CUSTODIAN AGREEMENT

                            SATURNA INVESTMENT TRUST
                          SEXTANT SHORT-TERM BOND FUND

This  CUSTODIAN  AGREEMENT,  effective  September  28,1995,  between the Sextant
Short-Term Bond Fund of Saturna  Investment  Trust, one of the separate Funds of
the Trust, organized under the Washington State Business Trust Act, (hereinafter
called the "Fund"),  and National  City Bank,  Indiana  (hereinafter  called the
"Custodian"),

                                   WITNESSETH:

WHEREAS,  the Fund desires that its  securities and cash shall be hereafter held
and administered by the Custodian pursuant to the terms of this Agreement:

NOW, THEREFORE,  in consideration of the mutual agreements herein made, the Fund
and the Custodian agree as follows:

Section 1. Definitions

The word  "Securities" as used herein includes stocks,  units,  options,  notes,
mortgages or other obligations and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase, or subscribe for the same,
or evidencing or representing any other rights or interests  therein,  or in any
property or assets.

The  words  "Officers'  Certificate"  shall  mean  a  request  or  direction  or
certification  in  writing  signed  in the  name  of the  Fund by any two of the
Chairman of the  Executive  Committee,  the  President,  a Vice  President,  the
Secretary  and the  Treasurer  of the Trust on behalf of the Fund,  or any other
persons  duly  authorized  to sign by the  Board of  Trustees  or the  Executive
Committee of the Trust.

The  term  "Book-Entry  System"  shall  mean  the  Federal  Reserve  /  Treasury
book-entry  system for the United  States and  federal  agency  Securities,  its
successor or successors and its nominee or nominees,  and the term  "Depository"
shall mean a Depository Trust Company ("DTC") a clearing agency  registered with
the  Securities  and Exchange  Commission,  its successor or successors  and its
nominee or nominees,  provided the Custodian has received a certified  copy of a
resolution of the Trust's Board of Trustees  specifically  approving deposits in
the Book-Entry  System or DTC, as the case may be. The term  "Depository"  shall
further  mean and include any other  registered  clearing  agent,  successor  or
successors and its nominee or nominees,  specifically  identified in a certified
copy of a resolution of the Trust's Board of Trustees approving deposits therein
by the Custodian.

Section 2. Names, Titles and Signatures of Trust's Officers

A. The  Secretary  of the Trust  will  certify  to the  Custodian  the names and
signatures  of  those  persons  authorized  to sign the  Officers'  Certificates
described  in  Section 1 hereof,  and the names of the  members  of the Board of
Trustees and the Executive  Committee  thereof,  together with any changes which
may occur from time to time.

B. Authorized Oral Instructions - Appropriate certifications will be provided to
the  Custodian  for  any  oral   instructions.   The  Custodian  shall  have  no
responsibility  for the adequacy or accuracy of such instructions  received from
the Fund and shall incur no  liability  for, and shall be entitled to rely upon,
any such instructions which the Custodian believes in good faith are given by an
Authorized Representative.

Section 3. Receipt and Disbursement of Money

A. The Custodian  shall open and maintain a separate  account or accounts in the
name of the  Fund,  subject  only to  draft or  order  by the  Custodian  acting
pursuant  to the  terms of this  Agreement.  The  Custodian  shall  hold in such
account or accounts,  subject to the provisions  hereof, all cash received by it
from or for the account of the Fund.  The Custodian  shall make payments of cash
to, or for the  account of the Fund from such cash only (a) for the  purchase of
Securities  for the Fund upon the delivery of such  Securities to the Custodian,
registered in the name of the Fund or the nominee of the  Custodian  referred to
in Section 9 or in proper form for transfer,  (b) for the purchase or redemption
of  Shares of the Fund  upon  delivery  thereof  to the  Custodian,  (c) for the
payment  of  interest,  dividends,  taxes,  management  or  supervisory  fees or
operating  expenses  (including,  without  limitation  thereto,  fees for legal,
accounting  and  auditing  services),  (d) for payments in  connection  with the
conversion,  exchange or surrender of  Securities to the  Custodian,  or (e) for
other proper trust purposes. Before making any such payment, the Custodian shall
receive (and may rely upon) an Officers' Certificate requesting such payment and
stating that it is for a purpose  permitted  under the terms of items (a),  (b),
(c) or (d) of this  subsection A, and also, in respect of item (e), upon receipt
of an Officers'  Certificate and a certified copy of the resolution of the Board
of Trustees or of the  Executive  Committee of the Trust signed by an Officer of
the Trust and certified by its Secretary or an Assistant  Secretary,  specifying
the amount of such payment, setting forth the purpose for which payment is to be
made, declaring such purpose to be a proper Trust purpose, and naming the person
or persons to whom such payment is to be made.

