Administration

Portfolio Management
Each managed account is assigned a primary portfolio manager, who is responsible for continuous supervision of his accounts. In the absence of a portfolio manager, another manager supervises his accounts and can take any actions deemed appropriate. The portfolio managers (primary reviewers) and number of accounts assigned are Nicholas Kaiser (33), Phelps McIlvaine (4), and Monem Salam (28). The other members of the Investment Committee (Peter Nielsen and Bryce Fegley) are also constantly monitoring Saturna’s “recommended list” of securities, from which the portfolio managers normally select investments. In addition, approximately twenty other Saturna employees (primarily those working as fund accountants, customer representatives, and in operational positions) monitor client securities and portfolios.

Securities may be bought or sold in any managed account at any time. Accounts have different objectives, and securities that are traded in one account may or may not be traded in other accounts. Tax reasons, for example, may cause a security to be traded (or not) in a specific account. If a security is dropped from the “recommended list” it is normally sold from all accounts holding it at that time. Many factors are evaluated in making a security trade, but the primary trigger is earnings (actual and projected). News reports are followed closely on “recommended list” securities, and evaluations by our analytical team (including what is NOT said) may trigger purchases or sales. Securities may be purchased or sold based upon our outlook for the market as a whole, or the industry or sector of the company. There are no limitations on the amount of securities that can be be bought or sold for clients, other than may be given in instructions from the client and the objectives of the client’s account.

The portfolio manager meets with his accounts as requested by the client. Confirmations of security trades are mailed or emailed at the time of transaction. Monthly statements are prepared by Saturna for each account and reviewed by the staff and/or portfolio managers before mailing. These statements give the client an opportunity to monitor his results each month as well. In addition, clients may access their portfolios and values on the Internet through services offered by Saturna Brokerage Services and its clearing broker. Mr. Kaiser formally reviews each managed account after the end of each quarter as part of the quarterly bill preparation process.

Saturna’s portfolio managers follow the firm’s general guidelines consistent with value investing. Portfolios are commonly in equity securities including foreign equities, debt of domestic issuers, and money market funds. Investment decisions may be made in accordance with specific account guidelines, such as Islamic principles. Portfolios are normally diversified across industries, although private accounts often are more concentrated
due to individual client situations.

Portfolio Trading
The placing of purchase and sale orders as well as the negotiation of commissions is performed by the Adviser (Saturna Capital). 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 is to obtain the best price and execution which in the judgment of the Adviser is attainable at the time and which would bring the best net overall economic result to a client. 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 client, and is not required to execute trades in “over-the-counter” securities with primary market-makers if similar terms are available elsewhere. The Adviser evaluates whether brokerage commissions are reasonable based upon available information about the general level of commissions paid by similar clients for comparable services.

When consistent with best execution, brokerage is primarily directed to Saturna Brokerage Service, Inc., a wholly owned subsidiary of the Adviser, which engages in a discount brokerage business. Saturna Brokerage Services has agreed to execute transactions for Saturna’s managed accounts without any commissions through at least December 2008.

Saturna conducts a “best execution” review of brokerage practices annually, with a report available to all clients requesting a copy.

Recordkeeping
We believe that comprehensive account information is key to quality service. We continue to develop our own computerized investment administration system, NEPTUNE©. In addition to Saturna’s use, this software is licensed to unaffiliated mutual fund sponsors.

Investment management clients may elect to go paperless. In an effort to reduce cost and waste, we offer the option of receiving your performance reporting electronically. Certain regulatory and brokerage correspondence will continue to be sent on paper.

Saturna Capital’s investment management clients receive integrated GALAXY month-end statements, reporting their account valuations. Each position is reported with such additional information as the current yield and annual
average return. We also act as trustee and administrator for IRA plans. We also provide certain recordkeeping services for 401k plans.