Q3 2017 • September 30, 2017 | Saturna Capital



Navigating Today's Volatile Markets



And The Beat Goes On

Equity indices around the world continued their remarkably steady march higher over the third quarter, despite the war of words that erupted between Donald Trump and North Korean leader Kim Jong-un; an exchange that caused serious people to discuss the risk of miscalculation leading to nuclear war.  On a more mundane level, there were indications the European Central Bank may be close to ending its extraordinary monetary policy; a hurricane battered the Texas Gulf Coast leaving Houston largely under water; another hurricane devastated heavily indebted Puerto Rico; and independence referendums in Iraqi Kurdistan and Spain’s Catalonia passed overwhelmingly, sparking tension between the regional and central governments, while making their neighbors nervous.  A lot happened in the third quarter, and none of it caused more than a blip in the stock market. 

Perhaps none of these events carry negative implications for corporate earnings or the investment environment, although it’s hard to believe a nuclear exchange wouldn't cause disruption.  Some events may even be positive for certain sectors, as illustrated by sharply higher car sales in October, driven by replacement demand in Texas and Florida.  Alternatively, market resilience may represent a victory of hope over experience.  Having failed to achieve any legislative victories to date, Republicans have set their sights on tax reform.  The plan, which remains short of detail, has been questioned in some quarters for potentially raising taxes on the middle class while cutting taxes for the wealthy.  Many prominent economists have expressed doubt surrounding the claims concerning deficit reduction.  Additionally, several Republicans have voiced reservations over some aspects of the plan, particularly the potential removal of mortgage interest deductibility, clouding the prospects for passage.  Regardless, the market remains unconcerned.

Maybe we shouldn’t be surprised by the “no drama” market of 2017 since that’s largely been the case since stocks bottomed in 2009 in the wake of the Global Financial Crisis…which may provide a clue as to the bull’s resilience.  There’s an unstoppable force (demographics) pushing against a clearly moveable object (stock values).  The two largest age cohorts in the United States are 20-29 and, more relevant to our point, 50-59.  The Baby Boom may have started in 1946, but it really got underway in the early 1950s and accelerated into the 1960s, as shown in the chart below.  People between the ages of 50-64 account for 19.9% of the US population.  Meanwhile, all cohorts above the age of 69 account for just over 10% of the population.  A reasonable assumption would be that the older citizens are drawing down their retirement portfolios, while a group that’s twice as large, many of whom have likely undersaved for retirement or have concerns about the future viability of Social Security, are ramping up their savings.  What happens when we transition to the retired making up a much larger portion of the population will not be known until the next decade.  Until then, for investors not yet in retirement or just beginning their retirement, staying fully invested remains the best strategy.


On a shorter-term view, and despite the risks of complacency, our outlook remains largely the same as at the end of the second quarter – economic conditions are generally good and improving around the world, interest rates remain low, and corporate earnings should grow, supporting current valuations. Nothing on the visible horizon presents a significant risk to equity markets.


Sextant Growth

The Sextant Growth Fund Investor Shares appreciated 2.89% in the third quarter, trailing the S&P 500’s 4.48% gain. Year-to-date the Fund has returned 14.90%, ahead of the 14.24% rise in the S&P 500. Technology remains the largest sector exposure, and new positions were established in Juniper Networks and Oracle. Technology also provided the largest contribution to Fund returns. Consumer Staples selections performed much better than the overall sector but that was more than offset by weak performance in the Consumer Discretionary sector.

Facebook has done well this year, but we have recently reduced the position with the view that the threat of regulatory interference is rising. Facebook management has also indicated that it expects advertising revenue growth to slow materially due to capacity constraints. It hasn't happened yet, but when it does, the reaction will likely be significant. It was a good quarter for the Fund’s Technology investments, as well as its Health Care selections. We retain confidence in Alphabet, Adobe, and Microsoft but are concerned about the underwhelming response to Apple’s latest iPhone introduction. On the other hand, if the government does pass tax reform that allows repatriation of overseas cash at reduced taxation, Apple shareholders could benefit.

After rebounding in the second quarter, Nike slumped again in the third quarter following an earnings release that showed US sales falling. Good sales performance elsewhere around the world is welcome, but the US remains the single largest market. Starbucks has been a desultory performer since late 2015, but we believe that to be a case of the valuation having gotten ahead of itself. The firm has significant room to grow, especially in China. We have added to positions in Alaska Air and Johnson Controls believing their valuations attractive along with positive business outlooks. EMCOR and Ashland have been sold from the portfolio.

