Q1 2016 • March 31, 2016 | Saturna Capital

Following Principles of Islamic Finance

Q1 2016 Highlights:

2016 started with high volatility:

  • The worst 10-day start to a year since 1897, possibly ever
  • Crashing oil prices, European concern, and panic over China's prospects
  • March saw a reverse, with most indices posting positive returns
  • Morningstar took sustainability mainstream


The first quarter of 2016 was remarkable, beginning with a woeful January and ending with an exceptional March. The conservative nature of the Amana Funds' investment process helped the Income, Growth, and Developing World Funds perform well this quarter during a volatile and uncertain market environment.

January began terribly, with crashing oil prices, rising concern over Europe's future, and panic over China's prospects, sending the Dow Jones Industrial Average Index to its worst 10-day start to a year on record going back to 1897. By the end of January, the S&P 500 Index was down nearly 5%. Conditions improved in February, although the S&P still ended the month slightly negative. March was a total reversal with the index up a noteworthy 6.78%. One reason we did well this quarter is that we invest in companies that are sustainable from several perspectives. Over the past several years, sustainability has become a topic of concern across multiple social, political, and economic fields. In the social sphere, questions surrounding sustainability drive our discussions of energy consumption, alternative fuels, water conservation, and, of course, global climate change. On the governmental front, the sustainability of spending, justifiably or not, constitutes a major divide between the political parties. In the stock market, sustainability generally comes packaged within the "environment" component of environmental, social and governance (ESG) investing. We believe financial sustainability, in the form of solid balance sheets and strong cash generation, is just as important in a corporate context as environmental sustainability is in the social sphere, or budget stability in the political arena.

We launch the discussion of sustainability because the Amana Funds' values-based investing approach means they have long followed many of the precepts of ESG investing without being specifically designated as such. The Amana Funds do not invest in sin stocks of any nature, be it tobacco, alcohol, pornography, or gambling. We avoid speculative or volatile businesses. We only invest in companies that feature rock-solid balance sheets and generate sufficient cash to fund their operations. We believe excessive debt begets risk, and excessive risk detracts from portfolio returns. We seek the highest quality management teams and corporate governance. We hold stocks for the long term, both as a means of minimizing taxes and as a manifestation of our investment philosophy.

Mutual fund rating firm Morningstar demonstrates the currency sustainability has gained in the investment world with its recent decision to team up with Sustainalytics, a leader in sustainability research and analysis, to rate funds using sustainability criteria. Whereas Morningstar bases its one to five-star ratings on a fund's relative performance within its category, its one to five-"globe" ratings are based on Sustainalytics' assessment of the sustainability of the portfolio's underlying securities, relative to the other funds in its category. While early days, Morningstar hopes to develop the industry's first global standard for portfolio sustainability. Under the parameters developed by Morningstar and Sustainalytics, the Amana Income, Growth, and Developing Funds have received excellent initial rankings. The Amana Income Fund and Amana Growth Fund both received five globes and ranked within the top percentile of their respective categories. The Amana Developing World Fund received four globes, ranking in the 25th percentile.

Some argue the jury remains out on the usefulness of ESG metrics as an investment marker, while various studies have provided inconclusive results. We invest for the long term, and we believe managers who run their businesses for the long term, rather than the next quarter, are more likely to make decisions that pay off over time. Such managers recognize that women account for half the world's talent (some might argue considerably more) and will not restrict their boards and executive suites to the old boys' club. They understand minimizing waste saves money and boosts returns over time, that reducing energy consumption pays off, and doing right by your employees improves the chances they will do right by the company.

The Amana Funds have been managed according to the same philosophy since the 1980s. It wasn't fashionable then, during the dot-com era, or in the run-up to the global financial crisis. We are pleased to see the industry now coming around to our way of thinking.


Amana Income Fund

Given the conservative nature of its investment process, the uncertain market environment present during the first quarter of 2016 proved favorable for the Amana Income Investor Shares. While the S&P 500 and the Russell 1000 Value Index gained 1.35% and 1.64%, respectively, the Amana Income Fund Investor Shares registered a 4.13% return. The Fund opened a gap against the benchmarks during the worst of the first-quarter downturn and continued to hold the advantage as markets rebounded the back half of the quarter. As a result, Amana Income Investor Shares finished the quarter in the 5th percentile of the Morningstar Large Blend category (among 1,655 funds).

