Q4 2019

2019 was a great year for equity markets, with the S&P 500 Index returning 31.49%, the best annual profit since 2013. At Saturna, we’re not forecasting 2020 to generate the outsized gains seen in 2019. Still, we enter the new decade optimistically.

It’s rare for the market to experience downturns or big profits following a year when returns exceed 25%. Since 1927, the S&P 500 experienced downturns in only 8% of the years following a year with returns in excess of 25%. Over this same period, only three years saw repeated returns greater than 25%. While statistics may support our forecast, we note “past returns may not indicate future performance.” Why then do we believe 2020 will follow a similar course of decent returns? Four reasons:

  • the four-year US presidential election cycle,
  • calming global trade tensions,
  • a reduction of Brexit’s uncertainties, and
  • accommodative yet stretched global monetary policies.

After minimal debate, both parties in the US Congress agreed to bigger spending and deficits, and the economy is roaring.  Touting his business forward approach to governing and claiming success for the long bull market, President Trump will likely focus his re-election campaign on the economy.  As the country moves from primaries to the general election, an incumbent’s narrative always pulls the opposition toward the middle. 

Also awaiting the election returns, the US-China trade war should see reduced agitations.  As President Trump looks to claim victory and President Xi takes advantage of US election related pressures, the two sides are compelled to sign an agreement.  This “phase one” deal is set to be signed on January 15th.  The truce calls for China to increase imports of US farm goods and the US to decrease tariffs on Chinese products.  This deal may address topics that frequently gain headlines, but it fails to address more fundamental issues on state-supported industry and tactics that the Chinese government uses to capture Western technologies.

Brexit will also have continued impact through 2020.  The UK leaving the European Union on January 31, 2020, will not mark the end of the process.  December’s election saw the Conservatives gain an 80-seat majority, removing the roadblocks to the withdrawal agreement.  Now a transition period begins where a trade agreement is negotiated, defining how the EU and the UK do business going forward.  This deal is set to take effect December 31, 2020.  As the UK “gets Brexit done” this month, expect a first bounce in the economy.  However, details of the trade agreement, and uncertainty related to it, will likely produce volatility in 2020 as the December deadline approaches. 

Beyond geopolitics, 2019 marked a year of renewed expansionary monetary policy as fears of recession sprouted across the globe.  These fears led the Federal Reserve to cut interest rates while central banks elsewhere amassed record levels of negative yielding debt during the summer of 2019.  In turn, low to negative interest rates injected fuel into equities, igniting the record bull market. 

Although the amount of negative yielding debt has since been cut, central banks are operating with less dry powder to reignite the economy should fear of recession renew. We expect that in 2020 central banks will play the part of observer as they balance the need to keep tools on hand for an economic downturn with the want to see 2019’s stimulus work its way through the financial system.  At its December meeting, the Federal Reserve confirmed a wait and see approach, noting members “agreed that maintaining the current stance of monetary policy would give the Committee some time to assess the full effects on the economy of its policy decisions and communications over the course of this year.” 

S&P 500 vs. Two-Year US Treasurys

Environmental, social, and governance factors gained in importance and visibility throughout 2019.  Wildfires in the Amazon, Indonesia, and Australia, protests in Hong Kong, and intensifying debates surrounding the social role of big technology firms all highlight this trend.  Attention focused on the social impact of technology firms such as China Inc., Facebook, Google, and Apple, and their role in elections and human rights.  As these firms have gained dominance, their rising power is also gaining greater scrutiny for the often-hidden risks they pose to human rights especially in the realm of surveillance and data privacy.1

According to a poll conducted across 10,000 people in nine countries – over 70% of people are concerned about how technology companies collect and use their personal data and want governments to do more to regulate the space.   Attempts to regulate data privacy in the US have so far been relatively unsuccessful, but continued public pressure could bring about a change for how these companies operate.  To quote Philip Alston, United Nations Special Rapporteur on poverty and human rights, “We are entering into a different operating environment where our current governance and civic structures for human rights protection are inadequate to deal with the darker side of big tech. ”  As investors, Saturna continues to evaluate the impacts to these firms, and their impact to society.  

If 2019 was a year in which the rising tide lifted all boats, in 2020 we expect to find out which boats are in need of repair and which are ocean worthy.  As such, we see returns in 2020 favoring firms with strong fundamentals and earnings growth.  Continued multiple expansion would be a surprise.  