B. The Custodian is hereby authorized to endorse and collect all checks,  drafts
or other  orders for the  payment of money  received  by the  Custodian  for the
account of the Fund.
Section 4. Receipt of Securities

The Custodian, or its sub-custodian as provided in Section 9, shall provide that
all  Securities  received  by it for the  account of the Fund shall be held in a
separate  account and physically  separated at all times from those of any other
person. All such Securities are to be held or disposed by the Custodian,  or its
sub-custodians  for and  subject  at all times to the  instructions  of the Fund
pursuant to the terms of this Agreement.  The Custodian,  or its sub-custodians,
shall have no power or authority to assign,  hypothecate,  pledge,  or otherwise
dispose of any such Securities and investments, except pursuant to the direction
of the Fund and only for the  account  of the Fund as set forth in  Section 5 of
this Agreement.

Section 5.   Transfer, Exchange, Registration, Redelivery,
                     etc. of Securities

The Custodian shall have sole power to release or deliver Securities of the Fund
held by it pursuant to this Agreement.

A. All Securities held for the Fund, which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry System, shall be held
by the  Custodian in that form;  all other  Securities  held for the Fund may be
registered in the name of the Fund, in the name of any duly appointed registered
nominee of the Custodian,  as the Custodian may from time to time determine,  or
in the name of the  Book-Entry  System or a  Depository  or their  successor  or
successors,  or their  nominee or  nominees.  The Fund  agrees to furnish to the
Custodian appropriate  instruments to enable the Custodian to hold or deliver in
proper form for transfer,  or to register in the name of its registered  nominee
or in the name of the Book-Entry  System or a Depository any Securities which it
may  hold  for the  account  of the  Fund.  The  Custodian  shall  hold all such
Securities  which are not held in the Book-Entry  System or in a Depository in a
separate  account in the name of the Fund,  physically  segregated  at all times
from those of any other person or persons.

B.  The  Fund  shall  instruct  the  Custodian  from  time to  time in its  sole
discretion,  by means of an Officers' Certificate signed in the name of the Fund
by two Officers in accordance with the provisions of Section 1, as to the manner
in which and in what amounts such  Securities  and moneys are to be deposited on
behalf of the Fund in the  Book-Entry  System or a  Depository,  as each term is
defined in Section l; provided, however, that prior to the deposit of Securities
or moneys of the Fund in either the Book-Entry System or a Depository, including
a deposit in connection with the settlement of a purchase or sale, or a delivery
of loan  collateral,  the Custodian  shall have  received a certified  copy of a
resolution of the Trust's Board of Trustees for the Fund specifically  approving
such deposits by the Custodian on behalf of the Fund in the Book-Entry System or
a Depository as the case may be.  Securities and moneys of the Fund deposited in
either  the  Book-Entry  System  or a  Depository,  as the case may be,  will be
represented  in accounts which include only assets held by the Custodian for its
customers,  (including  but not limited to) accounts in which the Custodian acts
in a fiduciary or representative capacity.

C. Unless  otherwise  instructed  to the  contrary by an  Officers'  Certificate
signed in the name of the Fund by any two Officers,  the Custodian by itself, or
through  the use of the  Book-Entry  System  or a  Depository  with  respect  to
Securities therein deposited,  shall with respect to all Securities held for the
Fund in accordance with this Agreement:

         (l) Collect all income due or payable;

         (2)  Present  for  payment  and  collect  the amount  payable  upon all
     Securities  which  may  mature  or be  called,  redeemed,  or  retired,  or
     otherwise become payable;

         (3) Surrender Securities in temporary form for definitive Securities;

         (4) Execute, as Custodian,  any necessary  declarations or certificates
     of ownership  under the Federal Tax Laws or the laws or  regulations of any
     other taxing authority now or hereafter in effect;

         (5) Hold  directly,  or through the  Book-Entry  System or a Depository
     with respect to Securities therein  deposited,  for the account of the Fund
     all stock dividends,  rights and similar  Securities issued with respect to
     any Securities held by the Custodian hereunder.