From a macroeconomic perspective, we benefited from concerns surrounding the financial sector, a sector the Fund avoids, following a long-awaited Federal Reserve rate hike in December. Finance was the worst-performing sector in the first quarter and, given its size, the largest detractor from index performance. Conversely, the Fund is overweight in Health Care, and major pharmaceutical stocks took a beating as presidential candidates hammered drug pricing while congressional hearings on the same topic exposed the shenanigans of Martin Shkreli and Turing Pharmaceuticals. Health Care losses more or less equaled the Finance losses avoided by being absent that sector.

With Finance and Healthcare largely a wash, stock selection came to the rescue with excellent performance across our Industrial and Consumer Staples selections and good performance across Consumer Discretionary and Materials.

Genuine Parts, our top Q1 contributor, provides an example of our long-term approach. After excellent performance over 2013 and 2014, the stock had arguably gotten ahead of itself by the start of last year, and in 2015 it detracted from Fund performance. We believe it to be a very well-managed company with a strong commitment to minority shareholder rights, as exemplified by its 59-year record of consecutive dividend increases. This year the shares have rebounded strongly.

Spice producer McCormick presents a classic "sustainable" business. It performed well coming out of the global financial crisis but lagged over 2013 and 2014. We believed in the company's brand power, its ability to expand its business into new segments and geographies, and its ability to benefit from a secular shift toward bolder flavors around the world. In 2015 McCormick was a solid outperformer and year-to-date the shares have moved sharply higher.

Industrials told the Fund's best story of the quarter. The Fund is significantly overweight the sector, which presented challenges last year. In the first quarter, 2015's desultory performance was quickly forgotten, and all but one of our Industrial stocks made a positive contribution to fund returns, accounting for their broad representation among the top contributors.

As mentioned previously, the Health Care sector was a tough place in the first quarter, accounting for six of the Fund's top ten detractors. In addition to the political headwinds faced by the group, drug failures dinged individual companies, such as Eli Lilly. That said, we believe the political overhang will dissipate once we move beyond the conventions. These companies continue to be strong cash generators, selling products that will experience rising demand as the population ages.

As of March 31, 2016

Ten Largest Contributors Return Contribution
Genuine Parts 16.50% 0.47
Illinois Tool Works 11.13% 0.43
PPG Industries 13.25% 0.42
3M 11.42% 0.37
Parker Hannifin 15.25% 0.34
McCormick & Co 16.27% 0.34
Rockwell Automation 11.71% 0.32
Honeywell International 8.81% 0.30
General Mills 10.75% 0.30
Carlisle 12.59% 0.30
Ten Largest Detractors Return Contribution
Eli Lilly -13.94% -0.61
Novartis ADR -12.56% -0.41
ConocoPhillips -30.11% -0.25
Bristol-Myers Squibb -6.58% -0.24
Intel -5.12% -0.23
Pfizer -7.25% -0.22
E.I. du Pont de Nemours -4.30% -0.12
Abbott Laboratories -6.26% -0.09
Nike, Class B -1.39% -0.05
AbbVie -2.50% -0.05
Top Ten Holdings Portfolio Weight
Illinois Tool Works 4.0%
Nike, Class B 3.6%
Honeywell International 3.5%
Eli Lilly 3.5%
PPG Industries 3.5%
3M 3.4%
Colgate-Palmolive 3.3%
Bristol-Myers Squibb 3.2%
Microsoft 3.2%
Kimberly-Clark 3.1%

Asset Weighted Average Debt to Market Cap: 16.3%


Amana Growth Fund

So far in 2016 value has bested growth, as reflected in the relative performances of Amana Income and Amana Growth, as well as their respective benchmarks. In the first quarter the Amana Growth Fund Investor Shares gained 1.32%, just shy of the 1.35% rise in the S&P 500, but well ahead of the 0.74% increase in the Russell 1000 Growth Index. Similar to Amana Income, Amana Growth opened a gap during the market sell-off of the first six weeks of the quarter, but didn't succeed in maintaining its advantage when the market rebounded. Nonetheless, the Amana Growth Fund Investor Shares finished the first quarter in the 7th percentile of the Morningstar Large Growth category (among 1,744 funds).

