Documents | Saturna Capital

 

Saturna Sustainable Equity Fund Summary Prospectus

Beginning on January 29, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Saturna Sustainable Funds' annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds' website (www.saturna.com/reports), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 800-SATURNA (800-728-8762) or by sending an e-mail request to Saturna Sustainable Funds at info@saturna.com.

Beginning on January 2, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 800-SATURNA (800-728-8762) or send an e-mail request to Saturna Sustainable Funds at info@saturna.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Funds.

 

Saturna Sustainable Equity Fund

Ticker Symbol: SEEFX

March 27, 2019

SUMMARY PROSPECTUS

Before you invest, you may want to review Saturna Sustainable Equity 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 27, 2019, are incorporated by reference into this Summary Prospectus.


Saturna Sustainable Equity Fund

SEEFX

Investment Objective

Capital appreciation.

Fees and Expenses

This section describes the fees and expenses that you may pay if you buy and hold shares of the Sustainable Equity Fund.

Shareowner Fees

None.

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees 0.65%
Other Expenses 0.62%
Total Annual Fund Operating Expenses 1.27%
Fee Waiver and Expense Reimbursement 0.52%
Total Annual Fund Operating Expense after Fee Waiver and Expense Reimbursement 0.75%

The investment adviser has committed through March 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to ensure that the Fund's net operating expenses, excluding brokerage commissions, interest, taxes, and extraordinary expenses do not exceed the net operating expense ratio of 0.75%. This expense limitation agreement may be changed or terminated only with approval of the Board of Trustees.

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
$129 $403 $697 $1,534

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 have 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 your after-tax returns. During the most recent fiscal year, the Fund's portfolio turnover rate was 8.33% of the average value of its portfolio.

Principal Investment Strategies

Under normal conditions, the Fund invests at least 80% of its net 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 employs a sustainable rating system based on its own, as well as third-party, data to identify issuers believed to present low risks in ESG. The Fund's adviser also uses negative screening to exclude security issuers primarily engaged in higher ESG risk businesses such as alcohol, tobacco, pornography, weapons, gambling, and fossil fuel extraction.

The Fund diversifies its investments across industries, companies, and countries, and generally follows a large and mid-cap value investment style. The Fund prefers seasoned companies that are expected to grow revenue and earnings, favoring equities of companies trading for less than the adviser's assessment of their intrinsic value, which typically means companies with low price/earnings multiples, strong balance sheets, and higher dividend yields. The Fund principally invests in securities of companies with market capitalizations of greater than $5 billion. The Fund may invest up to 30% of net assets in companies with headquarters in countries with developing economies and/or markets.


Saturna Sustainable Equity Fund

SEEFX

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: The adviser believes that sustainable investing may mitigate security-specific risk, but the screens used in connection with sustainable investing reduce the investable universe, which limits opportunities and may increase the risk of loss during market declines. In addition, the Fund has a relatively limited operating history, having commenced investment operations in March 2015, and its limited performance history does not provide extensive information on how the Fund may perform in different market conditions.

Equity securities risk: Equity securities may experience significant volatility in response to economic or market conditions or adverse events that affect a particular industry, sector, or company. Larger companies may have slower rates of growth as compared to smaller, faster-growing companies. Smaller companies may have more limited financial resources, products, or services, and tend to be more sensitive to changing economic or market conditions.

Growth investing risk: The Fund may invest in growth stocks, which may be more volatile than slower-growing value stocks, especially when market expectations are not met.

Foreign investing risk: Foreign investing involves risks not normally associated with US securities. These risks include fluctuations in currency exchange rates, less public information about securities, less governmental market supervision, and lack of uniform financial, social, and political standards. Foreign investing heightens the risk of confiscatory taxation, seizure or nationalization of assets, currency controls, or adverse political or social developments that affect investments.

Emerging markets risk: In emerging markets and less developed countries, the risks of investing in foreign securities can be magnified by less mature political systems and weaker corporate governance standards than typically found in the developed world.

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.saturnasustainable.com.

Saturna Sustainable Equity Fund Annual Total Returns

* For the period 3/27/2015 (the Fund's inception) through 12/31/2015, and not annualized.

Best Quarter Q1 2017 8.00%
Worst Quarter Q4 2018 -11.81%

Average Annual Total Returns

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

Periods ended December 31, 2018
  1 Year Life of Fund
Since 3/27/2015
Return before taxes -5.76% 2.60%
Return after taxes on distributions -5.88% 2.50%
Return after taxes on distributions and sale of Fund shares -4.32% 2.04%
S&P Global 1200 Index
(reflects no deduction for fees, expenses or taxes)
-8.17% 4.96%

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 tax-deferred, tax-exempt, or taxed at special rates.


Saturna Sustainable Equity Fund

SEEFX

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.

Investment Adviser

Saturna Capital Corporation is the Saturna Sustainable Equity Fund's investment adviser.

Portfolio Manager

Mrs. Jane K. Carten MBA, president of Saturna Capital Corporation, is the person primarily responsible for the day-to-day management of the Saturna Sustainable Equity Fund, a role she assumed in 2017. Mr. Nicholas F. Kaiser MBA, CFA®, chairman of Saturna Capital Corporation, serves the Fund as deputy portfolio manager, a role he assumed in 2017. Previously, he was the Fund's portfolio manager since 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 Sustainable Equity Fund.

The minimum initial investment is $10,000 (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:   Saturna Sustainable Funds
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

Telephone request

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

Online

Visit: www.saturnasustainable.com

Tax Information

Any distributions you receive from the Fund may be taxed as ordinary income, qualified dividend income, or capital gains.

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.

 

Saturna Sustainable Funds Prospectus March 27,2019

Beginning on January 29, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Saturna Sustainable Funds' annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds' website (www.saturna.com/reports), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 800-SATURNA (800-728-8762) or by sending an e-mail request to Saturna Sustainable Funds at info@saturna.com.

Beginning on January 2, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 800-SATURNA (800-728-8762) or send an e-mail request to Saturna Sustainable Funds at info@saturna.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Funds.

Saturna Sustainable Funds

Prospectus

March 27, 2019

Please read this Prospectus and keep it for future reference. It is designed to provide important information and to help investors decide if the Saturna Sustainable Funds' 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.

The Saturna Sustainable Funds are series of Saturna Investment Trust.

Sustainable Equity Fund(graphic omitted) SEEFX Sustainable Bond Fund(graphic omitted) SEBFX

Table of Contents:

Saturna Sustainable Equity Fund 3
Saturna Sustainable Bond Fund 6
Investment Objectives 9
Principal Investment Strategies 9
Principal Risks 10
Investment Information 12
Investment Adviser 12
Fund Share Pricing 12
Purchase and Sale of Fund Shares 13
Purchase and Sale of Fund Shares Through Financial Intermediaries 15
Distributions 15
Frequent Trading Policy 15
Tax Consequences 16
Distribution Arrangements 16
Financial Highlights 17

 

2


Saturna Sustainable Equity Fund

SEEFX

Investment Objective

Capital appreciation.

Fees and Expenses

This section describes the fees and expenses that you may pay if you buy and hold shares of the Sustainable Equity Fund.

Shareowner Fees

None.

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees 0.65%
Other Expenses 0.62%
Total Annual Fund Operating Expenses 1.27%
Fee Waiver and Expense Reimbursement 0.52%
Total Annual Fund Operating Expense after Fee Waiver and Expense Reimbursement 0.75%

The investment adviser has committed through March 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to ensure that the Fund's net operating expenses, excluding brokerage commissions, interest, taxes, and extraordinary expenses do not exceed the net operating expense ratio of 0.75%. This expense limitation agreement may be changed or terminated only with approval of the Board of Trustees.

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
$129 $403 $697 $1,534

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 have 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 your after-tax returns. During the most recent fiscal year, the Fund's portfolio turnover rate was 8.33% of the average value of its portfolio.

Principal Investment Strategies

Under normal conditions, the Fund invests at least 80% of its net 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 employs a sustainable rating system based on its own, as well as third-party, data to identify issuers believed to present low risks in ESG. The Fund's adviser also uses negative screening to exclude security issuers primarily engaged in higher ESG risk businesses such as alcohol, tobacco, pornography, weapons, gambling, and fossil fuel extraction.

The Fund diversifies its investments across industries, companies, and countries, and generally follows a large and mid-cap value investment style. The Fund prefers seasoned companies that are expected to grow revenue and earnings, favoring equities of companies trading for less than the adviser's assessment of their intrinsic value, which typically means companies with low price/earnings multiples, strong balance sheets, and higher dividend yields. The Fund principally invests in securities of companies with market capitalizations of greater than $5 billion. The Fund may invest up to 30% of net assets in companies with headquarters in countries with developing economies and/or markets.

3


Saturna Sustainable Equity Fund

SEEFX

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: The adviser believes that sustainable investing may mitigate security-specific risk, but the screens used in connection with sustainable investing reduce the investable universe, which limits opportunities and may increase the risk of loss during market declines. In addition, the Fund has a relatively limited operating history, having commenced investment operations in March 2015, and its limited performance history does not provide extensive information on how the Fund may perform in different market conditions.

Equity securities risk: Equity securities may experience significant volatility in response to economic or market conditions or adverse events that affect a particular industry, sector, or company. Larger companies may have slower rates of growth as compared to smaller, faster-growing companies. Smaller companies may have more limited financial resources, products, or services, and tend to be more sensitive to changing economic or market conditions.

Growth investing risk: The Fund may invest in growth stocks, which may be more volatile than slower-growing value stocks, especially when market expectations are not met.

Foreign investing risk: Foreign investing involves risks not normally associated with US securities. These risks include fluctuations in currency exchange rates, less public information about securities, less governmental market supervision, and lack of uniform financial, social, and political standards. Foreign investing heightens the risk of confiscatory taxation, seizure or nationalization of assets, currency controls, or adverse political or social developments that affect investments.

Emerging markets risk: In emerging markets and less developed countries, the risks of investing in foreign securities can be magnified by less mature political systems and weaker corporate governance standards than typically found in the developed world.

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.saturnasustainable.com.

Saturna Sustainable Equity Fund Annual Total Returns

* For the period 3/27/2015 (the Fund's inception) through 12/31/2015, and not annualized.

Best Quarter Q1 2017 8.00%
Worst Quarter Q4 2018 -11.81%

Average Annual Total Returns

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

Periods ended December 31, 2018
  1 Year Life of Fund
Since 3/27/2015
Return before taxes -5.76% 2.60%
Return after taxes on distributions -5.88% 2.50%
Return after taxes on distributions and sale of Fund shares -4.32% 2.04%
S&P Global 1200 Index
(reflects no deduction for fees, expenses or taxes)
-8.17% 4.96%

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 tax-deferred, tax-exempt, or taxed at special rates.

4


Saturna Sustainable Equity Fund

SEEFX

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.

Investment Adviser

Saturna Capital Corporation is the Saturna Sustainable Equity Fund's investment adviser.

Portfolio Manager

Mrs. Jane K. Carten MBA, president of Saturna Capital Corporation, is the person primarily responsible for the day-to-day management of the Saturna Sustainable Equity Fund, a role she assumed in 2017. Mr. Nicholas F. Kaiser MBA, CFA®, chairman of Saturna Capital Corporation, serves the Fund as deputy portfolio manager, a role he assumed in 2017. Previously, he was the Fund's portfolio manager since 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 Sustainable Equity Fund.

The minimum initial investment is $10,000 (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:   Saturna Sustainable Funds
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

Telephone request

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

Online

Visit: www.saturnasustainable.com

Tax Information

Any distributions you receive from the Fund may be taxed as ordinary income, qualified dividend income, or capital gains.

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


Saturna Sustainable Bond Fund

SEBFX

Investment Objective

Current income and capital preservation.

Fees and Expenses

This section describes the fees and expenses that you may pay if you buy and hold shares of the Sustainable Bond Fund.

Shareowner Fees

None.

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees 0.55%
Other Expenses 0.22%
Total Annual Fund Operating Expenses 0.77%
Fee Waiver and Expense Reimbursement 0.12%
Total Annual Fund Operating Expense after
Fee Waiver and Expense Reimbursement
0.65%

The investment adviser has committed through March 31, 2020, to waive fees and/or reimburse expenses to the extent necessary to ensure that the Fund's net operating expenses, excluding brokerage commissions, interest, taxes, and extraordinary expenses do not exceed the net operating expense ratio of 0.65%. This expense limitation agreement may be changed or terminated only with approval of the Board of Trustees.

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
$79 $246 $428 $954

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 have 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 your after-tax returns. During the most recent fiscal year, the Fund's portfolio turnover rate was 24.84% of the average value of its portfolio.

Principal Investment Strategies

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 employs a sustainable rating system based on its own, as well as third-party, data to identify issuers believed to present low risks in ESG. The Fund's adviser also uses negative screening to exclude security issuers primarily engaged in higher ESG risk businesses such as alcohol, tobacco, pornography, weapons, gambling, and fossil fuel extraction.

Under normal conditions, the Fund maintains a dollar-weighted average maturity of three years or more, invests at least 65% of its assets in bonds within the four highest grades (AAA, AA, A, or BBB) at the time of purchase, and may invest up to 35% in unrated and high-yield bonds ("junk bonds").

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: The adviser believes that sustainable investing may mitigate security-specific risk, but the screens used in connection with sustainable investing reduce the investable universe, which limits opportunities and may increase the risk of

6


Saturna Sustainable Bond Fund

SEBFX

loss during market declines. In addition, the Fund has a relatively limited operating history, having commenced investment operations in March 2015, and its limited performance history does not provide extensive information on how the Fund may perform in different market conditions.

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.

High yield risk: Investing in bonds that are unrated or rated below investment grade, which are known as "junk bonds," typically offer higher yields to compensate investors for increased credit risk. Issuers of high-yield securities generally are not as strong financially and are more vulnerable to changes that could affect their ability to make interest and principal payments. High-yield securities generally are more volatile and less liquid (harder to sell), which may make such securities more difficult to value.

Foreign investing risk: Foreign investing involves risks not normally associated with US securities. These risks include fluctuations in currency exchange rates, less public information about securities, less governmental market supervision, and lack of uniform financial, social, and political standards. Foreign investing heightens the risk of confiscatory taxation, seizure or nationalization of assets, currency controls, or adverse political or social developments that affect investments.

Emerging markets risk: In emerging markets and less developed countries, the risks of investing in foreign securities can be magnified by less mature political systems and weaker corporate governance standards than typically found in the developed world.

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.saturnasustainable.com.

Saturna Sustainable Bond Fund Annual Total Returns

* For the period 3/27/2015 (the Fund's inception) through 12/31/2015, and not annualized.

Best Quarter Q1 2017 2.80%
Worst Quarter Q4 2018 -3.05%

Average Annual Total Returns

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

Periods ended December 31, 2018
  1 Year Life of Fund
Since 3/27/2015
Return before taxes -3.17% 0.64%
Return after taxes on distributions -4.24% -0.43%
Return after taxes on distributions and sale of Fund shares -2.85% -0.01%
FTSE World BIG Bond Index
(reflects no deduction for fees, expenses or taxes)
-1.32% 1.69%

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 tax-deferred, tax-exempt, or 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.

7


Saturna Sustainable Bond Fund

SEBFX

Investment Adviser

Saturna Capital Corporation is the Fund's investment adviser.

Portfolio Manager

Mr. Patrick T. Drum MBA, CFA, is the person primarily responsible for the day-to-day management of the Saturna Sustainable Bond Fund. Mr. Bryce R. Fegley CFA, is the deputy portfolio manager. They have been the managers of the Fund since 2015, the Fund's inception.

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 Sustainable Bond Fund.

The minimum initial investment for each Fund is $10,000 (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:   Saturna Sustainable Funds
            Box N
            Bellingham, WA 98227-0596

Or Fax: 360-734-0755

Telephone request

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

Online

Visit: www.saturnasustainable.com

Tax Information

Any distributions you receive from the Fund may be taxed as ordinary income or capital gains.

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.

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Investment Objectives

The Saturna Sustainable Equity Fund seeks capital appreciation.

The Saturna Sustainable Bond Fund seeks current income and capital preservation.

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

Principal Investment Strategies

The Saturna Sustainable Funds seek to invest in sustainable and responsible companies. The Funds' adviser believes that companies proactively managing business risks relating to environmental, social, and governance (ESG) issues make better contributions to the global economy and are more resilient. The Funds' adviser uses negative screening to exclude companies engaged in activities that the adviser believes present higher ESG risk, including issuers engaged in:

  • Alcohol
  • Tobacco
  • Weapons
  • Gambling
  • Pornography
  • Fossil fuel extraction

The Funds' adviser employes a rating system based on its own, as well as third-party, data to identify issuers believed to present low ESG risks. In addition to an emphasis on low debt, the main characteristics of the sustainable rating system (scale of A to F) are:

Environmental

  • Resource efficiency (energy, emissions, water, waste, and monetary provisions)
  • Sustainability policies and disclosures

Social

  • Community relations (supply chain and human rights policies, philanthropy)
  • Labor relations (safety, training, and contracting policies)

Governance

  • Board (composition, independence, and attendance)
  • Shareowner rights
  • Business ethics
  • Compensation policies and amounts

The Saturna Sustainable Funds seek tax efficiency for their shareowners and reduced trading expenses through low portfolio turnover.

The Funds may, from time to time, take temporary defensive positions that are inconsistent with the Funds' 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 a Fund from attaining its investment objective.

