Saturna Sustainable Funds

Prospectus

March 28, 2018

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

11

Investment Adviser

12

Fund Share Pricing

12

Purchase and Sale of Fund Shares

13

Purchase and Sale of Fund Shares Through Financial Intermediaries

14

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

0.72%

Total Annual Fund Operating Expenses

1.37%

Fee Waiver and Expense Reimbursement

0.62%

Total Annual Fund Operating Expense after Fee Waiver and Expense Reimbursement

0.75%

Restated to reflect the ending of the Distribution (12b-1) Fees effective June 2, 2017, as approved by the Board of Trustees on March 14, 2017.

The investment adviser has committed through March 31, 2019, 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

$139

$434

$750

$1,646

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 12.21% 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 carbon-based fuels.

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.

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: The risks of investing in foreign securities typically are greater in less developed or emerging countries.

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

Q3 2015

-7.88%

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, 2017

 

1 Year

Life of Fund
(Since 3/27/2015)

Return before taxes

23.76%

5.81%

Return after taxes on distributions

23.62%

5.73%

Return after taxes on distributions and sale of Fund shares

13.72%

4.51%

S&P Global 1200 Index (reflects no deduction for fees, expenses or taxes)

23.84%

10.17%

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

4


Saturna Sustainable Equity Fund

SEEFX

Investment Adviser

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

Portfolio Manager

Mrs. Jane 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 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

0.29%

Total Annual Fund Operating Expenses

0.84%

Fee Waiver and Expense Reimbursement

0.19%

Total Annual Fund Operating Expense after Fee Waiver and Expense Reimbursement

0.65%

Restated to reflect the ending of the Distribution (12b-1) Fees effective June 2, 2017, as approved by the Board of Trustees on March 14, 2017.

The investment adviser has committed through March 31, 2019, 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

$86

$268

$466

$1,037

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 13.63% 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 carbon-based fuels.

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 Baa) 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

6


Saturna Sustainable Bond Fund

SEBFX

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.

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: The risks of investing in foreign securities typically are greater in less developed or emerging countries.

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 2016

-2.47%

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, 2017

 

1 Year

Life of Fund
(Since 3/27/2015)

Return before taxes

5.89%

2.06%

Return after taxes on distributions

4.63%

0.99%

Return after taxes on distributions and sale of Fund shares

3.31%

1.06%

Citi WorldBIG Bond (reflects no deduction for fees, expenses or taxes)

7.43%

2.81%

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

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

7


Saturna Sustainable Bond Fund

SEBFX

Investment Adviser

Saturna Capital Corporation is the Fund's investment adviser.

Portfolio Manager

Mr. Patrick Drum MBA, CFA, is the person primarily responsible for the day-to-day management of the Saturna Sustainable Bond Fund. Mr. Bryce 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.

8


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 securities of sustainable and responsible issuers. 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 the areas of environment, social responsibility, and corporate governance ("ESG"). 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 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 carbon-based fuels.

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.

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., Moody's: Aaa, Aa, A, or Baa) at the time of purchase. The Fund may invest up to 35% in unrated bonds and high-yield bonds ("junk bonds").

9


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 marketing risk: The risks of investing in foreign securities typically are greater in less developed or emerging countries.

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.

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,

10


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.

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.

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

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.

11


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, 2017, 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 ("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 $3.7 billion in assets under management as of December 31, 2017. It is also the adviser to other funds of the Saturna Investment Trust, the Amana Mutual Funds Trust, and to separately managed accounts. A wholly-owned subsidiary in Malaysia manages separate accounts and investment funds. Another wholly-owned subsidiary, Saturna Environmental Corporation, owns an environmental education camp.

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

Mr. Patrick 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 Kaiser MBA, CFA®, deputy portfolio manager of Saturna Sustainable Equity Fund, is chairman, director, and controlling shareowner of Saturna Capital Corporation. 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 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, 2017, the aggregate advisory fee paid (after waivers) was 0.03% and 0.36% 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, 2017.

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 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

12


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.

To allow time for clearing of funds used to purchase shares being redeemed, payment for redemptions of new investments may be restricted for up to 14 calendar days (until the purchase check clears).

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

13


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.sextantfunds.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 have up to seven days to pay proceeds to shareowners who redeem shares, however they normally send redemption proceeds within one day. 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 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.

14


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 particu


lar Fund's policies.

15

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 Funds are normally eligible for the "qualified dividend income" tax rate.

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

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

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

To avoid being subject to federal backup withholding tax on dividends and 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.

16


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


Susatainable Equity Fund (SEEFX)

For year ended November 30,

Period endedA

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

2017

2016

November 30, 2015

Net asset value at beginning of period

$9.43

$9.73

$10.00

Income from investment operations

    Net investment income

0.09

0.06

0.02

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

1.97

0.36)

(0.28)

Total from investment operations

2.06

(0.30)

(0.26)

Less distributions

    Dividends (from net investment income)

(0.05)

-

(0.01)

Total distributions

(0.05)

-

(0.01)

 

Net asset value at end of period

$11.44

$9.43

$9.73

 

Total return

22.01%

(3.08)%

(2.60)%B

 

Ratios / supplemental data

Net assets ($000), end of period

$4,984

$3,343

$3,423

Ratio of expenses to average net assets

    Before fee waivers

1.48%

1.65%

1.23%C

    After fee waivers

0.88%

1.00%

1.00%C

    After fee waivers and custodian fee credits

0.86%

0.99%

0.99%C

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

0.95%

0.67%

0.29%C

Portfolio turnover rate

12%

48%

53%B

A Operations commenced on March 27, 2015
B Not annualized
C Annualized

 

Sustainable Bond Fund (SEBFX)

Year ended November 30,

Period endedA

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

2017

2016

November 30, 2015

Net asset value at beginning of period

$9.65

$9.75

$10.00

Income from investment operations

    Net investment income

0.27

0.24

0.12

    Net gain (loss) on securities (both realized and unrealized)

0.23

(0.10)

(0.25)

Total from investment operations

0.50

0.14

(0.13)

Less distributions

    Dividends (from net investment income)

(0.27)

(0.24)

(0.12)

    Capital gains distribution

(0.01)

-

-

Total distributions

(0.28)

(0.24)

(0.12)

 

Net asset value at end of period

$9.87

$9.65

$9.75

 

Total return

5.28%

1.37%

(1.29)%B

 

Ratios / supplemental data

Net assets ($000), end of period

$21,980

$8,639

$6,885

Ratio of expenses to average net assets

    Before fee waivers

0.92%

1.17%

1.02%C

    After fee waivers

0.75%

0.89%

0.90%C

    After fee waivers and custodian fee credits

0.74%

0.89%

0.89%C

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

2.82%

2.46%

1.92%C

Portfolio turnover rate

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 November 30, 2017

Saturna Sustainable Funds

Annual Report     November 30, 2017

Sustainable
Equity

SEEFX

 

Sustainable
Bond

SEBFX


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

Average Annual Returns (before any taxes paid by shareowners)

 

1 Year

3 Year

5 Year

10 Year

Expense Ratio1

 

Gross

Net

Sustainable Equity Fund (SEEFX)

23.76%

n/a

n/a

n/a

1.40%

0.75%

S&P Global 1200 Index

23.84%

10.17%

12.15%

5.67%

n/a

n/a

 

Sustainable Bond Fund (SEBFX)

5.89%

n/a

n/a

n/a

0.92%

0.65%

Citi WorldBIG Index

7.43%

1.96%

0.93%

3.13%

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 22 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 June 2, 2017, and incorporate results for the fiscal year ended November 30, 2016. 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 June 2, 2018.

The S&P Global 1200 Index is a global stock market index covering nearly 70% of the world's equity markets. The Citi 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, 2017

Annual Report

 

Fellow Shareowners:

It's been a great year to be an investor. The bull markets continued their run, and all three major US indices – the Dow Jones Industrial Average, S&P 500, and Nasdaq – hit new highs. Technology led the pack in 2017, while international markets had a strong comeback.

The Trustees approval of the ending of the 12b-1 fees from the Sustainable Fund family has contributed positively to performance by lowering expenses for shareowners.

Saturna Sustainable Funds began operations on March 27, 2015. After their first two complete years of operations, at November 30, 2017, assets of the two Funds reached $26.95 milion up from $11.92 million the previous year. The following pages provide details of the assets and operations of the two Funds.

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

Going Forward

Since the election of Donald Trump, the impacts of government deregulation have been noticeable. Republican control of the executive, the legislative, and the judiciary branches of the US government means many changes. Federal tax rates and tax deductions have been cut. The shifting paradigm has led to increased media attention on sustainable investing. While large investment houses are beginning to see value in products that invest in companies with high environmental, social responsibility, and governance (ESG) standards, we like the independent perspective our boutique size and off-Wall Street location continue to offer.

Saturna expects the market to exhibit prolonged strength in the coming months. We will continue to invest in innovative companies with strong business advantages and balance sheets. We aim to avoid companies dependent on government spending, and are pursuing additional international investments where we notice value and opportunity.

Businesses across the globe are publishing more and better data regarding their ESG habits and goals. Many CEOs understand the business case for responsibly handling resources and stakeholders for the long-term good of the planet and their smaller communities. The trend is beneficial for our analysts as we evaluate individual securities.

 

May 31, 2017

Semi-Annual Report

3

 

Morningstar Awards Saturna Sustainable Equity Fund Top Sustainability Rating

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 November 30, 2017, Saturna Sustainable Equity Fund ranked in the first percentile of 711 funds in the World Large Stock category, earning the top "Five Globe" Sustainability Rating. The Saturna Sustainable Bond Fund was not rated as of November 30, and we are hopeful it will be ranked in the year ahead.

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)

Bryce Fegley CFA®, CIPM®

Saturna Sustainable Bond Fund
Deputy Portfolio Manager

 

4

November 30, 2017

Annual Report

 

Morningstar Sustainability Ratings

(unaudited)

As of November 30, 2017

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 Equity Fund's fiscal year-end results:

Saturna Sustainable Equity Fund

  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.

SEEFX

Ø Ø Ø Ø Ø

Ranked in 1st percentile among 711 World Stock Funds

The Saturna Sustainable Bond Fund (SEBFX) was not rated as of November 30, 2017.

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

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

Morningstar Sustainability Rating is as of November 30, 2017. The Morningstar Sustainability Rating™ is intended to measure how well the issuing companies of the securities within a fund's portfolio are managing their environmental, social, and governance ("ESG") risks and opportunities relative to the fund's Morningstar category peers. The Morningstar Sustainability Rating calculation is a two-step process. First, each fund with at least 50% of assets covered by a company-level ESG score from Sustainalytics receives a Morningstar Portfolio Sustainability Score™. The Morningstar Portfolio Sustainability Score is an asset-weighted average of normalized company-level ESG scores with deductions made for controversial incidents by the issuing companies, such as environmental accidents, fraud, or discriminatory behavior. The Morningstar Sustainability Rating is then assigned to all scored funds within Morningstar Categories in which at least ten (10) funds receive a Portfolio Sustainability Score and is determined by each fund's rank within the following distribution: High (highest 10%), Above Average (next 22.5%), Average (next 35%), Below Average (next 22.5%), and Low (lowest 10%). The Morningstar Sustainability Rating is depicted by globe icons where High equals 5 globes and Low equals 1 globe.

A Sustainability Rating is assigned to any fund that has more than half of its underlying assets rated by Sustainalytics and is within a Morningstar Category with at least 10 scored funds; therefore, the rating it is not limited to funds with explicit sustainable or responsible investment mandates. Morningstar updates its Sustainability Ratings monthly. Portfolios receive a Morningstar Portfolio Sustainability Score and Sustainability Rating one month and six business days after their reported as-of date based on the most recent portfolio. As part of the evaluation process, Morningstar uses Sustainalytics' ESG scores from the same month as the portfolio as-of date.

The Saturna Sustainable Equity Fund was rated on 91% 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.

The Saturna Sustainable Equity Fund and Saturna Sustainable Bond Fund began operations March 27, 2015, and have not yet received Morningstar Star Ratings.

 

November 30, 2017

Annual Report

5

 

Saturna Sustainable Equity Fund: Performance Summary

Average Annual Returns as of November 30, 2017

 

1 Year

5 Year

10 Year

Expense Ratio1

Sustainable Equity Fund (SEEFX)2

22.01%

n/a

n/a

1.40%

S&P Global 1200 Index

24.95%

12.33%

5.43%

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 $11,540 versus $12,895 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 June 2, 2017, and incorporates results for the fiscal year ended November 30, 2016, 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

 

Portfolio Diversification

% of Total Net Assets

% of Total Net Assets

 

Adobe Systems

3.6%

Household Products

7.3%

Saturna Sustainable Equity Fund Portfolio Diversification

Apple

3.4%

Application Software

6.9%

3M

3.4%

Automobiles

4.2%

Dassault Systemes ADR

3.3%

Apparel, Footwear & Accessory Design

4.0%

Toronto-Dominion Bank

3.2%

Communications Equipment

3.4%

Unilever

3.1%

Containers & Packaging

3.4%

Home Depot

3.1%

Electrical Components

3.4%

NXP Semiconductors

3.0%

Banks

3.2%

Koninklijke Philips

2.8%

Home Products Stores

3.1%

Murata Manufacturing

2.7%

Semiconductor Devices

3.0%

 

Industries < 3.0%

48.5%

Other assets (net of liabilities)

9.6%

 

6

November 30, 2017

Annual Report

 

Saturna Sustainable Bond Fund: Discussion of Fund Performance

(unaudited)

Fiscal Year 2017

(photos omitted)

Markets climbed ever higher this year, and the optimism and resilience of investors are encouraging, if not dependable, factors in this new world. Not everyone benefits from these higher prices, but those of us who were invested benefited.

For the fiscal year ended November 30, 2017, the Saturna Sustainable Equity Fund returned 22.01%, slightly below the 24.95% gain for the S&P Global 1200 index.

Factors Affecting Past Performance

Saturna Sustainable Equity Fund has an international framework – assets are allocated across 19 market economies. In terms of performance gain, our overweighting of Technology has been the most rewarding, and we remain optimistic about our selections. Adobe moved from $105 to $178, benefiting the Fund 194 basis points for the year. Taiwan Semiconductor also had an outstanding year, adding 180 basis points to the Fund. Finally, Apple had an excellent year and contributed 156 basis points to the performance of the Fund.

The Fund benefited from its Consumer Discretionary and Consumer Staples choices, especially Home Depot, Unilever, and Samsonite. 3M, in the Materials sector, also performed well. With unemployment low and wages potentially growing with improved economic conditions, we believe these names will continue to add value to the portfolio.

The position we had in Potash has been eliminated. The potash industry continues to be plagued by overcapacity and low crop prices that have reduced farm incomes. In addition, the cartel-type pricing environment did not sit well with us. Unfortunatley, we exited the position a little too early and it detracted from the Fund's returns.

Pandora is another position we exited and took a realized loss to do so. While the company has solid metrics, we couldn't help but notice the trend away from charm bracelet style jewelry. This exit was a positive move as the stock has declined further since we sold.