While allocation was negative during the quarter, particularly with regard to our large Health Care overweight, stock selection was positive across the board. This was especially true within the Technology, Consumer Discretionary, and Health Care sectors. Technology and Consumer Discretionary accounted for eight of the top ten contributors, with Stryker (Health Care) and Fastenal (Industrial) as the only outliers. Technology represents the largest exposure in the Fund by a wide margin.

The first quarter's top performer, Church & Dwight, we believe is a good example of a long-term "sustainable" investment. Despite the strong start to the year, 2016 may prove tougher as the advantage of lower overseas currency exposure fades. While its valuation has become arguably stretched, we recently visited the company and see no reason to reduce the position. Management has an enviable track record of sales growth, margin expansion, and disciplined acquisitions. Given a market capitalization around $12 billion as compared to over $200 billion for Proctor & Gamble, there's plenty of room to grow share.

Semiconductor chip equipment manufacturer ASML provides a story akin to Genuine Parts described above. Following a nice, if choppy, run from 2009 through 2014, the stock stalled in early 2015, partly due to valuation and partly due to concerns over the pace of progress as it manages the transition to extreme ultraviolet lithography (EUVL), the next generation technology in the manufacture of microprocessors. ASML already dominates the market for high-end lithography machines, and with the success of EUVL they will own it. We want to be there when it happens.

Amana Growth has an overweight exposure to Health Care. While the returns of our Health Care selections surpassed the benchmark, they still dominated the detractors list, taking the first six positions. As Express Scripts endures lawsuits and concerns over potential contract losses, we are evaluating whether the investment case remains valid. The case looks weak for Gentex, which for years has dominated the auto-dimming mirror industry and enjoyed ever-higher levels of penetration. We believe, however, that mirrors will eventually go the way of the buggy whip to be replaced by cameras and interior displays. That won't happen this year or even in the next several years, but stocks discount future cash flows, and the first vehicles to experience the shift will be at the high end where auto-dimming is de rigueur.

Given Express Scripts' poor performance during the quarter it dropped out of the top ten holdings list and was replaced by Eli Lilly.

As of March 31, 2016

Ten Largest Contributors Return Contribution
Church & Dwight 9.05% 0.38
TJX Companies 10.83% 0.37
Intuit 8.12% 0.36
Trimble Navigation 15.62% 0.36
Fastenal 20.99% 0.31
ASML Holding  13.09% 0.27
Stryker 15.85% 0.27
Estee Lauder, Class A 7.44% 0.26
Taiwan Semiconductor ADS 15.16% 0.26
Infosys ADS 13.55% 0.21
Ten Largest Detractors Return Contribution
Express Scripts Holding -21.42% -0.73
Eli Lilly -13.94% -0.46
Amgen -6.99% -0.36
Novartis ADR -12.56% -0.36
Celgene -16.42% -0.23
Novo Nordisk ADS -5.06% -0.20
Harris -9.83% -0.20
Adobe Systems -0.16% -0.10
Agilent Technologies -4.69% -0.10
Gentex -1.60% -0.05
Top Ten Holdings Portfolio Weight
Adobe Systems 5.2%
Amgen 4.8%
Intuit 4.1%
Apple 4.1%
Church & Dwight 3.8%
TJX Companies 3.6%
Estee Lauder, Class A 3.4%
Lowe's 3.2%
Novo Nordisk ADS 3.2%
Eli Lilly 3.1%

Asset Weighted Average Debt to Market Cap: 11.6%


Amana Developing World Fund

The start of 2016 has continued to reward caution, as well as an eye on macroeconomic developments. In the first quarter the Amana Developing World Fund Investor Shares gained 6.16% against 5.71% for the MSCI Emerging Markets Index, despite the Fund's having an average cash balance of 17%. Since Amana Developing World has the flexibility to (and often does) invest in companies domiciled in the developed markets as long as the majority of their sales, operations, or assets are in the developing world, the Fund is often compared to the MSCI All Country World Index ex-USA. During the quarter that index slipped -0.38% and the Fund ranked in the 23rd percentile of the Morningstar category employing the index.