JP Morgan Chase has replaced Nike among the top 10 holdings.

As of September 30, 2017

10 Largest Contributors Return Contribution
Facebook, Class A 13.17% 0.72
Apple 7.45% 0.51
Mastercard, Class A 16.47% 0.50
Celgene 12.28% 0.40
Microsoft 8.64% 0.32
Stanley Black & Decker 7.76% 0.31
Abbott Laboratories 10.37% 0.29
Bristol-Myers Squibb 15.19% 0.26
Alphabet, Class A 4.74% 0.25
Adobe Systems 5.47% 0.24
10 Largest Detractors Return Contribution
Nike, Class B -11.82% -0.48
Starbucks -7.47% -0.33
Alaska Air Group -14.70% -0.27
Edwards Lifesciences -7.55% -0.22
RPM International -5.37% -0.18
Hasbro -11.94% -0.13
Johnson Controls International -6.50% -0.12
Ecolab -2.84% -0.10
EMCOR Group -3.05% -0.04
Ashland Global Holdings -7.22% -0.04
Top 10 Holdings Portfolio Weight
Apple 7.05%
Facebook, Class A 5.90%
Alphabet, Class A 5.17%
TJX Companies 4.67%
Adobe Systems 4.36%
Stanley Black & Decker 4.01%
Starbucks 3.96%
Amazon.com 3.91%
Microsoft 3.75%
JP Morgan Chase 3.56%

Sextant International

The Sextant International Fund Investor Shares appreciated 7.78% in the third quarter, surpassing the 5.47% gain in the MSCI EAFE Index. Year-to-date the Fund has returned 20.65% versus 20.47% for the benchmark. Stock selection was strong across the board in the third quarter but especially so in Information Technology and Health Care. Regionally, the Fund did well in Western Europe, with excellent results in Germany, the Netherlands, and Denmark. In Asia-Pacific we are underweight Japan and Australia, which performed reasonably well, but solid returns in Canada made up the difference.

Our strongest contributors were drawn from a wide variety of sectors in the third quarter, including Technology, Health Care, Industrials, Media, and Consumer. European stocks were most represented, but they make up over half of the Fund’s exposure so that comes as no surprise. All of the stocks listed have been long-term investments, which likely will continue to be the case as we believe each to have an identifiable and sustainable competitive advantage.

When some of your worst performers provide positive double-digit basis point contributions, like MercadoLibre and Belmond, it’s a clear sign of market strength. That two of the weaker stocks are South Korean is to be expected given the insults tossed back forth between North Korea and the United States during the annual United Nations Conference. Carrefour has suffered an extended period of weakness and plunged in late August after cutting sales guidance. We are evaluating the outlook for that business.

There was only one change to the top 10 holdings during the quarter with Fomento Economico Mexicano replacing Toronto-Dominion Bank.

As of September 30, 2017

10 Largest Contributors Return Contribution
ASML Holding 31.38% 2.23
BASF ADS 14.16% 0.82
Toronto-Dominion Bank 13.75% 0.69
Dassault Systemes ADR 12.67% 0.66
Wolters Kluwer 9.95% 0.64
Unilever ADS 7.88% 0.55
Novo-Nordisk ADR 13.44% 0.45
Toyota Motor ADS 13.47% 0.43
Copa Holdings, Class A 7.09% 0.39
Total ADS 9.41% 0.32
10 Largest Detractors Return Contribution
Carrefour ADS -21.57% -0.29
Shire ADR -7.25% -0.19
Fomento Economico Mex ADS -2.86% -0.13
Mitsubishi UFJ Financial ADR -4.59% -0.10
SK Telecom ADR -4.21% -0.05
Korea Electric Power ADS -6.73% -0.04
Sinopharm Group -0.99% -0.01
Industria de Diseno Textil -1.65% 0.00
Belmond, Class A 2.63% 0.12
MercadoLibre 3.27% 0.12
Top 10 Holdings Portfolio Weight
Wolters Kluwer 6.78%
ASML Holding NY 6.48%
BASF ADS 6.25%
NICE Systems ADS 5.96%
Copa Holdings, Class A 5.48%
Dassault Systemes ADR 5.05%
Belmond, Class A 4.46%
Unilever ADS 4.25%
Fomento Economico Mex ADS 4.20%
Novartis ADR 4.15%

Sextant Global High Income

The Sextant Global High Income Fund returned 5.99% in the third quarter of 2017, ending the period with $9.6 million in total net assets, which included 14% in cash. Fund performance during the quarter exceeded the returns of the S&P Global 1200 benchmark (5.22%), the Bloomberg Global Corporate High Yield Index (2.79%), and its Morningstar World Allocation peer group (3.37%).