Our foray into renewable energy has not yet paid off. Siemens Gamesa Renewable Energy (formerly Gamesa Corporación Tecnológica and Grupo Auxiliar Metalúrgico) is a Spanish manufacturing company principally involved in the fabrication of wind turbines and the construction of wind farms. We are committed to this type of energy investment and plan to hold this into the foreseeable future.

We continue to monitor our investments to ensure our initial investment theses remain intact. However, we are long-term investors and look at our investments with that perspective.

Looking Forward

The positive shifts we've seen in the last year around the globe regarding womens rights and upending the status quo cannot be ignored. Globally, there is for the first time a real conversation occuring about what women have had to endure in the workplace, and it is more than just the pay gap. CEOs are taking seriously their place on the planet and the fact that as stewards of our environment and leaders in their communities, they must run their businesses with a long-term view. Companies that have been responsible from the start will emerge as leaders, and those are the investments we choose.

While markets continue to lift as a result of renewed corporate optimism, we will deploy capital and take cautious advantage of global earnings growth. We hold long-term views on the value of assets and see current trends as opportunities to acquire attractive companies at still reasonable valuations.

The Saturna Sustainable Equity Fund remains focused on stocks that we believe have exceptional long-term sustainability characteristics. Based on our internal research, we believe stocks with superior governance, social, and environmental track records generally have lower associated volatility. To this we add a financial stability assessment. We believe that in the long run these stocks lessen uncertainty for investors and improve the probability of achieving superior returns.

 

November 30, 2017

Annual Report

7

 

Saturna Sustainable Equity Fund:

Schedule of Investments

As of November 30, 2017

Common Stocks – 90.4%

Number of Shares

Cost

Market Value

Country1

Percentage of Assets

 

Communications

 
 

Internet Media

    Alphabet, Class A²

122

$67,177

$126,413

United States

2.5%

 

Telecom Carriers

    China Mobile

6,000

67,457

61,036

Hong Kong

1.2%

    Telekomunikasi Indonesia ADR

2,000

65,178

62,160

Indonesia

1.3%

 

132,635

123,196

 

2.5%

 
 

199,812

249,609

 

5.0%

 

Consumer Discretionary

 
 

Airlines

    Latam Airlines Group

3,600

46,768

45,540

Chile

0.9%

 

Apparel, Footwear & Accessory Design

    Nike, Class B

1,558

90,564

94,134

United States

1.9%

    Samsonite International

24,900

84,742

102,967

Hong Kong

2.1%

 

175,306

197,101

 

4.0%

 

Auto Parts

    Valeo

1,400

74,424

101,703

France

2.0%

 

Automobiles

    General Motors

2,000

76,360

86,180

United States

1.7%

    Toyota Motor ADR

1,000

107,633

126,340

Japan

2.5%

 

183,993

212,520

 

4.2%

 

Home Products Stores

    Home Depot

850

100,842

152,847

United States

3.1%

 

Other Commercial Services

    Ecolab

723

82,096

98,270

United States

2.0%

 

Restaurants

    Starbucks

1,713

102,502

99,046

United States

2.0%

 

Specialty Apparel Stores

    TJX Companies

1,500

103,931

113,325

United States

2.3%

 

Toys & Games

    Hasbro

600

56,958

55,812

United States

1.1%

 
 

926,820

1,076,164

 

21.6%

 

Consumer Staples

 
 

Household Products

    Church & Dwight

2,400

104,866

113,016

United States

2.3%

    Kimberly-Clark de Mexico, Class A

53,000

113,138

94,993

Mexico

1.9%

    Unilever

2,700

116,609

155,898

Netherlands

3.1%

 

334,613

363,907

 

7.3%

 

Continued on next page.

 

8

November 30, 2017

Annual Report

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

 

Common Stocks – 90.4%

Number of Shares

Cost

Market Value

Country1

Percentage of Assets

 

Consumer Staples (continued)

 
 

Packaged Food

    Nestle ADR

1,000

$86,610

$85,410

Switzerland

1.7%

 
 

421,223

449,317

 

9.0%

 

Energy

 
 

Renewable Energy Equipment

    Siemens Gamesa Renewable Energy

3,500

51,923

43,882

Spain

0.9%

    Vestas Wind Systems

900

65,551

57,491

Denmark

1.1%

 
 

117,474

101,373

 

2.0%

 

Financials

 
 

Banks

    Toronto-Dominion Bank

2,800

131,011

159,432

Canada

3.2%

 

Consumer Finance

    Mastercard, Class A

824

74,154

123,987

United States

2.5%

 

Islamic Banking

    BIMB Holdings

70,000

71,215

73,663

Malaysia

1.5%

 

Life Insurance

    AIA Group

11,600

67,862

94,514

Hong Kong

1.9%

 

P&C Insurance

    Chubb

700

77,224

106,477

Switzerland

2.1%

 
 

421,466

558,073

 

11.2%

 

Health Care

 
 

Health Care Facilities

    Ramsay Health Care

2,308

103,088

122,977

Australia

2.5%

 

Large Pharma

    Novo Nordisk ADR

1,569

86,409

81,227

Denmark

1.6%

 

Medical Equipment

    Koninklijke Philips

3,588

101,701

138,999

Netherlands

2.8%

 
 

291,198

343,203

 

6.9%

 

Industrials

 
 

Electrical Components

    Murata Manufacturing

1,000

133,698

136,966

Japan

2.7%

    TE Connectivity

351

22,756

33,148

Switzerland

0.7%

 

156,454

170,114

 

3.4%

 

Electrical Power Equipment

    Siemens ADR

1,000

66,086

68,020

Germany

1.4%

 

Continued on next page.

 

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

November 30, 2017

Annual Report

9

 

Common Stocks – 90.4%

Number of Shares

Cost

Market Value

Country1

Percentage of Assets

 

Industrials (continued)

 
 

Rubber & Plastic

    Hartalega Holdings

40,000

$63,885

$93,713

Malaysia

1.9%

 
 

286,425

331,847

 

6.7%

 

Materials

 
 

Containers & Packaging

    3M

700

118,457

170,198

United States

3.4%

 

Precious Metal Mining

    Randgold Resources ADR

500

48,731

45,880

South Africa

0.9%

 

Specialty Chemicals

    Johnson Matthey

2,000

85,287

82,055

United Kingdom

1.7%

 
 

252,475

298,133

 

6.0%

 

Technology

 
 

Application Software

    Adobe Systems²

1,000

108,410

181,470

United States

3.6%

    Dassault Systemes ADR

1,506

119,029

161,865

France

3.3%

 

227,439

343,335

 

6.9%

 

Communications Equipment

    Apple

1,000

113,474

171,850

United States

3.4%

 

Information Services

    Wolters Kluwer

1,000

46,595

51,870

Netherlands

1.0%

 

Infrastructure Software

    Microsoft

1,438

62,724

121,037

United States

2.4%

 

IT Services

    Accenture, Class A

900

89,878

133,209

Ireland

2.7%

 

Semiconductor Devices

    NXP Semiconductors²

1,300

127,835

147,407

Netherlands

3.0%

 

Semiconductor Manufacturing

    Taiwan Semiconductor ADR

3,250

78,323

128,700

Taiwan

2.6%

 
 

746,268

1,097,408

 

22.0%

 

Total investments

 

$3,663,161

4,505,127

 

90.4%

Other assets (net of liabilities)

   

479,102

 

9.6%

Total net assets

   

$4,984,229

 

100.0%

1 Country of domicile
2 Non-income producing security

ADR: American Depositary Receipt

 

10

November 30, 2017

Annual Report

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

 

Saturna Sustainable Equity Fund:

Schedule of Investments

As of May 31, 2017

 

Countries

(unaudited)
Saturna Sustainable Equity Fund Geographic Diversification

Other assets (net of liabilities) 9.6%

Weightings shown are a percentage of total net assets.

 

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

November 30, 2017

Annual Report

11

 

Saturna Sustainable Equity Fund

Statement of Assets and Liabilities

As of November 30, 2017

 

Assets

    Investments in securities, at value (Cost $3,663,161)

$4,505,127

    Cash

497,679

    Dividend receivable

12,839

    Prepaid expenses

5,735

    Receivable for Fund shares sold

2,325

        Total assets

5,023,705

Liabilities

    Payable for security purchases

30,588

    Accrued audit expenses

3,750

    Accrued advisory fees

2,135

    Accrued other expenses

1,616

    Accrued retirement plan custodial fees

722

    Accrued trustee expenses

479

    Accrued Chief Compliance Officer expenses

186

        Total liabilities

39,476

Net assets

$4,984,229

 

Analysis of net assets

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

$4,366,740

    Undistributed net investment income

37,569

    Accumulated net realized loss

(262,074)

    Unrealized net appreciation on investments

841,994

Net assets applicable to Fund shares outstanding

$4,984,229

 

Fund shares outstanding

435,646

 

Net asset value, offering, and redemption price per share

$11.44

 

Statement of Operations

Year ended November 30, 2017

 

Investment income

    Dividend income (net of foreign tax of $6,304)

$76,959

        Total investment income

76,959

Expenses

    Investment adviser fees

27,590

    Filing and registration fees

19,757

    Distribution fees

4,808

    Audit fees

4,293

    Printing and postage

2,360

    Chief Compliance Officer expenses

1,113

    Retirement plan custodial fees

828

    Trustee fees

779

    Legal fees

525

    Custodian fees

452

    Other expenses

444

        Total gross expenses

62,949

    Less adviser fees waived

(25,790)

    Less custodian fee credits

(452)

        Net expenses

36,707

Net investment income

$40,252

 
 

Net realized gain from investments and foreign currency

$57,790

Net increase in unrealized appreciation on investments and foreign currency

743,796

Net gain on investments

$801,586

 

Net increase in net assets resulting from operations

$841,838

 

12

November 30, 2017

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, 2017

Year ended November 30, 2016

Increase (decrease) in net assets from operations

From operations

    Net investment income

$40,252

$21,977

    Net realized gain (loss) on investments

57,790

(108,234)

    Net increase (decrease) in unrealized appreciation

743,796

(23,667)

        Net increase (decrease) in net assets

841,838

(109,924)

Distributions to shareowners from

    Net investment income

(19,031)

-

        Total distributions

(19,031)

-

Capital share transactions

    Proceeds from sales of shares

916,616

539,235

    Value of shares issued in reinvestment of dividends

19,031

-

    Cost of shares redeemed

(117,488)

(509,213)

        Total capital share transactions

818,159

30,022

Total increase (decrease) in net assets

1,640,966

(79,902)

 

Net assets

Beginning of year

3,343,263

3,423,165

End of year

4,984,229

3,343,263

 

Undistributed net investment income

$37,569

$18,207

 

Shares of the Fund sold and redeemed

    Number of shares sold

90,010

57,941

    Number of shares issued in reinvestment of dividends

2,029

-

    Number of shares redeemed

(10,988)

(55,331)

Net increase in number of shares outstanding

81,051

2,610

 

Financial Highlights

For year ended November 30,

Period endedA

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

2017

2016

November 30, 2015

Net asset value at beginning of period

$9.43

$9.73

$10.00

Income from investment operations

    Net investment income

0.09

0.06

0.02

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

1.97

0.36)

(0.28)

Total from investment operations

2.06

(0.30)

(0.26)

Less distributions

    Dividends (from net investment income)

(0.05)

-

(0.01)

Total distributions

(0.05)

-

(0.01)

 

Net asset value at end of period

$11.44

$9.43

$9.73

 

Total return

22.01%

(3.08)%

(2.60)%B

 

Ratios / supplemental data

Net assets ($000), end of period

$4,984

$3,343

$3,423

Ratio of expenses to average net assets

    Before fee waivers

1.48%

1.65%

1.23%C

    After fee waivers

0.88%

1.00%

1.00%C

    After fee waivers and custodian fee credits

0.86%

0.99%

0.99%C

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

0.95%

0.67%

0.29%C

Portfolio turnover rate

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, 2017

Annual Report

13

 

Saturna Sustainable Bond Fund: Performance Summary (unaudited)

Average Annual Returns as of November 30, 2017

 

1 Year

5 Year

10 Year

Expense Ratio1

Sustainable Bond Fund (SEBFX)2

5.28%

n/a

n/a

0.92%

Citi WorldBIG Index

6.74%

0.81%

3.07%

n/a

Growth of $10,000

Saturna Sustainable Bond Fund

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 Citi 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 $10,534 versus rising to $10,804 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 June 2, 2017, and incorporates results for the fiscal year ended November 30, 2016, 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

 

Portfolio Diversification

 

% of Total Net Assets

% of Total Net Assets

 

NextEra Energy Capital (3.445% due 06/15/2067)

4.7%

Financials

32.4%

Saturna Sustainable Bond Fund Portfolio Diversification

Chubb (3.60917% due 04/15/2037)

4.6%

Consumer Discretionary

16.6%

Puget Sound Energy (4.01063% due 06/01/2067)

4.5%

Communications

13.4%

Hanmi Financial (5.45% due 03/30/2027)

3.6%

Technology

10.3%

America Movil (6.00% due 06/09/2019)

3.5%

Foreign Government Bonds

5.2%

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

3.4%

Consumer Staples

4.9%

Nokia OYJ (3.375% due 06/12/2022)

3.4%

Energy

4.7%

Canadian Imperial Bank (3.42% due 01/26/2026)

3.3%

Health Care

3.4%

Hartford Financial Services Group (3.54086% due
02/12/2047)

3.2%

Industrials

1.4%

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

3.0%

Utilities

0.6%

 

Asset-Backed Securities

0.5%

Other assets (net of liabilites)

6.6%

 

14

November 30, 2017

Annual Report

 

Saturna Sustainable Bond Fund: Discussion of Fund Performance

(unaudited)

Fiscal Year 2017

(photos omitted)

For the fiscal year ended November 30, 2017, the Saturna Sustainable Bond Fund returned 5.28% versus the 6.74% return of its benchmark, the Citi World Broad Investment-Grade Bond Index (WorldBig®). The underperformance can be attributed, in part, to the Fund's underinvestment in euro denominated securities relative to the index's large euro exposure that exceeds 30% at year-end. The eurozone currently has an extraordinarily high concentration of low yielding and negative yielding debt, which has led to an environment of low income relative to risks that runs counter to the Fund's objective of capital preservation.

At year-end 2017, the Fund's effective duration was 2.53 years, down slightly from 2.56 the prior year. The Fund generated a 30-day SEC yield of 3.18%. The Fund was diversified among 45 separate issues and across six currencies, including 74.7% of net assets allocated to the US dollar, followed by 7.2% to the Canadian dollar, 6.5% to the Mexican peso, 4.6% to the New Zealand dollar, 4.2% to the Australian dollar, and 2.8% to the Norwegian krone.