The Developing World Fund does not follow MSCI convention in considering Taiwan and South Korea to be emerging market countries, given their high level of development. As a result, our geographic exposure differs significantly from the index. Asia Pacific represents the largest grouping in the index with Taiwan and Korea combined accounting for over 25% of the benchmark. Given our absence from those two markets, we are underweight the region, although overweight ASEAN countries. In Eastern Europe we find little of interest and, absent Turkey, the Fund would not have exposure there. The Fund is also underweight Latin America due to the sale of our investments in Brazil. All of these underweights are countered by our investments in developed-market domiciled companies with a majority of their activities in the emerging markets.

Our sector exposures also diverge markedly from the index. Unlike in the developed markets, Health Care is a tiny portion of the MSCI Emerging Markets Index (less than 3%), yet it represents our single largest sector. Technology, on the other hand, is a large index sector but concentrated in Taiwan and Korea so we are underweight. Finance represents the largest index sector, while our exposure there is restricted to one participation bank and one property company.

Kansas City Southern provides an example of a company domiciled in the developed world but heavily exposed to emerging markets. With the majority of its track miles and employees in Mexico, KSU stands to benefit from growing trade between the US and Mexico. According to the Federal Reserve, the value of goods imported from Mexico has exceeded that from Canada for the first time.

US Import of Goods, Customs Basis

We recently visited Turkey, and are interested in expanding our investments in the country. Despite threats posed by ISIS and the Turkish government's inability to arrive at an accommodation with the country's ethnic Kurdish population, Turkey's stock market performed very well in the first quarter, assisted by a strengthening currency, as illustrated by Turk Traktor and Ford Otomotiv's appearance near the head of our top ten contributors list.

Samsonite, an American brand headquartered in Hong Kong, a CEO based in India, and the majority of its production in emerging markets, was added to the portfolio last summer. It recently announced the planned acquisition of up-market luggage company Tumi. Samsonite has been a serial acquirer over the past few years, but the Tumi deal should be the last piece of the puzzle for some time, allowing management to focus on execution.

If there was a theme to the weakest performing stocks last quarter it can be described as Technology and China. We have sold the investments in Lenovo, Western Digital, Axiata, and M. Dias Branco. The world of computers is changing and neither Lenovo nor Western Digital appear well-placed to change along with it. Axiata is a victim of developments in the Malaysian cellular communication landscape and its own poor execution. We still believe M. Dias Branco is a good company, but Brazil is a basket case.

Samsonite, Turk Traktor, and Tencent Holdings replaced Baidu, Unilever, and Clicks Group among the top ten largest holdings.

As of March 31, 2016

Ten Largest Contributors Return Contribution
Kansas City Southern 31.11% 0.52
Turk Traktor ve Ziraat Makineleri A 25.05% 0.48
Ford Otomotiv Sanayi 26.94% 0.48
Samsonite International 10.66% 0.44
Telekomunikasi Indonesia ADS 14.53% 0.42
Indofood CBP Sukses Makmur  18.09% 0.40
Clicks Group 17.21% 0.39
Advanced Info Service 27.72% 0.39
Aboitiz Power 11.58% 0.35
KPJ Healthcare 11.96% 0.31
Ten Largest Detractors Return Contribution
Lenovo Group -23.30% -0.40
Western Digital -26.05% -0.38
Axiata Group -11.03% -0.21
Telenor -3.15% -0.14
Hong Kong & China Gas -5.90% -0.08
M. Dias Branco -7.59% -0.07
Genomma Lab Internacional -2.89% -0.04
China Mobile ADS -1.56% -0.03
Kerry Logistics Network -2.46% -0.03
BIMB Holdings 8.58% 0.00
Top Ten Holdings Portfolio Weight
Samsonite International 3.5%
Bangkok Dusit Medical Services 3.3%
MercadoLibre 3.3%
AboitizPower (Philippines) 3.1%
VF Corp  3.1%
SM Prime Holdings 3.1%
Telekomunikasi Indonesia ADS 3.0%
Tencent Holdings ADR 2.9%
KPJ Healthcare 2.8%
Turk Traktor ve Ziraat Makineleri A 2.7%

Asset Weighted Average Debt to Market Cap: 13.7%


Amana Participation Fund

The first quarter of 2016 marks an important half-year milestone for the Amana Participation Fund – the first dedicated non-equity Islamic fund in the US.