(D) Upon receipt of an Officers'  Certificate  signed in the name of the Fund by
any two  Officers  as defined in Section  1, and not  otherwise,  the  Custodian
shall:

         (l) Execute and deliver to such  persons as may be  designated  in such
     certificate, proxies, consents,  authorizations,  and any other instruments
     whereby  the  authority  of the  Fund as  owner  of any  Securities  may be
     exercised;

         (2) Deliver  any  Securities  held for the Fund in  exchange  for other
     Securities  or cash  issued  or paid in  connection  with the  liquidation,
     reorganization,   merger,   consolidation   or   recapitalization   of  any
     corporation, or the exercise of any conversion privilege;

         (3)  Deliver  any  Securities  held  for  the  Fund  to any  protective
     committee,  reorganization committee or other person in connection with the
     reorganization,  refinancing,  merger,  consolidation,  recapitalization or
     sale of assets of any corporation,  and receive and hold under the terms of
     this Agreement,  such  certificates of deposit,  interim  receipts or other
     instruments or documents as may be issued to it to evidence such delivery;

         (4) Make such  transfers or  exchanges  of the assets of the Fund,  and
     take such other steps, as shall be stated in said certificate to be for the
     purpose  of   effectuating   any  duly   authorized  plan  of  liquidation,
     reorganization, merger, consolidation or recapitalization of the Fund.

Section 6. Voting and Other Action

The  Custodian  shall  promptly  notify  the Fund of any calls  for  redemption,
mergers, tenders, consolidations, reorganizations, recapitalizations, or similar
proceedings  affecting domestic Securities held in the Account,  provided notice
of such  proceedings  appears in standard New York financial  publications  or a
service to which the Custodian subscribes. The Custodian shall not be liable for
late  presentation of such items when the Fund has failed to timely instruct the
Custodian in writing.

Neither the  Custodian  nor any nominee of the  Custodian  shall vote any of the
Securities  held  hereunder  by or for  the  account  of  the  Fund,  except  in
accordance  with the  instructions  contained in an Officers'  Certificate.  The
Custodian shall promptly deliver, or cause to be executed and delivered,  to the
Fund all notices,  proxies and proxy soliciting  materials with relation to such
securities,  such  proxies  to be  executed  by the  registered  holder  of such
Securities (if registered  otherwise than in the name of the Fund),  but without
indicating the manner in which such proxies are to be voted.
Section 7. Sale and Redemption of Capital Stock of the Fund A. Whenever the Fund
shall sell any Shares of  beneficial  interest in the Fund, it shall cause to be
delivered to the Custodian all moneys  received for such sales.  B. Upon receipt
of such  moneys,  the  Custodian  shall credit such moneys to the account of the
Fund.
C. Upon the issuance of any of the Shares of beneficial  interest of the Fund in
accordance  with the foregoing  provisions of this Section,  the Custodian shall
pay, out of the money held for the account of the Fund,  all  original  issue or
other taxes  required to be paid by the Fund in connection  with such  issuance,
specifying the amount to be paid.

D. Whenever the Fund shall hereafter redeem any Shares of beneficial interest in
the Fund, it shall furnish to the Custodian an Officers'  Certificate  signed in
the name of the Fund by any two Officers of the Trust, stating:

         (a) The name of the investor redeeming; and

         (b) The amount to be paid for the Shares redeemed.

E. Upon receipt from the Transfer Agent of an advice setting forth the number of
Shares  received by the Transfer  Agent for  redemption and that such Shares are
valid and good form for redemption,  the Custodian shall make payment out of the
moneys held for the account of the Fund, either to the Transfer Agent or to such
other  persons as may be  specified  by the  Transfer  Agent of the total amount
specified in the certificate  issued  pursuant to the foregoing  subsection D of
this Section.

