retirement plan custodial fees

38

        Total liabilities

28,457

Net assets

$16,981,135

 

Analysis of net assets

    Paid-in capital (unlimited shares authorized, without par value)

$16,940,980

    Undistributed tax-exempt income

3,051

    Accumulated net realized loss

(47,755)

    Unrealized net appreciation on investments

84,859

Net assets applicable to Fund shares outstanding

$16,981,135

 

Fund shares outstanding

3,183,265

 

Net asset value, offering and redemption price

$5.33

 

Statement of Operations

Period ended May 31, 2018

 

Investment income

    Interest income

$245,716

        Total investment income

245,716

Expenses

    Investment adviser fees

42,474

    Audit fees

4,766

    Trustee fees

2,156

    Chief Compliance Officer expenses

1,983

    Filing and registration fees

1,395

    Legal fees

1,384

    Printing and postage

1,262

    Other expenses

1,180

    Transfer agent fees

886

    Custodian fees

406

    Retirement plan custodial fees

40

        Total gross expenses

57,932

    Less transfer agent fees waived

(406)

    Less custodian fee credits

(886)

        Net expenses

56,640

Net investment income

$189,076

 
 

Net realized gain from investments

$14,991

Net decrease in unrealized appreciation on investments

(120,000)

Net loss on investments

$(105,009)

 

Net increase in net assets resulting from operations

$84,067

 

8 May 31, 2018 Semi-Annual Report The accompanying notes are an integral part of these financial statements.

 

Statements of Changes of Net Assets

Period ended May 31, 2018

Year ended November 30, 2017

Decrease in net assets from operations

From operations

    Net investment income

$189,076

$405,654

    Net realized gain (loss) on investment

14,991

(62,746)

    Net increase (decrease) in unrealized appreciation

(120,000)

304,617

            Net increase in net assets

84,067

647,525

Distributions to shareholders from

    Net investment income

(189,076)

(405,654)

            Total distributions

(189,076)

(405,654)

Capital share transactions

    Proceeds from sales of shares

2,074,108

2,980,462

    Value of shares issued in reinvestment of dividends

158,339

340,869

    Cost of shares redeemed

(2,620,514)

(4,086,060)

            Total capital share transactions

(388,067)

(764,729)

Total decrease in net assets

(493,076)

(522,858)

 

Net assets

Beginning of period

17,474,211

17,997,069

End of period

16,981,135

17,474,211

 

Undistributed tax-exempt income

$3,051

$3,051

 

Shares of the Fund sold and redeemed

    Number of shares sold

389,168

555,996

    Number of shares issued in reinvestment of dividends

29,685

63,317

    Number of shares redeemed

(489,708)

(766,934)

Net decrease in number of shares outstanding

(70,855)

(147,621)

 

Financial Highlights

For period ended

For the year ended November 30,

Selected data per share of outstanding capital stock throughout each period:

May 31, 2018

2017

2016

2015

2014

2013

Net asset value at beginning of period

$5.37

$5.29

$5.48

$5.51

$5.36

$5.68

Income from investment operations

    Net investment income

0.06

0.13

0.14

0.15

0.16

0.16

    Net gains (losses) on securities (both realized and unrealized)

(0.04)

0.08

(0.19)

(0.03)

0.15

(0.31)

Total from investment operations

0.02

0.21

(0.05)

0.12

0.31

(0.15)

Less distributions

    Dividends (from net investment income)

(0.06)

(0.13)

(0.14)

(0.15)

(0.16)

(0.16)

    Distributions (from capital gains)

-

-

0.00A

0.00A

0.00A

(0.01)

Total distributions

(0.06)

(0.13)

(0.14)

(0.15)

(0.16)

(0.17)

 

Net asset value at end of period

$5.33

$5.37

$5.29

$5.48

$5.51

$5.36

   

Total returnB

0.39%

3.90%

(0.95)%

2.21%

5.83%

(2.70)%

 

Ratios / supplemental data

Net assets ($000), end of period

$16,981

$17,474

$17,997

$17,420

$16,721

$15,492

Ratio of expenses to average net assets

 

    Before transfer agent fee waiver and custodian fee creditsC

0.68%

0.67%

0.67%

0.67%

0.65%

0.66%

    After transfer agent fee waiverC

0.67%

0.66%

0.66%

0.66%

0.63%

0.64%

    After transfer agent fee waiver and custodian fee creditsC

0.67%

0.65%

0.65%

0.66%

0.63%

0.64%

Ratio of net investment income after fee waiver and custodian credits to average net assetsC

2.23%

2.33%

2.54%

2.66%

2.85%

2.88%

Portfolio turnover rateB

10%

20%

15%

7%

5%

9%

A Amount is less than $0.01
B Not annualized for periods less than one year.
C Annualized for periods less than one year.

 

The accompanying notes are an integral part of these financial statements.

Semi-Annual Report May 31, 2018 9

Notes To Financial Statements

Note 1 – Organization

Saturna Investment Trust (the "Trust") was established under Washington State Law as a business trust on February 20, 1987. The Trust is registered as an open-end, diversified management company under the Investment Company Act of 1940, as amended. In addition to Idaho Tax-Exempt Fund (the "Fund"), eight portfolios have been created to date: Sextant Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Core Fund, Sextant Global High Income Fund, Sextant Growth Fund, Sextant International Fund, Saturna Sustainable Equity Fund, and Saturna Sustainable Bond Fund (each, a "Fund", and collectively, the "Funds"). The other eight portfolios are distributed through separate prospectuses and the results of those Funds are contained in separate reports.

The Idaho Tax-Exempt Fund was first authorized to sell shares of beneficial interest on September 4, 1987.

The Fund is an investment company and accordingly follows the investment accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 "Financial Services – Investment Companies."

Investment risks:

The value of Fund shares rises and falls as the value of the bonds in which the Fund invests goes up and down. The risks inherent in the Fund depend primarily on the terms and quality of the obligations in the Fund's portfolio, as well as on market conditions. When interest rates rise, bond prices fall. When interest rates fall, bond prices go up. Bonds with longer maturities, such as those held by the Fund, usually are more sensitive to interest rate changes than bonds with shorter maturities. Only consider investing in the Fund if you are willing to accept the risk that you may lose money.

The Fund entails credit risk, which is the possibility that a bond will not be able to pay interest or principal when due. If the credit quality of a bond is perceived to decline, investors will demand a higher yield, which means a lower price on that bond to compensate for the higher level of risk. If a security held by the Fund defaults on payment of interest or principal, the Fund's income, ability to preserve capital, and liquidity would all be adversely affected.

Fund investments are susceptible to factors adversely affecting Idaho, such as political, economic, and financial trends unique to this relatively small state. Investing only in Idaho bonds means that the Fund's investments are more concentrated than other mutual funds, and relatively few bond price changes may lead to underperformance compared to investments selected in greater number and/or from a wider universe.

The Fund is vulnerable to income 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.

Note 2 — Unaudited Information

The information in this interim report has not been subjected to independent audit.

Note 3 — Significant Accounting Policies

The following is a summary of the significant accounting policies, in conformity with accounting principles generally accepted in the United States of America, which are consistently followed by the Fund in the preparation of its financial statements.

Security valuation:

Debt securities are valued using bid-side valuations provided by an independent service. The service determines valuations using factors such as yields or prices of bonds of comparable quality, type of issue, coupon maturity, ratings, trading activity, and general market conditions. In the absence of a valuation from an independent service for a security, a fair value for such security is determined in good faith by or under the direction of the Board of Trustees.

Security transactions are recorded on trade date. Realized gains and losses on sales of securities are recorded on the identified cost basis.

Share valuation:

The net asset value ("NAV") per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund's shares are not priced or traded on days the New York Stock Exchange is closed. The NAV is the offering and redemption price per share.

The Trustees have adopted certain policies and procedures with respect to frequent trading of Fund shares. The Fund is intended for long-term investment and does not permit rapid trading of its shares. The Fund cannot always identify all intermediaries, or detect or prevent trading that violates the Frequent Trading Policy through intermediaries or omnibus accounts.

Fair value measurements:

Accounting Standards Codification (ASC) 820 establishes a three-tier framework for measuring fair value based on a hierarchy of inputs. The hierarchy distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's investments and are summarized below.

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access.

Level 2 – Observable inputs other than quoted prices in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.

Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Trust's own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

10 May 31, 2018 Semi-Annual Report

Notes To Financial Statements (continued)

The following table is a summary of the inputs used as of May 31, 2018, in valuing the Fund's investments carried at value.

Fair Value Inputs

Level 1
Quoted Price

Level 2
Significant Observable Input

Level 3
Significant Unobservable Input

Total

 

Municipal Bonds¹

$-

$16,483,146

$-

$16,483,146

Total Assets

$-

$16,483,146

$-

$16,483,146

¹ See Schedule of Investments for industry breakout.

During the period ended May 31, 2018, no Fund had transfers between Level 1, Level 2 or Level 3.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

Income taxes:

The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareowners sufficient to relieve it from all or substantially all federal income taxes. As the Fund intends to meet requirements for tax-exempt income dividends, and the requirements of the Idaho Department of Revenue for income dividends exempt from Idaho state income tax, no income tax provisions are required.

The Fund recognizes the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. Management has analyzed the Fund's tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2015 – 2017), or expected to be taken in the Fund's 2018 tax return. The Fund identifies its major tax jurisdiction as US federal and foreign jurisdictions where the Fund makes significant investments; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

Reclassification of capital accounts:

Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting.

As of May 31, 2018, there were no reclassifications to the capital accounts.

Distributions to shareowners:

The Fund's dividends to shareowners from net investment income are paid daily and distributed on the last business day of each month.

Distributions of capital gains, if any, are made at least annually and as required to comply with federal excise tax requirements. Distributions to shareowners are determined in accordance with income tax regulations and are recorded on the ex-dividend date. Dividends are paid in shares of the Fund, at the net asset value on the payable date. Shareowners may elect to take distributions in cash if they total $10 or more.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

Other:

Interest income is recognized on an accrual basis. Premiums on securities purchased are amortized and discounts are accreted over the lives of the respective securities.

Semi-Annual Report May 31, 2018 11

Notes To Financial Statements (continued)

Note 4 – Transactions with Affiliated Persons

Under a contract approved by shareowners on September 28, 1995 and reviewed annually by the Board of Trustees, Saturna Capital Corporation provides investment advisory services and certain other administrative and distribution services to conduct the Fund's business. For such services, the Fund pays an annual fee equal to 0.50% of its average daily net assets. For the fiscal period ended May 31, 2018, the Fund incurred advisory fee expenses of $42,474. Expenses incurred by the Trust on behalf of the Fund (e.g., legal fees) are allocated to the Fund and the other Funds of the Trust on the basis of relative daily average net assets.

Saturna Capital also acts as transfer agent for the Fund, for which it did not receive any compensation during the fiscal period ended May 31, 2018. Saturna Capital has voluntarily elected to waive the transfer agent fee through November 30, 2018, to reduce the Fund's operating expenses. Such fees, had they been charged, would have totaled $886.

Saturna Brokerage Services, Inc. ("SBS"), a discount brokerage and subsidiary of Saturna Capital, is registered as a broker-dealer and acts as distributor for the Fund.

Saturna Trust Company ("STC"), a subsidiary of Saturna Capital, acts as a retirement plan custodian for Fund shareowners. For the fiscal period ended May 31, 2018, the Fund incurred retirement plan custodial fees of $40.

Mrs. Jane Carten serves as a trustee and president of the Trust. She is also a director and the president of Saturna Capital and Saturna Trust Company. She is not compensated by the Trust. For the period ended May 31, 2018, the Trust paid trustee compensation expenses of $17,000 which is included in the $22,074 of total expenses paid for the independent Trustees. The Fund paid $1,969 of these total expenses.

The officers of the Trust are paid by Saturna Capital, not the Trust, except the Chief Compliance Officer, who is partially compensated by the Trust. For the period ended May 31, 2018, the Fund paid $2,218 in compensation for such services.

On May 31, 2018, the trustees, officers, and their immediate families as a group directly or indirectly owned 13.32% of the outstanding shares of the Fund.

Note 5 – Distributions to Shareowners

The tax characteristics of distributions paid during the fiscal period ended May 31, 2018, and the fiscal year ended November 30, 2017, were as follows:

 

May 31, 2018

November 30, 2017

Tax-exempt income

$189,076

$404,401

Taxable income

-

1,253

Note 6 – Federal Income Taxes

The cost basis of investments for federal income tax purposes at May 31, 2018 was as follows:

Cost of investments

$16,398,287

Gross unrealized appreciation

197,625

Gross unrealized depreciation

(112,766)

Net unrealized appreciation

$84,859

As of November 30, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed tax exempt income

$3,051

Tax accumulated earnings

3,051

Accumulated capital loss

(62,746)

Unrealized appreciation

204,859

Total accumulated earnings

$145,164

Note 7 – Investments

During the period ended May 31, 2018, the Fund purchased $1,709,064 of securities and sold/matur ed $1,889,350 of securities.

Note 8 – Custodian

Under the agreement in place with Bank of New York Mellon, custody fees are reduced by credits for cash balances. Such reduction for the period ended May 31, 2018, amounted to $406.