Under normal circumstances, each Fund limits its investments as follows:

  • No more than 40% in issues from a single country
  • No more than 30% in issues from developing countries (countries not members of the Organisation for Economic Co-operation and Development (OECD))

Saturna Sustainable Equity Fund

Under normal conditions, the Fund invests at least 80% of its net 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 ESG policies. The Fund invests in a diversified portfolio of global common stocks of companies with market capitalizations of greater than $5 billion, and may invest up to 30% of net assets in companies with headquarters in countries with developing economies and/or markets.

The Fund's investments emphasize a value approach to investing. The adviser looks for securities it believes offer favorable possibilities for capital appreciation over the next one to four years. In selecting equities, the adviser considers factors such as growth in revenues and earnings, relative price-to-earnings and price-to-book value ratios, country and industry position and outlook, corruption indicators, and management assessments.

Saturna Sustainable Bond Fund

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 ESG policies.

The Fund's investments include:

  • Corporate bonds;
  • Collateralized or securitized bonds, such as asset-backed securities, mortgage-backed securities, and commercial mortgage-backed securities;
  • Government and municipal securities;
  • High-quality commercial paper; and
  • Bank obligations, including repurchase agreements, of banks having total assets in excess of $1 billion.

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Under normal circumstances, at least 65% of net assets must be in bonds rated in the four highest grades assigned by a nationally recognized bond rating agency (e.g., Standard & Poor's: AAA, AA, A, or BBB) at the time of purchase. The Fund may invest up to 35% in unrated bonds and high-yield bonds ("junk bonds").

Under normal conditions, the Fund maintains a dollar-weighted average maturity of three years or more.

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 a Fund if you are willing to accept the risk that you may lose money. An investment in the Funds held for longer periods over full market cycles typically provides the best potential for favorable investment returns. The Funds' principal investment strategies include the following principal investment risks.

Saturna Sustainable Equity and Saturna Sustainable Bond

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 Funds invest. 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 Funds even if they are not invested primarily in those economies or markets.

Investment strategy risk: The ESG ratings process associated with sustainable investing reduces the investable universe, which limits opportunities and may increase the risk of loss during market declines. The adviser believes that sustainable investing may mitigate security-specific risk, but there is no guarantee that the securities favored by our investment process will perform better and may perform worse than those that are not favored. In addition, the Sustainable Equity Fund and the Sustainable Bond Fund have a relatively limited operating history, having commenced investment operations in March 2015. As a result, the performance history of these Funds is limited and does not provide extensive information on how these Funds may perform in different market conditions.

Foreign investing risk: Foreign investing involves risks not normally associated with US securities. These risks include fluctuations in currency exchange rates, less public information about securities, less governmental market supervision, and lack of uniform financial, social, and political standards. Foreign investing heightens the risk of confiscatory taxation, seizure or nationalization of assets, currency controls, or adverse political or social developments that affect investments.

Emerging markets risk: In emerging markets and less developed countries, the risks of investing in foreign securities can be magnified by less mature political systems and weaker corporate governance standards than typically found in the developed world.

Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If a Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, a 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. A 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. Because the Sustainable Bond Fund may invest in restricted securities, it may have greater exposure to liquidity risk as result of the legal restrictions on the resale of a portion of its portfolio securities.

Saturna Sustainable Equity

Equity securities risk: Equity securities may experience significant volatility in response to economic or market conditions or adverse events that affect a particular industry, sector, or company. Larger companies may have slower rates of growth as compared to smaller, faster-growing companies. Smaller companies may have more limited financial resources, products, or services, and tend to be more sensitive to changing economic or market conditions.

Growth investing risk: The Fund may invest in growth stocks, which may be more volatile than slower-growing value stocks. Growth stocks typically trade at higher multiples of current earnings than other stocks, which may lead to inflated prices. Growth stocks often are more sensitive to market fluctuations than other securities because their market prices are highly sensitive to future earnings expectations. At times when it appears that these expectations may not be met, growth stocks' prices typically fall and declines may be significant where a stock had been supported by significant investor speculation. During market cycles when growth investing is out of favor, selling growth stocks at desired prices may be more difficult.

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Saturna Sustainable Bond

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.

Variable rate securities risk: Variable rate debt securities (which include floating rate debt securities) pay interest based on an interest rate benchmark. When the benchmark rate changes, the interest payments on those securities may be reset at a higher or lower rate and, as a result, such securities generally are less price sensitive to interest rate changes than fixed rate debt securities. However, the market value of variable rate debt securities may decline, or not appreciate as quickly as expected, when prevailing interest rates rise, particularly if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, variable rate securities will not generally increase in market value if interest rates decline. However, when interest rates fall, there may be a reduction in the payments of interest received by the Fund from its variable rate securities.

High yield risk: Investing in bonds that are unrated or rated below investment grade, which are known as "junk bonds," typically offer higher yields to compensate investors for increased credit risk. Issuers of high-yield securities generally are not as strong financially and are more vulnerable to economic and market changes that could affect their ability to make interest and principal payments as expected. High-yield securities generally are more volatile and less liquid (harder to sell), which may make such securities more difficult to value.

US government and mortgage related securities risk: Government-related organizations such as Fannie Mae and Freddie Mac are not backed by the full faith and credit of the US government and no assurance can be given that the US government would provide financial support. Mortgage-related securities may be particularly sensitive to changes in economic conditions, including delinquencies and/or defaults. Some mortgage-related securities receive government or private support, but there is no assurance that such support will remain in place. Bond investments, especially mortgage-backed and asset-backed securities, are subject to the risk that borrowers will prepay the principal more quickly than expected (known as prepayment risk) or more slowly than expected (known as extension risk), which will affect the yield, average life, and price of the securities.

Operational Risk (Both Funds)

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 Funds do 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 Funds 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 Funds.

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Investment Information

Shareowners receive a Saturna Sustainable Funds financial report showing the investment returns, portfolio, income, and expenses of each Fund every six months. The audited financial statements of each Fund for the year ended November 30, 2018, included in the Trust's Annual Report, are available upon request. Investors may obtain current share prices daily on financial information websites, by calling toll-free 888-732-6262, on electronic quotation systems, and at www.saturnasustainable.com. The following symbols can be used to obtain quotations and other information:

Saturna Sustainable Equity Fund     SEEFX

Saturna Sustainable Bond Fund     SEBFX

This prospectus, financial reports, performance information, proxy voting records, and other useful information are also available at www.saturnasustainable.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 investment adviser and administrator ("Saturna Capital" or the "adviser") to each Fund. The adviser's wholly-owned subsidiary, Saturna Brokerage Services, Inc., is the distributor for each Fund. Founded in 1989, Saturna Capital Corporation has approximately $3.4 billion in assets under management as of December 31, 2018. It is also the adviser to other funds of the Saturna Investment Trust, the Amana Mutual Funds Trust, and to separately managed accounts. Saturna Capital's wholly-owned subsidiary in Malaysia manages separate accounts and investment funds. Another wholly-owned subsidiary, Saturna Environmental Corporation, owns an environmental education camp.

Mrs. Jane K. Carten MBA, portfolio manager of Saturna Sustainable Equity Fund, is president, director, and a controlling shareowner of Saturna Capital Corporation. Mrs. Carten joined Saturna Capital in 1997, and previously held positions in operations, information technology, and marketing.

Mr. Patrick T. Drum MBA, CFA®, CFP®, portfolio manager of Saturna Sustainable Bond Fund, joined Saturna Capital in 2014. He is also deputy portfolio manager of Sextant Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Global High Income Fund, and Idaho Tax-Exempt 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.

Mr. Nicholas F. Kaiser MBA, CFA®, deputy portfolio manager of Saturna Sustainable Equity Fund, is chairman, director, and a controlling shareowner of Saturna Capital. Mr. Kaiser has managed equity mutual funds since 1976; he has managed equity portfolios for the adviser since founding the firm in 1989.

Mr. Bryce R. Fegley CFA®, deputy portfolio manager of Saturna Sustainable Bond Fund, joined Saturna Capital in 2001. He is also the portfolio manager for Sextant Global High Income Fund. For Saturna Capital he has worked in brokerage, investment research, and its Malaysian investment advisory subsidiary.

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

Advisory Fee

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

For the fiscal year ended November 30, 2018, the aggregate advisory fee paid (after waivers) was 0.13% and 0.43% of average net assets for Saturna Sustainable Equity Fund and Saturna Sustainable Bond Fund, respectively.

A discussion regarding the basis for the Board of Trustees' approval of the advisory contracts is available in the Funds' Annual Report for the fiscal year ended November 30, 2018.

Fund Share Pricing

Each 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). Equity securities traded on a national securities exchange and over-the-counter securities are valued at the last reported sale price on the valuation day. 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 suspended, the market on which a security is principally traded closes early, or trading volume is insufficient to produce a

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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.

Bond markets and foreign markets may close before the time as of which the share price is computed. Because of this, events occurring after the close of the bond market or a foreign market and before the share price computation may have a material effect on bond and foreign security prices. To account for this, the Funds use evaluations provided by an independent pricing service for bonds and foreign securities. Evaluations for foreign securities are based on the foreign securities' most recent closing market prices as of 4 p.m. Eastern time and correlations with broad market indices, sector indices, equity index futures contracts, American Depositary Receipts, and other factors. Foreign securities may trade on weekends or other days when the Funds do not price their shares. As a result, the share price may change on days when you will not be able to purchase or redeem shares.

Additional information about portfolio security valuation, including foreign securities, is contained in the Funds' 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, 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 Fund(s) of your choice. Certain account types may be opened online. The minimum initial investment for each Fund is $10,000. The Funds do not accept initial orders via telephone or unaccompanied by payment.

A broker-dealer or other financial intermediary that maintains an account with a Fund in the intermediary's name as nominee for the benefit of the intermediary's clients may aggregate client orders to meet the $10,000 initial minimum investment. In addition, shares of the Funds are available for purchase without any minimum initial investment by:

  • Qualified and non-qualified employer-sponsored retirement or benefit plans, including 401(k) plans, 457 plans, 403(b) plans, profit-sharing plans, and deferred compensation plans;
  • Qualified retirement or benefit plans, including IRA, ESA, and HSA plans serviced as trustee by Saturna Trust Company; and
  • Fee-based advisory programs (including mutual fund wrap programs) sponsored by financial intermediaries that provide bundled services for a fee.

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. There are no sales charges or loads. The Funds may reject purchases for any reason, such as excessive trading. In addition, anti-money laundering regulations limit 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.saturnasustainable.com.

Shareowners may authorize the purchase or redemption of shares via electronic funds transfer ("EFT") by completing the appropriate section of the application. To use EFT to purchase or redeem shares, simply call 800-728-8762 (800-SATURNA). Investors may also wire money to purchase shares, though the wiring bank typically charges a fee for this service. Please notify Saturna Capital Corporation 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 Funds. The Funds pay 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 a Fund on that day and may be more or less than the cost of the shares being redeemed.

If you are redeeming shares that you recently purchased by check, the Funds may delay sending your redemption proceeds until your check has cleared. This may take up to 15 calendar days after your check is received. If you are redeeming shares that you have recently purchased by EFT, those shares may be subject to a 60-day waiting period during which such shares may only be redeemed by EFT to the same bank account from which the funds were initially withdrawn. Such shares may not be redeemed online during the 60-day waiting period.

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There are several methods you may choose to redeem shares:

Written request

Write:   Sextant Mutual Funds
            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, 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 Funds.

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 Transfers ($100 minimum) with proceeds transmitted 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 can be used.
  • Exchange (in at least the minimum 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 the Fund, the new account will automatically have the same registration as your original account.

For telephone requests, the Funds 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.saturnasustainable.com

To initiate transactions online, shareowners must first complete an Online Access and E-Delivery form available on www.saturnasustainable.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 Funds 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 Funds may restrain any account and suspend account services when: the Funds believe that there may exist a dispute between the registered or beneficial account owners; the Funds believe that a transaction may be fraudulent; in cases of abusive or threatening conduct or suspected illegal activity; or if the Funds are unable to verify the identity of the person(s) or entity opening an account or requesting a transaction.

The Funds normally send redemption proceeds within one day, however if the Funds reasonably believe that a cash redemption would negatively impact the operations of a Fund or that the shareowner may be engaged in market-timing or frequent trading, the Funds reserve the right delay payment of the redemption proceeds for up to seven calendar days. The Funds' investment team continually monitors portfolio liquidity and adjusts the Funds' cash levels based on market outlook, portfolio and investor transactions, and other relevant criteria. Unlike many mutual funds, the Saturna Sustainable Funds do 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 to manage liquidity successfully in all market environments. Under stressed conditions, the Funds may not pay redemption proceeds in a timely fashion.

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

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Purchase and Sale of Fund Shares Through Financial Intermediaries

The Funds have 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 Funds. These authorized intermediaries may designate other intermediaries to receive such orders. A 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 Funds' policies regarding purchases, redemptions, or exchanges and these may be in addition to or in place of the Funds' policies. For more information about these restrictions and policies, please contact your broker, retirement plan administrator, or other intermediary.

Distributions

The Funds intend to distribute their net investment income and net realized capital gains, if any, to their shareowners. Distributions from net capital gains are paid annually, typically by the end of the year. Saturna Sustainable Bond Fund declares income dividends daily, which are reinvested or distributed (paid) monthly. Saturna Sustainable Equity Fund pays income dividends annually, typically by the end of the year. As a result of its investment strategy, the Saturna Sustainable Equity Fund may not pay income dividends.

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.

Frequent Trading Policy

The Funds are intended for long-term investment and do not permit rapid trading. The Funds' 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 Funds monitor trading in their 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 Funds believe that they have identified a pattern of such trading (whether directly through a Fund, indirectly through an intermediary, or otherwise), they may, in their sole discretion, temporarily or permanently bar future purchases of shares of the Funds (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 Funds seek to make decisions that are consistent with the interests of the Funds' shareowners. The Funds reserve the right to refuse or revoke any purchase order for any reason a Fund believes to be contrary to the Frequent Trading Policy.

The Funds often receive 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 Funds obtain contractual agreements with intermediaries to enforce the Funds' redemption policies, and rely on intermediaries to have reasonable procedures in place to detect and prevent excessive trading or market timing of Fund shares. The Funds cannot always identify all intermediaries, or detect or prevent trading that violates the Frequent Trading Policy through intermediaries or omnibus accounts. Some intermediaries trade shares of several Funds and cannot always enforce a particular Fund's policies.

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Tax Consequences

Dividends and capital gain distributions may be subject to income tax, whether they are paid in cash or reinvested in additional Fund shares, depending on the type of distribution, the type of your account, and your city, state, and country of tax residence. Income dividends paid by the Saturna Sustainable Equity Fund are normally eligible for the "qualified dividend income" tax rate.

An exchange of a 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 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 US taxpayer identification number) and to the Internal Revenue Service ("IRS") the amount of each redemption transaction of the shareowner and the amount of dividends and capital gain distributions he or she received for the preceding calendar year. Capital gains a Fund distributes may be taxed at different rates, depending on the length of time a Fund held its investments on which the gains were realized.

Tax regulations require reporting cost basis information to you and the IRS 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 other distributions, you must furnish your correct Social Security or other tax payer identification number when you open an account.

Distributions to shareowners who are not US taxpayers may be subject to withholding tax unless an applicable tax treaty provides for a reduced rate or exemption. Capital gain distributions paid by the Funds are not subject to foreign withholding.

Distribution Arrangements

The Saturna Sustainable Funds intend 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 Saturna Sustainable Equity and Saturna Sustainable Bond Funds 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.

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Financial Highlights

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

17


Saturna Sustainable Equity Fund (SEEFX) For year ended November 30, Period endedA
Selected data per share of outstanding capital stock throughout each year: 2018 2017 2016 November 30, 2015
Net asset value at beginning of year $11.44 $9.43 $9.73 $10.00
Income from investment operations
Net investment income 0.09 0.09 0.06 0.02
Net gains (losses) on securities (both realized & unrealized) 0.07 1.97 (0.36) (0.28)
Total from investment operations 0.16 2.06 (0.30) (0.26)
Less distributions
Dividends (from net investment income) (0.09) (0.05) - (0.01)
Total distributions (0.09) (0.05) - (0.01)
 
Net asset value at end of year $11.51 $11.44 $9.43 $9.73
 
Total return 1.39% 22.01% (3.08)% (2.60)%B
 
Ratios / supplemental data
Net assets ($000), end of year $5,658 $4,984 $3,343 $3,423
Ratio of expenses to average net assets
Before fee waivers 1.27% 1.48% 1.65% 1.23%C
After fee waivers 0.76% 0.88% 1.00% 1.00%C
After fee waivers and custodian fee credits 0.75% 0.86% 0.99% 0.99%C
Ratio of net investment income after fee waivers and custodian fee credits to average net assets 0.82% 0.95% 0.67% 0.29%C
Portfolio turnover rate 8% 12% 48% 53%B
A Operations commenced on March 27, 2015.
B Not annualized.
C Annualized.

 

Saturna Sustainable Bond Fund (SEBFX) Year ended November 30, Period endedA
Selected data per share of outstanding capital stock throughout each year: 2018 2017 2016 Nov. 30, 2015
Net asset value at beginning of year $9.87 $9.65 $9.75 $10.00
Income from investment operations
Net investment income 0.26 0.27 0.24 0.12
Net gains (losses) on securities (both realized and unrealized) (0.48) 0.23 (0.10) (0.25)
Total from investment operations (0.22) 0.50 0.14 (0.13)
Less distributions
Dividends (from net investment income) (0.26) (0.27) (0.24) (0.12)
Capital gains distribution - (0.01) - -
Total distributions (0.26) (0.28) (0.24) (0.12)
 
Net asset value at end of year $9.39 $9.87 $9.65 $9.75
 
Total return (2.29)% 5.28% 1.37% (1.29)%B
 
Ratios / supplemental data
Net assets ($000), end of year $31,647 $21,980 $8,639 $6,885
Ratio of expenses to average net assets        
Before fee waivers 0.77% 0.92% 1.17% 1.02%C
After fee waivers 0.66% 0.75% 0.89% 0.90%C
After fee waivers and custodian fee credits 0.65% 0.74% 0.89% 0.89%C
Ratio of net investment income after fee waivers custodian fee credits to average net assets 2.99% 2.82% 2.46% 1.92%C
Portfolio turnover rate 25% 14% 46% 4%B
A Operations commenced on March 27, 2015
B Not annualized.
C Annualized.