Brazilian bank Itau Unibanco (25.38%) was the Fund’s strongest contributor to returns during the quarter after Brazilian stocks clawed back ground they lost in May due to worries about the country’s latest government corruption scandal. Mining company South 32 rose 28.45%, buoyed by higher commodity prices and success in cutting costs.

Detractors to performance included the pharmaceutical company GlaxoSmithKline (-4.66%), which suffered under a weakening British pound, and SK Telecom (-4.21%), which lagged the Korean market and its global telecom peers.

The Fund did not initiate any new positions during the period. Volatility in global and US equity indices was subdued during the third quarter, reaching lows last seen in early 2007 prior to the Global Financial Crisis. Meanwhile, high-yield bond spreads have been scraping along their lowest levels since the financial crisis. The serenity of the financial markets is consistent with a good outlook for economic and corporate earnings growth, but not, perhaps, with the recent escalation of tensions on the Korean peninsula and the risks of ongoing political fragmentation in Europe and elsewhere. We believe opportunity awaits when markets react more strongly to political or economic turmoil, and at least some amount of fear is palpable. For now, the Fund continues to maintain an excess cash position and a conservative approach.

As of September 30, 2017

10 Largest Contributors Return Contribution
Itau Unibanco Holding ADS 25.38% 0.76
South32 ADR 28.45% 0.68
Microchip Technology 16.84% 0.64
Statoil ADS 22.97% 0.56
CNOOC ADR 21.06% 0.48
BHP Billiton ADS 16.10% 0.44
Royal Dutch Shell ADS, Class A 15.78% 0.39
HP 14.97% 0.32
Potash Corp of Saskatchewan 19.13% 0.31
Federal Republic of Brazil (8.50% 01/05/2024) 9.09% 0.26
10 Largest Detractors Return Contribution
SK Telecom ADR -4.21% -0.08
GlaxoSmithKline ADS -4.66% -0.08
Puerto Rico Aqueduct & Sewer Rev (5.00% 07/01/2019) -6.18% -0.05
Colony TX NFM Sales Tax Revenue (7.00% 10/01/2027) -0.41% -0.01
Colony TX NFM Sales Tax Revenue (7.25% 10/01/2033) -0.76% -0.01
Goodrich Petroleum -20.41% 0.00
Nokia (5.375% 05/15/2019) 0.66% 0.01
Hewlett Packard (4.65% 12/09/2021) 0.87% 0.01
Anglogold Ashanti Holdings (5.375% 04/15/2020) 0.96% 0.01
Republic of South Africa (8.25% 09/15/2017) 1.24% 0.01
Top 10 Holdings Portfolio Weight
US Treasury Bond (6.125% 11/15/2027) Bond 7.04%
Microchip Technology Stock 3.76%
Mexico Bonos Desarrollo (6.50% 06/10/2021) Bond 3.43%
Itau Unibanco Holding ADS Stock 3.16%
T-Mobile USA (6.50% 01/15/2026) Bond 2.89%
Jefferies Group (5.125% 01/20/2023) Bond 2.86%
South32 ADR Stock 2.56%
BHP Billiton ADS Stock 2.55%
Statoil ADS Stock 2.52%
Federal Republic of Brazil (8.50% 01/05/2024) Bond 2.51%

Sextant Short-Term Bond Fund, Sextant Bond Income Fund

Sextant Short term Bond Fund returned 0.29% for the quarter and 0.97% year-to-date.

Sextant Bond Income Fund with its long average duration returned 1.18% for the quarter and 4.35% year-to-date.

Major central banks have assumed a new role as providers of liquidity to be made available when the world’s real savings fail to meet urgent needs. While the traditional management of short-term interest rates, currency exchange rates, and inflation will continue, it now appears less likely central bank balance sheets will revert to their prior relative size or immobility.