Note 9 – Subsequent Events

In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. There were no events or transactions during the period that materially impacted the amounts or disclosures in the Funds' financial statements.

12 May 31, 2018 Semi-Annual Report

Expenses

All mutual funds have operating expenses. As an Idaho Tax-Exempt Fund shareowner, you incur ongoing costs, including management fees and other fund expenses such as shareowner reports (like this one). Operating expenses, which are deducted from a fund's gross earnings, directly reduce the investment return of a fund. Mutual funds (unlike other financial investments) only report their results after deduction of operating expenses.

With the Idaho Tax-Exempt Fund, unlike many mutual funds, you do not incur sales charges (loads) on purchases, reinvested dividends, or other distributions. You do not incur redemption fees or exchange fees. You may incur fees related to extra services requested by you for your account, such as bank wires. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

Example

The following example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (December 1, 2017, to May 31, 2018 ).

Actual Expenses

The first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you have invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. The Fund may charge for extra services (such as domestic bank wires, international bank wires, or overnight courier delivery of redemption checks) rendered on request, which you may need to estimate to determine your total expenses.

Hypothetical Example for Comparison Purposes

The second line provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio (based on the last six months) and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareowner reports of other mutual funds. You may wish to add other fees that are not included in the expenses shown in the table, such as charges for extra services like bank wires.

Please note that the expenses shown are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees (note that the Idaho Tax-Exempt Fund does not charge any such transactional costs). Therefore, the "Hypothetical" line is useful in comparing ongoing costs only, and may not help you determine the relative total costs of owning different funds.

 

Beginning Account Value
[December 1, 2017]

Ending Account Value
[May 31, 2018]

Expenses Paid During Period1

Annualized Expense Ratio

Actual

$1,000.00

$1,003.60

$3.33

0.67%

Hypothetical (5% return before expenses)

$1,000.00

$1,021.61

$3.36

0.67%

¹ Expenses are equal to Idaho Tax-Exempt Bond Fund's annualized expense ratio of 0.67% (based on the most recent semi-annual period of December 1, 2017 through May 31, 2018) multiplied by the average account value over the period multiplied by 182/365 (to reflect the one-half year period).

 

Semi-Annual Report May 31, 2018 13

Except for this legend, this page has been left blank intentionally.

14 May 31, 2018 Semi-Annual Report

Availability of Portfolio Information

(1) The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.

(2) The Fund's Form N-Q is available on the SEC's website at
www.sec.gov and at www.idahotaxexemptfund.com.

(3) The Fund's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800/SEC-0330.

(4) The Fund makes a complete schedule of portfolio holdings after the end of each month available to investors at
www.idahotaxexemptfund.com.

 

Availability of Proxy Voting Information

(1) A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (a) without charge, upon request, by calling Saturna Capital at 1-800-728-8762; (b) on the Fund's website at www. idahotaxexemptfund.com; and (c) on the SEC's website at www.sec.gov.

(2) Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (a) without charge, upon request, by calling Saturna Capital at 1-800-728-8762; (b) on the Fund's website at www.idahotaxexemptfund.com; and (c) on the SEC's website at www.sec.gov.

Householding Policy

To reduce expenses, we may mail only one copy of the Fund's prospectus, each annual and semi-annual report, and proxy statement when necessary, to those addresses shared by two or more accounts. If you wish to receive individual and/or more copies of these documents, please call us at 1-800-728-8762 or write to us at Saturna Capital/Idaho Tax-Exempt Fund, P.O. Box N, Bellingham, WA 98227. We will begin sending you individual copies 30 days after receiving your request.

If you are currently receiving multiple copies and wish to receive only one copy, please call us at 1-800-728-8762 or write to us at Saturna Capital/Idaho Tax-Exempt Fund, P.O. Box N, Bellingham, WA 98227. We will begin sending you a single copy with subsequent report mailings.

 

Privacy Statement

At Saturna Capital and the Idaho Tax-Exempt Fund, we understand the importance of maintaining the privacy of your financial information. We want to assure you that we protect the confidentiality of any personal information that you share with us. In addition, we do not sell information about our current or former customers.

In the course of our relationship, we gather certain nonpublic information about you, including your name, address, investment choices, and account information. We do not disclose your information to unaffiliated third parties unless it is necessary to process a transaction; service your account; deliver your account statements, shareholder reports and other information; or as required by law. When we disclose information to unaffiliated third parties, we require a contract to restrict the companies' use of customer information and from sharing or using it for any purposes other than performing the services for which they were required.

We may share information within the Saturna Capital family of companies in the course of informing you about products or services that may address your investing needs.

We maintain our own technology resources to minimize the need for any third party services, and restrict access to information within Saturna. We maintain physical, electronic, and procedural safeguards to guard your personal information. If you have any questions or concerns about the security or privacy of your information please call us at 1-800-728-8762.

Semi-Annual Report May 31, 2018 15

www.idahotaxexemptfund.com

This report is issued for the information of the shareowners of the Idaho Tax-Exempt Fund. It is not authorized for distribution to prospective investors unless it is accompanied or preceded by an effective prospectus relating to the securities of the Fund, a series of Saturna Investment Trust.

(logo omitted)
1300 N. State Street
Bellingham, WA 98225
www.saturna.com
1-800-728-8762

Saturna Brokerage Services, Distributor


#   #   #

Saturna Investment Trust Statement of Additional Information

Statement of Additional Information

March 28, 2018

Sextant Mutual Funds

(logo omitted)

Sextant Growth

 

Sextant International

 

Sextant Core

Investor: SSGFX
Z: SGZFX

Investor: SSIFX
Z: SIZFX

SCORX

 

Sextant Short-Term Bond

 

Sextant Bond Income

 

Sextant Global High Income

STBFX

SBIFX

SGHIX

 

Saturna Sustainable Funds

(logo omitted)

 

Idaho Tax-Exempt Fund

(logo omitted)

NITEX

Sustainable Equity

SEEFX

Sustainable Bond

SEBFX

SATURNA INVESTMENT TRUST

1300 N. State Street
Bellingham, Washington 98225

360-734-9900
800-728-8762

 

 

The Sextant Growth Fund, Sextant International Fund, Sextant Core Fund, Sextant Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Global High Income Fund, Saturna Sustainable Equity Fund, Saturna Sustainable Bond Fund, and Idaho Tax-Exempt Fund (each a "Fund" and, collectively, the "Funds") are series of Saturna Investment Trust (the "Trust").

This Statement of Additional Information ("SAI") is not a Prospectus. It merely furnishes information concerning the Funds that is not included in the Funds' Prospectuses. It should be read in conjunction with the Prospectuses.

The Trust's Annual Report to shareowners of the Funds dated November 30, 2017, accompanying notes, and Report of Independent Registered Public Accounting Firm appearing in the Annual Report are incorporated by reference and made a part of this SAI.

You may obtain Prospectuses or Summary Prospectuses dated March 28, 2018, and shareowner Annual and Semi-Annual Reports without charge by writing to the address shown above, calling toll-free to 800-728-8762, and at www.saturna.com.


Table of Contents

Page

History of the Funds

2

Fund Descriptions, Investments, and Risks

2

Fundamental Policies

10

Management of the Funds

14

Control Persons and Principal Holders of Securities

19

Investment Advisory and Other Services

21

Portfolio Managers

23

Brokerage Allocation

25

Capital Stock

26

Purchase, Redemption, and Pricing of Shares

26

Taxation of the Funds

26

Underwriters

27

Financial Statements

27

History of the Funds

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. In connection with the formation of the Sextant Funds, the Trust's name was changed to Saturna Investment Trust on September 28, 1995.

The Trust has nine separate Funds organized into three fund families:

Sextant Mutual Funds

  • Sextant Growth Fund
    (commenced operation as an equity fund December 30, 1990, known as Northwest Growth Fund until September 28, 1995, when the investment objective of only Northwest stocks was changed),
  • Sextant International Fund
    (commenced operation September 28, 1995),
  • Sextant Core Fund
    (commenced operation March 30, 2007),
  • Sextant Short-Term Bond Fund
    (commenced operation September 28, 1995),
  • Sextant Bond Income Fund
    (commenced operation March 1, 1993, known as Washington Tax-Exempt Fund until September 28, 1995, when the investment objective of only Washington State municipal bonds was changed), and
  • Sextant Global High Income Fund
    (commenced operation March 30, 2012);

Sextant Growth and Sextant International Funds Z Shares commenced operations June 2, 2017.

Saturna Sustainable Funds

  • Saturna Sustainable Equity Fund
    (commenced operation March 27, 2015),
  • Saturna Sustainable Bond Fund
    (commenced operation March 27, 2015);

Idaho Tax-Exempt Fund

  • Idaho Tax-Exempt Fund
    (commenced operation September 4, 1987).

Fund Descriptions, Investments, and Risks

Classification

Saturna Investment Trust is an open-end management investment company. It is a series trust that presently offers six Sextant Funds, two Saturna Sustainable Funds, and the Idaho Tax-Exempt Fund to investors.

Investment Strategies

The Prospectuses and Summary Prospectuses describe the principal investment strategies and principal risks of those strategies.

2 Statement of Additional Information March 28, 2018

Sextant Mutual Funds

Sextant Growth Fund seeks long-term growth by investing primarily in common stocks of US companies. It may invest in securities convertible into common stocks and preferred stocks, and in other securities that are suited to the Fund's investment objectives. The Fund ordinarily does not invest in nonconvertible debt securities.

The Growth Fund principally invests in securities of companies with market capitalizations of greater than $1 billion. Although the Fund invests principally in securities of US issuers, it may invest up to 5% of its total net assets (valued at the time of investment) in foreign equity securities traded in or outside the US.

Sextant International Fund invests at least 65% of its total net assets (taken at market value at time of investment) in companies with their headquarters and at least half of their assets and earnings outside the US.

The International Fund principally invests in securities of companies with market capitalizations of greater than $1 billion. To reduce risk, the International Fund follows a value investment style and favors equities of larger, more seasoned companies.

The Fund diversifies its investments among several countries, ordinarily investing in securities of at least three countries outside the US. 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 outside the United States. The adviser considers the relative political and economic stability of a company's countries of operation in evaluating the potential rewards and risks of an investment opportunity. The Fund may invest in securities traded in mature markets (generally, the countries belonging to the Organisation for Economic Co-operation and Development), in less developed markets (for example, Mexico), and in emerging markets (for example, Peru).

The Fund may invest in securities denominated in various currencies. Accordingly, a change in the value of such currency against the US dollar results in a corresponding change in the US 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.

Sextant Core Fund seeks long-term capital appreciation and capital preservation. The Fund invests in a mix of common stocks and other equity securities (principally of companies with market capitalizations of greater than $5 billion), plus bonds and other debt securities including short-term (money market) instruments. The stocks in the Core Fund are generally issues included in the Sextant Growth and International Funds. The Core Fund's bond issues are selected using the same investment parameters that apply to Bond Income and Short-Term Bond Funds. Under normal circumstances, the Core Fund invests approximately 40% of its net assets in equities of US companies, 20% in foreign equities, and 40% in investment grade fixed income securities (those rated Baa or higher, including government and convertible bonds) including money market instruments and cash (see Bond investments below). To reduce risk, the Core Fund follows a value investment style, favoring income-producing securities and those of larger, more seasoned companies.

The Core Fund diversifies its foreign investments among several countries, ordinarily investing in securities of at least three countries outside the US. 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 outside the United States. The adviser considers the relative political and economic stability of a company's countries of operation in evaluating the potential rewards and risks of an investment opportunity. The Fund primarily invests in securities traded in mature markets (generally, the countries of the Organisation for Economic Co-operation and Development). It does not concentrate in any particular industry.

The Fund may invest in securities denominated in various currencies. Accordingly, a change in the value of such currency against the US dollar results in a corresponding change in the US 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.

Sextant Short-Term Bond Fund invests at least 80% of its net assets in short-term bond securities, including corporate and government bonds. Under normal circumstances, the Fund's dollar-weighted average effective maturity (the sum of the market value of each bond times its number of years to anticipated maturity, divided by the portfolio's total market value) does not exceed three years.

Sextant Bond Income Fund invests at least 80% of its net assets in long-term bond securities, including corporate and government bonds. As an operating policy that may be changed by the Board of Trustees, under normal circumstances the Fund maintains a dollar-weighted average effective maturity in excess of 10 years.

Sextant Global High Income Fund invests at least 80% of its net assets in a globally diversified portfolio of attractively valued high-income securities, including:

  • Foreign and domestic common and preferred stocks, including depositary receipts;
  • Foreign and domestic corporate bonds, including convertible bonds;
  • Foreign and domestic government bonds; and
  • High-yield bonds ("junk bonds").

When selecting equities, the Fund principally invests in income-producing securities of companies with market capitalizations greater than $5 billion.

The Global High Income Fund diversifies its foreign investments among several countries, ordinarily investing in securities of at least three countries outside the US. 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.