Factors Affecting Past Performance

Investors were handsomely rewarded throughout 2017 as investment assets demonstrated strong overall performance across the board. Equities towered to all-time highs. Commodities such as oil experienced a supportive rebound, rising from an average price per barrel of $43.44 throughout 2016 to $50.85 in 2017, reflecting a 17% increase. Fixed income securities continued to demonstrate favorable performance across domestic investment grade, high yield, and emerging debt categories. European high-yield debt traded at a yield only slightly higher than that offered by five-year US Treasurys. For example, at the end of November 2017, the BofA Merrill Lynch Euro High Yield Index offered investors a yield of 2.60%, while five-year US Treasurys yielded 2.20% – a baffling outcome in the years following the Global Financial Crisis, driven in large part by the European Central Bank's continuation of quantitative easing and its monthly US$35 billion asset purchase program.

2017 marked a considerable contrast to 2016 with respect to high asset valuations and historically low volatility as measured by the CBOE Volatility Index (VIX) that has declined to levels not seen since 2007. Some of the largest economies around the world, such as Europe and Japan, continued with their monetary stimulus programs in an attempt to spur economic growth. It appears that some of these measures are beginning to take hold. For example, the Fed announced that the US economy is on track to expand by 2.5% in 2018, up from the prior forecast of 2.1%. The International Monetary Fund revised China's 2017 year-end growth projections from 6.7% to 6.8%, while the eurozone is expected to grow 2.2% this year, the fastest pace since 2007.

Looking Forward

Throughout 2017, the Federal Reserve deepened its resolve to normalize monetary policy by raising the federal funds rate three times. On December 14, 2017, the Federal Open Market Committee (FOMC) raised interest rates by another quarter of a percent from 1.25% to 1.50%, signaling it would stay on a similar path in the coming year amid a leadership transition.

With central banks in Europe and Australia soon expected to follow the Federal Reserve's monetary normalization path, 2018 may see elevated risks and bring challenges for investors. We believe the Saturna Sustainable Bond Fund is positioned to meet its objective of capital preservation and current income by taking a more defensive posture.

 

November 30, 2017

Annual Report

15

 

Saturna Sustainable Bond Fund:

Schedule of Investments

As of November 30, 2017

Asset-Backed Securities – 0.5%

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

$100,186

United States

0.5%

 
 

100,000

100,186

 

0.5%

 

Corporate Bonds – 87.7%

Coupon / Maturity

Face Amount

Market Value

Country1

Percentage of Assets

 

Communications

 
 

    America Movil2

6.00% due 06/09/2019

MXN 15,000,000

778,448

Mexico

3.5%

    Puget Sound Energy (3 month LIBOR plus 2.53%)³

4.01063% due 06/01/2067

1,030,000

993,950

United States

4.5%

    Telecom Italia

7.175% due 06/18/2019

300,000

321,000

Luxembourg

1.5%

    Telus

3.20% due 04/05/2021

CAD 750,000

596,971

Canada

2.7%

    Vodafone Group

4.375% due 03/16/2021

250,000

265,061

United Kingdom

1.2%

 
 

2,955,430

 

13.4%

 

Consumer Discretionary

 
 

    Aramark Services

5.125% due 01/15/2024

600,000

633,000

United States

2.9%

    Barry Callebaut 4

5.50% due 06/15/2023

500,000

542,033

Belgium

2.5%

    BMW Finance

2.75% due 04/25/2019

NOK 2,000,000

246,341

Netherlands

1.1%

    BMW US Capital

2.75% due 12/02/2019

AUD 200,000

152,379

United States

0.7%

    Danone 4

2.077% due 11/02/2021

500,000

490,980

France

2.2%

    Nemak ²

5.50% due 02/28/2023

450,000

462,375

Mexico

2.1%

    Starbucks

2.45% due 06/15/2026

500,000

480,523

United States

2.2%

    Toyota Motor Credit

2.75% due 02/05/2028

150,000

147,547

Japan

0.7%

    Toyota Motor Credit

3.00% due 03/20/2030

500,000

495,027

Japan

2.2%

 

 

3,650,205

 

16.6%

 

Consumer Staples

 
 

    BRF ²

3.95% due 05/22/2023

500,000

496,250

Brazil

2.3%

    BRF ²

4.75% due 05/22/2024

200,000

204,000

Brazil

0.9%

    Nestle Holdings

2.75% due 04/15/2020

NOK 3,000,000

376,003

Switzerland

1.7%

 

 

1,076,253

 

4.9%

 

Energy

 
 

    NextEra Energy Capital (3 month LIBOR plus 2.125%)³

3.445% due 06/15/2067

1,090,000

1,027,325

United States

4.7%

 
 

1,090,000

1,027,325

 

4.7%

 

Continued on next page.

 

16

November 30, 2017

Annual Report

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

 

Saturna Sustainable Bond Fund:

Schedule of Investments

As of November 30, 2017

 

Corporate Bonds – 87.7%

Coupon / Maturity

Face Amount

Market Value

Country1

Percentage of Assets

 

Financials

 
 

    Bancolombia

5.95% due 06/03/2021

$500,000

$545,000

Colombia

2.5%

    Canadian Imperial Bank

3.42% due 01/26/2026

CAD 900,000

714,845

Canada

3.3%

    Chubb (3 month LIBOR plus 2.25%)³

3.60917% due 04/15/2037

1,015,000

1,006,119

Switzerland

4.6%

    Emirates²

6.00% due 10/08/2019

NZD 750,000

533,669

United Arab Emirates

2.4%

    First Abu Dhabi Bank²

3.00% due 03/30/2022

750,000

749,835

United Arab Emirates

3.4%

    Hanmi Financial5

5.45% due 03/30/2027

750,000

780,937

United States

3.6%

    Hartford Financial Services Group (3
month LIBOR plus 2.125%)
3,4

3.54086% due 02/12/2047

750,000

712,500

United States

3.2%

    Homestreet

6.50% due 06/01/2026

500,000

521,875

United States

2.4%

    Iron Mountain

5.75% due 08/15/2024

650,000

665,438

United States

3.0%

    Sun Life Financial

5.59% due 01/30/2023

CAD 350,000

272,987

Canada

1.2%

    Townebank Portsmouth VA6

4.50% due 07/30/2027

500,000

515,725

United States

2.3%

    Westpac Banking

4.625% due 06/01/2018

110,000

111,424

Australia

0.5%

 
 

7,130,354

 

32.4%

 

Health Care

 
 

    Koninklijke Philips

3.75% due 03/15/2022

350,000

364,786

Netherlands

1.7%

    Sanofi

4.00% due 03/29/2021

350,000

369,365

France

1.7%

 
 

700,000

734,151

 

3.4%

 

Industrials

 
 

    Ingersoll-Rand

2.625% due 05/01/2020

300,000

300,274

Luxembourg

1.4%

 
 

300,000

300,274

 

1.4%

 

Technology

 
 

    Apple²

2.65% due 06/10/2020

AUD 500,000

380,290

United States

1.7%

    Apple

3.60% due 06/10/2026

AUD 500,000

389,040

United States

1.8%

    MSCI²

5.75% due 08/15/2025

450,000

484,875

United States

2.2%

    MSCI4

5.75% due 08/15/2025

150,000

161,625

United States

0.7%

    Nokia OYJ

3.375% due 06/12/2022

750,000

749,063

Finland

3.4%

    Seagate HDD Cayman

3.75% due 11/15/2018

100,000

101,500

Cayman Islands

0.5%

 
 

2,266,393

 

10.3%

 

Utilities

 
 

    United Utilities

4.55% due 06/19/2018

59,000

59,707

United Kingdom

0.3%

    United Utilities

5.375% due 02/01/2019

75,000

77,530

United Kingdom

0.3%

 
 

134,000

137,237

 

0.6%

 

Total Corporate Bonds

19,277,622

 

87.7%

 

Continued on next page.

 

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

November 30, 2017

Annual Report

17

 

Saturna Sustainable Bond Fund:

Schedule of Investments

As of November, 2017

 

Government Bonds – 5.2%

Coupon / Maturity

Face Amount

Market Value

Country1

Percentage of Assets

 

Foreign Government Bonds

 
 

    Mexico Bonos Desarollo

6.50% due 06/10/2021

MXN 125,000

$657,588

Mexico

3.0%

    New Zealand Government²

3.00% due 04/15/2020

NZD 700,000

487,279

New Zealand

2.2%

 
 

1,144,867

 

5.2%

 

Total Government Bonds

1,144,867

 

5.2%

 

Total investments

(Cost = $20,537,391)

 

20,522,675

 

93.4%

Other assets (net of liabilities)

   

1,457,276

 

6.6%

Total net assets

   

$21,979,951

 

100.0%

1Country 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, 2017, the aggregate value of these securities wa s $4,577,021 representing 20.8% of net assets.

³ Variable rate security. The interest rate represents the rate in effect at November 30, 2017 and resets periodically based on the parenthetically disclosed reference rate and spread.

4 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, 2017, the net value of these securities was $1,907,138 representing 8.7% of net assets.

5 Hanmi Financial is a fixed to float bond and the interest rate shown represents the rate in effect at November 30, 2017. The bond has a fixed rate until March of 2022 when the interest rate will update to the 3-month Libor plus 3.315% and will reset periodically.

6 Townebank Portsmouth VA is a fixed to float bond and the interest rate shown represents the rate in effect at November 30, 2017. The bond has a fixed rate until July of 2022 when the interest rate will update to the 3-month Libor plus 2.55% and will reset periodically.

 

18

November 30, 2017

Annual Report

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

 

Saturna Sustainable Bond Fund:

Schedule of Investments

As of November 30, 2017

 

Countries

(unaudited)
Saturna Sustainable Bond Fund Geographic Diversification

Other assets (net of liabilities) 6.6%

Weightings shown are a percentage of total net assets.

 

Bond Quality Diversification

% of Total Net Assets

 

Rated "Aaa"

2.2%

Saturna Sustainable Bond Fund Bond Quality Diversification

Rated "Aa1"

3.5%

Rated "Aa2"

1.7%

Rated "Aa3"

6.3%

Rated "A1"

3.5%

Rated "A2"

2.2%

Rated "A3"

9.4%

Rated "Baa1"

13.0%

Rated "Baa2"

16.4%

Rated "Baa3"

3.7%

Rated "Ba1"

12.7%

Rated "Ba2"

2.9%

Rated "Ba3"

2.9%

Rated "B2"

3.0%

Not Rated

10.0%

Other assets (net of liabilities)

6.6%

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

 

 

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

November 30, 2017

Annual Report

19

 

Saturna Sustainable Bond Fund

Statement of Assets and Liabilities

As of November 30, 2017

 

Assets

    Investments in securities, at value
(Cost $20,537,391)

$20,522,675

    Cash

707,812

    Receivable for security sales

416,361

    Interest receivable

297,753

    Receivable for Fund shares sold

56,374

    Prepaid expenses

6,372

        Total assets

22,007,347

Liabilities

    Payable for Fund shares redeemed

6,438

    Accrued advisory fee

6,214

    Accrued audit expenses

6,000

    Accrued Chief Compliance Officer fee

604

    Accrued retirement plan custodial fees

488

    Accrued other expenses

364

    Accrued trustee expenses

140

        Total liabilities

27,396

Net assets

$21,979,951

 

Analysis of net assets

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

$22,029,087

    Undistributed net investment income

176

    Accumulated net realized loss

(32,818)

    Unrealized net depreciation on investments

(16,494)

Net assets applicable to Fund shares outstanding

$21,979,951

 

Fund shares outstanding

2,226,037

 

Net asset value, offering, and redemption price per share

$9.87

 

Statement of Operations

Year ended November 30, 2017

 

Investment income

    Interest income

$524,330

        Total investment income

524,330

Expenses

    Investment adviser fees

80,950

    Filing and registration fees

23,272

    Distribution fees

12,699

    Printing and postage

5,220

    Audit fees

4,325

    Chief Compliance Officer expenses

2,678

    Trustee fees

2,137

    Custodian fees

1,519

    Legal fees

1,457

    Other expenses

1,334

    Retirement plan custodial fees

531

        Total gross expenses

136,122

    Less adviser fees waived

(25,967)

    Less custodian fee credits

(1,519)

        Net expenses

108,636

Net investment income

$415,694

 
 

Net realized loss from investments and foreign currency

$(43,430)

Net decrease in unrealized depreciation on investments and foreign currency

205,033

Net gain on investments

$161,603

 

Net increase in net assets resulting from operations

$577,297

 

20

November 30, 2017

Annual Report

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

 

Saturna Sustainable Bond Fund

Statements of Changes in Net Assets

Year ended November 30, 2017

Year ended November 30, 2016

Increase (decrease) in net assets from operations

From operations

    Net investment income

$415,694

$188,631

    Net realized gain (loss) on investments

(43,430)

9,841

    Net increase (decrease) in unrealized depreciation

205,033

(119,271)

        Net increase in net assets

577,297

79,201

Distributions to shareowners from

    Net investment income

(405,083)

(184,887)

    Capital gains distribution

(13,408)

-

        Total distributions

(418,491)

(184,887)

Capital share transactions

    Proceeds from sales of shares

14,897,718

4,258,711

    Value of shares issued in reinvestment of dividends

359,283

116,029

    Cost of shares redeemed

(2,075,045)

(2,515,123)

        Total capital share transactions

13,181,956

1,859,617

Total increase in net assets

13,340,762

1,753,931

 

Net assets

Beginning of year

8,639,189

6,885,258

End of year

21,979,951

8,639,189

 

Undistributed net investment income

$176

$229

 

Shares of the Fund sold and redeemed

    Number of shares sold

1,504,397

432,552

    Number of shares issued in reinvestment of dividends

36,349

11,853

    Number of shares redeemed

(209,909)

(255,297)

Net increase in number of shares outstanding

1,330,837

189,108

 

Financial Highlights

Year ended November 30,

Period endedA

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

2017

2016

November 30, 2015

Net asset value at beginning of period

$9.65

$9.75

$10.00

Income from investment operations

    Net investment income

0.27

0.24

0.12

    Net gain (loss) on securities (both realized and unrealized)

0.23

(0.10)

(0.25)

Total from investment operations

0.50

0.14

(0.13)

Less distributions

    Dividends (from net investment income)

(0.27)

(0.24)

(0.12)

    Capital gains distribution

(0.01)

-

-

Total distributions

(0.28)

(0.24)

(0.12)

 

Net asset value at end of period

$9.87

$9.65

$9.75

 

Total return

5.28%

1.37%

(1.29)%B

 

Ratios / supplemental data

Net assets ($000), end of period

$21,980

$8,639

$6,885

Ratio of expenses to average net assets

    Before fee waivers

0.92%

1.17%

1.02%C

    After fee waivers

0.75%

0.89%

0.90%C

    After fee waivers and custodian fee credits

0.74%

0.89%

0.89%C

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

2.82%

2.46%

1.92%C

Portfolio turnover rate

14%

46%

4%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, 2017

Annual Report

21

 

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.