In this light, the lack of volatility in bond markets is a rational response to the availability of limitless capital that can be deployed to narrow the distribution of possible outcomes. Today, investors believe it is harder for a true “black swan” to take flight. Central banks have slowed the momentum of and increased the inertia of the fixed income capital market. They have reduced the kinetic energy of the market and multiplied the force necessary to cause an acceleration in interest rates and investor emotions. After five years, the US 10-year note and US 30-year bond remain within 0.20% of their five-year average yield.

The Catalan province of Spain, the regional banking crisis in Italy, the judicial upheaval in Poland, and Brexit have imposed new burdens on the European Central Bank’s ultra-accommodative policies. The ECB’s policies are becoming as important to fighting euro-skepticism as they are to re-funding the maturing bonds of heavily indebted EU members. We should expect the ECB to take a very long time to withdraw negative rates and reduce their balance sheet.

China’s exceptionally large public and private debt burdens will continue to act as a growth retardant and deflationary export. Chinese rates may rise internally to steady the yuan or compensate for greater counterparty risk, but the central government will contain the repercussions of debt rationalization inside China. China seems unlikely to be the source of a global interest rates rise.

Japan has replaced their quantitative easing (bond buying) with yield curve targeting (0% for 10-year notes). This is an overt ring fencing of market-based rate discovery and volatility. Considering their exceptional national debt burden, Japan is unlikely to exert upward pressure on global interest rates any time soon.

While economic growth around the world is improving, inflation trends remain subdued. If there is an impetus for US yields to rise it is likely to originate with the US Federal Reserve. However, Fed tightening today seems as much about restoring the ability to ease before the next recession as it is about the need to temper resurgent inflation or a booming economy. While rising wages, possible corporate tax cuts, and years of monetary easing appear to have put a floor under inflation, this floor is not a springboard. Federal deficits and debt burdens, slow real income growth, low productivity, poor demographics, and underfunded pensions seem more than a match for the recent uptick in inflation.

Current US Federal Reserve policy has mixed implications for bond investors. Bond prices under five years to maturity will respond to incremental increases in the US federal funds rate. Depending on the pace of these rate increases, coupon income can offset the decrease in bond prices netting out returns either side of zero. However, prices of bonds maturing beyond seven years may be able to resist this negative influence. A flattening yield curve leaves open the possibility of more positive returns for long-term paper.

Over the last year, the slow upward trend in US inflation and economic growth continued. The US Federal Reserve 5-year/5-year forward inflation index rose from 1.51% to 1.79%. The 30-year US Treasury yield rose from 2.31% to 2.86%. However, the yield curve between 30-year US Treasury bonds and 1-year US Treasury bills flattened from 2.12% to 1.91%. The September 30, 2016 Federal Reserve Bank of Atlanta Q3 2016 GDPNow forecast was 2.41%. The September 30, 2017 Federal Reserve Bank of Atlanta Q3 2017 GDPNow forecast is 2.30%.

As of September 30, 2017

Sextant Short-Term Bond Fund (STBFX)
Top 10 Holdings Portfolio Weight
US Treasury Note (3.625% 02/15/2021) 8.71%
US Treasury Note (2.50% 08/15/2023) 4.67%
McCormick & Co. (2.70% 8/15/2022) 4.57%
Gilead Sciences (2.55% 09/01/2020) 3.71%
Adobe Systems (4.75% 02/01/2020) 3.67%
Abbott Laboratories (4.125% 05/27/2020) 3.59%
Snap-On (6.70% 03/01/2019) 3.40%
Alibaba Holding Group (3.125% 11/28/21) 3.26%
Teva Pharmaceutical (3.65% 11/10/2021) 3.21%
BHP Billiton Fin USA (6.50% 04/01/2019) 3.07%
Sextant Bond Income Fund (SBIFX)
Top 10 Holdings Portfolio Weight
US Treasury Bond (5.375% 02/15/2031) 5.75%
Intel Corp (4.00% 12/15/2032) 4.23%
Apple (4.50% 02/23/2036) 4.23%
Microsoft Corp (4.20% 11/03/2035) 4.18%
Cincinnati Financial (6.92% 05/15/2028) 3.45%
US Treasury Bond (6.125% 08/15/2029) 3.35%
Statoil ASA (Norsk Hydro Yankee) (7.15% 01/15/2029) 3.27%
Puget Sound Energy (7.02% 12/01/2027) 3.20%
Becton Dickinson (6.70% 08/01/2028) 3.20%
Merck & Co. (Schering) (6.50% 12/01/2033) 3.09%

Sextant Core Fund

The third quarter of 2017 ended with generally positive equity returns and muted fixed income returns. During this period, the Sextant Core Fund produced positive results each month. The Fund's quarterly return of 3.52% led the benchmark Dow Jones Moderate Global Portfolio Index return of 3.29% for the same period. Year-to-date, the Fund produced positive returns each month and generated a total return of 10.86%, slightly higher than the benchmark return of 10.80%.