March 28, 2018 Statement of Additional Information 3

The adviser considers the relative political and economic stability of a company's countries of operation in evaluating the potential rewards and risks of an investment opportunity. The Fund may invest in securities traded in any market, but at least two-thirds of the Fund must be invested in companies headquartered or bonds issued in the developed countries belonging to the Organisation for Economic Co-operation and Development. Seeking the advantage of global diversification, no more than half of the Fund may be invested in securities of companies headquartered or bonds issued in the US.

The Fund may invest in securities denominated in various currencies. Accordingly, a change in the value of such currency against the US dollar results in a corresponding change in the US 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.

To increase safety, no more than half of the Global High Income Fund may be invested in common stocks. Investments in preferred stocks and bonds issued by corporations and governments thus make up the majority of the Fund's investments (see Bond investments, below). In seeking high income, the Fund favors bonds of lower quality, but may have up to half of its investments in bonds rated A3 or higher. Investors are cautioned that high-yield stocks and bonds carry extra risks (see High-yield securities below). The high-yield stocks and bonds in the Fund are not often included in the other Sextant Fund portfolios.

Sextant Funds Bond investments
(Sextant Short-Term Bond, Sextant Bond Income, Sextant Core, Sextant Global High Income)

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.

Under normal circumstances, the Short-Term Bond and Bond Income Funds invest at least 80% of their assets (net assets plus any borrowings for investment purposes, 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 US dollars, rated at the time of purchase within the four highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, or Baa);
  • Collateralized or securitized bonds, such as asset-backed securities, mortgage-backed securities, and commercial mortgage-backed securities;
  • Government and municipal securities;
  • Commercial paper rated Prime-1 by Moody's at time of purchase, or, if unrated, issued or guaranteed by a corporation with any outstanding debt rated Aa or better by Moody's; and
  • Bank obligations, including repurchase agreements, of banks having total assets in excess of $1 billion.

These four 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 (except Global High Income Fund) may not invest in a security rated at time of purchase below the fourth highest grade assigned by Moody's (Baa). Debt rated Baa is considered "medium grade," though still generally accepted as investment grade.

US 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 US Treasury; and (ii) other securities that are issued or guaranteed as to principal and interest by the US government or by its agencies or instrumentalities. US 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 securities' values fluctuate. The Funds may also invest in securities issued by foreign governments that meet the rating requirement of the Fund.

Among the government securities the Funds may purchase are those issued by Government National Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae"), 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 US Treasury, depending on the terms of the issue.

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 a loss of any premium the Fund may have paid to buy the security.

The Funds may also invest in floating rate instruments that 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) 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

4 Statement of Additional Information March 28, 2018

interest. During a period of adverse economic changes, including a period of rising interest rates, issuers of such bonds may experience more 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. A Fund may invest in unrated securities that in the adviser's opinion are comparable to securities having a rating suitable for investment by the Fund. In selecting investments, the adviser makes it own judgments and does not rely on rating agencies.

The Global High Income Fund may also invest in high-yield bonds ("junk bonds"). These bonds carry Moody's ratings below Baa and typically pay a higher yield due to their increased risk of default.

Saturna Sustainable Funds

Saturna Sustainable Equity Fund seeks capital appreciation by investing primarily in common stocks. It may invest in securities convertible into common stocks and preferred stocks, and in other securities that are suited to the Fund's investment objectives. The Fund does not invest in nonconvertible debt securities.

Under normal conditions, the Fund invests at least 80% of its assets in equities of issuers located throughout the world that the Fund's adviser believes demonstrate sustainable characteristics. For purposes of this investment policy, the Fund's adviser considers issuers with sustainable characteristics to be those issuers that are generally larger, more established, consistently profitable, and financially strong, and with robust policies in the areas of the environment, social responsibility, and corporate governance ("ESG"). The Fund's adviser uses an internally developed ESG rating system to identify issuers that the Fund's adviser believes demonstrate sustainable characteristics.

The Sustainable Equity Fund principally invests in equity securities of companies with market capitalizations greater than $5 billion. To reduce risk, the Fund follows a value investment style and favors equities of more seasoned companies.

The Sustainable Equity Fund diversifies its investments among countries, ordinarily investing in securities of companies headquartered in at least four countries. No more than 40% of the Fund can be invested in companies domiciled in any one country. The Fund varies its investments geographically and by industry based on the adviser's evaluation of economic, market, and political trends. The adviser considers the relative political and economic stability of a company's operational countries in evaluating the potential rewards and risks of an investment opportunity. The Fund primarily invests in securities traded in mature markets (generally, the countries belonging to the Organisation for Economic Co-operation and Development). No more than 30% of assets may be invested in developing markets.

The Fund may invest in securities denominated in various currencies. Accordingly, a change in the value of such currency against the US dollar results in a corresponding change in the US 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.

Saturna Sustainable Bond Fund seeks current income and capital preservation. Under normal conditions, the Fund invests at least 80% of its net assets in bonds of issuers located throughout the world (including emerging markets) that the Fund's adviser believes demonstrate sustainable characteristics. For purposes of this investment policy, the Fund's adviser considers issuers with sustainable characteristics to be those issuers that are generally larger, more established, consistently profitable, and financially strong, and with robust policies in the areas of the environment, social responsibility, and corporate governance ("ESG"). The Fund's adviser uses an internally developed ESG rating system to identify issuers that the Fund's adviser believes demonstrate sustainable characteristics.

Under normal conditions, the Fund maintains a dollar-weighted average maturity of three years or more, invests at least 65% of its net assets in bonds within the four highest grades (Aaa, Aa, A, or Baa), and may invest up to 35% in unrated and high-yield bonds ("junk bonds"). The Sustainable Bond Fund diversifies its investments among several countries, ordinarily investing in issuers headquartered in at least four countries. No more than 40% of the Fund can be invested in issuers domiciled in any one country. The Fund varies its investments geographically and by industry based on the adviser's evaluation of economic, market, and political trends. The adviser considers the relative political and economic stability of an issuer's countries of operation in evaluating the potential rewards and risks of an investment opportunity. The Fund primarily invests in bonds traded in mature markets (generally, the countries of the Organisation for Economic Co-operation and Development). No more than 30% of assets may be invested in developing markets.

The Fund may invest in securities denominated in various currencies. Accordingly, a change in the value of such currency against the US dollar results in a corresponding change in the US 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.

Under normal circumstances, the Fund invests at least 80% of its assets (net assets plus any borrowings for investment purposes, taken at market value at the time of investment) in "bonds," meaning:

  • Corporate bonds;
  • Collateralized or securitized bonds, such as asset-backed securities, mortgage-backed securities, and commercial mortgage-backed securities;
  • Government and municipal securities;
  • Commercial paper rated Prime-1 by Moody's at time of purchase, or , if unrated, issued or guaranteed by a corporation with any outstanding debt rated Aa or better by Moody's; and
  • Bank obligations, including repurchase agreements, of banks having total assets in excess of $1 billion.
March 28, 2018 Statement of Additional Information 5

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.

The Fund 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).

US 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 US Treasury; and (ii) other securities that are issued or guaranteed as to principal and interest by the US government or by its agencies or instrumentalities. 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 securities' values fluctuate. The Fund may also invest in securities issued by foreign governments that meet the rating requirement of the Fund.

Among the government securities the Fund may purchase are those such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks in the US. Securities such as these represent an interest in a pool of mortgages insured in whole or in part by other agencies or the US Treasury, depending on the terms of the issue.

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 a loss of any premium the Fund may have paid to buy the security.

The Fund may also invest in floating rate instruments that 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.

Lower grade 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 more 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 Fund may invest in unrated securities that in the adviser's opinion are comparable to securities having a rating suitable for investment by the Fund. In selecting investments, the adviser makes it own judgments and does not rely on rating agencies.

The Sustainable Bond Fund may also invest in high-yield bonds ("junk bonds"). These bonds carry Moody's ratings below Baa and typically pay a higher yield due to their increased risk of default.

Idaho Tax-Exempt Fund

The Idaho Tax-Exempt Fund may direct investments in other tax-exempt investment companies which do not concentrate their investments in Idaho bonds, but nevertheless yield income which is exempt from both federal income and alternative minimum taxation. Such income may be taxable at the state level. It is anticipated that shares of such investment companies may be obtained by an affiliated broker-dealer, Saturna Brokerage Services (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.

The adviser believes that many of the debt securities issued by the state of Idaho or its political subdivisions, agencies, or instrumentalities are small issues in total dollars and are typically issued by smaller communities or instrumentalities to obtain capital. Because of the small size of such issues, the expense of obtaining a rating for the issued obligation (bond) is typically not undertaken. Without a rating, investors must rely solely on their own analysis and investigation to determine investment risk and worth of such bonds. Since the cost of such analysis and investigation is typically not considered warranted due to the size of such issues, despite a higher return typically available from such unrated bonds, issues of unrated bonds generally do not have a trading market consisting of as many dealers as comparable rated issues. Occasionally, the financial institution lending the funds to a municipality receives the bond and holds it until maturity. As a result, although trading markets exist for unrated bonds, generally the number of dealers participating in the market are fewer than that which exists for rated bonds. Although all bonds are traded on the basis of dealers' perception of creditworthiness, an unrated 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. The adviser anticipates that investment in unrated bonds will occur only when the adviser believes the credit of the issuer of such unrated 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.

The adviser believes that there exist bonds that constitute good investments that will promote the investment objectives of the Fund.

6 Statement of Additional Information March 28, 2018

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

In contemplating the rate at which to bid a bond, the adviser may consider the opinions and evaluations of independent broker-dealers specializing in Idaho municipal bonds. Such brokers may also be requested to render their opinions as to the value of the Fund's investment securities. The adviser may consider such evaluations and valuation services provided by such independent brokers in determining where it effects transactions in investment securities.

The Fund buys investment-grade bonds, meaning those rated "Baa" or higher by a national bond rating agency (e.g., Moody's Investors Service) or, if unrated, of equivalent quality in the opinion of the adviser, considered at the time of purchase. At least 40% of bonds that the Fund buys must be rated "A" or higher or, if unrated, of equivalent quality, on a similar basis.

Up to 60% of total assets of the Fund can be invested in unrated bonds. The adviser will purchase only those unrated bonds that it believes are liquid and can be sold at the value consistent with that used for net asset value 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; and

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

These limitations and policies are considered primarily at the time of purchase. The sale of a bond is not mandated in the event of a subsequent change in circumstances. Bonds are commonly held until maturity, when the bond will be redeemed for its full face value, assuming no defaults. Nonetheless, 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 its political subdivisions, agencies, or instrumentalities ("municipality"). These municipal obligations generally include municipal bonds, municipal notes, municipal commercial paper, and any other obligation from which the payment of interest, in the opinion of the bond issuer's counsel, is exempt from federal and Idaho state income tax. 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 maturity ranging from six months to three years. The principal types of notes include tax, bond, revenue anticipation, and project notes.

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

Municipal notes and commercial paper obligations are usually issued in the following circumstances:

(a) When borrowing is in anticipation of long-term financing, the paper is generally referred to as a bond anticipation note ("BAN"). Cities are authorized to issue revenue BANs. The maturity date cannot exceed five years from the date of issue. Payment can be extended for not more than three years from their maturity date. BANs are secured by income and revenues derived by the city from the project and from the sale of the revenue bonds in anticipation of which the notes are issued.

(b) Borrowings to level temporary shortfalls in revenue occasioned by irregular receipts of taxes are generally referred to as tax anticipation notes ("TAN"). Taxing districts, including counties, any political subdivision of the state, any municipal corporation, school districts, any quasi-municipal corporation, or any other public corporation authorized to levy taxes, are authorized to borrow money and issue a TAN. The TANs must mature no longer than one year from the date of issue and are issued in 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 authorized to issue a TAN in anticipation of income or revenue from taxes but is forbidden by its constitution to engage in deficit spending or long-term borrowing. The term of the obligation is the shorter of 12 months or to the end of the fiscal year. Likewise, the borrowed amount cannot exceed 75% of the income or revenue from taxes which the State tax commission or other tax collection agency certifies is reasonably anticipated to be collected during the current fiscal year.

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

General obligation bonds ("GO Bonds") are those obligations of an issuer to which the full faith and credit of the municipality is pledged.

March 28, 2018 Statement of Additional Information 7

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, roads, water, and sewer systems, and facilities for a variety of public purposes. A GO Bond is paid from ad valorem property taxes or from other tax sources. Many types of obligations may be general obligations of a municipality whether or not they are incurred through the issuance of bonds. GO Bonds may be incurred in the form of a registered warrant, conditional sales contract, or other instrument in which an unconditional and unlimited promise to pay from ad valorem taxes is made.

Revenue bonds may be issued to fund a wide variety of revenue-producing capital projects including, but not limited to, electric, gas, water, and sewer systems; highways, bridges, and tunnels; airport facilities; colleges and universities; hospitals; and health, convention, recreational, and housing facilities. Although the principal security of these bonds varies, generally, revenue bonds are payable from a debt service reserve fund, the cash for which is derived from the operation of the particular utility or enterprise. Revenue bonds are not general obligations. 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 housing authorities.

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

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

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

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

Risks

Market risk
(All Funds)

The value of a Fund's shares rises and falls as the value of the securities in which a Fund invests goes up and down. Only consider investing in a Fund if you are willing to accept the risk that you may lose money.