What could go wrong?  Perhaps the breakout of realpolitik in the Mideast, as the US moves back leaving Arabia and Israel richly armed, impotent Europe dithers, Turkey rebuilds its loose empire (Kurdistan, Libya) with Russian aid, and Iran dominates its “allies” for a route (across Iraq, Syria, and Lebanon) to the Mediterranean?


Amana Income Fund


In the fourth quarter the Amana Income Investor Shares rebounded impressively, returning 9.58% and surpassing the 9.07% gain of the S&P 500 Index.  For 2019, the Fund returned 25.28%, trailing the 31.49% return of the S&P 500 Index.  Fund returns relative to the benchmark were hampered by a combination of stock selection and sector allocation challenges. Several sectors in which the Fund typically does not participate, such as Utilities and Communications Services (excessive debt), or Financial Services (prohibited activity), experienced strong performance in 2019.  Sectors in which the Fund has significant investments such as Technology and Industrials also performed well, boosted by positive stock selection.  Conversely, Consumer Staples, Health Care, and Materials performed relatively poorly, and our selections tended to lag. 

Our Technology investments in Microsoft, Microchip, and Taiwan Semiconductor registered impressive returns.  Microsoft has done an excellent job building its Azure cloud services business, while we believe a strong period of semiconductor demand will arrive in the new decade supporting Microchip and Taiwan Semiconductor.  Whether the rally starts in 2020 or 2021 remains to be seen but recent signs have been positive.  Industrials dominated the remainder of the top contributors led by Carlisle, a conglomerate engaged in a number of activities including agriculture, mining, construction, medical technology, transportation, etc. To some extent, Carlisle has its finger in the pies of all of our other industrial holdings. Illinois Tool Works is equally diverse and a company with a track record of strong management consistently driving revenue and earnings higher. As its name implies, Rockwell has significant exposure to industrial automation, an arena that should provide a steadily growing market over the coming years. Parker Hannifin also has automation exposure, along with aerospace and hydraulics.  Air Products may have received some benefit of disruption from the Praxair/Linde merger as it took off this year following modest performance in 2018. Honeywell engaged in corporate restructuring last year, slimming the company to a focus on aerospace, building technologies, performance materials, and safety solutions. Finally, PPG overcame an earlier accounting stumble to register solid 2019 performance. 

Among the laggards for the year, several experienced positive performances with only Resideo, Methanex, and Dupont declining by significant amounts. Resideo, which focuses primarily on residential security, was spun out from Honeywell in late 2017 and has yet to find its footing. Our holding is small, so the negative contribution was minor despite the large drop in price. Methanex is captive to movements in commodity markets and can be quite volatile. Last year the shares soared until the fourth quarter sell-off, subsequently failing to recover. Dupont emerged from the merger followed by deconsolidation involving Dow Chemical and an agricultural business that now stands on its own as Corteva. While the valuation is attractive, investors have yet to warm to the company. Alcon resulted from another spin, coming from Novartis, while Pfizer was engaged in its own corporate restructuring. During the year it merged its consumer health business with that of GSK, forming a joint venture, while also merging its generics business with Mylan. We expect the leaner Pfizer to demonstrate better performance going forward. 3M’s decline wasn’t large, except in the context of a market that jumped over 30%. The stock declined sharply in the second quarter following missed earnings and reduced guidance. Earnings for the year are anticipated to have declined at a double-digit pace. Nonetheless, we expect earnings to return to the growth track in the current year, while the shares offer an attractive dividend yield and rock-solid balance sheet.

As of December 31, 2019

10 Largest Contributors YTD Return Contribution
Microsoft 57.57% 2.34
Carlisle 63.09% 1.58
Taiwan Semiconductor ADS 64.81% 1.48
Microchip Technology 48.07% 1.32
Illinois Tool Works 45.59% 1.30
Rockwell Automation 37.85% 1.28
Parker Hannifin 40.76% 1.20
Air Products & Chemicals 49.98% 1.20
Honeywell International 36.72% 1.11
PPG Industries 32.81% 1.01
10 Largest Detractors YTD Return Contribution
Pfizer -6.92% -0.26
Dow 1.84% -0.12
3M -4.26% -0.11
Methanex -11.04% -0.10
DuPont de Nemours  -9.61% -0.06
AbbVie 1.50% -0.04
Resideo Technologies -41.95% -0.03
Alcon -2.15% 0.00
Rio Tinto ADS 7.26% 0.03
Nutrien 5.71% 0.04
Top 10 Holdings Portfolio Weight
Eli Lilly 5.81%
Microsoft 5.06%
Rockwell Automation 4.34%
McCormick & Co 4.24%
Illinois Tool Works 3.84%
Intel 3.84%
PPG Industries 3.81%
Honeywell International 3.79%
Microchip Technology 3.76%
Carlisle 3.58%
30-Day Yield
Investor Shares (AMANX): 0.98%
Institutional Shares (AMINX): 1.17%