The Sextant Core Fund’s mandates specify a 60% allocation to equity securities, with two-thirds being US-domiciled companies and one-third foreign-domiciled companies. The Fund’s equity allocation averaged 62.1% in the third quarter, a reduction from 67.6% in the second quarter of 2017. Positions in the Financial Services and Technology sectors positively contributed to performance while detractors dispersed across sectors. Year-to-date, the Technology sector provided the largest contribution to return and remained the largest equity sector at 13.9% of the total portfolio, a decrease from 14.8% at the end of the second quarter.

Fixed Income

The Fund’s fixed income component maintains an intermediate maturity profile with more than 80%, as measured by market value, having a maturity greater than two years. Volatility during the quarter was low while a beneficial low inflation outlook could not fully offset higher short-term rates that anticipate a rate increase by year-end 2017.

Looking Forward

With regard to the equity portion of the Fund, it remains fully invested at 62.1% versus the 60% allocation mandate. During the quarter, the Fund increased the number of equity positions from 52 to 56, and decreased average position size from 1.3% to 1.1% while increasing the average market capitalization from $120 billion to $122 billion. The Fund initiated four new positions, two in Industrials, and one each in the Consumer Goods and Technology sectors. Fifty-nine percent of the Fund’s equity portion is valued below the S&P 500 2017 projected price-to-earnings multiple (19.4x). Likewise, 70% of the Fund’s equity portion yields more than the S&P 500 2017 projected dividend yield (1.9%). The Fund’s equity capital allocation focus remains biased to value and income characteristics with an emphasis on value.

The Fund has modest maturities during the next 12 months. Should the Fed follow through and raise rates, the Fund may have opportunities to reinvest maturing issues at higher yields. We continue to see a Goldilocks-like scenario in which the US economy is "just right." US inflation remained moderate and economic growth improved. Low inflation and higher growth bode well for the next quarter.

As of September 30, 2017

10 Largest Contributors Return Contribution
Toronto-Dominion Bank 13.75% 0.22
Statoil ADS 22.97% 0.21
Ally Financial 16.69% 0.19
Infineon Technologies ADR 18.40% 0.18
HP 14.97% 0.18
Sensata Technologies Holding 12.52% 0.15
Tencent Holdings ADR 22.12% 0.14
PNC Financial Services Group 8.56% 0.14
Apple 7.45% 0.14
Amgen 8.99% 0.13
10 Largest Detractors Return Contribution
Delta Air Lines -9.70% -0.08
RPM International -5.37% -0.08
Nestle ADS -3.66% -0.08
Johnson Controls International -6.50% -0.06
Mitsubishi UFJ Financial ADR -4.59% -0.06
PepsiCo -2.84% -0.05
Oracle -3.21% -0.03
Chubb -1.46% -0.02
National Oilwell Varco -2.00% -0.01
PPG Industries -0.75% -0.01
Top 10 Holdings Portfolio Weight
US Treasury Note (1.50% 6/15/2020) Bond 5.11%
US Treasury Note (2.75% 11/15/2023) Bond 2.87%
Gilead Sciences (3.70% 04/01/2024) Bond 2.08%
Nestle ADS Stock 1.99%
US Treasury Note (2.00% 11/30/2022) Bond 1.97%
Apple Stock 1.82%
PNC Financial Services Group Stock 1.69%
Toronto-Dominion Bank Stock 1.65%
US Treasury Note (2.125% 08/31/2020) Bond 1.63%
3M Stock 1.61%

Morningstar Sustainability Ratings™

As of September 30, 2017

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Sextant Growth Fund


Sextant Core Fund

Investor Shares (SSGFX) Morningstar Sustainability Rating - Above Average SCORX Morningstar Sustainability Rating - High
Z Shares (SGZFX) Morningstar Sustainability Rating - Above Average Among 723 Allocation 50% — 70% Equity Funds
Among 1,258 Large Growth Funds

Sextant International Fund


Sextant Short-Term Bond Fund

Investor Shares (SSIFX) Morningstar Sustainability Rating - High STBFX Morningstar Sustainability Rating - High
Z Shares (SSIFX) Morningstar Sustainability Rating - High Among 463 Short-Term Bond Funds
Among 590 Foreign Large Blend Funds
The Sextant Bond Income Fund has not yet received a Sustainability Rating.  