 

18


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

19


www.saturnasustainable.com

Additional information about each Fund's investments is available in the Funds' annual and semi-annual shareowner reports. The Funds' annual report includes a discussion of the market conditions and investment strategies that significantly affected the Funds' 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 the Saturna Sustainable Funds, and to make shareowner inquiries, please contact us at:

Saturna Investment Trust – Saturna Sustainable Funds
1300 N. State St., Bellingham, WA 98225
1-800-728-8762 [1-800-SATURNA]
www.saturnasustainable.com

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

Information about the Funds (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 Funds are also available on the SEC's EDGAR database (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 e-mail to publicinfo@sec.gov.

The Saturna Sustainable Funds are 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.

Saturna Sustainable Funds Annual Report Cover November 30, 2018

Saturna Sustainable Funds

Annual Report November 30, 2018

Beginning on January 29, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Saturna Sustainable Fund's annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds' website (www.saturna.com/reports), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 800-SATURNA (800-728-8762) or by sending an e-mail request to Saturna Sustainable Funds at info@saturna.com.

Beginning on January 2, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 800-SATURNA (800-728-8762) or send an e-mail request to Saturna Sustainable Funds at info@saturna.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Funds.


 

Performance Summary

(as of December 31, 2018) (unaudited)

Average Annual Returns (before any taxes paid by shareowners)

  1 Year 3 Year 5 Year 10 Year Expense Ratio¹
Gross Net
Sustainable Equity Fund (SEEFX) -5.76% 4.76% n/a n/a 1.37% 0.75%
S&P Global 1200 Index -8.17% 7.38% 5.29% 10.28% n/a n/a
 
Sustainable Bond Fund (SEBFX) -3.17% 1.46% n/a n/a 0.84% 0.65%
FTSE WorldBIG Index -1.32% 2.62% 1.07% 2.30% n/a n/a

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.saturnasustainable.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. Funds that invest in foreign securities may involve greater risk, including political and economic uncertainties of foreign countries as well as the risk of currency fluctuations.

A note about risk: Please see Notes to Financial Statements beginning on page 21 for a discussion of investment risks. For a more detailed discussion of the risks associated with each Fund, please see the Funds' prospectus or each Fund's summary prospectus.

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.

¹ By regulation, expense ratios shown in these tables are as stated in the Funds' most recent Prospectus, dated March 28, 2018, and incorporate results for the fiscal year ended November 30, 2017. Ratios presented in this table differ from the expense ratios shown elsewhere in this report as they represent different periods. Also by regulation, the performance in this table represents the most recent quarter-end performance rather than performance through the Funds' most recent fiscal period. Saturna Capital, the Fund's adviser, has voluntarily capped actual expenses of the Sustainable Equity Fund at 0.75% and actual expenses of the Sustainable Bond Fund at 0.65% through March 31, 2019.

The S&P Global 1200 Index is a global stock market index covering nearly 70% of the world's equity markets. The FTSE WorldBIG Index is a multi-asset, multi-currency benchmark, which provides a broad-based measure of the global fixed income markets. Investors cannot invest directly in the indices.

The Saturna Sustainable Funds limit the securities they purchase to those consistent with sustainable principles. This limits opportunities and may affect performance.

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

2 November 30, 2018 Annual Report

 

Fellow Shareowners:

These volatile times are the reason we invest the way we do. Saturna Capital has been dedicated to values-based and sustainable investing for nearly 30 years. With a focus on sustainable financial management and an emphasis on long-term profitability, Saturna takes a holistic and future-oriented approach to each of its funds. This sensible approach does not always outshine other investment strategies if the market is on a bull run, but it helps cut out a lot of the noise when markets get jittery, as they have been recently.

The Saturna Sustainable Equity Fund returned 1.39% for the year ended November 30, 2018, outperforming the Morningstar World Large Stock category which declined -1.48%, and outpacing the S&P Global 1200 Index's return of 0.52%. The Saturna Sustainable Bond Fund returned -2.29%, versus the Morningstar World Bond category's return of -2.34%, and the -2.95% return of its benchmark, the FTSE World Broad Investment-Grade Bond Index.

We are pleased that investors are finding these low-cost Funds meet their investment needs. Assets in Saturna Sustainable Equity Fund increased 13.52% for the fiscal year. Assets in Saturna Sustainable Bond Fund increased 43.97% for the fiscal year.

Saturna Sustainable Funds seek sustainable investments with low risks in areas of the environment, social responsibility, and governance (ESG).

At Saturna, we view investing as a business partnership and favor high-caliber performers who operate with integrity, and with a view toward the long-term. The Saturna Sustainable Funds carefully consider a variety of environmental, social, and governance criteria, and seek to invest in issuers that demonstrate other sustainable characteristics such as management strength, risk consciousness, low debt, and strong balance sheets. Our investment team champions issuers that are leaders in ESG risk management, and that provide solutions for a new economy that must address resource efficiency; these issuers have the potential to form an advantage relative to their peers in a competitive and evolving market.

 

Annual Report November 30, 2018 3

 

As an asset manager, Saturna prioritizes the education and empowerment of its investors. Last summer, we published our first impact report in order to help shareowners see in quantitative format the difference your decision to invest responsibly is having in a broader context. A sampling of the facts we highlighted for you in that report include: in both the Sustainable Equity Fund and the Sustainable Bond Fund, more of the Funds' holdings have an energy efficiency policy, a carbon emissions reduction policy, and smaller carbon footprints, compared to the MSCI ACWI Index. Along with that, both Funds are also ahead of the Index when it comes to independent directors, having three or more female board members, and having at least 33.3% female board composition.

Thank you for investing with us. Please read this report and let us know how we can be of assistance to you in your quest for responsible investments choices.

Respectfully,

(photo omitted)

Jane Carten,
President

(photo omitted)

Gary Goldfogel,
Independent Board Chairman

 

Saturna Sustainable Funds Portfolio Management

(photo omitted) Jane Carten MBA

Saturna Sustainable Equity Fund
Portfolio Manager
  (photo omitted) Patrick Drum MBA, CFA®, CFP®

Saturna Sustainable Bond Fund
Portfolio Manage
(photo omitted) Nicholas Kaiser MBA, CFA®

Saturna Sustainable Equity Fund
Deputy Portfolio Manager
(photo omitted) Bryce Fegley CFA®, CIPM®

Saturna Sustainable Bond Fund
Portfolio Manager

 

4 November 30, 2018 Annual Report

 

Morningstar Sustainability Ratings™

(unaudited) As of November 30, 2018

At Saturna Capital, we have long described ourselves as value and values-based investors. We believe our approach improves the likelihood of achieving superior investment results over the long term. Our approach also leads to investment portfolios we can be proud of from the perspective of Environmental, Social, and Governance (ESG) issues. Morningstar recently partnered with leading ESG research firm Sustainalytics to develop the Morningstar Sustainability Rating™ – here are Saturna Sustainable Funds' fiscal period-end results:

Saturna Sustainable Equity Fund   Saturna Sustainable Bond Fund
SEEFX Ø Ø Ø Ø Ø SEBFX n/a
Ranked in 5th percentile among 732 World Large Stock Funds As of November 30, 2018, the Saturna Sustainable Bond Fund was not rated.

The Morningstar Sustainability Rating™ gives investors across the globe a way to compare fund portfolios based on a standard measure of sustainability. The rating is a holdings-based calculation using company-level environmental, social, and governance (ESG) analytics from Sustainalytics.

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").

© 2018 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 Rating is as of November 30, 2018. 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.

Saturna Sustainable Equity Fund was rated on 88% of Assets Under Management.

The Funds' portfolios are actively managed and are subject to change, which may result in different Morningstar Sustainability Scores and Ratings.

% Rank in Category is the fund's percentile rank for the specified time period relative to all funds that have the same Morningstar category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1. Percentile ranks within categories are most useful in those categories that have a large number of funds.

 

November 30, 2018 Annual Report 5

 

Saturna Sustainable Equity Fund:

Performance Summary (unaudited)

Average Annual Returns as of November 30, 2018

  1 Year 5 Year 10 Year Expense Ratio¹
Sustainable Equity Fund (SEEFX)² 1.39% n/a n/a 1.37%
S&P Global 1200 Index 0.52% 7.29% 11.50% n/a

Growth of $10,000

Saturna Sustainable Equity Fund Growth of $10,000
Comparison of any mutual fund to a market index must be made bearing in mind that the index is 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 March 27, 2015, to an identical amount invested in the Standard & Poor's Global 1200 Index, a global stock market index covering nearly 70% of the world's equity markets. The graph shows that an investment in the Fund would have risen to $11,700 versus $12,962 in the 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 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, before fee waivers. The expense ratio shown in the most recent prospectus after fee waivers was 0.75%. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different periods.

² Operations commenced on March 27, 2015.

Fund Objective

The objective of the Sustainable Equity Fund is capital appreciation.

Top 10 Holdings
% of Total Net Assets
Adobe Systems 4.4%
Dassault Systemes ADR 3.2%
Apple 3.2%
Mastercard, Class A 2.9%
Microsoft 2.8%
Church & Dwight 2.8%
Toronto-Dominion Bank 2.7%
Home Depot 2.7%
Murata Manufacturing 2.7%
Unilever 2.7%

 

Portfolio Diversification
% of Total Net Assets  
Household Products 9.5%
Saturna Sustainable Equity Fund Portfolio Diversification
Application Software 7.6%
Home Products Stores 4.0%
Banks 3.5%
IT Services 3.4%
Communications Equipment 3.2%
Automobiles 3.1%
Life Insurance 3.0%
Consumer Finance 2.9%
Semiconductor Devices 2.9%
Infrastructure Software 2.8%
Electronics Components 2.7%
Specialty Apparel Stores 2.6%
Containers & Packaging 2.6%
Industries <2.5% 38.1%
Other Assets (net of liabilities) 8.1%

 

6 November 30, 2018 Annual Report

 

Saturna Sustainable Equity Fund:

Discussion of Fund Performance (unaudited)

Fiscal Year 2018

Volatility returned to global equity markets over the course of 2018, which was unsurprising given the news of trade tensions, repeated Federal Reserve interest rate hikes, European dysfunction expressed through the rise of populist parties, a tortuous "Brexit" negotiation, and concerns surrounding China's increasing debt paired with a slowing economy. For the fiscal year ended November 30, 2018, the Saturna Sustainable Equity Fund returned 1.39%, slightly ahead the 0.52% gain for the S&P Global 1200 Index.

Factors Affecting Past Performance

The Saturna Sustainable Equity Fund has a global mandate with assets allocated among twenty nations. The Fund tends to be overweight the Technology and Consumer Discretionary sectors, which had a positive effect in the past fiscal year. Of the Fund's 10 largest contributors, four are technology companies and two belong to the Consumer Discretionary sector; the strongest appreciation among our holdings, however, at an impressive 42.87%, was generated by consumer staples company Church & Dwight.

Though Nike was one of the top 10 contributors to the Fund during the fiscal year, gaining 25.10%, we exited our position in June when lawsuits alleging sexual harassment and gender bias came to light. While we previously supported Nike's ambitious sustainability goals, we are conscientious of the negative effects reputational risk can have on a security, and are concerned that the lawsuits represent a corporate culture that is not in line with the Fund's values.

We also exited a portion of our position in Valeo, the French automotive components manufacturer. Valeo has demonstrated an excellent commitment to sustainability initiatives such as improving efficiency and reducing emissions. We are optimistic about Valeo's long-term prospects and will likely reinvest when the time is right. Exiting Valeo and a portion of the position in Kimberly Clarke de Mexico realized small losses for the Fund.

SEEFX continues to support the development of renewable energy and maintained positions in the German/Spanish wind turbine producer Siemens Gamesa Renewable Energy, along with Denmark's Vestas Wind Systems. In April 2018, Siemens Gamesa surpassed Vestas as the global leader in wind turbine manufacturing.¹ Growth of renewable energy is expected to accelerate as nations worldwide strive for alternatives to fossil fuels to meet the growing threat of global climate change.

We continuously screen and analyze companies around the globe, seeking the sustainability leaders that also meet our strict financial criteria. As long-term investors, we are focused on the sustainable business practices that improve our world and that also generate sustainable value.

Looking Forward

The past fiscal year was notable for the number of devastating natural disasters that occurred worldwide, many setting records in their destruction and directly attributable to climate change. Concurrently, two major reports were released in Fall 2018 that paint a grim picture for the future of our climate. In October, the Intergovernmental Panel on Climate Change (IPCC) published its Special Report on Global Warming; findings indicate that the impacts of a global temperature rise to 1.5°C – currently expected between 2030 and 2052 if global temperature "continues to increase at the current rate" – will have deleterious effects on the planet but, when compared to a 2°C increase, "(are) projected to reduce risks to marine biodiversity, fisheries, and ecosystems, and their functions and services to humans."² In November 2018, 13 US federal agencies released a scientific report that predicted unchecked climate change could "knock as much as 10 percent off the size of the American economy by century's end."³ Quantifying climate change impacts in terms of economic decline illustrates that environmental stewardship is not only the right thing to do from a moral perspective, but is also a necessary step to ensure that business remains sustainable and profitable.

The buoyant US equity markets we saw starting in the spring – and the subsequent sell-off we witnessed at the end of calendar year 2018 – illustrate that just about anything is possible within the current economic and political climate. Our sense heading into 2019 is one of cautious optimism; we believe the Sustainable Equity Fund is well positioned for either positive or negative developments, and that market volatility is best addressed by a focus on ESG criteria. Though investors may not see the large returns that can occur during a bull market, they can still benefit from a rising tide. On the flip side, Saturna's focus on low debt, and cash generative, highly sustainable companies led by excellent management teams helps protect the investor from potential downsides.

 

¹ Hill, Joshua. Siemens Gamesa Overtakes Vestas As Leading Wind Manufacturer, Clean Technica, April 23, 2018. https://cleantechnica.com/2018/04/23/siemens-gamesa-overtakes-vestas-as-leading-wind-manufacturer/

² Intergovernmental Panel on Climate Change. Global Warming of 1.5°C. https://www.ipcc.ch/site/assets/uploads/sites/2/2018/07/sr15_headline_statements.pdf

³ Davenport, Coral and Pierre-Louise, Kendra. U.S. Climate Report Warns of Damaged Environment and Shrinking Economy, November 23, 2018. https://www.nytimes.com/2018/11/23/climate/us-climate-report.html

November 30, 2018 Annual Report 7

 

Saturna Sustainable Equity Fund:

Schedule of Investments As of November 30, 2018
Common Stocks – 91.9% Number of Shares Cost Market Value Country¹ Percentage of Assets
 
Communications  
 
Entertainment Content
Naspers ADR 1,000 $58,320 $40,970 South Africa 0.7%
Walt Disney Company 500 53,703 57,745 United States 1.0%
  112,023 98,715   1.7%
 
Internet Media
Alphabet, Class A² 122 67,177 135,377 United States 2.4%
 
Telecom Carriers
China Mobile 6,000 67,458 59,796 Hong Kong 1.1%
Telekomunikasi Indonesia ADR 2,000 65,178 51,800 Indonesia 0.9%
  132,636 111,596   2.0%
 
  311,836 345,688   6.1%
 
Consumer Discretionary  
 
Airlines
Latam Airlines Group 3,600 46,768 37,512 Chile 0.6%
 
Apparel, Footwear & Accessory Design
adidas ADR 600 65,490 66,432 Germany³ 1.2%
 
Auto Parts
Valeo 960 46,954 27,400 France 0.5%
 
Automobiles
Subaru ADR 5,000 69,810 55,375 Japan 1.0%
Toyota Motor ADR 1,000 107,633 121,480 Japan 2.1%
  177,443 176,855   3.1%
 
E-Commerce Discretionary
Amazon.com² 60 103,132 101,410 United States 1.8%
 
Home Products Stores
Home Depot 850 100,842 153,272 United States 2.7%
Lowe's 750 80,222 70,778 United States 1.3%
  181,064 224,050   4.0%
 
Other Commercial Services
Ecolab 723 82,096 116,034 United States 2.0%
 
Restaurants
Starbucks 1,713 102,502 114,291 United States 2.0%
 
Specialty Apparel Stores
TJX Companies 3,000 103,932 146,550 United States 2.6%
 
Toys & Games
Hasbro 600 56,958 54,600 United States 1.0%
 
  966,339 1,065,134   18.8%
 
Continued on next page.