Growth stocks
(Sextant Growth, Sextant Core, Saturna Sustainable Equity)

Growth stocks, which can be priced on future expectations rather than current results, may decline substantially when expectations are not met.

Foreign securities
(Sextant International, Sextant Core, Sextant Short-Term Bond, Sextant Bond Income, Sextant Global High Income, Saturna Sustainable Equity, Saturna Sustainable Bond)

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 US 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 US; less public information with respect to issuers of securities; less governmental supervision of exchanges, issuers, and 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. Governments worldwide could affect investments by expropriation or confiscatory taxation, seizure or nationalization of bank deposits or other assets, establishment of exchange controls, adoption of anti-business restrictions, or adverse political, social, or diplomatic developments.

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

Developing markets
(Sextant Global High Income, Saturna Sustainable Equity)

In addition to the risks of foreign investing, developing markets may have heightened risks due to a lack of established legal, political, business, and social frameworks to support efficient securities markets.

8 Statement of Additional Information March 28, 2018

Bond credit
(Sextant Core, Sextant Short-Term Bond, Sextant Bond Income, Sextant Global High Income, Saturna Sustainable Bond, Idaho Tax-Exempt)

An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer's financial strength, the market's perception of the issuer's financial strength, or in a security's credit rating may affect a security's value.

Interest rate
(Sextant Core, Sextant Short-Term Bond, Sextant Bond Income, Sextant Global High Income, Saturna Sustainable Bond, Idaho Tax-Exempt)

When interest rates rise, bond prices generally fall. The opposite is also generally true: bond prices rise when interest rates fall. In general, securities with longer maturities are more sensitive to these interest rate changes. Interest rates change based on longer-term economic expectations, primarily inflation. Higher rates normally prevail in underperforming economies. When interest rates are historically low, the risk of bond prices falling should rates return to normal is increased.

High-yield securities
(Sextant Global High Income, Saturna Sustainable Bond)

High-yield securities ("junk bonds") involve greater risk of a loss, or delays of interest, principal, or dividend payments than higher quality securities. Issuers of lower rated or "high-yield" securities are not as strong financially as those issuing higher quality securities. Companies with high dividends are generally more financially leveraged and likely to be undergoing difficult and stressful conditions in their operations. Issuers of high-yield securities are likely more vulnerable to changes in the relevant economy that could affect their ability to make payments of interest, principal, or dividends as expected. The prices of high-yield securities generally fluctuate more than those of higher credit quality. High-yield securities are often more illiquid (harder to sell) and harder to value.

State-specific bonds
(Idaho Tax-Exempt)
State-specific bond risk entails changes in investor perceptions about the state of Idaho or other entities issuing bonds in Idaho. Investing only in Idaho bonds means the Idaho Tax-Exempt Fund has greater exposure to events in that state. Factors such as political, economic, and financial trends in the state of Idaho will affect market prices for the Fund's holdings of Idaho issuers, regardless of the actions of the broader market for municipal bonds. Investor perceptions of those events will cause bonds in the Fund's portfolio to vary up and down.

Liquidity
(All Funds)
Market risk also includes the concept of "liquidity," the ability of security holders to purchase and sell securities. Liquidity can relate to securities markets as a whole or to the market for only one or a few types of securities. Should a market become "illiquid" (lose liquidity), the ability to purchase and sell securities disappears. Holders of securities that are illiquid may have little or no ability to dispose or purchase securities as desired. Adverse market conditions can cause investors to place a premium on the highest quality liquid securities (such as US Treasury securities), which can result in a relative increase in interest rates for other types of bonds. Bonds that are less liquid, such as municipal bonds, may be affected by material increases in the general level of risk aversion and any resulting decrease in liquidity for non-US government obligations.

Saturna Sustainable Bond Fund may invest in restricted securities which may increase liquidity risk as a result of such restrictions.

March 28, 2018 Statement of Additional Information 9

Fundamental Policies

The investment objectives of each Fund are described in the Prospectuses and Summary Prospectuses. Investment objectives and certain policies of each of the Funds may not be changed without the prior approval of the holders of the majority of the outstanding shares of the respective Fund. Investment objectives and policies that are considered fundamental and subject to change only by prior approval of the shareowners include:

  • the primary and any secondary investment objectives;
  • for the Sextant Bond Income, Sextant Short-Term Bond, Saturna Sustainable Bond Fund, and Idaho Tax-Exempt Fund the 80% of assets minimum investment in bonds;
  • the classification of the Funds as an open-end management company and the subclassification of each of the Funds as a diversified company; and
  • the policies listed under "Investment Restrictions."

Investment Restrictions

Sextant Mutual Funds,Saturna Sustainable Funds

In addition to the restrictions stated in the Prospectuses and Summary Prospectuses, the Funds shall not:

  • purchase securities on margin;
  • sell securities short, or purchase or write put or call options;
  • purchase "restricted securities" — those which are subject to legal or contractual restrictions on resale or are otherwise not readily marketable (this restriction does not apply to Saturna Sustainable Bond Fund); or
  • invest in oil, gas, or other mineral exploration leases and programs.

The Funds shall not make loans to others, except for:

  • the purchase of debt securities; or
  • the entering into of repurchase agreements.

The Funds shall not invest in securities so as to not comply with Subchapter M of the Internal Revenue 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:

  • cash and cash items, government securities, and securities of other regulated investment companies; and
  • other securities.

In addition, the Funds shall not purchase:

  • real estate;
  • real estate limited partnerships (excepting master limited partnerships that are publicly traded on a national security exchange or Nasdaq's National Market System); or
  • commodities or commodity contracts.

The Funds shall not:

  • 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; yhe Trust is authorized to mortgage or pledge assets of a Fund to the extent necessary to secure such temporary borrowings; act as a securities underwriter, except that they may purchase securities directly from the issuer for investment purposes;
  • 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; or
  • invest in any company for the purpose of management or exercising control.

No Fund 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.

The Funds shall not:

  • purchase securities of any issuer in excess of 5% of the Fund's total assets;
  • purchase more than 10% of the outstanding voting securities of any issuer;
  • concentrate investments in a single industry beyond 25% of the total value of a Fund;
  • invest more than 10% of its assets in the securities of issuers which together have a record of less than three years continuous operation; or
  • purchase securities if such Fund's outstanding borrowings exceed 5% of its net assets.

No Fund's investments in warrants, valued at the lower of cost or market, shall exceed 5% of the value of the Fund's net assets. Included within that amount, but not to exceed 2% of the value of the Fund's net assets, may be warrants that are not listed on the New York or American Stock Exchanges. Warrants acquired in units or attached to securities may be deemed to be without value. Notwithstanding the above, the Funds may purchase securities pursuant to the exercise of subscription rights, provided that such purchase does not result in the Funds' ceasing to be a diversified investment company. Japanese and European corporations frequently issue additional capital stock by means of subscription rights offerings to existing shareowners at a price substantially below the market price of the shares. The failure to exercise such rights would result in the 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 exceeded 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 Funds would be forced to sell securities at a time when they might not otherwise have done so, or to forgo exercising the rights.

10 Statement of Additional Information March 28, 2018

Idaho Tax-Exempt Fund

In addition to the restrictions stated in the Prospectus and Summary Prospectus, the Fund shall not:

  • purchase securities on margin or sell securities short or purchase or write put or call options;
  • purchase "restricted securities" (those which are subject to legal or contractual restrictions on resale or are otherwise not readily marketable); or
  • invest in oil, gas, or other mineral exploration leases and programs.

The Fund shall not make loans to others, except for:

  • the purchase of debt securities; or
  • the entering into of repurchase agreements.

The Fund shall not invest in securities so as to not comply with Subchapter M of the Internal Revenue 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:

  • cash and cash items, government securities, and securities of other regulated investment companies; and
  • other securities.

In addition, the Fund shall not purchase

  • real estate;
  • real estate limited partnerships; or
  • commodities or commodity contracts.

The Fund shall not:

  • 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;
  • act as a securities underwriter except that it may purchase securities directly from the issuer for investment purposes;
  • purchase or retain securities of any issuer if the officers or trustees of the Fund or its adviser own more than one-half of one percent of the securities of such issuer; or
  • invest in any company for the purpose of management or exercising control.

The Fund shall not:

  • purchase securities of any issuer in excess of 5% of the Fund's total assets;
  • purchase more than 10% of the outstanding voting securities of any issuer;
  • concentrate its investments in a single industry beyond 25% of the total value of the Fund;
  • invest more than 10% of its assets in the securities of issuers which together have a record of less than three years continuous operation.

Other Fund Policies

Temporary Defensive Position

When the adviser considers a temporary defensive investment position advisable, any Saturna Investment Trust Fund may invest without limitation in high-quality corporate debt obligations, US government obligations, or hold cash or cash equivalents. Taking a temporary defensive position may keep a Fund from attaining its investment objective.

Portfolio Turnover

The Funds place no restrictions on portfolio turnover and the Funds will buy or sell investments according to the adviser's appraisal of the factors affecting the market and the economy. The adviser does not anticipate significant variation from the relatively low portfolio turnover rates experienced in the past.

Disclosure of Portfolio Holdings

The Saturna Investment Trust has adopted a portfolio holdings disclosure policy governing the disclosure of the Funds' portfolio holdings. In accordance with this policy, the Funds may provide portfolio holdings information directly to third parties no earlier than the time a report is filed with the SEC that is required to contain such information or one day after the information is posted on the Fund's publicly accessible website, www.saturna.com. A list of portfolio holdings is generally made available on the Funds' website within 10 business days after each month-end. Additionally, the Funds publish on the website a list of their top 10 holdings as of the end of each calendar quarter within 10 business days after the end of the quarter for which the information is current.

The Funds may disclose portfolio holdings information that has not been included in a filing with the SEC or posted on the Funds' website (i.e., nonpublic portfolio holdings information) only if there is a legitimate business purpose for doing so and if the recipient is required, either by explicit agreement or by virtue of the recipient's duties to the Funds as an agent or service provider, to maintain the confidentiality of the information and to not use the information in an improper manner (e.g., personal trading). The Funds may disclose on an ongoing basis such nonpublic portfolio holdings information in the normal course of their investment and administrative operations to various service providers, including the adviser (Saturna Capital and its affiliated companies), independent registered public accounting firm (Tait, Weller & Baker, LLP), custodian (Bank of New York Mellon Asset Servicing), financial printers (Lithtex Northwest, RR Donnelley, Broadridge), and to the legal counsel (Taft Stettinius & Hollister LLP) for the Funds' trustees. The adviser may disclose daily nonpublic portfolio holdings information on a next-day basis to service providers to enable the adviser to perform statistical analysis using that service provider's systems and software programs. The adviser may also provide certain nonpublic portfolio holdings information to broker-dealers from time to time in connection with the purchase or sale of securities. In providing this information, reasonable precautions are taken in an effort to avoid potential misuse of the disclosed information, including limitations on the scope of the portfolio holdings information disclosed, when appropriate.

March 28, 2018 Statement of Additional Information 11

Nonpublic portfolio holdings information may be provided to other persons if approved by the adviser's president or designee upon a determination that there is a legitimate business purpose for doing so, the disclosure is consistent with the interests of the Funds, and the recipient is obligated to maintain the confidentiality of the information and not misuse it.

Neither the adviser, the Funds, nor any affiliated or non-affiliated party shall receive any compensation or other consideration in connection with the disclosure of portfolio holdings.

In view of these Fund policies, it is unlikely that a conflict of interest between the Funds, the adviser, or any affiliated person of the Funds may arise. However, should the adviser's president become aware that a potential conflict of interest may exist in connection with authorized portfolio disclosures, she will promptly consult with the chairman of the Trust's Board of Trustees with regard to action to be taken. For further information about conflicts of interest, see the "Portfolio Managers" section beginning on page 23.

Proxy Voting Policies

The proxy voting guidelines summarize Saturna Capital Corporation's positions and give a general indication of how portfolio securities will be voted.

The guidelines are not exhaustive and do not include all potential voting issues. Because proxy issues and the circumstances of individual companies are varied, there may bse instances when the adviser may not vote in strict adherence to these guidelines. We will evaluate the merits and intentions of all proposals, and will typically vote in favor of those proposals we determine to be constructive to the company, to the environment in which it operates, and to the best interest of its shareholders. We will typically oppose proposals we deem to be immaterial, nuisance proposals or proposals that would entail significant costs in compliance with little associated benefit.

Regardless of the circumstances, the adviser will always attempt to vote in accordance with the Funds' specific investment objectives and policies, which in the case of the Saturna Sustainable Funds, includes careful examination of environmental, social, and governance issues.

Saturna Capital Corporation's investment professionals, as part of their ongoing review and analysis of all portfolio holdings, are responsible for monitoring significant corporate developments, including proxy proposals submitted to shareowners. The research analyst assigned to the sector in which an issue falls is responsible for voting the associated proxies.

These guidelines are reviewed and approved annually by the Trustees. The research analyst will refer issues where there could be a conflict of interest (e.g., a familial or business relationship with a company or management) or uncertainty regarding the merits of any management or shareholder proposal to Saturna's Proxy Committee for discussion and adjudication. The Proxy Committee consists of the Chief Investment Officer, President, and Chief Legal Officer of Saturna Capital Corporation, as well as other relevant investment professionals who may participate from time to time.