Sextant Global High Income Fund

SGHIX Morningstar Sustainability Rating - Average
Among 402 World Allocation Funds

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Performance data quoted herein represents past performance and does not guarantee future results.

The Morningstar Sustainability Rating and the Morningstar Portfolio Sustainability Score are not based on fund performance and are not equivalent to the Morningstar Rating ("Star Rating").

© 2017 Morningstar®. All rights reserved. Morningstar, Inc. is an independent fund performance monitor. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Morningstar Sustainability Ratings are As of August 31, 2017. The Morningstar Sustainability Rating™ is intended to measure how well the issuing companies of the securities within a fund's portfolio are managing their environmental, social, and governance ("ESG") risks and opportunities relative to the fund's Morningstar category peers. The Morningstar Sustainability Rating calculation is a two-step process. First, each fund with at least 50% of assets covered by a company-level ESG score from Sustainalytics receives a Morningstar Portfolio Sustainability Score™. The Morningstar Portfolio Sustainability Score is an asset-weighted average of normalized company-level ESG scores with deductions made for controversial incidents by the issuing companies, such as environmental accidents, fraud, or discriminatory behavior. The Morningstar Sustainability Rating is then assigned to all scored funds within Morningstar Categories in which at least ten (10) funds receive a Portfolio Sustainability Score and is determined by each fund's rank within the following distribution: High (highest 10%), Above Average (next 22.5%), Average (next 35%), Below Average (next 22.5%), and Low (lowest 10%). The Morningstar Sustainability Rating is depicted by globe icons where High equals 5 globes and Low equals 1 globe. A Sustainability Rating is assigned to any fund that has more than half of its underlying assets rated by Sustainalytics and is within a Morningstar Category with at least 10 scored funds; therefore, the rating it is not limited to funds with explicit sustainable or responsible investment mandates. Morningstar updates its Sustainability Ratings monthly. Portfolios receive a Morningstar Portfolio Sustainability Score and Sustainability Rating one month and six business days after their reported as-of date based on the most recent portfolio. As part of the evaluation process, Morningstar uses Sustainalytics' ESG scores from the same month as the portfolio as-of date

The Funds were rated on the following percentages of Assets Under Management:

Sextant Growth Fund 98%
Sextant International Fund 93%
Sextant Core Fund 76%
Sextant Short-Term Bond Fund 57%
Sextant Global High Income Fund 59%

The Sextant Growth and Sextant International Funds offer two share classes – Investor Shares and Z Shares, each of which has different expense structures.


Performance Summary

As of September 30, 2017

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Average Annual Total Returns(Before Taxes) 1 Year 3 Year 5 Year 10 Year Expense RatioA
  Gross Net
Sextant Growth Investor Shares (SSGFX) 15.31% 5.36% 10.79% 5.60% 0.76% 0.76%
Sextant Growth Z Shares (SGZFX)B n/a   n/a   n/a   n/a 0.51% 0.51%
S&P 500 Index 18.61% 10.81% 14.21% 7.43% n/a
Sextant International Investor Shares (SSIFX) 17.01% 5.36% 5.60% 2.35% 1.00% 1.00%
Sextant International Z Shares (SIFZX)B n/a   n/a   n/a   n/a 0.75% 0.75%
MSCI EAFE Index 19.65% 5.53% 8.86% 1.82% n/a
Sextant Core (SCORX) 9.43% 3.60% 5.37% 3.79% 0.80% 0.80%
Dow Jones Moderate Portfolio Index 10.09% 6.25% 7.60% 5.29% n/a
Sextant Global High Income (SGHIX)C 13.80% 5.18% 5.74% n/a   0.92% 0.75%
S&P 500 Global 1200 Index 19.62% 8.51% 11.58% 4.88% n/a
Bloomberg Global High Yield Corporate Bond Index 9.67% 5.30% 5.97% n/a   n/a
Sextant Short-Term Bond (STBFX) 0.64% 1.06% 0.96% 2.13% 0.90% 0.60%
Citi USBIG Govt/Corp 1-3 Year Index 0.62% 1.01% 0.87% 2.06% n/a
Sextant Bond Income (SBIFX) 0.15% 2.95% 2.28% 4.41% 0.76% 0.65%
Citi US Broad Investment-Grade Bond Index 0.06% 2.72% 2.06% 4.35% n/a

