Q3 2016 • September 30, 2016 | Saturna Capital

Following Principles of Islamic Finance

Q3 2016 Highlights:

  • Stock markets continued their upward march, with both developed and emerging markets posting gains
  • Potential for a December Fed rate hike but, by no means, certain
  • Possible Fed action and the presidential election heighten the likelihood of increased volatility, so caution is warranted
  • IMF concerned that monetary policy has run out of steam


Stock markets continued their upward march in the third quarter, although there were some shifts in leadership. Over the second quarter value stocks were the clear winners, while growth lagged. That reversed in Q3 with the Russell 1000 Growth Index staging a solid rebound, while the Russell Value Index trailed. International developed markets were weak performers through the first half of the year, but in Q3 the MSCI EAFE Index rallied strongly, pulling the index into positive territory for the year, despite the Brexit vote (approving the UK's exit from the European Union) and continuing economic challenges in Japan. Meanwhile, emerging markets continued their surge, and the MSCI Emerging Markets Index, up 16.02% through the end of Q3, is the strongest performing major index year-to-date.

So what can we expect for the remainder of the year? It seems certain that the lack of any action by the Federal Reserve to raise rates has contributed to stock market resilience. With fixed income instruments providing low to no to negative returns, the stock market and real estate become default options for many investors; at least for those not stashing cash and gold in abandoned Swiss military caves.¹ With the next Fed meeting scheduled the week before the presidential election, it seems an unlikely time to raise rates. In addition, no press conference is scheduled for the November meeting, and we do not think the Fed would raise rates without an explanation by Chairwoman Janet Yellen. Therefore, we, along with much of the rest of the market, believe December to be the most likely time for a rate hike. What happens after that is anybody's guess, but we might recall that last year's December rate increase was a factor in stock markets declining sharply through the first six weeks of this year. We must also factor in a changing of the guard in the White House and the reality that neither candidate is especially well-liked.

In short, we view the fourth quarter and the first months of 2017 as a time for considerable caution.

Apart from potential interest rate increases and a new president, one other factor raising concerns for the stock market is desultory economic expansion around the world. The International Monetary Fund recently updated its global GDP growth forecasts and the changes are not for the better.² While the IMF states, "…our baseline forecast sees improving world growth in the years ahead," caveats quickly follow the assertion. Meanwhile, the IMF identifies a conundrum that has long given us pause: "But while lower-for-longer interest rates have their upsides, they also reflect difficult economic realities." So how do we address these difficulties? Like many before them, the IMF argues that "overstretched monetary policies" must be supported by fiscal action and structural reform. Surveying the political establishment across the developed world, where might we expect such changes? Certainly not in the increasingly polarized US Congress or the hectoring Bundestag. Japan's Diet has demonstrated no ability to enact reform, and the UK has its hands full with negotiating the terms of its exit from European Union, while several countries in the EU face the prospect of new leadership with decidedly more nativist leanings. Any structural reform that arises in such circumstances would likely be less than market friendly.

The good news in all of this is that the United States economy is expected to continue growing, if at a lackluster pace.

The IMF sees real GDP in the US expanding 1.6% this year and 1.8% in 2017. Equally, the IMF projects EU area growth of 1.7% and 1.5% for this year and next, and sees Japan clocking in at a pedestrian 0.5% and 0.6%. Given a shrinking population and workforce, the glacial Japanese expansion comes as no surprise. The world will not be entirely devoid of economic activity, however, as the IMF expects India to expand its economy 7.6% this year and next, while China continues a slow deceleration to 6.6% growth this year and 6.2% next. The ASEAN area, which we often discuss, is expected to maintain its growth rate at 4.8% this year and accelerate to 5.1% in 2017.³


Amana Income Fund

The Amana Income Fund Investor Shares took a breather in the third quarter, returning 1.63%, compared to 3.85% for the S&P 500 and 3.48% for the Russell 1000 Value Index. Year-to-date the Fund has returned 9.51%, well ahead of the S&P 500 at 7.84%, but slightly trailing the Russell Value Index at 10.00%.

