December 4, 2007

  To: **Trustees of Saturna Investment Trust,   Amana Mutual Funds Trust**  Re: **Fidelity Bond and D&O/E&O Annual Premium Allocations**  From: **Saturna Capital**  Annually, the Trustees must review continuation of the existing Rule 17g-1 fidelity  bond coverage. As we discussed at the last meeting, we were completing the application  for the annual renewal to ICI Mutual (ICIM) for the Funds’ fidelity bond  and D&O/E&O coverage. The application was filed, and requested coverages  were approved.  We will accept the policies, including the increase in D&O/E&O coverage  to $3 million from $2 million, subject to your ratification. It is our understanding  that $3 million of coverage would be normal for fund complexes of Saturna Capital’s  size. The deductible has been increased from $200,000 to $300,000 to save premium  cost.  Each entity's fidelity bond coverage is to the full limit of $1,960,000, with  a $50,000 deductible (except for the Funds, which cannot legally have a deductible).  Mutual fund requirement amounts have been set in accordance with SEC Rule 17(g)-1,  based on assets as of October 10, 2007, date of the application, with some allowance  for growth.  Please note that the premium for the bond shown in the table below has increased  from last year’s in absolute numbers, but coverage increased in greater  proportion than did the premium. Therefore, a straight comparison with last  year’s premium is misleading. A better comparison can be made by considering  the annualized rate of $19,000 that was instituted last May when the bond was  increased to $1.725MM. The current premium, including a coverage limit increase  of $240,000, is approximately $2,500 less.  For both the fidelity bond and D&O policy, the premium per dollar of coverage  has decreased from last year, over 10% for the D&O/E&O policy and nearly  25% for the fidelity bond. In discussions with ICIM, the decrease in premium  was largely attributed to the “good” results of the SEC examinations,  the increased separation of duties among executive staff and compliance, and  the creation of an internal audit department. [During the course of ICIM’s  review, a member of the underwriting team, a former SEC examiner, remarked that  in her career she never seen such a detailed and rigorous examination as the  one we experienced, reflecting our understanding based on conversations with  SEC staff.] The quoted premiums for each policy are shown below in Table 1.

| **Table 1. ICI Mutual Policy Quote Summary** |
|----------------------------------------------|
| **Policy**                                   | **Limit** | **Quoted Premium** |
| Blanket Bond                                 | $1,960,000.00 | $17,034.00 |
| D&O/E&O                              | $3,000,000.00 | $101,202.00 |

***Allocations***  SEC rules do not require any particular method of allocating fidelity bond or  E&O/D&O premiums among the insured entities, so long as all relevant  factors are considered. One specific factor that must be met is that each Trust’s  allocated premium is less than what it would have paid purchasing an individual  policy.  Attached are letters from ICIM confirming that the Trusts incur cost savings  by purchasing a joint policy, as is the usual case. The letters state that the  share of total premium for the blanket bond and D&O/E&O coverage allocated  to each Trust is less than the premium each Trust would have had to pay if it  had purchased separate policies from ICI Mutual. At our request, ICIM suggested  possible methods of allocating the costs of the policies, which are also contained  in the letters. *Fidelity Bond Premium*  We have historically allocated the fidelity bond premium according to the proportion  of each insured’s required coverage to the total bond coverage. Using  this method, the calculation results in a premium allocation to the Trusts of  roughly 84%, in line with ICIM’s recommendations. The blanket bond allocation  is show below in Table 2.

| **Table 2. Blanket Fidelity Bond Premium Allocation** |
|-------------------------------------------------------|
| **Insured**                                           | **17(g)-1 Bracket** | **Coverage         Requirement** | **Percentage of         Total Bond** | **Bond Premium** |
| Amana                                                 | $1-1.5 Billion | $1,250,000 | 63.78% | $10,863.52 |
| Saturna Investment                                    | $50-75 Million | $400,000 | 20.41% | $3,476.33 |
| Saturna Capital                                       | IRS requirement | $250,000 | 12.76% | $2,172.70 |
| Saturna Brokerage                                     | FINRA requirement | $60,000 | 3.06% | $521.45 |
|                                                  |   | $1,960,000 | 100.00% | $17,034.00 |