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Performance data quoted 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.sextantfunds.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. Shares of a Fund may only be offered for sale through the Fund’s prospectus or summary prospectus.

A By regulation, expense ratios shown are as stated in a Fund's most recent prospectus or summary prospectus, dated June 2, 2017, and incorporate results from the fiscal year ended November 30, 2016. Expense ratios of Sextant Core, Sextant Global High Income, Sextant Short-Term Bond, and Sextant Bond Income Funds are restated to reflect the ending of the Distribution (12b-1) Fees, as approved by the Board of Trustees on March 14, 2017. Higher expense ratios may indicate higher returns relative to a Fund's benchmark. The Adviser has voluntarily capped actual expenses of Sextant Global High Income at 0.75%, Sextant Short-Term Bond at 0.60% and actual expenses of Sextant Bond Income at 0.65% through June 2, 2018

B Z Shares of Sextant Growth and Sextant International Funds began operations June 2, 2017.

C Sextant Global High Income Fund began operations March 30, 2012.

The S&P 500 Index is an index comprised of 500 widely held common stocks considered to be representative of the US stock market in general. The MSCI EAFE Index is an international index focused on Europe, Australasia, and the Far East. The S&P Global 1200 Index is a global stock market index covering nearly 70% of the world's equity markets. The Bloomberg Global High Yield Corporate Bond Index is a rules-based, market-value weighted index engineered to measure the non-investment grade, fixed-rate, taxable, global corporate bond market. The Dow Jones Moderate Portfolio Index is a broad-based index of stock and bond prices. The Citi USBIG Govt/Corp 1-3 Year Index is a broad-based index of shorter-term investment grade US government and corporate bond prices. The Citi US Broad Investment-Grade Bond Index is a broad-based index of medium and long-term investment grade bond prices. Investors cannot invest directly in the indices.


Important Disclaimers and Disclosure

This publication should not be considered investment, legal, accounting, or tax advice or a representation that any investment or strategy is suitable or appropriate to a particular investor's circumstances or otherwise constitutes a personal recommendation to any investor. This material does not form an adequate basis for any investment decision by any reader and Saturna may not have taken any steps to ensure that the securities referred to in this publication are suitable for any particular investor. Saturna will not treat recipients as its customers by virtue of their reading or receiving the publication.

The information in this publication was obtained from sources Saturna believes to be reliable and accurate at the time of publication.

All material presented in this publication, unless specifically indicated otherwise, is under copyright to Saturna. No part of this publication may be altered in any way, copied, or distributed without the prior express written permission of Saturna.

A Few Words About Risk

The Growth Fund may invest in smaller companies, which involve higher investment risks in that they often have limited product lines, markets, and resources, or their securities may trade less frequently and have greater price fluctuation than those of larger companies.

The International Fund involves risks not typically associated with investing in US securities. These include fluctuations in currency exchange rates, less public information about securities, less governmental market supervision, and lack of uniform financial, social, and political standards.

The Core Fund involves the risks of both equity and debt investing, although it seeks to mitigate these risks by maintaining a widely diversified portfolio that includes domestic stocks, foreign stocks, short and long-term bonds, and money market instruments.

Investment in the Global High Income Fund entails the risks of both equity and debt securities, although it seeks to mitigate these risks through a widely diversified portfolio that includes foreign and domestic stocks and bonds. Issuers of high-yield securities are generally not as strong financially as those issuing higher quality securities. Investments in high-yield securities can be speculative in nature. High-yield bonds may have low or no ratings, and may be considered "junk bonds."

The risks inherent in the Short-Term Bond and Bond Income Funds depend primarily on the terms and quality of the obligations in their portfolios, as well as on bond 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 Bond Income Fund) usually are more sensitive to interest rate changes than bonds with shorter maturities (such as those held by the Short-Term Bond Fund). The Funds entail 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.