A combination of stock selection and sector allocation conspired to hold back the Amana Income Fund from performing better than the benchmarks in the third quarter. From an allocation perspective, Financial stocks, which did not perform well during the first half of the year, staged a rally despite the egregious malfeasance at Wells Fargo that was publicized during the quarter. Meanwhile, sectors in which we have heavy exposure, such as Consumer Staples, saw their momentum halted. Year-to-date the Energy sector has made the single largest contribution to benchmark returns. Our underweight position reflects the challenges of investing for the long-term in this highly cyclical sector and the growing risk that a significant portion of their assets may become "stranded" by concerns over climate change and advances in non-fossil fuel sources of energy.

On the stock selection side, generally good performance was held back by Health Care, which provided a negative year-to-date contribution to returns despite the benchmark being solidly positive. The problem can almost entirely be laid at the doorstep of one stock — Bristol-Myers Squibb — which sold off severely when its cancer drug Opdivo failed to meet the endpoint in a lung cancer study. While the drug has been approved for other uses, better results in the lung cancer study would have significantly expanded the potential market, and those better results had been baked into expectations for the stock.

On a more positive note, good selection in the Industrial sector, which represents our single largest sector exposure, was illustrated by the number of industrials among the top contributors, including Illinois Tool Works, Parker Hannifin, Rockwell Automation, and Canadian National Railway.

The final major shift that occurred in the quarter was the reversal of fortunes for the Consumer Staples sector. General Mills, Smucker, and McCormick, which all provided excellent first-half returns, were punished in Q3 and were among the largest detractors from Fund performance. Whether investors felt that the dividend yields no longer justified valuations that had been bid up or there was some other factor, the sector rapidly morphed from being one of our top contributors to one of the largest detractors.

Given the change in leadership during the quarter, three companies dropped out of the top 10: Bristol-Myers Squibb, General Mills, and Kimberly-Clark, and were replaced by Microsoft, Genuine Parts, and Rockwell Automation.

As of September 30, 2016

Ten Largest Contributors Return Contribution
Illinois Tool Works 15.68% 0.62
Microchip Technology 23.14% 0.53
Parker Hannifin 16.77% 0.38
Microsoft 13.27% 0.38
Intel 15.97% 0.28
Taiwan Semiconductor ADS 16.62% 0.28
Rockwell Automation 7.20% 0.21
Canadian Natl Railway 6.74% 0.16
Methanex 23.76% 0.16
Praxair 8.17% 0.15
Ten Largest Detractors Return Contribution
Bristol-Myers Squibb -26.69% -0.95
General Mills -9.83% -0.32
Kimberly-Clark -7.58% -0.23
JM Smucker -10.64% -0.22
Nike, Class B -4.36% -0.14
McCormick & Co -5.95% -0.14
Novartis ADR -4.30% -0.12
Pfizer -2.99% -0.09
Carlisle -2.62% -0.07
Johnson & Johnson -1.96% -0.03
Top Ten Holdings Portfolio Weight
Illinois Tool Works 4.6%
Eli Lilly 3.8%
Honeywell International 3.6%
3M 3.5%
Colgate-Palmolive 3.4%
Microsoft 3.3%
PPG Industries 3.1%
Genuine Parts 3.1%
Nike, Class B 3.0%
Rockwell Automation 3.0%
30-Day Yield
 Investor Shares (AMANX): 1.26%
 Institutional Shares (AMINX): 1.51%

Asset Weighted Average Debt to Market Cap: 15.5%


Amana Growth Fund

As noted above, the trend of growth lagging value reversed in the third quarter, and the Amana Growth Fund Investor Shares appreciated 3.60% against 3.85% for the S&P 500 and 4.58% for the Russell 1000 Growth Index. Year-to-date the Investor Shares have returned 7.87%, outpacing both the S&P 500 and the Russell 1000 Growth Index at 7.84% and 6.00%, respectively.