*E&O/D&O Premium Allocations*  ICIM has been significantly increasing assignment of risk to advisers in joint  D&O/E&O policies as a result of recent industry problems. According  to ICIM, factors such as participation in market-timing schemes, purchasing  and pricing lower-grade and foreign securities, and investments in derivatives,  restricted securities and other riskier and more complex investments, among  other things, have played a significant role in this process.   We have spoken to counsel familiar with industry practices, the Trusts’  auditors, and ICIM itself about ICIM’s recommended premium allocations.  Both counsel and the Trusts’ auditors believe that a 50/50 allocation  is unusually high, and something that they have seen very infrequently, if at  all. In addition, ICIM says that its recommendations are only one possible way  of computing an allocation, and that it is not aware of the actual role its  recommendations play in establishing allocations, or whether they are used at  all.  We recommend a different allocation method than the straight 50/50. Our recommended  allocations take into account several considerations, including the nature of  the Trusts’ and adviser’s businesses. Primary among these factors  is the level of coverage each entity would choose if insuring individually and  not as part of a joint policy. Because the assets and size of each entity within  the Saturna complex are widely divergent, the coverage amounts each would purchase  individually are also widely different. In addition, we believe the lower risk  profile of Saturna’s business as a result of its not participating in  any of the practices listed above or purchasing and pricing riskier and complex  investments decreases its relative contribution to the complex’s total  risk.  The recommendations below were developed by examining the relative costs of  the Trusts’ expected premium for individual coverage in an amount that  each would likely purchase if it were purchasing an individual policy. This  assures a benefit to each Trust from participating in the joint bond. In the  case of Amana, the allocation is based on purchasing an individual policy of  $3MM, which ICIM estimates in the attached letter as $71,000. For Saturna Investment  Trust, the letter also contains an estimate of the cost of a $3MM individual  bond, $61,000.  However, in actual practice Saturna Investment Trust would be unlikely to purchase  such a large policy. It probably could be expected to continue with a $1MM policy  (although last year it shared in the cost of a $2MM policy). In conversation,  we received a quote from ICIM for a $1MM policy for Saturna Investment Trust  at a premium of $22,500. Similarly, the adviser and its affiliate would be expected  to continue with a $1MM policy, at an ICIM estimated premium of $32,000-$35,000.  We used $33,000 for purposes of a proposed allocation.  After examining various approaches, we developed an approach that we believe  fairly allocates costs, provides roughly equal savings for each insured relative  to the cost of individual policies, reflects changes in the market for advisers’  coverage, and recognizes the differences in policy limit requirements between  the insured parties.   The D&O/E&O premium allocation developed applies a 20% discount to estimated  or quoted premiums received from ICI Mutual for an individual policies of appropriate  size. The policy size for Amana was $3MM, and $1MM for each of Saturna Investment  Trust and Saturna Capital, including its affiliate, Saturna Brokerage Services.  The D&O/E&O allocation is show below in Table 3.

| **Table 3. D&O/E&O Policy Premium Allocation** |
|--------------------------------------------------------|
| **Insured**                                            | **Individual        Policy Limit** | **Individual        Policy Quote** | **Joint Policy        Discount (20%)** | **Policy Premium** |
| Amana                                                  | $3,000,000 | $71,000.00 | $14,200.00 | $56,800.00 |
| Saturna Investment                                     | $1,000,000 | $22,500.00 | $4,500.00 | $18,000.00 |
| Saturna Capital and SBS                                | $1,000,000 | $33,000.00 | $6,598.00 | $26,402.00 |

  Despite an increase in coverage of 67%, Amana’s bond premium has only  increased 26%. Similarly, Amana’s D&O/E&O limit has increased  50% but its premium 44%. Saturna Investment Trust’s premiums have remained  relatively constant, decreasing 14% for the bond and 2% for the D&O/E&O  policy. Saturna Capital and its affiliate’s bond premium have decreased  30%, whereas its D&O/E&O premium has increased 50%. A comparison of  the current premium with last year’s allocation is shown below in Table  4.

| **Table 4. Current Premium (2006-2007) vs. Proposed      Premium (2007-2008)** |
|--------------------------------------------------------------------------------|
|                                                                                | **Bond****** | **D&O/E&O** |
| **Insured**                                                                    | 2006-2007 | 2007-2008 | 2006-2007 | 2007-2008 |
| Amana                                                                          | $8,644.33 | $10,863.52 | $39,476.16 | $56,800.00 |
| Saturna Investment                                                             | $4,034.35 | $3,476.33 | $18,423.72 | $18,000.00 |
| Saturna Capital and SBS                                                        | $3,862.32 | $2,694.15 | $17,638.12 | $26,402.00 |