 

22

November 30, 2017

Annual Report

 

Notes To Financial Statements

(continued)

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. 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

$188,573

$61,036

$-

$249,609

    Consumer Discretionary

871,494

204,670

-

1,076,164

    Consumer Staples

354,324

94,993

-

449,317

    Energy

-

101,373

 

101,373

    Financials

389,896

168,177

-

558,073

    Health Care

220,226

122,977

-

343,203

    Industrials

101,168

230,679

-

331,847

    Materials

216,078

82,055

 

298,133

    Technology

1,045,538

51,870

-

1,097,408

Total Assets

$3,387,297

$1,117,830

$-

$4,505,127

 

Sustainable Bond Fund

Asset-Backed Securities1

$-

$100,186

$-

$100,186

Corporate Bonds1

-

19,277,622

-

19,277,622

Government Bonds1

-

1,144,867

-

1,144,867

Total

$-

$20,522,675

$-

$20,522,675

1 See Schedule of Investments for industry breakout.

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

 

November 30, 2017

Annual Report

23

 

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 23 is a summary of the inputs used as of November 30, 2017, 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 (2015-2016) or expected to be taken in the Funds' 2017 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. These reclassifications have no effect on net assets or net asset value per share. As of November 30, 2017, the reclassification of capital accounts were as follows:

 

Equity Fund

Bond Fund

Undistributed net investment loss

$(1,859)

$(10,664)

Accumulated gains (losses)

1,859

10,664

Paid-in capital

-

-

These reclassifications were due to treatment of foreign currencies, re-designation of distributions, and investments in real estate investment trusts (REITs).

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

 

24

November 30, 2017

Annual Report

 

Notes To Financial Statements

(continued)

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

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 from December 1, 2016 through June 1, 2017 of the Sustainable Equity Fund to 0.99% and the Sustainable Bond Fund to 0.89% and from June 2, 2017 through March 31, 2018 of the Sustainable Equity Fund to 0.75% and the Sustainable Bond Fund to 0.65%. For the year ended November 30, 2017, the advisory fees incurred were as follows:

 

Adviser
Fees

Adviser Fees
Waived

Expense
Reimbursement

Sustainable Equity

$27,590

$25,790

$-

Sustainable Bond

80,950

25,967

-

In accordance with the expense limitation noted above, for the year ended November 30, 2017, 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 all Funds.

During the year ended November 30, 2017, the Trust paid SBS the following amounts:

12b-1 Fees

Sustainable Equity

$4,808

Sustainable Bond

12,699

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, 2017, the Funds incurred the following amounts:

Retirement plan custodial fees

Sustainable Equity

$828

Sustainable Bond

531

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, 2017, the Trust incurred compensation expenses of $32,000 which is included in $38,260 of total expenses for the independent Trustees. The Saturna Sustainable Funds paid $2,916 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, 2017, the Funds paid the following compensation expenses for the Chief Compliance Officer:

Chief Compliance Officer

Sustainable Equity

$1,113

Sustainable Bond

2,678

On November 30, 2017, the trustees, officers, and their affiliates as a group owned 67.84% and 16.77% of the outstanding shares of Sustainable Equity Fund and Sustainable Bond Fund, respectively.

 

November 30, 2017

Annual Report

25

 

Notes To Financial Statements

(continued)

NOTE 4 – Distributions to Shareowners

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

 

Year ended
November 30, 2017

Year ended
November 30, 2016

Sustainable Equity Fund

    Ordinary income

$19,031

$-

Sustainable Bond Fund

    Ordinary income

413,984

184,887

    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, 2017, was as follows:

 

Sustainable Equity

Sustainable Bond

Cost of investments

$3,663,161

$20,537,391

Gross tax unrealized appreciation

908,557

211,898

Gross tax unrealized depreciation

(66,591)

(226,614)

Net tax unrealized appreciation (depreciation)

841,966

(14,716)

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

Sustainable Equity

Undistributed ordinary income

$37,569

Tax accumulated earnings

37,569

Accumulated capital losses

(262,074)

Unrealized appreciation

841,966

Other unrealized losses

28

Total accumulated earnings

$617,489

 

Sustainable Bond

Undistributed ordinary income

$176

Tax accumulated earnings

176

Accumulated capital losses

(32,818)

Unrealized depreciation

(14,716)

Other unrealized losses

(1,778)

Total accumulated earnings

$(49,136)

 

On November 30, 2017, the Funds had capital loss carryforwards as follows, subject to regulation.

 

Carryforward

Expiration

Equity Fund

Short-term loss carryforwards

$262,074

Unlimited

 

262,074

Unlimited

 

 

Carryforward

Expiration

Bond Fund

Short-term loss carryforward

$32,818

Unlimited

 

32,818

Unlimited

NOTE 6 – Investments

Investment transactions other than short-term investments for the period ended November 30, 2017, were as follows:

 

Purchases

Sales

Sustainable Equity

$1,321,338

$474,846

Sustainable Bond

14,514,544

1,909,840

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, 2017, were as follows:

Custodian Fee Credits

Sustainable Equity

$452

Sustainable Bond

1,519

NOTE 8 – Subsequent Events

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

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

 

Ordinary Income

Qualified Income

Equity Fund

$-

$0.08914

Bond Fund

0.02229

-

Dividend income distributions paid by Sustainable Bond Fund were accrued daily.

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

 

26

November 30, 2017

Annual Report

 

Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying statements of assets and liabilities of the 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, 2017, and the related statements of operations, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the two years in the period then ended and for the period March 27, 2015 (commencement of operations) to November 30, 2015. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

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

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Saturna Sustainable Equity Fund and Saturna Sustainable Bond Fund as of November 30, 2017, the results of their operations, changes in their net assets, and their financial highlights for the periods indicated above, in conformity with accounting principles generally accepted in the United States of America.

Philadelphia, Pennsylvania

January 29, 2018

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

 

November 30, 2017

Annual Report

27

 

Expenses

(unaudited)

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, 2017 to November 30, 2017).

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, 2017]

Ending Account Value
[November 30, 2017]

Expenses Paid
During Period

Annualized
Expense Ratio

 

Sustainable Equity Fund (SEEFX), Actual

$1,000.00

$1,081.30

$3.95

0.76%

Hypothetical (5% return before expenses)

$1,000.00

$1,021.27

$3.84

0.76%

 
 

Sustainable Bond Fund (SEBFX), Actual

$1,000.00

$1,012.90

$3.31

0.66%

Hypothetical (5% return before expenses)

$1,000.00

$1,021.78

$3.33

0.66%

 

Expenses are equal to annualized expense ratios indicated above (based on the most recent fiscal period of June 1, 2017, through November 30, 2017) multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).

 

28

November 30, 2017

Annual Report

 

Trustees and Officers (unaudited)

Name, Address, and Age

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

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

Other Directorships held by Trustee

Independent Trustees

(photo omitted)

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

Independent Trustee (since 2017);
Nine

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

Author

None

(photo omitted)

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

Independent Trustee (since 2009);
Thirteen

Director, ICI Mutual Insurance Company

Amana Mutual Funds Trust

(photo omitted)

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

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

Medical Examiner (pathologist)

Owner, Avocet Environmental Testing (laboratory)

None

(photo omitted)

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

Independent Trustee (since 2017);
Nine

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

None

(photo omitted)

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

Independent Trustee (since 2017);
Nine

CEO, Birch Equipment (industrial rentals and sales)

None

Interested Trustee

(photo omitted)

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

President, Trustee (since 2017);
Nine

President and Director,
Saturna Capital Corporation

Vice President and Director,
Saturna Trust Company

President,
Saturna Brokerage Services

None

 

November 30, 2017

Annual Report

29

 

Trustees and Officers (continued)   (unaudited)

Name, Address, and Age

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

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

Other Directorships held by Trustee

Officers Who Are Not Trustees

(photo omitted)

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

Vice President
(since 1994);
N/A

Vice President, Saturna Capital Corporation

Director, Vice President, and former Treasurer Saturna Brokerage Services

N/A

(photo omitted)

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

Treasurer¹
(since 2002);
N/A

Chief Operations Officer, Saturna Capital Corporation

Vice President and Chief Operations Officer, Saturna Brokerage Services

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

N/A

(photo omitted)

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

Chief Compliance Officer¹
(since 2012);
N/A

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

N/A

(photo omitted)

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

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

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

Chief Compliance Officer, Saturna Brokerage Services

Bank Secrecy Act Officer, Saturna Trust Company

N/A

(photo omitted)

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

Secretary
(since 2017);
N/A

Chairman and Director,
Saturna Capital Corporation

Chairman, Director, and President, Saturna Trust Company

Former Director, Saturna Brokerage Services

Amana Mutual Funds Trust

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

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

On November 30, 2017, the trustees, officers, and their affiliates as a group owned 67.84% and 16.77% 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, 2017, 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

 

30

November 30, 2017

Annual Report

 

Renewal of Investment Advisory Contract

During their meeting of September 16, 2017, the Trustees of Saturna Investment Trust discussed the continuance of the Investment Advisory and Administration Agreements between each of Sustainable Equity Fund and Sustainable Bond Fund (the "Funds") and Saturna Capital Corporation ("Saturna"). In considering the renewal of the agreements with Saturna, the Trustees discussed the nature, extent, and quality of the services provided by Saturna 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 increasingly qualified, experienced, and specialized staff and improve the capital base on which Saturna operates, which the Trustees believe is important to the long-term success of the Funds. They appreciate 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 one-year period ended July 31, 2017, noting that Sustainable Equity Fund had underperformed its Morningstar category average 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 Saturna Sustainable Equity Fund by Morningstar. In addition, 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 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 their 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 has undertaken to maintain competitive levels of Fund operating expenses. They noted the significant sponsorship of the Funds by Saturna evidenced, in part, by certain fees and expenses paid by Saturna 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's efforts. The Trustees' decision to end the expense of the 12b-1 plan both helped the Funds' with lowered operating expenses and reduced the income available to Saturna 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 that Saturna operates the Funds at considerable costs to itself.

The Trustees reviewed Saturna's financial information and discussed the issue of Saturna's profitability as related to management and administration of the Trust. They discussed the reasonableness of Saturna's profitability as part of their evaluation of whether the advisory fees bear a reasonable relationship to the mix of services provided by Saturna, including the nature, extent, and quality of such services. The Trustees appreciated Saturna 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 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's other business lines from acting as investment adviser to the Funds, but also recognized that Saturna's other business lines benefit the Funds. The Trustees also noted that there were no soft dollar arrangements and considered whether there are other potential benefits to Saturna 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

 

November 30, 2017

Annual Report

31

 

Renewal of Investment Advisory Contract (continued)

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 the Funds to Saturna were, from an arm's-length bargaining perspective, reasonable and in the best interest of the Funds and their shareowners in light of the services provided, comparative performance, expense and advisory fee information, costs of services provided, profits to be realized, and benefits derived or to be derived by Saturna from its relationship with the Funds. Following this discussion, the Trustees unanimously agreed to renew the agreements of Sustainable Equity Fund and Sustainable Bond Fund, with Saturna Capital Corporation.

 

32

November 30, 2017

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.

Availability of Proxy Voting Information

(1) A descriptionof 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.

 

November 30, 2017

Annual Report

33

 

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.

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.

 

34

November 30, 2017

Annual Report

 

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

 

November 30, 2017

Annual Report

35

 

 

www.saturnasustainable.com

(logo omitted)

Saturna Capital
1300 North 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, 2018

Saturna Sustainable Funds

Semi-Annual Report     May 31, 2018

Sustainable
Equity

SEEFX

 

SustainableBond

SEBFX


Performance Summary (as of June 30, 2018)

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)

11.70%

6.89%

n/a

n/a

1.37%

0.75%

S&P Global 1200 Index

11.57%

9.29%

10.51%

6.85%

n/a

n/a

 

Sustainable Bond Fund (SEBFX)

-0.52%

1.94%

n/a

n/a

0.84%

0.65%

FTSE WorldBIG Index

1.42%

2.62%

1.52%

2.56%

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.asustainable.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.saturnaasustainable.com, or call toll-free 1-800-728-8762. Please read the prospectus or summary prospectus carefully before investing.

2

May 31, 2018

Semi-Annual Report

Fellow Shareowners:

Saturna Sustainable Funds began operations on March 27, 2015, and this March marked their three-year anniversary.

At May 31, 2018, assets of the two Funds reached $32.53 million up from $16.70 million the previous year. The following pages provide details of the assets and operations of the two Funds.

Markets rose with abandon during the last half of 2017, but the euphoria melted away as caution brought volatility and doubt. Emerging markets, led by China, suffered as the dollar surged and trade wars loomed. Oil and coal stocks, which we avoid, were the big winners following political failures in countries such as Venezuela, Brazil, and Iran. Central banks are cutting a decade of stimulus and low rates. In the US, lower taxes are stimulating vast investments, especially in technology, while the global supply chain is being rattled by trade revamps. The future, as always, is murky.

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 an unemployment rate that dipped below 4% for the first time since 2000, inflation remains subdued, while corporate profitability and consumer confidence are robust. Conditions over the past several years have contributed to a go-go mentality.

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.

Central bankers are reversing policy and understandably slowing the flow from their stimulus. An extraordinary era of low interest rates fueled upward moves in economies and markets. Central banks are now shifting toward raising rates and/or removing stimulus. We must be vigilant in the coming months for signs of a recession – we believe a riskier period looms ahead.

May 31, 2018

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, 2018, Saturna Sustainable Equity Fund ranked in the first percentile of 726 funds in the World Large Stock category, earning the top "Five Globe" Sustainability Rating. The Saturna Sustainable Bond Fund ranked in the top 20th percentile of 265 funds in the World Bond category earning an above average "Four Globe" rating.

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)

Bryce Fegley CFA®, CIPM®

Saturna Sustainable Bond Fund
Deputy Portfolio Manager

 

4

May 31, 2018

Semi-Annual Report

 

Morningstar Sustainability Ratings™

As of May 31, 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 the Saturna Sustainable Funds' fiscal period-end results:

 

Saturna Sustainable Equity Fund

 

Saturna Sustainable Bond Fund

SEEFX

Ø Ø Ø Ø Ø

SEBFX

Ø Ø Ø Ø Ø

Ranked in 1st percentile among 726 World Stock Funds

Ranked in 20th percentile among 265 World Bond Funds

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 May 31, 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 92% and Saturna Sustainable Bond Fund was rated on 60% 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.

The Saturna Sustainable Equity Fund and Saturna Sustainable Bond Fund began operations March 27, 2015.