Disclosure of the proxy voting record is a responsibility of the Trust's secretary. The Funds' voting record is filed on Form N-PX for each 12-month period ending June 30th and is available (1) without charge, upon request, by calling Saturna Capital Corporation toll-free at 1-800-728-8762; (2) on the Saturna website; and (3) on the SEC's website at www.sec.gov.

CORPORATE GOVERNANCE

We will generally vote FOR:

  • Proposals requesting disclosure of the company's political contributions and policies governing political contributions.
  • Proposals requesting disclosure of the company's lobbying expenditures and policies governing lobbying expenditures.
  • Proposals requesting disclosure of the company's participation in drafting and/or supporting legislation (including the names of partnering organizations, if applicable).
  • Management's recommendation for ratification of the auditor, except in the case where non-audit fees represent more than 30% of the total fees paid in the previous year.

Corporate Transactions

We will generally vote AGAINST:

  • Authorization to transact other, unidentified, substantive business at the meeting.

We will vote CASE BY CASE on:

  • Mergers and acquisitions, leveraged buyouts, spin-offs, re-incorporations, tax inversions, liquidations and asset sales, with regard to the impact on existing shareholders' and community stakeholders' interests.
  • Proposals to amend a company's charter or by-laws.

Director Elections

We will generally vote FOR:

  • Proposals that require a majority of independent Directors.
  • Proposals to separate the Chief Executive Officer and Chairman of the Board positions.
  • Proposals seeking to increase the independence and diversity of board nominating, audit, and compensation committees.
  • Establishment of reasonable retirement age for Directors.
  • Proposals that require Directors to own a minimum number of shares in the company.

We will generally vote AGAINST:

  • Directors who have attended less than 75% of Board meetings.
  • Management proposals that give management the ability to alter the size of the board without shareholder approval.
  • Efforts to classify the board or eliminate cumulative voting.
  • The election of Directors who serve on the compensation committee who also serve as CEO of any public company.
  • Proposals to elect directors on a staggered schedule.
12 Statement of Additional Information March 28, 2018

We will vote CASE BY CASE on:

  • Individual directors, committee members, or on the entire board.
  • Directors who are incumbent members of the nominating committee if the board, in our judgment, lacks diversity.

Takeover Defenses

We will generally vote FOR:

  • The elimination of dual class stock with unequal voting rights.
  • Proposals to put poison pills to a shareholder vote.

We will generally vote AGAINST:

  • Proposals to introduce dual-class shareholding structures or non-voting share classes.
  • Proposals to adopt anti-takeover defenses.

Capital Structure

We will generally vote FOR:

  • Proposals to effect stock splits.
  • Proposals authorizing share repurchase programs.

We will vote CASE BY CASE on:

  • Proposals to increase common stock.

Compensation

We will generally vote FOR:

  • Proposals to allow shareholders to vote on executive compensation.
  • Compensation programs that relate executive compensation to a company's long-term performance.
  • Stock option plans unless they could result in significant dilution or have other provisions clearly not in the interest of existing shareholders.

We will vote CASE BY CASE on:

  • Executive and director compensation. We generally favor capital-related Key Performance Indicators (return on capital expenditure (ROCE); return on invested capital (ROIC); economic value added (EVA)) rather than accounting-related indicators (sales; earnings per share (EPS); and earnings before interest, taxes, depreciation, and amortization (EBITDA)).

ENVIRONMENT

We expect companies to be mindful of their environmental record and impact. We will vote in favor of proposals requesting that companies adopt the Ceres principles, and in favor of requests for corporate social responsibility or sustainability reports detailing a company's environmental practices.

We will also generally vote in favor of any proposal that requests disclosure and/or improvement relating to the company's approach to:

  • Addressing climate change.
  • Reducing waste.
  • Reducing greenhouse gas emissions.
  • Reducing other toxic emissions.
  • Taking responsibility for toxic cleanup.
  • Mitigating water-related risks.
  • Mitigating negative impact on biodiversity in the communities in which the company operates.
  • The use of harmful pesticides, antibiotics, genetically engineered organisms, and other chemicals in food production.
  • Health and environmental hazards the company's operations present to the communities in which it operates .
  • Sustainable business operations.

SOCIAL RESPONSIBILITY

We will generally vote for any proposals that request disclosure and/or improvement relating to the company's approach to:

  • The representation of women and minorities in the workplace.
  • Equal employment opportunities and/or nondiscrimination policies.
  • Workplace codes of conduct, particularly practices related to employee health and safety.
  • Product-related safety issues, including product quality, and recalls.
  • Animal welfare.
March 28, 2018 Statement of Additional Information 13

Management of the Funds

Board of Trustees

A Board of six Trustees supervises the Funds: Marina E. Adshade, Ronald H. Fielding, Gary A. Goldfogel, James V. McKinney, Sarah E.D. Rothenbuhler, and Jane K. Carten. The Trustees establish policies as well as review and approve the Funds' investment advisory 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. Trustees serve for the lifetime of the Trust or until reaching the mandatory retirement age, death, resignation, removal, or non re-election by the shareowners. The Trustees annually appoint officers for one-year terms.

Management Information

Name, Address, and Age

Position(s) held with Trust; term of office and length of time served

Principal occupation(s) during past 5 years

Number of portfolios in Saturna fund complex overseen by Trustee

Other directorships held by Trustee during past 5 years

Independent Trustees

(photo omitted)

Marina E. Adshade, PhD (50)
1300 N. State Street
Bellingham WA 98225

Independent Trustee
(since 2017)

Professor of Economics, University of British Columbia, Vancouver and Simon Fraser University;

Author

Nine

None

(photo omitted)

Ronald H. Fielding, MA, MBA, CFA (69)
1300 N. State Street
Bellingham WA 98225

Independent Trustee
(since 2009)

Director, ICI Mutual Insurance Company

Thirteen

Amana Mutual Funds Trust

(photo omitted)

Gary A. Goldfogel, MD (59)
1300 N. State Street
Bellingham WA 98225

Chairman (since 2017);

Independent Trustee
(since 1995)

Medical Examiner (pathologist)

Nine

None

(photo omitted)

Jim V. McKinney (56)
1300 N. State Street
Bellingham WA 98225

Independent Trustee
(since 2017)

President/CEO, Apple Mountain LLC, consulting and development;

US Army Foreign Area Officer - Retired

Nine

None

(photo omitted)

Sarah E.D. Rothenbuhler (50)
1300 N. State Street
Bellingham WA 98225

Independent Trustee
(since 2017)

CEO, Birch Equipment (industrial rentals and sales)

Nine

None

Interested Trustee

(photo omitted)

Jane K. Carten, MBA (43)
1300 N. State Street
Bellingham WA 98225

President, Trustee
(since 2017)

President and Director,
Saturna Capital Corporation

Vice President and Director,
Saturna Trust Company

President,
Saturna Brokerage Services

Nine

None

Mrs. Carten is an "interested person" of the Trust as an officer of the Adviser, Saturna Capital Corporation.

14 Statement of Additional Information March 28, 2018

 

Officers Who Are Not Trustees

Name, Address, and Age

Position(s) held with Trust (length of time served); and term of office

Principal occupation(s) during past 5 years

Officers Who Are Not Trustees

(photo omitted)

Phelps S. McIlvaine (64)¹
1300 N. State Street
Bellingham, WA 98225

Vice President
(since 1994)

Vice President, Saturna Capital Corporation

Director, Vice President, and former Treasurer Saturna Brokerage Services

(photo omitted)

Christopher R. Fankhauser (46)¹
1300 N. State Street
Bellingham, WA 98225

Treasurer
(since 2002)

Chief Operations Officer, Saturna Capital Corporation

Vice President and Chief Operations Officer, Saturna Brokerage Services

Director, Vice President, and Chief Operations Officer, Saturna Trust Company

(photo omitted)

Michael E. Lewis (56)¹
1300 N. State Street
Bellingham, WA 98225

Chief Compliance Officer
(since 2012)

Chief Compliance Officer, Saturna Capital, Saturna Trust Company, and Affiliated Funds

(photo omitted)

Jacob A. Stewart (37)¹
1300 N. State Street
Bellingham, WA 98225

Anti-Money Laundering Officer
(since 2015)

Anti-Money Laundering Officer, Saturna Capital Corporation, Saturna Brokerage Services

Chief Compliance Officer, Saturna Brokerage Services

Bank Secrecy Act Officer, Saturna Trust Company

(photo omitted)

Nicole Trudeau (38)¹
1300 N. State Street
Bellingham WA 98225

Secretary
(since 2018)

Chief Legal Officer,
Saturna Capital Corporation

Former:
Counsel, Simpson Thacher & Bartlett LLP;
Partner, Stradley Ronon Stevens & Young, LLP;
Partner, K&L Gates LLP

¹ Messrs. Fankhauser, Lewis, McIlvaine, Stewart, and Ms. Trudeau are "interested persons" of the Trust as officers and/or employees of the Adviser, Saturna Capital Corporation. Messrs. Fankhauser, Lewis, and Stewart hold the same positions with Amana Mutual Funds Trust, which has four fund portfolios and is also managed by Saturna Capital Corporation.

As of December 31, 2017 no Independent Trustee (or any of his immediate family members) owned beneficially or of record securities of the adviser or the Trust's principal underwriter, or any person (other than a registered investment company) directly or indirectly, controlling, controlled by or under common control with the adviser or principal underwriter.

March 28, 2018 Statement of Additional Information 15

 

Management Ownership Information (as of Dec. 31, 2017)

Trustee

Dollar range of equity securities in Funds of Saturna fund complex

Aggregate dollar range of equity securities in all Registered Investment Companies overseen by Trustee/Officer in Saturna fund complex

Marina E. Adshade

None

None

Jane K. Carten

Sextant Growth Z Shares: $50,001-$100,000
Sextant International Z Shares: $10,001-$50,000
Sextant Bond Income: $1-$10,000
Saturna Sustainable Equity: over $100,000
Saturna Sustainable Bond: $50,001-$100,000

Amana Income Investor Shares: $1-$10,000
Amana Income Institutional Shares: over $100,000
Amana Growth Investor Shares: $1-$10,000
Amana Growth Institutional Shares: over $100,000
Amana Developing World Investor Shares: $1-$10,000
Amana Participation Institutional Shares: $10,001-$50,000

Over $100,000

Ronald H. Fielding

Sextant International Z Shares: over $100,000
Sextant Global High Income: over $100,000

Amana Income Investor Shares: $50,001-$100,000
Amana Growth Investor Shares: $50,001-$100,000
Amana Developing World Investor Shares: $10,001-$50,000

Over $100,000

Gary A. Goldfogel

Sextant Growth Z Shares: over $100,000
Sextant International Investor Shares: $1-$10,000
Sextant International Z Shares: over $100,000
Sextant Core: over $100,000
Sextant Bond Income: $50,001-$100,000
Sextant Global High Income: over $100,000

Amana Developing World Investor Shares: over $100,000

Over $100,000

Jim V. McKinney

None

None

Sarah E.D. Rothenbuhler

None

None

 

16 Statement of Additional Information March 28, 2018

Leadership Structure and Board of Trustees

As part of its annual governance assessment, the Board reviews the collective and individual experience, qualifications, attributes, and skills of the Trustees. Attributes common to all Trustees are strong educational backgrounds, lifetimes of experience in business and finance, and ability to effectively request, evaluate, and discuss information about the Trust with the adviser and other service providers to the Trust. The Chairman of the Board and all other Trustees (except Mrs. Carten) are independent of the adviser.

The Board has concluded that its current leadership structure, in which the Chairman of the Board is not affiliated with the adviser, is appropriate and in the best interest of shareowners, in light of the services provided to the Trust. In making the determination that each Trustee is qualified to serve, the Board considers a variety of criteria, including actual service, commitment, and participation of each Trustee during his tenure with the Trust. In addition to the information set forth in the Trustees table (on page 14) and other relevant qualifications, the following are additional important qualifications of each Trustee:

Marina E. Adshade PhD, is a professor of economics at the Vancouver School of Economics at the University of British Columbia and the School of Public Policy at Simon Fraser University (Vancouver, British Columbia). Dr. Adshade earned her doctorate in economics from Queen's University (Kingston, Ontario). Dr. Adshade is a regular contributor to print and broadcast media and has been published globally in thirteen different languages. The Board believes Dr. Adshade's economics background and research experience make her an excellent board member.

Jane K. Carten MBA, graduated from Western Washington University with an MBA and undergraduate degree in Computer Science and Business. As President of Saturna Capital Corporation (the Funds' investment adviser), Mrs. Carten oversees Saturna's daily operations and holds officer positions and directorships with certain Saturna Capital affiliates as noted previously. Mrs. Carten is active in the Bellingham Bay Rotary and is a member of the Young Presidents' Organization. She is a founder of the nonprofit OpenAccess Internet Services and is a Bellingham Sister Cities member and contributor. The Board believes Mrs. Carten's demonstrated mutual fund industry experience and background, and her volunteer service and leadership on community boards make her an excellent board member.