For the first six months of operation, the Amana Participation Fund Investor Shares returned 0.10% and the Institutional Shares returned 0.25%, compared to 2.09% for the Citi Sukuk Index. The underperformance is largely due to holding cash while the investment operations ramped up.

The name, Participation, reflects the characteristics of sukuk (sak for singular), a non-equity security that shares in the economic profits and losses of an underlying asset. Sukuk is an Arabic word describing investment certificates that share similar characteristics with conventional bonds. Generally sukuk have a stated maturity date and offer a stated annual investment income rate, similar to a coupon offered by a conventional bond. They may obtain a credit rating from one or more well recognized credit rating agencies, such as Moody's or Standard & Poor's. It is important to note that while sukuk may share similar features with conventional bonds, unlike conventional bonds, they typically reflect an undivided beneficial ownership interest in an underlying asset, similar to a stock. The returns of the underlying asset provide the investment return, and sukuk holders share in the underlying asset's profits as well as potential losses.

It is Saturna's view that sukuk are an asset class distinct from both stocks and bonds.

March 16, 2016, marked an important date for the conventional fixed income markets as Federal Reserve Chairperson Janet Yellen announced the Federal Open Market Committee's decision to leave the federal funds rate unchanged. Her message took a dovish tone, acknowledging that "global economic and financial developments continue to pose risks," and that "inflation is expected to remain low in the near term, in part because of earlier declines in energy prices." As a result, Yellen indicated that the Federal Reserve is still on course to raise interest rates over the upcoming year but at a less vigorous pace; telegraphing two interest rate hikes rather than the originally anticipated four rate hikes.

We anticipate economic growth in the US will remain positive as Europe and Asia continue to offer accommodative monetary and fiscal policies. The US dollar should retain its relative strength compared to the rest of its trading partners. We also expect interest rates in the US to remain higher relative to interest rates in foreign markets.

This trend should continue over the near to intermediate term, warranting a US dollar investment bias with a barbell duration profile emphasizing sovereign sukuk issues on the long end of the yield curve and corporate issues on the short end of the yield curve. The expected benefit of this type of approach is that the portfolio should attain a competitive weighted average gross yield to maturity. Sovereign securities can have the authority and ability to increase taxes and other revenue enhancing activities to preserve their credit status which tends to make them more liquid. Focusing on corporate issuers on the short end of the yield curve attempts to position the portfolio in higher income producing assets relative to sovereign issues as well as creating flexibility to preserve capital in a dynamic interest rate environment.

For the period ending of March 31, 2016, the portfolio held sixteen separate US dollar denominated issues and had an effective maturity of 5.3 years and a modified duration of 4.4 years.

As of March 31, 2016

Top Ten Holdings Portfolio Weight
 DIB Sukuk 8.7%
 Dubai DOF Sukuk 7.1%
 Saudi Elec Global Sukuk  7.1%
 Sharjah Sukuk 7.1%
 QIB Sukuk 7.0%
 RAK Capital  6.8%
 Sukuk Funding No3 5.5%
 MAF Sukuk 5.5%
 TF Varlik Kiralama As  5.4%
 Petronas Global Sukuk  5.3%
30-Day Yield
 Investor Shares (AMAPX): 1.87%
 Institutional Shares (AMIPX): 2.11%

Credit Profile

Moody's Investor Services
Aa2 3.6%
A1 12.4%
A3 7.1%
Baa1 15.7%
Baa3 18.2%
Unrated 37.1%
Cash and equivalents 5.9%

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.