May 31, 2018

Semi-Annual Report

5

Saturna Sustainable Equity Fund: Performance Summary

Average Annual Returns as of May 31, 2018

 

1 Year

5 Year

10 Year

Expense Ratio¹

Sustainable Equity Fund (SEEFX)²

12.20%

n/a

n/a

1.37%

S&P Global 1200 Index

12.37%

9.95%

5.96%

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 $11,975 versus $13,154 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

3.8%

Apple

3.3%

Toronto-Dominion Bank

2.9%

Home Depot

2.8%

Mastercard, Class A

2.8%

Unilever

2.7%

Murata Manufacturing

2.6%

NXP Semiconductors

2.6%

Koninklijke Philips ADR

2.6%

 

Portfolio Diversification

% of Total Net Assets

 

Application Software

8.2%

Saturna Sustainable Equity Fund Portfolio Diversification

Household Products

6.3%

Semiconductor Devices

4.3%

Apparel, Footwear & Accessory Design

3.5%

Communications Equipment

3.3%

Electrical Components

3.2%

Banks

2.9%

Home Products Stores

2.8%

Consumer Finance

2.8%

Specialty Chemicals

2.7%

Medical Equipment

2.6%

Infrastructure Software

2.5%

IT Services

2.5%

Containers & Packaging

2.5%

Industries < 2.5%

40.6%

Other Assets (net of liabilities)

9.3%

 

6

May 31, 2018

Semi-Annual Report

 

Saturna Sustainable Equity Fund:

Schedule of Investments

As of May 31, 2018

Common Stocks – 90.7%

Number of Shares

Cost

Market Value

Country¹

Percentage of Assets

 

Communications

 
 

Entertainment Content

    Walt Disney Company

500

$53,703

$49,735

United States

0.9%

 

Internet Media

    Alphabet, Class A²

122

67,177

134,200

United States

2.4%

 

Publishing & Broadcasting

    Naspers ADR

2,600

146,512

126,022

United States

2.2%

 

Telecom Carriers

    China Mobile

6,000

67,457

53,708

Hong Kong

0.9%

    Telekomunikasi Indonesia ADR

2,000

65,178

49,420

Indonesia

0.9%

 

132,635

103,128

 

1.8%

 
 

400,027

413,085

 

7.3%

 

Consumer Discretionary

 
 

Airlines

    Latam Airlines Group

3,600

46,768

43,200

Chile

0.8%

 

Apparel, Footwear & Accessory Design

    Nike, Class B

1,558

90,564

111,864

United States

2.0%

    Samsonite International

24,900

84,742

85,016

Hong Kong³

1.5%

 

175,306

196,880

 

3.5%

 

Auto Parts

    Valeo

1,400

74,424

88,812

France

1.6%

 

Automobiles

    Toyota Motor ADR

1,000

107,633

127,970

Japan

2.3%

 

Home Products Stores

    Home Depot

850

100,842

158,567

United States

2.8%

 

Other Commercial Services

    Ecolab

723

82,095

103,107

United States

1.8%

 

Restaurants

    Starbucks

1,713

102,502

97,076

United States

1.7%

 

Specialty Apparel Stores

    TJX Companies

1,500

103,932

135,480

United States

2.4%

 

    Toys & Games

       

    Hasbro

600

56,958

52,050

United States

0.9%

 
 

850,460

1,003,142

 

17.8%

 

Consumer Staples

 
 

Food & Drug Stores

    Clicks Group ADR

1,500

38,630

48,720

South Africa

0.9%

 

Continued on next page.

 

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

May 31, 2018

Semi-Annual Report

7

 

Saturna Sustainable Equity Fund:

Schedule of Investments

As of May 31, 2018

Common Stocks – 90.7%

Number of Shares

Cost

Market Value

Country¹

Percentage of Assets

 

Consumer Staples (continued)

 
 

Household Products

    Church & Dwight

2,400

$104,866

$112,680

United States

2.0%

    Kimberly-Clark de Mexico, Class A

53,000

111,986

88,676

Mexico

1.6%

    Unilever

2,700

116,609

150,579

Netherlands

2.7%

 

333,461

351,935

 

6.3%

 

Household Products Manufacturing

    L'Oreal ADR

2,200

98,743

106,128

United States

1.9%

 

Packaged Food

    Nestle ADR

1,000

86,610

75,670

Switzerland

1.3%

 
 

557,444

582,453

 

10.4%

 

Energy

 
 

Renewable Energy Equipment

    Siemens Gamesa Renewable Energy

3,500

51,922

53,913

Spain

1.0%

    Vestas Wind Systems

900

65,551

58,878

Denmark

1.0%

 
 

117,473

112,791

 

2.0%

 

Financials

 
 

Banks

    Toronto-Dominion Bank

2,800

131,011

163,492

Canada

2.9%

 

Consumer Finance

    Mastercard, Class A

824

74,154

156,659

United States

2.8%

 

Islamic Banking

    BIMB Holdings

100,000

103,496

98,328

Malaysia

1.7%

 

Life Insurance

    AIA Group

11,600

67,862

105,866

Hong Kong

1.9%

 

P&C Insurance

    Chubb

700

77,224

91,483

Switzerland

1.6%

 
 

453,747

615,828

 

10.9%

 

Health Care

 
 

Health Care Facilities

    Ramsay Health Care

2,308

103,089

106,910

Australia

1.9%

 

Large Pharma

    Novo Nordisk ADR

1,569

86,408

74,590

Denmark

1.3%

 

Medical Equipment

    Koninklijke Philips

3,588

101,701

147,610

Netherlands

2.6%

 
 

291,198

329,110

 

5.8%

 

Continued on next page.

 

8

May 31, 2018

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, 2018

Common Stocks – 90.7%

Number of Shares

Cost

Market Value

Country¹

Percentage of Assets

 

Industrials

 
 

Electrical Components

    Murata Manufacturing

1,000

$133,698

$148,203

Japan

2.6%

    TE Connectivity

351

22,756

32,671

Switzerland

0.6%

 

156,454

180,874

 

3.2%

 

Electrical Power Equipment

    Siemens ADR

1,000

66,086

65,290

Germany

1.2%

 

Rubber & Plastic

    Hartalega Holdings

80,000

63,885

122,772

Malaysia

2.2%

 
 

286,425

368,936

 

6.6%

 

Materials

 
 

Containers & Packaging

    3M

700

118,457

138,061

United States

2.5%

 

Precious Metal Mining

    Randgold Resources ADR

500

48,731

39,760

South Africa

0.7%

 

Specialty Chemicals

    Johnson Matthey

2,000

85,287

93,350

United Kingdom

1.6%

    Koninklijke DSM

600

62,437

59,689

Netherlands

1.1%

 

147,724

153,039

 

2.7%

 
 

314,912

330,860

 

5.9%

 

Technology

 
 

Application Software

    Adobe Systems²

1,000

108,410

249,280

United States

4.4%

    Dassault Systemes ADR

1,506

119,029

211,216

France

3.8%

 

227,439

460,496

 

8.2%

 

Communications Equipment

    Apple

1,000

113,474

186,870

United States

3.3%

 

Information Services

    Wolters Kluwer

1,000

46,595

56,092

Netherlands

1.0%

 

Infrastructure Software

    Microsoft

1,438

62,724

142,132

United States

2.5%

 

IT Services

    Accenture, Class A

900

89,878

140,166

Ireland

2.5%

 

Semiconductor Devices

    NXP Semiconductors²

1,300

127,836

148,200

Netherlands

2.6%

    STMicroelectronics

3,800

84,537

90,706

Switzerland

1.7%

 

212,373

238,906

 

4.3%

 

Semiconductor Manufacturing

    Taiwan Semiconductor ADR

3,250

78,323

125,775

Taiwan

2.2%

 
 

830,806

1,350,437

 

24.0%

 

Continued on next page.

 

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

May 31, 2018

Semi-Annual Report

9

 

Saturna Sustainable Equity Fund:

Schedule of Investments

As of May 31, 2018

Common Stocks – 90.7%

Number of Shares

Cost

Market Value

Country¹

Percentage of Assets

 
 

Total investments

 

$4,102,492

$5,106,642

 

90.7%

Other assets (net of liabilities)

   

523,244

 

9.3%

Total net assets

   

$5,629,886

 

100.0%

¹ Country of domicile unless otherwise indication
² Non-income producing security
³ Denotes a country of primary exposure

ADR: American Depositary Receipt

 

Countries

Saturna Sustainable Equity Fund Geographic Diversification

Other assets (net of liabilities) 9.3%

Weightings shown are a percentage of total net assets.

 

10

May 31, 2018

Semi-Annual Report

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

Saturna Sustainable Equity Fund

Statement of Assets and Liabilities

As of May 31, 2018

 

Assets

    Investments in securities, at value
(Cost $4,102,492)

$5,106,642

    Cash

499,196

    Dividends receivable

17,849

    Prepaid expenses

6,582

    Receivable from adviser

1,117

    Receivable for Fund shares sold

243

        Total assets

5,631,629

Liabilities

    Accrued printing expenses

443

    Accrued audit expenses

417

    Accrued retirement plan custodial fees

401

    Accrued trustee expenses

259

    Accrued Chief Compliance Officer expenses

153

    Accrued other expenses

70

        Total liabilities

1,743

Net assets

$5,629,886

 

Analysis of net assets

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

$4,859,329

    Undistributed net investment income

23,638

    Accumulated net realized loss

(257,205)

    Unrealized net appreciation on investments

1,004,124

Net assets applicable to Fund shares outstanding

$5,629,886

 

Fund shares outstanding

477,938

 

Net asset value, offering,
and redemption price per share

$11.78

 

Statement of Operations

Period ended May 31, 2018

 

Investment income

    Dividend income (net of foreign tax of $5,730)

$46,552

        Total investment income

46,552

Expenses

    Investment adviser fees

17,390

    Filing and registration fees

12,414

    Audit fees

3,551

    Printing and postage

1,647

    Trustee fees

709

    Legal fees

575

    Chief Compliance Officer expenses

548

    Retirement plan custodial fees

548

    Other expenses

444

    Custodian fees

361

        Total gross expenses

38,187

    Less adviser fees waived

(17,661)

    Less custodian fee credits

(361)

        Net expenses

20,165

Net investment income

$26,387

 
 

Net realized gain from investments and foreign currency

$4,869

Net increase in unrealized appreciation on investments and foreign currency

162,130

Net gain on investments

$166,999

 

Net increase in net assets resulting from operations

$193,386

 

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

May 31, 2018

Semi-Annual Report

11

Saturna Sustainable Equity Fund

Statements of Changes of Net Assets

Period ended May 31, 2018

Year ended November 30, 2017

Increase in net assets from operations

From operations

    Net investment income

$26,387

$40,252

    Net realized gain on investment

4,869

57,790

    Net increase in unrealized appreciation

162,130

743,796

        Net increase in net assets

193,386

841,838

Distributions to shareowners from

    Net investment income

(40,318)

(19,031)

        Total distributions

(40,318)

(19,031)

Capital share transactions

    Proceeds from sales of shares

504,816

916,616

    Value of shares issued in reinvestment of dividends

40,318

19,031

    Cost of shares redeemed

(52,545)

(117,488)

        Total capital share transactions

492,589

818,159

Total increase in net assets

645,657

1,640,966

 

Net assets

Beginning of period

4,984,229

3,343,263

End of period

5,629,886

4,984,229

 

Undistributed net investment income

$23,638

$37,569

 

Shares of the Fund sold and redeemed

    Number of shares sold

43,380

90,010

    Number of shares issued in reinvestment of dividends

3,500

2,029

    Number of shares redeemed

(4,588)

(10,988)

Net increase in number of shares outstanding

42,292

81,051

 

Financial Highlights

Period ended

For year ended November 30,

Period endedA

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

May 31, 2018

2017

2016

November 30, 2015

Net asset value at beginning of period

$11.44

$9.43

$9.73

$10.00

Income from investment operations

    Net investment income

0.05

0.09

0.06

0.02

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

0.38

1.97

(0.36)

(0.28)

Total from investment operations

0.43

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 period

$11.78

$11.44

$9.43

$9.73

 

Total returnB

3.77%

22.01%

(3.08)%

(2.60)%

 

Ratios / supplemental data

Net assets ($000), end of period

$5,630

$4,984

$3,343

$3,423

Ratio of expenses to average net assets

    Before fee waiversC

1.43%

1.48%

1.65%

1.23%

    After fee waiversC

0.77%

0.88%

1.00%

1.00%

    After fee waivers and custodian fee creditsC

0.75%

0.86%

0.99%

0.99%

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

0.99%

0.95%

0.67%

0.29%

Portfolio turnover rateB

2%

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 one year.

 

12

May 31, 2018

Semi-Annual Report

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

Saturna Sustainable Bond Fund: Performance Summary

Average Annual Returns as of May 31, 2018

 

1 Year

5 Year

10 Year

Expense Ratio¹

Sustainable Bond Fund (SEBFX)²

0.81%

n/a

n/a

0.84%

FTSE WorldBIG Index³

1.64%

1.36%

2.61%

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 $10,484 versus rising to $10,699 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

NextEra Energy Capital (4.2495% due 06/15/2067)

4.9%

Lincoln National (4.39866% due 04/20/2067)

4.9%

Hartford Financial Services Group (4.4675% due 02/12/2047)

4.8%

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

4.6%

Nokia (3.375% due 06/12/2022)

4.5%

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

4.5%

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

4.4%

Telus (3.20% due 04/05/2021)

4.4%

Bank of Nova Scotia (4.65% due PERP)

4.3%

Hanmi Financial (5.45% due 03/30/2027)

3.8%

 

Portfolio Diversification

% of Total Net Assets

 

Financials

44.0%

Saturna Sustainable Bond Fund Portfolio Diversification

Consumer Discretionary

13.6%

Communications

10.9%

Technology

10.4%

Government Bonds

5.4%

Energy

4.9%

Materials

4.4%

Consumer Staples

1.4%

Utilities

0.5%

Asset-Backed Securities

0.4%

Other Assets (net of liabilities)

4.1%

 

May 31, 2018

Semi-Annual Report

13

 

Saturna Sustainable Bond Fund:

Schedule of Investments

As of May 31, 2018

Asset-Backed Securities – 0.4%

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

$99,722

United States

0.4%

 
 

99,722

 

0.4%

 

Corporate Bonds – 90.1%

Coupon / Maturity

Face Amount

Market Value

Country¹

Percentage of Assets

 

Communications

 
 

    America Movil²

6.00% due 06/09/2019

MXN 15,000,000

728,316

Mexico

2.7%

    Telecom Italia

7.175% due 06/18/2019

500,000

517,750

Luxembourg

1.9%

    Telus

3.20% due 04/05/2021

CAD 1,500,000

1,168,950

Canada

4.4%

    Vodafone Group

4.375% due 03/16/2021

500,000

515,163

United Kingdom

1.9%

 
 

2,930,179

 

10.9%

 

Consumer Discretionary

 
 

    Aramark Services

5.125% due 01/15/2024

600,000

609,300

United States

2.3%

    Barry Callebaut³

5.50% due 06/15/2023

500,000

513,369

Belgium

1.9%

    Barry Callebaut²

5.50% due 06/15/2023

500,000

513,369

Belgium

1.9%

    BMW Finance

2.75% due 04/25/2019

NOK 2,000,000

247,911

Netherlands

0.9%

    BMW US Capital

2.75% due 12/02/2019

AUD 200,000

151,825

Germany

0.6%

    Danone³

2.077% due 11/02/2021

500,000

480,861

France

1.8%

    Starbucks

2.45% due 06/15/2026

500,000

463,217

United States

1.7%

    Toyota Motor Credit

2.75% due 02/05/2028

202,000

192,904

Japan

0.7%

    Toyota Motor Credit

3.00% due 03/20/2030

500,000

490,706

Japan

1.8%

 
 

3,663,462

 

13.6%

 

Consumer Staples

 
 

    Nestle Holdings

2.75% due 04/15/2020

NOK 3,000,000

376,887

Switzerland

1.4%

 
 

376,887

 

1.4%

 

Energy

 
 

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

4.2495% due 06/15/2067

1,350,000

1,321,283

United States

4.9%

 
 

1,321,283

 

4.9%

 

Financials

 
 

    AXA²

5.125% due 01/17/2047

500,000

473,815

France

1.8%

    Bancolombia

5.95% due 06/03/2021

750,000

780,000

Colombia

2.9%

    Bank of Nova Scotia5

4.65% due PERP

1,250,000

1,153,375

Canada

4.3%

    Canadian Imperial Bank

3.42% due 01/26/2026

CAD 1,150,000

893,330

Canada

3.3%

    EMIRATES NBD PJSC²

6.00% due 10/08/2019

NZD 750,000

541,426

United Arab Emirates

2.0%

    First Abu Dhabi Bank²

3.00% due 03/30/2022

1,250,000

1,212,446

United Arab Emirates

4.5%

    Hanmi Financial6

5.45% due 03/30/2027

1,000,000

1,014,854

United States

3.8%

    Hartford Financial Services Group3,4

4.4675% due 2/12/2047

1,350,000

1,282,500

United States

4.8%

    HomeStreet

6.50% due 06/01/2026

500,000

518,295

United States

1.9%

    Iron Mountain

5.75% due 08/15/2024

1,257,000

1,239,653

United States

4.6%

    Lincoln National4

4.39866% due 04/20/2067

1,385,000

1,310,210

United States

4.9%

 

Continued on next page.