 

8 November 30, 2018 Annual Report The accompanying notes are an integral part of these financial statements.

 

Saturna Sustainable Equity Fund:

Schedule of Investments As of November 30, 2018
Common Stocks – 91.9% Number of Shares Cost Market Value Country¹ Percentage of Assets
 
Consumer Staples  
 
Food & Drug Stores
Clicks Group ADR 1,500 $38,630 $41,250 South Africa 0.7%
 
Household Products
Church & Dwight 2,400 104,866 158,856 United States 2.8%
Kimberly-Clark de Mexico, Class A 13,000 22,582 19,251 Mexico 0.4%
L'Oreal ADR 2,200 98,743 103,796 United States 1.8%
Reckitt Benckiser Group PLC ADR 6,250 100,292 104,125 United States 1.8%
Unilever 2,700 116,609 149,877 Netherlands 2.7%
  443,092 535,905   9.5%
 
Packaged Food
Nestle ADR 1,000 86,610 85,220 Switzerland 1.5%
 
  568,332 662,375   11.7%
 
Energy  
 
Renewable Energy Equipment
Siemens Gamesa Renewable Energy 3,500 51,922 49,494 Spain 0.9%
Vestas Wind Systems 900 65,551 67,287 Denmark 1.2%
 
  117,473 116,781   2.1%
 
Financials  
 
Banks
Banco Santander ADR 10,081 50,683 47,985 Spain 0.8%
Toronto-Dominion Bank 2,800 131,011 154,840 Canada 2.7%
  181,694 202,825   3.5%
 
Consumer Finance
Mastercard, Class A 824 74,154 165,682 United States 2.9%
 
Islamic Banking
BIMB Holdings 100,000 103,496 91,191 Malaysia 1.6%
 
Life Insurance
AIA Group 11,600 67,862 95,277 Hong Kong 1.7%
Aviva PLC ADR 7,000 93,166 72,100 United States 1.3%
  161,028 167,377   3.0%
 
P&C Insurance
Chubb 700 77,224 93,618 Switzerland 1.7%
 
  597,596 720,693   12.7%
 
Continued on next page.

 

The accompanying notes are an integral part of these financial statements. November 30, 2018 Annual Report 9

 

Saturna Sustainable Equity Fund:

Schedule of Investments As of November 30, 2018
Common Stocks – 91.9% Number of Shares Cost Market Value Country¹ Percentage of Assets
 
Health Care  
 
Health Care Facilities
Ramsay Health Care 2,308 $103,089 $91,558 Australia 1.6%
 
Large Pharma
Novo Nordisk ADR 1,569 86,408 73,147 Denmark 1.3%
 
Medical Equipment
Koninklijke Philips ADR 3,588 101,701 136,164 Netherlands 2.4%
 
  291,198 300,869   5.3%
 
Industrials  
 
Electrical Components
TE Connectivity 351 22,756 27,002 Switzerland 0.5%
 
Electrical Power Equipment
Siemens ADR 1,000 66,086 58,040 Germany 1.0%
 
Rubber & Plastic
Hartalega Holdings 80,000 63,885 122,517 Malaysia 2.2%
 
  152,727 207,559   3.7%
 
Materials  
 
Containers & Packaging
3M 700 118,457 145,544 United States 2.6%
 
Precious Metal Mining
Randgold Resources ADR 500 48,731 40,085 South Africa 0.7%
 
Specialty Chemicals
Johnson Matthey 2,031 86,775 76,151 United Kingdom 1.4%
Koninklijke DSM 600 62,437 53,288 Netherlands 0.9%
  149,212 129,439   2.3%
 
  316,400 315,068   5.6%
 
Technology  
 
Application Software
Adobe Systems² 1,000 108,410 250,890 United States 4.4%
Dassault Systemes ADR 1,506 119,029 181,345 France 3.2%
  227,439 432,235   7.6%
 
Communications Equipment
Apple 1,000 113,474 178,580 United States 3.2%
           
Electronics Components
Murata Manufacturing 1,000 133,698 153,202 Japan 2.7%
 
Information Services
Wolters Kluwer 1,000 46,595 60,464 Netherlands 1.1%
 
Infrastructure Software
Microsoft 1,438 62,724 159,460 United States 2.8%
 
Continued on next page.

 

10 November 30, 2018 Annual Report The accompanying notes are an integral part of these financial statements.

 

Saturna Sustainable Equity Fund:

Schedule of Investments As of November 30, 2018
Common Stocks – 91.9% Number of Shares Cost Market Value Country¹ Percentage of Assets
 
Technology (continued)  
 
IT Services
Accenture, Class A 900 $89,878 $148,068 Ireland 2.6%
CGI Group Inc Class A² 750 48,570 47,865 Canada 0.8%
  138,448 195,933   3.4%
 
Semiconductor Devices
NXP Semiconductors 1,300 127,836 108,381 Netherlands 1.9%
STMicroelectronics 3,800 84,537 56,430 Switzerland 1.0%
  212,373 164,811   2.9%
 
Semiconductor Manufacturing
Taiwan Semiconductor ADR 3,250 78,323 122,168 Taiwan 2.2%
 
  1,013,074 1,466,853   25.9%
 
Total investments $4,334,975 $5,201,020   91.9%
Other assets (net of liabilities)   457,134   8.1%
Total net assets   $5,658,154   100.0%
¹ Country of domicile
² Non-income producing security
³ Denotes a country of primary exposure

ADR: American Depositary Receipt

 

Countries (unaudited)
 
Saturna Sustainable Equity Fund Countries

Other assets (net of liabilities) 8.1%

Weightings shown are a percentage of total net assets.

 

The accompanying notes are an integral part of these financial statements. November 30, 2018 Annual Report 11

 

Saturna Sustainable Equity Fund

Statement of Assets and Liabilities
As of November 30, 2018
 
Assets
Investments in securities, at value
(Cost $4,334,975)
$5,201,020
Cash 438,861
Receivable for security sales 12,637
Dividends receivable 10,839
Prepaid expenses 1,622
Receivable for Fund shares sold 1,025
Total assets 5,666,004
Liabilities
Accrued advisory fees 2,987
Accrued audit expenses 2,917
Accrued retirement plan custodial fees 977
Accrued other expenses 564
Accrued trustee expenses 379
Accrued Chief Compliance Officer expenses 26
Total liabilities 7,850
Net assets $5,658,154
 
Analysis of net assets
Paid-in capital (unlimited shares authorized, without par value) $5,036,065
Total distributable earnings 622,089
Net assets applicable to Fund shares outstanding $5,658,154
 
Fund shares outstanding 491,659
 
Net asset value, offering, and redemption price per share $11.51

 

Statement of Operations
Year ended November 30, 2018
 
Investment income
Dividend income (net of foreign tax of $9,868) $87,052
Miscellaneous income 25
Total investment income 87,077
Expenses
Investment adviser fees 36,146
Filing and registration fees 19,885
Audit fees 5,698
Printing and postage 2,745
Trustee fees 1,185
Retirement plan custodial fees 1,125
Chief Compliance Officer expenses 1,102
Legal fees 1,009
Other expenses 761
Custodian fees 719
Total gross expenses 70,375
Less adviser fees waived (28,018)
Less custodian fee credits (719)
Net expenses 41,638
Net investment income $45,439
 
 
Net realized loss from investments and foreign currency $(24,490)
Net increase in unrealized appreciation on investments and foreign currency 23,969
Net loss on investments and foreign currency $(521)
 
Net increase in net assets resulting from operations $44,918

 

12 November 30, 2018 Annual Report The accompanying notes are an integral part of these financial statements.

 

Saturna Sustainable Equity Fund

Statements of Changes of Net Assets Year ended November 30, 2018 Year ended November 30, 2017
Increase in net assets from operations
From operations
Net investment income $45,439 $40,252
Net realized gain (loss) on investment and foreign currency (24,490) 57,790
Net increase in unrealized appreciation on investments and in foreign currencies 23,969 743,796
Net increase in net assets resulting from operations 44,918 841,838
Distributions to shareowners (40,318) (19,031)A
Capital share transactions
Proceeds from sales of shares 1,036,069 916,616
Value of shares issued in reinvestment of dividends 40,318 19,031
Cost of shares redeemed (407,062) (117,488)
Total capital share transactions 669,325 818,159
Total increase in net assets 673,925 1,640,966
 
Net assets
Beginning of year 4,984,229 3,343,263
End of year $5,658,154 $4,984,229B
 
Shares of the Fund sold and redeemed
Number of shares sold 87,399 90,010
Number of shares issued in reinvestment of dividends 3,500 2,029
Number of shares redeemed (34,886) (10,988)
Net increase in number of shares outstanding 56,013 81,051
A Consists of net investment income distributions of $19,031.
B Includes accumulated net investment income of $37,569.

 

Financial Highlights For year ended November 30, Period endedA
Selected data per share of outstanding capital stock throughout each year: 2018 2017 2016 November 30, 2015
Net asset value at beginning of year $11.44 $9.43 $9.73 $10.00
Income from investment operations
Net investment income 0.09 0.09 0.06 0.02
Net gains (losses) on securities (both realized & unrealized) 0.07 1.97 (0.36) (0.28)
Total from investment operations 0.16 2.06 (0.30) (0.26)
Less distributions
Dividends (from net investment income) (0.09) (0.05) - (0.01)
Total distributions (0.09) (0.05) - (0.01)
 
Net asset value at end of year $11.51 $11.44 $9.43 $9.73
 
Total return 1.39% 22.01% (3.08)% (2.60)%B
 
Ratios / supplemental data
Net assets ($000), end of year $5,658 $4,984 $3,343 $3,423
Ratio of expenses to average net assets
Before fee waivers 1.27% 1.48% 1.65% 1.23%C
After fee waivers 0.76% 0.88% 1.00% 1.00%C
After fee waivers and custodian fee credits 0.75% 0.86% 0.99% 0.99%C
Ratio of net investment income after fee waivers and custodian fee credits to average net assets 0.82% 0.95% 0.67% 0.29%C
Portfolio turnover rate 8% 12% 48% 53%B
A Operations commenced on March 27, 2015.
B Not annualized.
C Annualized.

 

The accompanying notes are an integral part of these financial statements. November 30, 2018 Annual Report 13

 

Saturna Sustainable Bond Fund:

Performance Summary (unaudited)

Average Annual Returns as of November 30, 2018

  1 Year 5 Year 10 Year Expense Ratio¹
Sustainable Bond Fund (SEBFX)² -2.29% n/a n/a 0.84%
FTSE WorldBIG Index³ -2.95% 0.56% 2.72% n/a

Growth of $10,000

Saturna Sustainable Bond Fund Growth of $10,000
Comparison of any mutual fund to a market index must be made bearing in mind that the index is 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 March 27, 2015, to an identical amount invested in the FTSE WorldBIG Index, a multi-asset, multi-currency benchmark, which provides a broad-based measure of the global fixed income markets. The graph shows that an investment in the Fund would have risen to $10,293 versus rising to $10,485 in the 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 shown in this table is as stated in the Fund's most recent prospectus which is dated March 31, 2018, and incorporates results for the fiscal year ended November 30, 2017, before fee waivers. The expense ratio shown in the most recent prospectus after fee waivers was 0.65%. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different periods.

² Operations commenced March 27, 2015.

³ The FTSE WorldBIG Index was formerly known as the Citi WorldBIG Index. The London Stock Exchange Group acquired Citigroup Index LLC in August 2017.

Fund Objective

The objectives of the Sustainable Bond Fund are current income and capital preservation.

Top 10 Holdings
% of Total Net Assets
Bank of Nova Scotia (4.65% due 10/12/2099) 4.5%
NextEra Energy Capital (6.65% due 06/15/2067) 4.2%
Lincoln National (6.05% due 04/20/2067) 4.2%
Telecom Italia (7.175% due 06/18/2019) 4.0%
Hartford Financial Services Group (3.164% due 02/12/2047) 4.0%
United States Treasury Bill (0.00% due 12/11/2018) 3.9%
Iron Mountain (5.75% due 08/15/2024) 3.9%
Novartis Capital (1.80% due 02/14/2020) 3.9%
First Abu Dhabi Bank (3.00% due 03/30/2022) 3.8%
Nokia OYJ (3.375% due 06/12/2022) 3.7%

 

Portfolio Diversification
% of Total Net Assets  
Financials 39.6%
Saturna Sustainable Bond Fund Portfolio Diversification
Consumer Discretionary 11.8%
Communications 11.5%
Government Bonds 10.0%
Technology 6.8%
Health Care 6.0%
Energy 4.2%
Materials 3.6%
Consumer Staples 1.1%
Industrials 0.8%
Asset-Backed Securities 0.3%
Utilities 0.2%
Other Assets (net of liabilities) 4.1%

 

 

14 November 30, 2018 Annual Report

 

Saturna Sustainable Bond Fund:

Discussion of Fund Performance (unaudited)

(photos omitted)

Fiscal Year 2018

For the fiscal year ended November 30, 2018, the Sustainable Bond Fund returned -2.29% versus the -2.95% return of its benchmark, the FTSE World BIG Bond Index. The outperformance can be explained, in part, by the Sustainable Bond Fund having a larger US dollar exposure relative to the benchmark of 78.78% versus 51.17%. The portfolio was invested among 45 separate issues over the quarter offered by 38 different issuers posting a modified duration of 2.37 years and a 30-day yield of 3.79%.

Factors Affecting Past Performance

The old adage that things come in threes may help to offer context as to what brought about volatility to the fixed income markets throughout 2018. The triad of factors include increasing interest rates, a strong US dollar, and trade war tensions.

On September 26, 2018, the Federal Reserve chairman, Jerome H. Powell, announced that the Federal Open Market Committee (FOMC) voted to increase the target range for the federal funds rate from 2.00% to 2.25%. The FOMC's decision marked the eighth interest rate hike since they began taking steps toward normalizing monetary policy on December 16, 2015. Following the announced interest rate increase, Powell was quoted as saying that "our economy is strong" and adding that "these rates remain low, and my colleagues and I believe that this gradual returning to normal is helping to sustain this strong economy."¹ Since that time, short-term interest rates have experienced a material increase as the three-month London Interbank Offered Rate (LIBOR) has risen by a factor of nine as the one-year US Treasury has nearly tripled. The knock-on-effects of rising interest rates are that borrowing costs are rising, particularly for those with floating-rate debt obligations such as consumer credit cards which are typically benchmarked to the prime lending rate.

Change in US Interest Rates
  Dec. 16, 2015 Nov. 30, 2018 Change
3 Month LIBOR 0.25% 2.74% 985.7%
1 year US T-Bill 0.69% 2.68% 290.1%
2 year US Government Note 1.01% 2.79% 177.3%
5 year US Government Note 1.75% 2.81% 60.9%
10 year US Government Note 2.30% 2.99% 30.1%
30 year US Government Note 3.00% 3.29% 9.6%

Source: Bloomberg

The US dollar has also demonstrated strength relative to the currencies of its primary trading partners throughout 2018. This contrasts with 2017 when the US dollar demonstrated broad weakness, as can be observed in the accompanying illustration. A strong US dollar has some advantages in making foreign imported goods cheaper; however, this also makes US exports more expensive. The knock-on-effects also make it much more expensive for foreign governments and corporations that have issued US dollar debt, particularly in a higher interest rate environment. Some of the casualties of the rising interest rates costs and the strong US dollar have been observed in Turkey where its stock market, the Borsa (XU100 Index), has experienced a -14.43% decline year-to-date in its local currency, the Turkish lira, with a more jarring decline of -38.33% when expressed in the US dollar terms.

Change of the US dollar compared to selected currencies
  2017 YTD
(Ending Nov. 30, 2018)
US dollar vs. Canadian dollar -6.92% 5.42%
US dollar vs. Mexican peso -5.43% 3.48%
US dollar vs. Euro -14.15% 5.73%
US dollar vs. British pound -9.51% 5.65%
US dollar vs. Australian dollar -8.34% 6.44%
US dollar vs. Chinese yuan -6.74% 6.52%

Source: Bloomberg

There appears to be a temporary trade detente between President Trump and Chinese president Xi Jinping regarding tariffs following the G-20 summit in Argentina; however, investor uncertainty remains high, as US trade policy under President Trump's administration has taken a pronounced shift with long standing trading partners. Some countries look to exports as a major source of their economic activity; China, Mexico, and Germany reported that exports represented 19.8%, 37.9% and 47.3% of their 2017 GDP, respectively.² If trade patterns become materially altered, it can be expected to negatively impact global growth.

Given our current expectations for a rising interest rate environment, the Fund is well situated from a credit perspective to meet its investment objective of capital preservation and current income, while focusing on issuers that are better positioned relative to their peers from an environmental, social, and governance (ESG) perspective.