Gary A. Goldfogel MD, serves as the Medical Examiner for Northwest Washington State and is the owner and president of Avocet Environmental Testing Laboratory. Dr. Goldfogel is a board certified physician in Surgical and Forensic Pathology and Laboratory Medicine. He earned his doctorate in the field of medicine from Emory University. He has served on boards of various professional and community organizations. The Board believes Dr. Goldfogel's service to community organizations, considerable board experience, and business background make him an excellent board member.

Ronald H. Fielding MA, MBA, CFA, has worked in the mutual fund industry as a portfolio manager, owner, and senior officer of mutual fund advisers for over 25 years. He has served on the board of Investment Company Institute Mutual Insurance for 15 years. He has taught courses in finance and economics, and serves on philanthropic and educational institution boards. Mr. Fielding has a bachelor's degree in liberal arts from St. John's College, plus master's degrees in economics and in business from the University of Rochester. The Board believes Mr. Fielding's demonstrated mutual fund industry experience and background, and his volunteer service and leadership on many boards including ICI Mutual Insurance, make him an excellent board member.

James V. McKinney is the Executive Director of Common Threads Northwest, and owner of Apple Mountain LLC, a strategy and development consulting firm. Mr. McKinney is a retired foreign area officer with extensive service in the Middle East, Europe, and Asia. He served as a senior defense official/defense attaché and security assistance officer for US Embassies, and as a leader, advisor, and analyst in numerous global assignments. He provided extensive guidance and assistance to senior government leaders in developing nations. He has a bachelor's in Government from California State University, Sacramento, and a master's in International Studies from the University of Washington. The Board believes Mr. McKinney's background, leadership experience, and community service activity make him an excellent board member.

Sarah E. D. Rothenbuhler is CEO of Birch Equipment Co, Inc, a construction equipment rental and sales company. She earned a bachelor's from the University of Colorado and is a recipient of multiple business and community leadership awards. She is active on several philanthropic boards and organizations, including Bellingham Bay Rotary, St. Joseph's Hospital Foundation, and Whatcom Business Alliance. The Board believes Ms. Rothenbuhler's background, considerable business experience, and leadership service on community boards make her an excellent board member.

Board Role in Risk Oversight

The Board's role in management of the Trust is oversight. As is the case with many investment companies, day-to-day management of the Trust, selection of Fund investments, administration and distribution services, and management of operational and portfolio risk are responsibilities of the adviser. The Board, through reports from the adviser and third parties, meetings of the Board as well as its committees, independent experiences including shareowner contacts, and Board advisors such as auditors, legal counsel, compliance officers, and regulators, provides only general supervision and risk oversight. The Chairman's duties include developing the agenda for each Board meeting in consultation with management, presiding over each Board meeting, discussing matters with management between Board meetings, and facilitating communication and coordination between the Trustees and management.

Committees

The Board has an Audit and Compliance Committee consisting of the Independent Trustees. The Committee held one meeting during the fiscal year. The Committee operates under a specific charter, selects the independent registered public accounting firm, and reviews all audit reports. The Committee also reviews and considers matters related to the Trust's compliance program, and meets with the Chief Compliance Officer at least annually.

March 28, 2018 Statement of Additional Information 17

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.

Compensation

The Trust currently pays disinterested trustees $1,000 per meeting attended, plus $2,000 per year retainer, plus reimbursement of travel expenses (allocated pro rata to each Fund of the Trust). Trustees are also compensated for committee meetings and chairmanships. As an interested trustee, Mrs. Carten receives no compensation from the Trust. The Trustee Compensation table (below) provides the total compensation paid Trustees for the fiscal year ended November 30, 2017.

Code of Ethics

The Trust, its investment adviser Saturna Capital Corporation, and its principal underwriter Saturna Brokerage Services, Inc., have adopted a common Code of Ethics under Rule 17j-1 of the Investment Company Act and Rule 204a-1 of the Investment Advisers Act. The Code permits personnel subject to the Code (as defined in the Code) to invest in securities, including common stocks and mutual funds. To prevent conflicts of interest, the Code includes restrictions on investing in securities that may be purchased by the Funds. A copy of the Code is available without charge by contacting the Trust or Saturna Capital Corporation, and at www.saturna.com.

Trustee Compensation for Fiscal Year ended Nov. 30, 2017

Name of Person; Position

Aggregate Compensation from Trust

Pension or Retirement Benefits Accrued as Part of Trust Expenses

Estimated Annual Benefits Upon Retirement

Total Compensation From Trust and Fund Complex Paid to Trustees

Marina E. Adshade; Trustee

$3,000

$0

$0

$3,000

Jane K. Carten; Trustee

0

0

0

0

Ronald H. Fielding; Trustee¹

8,250

0

0

22,2501

Gary A. Goldfogel; Trustee, Chairman

7,250

0

0

7,250

Herbert G. Grubel; Trustee²

3,250

0

0

3,250

John E. Love; Trustee²

4,250

0

0

4,250

James V. McKinney; Trustee

3,000

0

0

3,000

Sarah E.D. Rothenbuhler; Trustee

3,000

0

0

$3,000

¹ Ronald H. Fielding also serves as Trustee to the Amana Mutual Funds Trust. He was paid $14,000 by that Trust during Saturna Investment Trust's fiscal year ended November 30, 2017.

² Herbert G. Grubel and John E. Love retired from the Trust on June 20, 2017.

Trustees and Officers Ownership of Trust Shares¹

Fund:

Shares Owned:

Percentage of Outstanding:

Sextant Growth Investor Shares

-

0.0%

Sextant Growth Z Shares

219,945

18.2%

Sextant International Investor Shares

51

0.0%

Sextant International Z Shares

314,418

25.4%

Sextant Core

365,059

39.3%

Sextant Short-Term Bond

732,311

36.0%

Sextant Bond Income

533,924

28.5%

Sextant Global High Income

475,878

56.4%

Saturna Sustainable Equity

270,293

59.3%

Saturna Sustainable Bond

376,034

14.4%

Idaho Tax-Exempt

421,195

13.2%

¹ As of March 1, 2018, officers and Trustees (plus affiliated family members and entities), as a group, owned the above shares of the Funds.

18 Statement of Additional Information March 28, 2018

Control Persons and Principal Holders of Securities

Principal Holders of Securities

As of March 1, 2018, the principal holders of record (those with 5% or more of the outstanding shares) of securities of the following Funds were:

 

Name and Address

Shares

Percentage

Sextant Growth Investor Shares

NFSC Omnibus Account for the Exclusive Benefit of our Customers
200 Liberty Street
New York, NY 10281

155,840

71.32%

First Clearing, LLC Special Custody Account for the Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103

26,113

11.95%

Charles Schwab & Co., Inc. Special Custody Account FBO Customers
101 Montgomery Street
San Francisco, CA 94104

20,980

9.60%

Sextant Growth Z Shares

Helen F. Schloerb Recovable Trust¹
P.O. Box 9623
North Amherst, MA 01059

78,078

6.48%

Saturna Capital Corporation1
1300 North State Street
Bellingham, WA 98225

76,104

6.31%

Sextant International Investor Shares

Charles Schwab & Co., Inc. Special Custody Account FBO Customers
101 Montgomery Street
San Francisco, CA 94104

1,109,671

42.27%

NFSC Omnibus Account for the Exclusive Benefit of our Customers
200 Liberty Street
New York, NY 10281

1,102,340

41.99%

Sextant International Z Shares

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

132,822

10.74%

Ronald H. Fielding¹
1300 North State Street
Bellingham, WA 98225

89,654

7.25%

Helen F. Schloerb Revocable Trust¹
P.O. Box 9623
North Amherst, MA 01059

78,828

6.37%

Saturna Capital 401(k) Omnibus Account FBO Saturna Capital Employees
1300 North State Street
Bellingham, WA 98225

66,430

5.37%

Janicki Industries 401(k)
Omnibus Account FBO Janicki Industries Employees
719 Metcalf Street
Sedro Woolley, WA 98284

62,835

5.08%

¹ Shares are owned beneficially

Principal Holders of Securities

As of March 1, 2018, the principal holders of record (those with 5% or more of the outstanding shares) of securities of the following Funds were:

 

Name and Address

Shares

Percentage

Sextant Core

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

111,096

11.95%

Goldfogel Family Partnership¹
406 Bayside Road
Bellingham, WA 98225

88,191

9.49%

Janicki Industries 401(k) Omnibus Account FBO Janicki Industries Employees
719 Metcalf Street
Sedro Woolley, WA 98284

64,736

6.96%

Saturna Capital 401(k) Omnibus Account FBO Saturna Capital Employees
1300 North State Street
Bellingham, WA 98225

58,047

6.24%

JL Living Trust1
324 North Garden Terrace
Bellingham, WA 98225

49,222

5.29%

Sextant Short-Term Bond

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

528,970

25.99%

Dr. Peter A. Telfer1
2152 Dellesta Drive
Bellingham, WA 98226

299,802

14.73%

Sextant Bond Income

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

271,189

14.48%

Saturna Trust Company¹
1070 West Horizon Ridge Parkway, Suite 201
Henderson, NV 89012

156,319

8.35%

Western Washington University Foundation1
516 High Street OM 430
Bellingham, WA 98225

132,396

7.07%

Sextant Global High Income

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

238,305

28.24%

Saturna Capital 401(k) Omnibus Account FBO Saturna Capital Employees
1300 North State Street
Bellingham, WA 98225

89,831

10.65%

Nicholas F. Kaiser¹
1300 North State Street
Bellingham, WA 98225

80,812

9.58%

Goldfogel Family Partnership¹
406 Bayside Road
Bellingham, WA 98225

74,176

8.79%

¹ Shares are owned beneficially

March 28, 2018 Statement of Additional Information 19

 

Principal Holders of Securities

As of March 1, 2018, the principal holders of record (those with 5% or more of the outstanding shares) of securities of the following Funds were:

 

Name and Address

Shares

Percentage

Saturna Sustainable Equity

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

202,904

44.50%

Saturna Capital 401(k) Omnibus Account FBO Saturna Capital Employees
1300 North State Street
Bellingham, WA 98225

82,162

18.02%

Dr. Peter A. Telfer¹
2152 Dellesta Drive
Bellingham, WA 98226

30,436

6.68%

Saturna Sustainable Bond

NFSC Omnibus Account for the Exclusive Benefit of our Customers
200 Liberty Street New York, NY 10281

1,133,593

43.31%

FolioFN Investments, Inc.
8180 Greensboro Dr., 8th Floor
McLean, VA 22102

303,678

11.60%

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

268,516

10.26%

Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399

263,875

10.08%

Charles Schwab & Co., Inc. Special Custody Account FBO Customers
101 Montgomery Street
San Francisco, CA 94104

242,309

9.26%

Idaho Tax-Exempt

Charles Schwab & Co., Inc. Special Custody Account FBO Customers
101 Montgomery Street
San Francisco, CA 94104

769,284

24.10%

TD Ameritrade, Inc., For the Exclusive Benefit of Our Clients
P.O. Box 2226
Omaha, NE 68103

480,657

15.06%

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

347,934

10.90%

¹ Shares are owned beneficially

Any person holding in excess of 25% of the outstanding voting securities of a Fund may be deemed to control the Fund based on 1) the substantial ownership interest held and 2) the person's resulting ability to potentially influence voting on certain matters submitted to shareowners for their consideration and approval.

Mr. Nicholas Kaiser, 1300 N. State Street, Bellingham, WA 98225, is considered a "control person" of the Sextant Global High Income, Sextant Short-Term Bond, Sextant Bond Income, and Saturna Sustainable Equity. As of March 1, 2018, he directly and indirectly owned 37.82%, 34.09%, 27.32%, and 48.97% of these funds, respectively. Mr. Kaiser's status as a control person has no effect on the voting rights of other security holders.

The Control Persons and Principal Holders of Securities table shows the only persons known to the Trust to be the owners of record of more than five percent or more of any Fund.

20 Statement of Additional Information March 28, 2018

Investment Advisory and Other Services

Investment Adviser and Administrator

Saturna Capital Corporation, 1300 N. State Street, Bellingham, Washington 98225, is the Investment Adviser and Administrator for the Funds. Saturna Capital is also the Funds' transfer agent and shareowner servicing agent. Mr. Nicholas Kaiser, chairman of the board of Saturna Capital, through his ownership of 88% of its voting stock, is the controlling person of the adviser. Mr. Kaiser is also a principal manager of the Sextant International Fund and a deputy portfolio manager of Saturna Sustainable Equity Fund.

Advisory Fee

Sextant Funds

Each of the Sextant Funds pays the adviser an Advisory and Administrative Services Fee (the "Base Fee"). The Base Fee is compensation for portfolio management, advice, and recommendations on securities to be purchased, held, or sold. The Base Fee also covers certain administrative services such as portfolio accounting, shareowner and financial reporting, shareowner servicing, and transfer agency services. The Base Fee is computed at the annual rate of 0.50% 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.

  • For each month in which any 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 benchmark for that period by 1% or more but less than 2%, the Base Fee is increased or decreased by the annual rate of 0.10% based on the Fund's average net assets over the performance period (one year).
  • If the outperformance or underperformance is 2% or more, then the adjustment is at the annual rate of 0.20%.