Performance Summary

As of March 31, 2016

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Average Annual Total Returns (Before Taxes) 1 Year 3 Year 5 Year 10 Year Expense Ratio
Amana Income Investor Shares (AMANX) 1.34% 9.04% 8.88% 7.95% 1.13%
Amana Income Institutional Shares (AMINX)¹ 1.60% n/a   n/a   n/a   0.88%
S&P 500 Index 1.78% 11.78% 11.57% 7.00% n/a
Russell 1000 Value Index -1.55% 9.35% 10.24% 5.70% n/a
Amana Growth Investor Shares (AMAGX) -0.67% 10.06% 9.35% 7.18% 1.08%
Amana Growth Institutional Shares (AMIGX)¹ -0.42% n/a   n/a   n/a   0.83%
S&P 500 Index 1.78% 11.78% 11.57% 7.00% n/a
Russell 1000 Growth Index 2.51% 13.56% 12.36% 8.28% n/a
Amana Developing World Investor Shares (AMDWX)² -8.56% -4.78% -2.70% n/a   1.54%
Amana Developing World Institutional Shares (AMIDX)¹ -8.34% n/a   n/a   n/a   1.24%
MSCI Emerging Markets Index -12.03% -4.41% -4.13% 3.01% n/a

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Expense ratios shown are as stated in the Funds' most recent Prospectus dated September 28, 2015.

The Amana Participation Fund began operations September 28, 2015, and consequently has no historical standardized performance to report and is not yet rated by Morningstar.

Performance data quoted 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 888-732-6262 or visiting Month-end Performance. 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. Shares of a Fund may only be offered for sale through the Fund's prospectus or summary prospectus.

The S&P 500 is an index comprised of 500 widely held common stocks considered to be representative of the US stock market in general. The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the US equity universe. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of the large-cap value segment of the US equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values. The MSCI Emerging Markets Index, produced by Morgan Stanley Capital International, measures equity market performance in over 20 emerging market countries. When available, Saturna uses total return components of indices mentioned. Investors cannot invest directly in the indices.

¹ Institutional Shares of the Amana Funds began operations September 25, 2013.

² The Amana Developing World Fund began operations September 28, 2009.

A Few Words About Risk

IncomeGrowthDeveloping World, and Participation Funds: The value of the shares of each of the Funds rises and falls as the value of the securities in which the Funds invest go up and down. The Amana Mutual Funds limit the securities they purchase to those consistent with Islamic principles. This limits opportunities and may affect performance. Each of the Funds may invest in securities that are not traded in the United States. Investments in the securities of foreign issuers may involve risks in addition to those normally associated with investments in the securities of US issuers. These risks include currency and market fluctuations, and political or social instability. The risks of foreign investing are generally magnified in the smaller and more volatile securities markets of the developing world.

Growth Fund: The smaller and less seasoned companies that may be in the Growth Fund have a greater risk of price volatility.

Participation Fund: While the Participation Fund does not invest in conventional bonds, risks similar to those of conventional nondiversified fixed-income funds apply. These include: diversification and concentration risk, liquidity risk, interest rate risk, credit risk, and high-yield risk. The Participation Fund also includes risks specific to investments in Islamic fixed-income instruments. The structural complexity of sukuk, along with the weak infrastructure of the sukuk market, increases risk. Compared to rights of conventional bondholders, holders of sukuk may have limited ability to pursue legal recourse to enforce the terms of the sukuk or to restructure the sukuk in order to seek recovery of principal. Sukuk are also subject to the risk that some Islamic scholars may deem certain sukuk as not meeting Islamic investment principles subsequent to the sukuk being issued.

Shares of the Participation Fund held less than 182 calendar days are subject to a 2% early redemption fee.