 

¹ Borak, Donna. Federal Reserve Hikes Rates for Third Time This Year, CNN, September 26, 2018. https://money.cnn.com/2018/09/26/news/economy/federal-reserve-interest-rates-hike/index.html

² https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?year_high_desc=true

Annual Report November 30, 2018 15

 

Saturna Sustainable Bond Fund:

Schedule of Investments As of November 30, 2018
Asset-Backed Securities – 0.3% Coupon / Maturity Face Amount Market Value Country¹ Percentage of Assets
 
Asset-Backed Securities  
 
CRART 2014-3 C 3.61% due 06/17/2021 $100,000 $99,990 United States 0.3%
 
  99,990   0.3%
 
Total Asset-Backed Securities $99,990   0.3%

 

Corporate Bonds – 85.6% Coupon / Maturity Face Amount Market Value Country¹ Percentage of Assets
 
Communications  
 
America Movil² 6.00% due 06/09/2019 MXN 15,000,000 $722,911 Mexico 2.3%
Telecom Italia 7.175% due 06/18/2019 1,250,000 1,269,375 Luxembourg 4.0%
Telus 3.20% due 04/05/2021 CAD 1,500,000 1,129,361 Canada 3.6%
Vodafone Group 4.375% due 03/16/2021 500,000 509,791 United Kingdom 1.6%
 
  3,631,438   11.5%
 
Consumer Discretionary  
 
Barry Callebaut² 5.50% due 06/15/2023 500,000 520,887 Belgium 1.6%
Barry Callebaut³ 5.50% due 06/15/2023 750,000 781,330 Belgium 2.5%
BMW Finance 2.75% due 04/25/2019 NOK 2,000,000 233,919 Netherlands 0.8%
BMW US Capital 2.75% due 12/02/2019 AUD 200,000 146,818 Germany 0.5%
Danone³ 2.077% due 11/02/2021 1,000,000 956,601 France 3.0%
Starbucks 2.45% due 06/15/2026 500,000 446,355 United States 1.4%
Toyota Motor Credit 2.75% due 02/05/2028 202,000 187,197 Japan 0.6%
Toyota Motor Credit 3.00% due 03/20/2030 500,000 457,930 Japan 1.4%
 
  3,731,037   11.8%
 
Consumer Staples  
 
Nestle Holdings 2.75% due 04/15/2020 NOK 3,000,000 355,422 Switzerland 1.1%
 
  355,422   1.1%
 
Energy  
 
NextEra Energy Capital (3 month LIBOR plus 2.35%)4 6.65% due 06/15/2067 1,550,000 1,329,125 United States 4.2%
 
  1,329,125   4.2%
 
Financials  
 
AXA² 5.125% due 01/17/2047 500,000 477,566 France 1.5%
Bancolombia 5.95% due 06/03/2021 1,000,000 1,033,760 Colombia 3.3%
Bank of Nova Scotia5 4.65% due 10/12/2099 1,550,000 1,408,640 Canada 4.5%
Canadian Imperial Bank 3.42% due 01/26/2026 CAD 1,150,000 866,163 Canada 2.7%
EMIRATES NBD PJSC² 6.00% due 10/08/2019 NZD 750,000 525,268 United Arab Emirates 1.6%
First Abu Dhabi Bank² 3.00% due 03/30/2022 1,250,000 1,207,328 United Arab Emirates 3.8%
Hanmi Financial6 5.45% due 03/30/2027 1,000,000 1,011,895 United States 3.2%
Hartford Financial Services Group (3 month LIBOR 2.125%)3,4 3.164% due 02/12/2047 1,500,000 1,256,250 United States 4.0%
HomeStreet 6.50% due 06/01/2026 500,000 518,685 United States 1.6%
Iron Mountain 5.75% due 08/15/2024 1,300,000 1,238,250 United States 3.9%
Lincoln National (3 month LIBOR plus 2.04%)4 6.05% due 04/20/2067 1,600,000 1,320,000 United States 4.2%
Townebank Portsmouth VA7 4.50% due 07/30/2027 $750,000 $741,159 United States 2.3%
 
Continued on next page.

 

16 November 30, 2018 Annual Report The accompanying notes are an integral part of these financial statements.

 

Saturna Sustainable Bond Fund:

Schedule of Investments As of November 30, 2018
 
Financials (continued)  
 
XLIT (3 month LIBOR plus 2.46%)4 4.89381% due PERP8 1,000,000 941,250 Bermuda 3.0%
 
  12,546,214   39.6%
 
Health Care  
 
Novartis Capital 1.80% due 02/14/2020 1,250,000 1,230,065 Switzerland 3.9%
TEVA Pharmaceuticals 2.80% due 07/21/2023 750,000 657,930 Netherlands 2.1%
 
  1,887,995   6.0%
 
Industrials  
 
Ingersoll-Rand 2.625% due 05/01/2020 250,000 247,151 Luxembourg 0.8%
 
  247,151   0.8%
 
Materials  
 
Koninklijke DSM² 1.00% due 04/09/2025 EUR 1,000,000 1,140,415 Netherlands 3.6%
 
  1,140,415   3.6%
 
Technology  
 
Apple² 2.65% due 06/10/2020 AUD 500,000 365,865 United States 1.2%
MSCI³ 5.75% due 08/15/2025 600,000 607,500 United States 1.9%
Nokia OYJ 3.375% due 06/12/2022 1,250,000 1,185,938 Finland 3.7%
 
  2,159,303   6.8%
 
Utilities  
 
United Utilities 5.375% due 02/01/2019 75,000 75,278 United Kingdom 0.2%
 
  75,278   0.2%
 
Total Corporate Bonds $27,103,378   85.6%
Continued on next page.

 

Countries (unaudited)
 
Saturna Sustainable Bond Fund Countries

Other assets (net of liabilities) 4.1%

Weightings shown are a percentage of total net assets.

 

The accompanying notes are an integral part of these financial statements. November 30, 2018 Annual Report 17

 

Saturna Sustainable Bond Fund:

Schedule of Investments As of November 30, 2018
Government Bonds – 10.0% Coupon / Maturity Face Amount Market Value Country¹ Percentage of Assets
 
Banks  
 
KFW 2.00% due 11/30/2021 $1,000,000 $972,589 Germany 3.1%
 
  972,589   3.1%
 
Foreign Government Bonds  
 
Mexico Bonos Desarrollo 6.50% due 06/10/2021 MXN 200,000 934,471 Mexico 3.0%
 
  934,471   3.0%
 
US Treasury Bill  
 
United States Treasury Bill9 0.00% due 12/11/2018 1,250,000 1,249,403 United States 3.9%
 
  1,249,403   3.9%
 
Total Government Bonds $3,156,463   10.0%
 
Total investments (Cost = $31,872,564)   $30,359,831   95.9%
Other assets (net of liabilities)     1,286,729   4.1%
Total net assets     $31,646,560   100.0%

¹ Country of risk

² Security was purchased pursuant to Regulation S under the Securities Act of 1933 which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Trust's Board of Trustees. At November 30, 2018, the aggregate value of Regulation S securities was $4,960,240 representing 15.6% of net assets.

³ Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust's Board of Trustees. At November 30, 2018, the net value of Rule 144A securities was $3,601,681 representing 11.4% of net assets.

4 Variable rate security. The interest rate represents the rate in effect at November 30, 2018 and resets periodically based on the parenthetically disclosed reference rate and spread.

5 Bank of Nova Scotia is a fixed to float bond. The bond has a fixed rate until 10/12/2022. The interest rate represents the rate in effect at November 30, 2018.

6 Hanmi Financial is a fixed to float bond. The bond has a fixed rate until 03/30/2022. The interest rate represents the rate in effect at November 30, 2018.

7 Townebank Portsmouth VA is a fixed to float bond. The bond has a fixed rate until 07/30/2022. The interest rate represents the rate in effect at November 30, 2018.

8 Security is perpetual in nature and has no stated maturity.

9 Non-income producing.

Bond Quality Diversification (unaudited)
% of Total Net Assets  
Rated "AAA" 3.1%
Saturna Sustainable Bond Fund Bond Quality Diversification
Rated "AA+" 1.2%
Rated "AA-" 10.8%
Rated "A+" 1.6%
Rated "A-" 10.5%
Rated "BBB+" 12.7%
Rated "BB" 18.4%
Rated "BBB-" 8.5%
Rated "BB+" 13.7%
Rated "BB" 2.1%
Rated "B" 3.9%
Not rated 9.4%
Other Assets (net of liabilities) 4.1%

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.

18 November 30, 2018 Annual Report The accompanying notes are an integral part of these financial statements.

 

Saturna Sustainable Bond Fund

Statement of Assets and Liabilities
As of November 30, 2018
 
Assets
Investments in securities, at value
(Cost $31,872,564)
$30,359,831
Cash 887,864
Interest receivable 380,543
Receivable for Fund shares sold 84,673
Prepaid expenses 481
Total assets 31,713,392
Liabilities
Payable for Fund shares redeemed 44,200
Accrued advisory fees 14,355
Accrued audit expenses 5,822
Accrued other expenses 823
Accrued trustee expenses 677
Accrued retirement plan custodial fees 649
Accrued Chief Compliance Officer expenses 306
Total liabilities 66,832
Net assets $31,646,560
 
Analysis of net assets
Paid-in capital (unlimited shares authorized, without par value) $33,182,297
Total distributable earnings (1,535,737)
Net assets applicable to Fund shares outstanding $31,646,560
 
Fund shares outstanding 3,370,676
 
Net asset value, offering, and redemption price per share $9.39

 

Statement of Operations
Year ended November 30, 2018
 
Investment income
Interest income $999,960
Miscellaneous income 29
Total investment income 999,989
Expenses
Investment adviser fees 150,966
Filing and registration fees 25,598
Audit fees 15,772
Printing and postage 5,175
Chief Compliance Officer expenses 4,423
Trustee fees 2,980
Custodian fees 2,882
Legal fees 1,769
Other expenses 1,655
Retirement plan custodial fees 731
Total gross expenses 211,951
Less adviser fees waived (30,867)
Less custodian fee credits (2,882)
Net expenses 178,202
Net investment income $821,787
 
 
Net realized loss from investments and foreign currency $(88,078)
Net increase in unrealized depreciation on investments and foreign curreny (1,499,785)
Net loss on investments $(1,587,863)
 
Net decrease in net assets resulting from operations $(766,076)

 

The accompanying notes are an integral part of these financial statements. November 30, 2018 Annual Report 19

 

Saturna Sustainable Bond Fund

Statements of Changes in Net Assets Year ended November 30, 2018 Year ended November 30, 2017
Increase in net assets from operations
From operations
Net investment income $821,787 $415,694
Net realized loss on investment (88,078) (43,430)
Net increase (decrease) in unrealized appreciation (1,499,785) 205,033
Net increase (decrease) in net assets (766,076) 577,297
Distributions to shareowners (722,566) (418,491)A
Capital share transactions
Proceeds from sales of shares 14,807,636 14,897,718
Value of shares issued in reinvestment of dividends 637,199 359,283
Cost of shares redeemed (4,289,584) (2,075,045)
Total capital share transactions 11,155,251 13,181,956
Total increase in net assets 9,666,609 13,340,762
 
Net assets
Beginning of year 21,979,951 8,639,189
End of year $31,646,560 $21,979,951B
 
Shares of the Fund sold and redeemed
Number of shares sold 1,517,615 1,504,397
Number of shares issued in reinvestment of dividends 65,470 36,349
Number of shares redeemed (438,446) (209,909)
Net increase in number of shares outstanding 1,144,639 1,330,837
A Consists of net investment income distributions of $405,083 and capital gains distribution of $13,408.
B Includes accumulated net investment income of $176.

 

Financial Highlights Year ended November 30, Period endedA
Selected data per share of outstanding capital stock throughout each year: 2018 2017 2016 Nov. 30, 2015
Net asset value at beginning of year $9.87 $9.65 $9.75 $10.00
Income from investment operations
Net investment income 0.26 0.27 0.24 0.12
Net gains (losses) on securities (both realized and unrealized) (0.48) 0.23 (0.10) (0.25)
Total from investment operations (0.22) 0.50 0.14 (0.13)
Less distributions
Dividends (from net investment income) (0.26) (0.27) (0.24) (0.12)
Capital gains distribution - (0.01) - -
Total distributions (0.26) (0.28) (0.24) (0.12)
 
Net asset value at end of year $9.39 $9.87 $9.65 $9.75
 
Total return (2.29)% 5.28% 1.37% (1.29)%B
 
Ratios / supplemental data
Net assets ($000), end of year $31,647 $21,980 $8,639 $6,885
Ratio of expenses to average net assets        
Before fee waivers 0.77% 0.92% 1.17% 1.02%C
After fee waivers 0.66% 0.75% 0.89% 0.90%C
After fee waivers and custodian fee credits 0.65% 0.74% 0.89% 0.89%C
Ratio of net investment income after fee waivers custodian fee credits to average net assets 2.99% 2.82% 2.46% 1.92%C
Portfolio turnover rate 25% 14% 46% 4%B
A Operations commenced on March 27, 2015
B Not annualized.
C Annualized.

 

20 November 30, 2018 Annual Report The accompanying notes are an integral part of these financial statements.

 

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. Nine portfolio series have been created to date, two of which are covered by this annual report: Saturna Sustainable Equity Fund and Saturna Sustainable Bond Fund (the "Funds"). The Sextant Short-Term Bond Fund, Sextant Bond Income Fund, Sextant Core Fund, Sextant Global High Income Fund, Sextant Growth Fund, Sextant International Fund, and the Idaho Tax-Exempt Fund are offered through separate prospectuses, the results of which are contained in separate reports.

Saturna Sustainable Equity Fund and Saturna Sustainable Bond Fund commenced operations on March 27, 2015.

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

Investment risks:

Saturna Sustainable Equity and Saturna Sustainable Bond Funds: The value of each Fund's shares rises and falls as the value of the securities in which the Fund invests goes up and down. Fund share prices, yields, and total returns will change with market fluctuations as well as the fortunes of the countries, industries, and companies in which the Fund invests. The Funds do not use derivatives to hedge currency, interest rate, or credit risk.

Ratings are dependent upon the associated ESG risks that are most pertinent to the sector in which an issuer operates. The ratings process associated with sustainable and responsible investing reduces the investable universe for each Fund, which limits opportunities and may increase the risk of loss during market declines. The adviser believes that sustainable investing may mitigate security-specific risk, but there is no guarantee that the securities favored by our investment process will perform better and may perform worse than those that are not favored.

The Funds may invest substantially in one or more sectors, which can increase volatility and exposure to issues specific to a particular sector or industry.

Foreign investing involves risks not normally associated with investing in US securities. These include fluctuations in currency exchange rates, less public information about securities, less governmental market supervision, and the lack of uniform financial, social, and political standards. Foreign investing heightens the risk of confiscatory taxation, seizure or nationalization of assets, establishment of currency controls, or adverse political or social developments that affect investments. The risks of investing in foreign securities are typically greater in less developed or emerging countries.

Liquidity risk exists when particular investments are difficult to sell. If a Fund holds illiquid investments, its portfolio may be more difficult to value, especially in changing markets. Investments by a Fund in foreign securities and those that are thinly traded, such as lower quality issuers, and smaller companies tend to involve greater liquidity risk. If a Fund is forced to sell or unwind these investments to meet redemptions or for other cash needs, the Fund may suffer a penalty. Additionally, the market for certain investments may become illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer. In such cases, the Fund, due to limitations on investments in illiquid securities and the difficulty in purchasing and selling such securities, may be unable to achieve its investment objective.

Saturna Sustainable Bond Fund: The risks inherent in the Saturna Sustainable Bond Fund depend primarily on the terms and quality of the obligations in its portfolio, 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 usually are more sensitive to interest rate changes than bonds with shorter maturities. 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.

The Fund may invest a portion of its assets in securities issued by government sponsored entities such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks in the US. Foreign governments also sponsor similar entities, which may promote activities such as low-cost housing or alternative energy. The Fund may also invest in the issues of regional, state, and local governments. The terms of such issues can be complex, and there can be no assurance that a government entity will support such enterprises that encounter financial difficulty.

Issuers of high-yield securities are generally not as strong financially as those issuing higher quality securities. These issuers are more likely to encounter financial difficulties and are more vulnerable to changes in the relevant economy that could affect their ability to make interest and principal payments as expected. High-yield bonds may have low or no ratings, and may be considered "junk bonds."

Bond investments, especially mortgage-backed and asset-backed securities, are subject to the risk that borrowers will prepay the principal more quickly than expected (prepayment risk) or more slowly than expected (extension risk), which will affect the yield, average life, and price of the securities.

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 Funds in preparation of their financial statements.

Security valuation:
Investments in securities traded on a national securities exchange and over-the-counter securities for which sale prices are available are valued at that price. Securities for which there are no sales are valued at the latest bid price.

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.

Fixed-income debt instruments, such as commercial paper, bankers' acceptances, and US Treasury Bills, with a maturity of 60 days or less are valued at amortized cost, which approximates market value.

Annual Report November 30, 2018 21

 

Notes To Financial Statements

(continued)

Any discount or premium is accreted or amortized on a straight-line basis until maturity.

Foreign markets may close before the time as of which the Funds' share prices are determined. Because of this, events occurring after the close and before the determination of the Funds' share prices may have a material effect on the values of some or all of the Funds' foreign securities. To account for this, the Funds may use outside pricing services for valuation of their non-US securities.

In cases in which there is not a readily available market price, 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 the trade date. Realized gains and losses on sales of securities are recorded on the identified cost basis.

Foreign currency:
Investment securities and other assets and liabilities denominated in foreign currencies are translated into US dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into US dollar amounts on the respective dates of such transactions.

The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds' books and the US dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.

Share valuation:
The net asset value ("NAV") per share of each Fund is calculated by dividing the sum of the value of the securities held by each Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for each Fund, rounded to the nearest cent. The Funds' 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.

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 Funds' own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds' investments and are summarized below.

Funds Level 1
Quoted Price
Level 2
Significant Observable Input
Level 3
Significant Unobservable Input
Total
Sustainable Equity Fund
Common Stocks
Communications $285,892 $59,796 $- $345,688
Consumer Discretionary 1,037,734 27,400 - $1,065,134
Consumer Staples 643,124 19,251 - $662,375
Energy - 116,781 - $116,781
Financials 534,225 186,468 - $720,693
Health Care 209,311 91,558 - $300,869
Industrials 85,042 122,517 - $207,559
Materials 185,629 129,439 - $315,068
Technology 1,205,322 261,531 - $1,466,853
Total Assets $4,186,279 $1,014,741 $- $5,201,020
 
Sustainable Bond Fund
Asset-Backed Securities¹ $- $99,990 $- $99,990
Corporate Bonds¹ - $27,103,378 - $27,103,378
Government Bonds¹ - $3,156,463 - $3,156,463
Total Assets $- $30,359,831 $- $30,359,831

¹ See Schedule of Investments for industry breakout.

During the period ended November 30, 2018, no Fund had transfers between Level 1, Level 2 or Level 3.