Section 8. Concerning Custodian

A. The  Custodian  shall be paid  promptly  upon  receipt of an invoice from the
Custodian for its services  pursuant to this Agreement such  compensation as may
from time to time be agreed upon between the two parties.

B. The Custodian shall not be liable for any action taken in good faith upon any
certificate  herein described or a certified copy of any resolution of the Board
of  Trustees  of the Trust or of the  Executive  Committee,  and may rely on the
genuiness of any such  document  which it may in good faith believe to have been
validly executed.

C. The Fund agrees to indemnify  and hold harmless the Custodian and its nominee
from  all  taxes,  charges,  expenses,   assessments,   claims  and  liabilities
(including  counsel  fees)  incurred  or  assessed  against it or its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its  nominee's  failure  to act due to its gross  negligence  or  willful
misconduct.  The  Custodian is  authorized to charge any account of the Fund for
such  items.  In the event of any  advance of cash for any  purpose  made by the
Custodian  resulting  from orders or  instructions  of the Fund, or in the event
that the Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses,  assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's failure to
act due to its gross negligence or willful misconduct,  any property at any time
held for the account of the Fund shall be security therefor.

Upon the failure of the Fund to cure any  overdraft  amounts,  the Custodian may
immediately  and  without  notice  foreclose  the  foregoing  lien and  security
interest.

D. The Custodian may appoint one or more banking  institutions  as Depository or
Depositories  or as  Sub-Custodians,  including,  but  not  limited  to  banking
institutions located in foreign countries,  of Securities and moneys at any time
owned by the Fund,  upon terms and conditions  approved in written  instructions
from two Officers of the Trust for the Fund. Such  appointment may include,  but
is not limited to, the deposit of all or any portion of the Securities or moneys
of the Fund with DTC or Book-Entry System.

E. The  Custodian  shall  provide  the  Fund  with any  report  obtained  by the
Custodian on the system of internal  accounting control of the Book-Entry System
or a Depository and with such reports on its own systems of internal  accounting
control as the Fund may reasonably request from time to time.

Section 9. Reports by Custodian

A.  Promptly  after each  purchase  of  Securities  by the Fund,  the Fund shall
deliver to the  Custodian,  with  respect to each  purchase  of  Securities,  an
Officers'  Certificate  signed  in the name of the Fund by any two  Officers  as
defined in Section 1,  specifying  with respect to each such  purchase:  (a) the
name of the issuer and the title of the Securities,  (b) the number of shares or
the principal  amount  purchased and accrued  interest,  if any, (c) the date of
purchase and settlement,  (d) the purchase price per share, (e) the total amount
payable upon such  purchase,  (f) the name of the person from whom or the broker
through whom the purchase was made,  (g) whether such  purchase is to be settled
through the  Book-Entry  System or a Depository,  and (h) whether the Securities
purchase are to be  deposited  in the  Book-Entry  System or a  Depository.  The
Custodian shall upon receipt of the Securities  purchased by or for the Fund pay
out of the moneys held for the  account of the Fund,  the total  amount  payable
upon such purchase,  provided that the same conforms to the total amount payable
as set forth in such certificate.

B. Promptly after each sale of Securities by the Fund, the Fund shall deliver to
the Custodian,  with respect to each sale of Securities, a certificate signed in
the name of the Fund by any two  Officers  as defined  in Section 1,  specifying
with respect to each such sale:  (a) the name of the issuer and the title of the
Security,  (b) the number of shares or principal  amount  sold,  and the accrued
interest,  if any, (c) the date of sale,  (d) the sale price per share,  (e) the
total amount  payable to the Fund upon such sale,  (f) the name of the person to
whom or the broker  through whom the sale was made, and (g) whether such sale is
to be settled through the Book-Entry System or a Depository. The Custodian shall
deliver the Securities upon receipt of the total amount payable to the Fund upon
such sale,  provided that the same  conforms to the total amount  payable as set
forth in such  certificate.  Subject to the foregoing,  the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver  Securities
and arrange for payment in accordance with the customs  prevailing among dealers
in Securities.