 

14

May 31, 2018

Semi-Annual Report

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

 

Saturna Sustainable Bond Fund:

Schedule of Investments

As of May 31, 2018

Corporate Bonds – 90.1%

Coupon / Maturity

Face Amount

Market Value

Country¹

Percentage of Assets

 

Financials (continued)

 
 

    Townebank Portsmouth VA7

4.50% due 07/30/2027

$600,000

$604,621

United States

2.2%

    XLIT (3 month LIBOR plus 2.46%)4

4.80519% due PERP

825,000

802,461

Cayman Islands

3.0%

 
 

11,826,986

 

44.0%

 

Materials

 
 

    Koninklijke DSM²

1.00% due 04/09/2025

EUR 1,000,000

1,186,840

Netherlands

4.4%

 
 

1,186,840

 

4.4%

 

Technology

 
 

    Apple

3.60% due 06/10/2026

AUD 750,000

576,256

United States

2.2%

    Apple²

2.65% due 06/10/2020

AUD 500,000

378,924

United States

1.4%

    MSCI³

5.75% due 08/15/2025

600,000

617,250

United States

2.3%

    Nokia

3.375% due 06/12/2022

1,250,000

1,218,750

Finland

4.5%

 
 

2,791,180

 

10.4%

 

Utilities

 
 

    United Utilities

4.55% due 06/19/2018

59,000

59,043

United Kingdom

0.2%

    United Utilities

5.375% due 02/01/2019

75,000

76,131

United Kingdom

0.3%

 

 

135,174

 

0.5%

 

Total Corporate Bonds

24,231,991

 

90.1%

 

Government Bonds – 5.4%

Coupon / Maturity

Face Amount

Market Value

Country¹

Percentage of Assets

 

Foreign Government Bonds

 
 

    Mexico Bonos Desarollo

6.50% due 06/10/2021

MXN 200,000

969,172

Mexico

3.6%

    New Zealand Government²

3.00% due 04/15/2020

NZD 700,000

498,725

New Zealand

1.8%

 
 

1,467,897

 

5.4%

 

Total Government Bonds

1,467,897

 

5.4%

 

Total investments

(Cost = $26,402,985)

 

25,799,610

 

95.9%

Other assets (net of liabilities)

 

1,091,013

 

4.1%

Total net assets

 

$26,890,623

 

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 May 31, 2018, the aggregate value of these securities was $5,533,861 representing 20.5% 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 May 31, 2018, the net value of these securities was $2,893,980 representing 10.8% of net assets.

4 Variable rate security. The interest rate represents the rate in effect at May 31, 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 when the interest rate will update to the 3 month LIBOR plus 2.648% and will reset periodically. The interest rate represents the rate in effect at May 31, 2018.

6 Hanmi Financial is a fixed to float bond. The bond has a fixed rate until 03/30/2022 when the interest rate will update to the 3 month LIBOR plus 3.315% and will reset periodically. The interest rate represents the rate in effect at May 31, 2018.

7 Townebank Portsmouth VA is a fixed to float bond. The bond has a fixed rate until 07/30/2022 when the interest rate will update to the 3-month LIBOR plus 2.55% and will reset periodically. The interest rate represents the rate in effect at May 31, 2018.

 

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

May 31, 2018

Semi-Annual Report

15

 

Saturna Sustainable Bond Fund:

Schedule of Investments

As of May 31, 2018

 

Countries

Saturna Sustainable Bond Fund Geographic Diversification

Other assets (net of liabilities) 4.1%

Weightings shown are a percentage of total net assets.

 

Bond Quality Diversification

% of Total Net Assets

 

Rated "AA+"

5.4%

Saturna Sustainable Bond Fund Bond Quality Diversification

Rated "AA-"

8.4%

Rated "A+"

1.5%

Rated "A"

0.4%

Rated "A-"

14.4%

Rated "BBB+"

12.1%

Rated "BBB"

19.5%

Rated "BBB-"

9.1%

Rated "BB+"

12.5%

Rated "BB"

2.3%

Rated "B"

4.6%

Not rated

5.7%

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.

 

16

May 31, 2018

Semi-Annual Report

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

Saturna Sustainable Bond Fund

Statement of Assets and Liabilities

As of May 31, 2018

 

Assets

    Investments in securities, at value (Cost $26,402,985)

$25,799,610

    Receivable for security sales

657,787

    Cash

362,598

    Interest receivable

346,514

    Receivable for Fund shares sold

143,289

    Prepaid expenses

12,323

        Total assets

27,322,121

Liabilities

    Payable for security purchases

370,864

    Payable for Fund shares redeemed

40,378

    Accrued advisory fees

8,658

    Distributions payable

7,821

    Accrued other expenses

2,959

    Accrued Chief Compliance Officer expenses

512

    Accrued retirement plan custodial fees

306

        Total liabilities

431,498

Net assets

$26,890,623

 

Analysis of net assets

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

$27,488,939

    Undistributed net investment loss

(3,905)

    Accumulated net realized gain

12,974

    Unrealized net depreciation on investments

(607,385)

Net assets applicable to Fund shares outstanding

$26,890,623

 

Fund shares outstanding

2,778,754

 

Net asset value, offering, and redemption price per share

$9.68

 

Statement of Operations

Period ended May 31, 2018

 

Investment income

    Interest income

$450,730

    Miscellaneous income

4

        Total investment income

450,734

Expenses

    Investment adviser fees

69,565

    Filing and registration fees

12,166

    Audit fees

7,388

    Printing and postage

3,149

    Chief Compliance Officer expenses

2,158

    Trustee fees

1,642

    Custodian fees

1,370

    Other expenses

994

    Legal fees

869

    Retirement plan custodial fees

388

        Total gross expenses

99,689

    Less adviser fees waived

(15,704)

    Less custodian fee credits

(1,370)

        Net expenses

82,615

Net investment income

$368,119

 
 

Net realized gain from investments and foreign currency

$45,792

Net increase in unrealized depreciation on investments and foreign curreny

(590,891)

Net loss on investments

$(545,099)

 

Net decrease in net assets resulting from operations

$(176,980)

 

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

May 31, 2018

Semi-Annual Report

17

Saturna Sustainable Bond Fund

Statements of Changes in Net Assets

Period ended May 31, 2018

Year ended November 30, 2017

Increase in net assets from operations

From operations

    Net investment income

$368,119

$415,694

    Net realized gain (loss) on investments

45,792

(43,430)

    Net increase (decrease) in unrealized appreciation

(590,891)

205,033

        Net increase (decrease) in net assets

(176,980)

577,297

Distributions to shareowners from

    Net investment income

(372,200)

(405,083)

    Capital gains distribution

-

(13,408)

        Total distributions

(372,200)

(418,491)

Capital share transactions

    Proceeds from sales of shares

7,930,427

14,897,718

    Value of shares issued in reinvestment of dividends

327,417

359,283

    Cost of shares redeemed

(2,797,992)

(2,075,045)

        Total capital share transactions

5,459,852

13,181,956

Total increase in net assets

4,910,672

13,340,762

 

Net assets

Beginning of period

21,979,951

8,639,189

End of period

26,890,623

21,979,951

 

Undistributed net investment income (loss)

$(3,905)

$176

 

Shares of the Fund sold and redeemed

    Number of shares sold

802,619

1,504,397

    Number of shares issued in reinvestment of dividends

33,294

36,349

    Number of shares redeemed

(283,196)

(209,909)

Net increase in number of shares outstanding

552,717

1,330,837

 

Financial Highlights

Period ended

Year ended November 30,

Period endedA

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

May 31, 2018

2017

2016

November 30, 2015

Net asset value at beginning of period

$9.87

$9.65

$9.75

$10.00

Income from investment operations

    Net investment income

0.12

0.27

0.24

0.12

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

(0.19)

0.23

(0.10)

(0.25)

Total from investment operations

(0.07)

0.50

0.14

(0.13)

Less distributions

    Dividends (from net investment income)

(0.12)

(0.27)

(0.24)

(0.12)

    Capital gains distribution

-

(0.01)

-

-

Total distributions

(0.12)

(0.28)

(0.24)

(0.12)

 

Net asset value at end of period

$9.68

$9.87

$9.65

$9.75

 

Total returnB

(0.48)%

5.28%

1.37%

(1.29)%

 

Ratios / supplemental data

Net assets ($000), end of period

$26,891

$21,980

$8,639

$6,885

Ratio of expenses to average net assets

    Before fee waiversC

0.78%

0.92%

1.17%

1.02%

    After fee waiversC

0.65%

0.75%

0.89%

0.90%

    After fee waivers and custodian fee creditsC

0.65%

0.74%

0.89%

0.89%

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

2.91%

2.82%

2.46%

1.92%

Portfolio turnover rateB

20%

14%

46%

4%

A Operations commenced on March 27, 2015
B Not annualized for periods of less than one year
C Annualized for periods of less than one year

 

18

May 31, 2018

Semi-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 – Unaudited Information

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

NOTE 3 – Significant Accounting Policies

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

May 31, 2018

Semi-Annual Report

19

Notes To Financial Statements (continued)

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. 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

$359,377

$53,708

$-

$413,085

    Consumer Discretionary

829,315

173,827

-

1,003,142

    Consumer Staples

493,777

88,676

-

582,453

    Energy

-

112,791

-

112,791

    Financials

411,634

204,194

-

615,828

    Health Care

222,201

106,910

-

329,110

    Industrials

97,961

270,975

-

368,936

    Materials

177,821

153,039

-

330,860

    Technology

1,294,345

56,092

-

1,350,437

Total Assets

$3,886,431

$1,220,211

$-

$5,106,642

 

Sustainable Bond Fund

Asset-Backed Securities¹

$-

$99,722

$-

$99,722

Corporate Bonds¹

-

24,231,991

-

24,231,991

Government Bonds¹

-

1,467,897

-

1,467,897

Total Assets

$-

$25,799,610

$-

$25,799,610

¹ See Schedule of Investments for industry breakout.

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

20

May 31, 2018

Semi-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 20 is a summary of the inputs used as of May 31, 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. These reclassifications have no effect on net assets or net asset value per share. As of November 30, 2017, the reclassification of capital accounts were as follows:

 

Equity Fund

Bond Fund

Undistributed net investment loss

$(1,859)

$(10,664)

Accumulated gains (losses)

1,859

10,664

Paid-in capital

-

-

These reclassifications were due to treatment of foreign currencies, re-designation of distributions, and investments in real estate investment trusts (REITs).

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 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.

May 31, 2018

Semi-Annual Report

21

Notes To Financial Statements (continued)

Other:
Interest income is recognized on an accrual basis. Premiums on securities purchased are amortized, and discounts are accreted over the lives of the respective securities. Dividends from equity securities are recorded as income on the ex-dividend date.

NOTE 4 – 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 period ended May 31, 2018, the advisory fees incurred were as follows:

 

Adviser Fees

Adviser Fees Waived

Expense
Reimbursement

Sustainable Equity

$17,390

$(17,661)

$(271)

Sustainable Bond

$69,565

$(15,704)

$-

In accordance with the expense limitation noted above, for the period ended May 31, 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 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 a Trust Company. For the period ended May 31, 2018, the Funds incurred the following amounts:

Retirement plan custodial fees

Sustainable Equity

$548

Sustainable Bond

$388

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 a Trust Company. Mrs. Carten is not compensated by the Trust. For the period ended May 31, 2018, the Trust incurred compensation expenses of $17,000 which is included in $22,074 of total expenses for the independent Trustees. The Saturna Sustainable Funds paid $2,639 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 period ended May 31, 2018, the Funds paid the following compensation expenses for the Chief Compliance Officer:

Chief Compliance Officer

Sustainable Equity

$581

Sustainable Bond

$2,250

On May 31, 2018, the trustees, officers, and their affiliates as a group owned 59.55% and 13.72% of the outstanding shares of Sustainable Equity Fund and Sustainable Bond Fund, respectively.

NOTE 5 – Distributions to Shareowners

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

 

Period ended
May 31, 2018

Year ended November 30, 2017

Sustainable Equity Fund

    Ordinary income

$40,318

$19,031

Sustainable Bond Fund

    Ordinary income

372,200

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.

22

May 31, 2018

Semi-Annual Report

Notes To Financial Statements (continued)

NOTE 6 – Federal Income Taxes

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

 

Sustainable Equity

Sustainable Bond

Cost of investments

$4,102,492

$26,402,985

Gross tax unrealized appreciation

1,146,689

149,513

Gross tax unrealized depreciation

(142,539)

(752,888)

Net tax unrealized appreciation (depreciation)

$1,004,150

$(603,375)

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

Sustainable Equity

Undistributed ordinary income

$37,569

Tax accumulated earnings

37,569

Accumulated capital losses

(262,074)

Unrealized appreciation

841,966

Other unrealized losses

28

Total accumulated earnings

$617,489

 

Sustainable Bond

Undistributed ordinary income

$176

Tax accumulated earnings

176

Accumulated capital losses

(32,818)

Unrealized depreciation

(14,716)

Other unrealized losses

(1,778)

Total accumulated earnings

$(49,136)

On November 30, 2017, the Funds had capital loss carryforwards as follows, subject to regulation.