22 November 30, 2018 Annual Report

 

Notes To Financial Statements

(continued)

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.

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 risk associated with investing in those securities.

The table on page 22 is a summary of the inputs used as of November 30, 2018, in valuing the Funds' investments carried at fair value.

Investment concentration:
The Funds may have deposits of cash with the custodian from time to time for one or more reasons. "Other assets (net of liabilities)" in the Funds' Schedules of Investments primarily represents cash on deposit with the custodian. Cash on deposit will vary widely over time. Accounting Standards Codification ("ASC") 825, "Financial Instruments," identifies these items as a concentration of credit risk. The risk is managed by careful financial analysis and review of the custodian's operations, resources, and protections available to the Trust. This process includes evaluation of other financial institutions providing investment company custody services.

Federal income taxes:
The Funds intend 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 them from all or substantially all federal income taxes. Therefore, no federal income tax provision is required.

The Funds recognize 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 Funds' 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 Funds' 2018 tax returns. The Funds identify their major tax jurisdictions as US federal and foreign jurisdictions where the Funds make significant investments; however, the Funds are 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, 2018, the reclassification of capital accounts were as follows:

  Equity Fund Bond Fund
Distributable earnings $- $2,041
Paid-in capital $- $(2,041)

Distributions to shareowners:
For the Sustainable Bond Fund, dividends to shareowners from net investment income are paid daily and distributed on the last business day of each month. Sustainable Equity Fund pays income dividends annually, typically by the end of the year. As a result of its investment strategy, the Saturna Sustainable Equity Fund may not pay income dividends. For both Funds, 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 Funds, at the net asset value on the payable date. Shareowners may elect to take distributions if they total $10 or more in cash.

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.

Foreign taxes:
Withholding taxes on foreign dividends are paid (a portion of which may be reclaimable) or provided for in accordance with the applicable country's tax rules and rates and are disclosed in the Statement of Operations. Withholding tax reclaims are filed in certain countries to recover a portion of the amounts previously withheld. The Funds record a reclaim receivable based on a number of factors, including a jurisdiction's legal obligation to pay reclaims as well as payment history and market convention.

Other:

Interest income is recognized on an accrual basis. Premiums on securities purchased are amortized, and discounts are accreted

Annual Report November 30, 2018 23

 

Notes To Financial Statements

(continued)

over the lives of the respective securities. Dividends from equity securities are recorded as income on the ex-dividend date.

Recent accounting pronouncements:
As of November 5, 2018, pursuant to the SEC Release #33-10532 "Disclosure Update and Simplification", funds are no longer required to disclose whether the distributions from earnings are either from net investment income or net realized capital gains. The presentation for the year ended November 30, 2017, has been adjusted for this change in the Statement of Changes in Net Assets.

In March 2017, FASB issued Accounting Standards Update No. 2017-08, "Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities" ("ASU 2017-08"). ASU 2017-08 shortens the amortization period to the earliest call date for certain purchased callable debt securities held at a premium. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management is currently evaluating the impact of applying this guidance.

In August 2018, FASB issued Accounting Standards Update No. 2018-13, "Fair Value Measurement (Topic 820: Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. ASU 2018-13 will require the need to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 will also require that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and allows for early adoption of either the entire standard or only the provisions that eliminate or modify the requirements. Management has elected to adopt early the provisions that eliminate the disclosure requirements. Management is still currently evaluating the impact of applying the rest of the guidance.

NOTE 3 — Transactions with Affiliated Persons

Under contracts approved annually by the Trust's independent trustees, Saturna Capital Corporation provides investment advisory services and certain other administrative services required to conduct Trust business. Expenses incurred by the Trust on behalf of the Funds (e.g., legal fees) are allocated to the Funds on the basis of relative daily average net assets. For such services, each of the Funds pays the adviser an Investment Advisory and Administrative Services Fee of 0.65% for the Sustainable Equity Fund and 0.55% for the Sustainable Bond Fund of average net assets per annum, payable monthly. In addition, the adviser has agreed to certain limits on other expenses, as described below.

The Adviser has voluntarily undertaken to limit expenses of the Sustainable Equity Fund to 0.75% and the Sustainable Bond Fund to 0.65% through March 31, 2019. For the year ended November 30, 2018, the advisory fees incurred were as follows:

  Adviser Fees Adviser Fees Waived Expense
Reimbursement
Sustainable Equity $36,146 $(28,018) $-
Sustainable Bond $150,966 $(30,867) $-

In accordance with the expense limitation noted above, for the year ended November 30, 2018, Saturna Capital waived a portion of the advisory fees of the Sustainable Equity Fund and Sustainable Bond Fund. The adviser cannot recoup previously waived fees.

Saturna Brokerage Services, Inc. ("SBS"), a discount brokerage and subsidiary of Saturna Capital Corporation, is registered as a broker-dealer and acts as distributor. On December 19, 2014, the Funds adopted a Distribution Plan in accordance with Rule 12b-1 under the 1940 Act. On June 2, 2017, 12b-1 fees were terminated for both Saturna Sustainable Funds.

SBS is used to effect portfolio transactions for the Trust. SBS currently executes portfolio transactions without commission. Transactions effected through other brokers are subject to commissions payable to that broker.

Saturna Trust Company ("STC"), a subsidiary of Saturna Capital, acts as retirement plan custodian for Fund shareowners. Each Fund pays an annual fee of $10 per account for retirement plan services to Saturna Trust Company. For the year ended November 30, 2018, the Funds incurred the following amounts:

Retirement plan custodial fees
Sustainable Equity $1,125
Sustainable Bond $731

Mrs. Jane Carten serves as a trustee and president of the Trust. She is also a director and president of Saturna Capital and vice president of Saturna Trust Company. Mrs. Carten is not compensated by the Trust. For the year ended November 30, 2018, the Trust incurred compensation expenses of $33,000 which is included in $48,917 of total expenses for the independent Trustees. The Saturna Sustainable Funds paid $6,454 of these total expenses.

The officers of the Trust are paid by Saturna Capital, not the Trust, except the Chief Compliance Officer, who may be partially compensated by the Trust. For the year ended November 30, 2018, the Funds paid the following compensation expenses for the Chief Compliance Officer:

Chief Compliance Officer
Sustainable Equity $1,102
Sustainable Bond $4,423

On November 30, 2018, the trustees, officers, and their affiliates as a group owned 60.34% and 11.38% of the outstanding shares of Sustainable Equity Fund and Sustainable Bond Fund, respectively.

24 November 30, 2018 Annual Report

 

Notes To Financial Statements

(continued)

NOTE 4 — Distributions to Shareowners

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

  Year ended
November 30, 2018
Year ended
November 30, 2017
Sustainable Equity Fund
Ordinary income $40,318 $19,031
Sustainable Bond Fund
Ordinary income $722,566 413,984
Long-term capital gain¹ $- $4,507

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 on November 30, 2018, was as follows:

  Sustainable Equity Sustainable Bond
Cost of investments $4,334,975 $31,872,564
Gross tax unrealized appreciation 1,113,949 24,408
Gross tax unrealized depreciation (247,904) (1,537,141)
Net tax unrealized appreciation (depreciation) $866,045 $(1,512,733)

As of November 30, 2018, components of distributable earnings on a tax basis were as follows:

Sustainable Equity
Undistributed ordinary income $40,520
Tax accumulated earnings 40,520
Accumulated capital losses (284,394)
Unrealized appreciation 866,045
Other unrealized losses (82)
Total accumulated earnings 622,089

 

Sustainable Bond
Accumulated capital losses (19,458)
Unrealized depreciation (1,512,733)
Other unrealized losses (3,546)
Total accumulated earnings (1,535,737)

 

On November 30, 2018, the Funds had capital loss carryforwards as follows, subject to regulation.

  Carryforward Expiration
Equity Fund
Short-term loss carryforward $275,790 Unlimited
Long-term loss carryforward $8,604 Unlimited
  $284,394  

 

  Carryforward Expiration
Bond Fund
Short-term loss carryforward $16,739 Unlimited
Long-term loss carryforward $2,719 Unlimited
  $19,458  

 

NOTE 6 — Investments

Investment transactions other than short-term investments for the year ended November 30, 2018, were as follows:

  Purchases Sales
Sustainable Equity $1,127,812 $432,206
Sustainable Bond $22,558,031 $6,519,858

NOTE 7 — Custodian

Under agreements in place with the Trust's custodian, Bank of New York Mellon, custody fees are reduced by credits for cash balances. Such reductions for the period ended November 30, 2018, were as follows:

Custodian Fee Credits
Sustainable Equity $719
Sustainable Bond $2,882

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.

The Funds declared the payment of a distribution to be paid on December 27, 2018, to all shareowners of record on December 26, 2018, as follows:

  Dividend Income Short-Term Capital Gain Long-Term Capital Gain
Sustainable Equity $0.09600 $- $0.09600
Sustainable Bond $- $- $-

On January 23, 2019, the Saturna Sustainable Funds changed custodian banks from Bank of New York Mellon to UMB Bank.

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

Annual Report November 30, 2018 25

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of
Saturna Investment Trust
and the Shareholders of Saturna Sustainable Funds

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Saturna Sustainable Equity Fund and Saturna Sustainable Bond Fund, (the "Funds"), each a series of Saturna Investment Trust, including the schedules of investments, as of November 30, 2018, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the three years in the period then ended and the period March 27, 2015 through November 30, 2015, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Funds as of November 30, 2018, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights each of the three years in the period then ended and the period March 27, 2015 through November 30, 2015, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the auditor of one or more of the funds in the Trust since 1997.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of November 30, 2018 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.

Philadelphia, Pennsylvania
January 25, 2019

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

26 November 30, 2018 Annual Report

 

Expenses

All mutual funds have operating expenses. As a Saturna Sustainable 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 Saturna Sustainable Funds, 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 Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

Examples

The following examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period (June 1, 2018 to November 30, 2018).

Actual Expenses

The first line for each Fund 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 Funds 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 for each Fund provides information about hypothetical account values and hypothetical expenses based on each 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 Funds 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 IRA fees charged by custodians other than Saturna Trust Company (note that Saturna does not charge such fees to shareowners directly on Saturna IRAs, ESAs, or HSAs with the Saturna Sustainable Funds), and charges for extra services such as bank wires.

Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or exchange fees (note that the Saturna Sustainable Funds do not assess any such transactional costs). Therefore, the "Hypothetical" line of each fund 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, 2018]
Ending Account Value
[November 30, 2018]
Expenses Paid During Period Annualized Expense Ratio
 
Sustainable Equity Fund (SEEFX), Actual $1,000.00 $977.10 $3.74 0.75%
Hypothetical (5% return before expenses) $1,000.00 $1,021.29 $3.82 0.75%
 
 
Sustainable Bond Fund (SEBFX), Actual $1,000.00 $981.80 $3.21 0.65%
Hypothetical (5% return before expenses) $1,000.00 $1,021.83 $3.27 0.65%

Expenses are equal to annualized expense ratios indicated above (based on the most recent fiscal period of June 1, 2018, through November 30, 2018) multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).

Annual Report November 30, 2018 27

 

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 (51)
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 (69)
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 (60)
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 (57)
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 (50)
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 (43)
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

 

28 November 30, 2018 Annual Report

 

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 (65)
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 (46)
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 (57)
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 (38)
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) Nicole Trudeau (39)
1300 N. State Street
Bellingham WA 98225
Secretary¹
(since 2018)
N/A
Chief Legal Officer,
Saturna Capital Corporation

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

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.saturnasustainable.com, includes additional information about the Trustees.

On November 30, 2018, the trustees, officers, and their affiliates as a group owned 60.34% and 11.38% of the outstanding shares of Sustainable Equity and Sustainable Bond Funds, respectively.

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 chairman 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, 2018, all Saturna Capital employees listed 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 position with Amana Mutual Funds Trust

Annual Report November 30, 2018 29

 

Renewal of Investment Advisory Contract

The Trustees of the Trust, including those Trustees who are not "interested persons" (as that term is defined in the Investment Company Act of 1940 (the "1940 Act")) of the Trust or Saturna Capital (the "Independent Trustees"), at their June 19, 2018 meeting, considered new Investment Advisory and Administration Agreements (the "Agreements") with Saturna Capital on behalf of each of the Sustainable Funds (Sustainable Equity Fund and Sustainable Bond Fund) (the "Funds"), in light of the expected exercise by Mrs. Jane Carten, President and Chief Executive Officer of Saturna Capital, of her option to purchase the controlling voting interest in Saturna Capital (the "Option Purchase"), and Saturna Capital's presumed change of control as a result. The Trustees noted that the Option Purchase would be deemed to result in the "assignment" (as defined in the 1940 Act) and automatic termination of each Fund's advisory agreement with Saturna Capital, and that approval of the Agreements by the Trustees and the shareowners of each Fund was necessary to ensure the continuation of services to the Funds without interruption upon the Option Purchase. In deciding to approve the Agreements for each Fund in the context of the Option Purchase, the Trustees considered representations from Saturna Capital that (i) the change of control was not expected to result in any material changes to the nature, quality and extent of services provided to the Funds by Saturna Capital, including the continuity of the Funds' portfolio managers and other personnel responsible for the management operations of the Funds; (ii) the compensation payable to Saturna Capital under each new Agreement would not change and is the same as that under the corresponding current agreement; and (iii) Saturna Capital did not anticipate any material changes to its compliance program or code of ethics in connection with the change of control. The Trustees further considered that the Option Purchase was a positive development in that it would further secure succession planning for Saturna Capital. At a Special Meeting of Shareowners of the Trust held on September 24, 2018, shareowners of each Fund approved the Agreements. At their June 19, 2018 meeting, the Trustees determined to continue to conduct the annual contracts review process for the Funds on its regular schedule, notwithstanding the two-year initial term set forth in the Agreements that had been approved by shareowners.

During their meeting of September 25, 2018, the Trustees discussed the continuance of the Agreements between the Funds and Saturna Capital. In considering the renewal of the Agreements, the Trustees discussed the nature, extent, and quality of the services provided by Saturna Capital to the Trust and each of the Funds. The Trustees considered that the Funds offer a full range of high-quality investor services. The Trustees discussed Saturna's experience, ability, and commitment to quality service through performing internally such functions as shareowner servicing, administration, retirement plan and trust services, 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 qualified and experienced staff and improve the capital base on which Saturna operates, which the Trustees believe is important to the long-term success of the Funds. They considered Saturna's focus on investors and its efforts to avoid potential conflicts of interest.

The Trustees considered the investment performance of each Fund, recognizing that because the Funds had commenced investment operations on March 27, 2015, each Fund had a relative short operating history. The Trustees 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 each Fund's performance relative to the Fund's Morningstar category for the three-year period ended August 31, 2018, noting that Sustainable Equity Fund had outperformed its Morningstar category average and Sustainable Bond Fund had slightly underperformed its Morningstar category average during that period. The Trustees considered and discussed each Fund's performance relative to the Fund's Morningstar category for the one-year period ended August 31, 2018, noting that both the Sustainable Equity Fund and Sustainable Bond Fund had outperformed its Morningstar category average during that period. The Trustees also noted the recent high sustainability ratings assigned to the Funds by Morningstar. The Trustees also considered each Fund's performance ranking relative to the Fund's category selected by Lipper, Inc.

The Trustees noted the risk-averse investment style and other factors, which can affect a Fund's performance relative to the Fund's broader Morningstar categories. The Trustees also noted certain differences between a Fund and the peer funds within the relevant Morningstar category, including differences in investment strategies and asset size. The Trustees found that Saturna manages the Funds 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 Funds. 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 each Fund as compared to a smaller group of funds with similar assets and investment objectives and strategies. The Trustees considered these comparative performance and expense data, along with the comparative data published by Morningstar and each Fund's performance relative to its benchmark, to evaluate each Fund's performance over its relatively short operating history.

The Trustees also reviewed the fees and expenses of the Funds and considered the components of each Fund's operating expenses. The Trustees noted the steps that Saturna Capital has undertaken to maintain competitive levels of Fund operating expenses. They noted the significant sponsorship of the Funds by Saturna Capital

30 November 30, 2018 Annual Report

 

Renewal of Investment Advisory Contract (continued)

evidenced, in part, by certain fees and expenses paid by Saturna Capital out of its own resources (known as "revenue sharing") to unaffiliated intermediaries.

Recognizing that Saturna pays certain fees and expenses that are often borne by funds, the Trustees appreciated Saturna's efforts help make the Funds more widely available and less expensive than would otherwise be the case without Saturna Capital's efforts. The Trustees decision to end the expense of the 12b-1 plan helped lower the Funds' operating expenses and reduced the income available to Saturna Capital to pay for its marketing activities.

The Trustees recognized that the Funds remain relatively small and there have not yet been opportunities to consider economies of scale. The Trustees noted Saturna Capital's commitment to continue operating the Funds and the costs undertaken by Saturna Capital.

The Trustees reviewed Saturna Capital's financial information and discussed the issue of Saturna Capital's profitability as related to management and administration of the Trust. They discussed the reasonableness of Saturna Capital's profitability as part of their evaluation of whether the advisory fees bear a reasonable relationship to the mix of services provided by Saturna Capital, including the nature, extent, and quality of such services. The Trustees appreciated Saturna Capital marketing the Funds as low-cost, "clean shares" investment options to a wide variety of potential investors.

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 Capital provides to the Funds, including investment advisory services, transfer agency services, shareholder services, and other services, as compared to the investment advisory services provided to the other advisory accounts.