Sextant Funds Advisory Fee Structure

Base Fee
annual rate

Performance adjustment annual rate

< 1%
more or less than benchmark

1% and < 2%
more or less than benchmark

2% or greater
more or less than benchmark

0.50%

0.00%

+/- 0.10%

+/- 0.20%

Total return investment performance is calculated and published by Morningstar, Inc. for each Sextant Fund. The Morningstar category is used as the benchmark for comparison purposes.

The categories currently assigned by Morningstar are:

Sextant Growth

Large Growth

Sextant International

Foreign Large Blend

Sextant Core

Allocation – 50% to 70% Equity

Sextant Short-Term Bond

Short-Term Bond

Sextant Bond Income

Long-Term Bond

Sextant Global High Income

World Allocation

Each class of shares of a Fund is subject to the same Advisory and Administrative Fee schedule. However, for the Sextant Growth Fund and the Sextant International Fund, advisory and administrative fees paid by Investor Shares (subject to a 12b-1 Fee) and Z Shares may differ due to performance fee adjustments.

The adviser has committed through March 31, 2019, to waive fees and/or reimburse expenses to the extent necessary to ensure that annual net operating expenses, excluding brokerage commissions, interest, taxes, and extraordinary expenses do not exceed 0.60% for Sextant Short-Term Bond, 0.65% for Sextant Bond Income, and 0.75% for Sextant Global High Income.

Saturna Sustainable Funds

Under their Advisory and Administrative Services Agreements, each of the Saturna Sustainable Funds pays the adviser an advisory and administration fee. This fee covers certain administrative services such as portfolio accounting, shareowner and financial reporting, shareowner servicing, and transfer agency services. The Fee is also compensation for portfolio management, advice, and recommendations on securities to be purchased, held, or sold. The Fee is computed at an annual rate — 0.65% for Sustainable Equity Fund and 0.55% for Sustainable Bond Fund — of average daily net assets and is paid monthly.

The adviser has committed through March 31, 2019, to waive fees and/or reimburse expenses to the extent necessary to ensure that annual net operating expenses, excluding brokerage commissions, interest, taxes, and extraordinary expenses do not exceed the net operating expense ratio of 0.75% for Sustainable Equity Fund and 0.65% for Sustainable Bond Fund.

Idaho Tax-Exempt Fund

The Fund is obligated to pay Saturna Capital monthly an advisory fee at the annual rate of 0.50% of the average daily net assets up to $250 million, 0.40% of assets between $250 million and $1 billion, and 0.30% of assets in excess of $1 billion.

Advisory Fees Paid To Saturna Capital For The Last Three Fiscal Years¹

 

2017

2016

2015

Sextant Growth Fund

$110,286

$93,790

$266,036

Sextant International Fund

359,891

359,812

554,872

Sextant Core Fund

39,680

37,248

34,795

Sextant Short-Term Bond Fund

18,915

8,748

6,261

Sextant Bond Income Fund

22,812

26,713

21,768

Sextant Global High Income Fund

27,242

14,178

19,620

Saturna Sustainable Equity Fund

1,800

(40)

9,489

Saturna Sustainable Bond Fund

54,983

20,828

14,321

Idaho Tax-Exempt Fund

$87,145

$90,140

$87,806

¹ After performance adjustments and expense limitations

March 28, 2018 Statement of Additional Information 21

Shareowner Services

Under the advisory agreement, Saturna Capital also provides services as the transfer agent, shareowner servicing agent, and dividend-paying agent for the Funds. As transfer agent, Saturna furnishes to each shareowner a confirmation after each transaction, a historical statement quarterly and annually showing all transactions during the respective periods, and Form 1099 tax forms. Saturna also, on behalf of the Funds, responds to shareowners' questions and correspondence. Furthermore, the transfer agent regularly furnishes the Funds with current shareowner lists and information necessary to keep the shares in balance with the Funds' records. The transfer agent (or its agents) performs the mailing of all financial statements, notices, prospectuses, and summary prospectuses to shareowners. These transfer agent services are included in the Advisory Fee.

Saturna Trust Company, a separate wholly-owned subsidiary of Saturna Capital, receives compensation for maintaining records of contributions, disbursements, and assets as required for IRAs and qualified retirement accounts that invest in the Funds. An annual fee of $10 per fund account for retirement plan services is paid by the Funds to Saturna Trust Company.

The Retirement Plan Custodial Fees table shows the amounts the Funds paid to Saturna Trust Company as retirement plan custodian for the three most recent fiscal years ended November 30.

Rule 12b-1 Plan

Effective October 2, 2006, the Trust entered into a distribution agreement with the distributor (see Underwriter), pursuant to which the distributor acts as principal underwriter of Fund shares for sale to the public. Prior to June 2, 2017, each series of the Trust (with the exception of the Idaho Tax-Exempt Fund) participated in a Rule 12b-1 distribution plan. Under the plan, each Fund paid the distributor a monthly fee at the rate of 0.25% annually of their average daily net assets to finance activities that support the sales of Fund shares, including distribution of Fund shares, and to furnish services to shareowners. Beginning on June 2, 2017, only Investor Shares of Sextant Growth and Sextant International Funds will continue to participate in the Rule 12b-1 Plan.

The Trust allocates the Rule 12b-1 expenses between the Sextant Growth Fund Investor Shares and Sextant International Fund Investor Shares based on relative net asset size. A stable or growing portfolio with reduced redemptions may spread fixed costs across a wider base and increase investment efficiency. There is no assurance that these events will occur.

The 12b-1 Fees table shows the amounts Saturna Brokerage Services was paid as the Funds' underwriter under the distribution plan for the three most recent fiscal years ended November 30.

No Trustee who is not an interested person of the Trust has a direct or indirect financial interest in the operation of the plan or related agreements, but Mrs. Jane Carten and other employees of Saturna Capital may be considered to receive indirect financial benefits from the operation of the plan insofar as the plan grows Trust assets and pays fees to Saturna Capital.

Under the distribution plan, the distributor has entered into selling agreements with a number of financial intermediaries, such as brokers, financial advisers, banks, plan administrators, and others.

During the fiscal year ended November 30, 2017, the Trust paid the distributor $271,661. The distributor spent the following amounts on these principal activities:

Advertising:

$0

Printing and mailing of prospectuses
to other than current shareowners:

$0

Compensation to underwriters:

$0

Compensation to broker-dealers:

$271,661

The adviser spent an additional $33,808 out of its own resources and not as an additional charge to any Fund. These expenses include payments to selected brokers, dealers, or other financial intermediaries, including plan administrators (collectively, "intermediaries") in connection with the sale and/or distribution of a Fund's shares or the retention and/or servicing of fund shareowners. This compensation by the adviser could be characterized as "revenue sharing."

Retirement Plan Custodial Fees

 

2017

2016

2015

Sextant Growth Fund Investor Shares

$10

$9,049

$8,247

Sextant Growth Fund Z Shares

8,588

n/a

n/a

Sextant International Fund Investor Shares

506

6,733

6,526

Sextant International Fund Z Shares

5,689

n/a

n/a

Sextant Core Fund

2,817

2,920

2,272

Sextant Short-Term Bond Fund

3,545

3,680

3,255

Sextant Bond Income Fund

2,685

2,733

2,243

Sextant Global High Income Fund

1,512

1,110

837

Saturna Sustainable Equity Fund

828

456

409

Saturna Sustainable Bond Fund

531

58

408

Idaho Tax-Exempt Fund

$49

$37

$131

 

12b-1 Fees

 

2017

2016

2015

Sextant Growth Fund Investor Shares

$61,335

$99,471

$142,838

Sextant Growth Fund Z Shares

n/a

n/a

n/a

Sextant International Fund Investor Shares

145,274

171,597

228,048

Sextant International Fund Z Shares

n/a

n/a

n/a

Sextant Core Fund

12,497

21,860

21,733

Sextant Short-Term Bond Fund

13,165

20,108

19,407

Sextant Bond Income Fund

11,601

22,476

20,578

Sextant Global High Income Fund

10,281

17,812

19,504

Saturna Sustainable Equity Fund

4,808

8,242

5,598

Saturna Sustainable Bond Fund

$12,699

$19,200

$8,279

 

22 Statement of Additional Information March 28, 2018

In some cases, these payments may create an incentive for the intermediary or its employees to recommend or sell shares of the Funds to you. If you have purchased shares of a Fund through an intermediary, please contact your intermediary to learn more about any payments it receives from the adviser and/or its affiliates, as well as fees and/or commissions the intermediary charges. You should also consult disclosures made by your intermediary at the time of purchase. Any such payments will not change the net asset value or the price of a Fund's shares.

Custodian

Bank of New York Mellon Asset Servicing, 2 Hanson Place, Brooklyn, NY 11217, is the custodian of the Funds. The custodian holds all securities and cash, settles all Fund portfolio securities transactions, receives (on behalf of the Funds) the money from sale of shares, and on order of the Funds, pays the authorized expenses of the Funds. When investors redeem Fund shares, the proceeds are paid to the shareowner from an account at the custodian bank.

Independent Registered Public Accounting Firm

Tait, Weller & Baker, LLP, 1818 Market Street, Suite 2400, Philadelphia, PA 19103, is the independent registered public accounting firm for the Funds. The accountants conduct an annual audit of the Funds as of November 30 each year, prepare the tax returns of the Funds, and assist the adviser in various accounting matters throughout the year.

Portfolio Managers

All Saturna Capital employees, including Jane K. Carten, Patrick T. Drum, Bryce R. Fegley, Tyler J. Howard, Nicholas F. Kaiser, Scott F. Klimo, Phelps S. McIlvaine, Christopher E. Paul, and other portfolio managers are paid an annual salary, as set by the board of Saturna Capital. The board also pays bonuses that are partly dependent on the profits of Saturna Capital and may also reflect the results of specific managed accounts or specific businesses of Saturna Capital. As owners of shares and/or stock options of Saturna Capital Corporation, Mrs. Carten and Messrs. Drum, Fegley, Howard, Kaiser, Klimo, McIlvaine, and Paul may benefit from any increase in its value per share that might result from its operations or profits. They may also receive dividends on shares of Saturna Capital. All Saturna Capital employees are eligible for a retirement plan, health care, and other benefits, and a stock option plan. Stock options are annually awarded on the basis of years of service, and not individual performance. Mutual fund portfolio managers are paid a monthly bonus (which may be shared with other employees) when a Fund achieves an overall rating of 4 or 5 stars from Morningstar. The bonus is 1% of the adviser's net monthly fee (which is based on both assets and performance) for a 4-star rating and 2% of the monthly fee for a 5-star rating.

Saturna's portfolio managers may manage multiple accounts, including mutual funds and separate accounts for individuals, investment partnerships, pension funds, and charities. Portfolio managers make investment decisions for each account based on the investment objectives, policies, practices, and other relevant investment considerations that the managers believe are applicable to that account. The management of multiple accounts may give rise to potential conflicts of interest when the accounts have similar or different objectives, benchmarks, time horizons, and fees because the portfolio manager must allocate his time and investment ideas across multiple accounts. Consequently, a manager may purchase (or sell) a security for one account and not for another. The adviser has adopted policies designed to fairly allocate securities purchased or sold on an aggregated basis. Transactions executed for one account may adversely affect the value of securities held by other accounts. Securities selected for some accounts may outperform the securities selected for others. Through an arrangement with Saturna Brokerage Services, accounts presently trade securities at zero commission, eliminating a potential conflict. A portfolio manager's compensation plan may give rise to potential conflicts of interest. To reduce this risk, a mutual fund portfolio manager's account performance bonus depends upon the Fund's overall Morningstar rating, which derives from investment results over the last three, five, and 10 years. A manager's compensation tends to increase with assets under management, which in turn may increase the value of Saturna Capital Corporation.