Information Technology represents the largest sector in the Fund by a wide margin. As has been the case throughout the year, the Technology sector made the largest contribution to Fund returns during the third quarter, although the total return of our selections slightly trailed the benchmark Technology sector performance. Most of our positions handily outpaced the sector, but we suffered losses in a few stocks, including Akamai and Infosys. We have eliminated the investment in Akamai due to increasing competitive pressures, while the Infosys position has been sharply reduced.

As was the case with Amana Income, Health Care presented challenges for Amana Growth during the third quarter, and again it was largely due to one stock. In this case, however, the stock was Novo Nordisk. We have owned Novo in the Fund since the late 1990s at an original price of $2.22. Today it trades in the neighborhood of $40, so it's been an outstanding investment. Despite the weak performance this year, we remain confident in the outlook for Novo's diabetes franchise. For the year, Health Care selection has been positive, and our stocks have easily outperformed the benchmark.

Technology clearly dominated the top contributors during the quarter, led by Apple, even though the introduction of the iPhone 7 was not the event we have seen in the past. Meanwhile, Qualcomm was not locked out of the Samsung business as some had feared, and Adobe's transition from licensing to subscription pushed margins higher than expected.

Novo Nordisk has had a tough year but, as noted, we are sticking with it. Church & Dwight and Clorox also suffered in the rush out of Staples. We are more attracted to Church & Dwight's growth model but believe mergers and acquisitions lurk as a possibility for both companies.

The only change this quarter among the top 10 holdings was Qualcomm replacing Novo Nordisk.

As of September 30, 2016

Ten Largest Contributors Return Contribution
Apple 18.89% 0.72
Qualcomm 28.95% 0.71
Adobe Systems 13.34% 0.65
Amgen 10.14% 0.47
EMCOR Group 21.22% 0.41
Trimble Navigation 17.24% 0.40
Alphabet, Class A 14.29% 0.31
Taiwan Semiconductor ADS 16.62% 0.31
Cisco Systems 11.58% 0.29
Xilinx 18.55% 0.29
Ten Largest Detractors Return Contribution
Novo Nordisk ADS -21.91% -0.72
Church & Dwight -6.52% -0.31
Lowe's -8.40% -0.29
Clorox -9.01% -0.20
Express Scripts Holding -6.87% -0.19
Infosys ADS -11.35% -0.15
Akamai Technologies -5.47% -0.13
Gartner -9.20% -0.13
Novartis ADR -4.33% -0.11
TJX Companies -2.86% -0.10
Top Ten Holdings Portfolio Weight
Adobe Systems 5.0%
Apple 4.5%
Church & Dwight 4.4%
Intuit 4.2%
Amgen 4.1%
TJX Companies 3.4%
Lowe's 3.3%
Estee Lauder, Class A 3.2%
Qualcomm 3.1%
Eli Lilly 3.0%

Asset Weighted Average Debt to Market Cap: 13.1%


Amana Developing World Fund

Emerging markets soared in Q3, with the MSCI Emerging Markets Index rising 9.03%, while the Amana Developing World Fund Investor Shares had a difficult time, rising only 1.56%. For the year-to-date period the Investor Shares have gained 11.40%, while the MSCI Emerging Markets Index is up 16.02%.

The Developing World Fund's lagging performance in Q3 resulted from both sector and regional factors. Finance is the largest sector in the benchmark and made the second largest contribution to returns, while our only exposure is to BIMB Bank in Malaysia.

We are also dramatically overweight Health Care, believing it to be a secular growth opportunity in emerging markets. Year-to-date that thesis has played out well, and Health Care has provided good returns. In Q3, however, several of the stocks that performed strongly in the first half fell off a cliff. We view the development as more a case of the typical nonlinear movement of stock markets rather than an indictment of our thesis.