 

Carryforward

Expiration

Equity Fund

Short-term loss carryforwards

$262,074

Unlimited

 

262,074

Unlimited

 

 

Carryforward

Expiration

Bond Fund

Short-term loss carryforward

$32,818

Unlimited

 

32,818

Unlimited

NOTE 7 – Investments

Investment transactions other than short-term investments for the period ended May 31, 2018, were as follows:

 

Purchases

Sales

Sustainable Equity

$516,843

$82,263

Sustainable Bond

$10,735,772

$4,859,279

NOTE 8 – 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 May 31, 2018, were as follows:

Custodian Fee Credits

Sustainable Equity

$361

Sustainable Bond

$1,370

NOTE 9 – Subsequent Events

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

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

May 31, 2018

Semi-Annual Report

23

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 (December 1, 2017 to May 31, 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 a Trust Company (note that a does not charge such fees to shareowners directly on a 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
[December 1, 2017]

Ending Account Value
[May 31, 2018]

Expenses Paid During Period

Annualized Expense Ratio

 

Sustainable Equity Fund (SEEFX), Actual

$1,000.00

$1,037.70

$3.83

0.75%

Hypothetical (5% return before expenses)

$1,000.00

$1,021.17

$3.80

0.75%

 

Sustainable Bond Fund (SEBFX), Actual

$1,000.00

$995.20

$3.25

0.65%

Hypothetical (5% return before expenses)

$1,000.00

$1,021.67

$3.29

0.65%

Expenses are equal to annualized expense ratios indicated above (based on the most recent fiscal period of December 1, 2017, through May 31, 2018) multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).

24

May 31, 2018

Semi-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.

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.

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.

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.

May 31, 2018

Semi-Annual Report

25

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

26

May 31, 2018

Semi-Annual Report

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

May 31, 2018

Semi-Annual Report

27

 

 

www.saturnasustainable.com

(logo omitted)

Saturna Capital
1300 North 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 Investment Trust Statement of Additional Information

Statement of Additional Information

March 28, 2018

Sextant Mutual Funds

(logo omitted)

Sextant Growth

 

Sextant International

 

Sextant Core

Investor: SSGFX
Z: SGZFX

Investor: SSIFX
Z: SIZFX

SCORX

 

Sextant Short-Term Bond

 

Sextant Bond Income

 

Sextant Global High Income

STBFX

SBIFX

SGHIX

 

Saturna Sustainable Funds

(logo omitted)

 

Idaho Tax-Exempt Fund

(logo omitted)

NITEX

Sustainable Equity

SEEFX

Sustainable Bond

SEBFX

SATURNA INVESTMENT TRUST

1300 N. State Street
Bellingham, Washington 98225

360-734-9900
800-728-8762

 

 

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

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

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

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


Table of Contents

Page

History of the Funds

2

Fund Descriptions, Investments, and Risks

2

Fundamental Policies

10

Management of the Funds

14

Control Persons and Principal Holders of Securities

19

Investment Advisory and Other Services

21

Portfolio Managers

23

Brokerage Allocation

25

Capital Stock

26

Purchase, Redemption, and Pricing of Shares

26

Taxation of the Funds

26

Underwriters

27

Financial Statements

27

History of the Funds

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

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

Sextant Mutual Funds

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

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

Saturna Sustainable Funds

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

Idaho Tax-Exempt Fund

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

Fund Descriptions, Investments, and Risks

Classification

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

Investment Strategies

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

2 Statement of Additional Information March 28, 2018

Sextant Mutual Funds

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Global High Income Fund diversifies its foreign investments among several countries, ordinarily investing in securities of at least three countries outside the US. The Fund varies its investments geographically and by type of securities in which it invests based on the adviser's evaluation of economic, market, and political trends.

March 28, 2018 Statement of Additional Information 3

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

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

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

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

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

Under normal circumstances, the Short-Term Bond and Bond Income Funds invest at least 80% of their assets (net assets plus any borrowings for investment purposes, taken at market value at the time of investment) in "bonds," meaning:

  • Marketable straight-debt securities of domestic issuers, and of foreign issuers payable in US dollars, rated at the time of purchase within the four highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, or Baa);
  • Collateralized or securitized bonds, such as asset-backed securities, mortgage-backed securities, and commercial mortgage-backed securities;
  • Government and municipal securities;
  • Commercial paper rated Prime-1 by Moody's at time of purchase, or, if unrated, issued or guaranteed by a corporation with any outstanding debt rated Aa or better by Moody's; and
  • Bank obligations, including repurchase agreements, of banks having total assets in excess of $1 billion.

These four Funds may also invest in other debt securities (including those convertible into, or carrying warrants to purchase, common stocks or other equity interests, and privately placed debt securities). However, the Funds (except Global High Income Fund) may not invest in a security rated at time of purchase below the fourth highest grade assigned by Moody's (Baa). Debt rated Baa is considered "medium grade," though still generally accepted as investment grade.

US government securities include: (i) bills, notes, bonds, and other debt securities, differing as to maturity and rates of interest, that are issued by and are direct obligations of the US Treasury; and (ii) other securities that are issued or guaranteed as to principal and interest by the US government or by its agencies or instrumentalities. US government securities are generally accepted as being among the safest debt securities with respect to the timely payment of principal and interest (but not any premium paid on their purchase), but generally bear a lower rate of interest than corporate debt securities. However, they are subject to market risk like other debt securities, and the securities' values fluctuate. The Funds may also invest in securities issued by foreign governments that meet the rating requirement of the Fund.

Among the government securities the Funds may purchase are those issued by Government National Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae"), and other agencies. Securities such as these represent an interest in a pool of mortgages insured in whole or in part by other agencies or the US Treasury, depending on the terms of the issue.

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

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

Medium grade (Baa) debt securities are obligations of issuers with less capacity to pay interest and repay principal than those rated more highly. Investment in these debt securities involves somewhat greater investment risk, including the possibility of issuer default or bankruptcy. An economic downturn could adversely affect the value of outstanding bonds and the ability of issuers to repay principal and

4 Statement of Additional Information March 28, 2018

interest. During a period of adverse economic changes, including a period of rising interest rates, issuers of such bonds may experience more difficulty in servicing their principal and interest payment obligations.

Some issuers of debt securities choose not to have their securities rated by a rating service. A Fund may invest in unrated securities that in the adviser's opinion are comparable to securities having a rating suitable for investment by the Fund. In selecting investments, the adviser makes it own judgments and does not rely on rating agencies.

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

Saturna Sustainable Funds

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

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

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

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

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

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

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

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

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

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

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

The Fund may also invest in other debt securities (including those convertible into, or carrying warrants to purchase, common stocks or other equity interests, and privately placed debt securities).

US government securities include: (i) bills, notes, bonds, and other debt securities, differing as to maturity and rates of interest, that are issued by and are direct obligations of the US Treasury; and (ii) other securities that are issued or guaranteed as to principal and interest by the US government or by its agencies or instrumentalities. Government securities are generally accepted as being among the safest debt securities with respect to the timely payment of principal and interest (but not any premium paid on their purchase), but generally bear a lower rate of interest than corporate debt securities. However, they are subject to market risk like other debt securities, and the securities' values fluctuate. The Fund may also invest in securities issued by foreign governments that meet the rating requirement of the Fund.

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

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

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

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

Some issuers of debt securities choose not to have their securities rated by a rating service. The Fund may invest in unrated securities that in the adviser's opinion are comparable to securities having a rating suitable for investment by the Fund. In selecting investments, the adviser makes it own judgments and does not rely on rating agencies.

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

Idaho Tax-Exempt Fund

The Idaho Tax-Exempt Fund may direct investments in other tax-exempt investment companies which do not concentrate their investments in Idaho bonds, but nevertheless yield income which is exempt from both federal income and alternative minimum taxation. Such income may be taxable at the state level. It is anticipated that shares of such investment companies may be obtained by an affiliated broker-dealer, Saturna Brokerage Services (the "distributor"), which has agreed to act as agent for the Fund and not charge a commission or receive any compensation on purchases of securities made on behalf of the Fund. The purchase of securities of other investment companies may result in the Fund's shareowners paying investment advisory fees twice on the same assets.

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

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

6 Statement of Additional Information March 28, 2018

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

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

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

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

In evaluating bonds, the adviser analyzes the extent of investment risk by policies that include:

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

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

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

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

The Fund invests predominantly in municipal obligations issued by the State of Idaho or its political subdivisions, agencies, or instrumentalities ("municipality"). These municipal obligations generally include municipal bonds, municipal notes, municipal commercial paper, and any other obligation from which the payment of interest, in the opinion of the bond issuer's counsel, is exempt from federal and Idaho state income tax. General descriptions of these investments are:

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

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

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

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

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

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

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

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

March 28, 2018 Statement of Additional Information 7

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

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

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

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

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

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

Risks

Market risk
(All Funds)

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

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

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

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

Investors should understand and carefully consider the risks involved in foreign investing. Investing in foreign securities or instruments involves risks and opportunities not typically associated with investing in US securities. These include: fluctuations in exchange rates of foreign currencies; possible imposition of exchange control regulation or currency restrictions that would prevent cash from being brought back to the US; less public information with respect to issuers of securities; less governmental supervision of exchanges, issuers, and brokers; lack of uniform accounting, auditing, and financial reporting standards; lack of uniform trading practices; less liquidity or greater price volatility in foreign markets; possible imposition of foreign taxes; or less advantageous legal, operational, and financial protections applicable to foreign custodial arrangements. Governments worldwide could affect investments by expropriation or confiscatory taxation, seizure or nationalization of bank deposits or other assets, establishment of exchange controls, adoption of anti-business restrictions, or adverse political, social, or diplomatic developments.

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

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

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

8 Statement of Additional Information March 28, 2018

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

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

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

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

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

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

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

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

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

March 28, 2018 Statement of Additional Information 9

Fundamental Policies

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

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

Investment Restrictions

Sextant Mutual Funds,Saturna Sustainable Funds

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

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

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

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

The Funds shall not invest in securities so as to not comply with Subchapter M of the Internal Revenue Code, in that generally at the close of each quarter of the tax year, at least 50% of the value of each Fund's total assets is represented by:

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

In addition, the Funds shall not purchase:

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

The Funds shall not:

  • issue senior securities; provided, however, that a fund may borrow money for extraordinary or emergency purposes and then only if after such borrowing there is asset coverage of at least 300% for all such borrowings; yhe Trust is authorized to mortgage or pledge assets of a Fund to the extent necessary to secure such temporary borrowings; act as a securities underwriter, except that they may purchase securities directly from the issuer for investment purposes;
  • purchase or retain securities of any issuer if the officers or trustees of the Trust or its adviser own more than one-half of one percent of the securities of such issuer; or
  • invest in any company for the purpose of management or exercising control.

No Fund shall invest in the securities of other open-end investment companies, except in connection with a merger, consolidation, acquisition, or reorganization or by purchase in the open market where no commission or profit to a sponsor or dealer results from the purchase other than the customary broker's commission.

The Funds shall not:

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

No Fund's investments in warrants, valued at the lower of cost or market, shall exceed 5% of the value of the Fund's net assets. Included within that amount, but not to exceed 2% of the value of the Fund's net assets, may be warrants that are not listed on the New York or American Stock Exchanges. Warrants acquired in units or attached to securities may be deemed to be without value. Notwithstanding the above, the Funds may purchase securities pursuant to the exercise of subscription rights, provided that such purchase does not result in the Funds' ceasing to be a diversified investment company. Japanese and European corporations frequently issue additional capital stock by means of subscription rights offerings to existing shareowners at a price substantially below the market price of the shares. The failure to exercise such rights would result in the Funds' interest in the issuing company being diluted. The market for such rights is not well developed in all cases and, accordingly, the Funds may not always realize the full value on the sale of rights. The exception applies in cases where the limits set forth in the investment restrictions would otherwise be exceeded by exercising rights or would have already been exceeded as a result of fluctuations in the market value of the Funds' portfolio securities with the result that the Funds would be forced to sell securities at a time when they might not otherwise have done so, or to forgo exercising the rights.

10 Statement of Additional Information March 28, 2018

Idaho Tax-Exempt Fund

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

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

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

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

The Fund shall not invest in securities so as to not comply with Subchapter M of the Internal Revenue Code, in that generally at the close of each quarter of the tax year, at least 50% of the value of the Fund's total assets is represented by:

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

In addition, the Fund shall not purchase

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

The Fund shall not:

  • issue senior securities; provided, however, that a fund may borrow money for extraordinary or emergency purposes and then only if after such borrowing there is asset coverage of at least 300% for all such borrowings;
  • act as a securities underwriter except that it may purchase securities directly from the issuer for investment purposes;
  • purchase or retain securities of any issuer if the officers or trustees of the Fund or its adviser own more than one-half of one percent of the securities of such issuer; or
  • invest in any company for the purpose of management or exercising control.

The Fund shall not:

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

Other Fund Policies

Temporary Defensive Position

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

Portfolio Turnover

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

Disclosure of Portfolio Holdings

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

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

March 28, 2018 Statement of Additional Information 11

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

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

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

Proxy Voting Policies

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

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

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

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

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

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

CORPORATE GOVERNANCE

We will generally vote FOR:

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

Corporate Transactions

We will generally vote AGAINST:

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

We will vote CASE BY CASE on:

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

Director Elections

We will generally vote FOR:

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

We will generally vote AGAINST:

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

We will vote CASE BY CASE on:

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

Takeover Defenses

We will generally vote FOR:

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

We will generally vote AGAINST:

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

Capital Structure

We will generally vote FOR:

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

We will vote CASE BY CASE on:

  • Proposals to increase common stock.