Morningstar Ratings™

As of March 31, 2016

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Morningstar Ratings™ ¹ Overall 1 Year 3 Year 5 Year 10 Year Sustainability Rating™ ²
Amana Income Fund — "Large Blend" Category  
Investor Shares (AMANX) ★ ★ ★ ★ n/a ★ ★ ★ ★ ★ ★ ★ ★ ★ ★ ★ Morningstar Sustainability Rating - High - 5 Globes
    % Rank in Category n/a 20 69 69 5 1
Institutional Shares (AMINX) ☆ ☆ ☆ ☆ n/a ☆ ☆ ☆ ☆ ☆ ☆ ☆ ☆ ☆ ☆ ☆ Morningstar Sustainability Rating - High - 5 Globes
    % Rank in Category n/a 16 65 67 4 1
    Number of Funds in Category 1,398 1,573 1,398 1,225 893 1,399
Amana Growth Fund — "Large Growth" Category  
Investor Shares (AMAGX) ★ ★ ★  n/a ★ ★ ★ ★ ★  ★ ★ ★ ★ Morningstar Sustainability Rating - High - 5 Globes
    % Rank in Category n/a 31 68 80 38 1
Institutional Shares (AMIGX) ☆ ☆ ☆ ☆ n/a ☆ ☆ ☆  ☆ ☆ ☆ ☆ ☆ ☆ ☆ Morningstar Sustainability Rating - High - 5 Globes
    % Rank in Category n/a 29 65 78 35 1
    Number of Funds in Category 1,524 1,663 1,524 1,315 937 1,542
Amana Developing World Fund — "Diversified Emerging Markets" Category  
Investor Shares (AMDWX) ★ ★ ★ ★ n/a ★ ★ ★ ★ ★ ★ ★ ★ n/a Morningstar Sustainability Rating - Above Average - 4 Globes
    % Rank in Category n/a 20 51 30 n/a 19
Institutional Shares (AMIDX) ☆ ☆ ☆ ☆ n/a ☆ ☆ ☆ ☆ ☆ ☆ ☆ ☆ n/a Morningstar Sustainability Rating - Above Average - 4 Globes
    % Rank in Category n/a 18 49 26 n/a 19
    Number of Funds in Category 591 848 591 410 n/a 586

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Performance data quoted herein represents past performance and does not guarantee future results.

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").

© 2016 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.

¹ Morningstar Ratings™ ("Star Ratings") are As of March 31, 2016. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% in each category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a fund is derived from a weighted average of performance figures associated with its 3, 5, and 10 year (if applicable) Morningstar Rating metrics. Morningstar ratings represented as unshaded stars are based on extended performance. These extended performance ratings are based on the historical adjusted returns prior to the inception date of the institutional shares and reflect the historical performance of the investor shares, adjusted to reflect the fees and expenses of the institutional shares.

² Morningstar Sustainability Ratings and Portfolio Sustainability Scores are as of February 29, 2016. 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 Amana Income Fund, Amana Growth Fund, and Amana Developing World Fund were rated based on 98%, 98%, and 65% of Assets Under Management, respectively.

The Amana Mutual Funds offer two share classes – Investor Shares and Institutional Shares, each of which has different expense structures.

The Morningstar Portfolio Sustainability Scores and Morningstar Sustainability Ratings are new and it is anticipated that Morningstar will issue the scores and ratings monthly. The Fund's portfolio is actively managed and is subject to change, which may result in a different Morningstar Sustainability Score and Rating.

% 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.


Important Disclaimers and Disclosure

Performance data quoted represents past performance which is no guarantee of future results.

This publication should not be considered investment, legal, accounting, or tax advice or a representation that any investment or strategy is suitable or appropriate to a particular investor's circumstances or otherwise constitutes a personal recommendation to any investor. This material does not form an adequate basis for any investment decision by any reader and Saturna may not have taken any steps to ensure that the securities referred to in this publication are suitable for any particular investor. Saturna will not treat recipients as its customers by virtue of their reading or receiving the publication.

The information in this publication was obtained from sources Saturna believes to be reliable and accurate at the time of publication.

All material presented in this publication, unless specifically indicated otherwise, is under copyright to Saturna. No part of this publication may be altered in any way, copied, or distributed without the prior express written permission of Saturna.

Asset-weighted average debt to market capitalization: his ratio represents the average debt to market capitalization of the portfolio. It is calculated by taking the debt to market capitalization for each company (its debt divided by its market capitalization), then weighting these values (multiplying each by the company's percent share of total portfolio assets), then totaling the weighted values.

Effective maturity and modified duration are measures of a fund's sensitivity to changes in interest rates and the markets. A fund's effective maturity is a dollar-weighted average length of time until principal payments must be paid. Longer maturities typically indicate greater sensitivity to interest rate changes than shorter maturities. Modified duration differs from effective maturity in that it accounts for interest payments in addition to the length of time until principal payments must be paid. Longer durations tend to indicate greater sensitivity to interest rate changes than shorter durations. Call options and other security specific covenants may be used when calculating effective maturity and modified duration.