Information Technology is the second largest sector in the benchmark and provided the largest contribution to sector return in Q3. Since the Developing World Fund does not participate in the Taiwanese and Korean markets, viewing them as developed markets, we have an underweight position in the sector. That was exacerbated by Taiwan and Korea being two of the three best performing countries during the quarter, with China being the other. We are also underweight China and looking to increase our exposure.

We are lightly exposed to Latin America, which has not been beneficial, but our largest position, MercadoLibre — the eBay of Argentina — has been a spectacular holding and is the only top 10 contributor not domiciled in the Asia-Pacific region. Indonesia has rebounded strongly this year as President Jokowi appears to have found his footing. Samsonite closed its acquisition of business travel luggage maker Tumi and cemented its position as the largest luggage company in the world. Bangkok Airways is a new investment initiated in late June. It has preferential landing rights at one of Thailand's most attractive tourist destinations, a well-developed network to secondary locations throughout Asia, and excellent code share agreements with international airlines.

Hikma had been one of the Fund's top contributors until it reset expectations at the time of its interim results. While a setback, we still find the story attractive over the longer term. Pandora was also very strong earlier in the year and continues to report good numbers, but concerns over extraordinary monetary policy and the possible impact on the price of gold held it back over the summer. Infosys disappointed during its latest results and subsequent investigation led us to sell the investment.

Clothing distributor and brand manager VF Corp along with home and personal care company Unilever have been replaced in the top 10 by Bangkok Airways and Indonesian pharmaceutical company Kalbe Farma.

As of September 30, 2016

Ten Largest Contributors Return Contribution
MercadoLibre 31.60% 1.19
Tencent Holdings ADR 21.35% 0.66
Samsonite International 16.13% 0.43
Kalbe Farma 13.52% 0.35
Clicks Group 10.25% 0.32
Telekomunikasi Indonesia ADS 7.52% 0.27
Bangkok Airways 9.47% 0.24
Indofood CBP Sukses Makmur 11.41% 0.22
Baidu ADS 10.25% 0.22
China Mobile ADS 7.92% 0.16
Ten Largest Detractors Return Contribution
Hikma Pharmaceuticals -20.49% -0.46
Pandora -10.82% -0.28
Mead Johnson Nutrition -12.47% -0.25
VF -8.29% -0.23
Bangkok Dusit Med Services -7.13% -0.23
Aspen Pharmacare Holdings -8.95% -0.22
Dr. Reddy's Laboratories  ADR -8.89% -0.21
Infosys ADS -10.82% -0.21
Turk Traktor ve Ziraat Makineleri -6.98% -0.17
Techtronic Industries -8.46% -0.15
Top Ten Holdings Portfolio Weight
MercadoLibre 4.9%
Tencent Holdings ADR 3.8%
Telekomunikasi Indonesia ADS 3.8%
SM Prime Holdings 3.6%
Clicks Group 3.4%
Samsonite International 3.2%
Bangkok Dusit Medical Services 3.0%
Kalbe Farma 2.9%
AboitizPower  2.9%
Bangkok Airways 2.7%

Asset Weighted Average Debt to Market Cap: 14.4%


Amana Participation Fund

The end of the third quarter of 2016 marks a significant milestone as the Amana Participation Fund completed its first full year in operation. We want to thank our investors for a successful first year with the first Islamic-compliant, income-producing fund in the United States entirely dedicated to non-equity securities. We are both delighted and humbled in our role of serving Participation Fund investors.

During the quarter, developed economies' central banks continued to promote accommodative monetary policies in an attempt to spur economic growth. In September, the US Federal Reserve, through its Federal Open Market Committee (FOMC), opted to leave interest rates unchanged while the Bank of Japan elected to employ a new and unconventional strategy of targeting the yield of its 10-year government debt to offer a zero rate of return.