Compensation

We will generally vote FOR:

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

We will vote CASE BY CASE on:

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

ENVIRONMENT

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

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

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

SOCIAL RESPONSIBILITY

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

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

Management of the Funds

Board of Trustees

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

Management Information

Name, Address, and Age

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

Principal occupation(s) during past 5 years

Number of portfolios in Saturna fund complex overseen by Trustee

Other directorships held by Trustee during past 5 years

Independent Trustees

(photo omitted)

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

Independent Trustee
(since 2017)

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

Author

Nine

None

(photo omitted)

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

Independent Trustee
(since 2009)

Director, ICI Mutual Insurance Company

Thirteen

Amana Mutual Funds Trust

(photo omitted)

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

Chairman (since 2017);

Independent Trustee
(since 1995)

Medical Examiner (pathologist)

Nine

None

(photo omitted)

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

Independent Trustee
(since 2017)

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

US Army Foreign Area Officer - Retired

Nine

None

(photo omitted)

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

Independent Trustee
(since 2017)

CEO, Birch Equipment (industrial rentals and sales)

Nine

None

Interested Trustee

(photo omitted)

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

President, Trustee
(since 2017)

President and Director,
Saturna Capital Corporation

Vice President and Director,
Saturna Trust Company

President,
Saturna Brokerage Services

Nine

None

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

14 Statement of Additional Information March 28, 2018

 

Officers Who Are Not Trustees

Name, Address, and Age

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

Principal occupation(s) during past 5 years

Officers Who Are Not Trustees

(photo omitted)

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

Vice President
(since 1994)

Vice President, Saturna Capital Corporation

Director, Vice President, and former Treasurer Saturna Brokerage Services

(photo omitted)

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

Treasurer
(since 2002)

Chief Operations Officer, Saturna Capital Corporation

Vice President and Chief Operations Officer, Saturna Brokerage Services

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

(photo omitted)

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

Chief Compliance Officer
(since 2012)

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

(photo omitted)

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

Anti-Money Laundering Officer
(since 2015)

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

Chief Compliance Officer, Saturna Brokerage Services

Bank Secrecy Act Officer, Saturna Trust Company

(photo omitted)

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

Secretary
(since 2018)

Chief Legal Officer,
Saturna Capital Corporation

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

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

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

March 28, 2018 Statement of Additional Information 15

 

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

Trustee

Dollar range of equity securities in Funds of Saturna fund complex

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

Marina E. Adshade

None

None

Jane K. Carten

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

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

Over $100,000

Ronald H. Fielding

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

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

Over $100,000

Gary A. Goldfogel

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

Amana Developing World Investor Shares: over $100,000

Over $100,000

Jim V. McKinney

None

None

Sarah E.D. Rothenbuhler

None

None

 

16 Statement of Additional Information March 28, 2018

Leadership Structure and Board of Trustees

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

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

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

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

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

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

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

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

Board Role in Risk Oversight

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

Committees

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

March 28, 2018 Statement of Additional Information 17

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

Compensation

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

Code of Ethics

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

Trustee Compensation for Fiscal Year ended Nov. 30, 2017

Name of Person; Position

Aggregate Compensation from Trust

Pension or Retirement Benefits Accrued as Part of Trust Expenses

Estimated Annual Benefits Upon Retirement

Total Compensation From Trust and Fund Complex Paid to Trustees

Marina E. Adshade; Trustee

$3,000

$0

$0

$3,000

Jane K. Carten; Trustee

0

0

0

0

Ronald H. Fielding; Trustee¹

8,250

0

0

22,2501

Gary A. Goldfogel; Trustee, Chairman

7,250

0

0

7,250

Herbert G. Grubel; Trustee²

3,250

0

0

3,250

John E. Love; Trustee²

4,250

0

0

4,250

James V. McKinney; Trustee

3,000

0

0

3,000

Sarah E.D. Rothenbuhler; Trustee

3,000

0

0

$3,000

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

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

Trustees and Officers Ownership of Trust Shares¹

Fund:

Shares Owned:

Percentage of Outstanding:

Sextant Growth Investor Shares

-

0.0%

Sextant Growth Z Shares

219,945

18.2%

Sextant International Investor Shares

51

0.0%

Sextant International Z Shares

314,418

25.4%

Sextant Core

365,059

39.3%

Sextant Short-Term Bond

732,311

36.0%

Sextant Bond Income

533,924

28.5%

Sextant Global High Income

475,878

56.4%

Saturna Sustainable Equity

270,293

59.3%

Saturna Sustainable Bond

376,034

14.4%

Idaho Tax-Exempt

421,195

13.2%

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

18 Statement of Additional Information March 28, 2018

Control Persons and Principal Holders of Securities

Principal Holders of Securities

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

 

Name and Address

Shares

Percentage

Sextant Growth Investor Shares

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

155,840

71.32%

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

26,113

11.95%

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

20,980

9.60%

Sextant Growth Z Shares

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

78,078

6.48%

Saturna Capital Corporation1
1300 North State Street
Bellingham, WA 98225

76,104

6.31%

Sextant International Investor Shares

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

1,109,671

42.27%

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

1,102,340

41.99%

Sextant International Z Shares

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

132,822

10.74%

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

89,654

7.25%

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

78,828

6.37%

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

66,430

5.37%

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

62,835

5.08%

¹ Shares are owned beneficially

Principal Holders of Securities

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

 

Name and Address

Shares

Percentage

Sextant Core

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

111,096

11.95%

Goldfogel Family Partnership¹
406 Bayside Road
Bellingham, WA 98225

88,191

9.49%

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

64,736

6.96%

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

58,047

6.24%

JL Living Trust1
324 North Garden Terrace
Bellingham, WA 98225

49,222

5.29%

Sextant Short-Term Bond

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

528,970

25.99%

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

299,802

14.73%

Sextant Bond Income

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

271,189

14.48%

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

156,319

8.35%

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

132,396

7.07%

Sextant Global High Income

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

238,305

28.24%

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

89,831

10.65%

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

80,812

9.58%

Goldfogel Family Partnership¹
406 Bayside Road
Bellingham, WA 98225

74,176

8.79%

¹ Shares are owned beneficially

March 28, 2018 Statement of Additional Information 19

 

Principal Holders of Securities

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

 

Name and Address

Shares

Percentage

Saturna Sustainable Equity

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

202,904

44.50%

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

82,162

18.02%

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

30,436

6.68%

Saturna Sustainable Bond

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

1,133,593

43.31%

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

303,678

11.60%

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

268,516

10.26%

Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399

263,875

10.08%

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

242,309

9.26%

Idaho Tax-Exempt

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

769,284

24.10%

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

480,657

15.06%

Saturna Capital Corporation¹
1300 North State Street
Bellingham, WA 98225

347,934

10.90%

¹ Shares are owned beneficially

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

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

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

20 Statement of Additional Information March 28, 2018

Investment Advisory and Other Services

Investment Adviser and Administrator

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

Advisory Fee

Sextant Funds

Each of the Sextant Funds pays the adviser an Advisory and Administrative Services Fee (the "Base Fee"). The Base Fee is compensation for portfolio management, advice, and recommendations on securities to be purchased, held, or sold. The Base Fee also covers certain administrative services such as portfolio accounting, shareowner and financial reporting, shareowner servicing, and transfer agency services. The Base Fee is computed at the annual rate of 0.50% of average daily net assets of each Fund and is paid monthly. The Base Fee is subject to adjustment up or down depending on the investment performance of the Fund.

  • For each month in which any of these Funds' total investment return (change in net asset value plus all distributions reinvested) for the one year period through that month outperforms or underperforms the total return of a specified benchmark for that period by 1% or more but less than 2%, the Base Fee is increased or decreased by the annual rate of 0.10% based on the Fund's average net assets over the performance period (one year).
  • If the outperformance or underperformance is 2% or more, then the adjustment is at the annual rate of 0.20%.

Sextant Funds Advisory Fee Structure

Base Fee
annual rate

Performance adjustment annual rate

< 1%
more or less than benchmark

1% and < 2%
more or less than benchmark

2% or greater
more or less than benchmark

0.50%

0.00%

+/- 0.10%

+/- 0.20%

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

The categories currently assigned by Morningstar are:

Sextant Growth

Large Growth

Sextant International

Foreign Large Blend

Sextant Core

Allocation – 50% to 70% Equity

Sextant Short-Term Bond

Short-Term Bond

Sextant Bond Income

Long-Term Bond

Sextant Global High Income

World Allocation

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

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

Saturna Sustainable Funds

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

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

Idaho Tax-Exempt Fund

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

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

 

2017

2016

2015

Sextant Growth Fund

$110,286

$93,790

$266,036

Sextant International Fund

359,891

359,812

554,872

Sextant Core Fund

39,680

37,248

34,795

Sextant Short-Term Bond Fund

18,915

8,748

6,261

Sextant Bond Income Fund

22,812

26,713

21,768

Sextant Global High Income Fund

27,242

14,178

19,620

Saturna Sustainable Equity Fund

1,800

(40)

9,489

Saturna Sustainable Bond Fund

54,983

20,828

14,321

Idaho Tax-Exempt Fund

$87,145

$90,140

$87,806

¹ After performance adjustments and expense limitations

March 28, 2018 Statement of Additional Information 21

Shareowner Services

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

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

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

Rule 12b-1 Plan

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

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

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

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

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

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

Advertising:

$0

Printing and mailing of prospectuses
to other than current shareowners:

$0

Compensation to underwriters:

$0

Compensation to broker-dealers:

$271,661

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

Retirement Plan Custodial Fees

 

2017

2016

2015

Sextant Growth Fund Investor Shares

$10

$9,049

$8,247

Sextant Growth Fund Z Shares

8,588

n/a

n/a

Sextant International Fund Investor Shares

506

6,733

6,526

Sextant International Fund Z Shares

5,689

n/a

n/a

Sextant Core Fund

2,817

2,920

2,272

Sextant Short-Term Bond Fund

3,545

3,680

3,255

Sextant Bond Income Fund

2,685

2,733

2,243

Sextant Global High Income Fund

1,512

1,110

837

Saturna Sustainable Equity Fund

828

456

409

Saturna Sustainable Bond Fund

531

58

408

Idaho Tax-Exempt Fund

$49

$37

$131

 

12b-1 Fees

 

2017

2016

2015

Sextant Growth Fund Investor Shares

$61,335

$99,471

$142,838

Sextant Growth Fund Z Shares

n/a

n/a

n/a

Sextant International Fund Investor Shares

145,274

171,597

228,048

Sextant International Fund Z Shares

n/a

n/a

n/a

Sextant Core Fund

12,497

21,860

21,733

Sextant Short-Term Bond Fund

13,165

20,108

19,407

Sextant Bond Income Fund

11,601

22,476

20,578

Sextant Global High Income Fund

10,281

17,812

19,504

Saturna Sustainable Equity Fund

4,808

8,242

5,598

Saturna Sustainable Bond Fund

$12,699

$19,200

$8,279

 

22 Statement of Additional Information March 28, 2018

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

Custodian

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

Independent Registered Public Accounting Firm

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

Portfolio Managers

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

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

March 28, 2018 Statement of Additional Information 23

 

Portfolio Managers (as of Nov. 30, 2017)

Portfolio Manager:

Trust portfolios served as primary manager (assets):

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

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

Other accounts (assets):

Jane K. Carten

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

None

None

None

Patrick T. Drum

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

Amana Participation Fund
($47,359,358)

None

None

Bryce R. Fegley

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

None

None

None

Nicholas F. Kaiser

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

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

Four
($54,246,976)¹

Seventeen
($28,051,419)

Scott F. Klimo

Sextant Growth Fund
($37,975,316)¹

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

None

None

Phelps S. McIlvaine

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

None

None

Six
($7,964,565)

Christopher E. Paul

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

None

None

None

¹ Assets managed with a performance fee

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

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

Jane K. Carten

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

Patrick T. Drum

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

Bryce R. Fegley

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

Tyler J. Howard

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

Nicholas F. Kaiser

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

Scott F. Klimo

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

Phelps S. McIlvaine

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

Christopher E. Paul

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

 

24 Statement of Additional Information March 28, 2018

Brokerage Allocation

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

The primary consideration in effecting securities transactions for the Funds is to obtain the best price and execution that in the judgment of the adviser is attainable at the time and which would bring the best overall net economic result to a Fund. Factors taken into account in the selection of brokers include the price of the security, commissions paid on the transaction, the efficiency and cooperation with which the transaction is effected, the expediency of making settlement, and the financial strength and stability of the broker. The adviser may negotiate commissions at a rate in excess of the amount another broker would have charged if it determines in good faith that the overall net economic result is favorable to the Fund and is not required to execute trades in "over-the-counter" securities with primary market-makers if similar terms are available elsewhere. A Fund may not pay the lowest possible commission rate on certain trades if Saturna Capital believes that the Fund has obtained best execution and the commission rates are reasonable. The adviser evaluates whether brokerage commissions are reasonable based upon available information about the general level of commissions paid by other mutual funds for comparable services as well as evaluating services provided by the broker-dealer, such as willingness to take principal positions, ability to handle a particular type of trade, and confidentiality, among other things.

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

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

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

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

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

Commissions Paid To Saturna Brokerage Services

 

2017

2016

2015

% of 2017 aggregate brokerage commissions paid Saturna Brokerage

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

Sextant Growth Fund

$-

$-

$-

0%

0%

Sextant International Fund

$-

$-

$-

0%

0%

Sextant Core Fund

$-

$-

$-

0%

0%

Sextant Short-Term Bond Fund

$-

$-

$-

0%

0%

Sextant Bond Income Fund

$-

$-

$-

0%

0%

Sextant Global High Income Fund

$-

$-

$-

0%

0%

Saturna Sustainable Equity Fund

$-

$-

n/a

0%

0%

Saturna Sustainable Bond Fund

$-

$-

n/a

0%

0%

Idaho Tax-Exempt Fund

$-

$-

$-

0%

0%

 

Commissions Paid To Other Broker-Dealers

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

 

2017

2016

2015

Sextant Growth Fund

$-

$-

$-

Sextant International Fund

$-

$200

$2975

Sextant Core Fund

$-

$-

$7

Sextant Short-Term Bond Fund

n/a

n/a

n/a

Sextant Bond Income Fund

n/a

n/a

n/a

Sextant Global High Income Fund

$-

$-

$513

Saturna Sustainable Equity Fund

$358

$-

$196

Saturna Sustainable Bond Fund

n/a

n/a

n/a

Idaho Tax-Exempt Fund

n/a

n/a

n/a

 

March 28, 2018 Statement of Additional Information 25

Capital Stock

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

Purchase, Redemption, and Pricing of Shares

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

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

Offering Price

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

Pricing of Foreign Securities

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

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

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

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

Taxation of the Funds

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

Each Fund intends to distribute to shareowners substantially all of its net investment income and net realized capital gains, if any, and to comply, as each has since inception, with the provisions of the Internal Revenue Code applicable to regulated investment companies (Subchapter M), which relieve mutual funds of federal income taxes on the amounts so distributed.

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

26 Statement of Additional Information March 28, 2018

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

If shareowners do not furnish the transfer agent with a valid Social Security or Tax Identification Number and in certain other circumstances, the transfer agent is required to withhold 28% of income. Dividends and capital gain distributions to shareowners who are nonresident aliens may be subject to a 30% United States foreign withholding tax under the existing provisions of the code applicable to foreign individuals and entities, unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law. If the IRS determines that a Fund should be fined or penalized for inaccurate, missing, or otherwise inadequate reporting of a Tax Identification Number, the amount of the IRS fee or penalty will be directly assessed to the shareowner account involved.

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

 

Carryforward

Expiration

 

Sextant Bond Income

Long-term loss carryforward

$46,167

Unlimited

 

46,167

 
 

Sextant Core

Short-term loss carryforward

$88,781

Unlimited

Long-term loss carryforward

$79,711

Unlimited

 

168,492

 
 

Sextant Global High Income

Long-term loss carryforward

$189,339

Unlimited

 

189,339

 
 

Saturna Sustaianble Equity

Short-term loss carryforwards

$262,074

Unlimited

 

262,074

 
 

Saturna Sustainable Bond

Short-term loss carryforward

$32,818

Unlimited

 

32,818

 
 

Idaho Tax-Exempt

Short-term loss carryforward

$62,746

Unlimited

 

62,746

 

Underwriters

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

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

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

Financial Statements

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

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

March 28, 2018 Statement of Additional Information 27