C. The Custodian  shall deliver to the Fund promptly after the close of business
on each day  safekeeping  receipts for all  transactions  for the account of the
Fund  during  said day;  and it shall,  at least  monthly and from time to time,
render a detailed statement of the Securities and moneys held for the Fund under
this  Agreement.  The Custodian  shall forward to the Fund  confirmation  of any
purchase or sale of Securities.

Section 10. Termination or Assignment

A. This Agreement may be terminated by the Fund, or by the  Custodian,  on sixty
days' notice,  given in writing and sent by registered  mail to the Custodian or
to the Fund,  as the case may be. In the event such notice is given by the Fund,
it shall be  accompanied  by a copy of a resolution  of the Board of Trustees of
Saturna Investment Trust, certified by the Secretary or any Assistant Secretary,
electing to terminate  this Agreement and  designating a successor  custodian or
custodians,  each of which shall be a bank or trust company having not less than
$1,000,000  aggregate capital surplus and undivided  profits.  In the event such
notice is given by the Custodian,  the Fund shall,  on or before the termination
date, deliver to the Custodian a copy of a resolution of the Board of the Trust,
certified by the Secretary or any Assistant  Secretary,  designating a successor
custodian or  custodians.  In the absence of such  designation  by the Fund, the
Custodian  may  designate a successor  custodian  which shall be a bank or trust
company  having  not  less  than  $2,000,000  aggregate  capital,  surplus,  and
undivided  profits.  If the Fund fails to designate a successor  custodian,  the
Fund  shall  upon  the date  specified  in the  notice  of  termination  of this
Agreement  and upon the delivery by the Custodian of all  securities  and moneys
then owned by the Fund be deemed to be its own custodian and the Custodian shall
thereby  be  relieved  of all  duties  and  responsibilities  pursuant  to  this
Agreement.

B. This  Agreement may not be assigned by the  Custodian  without the consent of
the Fund, authorized or approved by a resolution of the Board of Trustees of the
Trust for the Fund.

Section 11. Custodian Power of Attorney

The  Custodian is  authorized  and empowered in the name of and on behalf of the
Fund to execute any certificates of ownership or other  instruments which are or
may hereafter be required by any  regulations  of the United States or any state
or  political  subdivision  thereof,  so that  the  Custodian  may  fulfill  its
obligations hereunder as required in connection with any Securities.

Section 12. Amendments

The parties may make  amendments  to the Agreement  from time to time,  provided
that any such amendment  shall be reduced to writing and shall be executed as an
addendum  to this  Agreement  in the  same  manner  as this  Agreement  has been
executed.

Section 13. Successors and Assigns

This  Agreement  shall be  binding  upon and shall  inure to the  benefit of the
successors and assigns of the respective parties hereto.

Section 14. Completeness

This Agreement  along with a copy of the fee schedule  constitutes  the full and
complete agreement between the Custodian and Fund, and no other understanding or
agreement, whether written or oral, shall bind either of the parties hereto.

Section 15. Governing Law

This Agreement shall be governed by the applicable laws of the State of Indiana.

Section 16. Notices

It shall be sufficient service of any notice, request, authorization, complaint,
demand or other paper  required  under this  Agreement to be given or filed with
the  Custodian or Fund if the same shall be duly mailed by first class mail with
postage prepaid addressed as follows:

     (a)  If to the Custodian:

         National City Bank, Indiana
         Investment Operations, Suite 435E
         Attention: Donna Weir
         101 W. Washington Street
         Indianapolis, Indiana 46255

         FAX Number: (317) 267-7658

     (b) If to the Fund:

         Saturna Investment Trust
         Sextant Short-Term Bond Fund
         P.O. Box 2969
         Bellingham, Washington 98227-2969

         FAX Number: (360) 734-0755


SATURNA  INVESTMENT  TRUST SEXTANT  SHORT-TERM  BOND FUND By:  Nicholas  Kaiser,
President ATTEST

By: James Winship, Secretary


                                                     NATIONAL CITY BANK, INDIANA


                                                     By: Christopher N. Daily
ATTEST


Donna Weir