Years of accommodative monetary policies have led to an abnormal environment where negative-yielding debt has become the fastest growing subsector of the debt market. That statement in itself is both hard to acknowledge and difficult to contemplate in terms of its lasting impacts. For example, in March of 2015, negative-yielding notes and bonds totaled almost $2.0 trillion.4 Nearly eighteen months later, the amount of negative-yielding debt grew, if that term can be properly applied, to $13.4 trillion in August of 2016,5 representing over a 600% increase. According to bond rating agency Fitch, owing to the -24 basis point average yield of these bonds, the equivalent of $24 billion in capital is destroyed annually through the accepted issuance of negative-yielding debt.6

Such a low interest rate environment motivates investors to search globally, particularly among emerging market economies, for higher yielding assets. According to an August article by Reuters, emerging markets bond portfolios saw average weekly inflows dramatically increase to $870 million from an average of $85 million during the first half of the year.7 The pace and increasing size of capital movements are nearing records with investors pouring $6.5 billion into developing equity and debt funds in one week last July, the largest weekly inflow since September 2013.8 The large capital flows have led some large index providers, such as JP Morgan, to begin including sukuk in conventional fixed income emerging market benchmarks.9 The inclusion of sukuk into emerging market indexes isn't entirely a new phenomenon as Barclays Capital and Vanguard have been including these instruments among their emerging market investment vehicles since 2015.

As of September 30, the Amana Participation Fund Institutional Shares (AMIPX) returned 4.04% year-to-date compared to 5.80% offered by the Citi Sukuk Index. Over the same period the Amana Participation Investor Shares (AMAPX) offered 3.90%. During the quarter Institutional Shares returned 1.08% and Investor Shares returned 1.02%, versus the benchmark's return of 1.46%. The portfolio holds 20 separate issues and sports a modified duration of 4.4 years, a 30-day yield for the Investor Shares of 1.55%, and a 30-day yield for the Institutional Shares of 1.85%. The Fund is positioned well from a credit perspective to meet its investment objective of capital preservation and current income while being entirely invested in US dollar-denominated securities.

As of September 30, 2016

Top Ten Holdings Portfolio Weight
 Perusahaan Penerbit SBSN  5.3%
 Sharjah Sukuk  5.1%
 Saudi Electric Global  5.0%
 Dubai DOF Sukuk  5.0%
 TF Varlik Kiralama  5.0%
 QIB Sukuk  4.9%
 RAK Capital  4.9%
 JAFZ Sukuk 2019  4.3%
 Perusahaan Penerbit SBSN III  4.0%
 EMG Sukuk  3.9%
30-Day Yield
 Investor Shares (AMAPX): 1.55%
 Institutional Shares (AMIPX): 1.85%

Credit Profile

Moody's Investor Services
Aa2 3.9%
A1 3.7%
A2 8.8%
A3 5.1%
Baa1 6.1%
Baa2 10.8%
Baa3 13.1%
Ba1 3.6%
Unrated 27.3%
Cash and equivalents 17.6%


¹ Miller, H., Baker, S. Secret Alpine Gold Vaults Are the New Swiss Bank Accounts, Bloomberg BusinessWeek, September 30, 2016.

² International Monetary Fund World Economic Outlook, October 2016: Subdued Demand, Symptoms and Remedies.

³ International Monetary Fund World Economic Outlook, October 2016: Subdued Demand, Symptoms and Remedies.
http://www.imf.org/external/pubs/ft/weo/2016/02/pdf/text.pdf, pg. 2

4 Goodman, D., Mnyanda, L. Euro-Area Negative-Yield Bond Universe Expands to $1.9 Trillion, Bloomberg.com, February 27, 2015.