The Trustees considered potential benefits to Saturna Capital's other business lines from acting as investment adviser to the Funds, but also recognized that Saturna Capital's other business lines benefit the Funds. The Trustees also noted that there were no soft dollar arrangements with respect to trading in the Funds' portfolios and considered whether there are other potential benefits to Saturna Capital in continuing to manage the Funds. The Trustees found that there were no material benefits other than Saturna's receipt of advisory fees. The Trustees also noted that Saturna Brokerage Services voluntarily waives brokerage commissions for executing Fund portfolio transactions, resulting in lower transaction costs.

The Trustees concluded that the fees paid by each Fund to Saturna Capital were, from an arm's-length bargaining perspective, reasonable and in the best interest of each 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 Capital from its relationship with the Funds. Following this discussion, the Trustees unanimously agreed to approve the Agreements of Sustainable Equity Fund and Sustainable Bond Fund with Saturna Capital.

 

Annual Report November 30, 2018 31

 

Results of Shareowner Meeting

On September 24, 2018, shareowners of the Saturna Investment Trust convened a Special Meeting. The meeting record date was July 27, 2018, when 3,410,380 shares were outstanding in the two Saturna Sustainable Funds.

At the meeting, one proprosal to approve a proposed new advisory agreement was considered and approved. The following shares were voted at the meeting:

Saturna Sustainable Equity Fund
Outstanding Shares For Against Abstain
479,783 449,100 0 1,231

 

Saturna Sustainable Bond Fund
Outstanding Shares For Against Abstain
2,930,597 1,696,891 23,902 94,953

 

 

 

32 November 30, 2018 Annual Report

 

Availability of Portfolio Information

(1) The Saturna Sustainable Funds file complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.

(2) The Funds' Forms N-Q are available on the SEC's website at www.sec.gov and at www.saturnasustainable.com.

(3) The Funds' Forms 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 Funds make a complete schedule of portfolio holdings after the end of each month available to investors at www.saturnasustainable.com.

Householding Policy

To reduce expenses, we may mail only one copy of the Funds' prospectus, each annual and semi-annual report, and proxy statements 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/Saturna Sustainable Funds, 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/Saturna Sustainable Funds, P.O. Box N, Bellingham, WA 98227. We will begin sending you a single copy with subsequent report mailings.

Availability of Proxy Voting Information

(1) A description of the policies and procedures that the Funds use 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 Funds' website at www.saturnasustainable.com; and (c) on the SEC's website at www.sec.gov.

(2) Information regarding how each 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 Funds' website at www.saturnasustainable.com; and (c) on the SEC's website at www.sec.gov.

Privacy Statement

At Saturna Capital and Saturna Investment Trust, 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, shareowner 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, 2018 33

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34 November 30, 2018 Annual Report

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Annual Report November 30, 2018 35

 

 

(photo omitted)

www.saturnasustainable.com

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

This report is issued for the information of the shareowners of the Funds. It is not authorized for distribution to prospective investors unless it is accompanied or preceded by an effective prospectus relating to the securities of the Funds. The Saturna Sustainable Funds are series of Saturna Investment Trust.

Saturna Brokerage Services, Distributor

♻ This report is printed on paper with a minimum of 30% post-consumer
fiber using soy-based inks. It is 100% recyclable.

 

 
Saturna Sustainable Funds Semi-Annual Report May 31, 2019

 


 

Performance Summary (as of June 30, 2019)

 

                                                 

Average Annual Returns (before any taxes paid by shareowners)

 

                                           Expense Ratio1  
             
       1 Year        3 Year        5 Year        10 Year        Gross        Net  
             

Sustainable Equity Fund (SEEFX)

     10.76%        12.87%        n/a        n/a        1.27%        0.75%  
             

S&P Global 1200 Index

     6.96%        12.57%        7.27%        11.29%        n/a        n/a  
             

    

                                                     
             

Sustainable Bond Fund (SEBFX)

     3.58%        2.31%        n/a        n/a        0.77%        0.65%  
             

FTSE WorldBIG Index

     5.85%        1.76%        1.24%        2.75%        n/a        n/a  

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.saturnasustainable.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. Funds that invest in foreign securities may involve greater risk, including political and economic uncertainties of foreign countries as well as the risk of currency fluctuations.

A note about risk: Please see Notes to Financial Statements beginning on page 19 for a discussion of investment risks. For a more detailed discussion of the risks associated with each Fund, please see the Funds’ prospectus or each Fund’s summary prospectus.

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.

 

1 

By regulation, expense ratios shown in these tables are as stated in the Funds’ most recent Prospectus, dated March 27, 2019, and incorporate results for the fiscal year ended November 30, 2018. Ratios presented in this table differ from the expense ratios shown elsewhere in this report as they represent different periods. Also by regulation, the performance in this table represents the most recent quarter-end performance rather than performance through the Funds’ most recent fiscal period. Saturna Capital, the Fund’s adviser, has voluntarily capped actual expenses of the Sustainable Equity Fund at 0.75% and actual expenses of the Sustainable Bond Fund at 0.65% through March 31, 2020.

The S&P Global 1200 Index is a global stock market index covering nearly 70% of the world’s equity markets. The FTSE WorldBIG Index is a multi-asset, multi-currency benchmark, which provides a broad-based measure of the global fixed income markets. Investors cannot invest directly in the indices.

The Saturna Sustainable Funds limit the securities they purchase to those consistent with sustainable principles. This limits opportunities and may affect performance.

 

(photo omitted)

On the cover: Vogelsang Peak in

Yosemite National Park, Photo by

Elizabeth Alm.

 

 

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

 

 

             
 
       
2                  May 31, 2019   Semi-Annual Report

 


 

Fellow Shareowners:

At May 31, 2018, assets of the two Funds reached $36.14 million up from $32.53 million the previous May. The following pages provide details of the assets and operations of the two Funds.

Markets swung with abandon during the year, as euphoria melting to caution brought volatility and doubt. Emerging markets, led by China, suffered as the dollar surged and trade battles commenced. Wars were mostly fought with money, not arms. Global prices for carbon fuels (coal, oil, gas) are weak, as US shale production surges and demand softens. Lower taxes and interest rates are stimulating high employment, especially in technology, while the global supply chain is being rattled by trade revamps. While it’s impossible to predict the future, we believe our portfolios are well-positioned for positive or negative economic developments given our focus on low debt, cash generative, high quality companies led by excellent management teams. We believe such characteristics are defensive in the event of a downturn, while the low debt focus should also be an advantage in the event economies gain momentum.

 

 

Saturna Sustainable Funds seek sustainable investments with low risks in areas of the

environment, social responsibility, and governance (ESG).

 

 

The 1960s and the 1990s were decades of nearly uninterrupted economic growth and the 2010s are now looking to stake their longevity claim. The last time the economy contracted for two consecutive quarters (the standard definition of a recession) was in the first two quarters of 2009, and current conditions appear buoyant. Despite record low unemployment rates, inflation remains subdued, while corporate profitability and consumer confidence are robust.

The trend toward adoption of ESG and sustainable investing strategies continued as more firms added products labeled to appeal to thoughtful investors. Upon closer inspection, however, a high profile blow-up revealed that not all products labeled as ESG or “fossil-fuel free” actually were (one fund claimed “fossil-fuel free” but owned refineries while any S&P 500 Index fund or ETF likely owns both oil producers and refiners, along with weapons manufacturers).

At this point, the greatest risk to continued economic buoyancy appears to be trade friction, a development that could spin out of control or be contained rather easily with greater flexibility. Economic policies can and do change frequently.

An extraordinary era of low interest rates fueled upward moves in economies and markets. The US economy is in a “goldilocks” phase, with employment for those who want it, and little need for more government stimulus. We must be vigilant in the coming months for signs of a recession – we believe a riskier period looms ahead.

 

 

             
 
       
May 31, 2019        Semi-Annual Report              3

 


 

Morningstar Awards Saturna Sustainable Funds Top Sustainability Ratings

The Morningstar Sustainability Rating gives investors across the globe a way to compare fund portfolios based on a standard measure of sustainability. The rating is a holdings-based calculation using company-level environmental, social, and governance (ESG) analytics from Sustainalytics.

We are pleased to note that as of May 31, 2019, Saturna Sustainable Equity Fund ranked in the fifth percentile of 718 funds in the World Large Stock category, earning the top “Five Globe” Sustainability Rating. Morningstar did not issue a Sustainability Rating for the Saturna Sustainable Bond Fund for the period.

Going forward, Saturna’s values-based approach to investing seeks to provide firsthand insight into the risk mitigation dimensions of sustainable investing. We stand ready to serve you in both bull and bear markets by seeking to provide steady, long-term growth with a focus on preservation of capital.

Respectfully,

(photo omitted)

Jane Carten,

President

(photo omitted)

Gary Goldfogel,

Independent Board Chairman

 

                     
     
    Saturna Sustainable Funds Portfolio Management    
           
    (photo omitted)   

Jane Carten MBA

 

Saturna Sustainable Equity Fund

Portfolio Manager

     (photo omitted)   

Patrick Drum MBA, CFA®, CFP®

 

Saturna Sustainable Bond Fund

Portfolio Manager

   
           
    (photo omitted)   

Nicholas Kaiser MBA, CFA®

 

Saturna Sustainable Equity Fund

Deputy Portfolio Manager

     (photo omitted)   

Elizabeth Alm CFA®

 

Saturna Sustainable Bond Fund

Deputy Portfolio Manager

 

   

 

 

             
 
       
4                  May 31, 2019   Semi-Annual Report

 


 
         
Morningstar Sustainability Rating & Carbon Metrics           

 

At Saturna Capital, we have long described ourselves as value and values-based investors. We believe our approach improves the likelihood of achieving superior investment results over the long term. Our approach also leads to investment portfolios we can be proud of from the perspective of Environmental, Social, and Governance (ESG) issues. Morningstar partners with leading ESG research firm Sustainalytics to publish the Morningstar Sustainability Rating and Carbon Metrics. Here are Saturna Sustainable Equity Fund’s fiscal period-end results (Saturna Sustainable Bond Fund was not rated for the period).

 

                 
     
Saturna Sustainable Equity Fund        
     
As of May 31, 2019        
         

    

   ؠؠؠ Ø Ø             
     
Ranked in 5th percentile among 718 World Large Stock Funds        
     
As of March 31, 2019        
 
Saturna Sustainable Equity Fund Morningstar Carbon Metrics as of March 31, 2019

The Morningstar Sustainability Rating, Low Carbon designation, Carbon Risk Score, and Fossil Fuel Involvement % are not based on fund performance and are not equivalent to the Morningstar Rating (“Star Rating”).

© 2019 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 Rating is as of May 31, 2019. 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.

Saturna Sustainable Equity Fund was rated on 91% of Assets Under Management.

% Rank in Category is the fund’s percentile rank for the specified time period relative to all funds that have the same Morningstar category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1. Percentile ranks within categories are most useful in those categories that have a large number of funds.

Morningstar Carbon Metrics are as of March 31, 2019. Morningstar carbon metrics are asset-weighted portfolio calculations based on their Sustainalytics subsidiary’s carbon-risk research. Based on two of these metrics – Carbon Risk Score and Fossil Fund Involvement % – funds may receive the Low Carbon designation, which allows investors to easily identify low-carbon funds within the global universe.

The portfolio Carbon Risk Score is a number between 0 and 100 (a lower score is better). A portfolio’s Carbon Risk Score is the asset-weighted sum of the carbon risk scores of its holdings, averaged over the trailing 12 months. The carbon risk of a company is Sustainalytics’ evaluation of the degree to which a firm’s activities and products are aligned with the transition to a low-carbon economy. The assessmemt includes carbon intensity, fossil fuel involvement, stranded assets exposure, mitigation strategies, and green product solutions.

Fossil Fuel Involvement % is the portfolio’s asset-weighted percentage exposure to fossil fuels, averaged over the trailing 12 months. Companies with fossil fuel involment are defined as these in the following subindustries: Thermal Coal Extraction, Thermal Coal Power Generation, Oil & Gas Production, Oil & Gas Power Generation, and Oil and Gas Products and Services.

To receive the Low Carbon designation a fund must have Carbon Risk Score below 10 and a Fossil Fuel Involvement % of less than 7% of assets. For these metrics to be calculated, at least 67% of a portfolio’s assets must be covered by Sustainalytics company carbon-risk research. All Morningstar carbon metrices are calculated quarterly.

Saturna Sustainable Equity Fund was rated on 90% of Assets Under Management.

The Funds’ portfolios are actively managed and are subject to change, which may result in different Morningstar Sustainability Ratings and Carbon Metrics over time.

 

 

             
 
       
May 31, 2019        Semi-Annual Report              5

 


 
     
Saturna Sustainable Equity Fund: Performance Summary   
Saturna Sustainable Equity Fund Logo

 

                                 

Average Annual Returns as of May 31, 2019

 

         
     1 Year      5 Year      10 Year      Expense Ratio  
         

Sustainable Equity Fund (SEEFX)2

     3.98%        n/a        n/a        1.27%  
         

S&P Global 1200 Index

     0.19%        6.28%        10.50%        n/a  

Growth of $10,000

 

 

     
Saturna Sustainable Equity Fund Growth of $10,000
 

Comparison of any mutual fund to a market index must be made bearing in mind that the index is 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 March 27, 2015, to an identical amount invested in the Standard & Poor’s Global 1200 Index, a global stock market index covering nearly 70% of the world’s equity markets. The graph shows that an investment in the Fund would have risen to $12,452 versus $13,179 in the 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 shown in this table is as stated in the Fund’s most recent prospectus which is dated March 27, 2019, and incorporates results for the fiscal year ended November 30, 2018, before fee waivers. The expense ratio shown in the most recent prospectus after fee waivers was 0.75%. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different periods.

 

2 

Operations commenced on March 27, 2015.

Fund Objective

 

The objective of the Sustainable Equity Fund is capital appreciation.

 

         

Top 10 Holdings

 

 
% of Total Net Assets  
   

Adobe Inc.

     4.7%  
   

Dassault Systemes ADR

     3.8%  
   

Mastercard, Class A

     3.6%  
   

Church & Dwight

     3.1%  
   

Microsoft

     3.1%  
   

Apple

     3.0%  
   

Unilever

     2.8%  
   

Home Depot

     2.8%  
   

Accenture, Class A

     2.8%  
   

Toronto-Dominion Bank

     2.6%  

 

 

                         

Portfolio Diversification

 

     
% of Total Net Assets

 

                   
       

Household Products

    10.0%             
Saturna Sustainable Equity Fund Portfolio Diversification
 

Application Software

    8.5%        

Home Products Stores

    4.0%        

Specialty Apparel Stores

    4.0%        

IT Services

    3.7%        

Consumer Finance

    3.6%        

Infrastructure Software

    3.1%        

Life Insurance

    3.1%        

Automobiles

    3.0%        
       

Communications Equipment

    3.0%                 
       

Semiconductor Devices

    3.0%                 
       

Banks

    2.6%                 
       

Specialty Chemicals

    2.6%                 
       

Medical Equipment

    2.5%                 
       

Industries < 2.5%

    34.6%                 
       

Other assets (net of liabilities)

    8.7%                 

 

 

             
 
       
6                  May 31, 2019   Semi-Annual Report

 


 
         
Saturna Sustainable Equity Fund: Schedule of Investments    As of May 31, 2019   
Saturna Sustainable Equity Fund Logo

 

                                             
               
    Common Stocks – 91.3%        Number of Shares     Cost      Market Value      Country1    Percentage of Assets  
               
    Communications                                    
               
     Cable & Satellite                                    
               
   

MultiChoice Group2

         200       $1,106        $1,665      South Africa      0.0% 3  
               
     Entertainment Content                                    
               
   

Walt Disney Company

         500       53,704        66,020      United States      1.2%  
               
     Internet Media                                    
               
   

Naspers ADR

         1,000       57,214        44,970      South Africa      0.8%  
               
     Telecom Carriers                                    
               
   

Telekomunikasi Indonesia ADR

         2,000       65,178        53,940      Indonesia      0.9%  
               
                       177,202        166,595             2.9%  
               
    Consumer Discretionary                                    
               
     Apparel, Footwear & Accessory
Design
                                   
               
   

adidas ADR

         800       93,431        114,292      Germany4      2.0%  
               
     Automobiles                                    
               
   

Subaru ADR

         5,000       69,810        57,650      Japan      1.0%  
               
   

Toyota Motor ADR

         1,000       107,633        117,580      Japan      2.0%  
               
                                                 
               
                       177,443        175,230             3.0%  
               
     E-Commerce Discretionary                                    
               
   

Amazon.com2

         60       103,132        106,504      United States      1.8%  
               
     Home Products Stores                                    
               
   

Home Depot

         850       100,842        161,373      United States      2.8%  
               
   

Lowe’s

         750       80,222        69,960      United States      1.2%  
               
                                                 
               
                       181,064        231,333             4.0%  
               
     Other Commercial Services                                    
               
   

Ecolab

         723       82,096        133,097      United States      2.3%  
               
     Restaurants                                    
               
   

Starbucks

         1,713       102,502        130,291      United States      2.2%  
               
     Specialty Apparel Stores                                    
               
   

Industria de Diseno Textil

         3,000       92,121        79,914      Spain      1.4%  
               
   

TJX Companies

         3,000       103,932        150,870      United States      2.6%  
               
                                                 
               
                       196,053        230,784             4.0%  
               
     Toys & Games                                    
               
   

Hasbro

         600       56,958        57,084      United States      1.0%  
               
                       992,679        1,178,615             20.3%  
               
    Consumer Staples                                    
               
     Food & Drug Stores                                    
               
   

Clicks Group ADR

         1,500       38,630        38,752      South Africa      0.7%  

 

Continued on next page.