March 28, 2018 Statement of Additional Information 23

 

Portfolio Managers (as of Nov. 30, 2017)

Portfolio Manager:

Trust portfolios served as primary manager (assets):

Other investment company portfolios served as primary manager (assets):

Other pooled investment vehicles served as primary manager (assets):

Other accounts (assets):

Jane K. Carten

Saturna Sustainable Equity Fund
($4,983,786)

None

None

None

Patrick T. Drum

Saturna Sustainable Bond Fund
($21,970,987)

Amana Participation Fund
($47,359,358)

None

None

Bryce R. Fegley

Sextant Global High Income Fund
($9,368,909)¹

None

None

None

Nicholas F. Kaiser

Sextant International Fund
($67,338,085)¹
Saturna Sustainable Equity Fund
($4,983,786)

Amana Growth Fund
($1,692,426,131)
Amana Income Fund
($1,427,659,912)

Four
($54,246,976)¹

Seventeen
($28,051,419)

Scott F. Klimo

Sextant Growth Fund
($37,975,316)¹

Amana Dev. World Fund
($30,346,081)

None

None

Phelps S. McIlvaine

Sextant Bond Income Fund
($9,489,882)¹
Sextant Core Fund
($12,979,797)¹
Sextant Short-Term Bond Fund
($10,703,204)¹
Idaho Tax-Exempt Fund
($17,474,624)

None

None

Six
($7,964,565)

Christopher E. Paul

Sextant Core Fund
($12,979,797)1

None

None

None

¹ Assets managed with a performance fee

Portfolio Manager Fund Ownership (as of Nov. 30, 2017)

Dollar range of equity securities in Saturna Investment Trust Funds owned beneficially by Portfolio Managers

Jane K. Carten

Sextant Growth Z Shares: $50,001-$100,000
Sextant International Z Shares: $10,001-$50,000
Sextant Bond Income: $1-$10,000
Saturna Sustainable Equity: $100,001-$500,000
Saturna Sustainable Bond: $50,001-$100,000

Patrick T. Drum

Saturna Sustainable Bond: $10,001-$50,000

Bryce R. Fegley

Sextant Global High Income: $100,001-$500,000

Tyler J. Howard

Sextant Growth Z Shares: $10,001-$50,000
Sextant Core: $1-$10,000
Sextant Global High Income: $10,001-$50,000

Nicholas F. Kaiser

Sextant Growth Z Shares: over $1,000,000
Sextant International Z Shares: over $1,000,000
Sextant Core Fund: over $1,000,000
Sextant Short-Term Bond Fund: over $1,000,000
Sextant Bond Income Fund: over $1,000,000
Sextant Global High Income Fund: over $1,000,000
Saturna Sustainable Equity: over $1,000,000
Saturna Sustainable Bond: over $1,000,000
Idaho Tax-Exempt Fund: over $1,000,000

Scott F. Klimo

Sextant Growth Z Shares: $100,001-$500,000
Sextant International Z Shares: $100,001-$500,000

Phelps S. McIlvaine

Sextant Growth Fund Z Shares: $10,001-$50,000
Sextant International Fund Z Shares: $100,001-$500,000
Sextant Global High Income Fund: $50,001-$100,000

Christopher E. Paul

Sextant Core Fund: $500,001-$1,000,000

 

24 Statement of Additional Information March 28, 2018

Brokerage Allocation

The placing of purchase and sale orders and the negotiation of commissions for equity transactions are performed by the adviser and are reviewed by the Board of Trustees. Although it is permitted to do so, the adviser does not allocate brokerage to any broker in return for research or services.

The primary consideration in effecting securities transactions for the Funds is to obtain the best price and execution that in the judgment of the adviser is attainable at the time and which would bring the best overall net economic result to a 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 and is not required to execute trades in "over-the-counter" securities with primary market-makers if similar terms are available elsewhere. A Fund may not pay the lowest possible commission rate on certain trades if Saturna Capital believes that the Fund has obtained best execution and the commission rates are reasonable. The adviser evaluates whether brokerage commissions are reasonable based upon available information about the general level of commissions paid by other mutual funds for comparable services as well as evaluating services provided by the broker-dealer, such as willingness to take principal positions, ability to handle a particular type of trade, and confidentiality, among other things.

When consistent with best execution, brokerage may be directed to Saturna Brokerage Services, Inc., a wholly-owned subsidiary of the adviser, which engages in a discount brokerage business. Saturna Brokerage Services currently executes portfolio transactions for the Trust for free (no commissions). Transactions effected through other brokers are subject to commissions payable to that broker.

For purchases and sales of bonds and other fixed-income instruments, Saturna Capital, acting on behalf of the Fund, will deal directly with the issuer or through a primary market-maker acting as principal on a net basis. The Fund does not pay brokerage commissions, but the price will reflect the spread between the bid and ask prices of the security, which includes undisclosed compensation and may include selling concessions or underwriting fees.

The Commissions Paid To Saturna Brokerage Services table below contains the commissions each Fund paid Saturna Brokerage for each of the last three fiscal years.

The Commissions Paid To Other Broker-Dealers table below contains the commissions each Fund paid to unaffiliated broker-dealers for each of the last three fiscal years.

The Trustees review brokerage activity in detail at each regular quarterly meeting.

Commissions Paid To Saturna Brokerage Services

 

2017

2016

2015

% of 2017 aggregate brokerage commissions paid Saturna Brokerage

% of 2017 aggregate dollar amount of transactions involving the payment of commissions through Saturna Brokerage

Sextant Growth Fund

$-

$-

$-

0%

0%

Sextant International Fund

$-

$-

$-

0%

0%

Sextant Core Fund

$-

$-

$-

0%

0%

Sextant Short-Term Bond Fund

$-

$-

$-

0%

0%

Sextant Bond Income Fund

$-

$-

$-

0%

0%

Sextant Global High Income Fund

$-

$-

$-

0%

0%

Saturna Sustainable Equity Fund

$-

$-

n/a

0%

0%

Saturna Sustainable Bond Fund

$-

$-

n/a

0%

0%

Idaho Tax-Exempt Fund

$-

$-

$-

0%

0%

 

Commissions Paid To Other Broker-Dealers

The increase in brokerage commissions in fiscal year 2015 is attributable to an increase in portfolio transactions being directed to broker-dealers other than Saturna Brokerage Services.

 

2017

2016

2015

Sextant Growth Fund

$-

$-

$-

Sextant International Fund

$-

$200

$2975

Sextant Core Fund

$-

$-

$7

Sextant Short-Term Bond Fund

n/a

n/a

n/a

Sextant Bond Income Fund

n/a

n/a

n/a

Sextant Global High Income Fund

$-

$-

$513

Saturna Sustainable Equity Fund

$358

$-

$196

Saturna Sustainable Bond Fund

n/a

n/a

n/a

Idaho Tax-Exempt Fund

n/a

n/a

n/a

 

March 28, 2018 Statement of Additional Information 25

Capital Stock

The Saturna Investment Trust is organized as a "series" investment company. Each share class of a Fund is divided into shares of beneficial interest. Those Funds and classes are named: Sextant Growth Fund Investor Shares, Sextant Growth Fund Z Shares, Sextant International Fund Investor Shares, Sextant International Fund Z Shares, Sextant Core Fund, Sextant Global High Income Fund, Sextant Bond Income Fund, Sextant Short-Term Bond Fund, Saturna Sustainable Equity Fund, Saturna Sustainable Bond Fund, and Idaho Tax-Exempt Fund. There are no restrictions on shareowners' rights to freely retain or dispose of shares of any class. There are no material obligations or potential liabilities associated with owning a Fund's shares except the investment risks described in the Funds' prospectuses and summary prospectuses, and in this statement of additional information in the section Fund Descriptions, Investments, and Risks beginning on page 2. The shareowners of each separate Fund may look only to that Fund for dividends, income, capital gains or losses, redemption, liquidation, or termination. Each class of shares of a Fund will have (i) exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement and (ii) separate voting rights on any matter submitted to shareowners in which the interests of one Fund differ from the interest of any other Fund. The voting rights of each class of shares can only be modified by a majority vote of that class. Shareowners may elect to convert eligible Investor Shares into corresponding Z Shares of the same series. Any such conversion will occur at the next available respective net asset values of the share classes. There are no sinking fund provisions. The creditors and shareowners of each Fund are limited to the assets of that Fund for recovery of charges, expenses, and liabilities.

Purchase, Redemption, and Pricing of Shares

See Purchase and Sale of Fund Shares in the Prospectus or Summary Prospectus and Fund Share Pricing in the Prospectus for an explanation about the ways to purchase or redeem shares. Purchases and redemptions are processed at net asset value per share.

It is important to note that there are differences between the two share classes of Sextant Growth and Sextant International Funds. Investor Shares are subject to an annual distribution fee to compensate financial intermediaries for providing investors with ongoing account services. Z Shares (and shares of Funds that do not participate in the 12b-1 distribution plan) are not subject to an annual distribution fee and, consequently, holders of these shares may not receive the same types or levels of services from financial intermediaries. In choosing between Investor Shares versus Z Shares, investors should weigh the benefits of the services to be provided by financial intermediaries against the annual distribution fee imposed upon some shares. Sextant Growth and Sextant International Fund Z Shares will be purchased by default.

Offering Price

A Fund computes its price per share of share classes on each business day by dividing the value of all securities and other assets, less liabilities, attributable to each share class, by the number of shares outstanding of that class. The daily price is determined for each class of a Fund as of the close of trading on the New York Stock Exchange (generally 4 p.m. Eastern time) on each day the Exchange is open for trading. The Exchange is generally closed on New Year's Day, Martin Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. See the balance sheet in the Annual Report or Semi-Annual Report for a specimen sheet showing how the Funds calculate net asset value, which is the price used for both purchase and redemption of shares.

Pricing of Foreign Securities

Foreign securities traded outside the US are valued on the basis of their most recent closing market prices at 4 p.m. Eastern time.

Foreign markets may close before the time at which the Funds' prices are determined. Because of this, events occurring after the close of a foreign market and before the determination of the Funds' NAVs may have a material effect on the Funds' foreign security prices. To account for this the Funds may use independent pricing services for valuation of securities.

In developing valuations for foreign securities, the independent pricing services review a variety of factors, including developments in foreign markets, the performance of US securities markets, and the performance of instruments trading in US markets that represent foreign securities and baskets of foreign securities. The Funds may also fair value securities in other situations, for example, when a particular foreign market is closed but the Fund is open.

The Funds routinely compare closing market prices, the next day's opening prices in the same markets, and adjusted prices and other factors they believe are relevant for such testing. Other mutual funds may adjust the prices of their securities by different amounts.

Taxation of the Funds

Saturna Investment Trust is organized as a "series" investment company. Each Fund of the Trust 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 of the Trust conducts separate voting on issues relating solely to that Fund, except as required by the Investment Company Act. The tax status and tax consequences to shareowners of each Fund 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 each has since inception, with the provisions of the Internal Revenue Code applicable to regulated investment companies (Subchapter M), which relieve mutual funds of federal income taxes on the amounts so distributed.

If, in any taxable year, a Fund does not qualify as a regulated investment company under the Internal Revenue Code, (1) the Fund would be taxed at the normal corporate rates on the entire amount

26 Statement of Additional Information March 28, 2018

of its taxable income, if any, without a deduction for dividends or other distributions to shareowners; (2) the Fund's distributions, to the extent made out of the Fund's current or accumulated earnings and profits, would be taxable to shareowners as ordinary dividends, regardless of whether they would otherwise have been considered capital gain dividends; (3) the Fund may qualify for the 70% deduction for dividends received by corporations; and (4) foreign tax credits would not "pass through" to shareowners.

If shareowners do not furnish the transfer agent with a valid Social Security or Tax Identification Number and in certain other circumstances, the transfer agent is required to withhold 28% of income. Dividends and capital gain distributions to shareowners who are nonresident aliens may be subject to a 30% United States foreign 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 a Fund should be fined or penalized for inaccurate, 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.

At November 30, 2017, the Funds had capital loss carryforwards as follows, subject to regulation. The Registered Investment Company Modernization Act requires that the Funds use long-term and short-term loss carryforwards with unlimited expiration prior to those with an expiration. Prior to their expiration, such loss carryforwards may be used to offset future new capital gains realized for federal income tax purposes.

 

Carryforward

Expiration

 

Sextant Bond Income

Long-term loss carryforward

$46,167

Unlimited

 

46,167

 
 

Sextant Core

Short-term loss carryforward

$88,781

Unlimited

Long-term loss carryforward

$79,711

Unlimited

 

168,492

 
 

Sextant Global High Income

Long-term loss carryforward

$189,339

Unlimited

 

189,339

 
 

Saturna Sustaianble Equity

Short-term loss carryforwards

$262,074

Unlimited

 

262,074

 
 

Saturna Sustainable Bond

Short-term loss carryforward

$32,818

Unlimited

 

32,818

 
 

Idaho Tax-Exempt

Short-term loss carryforward

$62,746

Unlimited

 

62,746

 

Underwriters

The adviser's wholly-owned subsidiary, Saturna Brokerage Services, Inc., 1300 N. State Street, Bellingham, WA 98225 is a general securities brokerage firm and acts as distributor for the Funds under a Rule 12b-1 distribution plan.

Mrs. Jane Carten is President of Saturna Brokerage Services, Inc. All employees of the distributor are also employees of the adviser.

Under the distribution agreement, the distributor is not required to sell a certain number of shares. The offering of shares by the distributor is continuous.

Financial Statements

The most recent audited annual report accompanies this Statement of Additional Information.

There is incorporated into this Registration Statement the Annual Report to shareowners for the fiscal year ended November 30, 2017.

March 28, 2018 Statement of Additional Information 27
 

¹ A Fund's 30-Day Yield, sometimes referred to as "standardized yield" or "SEC yield,” is expressed as an annual percentage rate using a method of calculation adopted by the Securities and Exchange Commission (SEC). The 30-Day Yield provides an estimate of a Fund's investment income rate, but may not equal the actual income distribution rate.

² Expense ratios shown are as stated in the Fund's most recent prospectus or summary prospectus dated March 28, 2018.

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than performance data quoted. Standardized returns current to the most recent month-end can be obtained by visiting our Month-end Returns Page or by calling toll free 1-800-728-8762. The Fund cannot guarantee that its investment objective will be met. Securities of the Fund are offered and sold only through the prospectus or summary prospectus.