5 Wigglesworth, R., Platt, E. Value of negative-yielding bonds hits $13.4tn, Financial Times, August 12, 2016.

6 Chang, Sue. Investors lose $24 billion a year on negative-yielding bonds, MarketWatch, May 6, 2016.
http://www.marketwatch.com/story/investors-lose-24-billion-a-year-on-negative-yielding-bonds-2016-05-05 ]

7 Rabouin, Dion. Emerging markets portfolio allocations highest since Aug. 2015: IIF, Reuters, August 22, 2016.

8 Abramowicz, Lisa. The Emerging-Markets Debt Time Bomb, BloombergGadfly, July 21, 2016.

9 Ananthalakshmi, A., Vizcaino, B., Cohn, C. JPMorgan adds sukuk to emerging markets indices, Reuters, August 18, 2016.


Performance Summary

As of September 30, 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) 16.36% 8.18% 12.91% 8.25% 1.15%
Amana Income Institutional Shares (AMINX)¹ 16.69% 8.45% n/a   n/a   0.90%
S&P 500 Index 15.43% 11.15% 16.35% 7.23% n/a
Russell 1000 Value Index 16.18% 9.69% 16.13% 5.83% n/a
Amana Growth Investor Shares (AMAGX) 13.51% 10.18% 12.91% 7.75% 1.09%
Amana Growth Institutional Shares (AMIGX)¹ 13.81% 10.44% n/a   n/a   0.85%
S&P 500 Index 15.43% 11.15% 16.35% 7.23% n/a
Russell 1000 Growth Index 13.75% 11.81% 16.57% 8.84% n/a
Amana Developing World Investor Shares (AMDWX)² 13.21% -2.61% 0.43% n/a   1.51%
Amana Developing World Institutional Shares (AMIDX)¹ 13.48% -2.29% n/a   n/a   1.20%
MSCI Emerging Markets Index 16.78% -0.56% 3.03% 3.94% n/a
Amana Participation Investor Shares (AMAPX)² 3.17% n/a   n/a   n/a   1.12%
Amana Participation Institutional Shares (AMIPX)¹ 3.42% n/a   n/a   n/a   0.72%
Citi Sukuk Index 5.78% 5.02% 4.62% 4.51% n/a

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Expense ratios shown are as stated in the Funds' most recent Prospectus dated September 22, 2016.

The Amana Participation Fund began operations September 28, 2015, 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.

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

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

The Amana Participation Fund began operations September 28, 2015.

Income, Growth Fund, Developing World, and Participation Fund 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 September 30, 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 7 70 84 5 1
Institutional Shares (AMINX) ★ ★ ★ n/a ★ ★ ★ ☆ ☆ ☆ ☆ ☆ ☆ ☆ Morningstar Sustainability Rating - High - 5 Globes
    % Rank in Category n/a 7 66 82 4 1
    Number of Funds in Category 1,392 1,531 1,392 1,206 911 1,395
Amana Growth Fund — "Large Growth" Category  
Investor Shares (AMAGX) ★ ★ ★  n/a ★ ★ ★ ★ ★  ★ ★ ★ ★ Morningstar Sustainability Rating - High - 5 Globes
    % Rank in Category n/a 15 37 89 46 1
Institutional Shares (AMIGX) ★ ★ ★ ★ n/a ★ ★ ★ ★ ☆ ☆ ☆ ☆ ☆ ☆ Morningstar Sustainability Rating - High - 5 Globes
    % Rank in Category n/a 13 31 87 44 1
    Number of Funds in Category 1,482 1,627 1,482 1,285 924 1,470
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 65 83 96 n/a 14
Institutional Shares (AMIDX) ★ ★ ★ n/a ★ ★ ★ ☆ ☆ n/a Morningstar Sustainability Rating - Above Average - 4 Globes
    % Rank in Category n/a 63 79 94 n/a 14
    Number of Funds in Category 602 867 602 435 n/a 592

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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 September 30, 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 August 31, 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 97%, 98%, and 68% 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 Amana Participation Fund has not yet been rated by Morningstar.

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.

A Fund's 30-Day Yield, sometimes referred to as standardized yield, current yield, or SEC yield, is based on methods of computation prescribed in SEC Form N-1A. Calculated by dividing the net investment income per share during the preceding 30 days by the net asset value per share on the last day of the period, the 30-Day Yield provides an estimate of a Fund's investment income rate, but may not equal the actual income distribution rate.

The MSCI EAFE Index is an international index focused on Europe, Australasia, and the Far East.