 

 

                 
 
         
The accompanying notes are an integral part of these financial statements.   May 31, 2019   Semi-Annual Report                  7

 


 
         
Saturna Sustainable Equity Fund: Schedule of Investments    As of May 31, 2019   
Saturna Sustainable Equity Fund Logo

 

 

                                             
               
    Common Stocks – 91.3%        Number of Shares     Cost      Market Value      Country1    Percentage of Assets  
             
    Consumer Staples (continued)                                
             
     Household Products                                
               
   

Church & Dwight

         2,400       $104,866        $178,584      United States      3.1%  
               
   

Kimberly-Clark de Mexico, Class A

         13,000       22,070        23,448      Mexico      0.4%  
               
   

L’Oreal ADR

         2,200       98,743        117,722      United States4      2.0%  
               
   

Reckitt Benckiser Group ADR

         6,250       100,292        100,875      United Kingdom      1.7%  
               
   

Unilever

         2,700       116,609        162,324      Netherlands      2.8%  
               
                       442,580        582,953             10.0%  
             
     Packaged Food                                
               
   

Nestle ADR

         1,000       86,610        99,160      Switzerland      1.7%  
               
                       567,820        720,865             12.4%  
             
    Energy                                
             
     Renewable Energy Equipment                                
               
   

Siemens Gamesa Renewable Energy

         3,500       51,922        54,147      Spain      0.9%  
               
   

Vestas Wind Systems

         900       65,551        73,089      Denmark      1.3%  
               
                       117,473        127,236             2.2%  
               
    Financials                                    
               
     Banks                                    
               
   

Toronto-Dominion Bank

         2,800       131,011        153,020      Canada      2.6%  
               
     Consumer Finance                                    
               
   

Mastercard, Class A

         824       74,155        207,228      United States      3.6%  
               
     Diversified Banks                                    
               
   

Banco Santander ADR

         10,081       50,683        43,651      Spain      0.7%  
               
     Islamic Banking                                    
               
   

BIMB Holdings

         104,800       107,265        115,399      Malaysia      2.0%  
               
     Life Insurance                                    
               
   

AIA Group

         11,600       67,861        108,959      Hong Kong      1.9%  
               
   

Aviva PLC ADR

         7,000       93,166        72,170      United States      1.2%  
               
                                                 
               
                       161,027        181,129             3.1%  
               
     P&C Insurance                                    
               
   

Chubb

         700       77,224        102,249      Switzerland      1.8%  
               
                       601,365        802,676             13.8%  
               
    Health Care                                    
               
     Health Care Facilities                                    
               
   

Ramsay Health Care

         2,308       103,089        111,375      Australia      1.9%  
               
     Large Pharma                                    
               
   

Novo Nordisk ADR

         1,569       86,408        74,057      Denmark      1.3%  
               
     Medical Equipment                                    
               
   

Koninklijke Philips ADR

         3,588       101,701        142,157      Netherlands      2.5%  
               
                       291,198        327,589             5.7%  

 

Continued on next page.

 

 

                 
 
         
8                  May 31, 2019   Semi-Annual Report   The accompanying notes are an integral part of these financial statements.

 


 
         
Saturna Sustainable Equity Fund: Schedule of Investments    As of May 31, 2019   
Saturna Sustainable Equity Fund Logo

 

 

                                             
               
    Common Stocks – 91.3%        Number of Shares     Cost      Market Value      Country1    Percentage of Assets  
               
    Industrials                                    
               
     Commercial and Residential
Building Equipment
                                   
               
   

Legrand

         700       $39,602        $46,939      France      0.8%  
               
     Electrical Components                                    
               
   

TE Connectivity

         351       22,755        29,565      Switzerland      0.5%  
               
     Electrical Power Equipment                                    
               
   

Siemens ADR

         1,000       66,086        56,760      Germany      1.0%  
               
     Rubber & Plastic                                    
               
   

Hartalega Holdings

         80,000       63,885        99,335      Malaysia      1.7%  
               
                       192,328        232,599             4.0%  
               
    Materials                                    
               
     Precious Metal Mining                                    
               
   

Barrick Gold

         3,064       48,731        38,055      Canada      0.6%  
               
     Specialty Chemicals                                    
               
   

Johnson Matthey

         2,031       86,775        79,109      United Kingdom      1.4%  
               
   

Koninklijke DSM

         600       62,437        67,142      Netherlands      1.2%  
               
                                                 
               
                       149,212        146,251             2.6%  
               
                       197,943        184,306             3.2%  
               
    Technology                                    
               
     Application Software                                    
               
   

Adobe Systems2

         1,000       108,410        270,900      United States      4.7%  
               
   

Dassault Systemes ADR

         1,506       119,029        223,370      France      3.8%  
               
                       227,439        494,270             8.5%  
               
     Communications Equipment                                    
               
   

Apple

         1,000       113,474        175,070      United States      3.0%  
               
     Electronics Components                                    
               
   

Murata Manufacturing

         3,000       133,698        127,917      Japan      2.2%  
               
     Information Services                                    
               
   

Wolters Kluwer

         1,000       46,595        69,589      Netherlands      1.2%  
               
     Infrastructure Software                                    
               
   

Microsoft

         1,438       62,724        177,852      United States      3.1%  
               
     IT Services                                    
               
   

Accenture, Class A

         900       89,878        160,263      Ireland      2.8%  
               
   

CGI Group, Class A2

         750       48,570        54,645      Canada      0.9%  
               
                                                 
               
                       138,448        214,908             3.7%  
               
     Semiconductor Devices                                    
               
   

NXP Semiconductors

         1,300       127,836        114,608      Netherlands      2.0%  
               
   

STMicroelectronics

         3,800       84,537        57,152      Switzerland      1.0%  
               
                                                 
               
                       212,373        171,760             3.0%  

 

Continued on next page.

 

 

                 
 
         
The accompanying notes are an integral part of these financial statements.   May 31, 2019   Semi-Annual Report                  9

 


 
         
Saturna Sustainable Equity Fund: Schedule of Investments    As of May 31, 2019   
Saturna Sustainable Equity Fund Logo

 

 

                                             
               
    Common Stocks – 91.3%        Number of Shares     Cost      Market Value      Country1    Percentage of Assets  
               
    Technology (continued)                                    
               
     Semiconductor Manufacturing                                    
               
   

Taiwan Semiconductor ADR

         3,250       $78,323        $124,637      Taiwan      2.1%  
               
                       1,013,074        1,556,003             26.8%  
               
                                                 
               
    Total investments                  $4,151,082        5,296,484             91.3%  
               
    Other assets (net of liabilities)                           505,695             8.7%  
               
    Total net assets                           $5,802,179             100.0%  
               
                                                 
1 

Country of domicile unless otherwise indication

2 

Non-income producing security

3 

Less than 0.05%

4 

Denotes a country of primary exposure

ADR: American Depositary Receipt

 

         

Countries

        
   

    

        
 
Saturna Sustainable Equity Fund Geographic Diversification

 

 
Weightings shown are a percentage of total net assets.

 

 

 

                 
 
         
10                  May 31, 2019   Semi-Annual Report   The accompanying notes are an integral part of these financial statements.

 


 
     
Saturna Sustainable Equity Fund   
Saturna Sustainable Equity Fund Logo

 

Statement of Assets and Liabilities

 

         
As of May 31, 2019

 

   

    

       
   

Assets

       
   

Investments in securities, at value
(Cost $4,151,082)

    $5,296,484  
   

Cash

    482,402  
   

Dividends receivable

    19,488  
   

Receivable from adviser

    3,457  
   

Prepaid expenses

    845  
   

Receivable for security sales

    129  
         
   

Total assets

    5,802,805  
         
   

Liabilities

       
   

Accrued retirement plan custodial fees

    424  
   

Accrued Chief Compliance Officer expenses

    202  
         
   

Total liabilities

    626  
         
   

Net assets

    $5,802,179  
   
         
   

Analysis of net assets

       
   

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

    $4,880,414  
   

Total distributable earnings

    921,765  
         
   

Net assets applicable to Fund shares outstanding

    $5,802,179  
   
         

Fund shares outstanding

    477,792  
   

Net asset value, offering, and redemption price per share

    $12.14  
         

 

Statement of Operations

 

         
Period ended May 31, 2019

 

   

    

       
   

Investment income

       
   

Dividend income
(net of foreign tax of $6,966)

    $54,428  
         
   

Total investment income

    54,428  
         
   

Expenses

       
   

Investment adviser fees

    18,293  
   

Filing and registration fees

    18,278  
   

Audit fees

    3,666  
   

Printing and postage

    1,296  
   

Chief Compliance Officer expenses

    892  
   

Trustee fees

    873  
   

Retirement plan custodial fees

    596  
   

Other expenses

    446  
   

Custodian fees

    347  
   

Legal fees

    314  
         
   

Total gross expenses

    45,001  
         
   

Less adviser fees waived

    (23,462
   

Less custodian fee credits

    (327
         
   

Net expenses

    21,212  
         
   

Net investment income

    $33,216  
   
         
   

    

       
   

Net realized gain from investments and foreign currency

    $33,209  
   

Net increase in unrealized appreciation on investments and foreign currency

    279,437  
         
   

Net gain on investments and foreign currency

    $312,646  
   
         
   

Net increase in net assets resulting from operations

    $345,862  
         

 

 

                 
 
         
The accompanying notes are an integral part of these financial statements.   May 31, 2019   Semi-Annual Report                  11

 


 
     
Saturna Sustainable Equity Fund   
Saturna Sustainable Equity Fund Logo

 

                 

Statements of Changes of Net Assets

    Period ended May 31, 2019          Year ended November 30, 2018  
     

Increase in net assets from operations

                  
     

From operations

                  
     

Net investment income

    $33,216          $45,439  
     

Net realized gain (loss) on investment and foreign currency

    33,209          (24,490
     

Net increase in unrealized appreciation on investments and foreign currencies

    279,437          23,969  
                    
     

Net increase in net assets resulting from operations

    345,862          44,918  
                    
     
                    
     

Distributions to shareowners

    (46,186        (40,318
     
                    
     

Capital share transactions

                  
     

Proceeds from sales of shares

    332,493          1,036,069  
     

Value of shares issued in reinvestment of dividends

    46,187          40,318  
     

Cost of shares redeemed

    (534,331        (407,062
                    
     

Total capital share transactions

    (155,651        669,325  
                    
     

Total increase in net assets

    144,025          673,925  
     
                    
     

Net assets

                  
     

Beginning of year

    5,658,154          4,984,229  
     

End of year

    $5,802,179          $5,658,154  
     
                    
     

Shares of the Fund sold and redeemed

                  
     

Number of shares sold

    27,881          87,399  
     

Number of shares issued in reinvestment of dividends

    4,325          3,500  
     

Number of shares redeemed

    (46,073        (34,886
                    
     

Net increase (decrease) in number of shares outstanding

    (13,867        56,013  
     
                    
                                         

Financial Highlights

    Period endedA       For year ended November 30,       Period endedA  
           

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

    May 31, 2019       2018       2017       2016       Nov. 30, 2015  
           

Net asset value at beginning of period

    $11.51       $11.44       $9.43       $9.73       $10.00  
           

Income from investment operations

                                       
           

Net investment income

    0.06       0.09       0.09       0.06       0.02  
           

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

    0.67       0.07       1.97       (0.36     (0.28
                                         
           

Total from investment operations

    0.73       0.16       2.06       (0.30     (0.26
                                         
           

Less distributions

                                       
           

Dividends (from net investment income)

    (0.10     (0.09     (0.05     -       (0.01
                                         
           

Total distributions

    (0.10     (0.09     (0.05     -       (0.01
                                         
           
                                         
           

Net asset value at end of period

    $12.14       $11.51       $11.44       $9.43       $9.73  
           
                                         

Total returnB

    6.42%       1.39%       22.01%       (3.08 )%      (2.60 )% 
           

Ratios / supplemental data

                                       
           

Net assets ($000), end of period

    $5,802       $5,658       $4,984       $3,343       $3,423  
           

Ratio of expenses to average net assets

                                       
           

Before fee waiversC

    1.60%       1.27%       1.48%       1.65%       1.23%  
           

After fee waiversC

    0.77%       0.76%       0.88%       1.00%       1.00%  
           

After fee waivers and custodian fee creditsC

    0.75%       0.75%       0.86%       0.99%       0.99%  
           

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

    1.18%       0.82%       0.95%       0.67%       0.29%  
           

Portfolio turnover rateB

    5%       8%       12%       48%       53%  
           
                                         
A 

Operations commenced on March 27, 2015

B 

Not annualized for periods of less than one year

C 

Annualized for periods of less than on year

 

 

                 
 
         
12                  May 31, 2019   Semi-Annual Report   The accompanying notes are an integral part of these financial statements.

 


 
     
Saturna Sustainable Bond Fund: Performance Summary   
Saturna Sustainable Bond Fund Logo

 

                 

Average Annual Returns as of May 31, 2019

                                 
         
       1 Year        5 Year        10 Year        Expense Ratio1  
         

Sustainable Bond Fund (SEBFX)2

       1.80%          n/a          n/a          0.77%  
         

FTSE WorldBIG Index

       3.30%          0.93%          2.56%          n/a  

Growth of $10,000

 

 

     
Saturna Sustainable Bond Fund Growth of $10,000
  Comparison of any mutual fund to a market index must be made bearing in mind that the index is 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 March 27, 2015, to an identical amount invested in the FTSE WorldBIG® Bond Index, a multi-asset, multi-currency benchmark, which provides a broad-based measure of the global fixed income markets. The graph shows that an investment in the Fund would have risen to $10,673 versus rising to $11,053 in the 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 shown in this table is as stated in the Fund’s most recent prospectus which is dated March 27, 2019, and incorporates results for the fiscal year ended November 30, 2018, before fee waivers. The expense ratio shown in the most recent prospectus after fee waivers was 0.65%. The ratio presented in this table differs from expense ratios shown elsewhere in this report as they represent different periods.

 

2

Operations commenced March 27, 2015.

Fund Objective

 

The objectives of the Sustainable Bond Fund are current income and capital preservation.

 

         

Top 10 Holdings

 

 
% of Total Net Assets  
   

United States Treasury Bond (4.50% due 05/15/2038)

     6.6%  
   

First Abu Dhabi Bank (3.00% due 03/30/2022)

     4.1%  
   

Lincoln National (4.643% due 02/12/2047)

     4.1%  
   

Koninklijke DSM (1.00% due 04/09/2025)

     3.9%  
   

Telus (3.20% due 04/05/2021)

     3.7%  
   

Telecom Italia (7.175% due 06/18/2019)

     3.3%  
   

KFW (2.00% due 11/30/2021)

     3.3%  
   

Nokia (3.375% due 06/12/2022)

     3.3%  
   

Mexico Bonos Desarrollo (6.50% due 06/10/2021)

     3.3%  
   

Iron Mountain (5.75% due 08/15/2024)

     3.3%  

 

 

                         

Portfolio Diversification

 

     
% of Total Net Assets

 

                
       

Financials

    27.2%           

 

 

 

Saturna Sustainable Equity Fund Portfolio Diversification

 

 

Government Bonds

    24.0%        

Communications

    10.4%        

Consumer Discretionary

    9.5%        

Technology

    6.5%        

Health Care

    6.3%        

Materials

    3.9%        

Energy

    2.9%        

Consumer Staples

    1.1%        

Industrials

    0.8%        

Other assets (net of liabilities)

    7.4%        

 

 

             
 
       
May 31, 2019   Semi-Annual Report                  13

 


 
         
Saturna Sustainable Bond Fund: Schedule of Investments    As of May 31, 2019   
Saturna Sustainable Bond Fund Logo

 

 

                                         
               
    Corporate Bonds – 68.6%       Coupon / Maturity    Face Amount      Market Value      Country1    Percentage of Assets  
             
    Communications                              
               
   

America Movil2

      6.00% due 06/09/2019      MXN 15,00,000        $764,360      Mexico      2.5%  
               
   

Telecom Italia

      7.175% due 06/18/2019      $1,000,000        1,001,250      Luxembourg      3.3%  
               
   

Telus

      3.20% due 04/05/2021      CAD 1,500,000        1,129,606      Canada      3.7%  
               
   

Vodafone Group

      4.375% due 03/16/2021      250,000        257,249      United Kingdom      0.9%  
               
                            3,152,465             10.4%  
             
    Consumer Discretionary                              
               
   

Barry Callebaut3

      5.50% due 06/15/2023      500,000        535,392      Belgium      1.8%  
               
   

Barry Callebaut2

      5.50% due 06/15/2023      500,000        535,391      Belgium      1.8%  
               
   

BMW US Capital

      2.75% due 12/02/2019      AUD 200,000        139,432      Germany      0.5%  
               
   

Danone3

      2.077% due 11/02/2021      500,000        493,460      France      1.6%  
               
   

Starbucks

      2.45% due 06/15/2026      500,000        483,034      United States      1.6%  
               
   

Toyota Motor Credit

      2.75% due 02/05/2028      202,000        200,466      Japan      0.6%  
               
   

Toyota Motor Credit

      3.00% due 03/20/2030      500,000        491,492      Japan      1.6%  
               
                            2,878,667             9.5%  
               
    Consumer Staples                                  
               
   

Nestle Holdings

      2.75% due 04/15/2020      NOK 3,000,000        346,250      Switzerland      1.1%  
               
                            346,250             1.1%  
               
    Energy                                  
               
   

NextEra Energy Capital (3 month LIBOR plus 2.35%)4

      4.73588% due 06/15/2067      1,050,000        881,974      United States      2.9%  
               
                            881,974             2.9%  
               
    Financials