Asset Weighted Average Debt to Market Cap: 17.5%


Amana Growth Fund


In the fourth quarter, the Amana Growth Fund Investor Shares rose 8.57% versus the 9.07% return of the S&P 500 Index. For the year, however, the Fund’s return of 33.07% exceeded the 31.49% gain of the S&P 500 Index.  Within its Morningstar Large Growth category, Amana Growth finished 2019 in the 42nd percentile, marking the fourth consecutive year the Fund performed in the top half of the group.  Like Amana Income, Amana Growth was somewhat held back relative to the Index by its lack of participation in Finance and Communication Services, but it more than made up for that headwind with excellent stock selection in Health Care, Industrials, and Consumer Discretionary.  In Technology, the Fund’s largest exposure, selection was in line with the benchmark.

The return numbers among the top contributors are stunning: 89% for Apple, 93% for ASML, returns in the 60’s for Estée Lauder, Taiwan Semiconductor, Qualcomm, and Keysight.  Equally stunning is that Apple once again commands the top spot for Fund contribution; a position it has captured several times and a testament to long-term investing. Despite slowing iPhone sales, Apple’s services businesses have developed into meaningful contributors to revenue, with highly attractive margins. Digital media leader Adobe has also appeared as a top contributor over multiple years.  Its appreciation wasn’t as great but it’s a large position, leading to the strong contribution.  We visited ASML at the end of last year and came away convinced that its position within lithography would only grow stronger.  In 2019, investors agreed.  Cosmetics is a favored category given defensive characteristics that, in no way, hamper growth prospects, while Estée Lauder stands as a global leader.  Without making any predictions, were the Democrats to capture the White House, significant re-writing of the tax code might be expected, which would certainly boost Intuit’s prospects.  We believe the new decade will be a strong one for semiconductor stocks, and as the world’s leading foundry, Taiwan Semiconductor will certainly benefit.  Qualcomm faced a raft of challenges over the past few years but commands an unassailable lead in 5G intellectual property.  While TJX wasn’t the strongest performer in 2019, it owns an enviable long-term record, and the company will likely benefit from the growing movement toward higher minimum wages. Since its spin out from Agilent in 2014, Keysight’s electronic design and test business which encompasses both software and hardware, has grown at an impressive pace, resulting in the stock roughly quintupling since early 2016.  We believe the investment case remains compelling.

Only one of the Fund’s 10 biggest laggards declined in price, which was due to the timing of our sale of Alphabet for reasons concerning company ethics and the potential impact of government intervention in its business.  While the latter did not come to pass in 2019, it will certainly be a topic of discussion throughout this presidential election year.  The Bristol-Myers CVR (contingent value right) was distributed to shareholders of Celgene as part of the acquisition.  The CVR either pays out or expires worthless depending on the success of three Celgene drugs in development.  Bristol-Myers itself had a reasonable year as the immuno-oncology drug Opdivo continues to grow strongly.  All of major pharma, however, was under pressure from political considerations.  We became shareholders in Synnex when it acquired Convergys and plan to maintain the position.  With the exception of Clorox, we remain committed to the investment thesis for the remainder of the positions.  Some of them, including Pepsi and Lincoln Electric, enjoyed quite strong returns, which we expect to continue.  Returning to Clorox, we do see challenges in the business but also believe there may be opportunities in restructuring or even acquisition.  The $19 billion market capitalization would not pose a challenge for several larger household products companies, while the firm holds significant brand equity.

Since the end of the third quarter, strong performance from ASML, Amgen, and Agilent pushed each into the top 10 holdings list.  They replaced Trimble, Xilinx, and Cisco. 

As of December 31, 2019

10 Largest Contributors YTD Return Contribution
Apple 88.97% 3.36
Adobe 45.78% 2.21
ASML Holding 93.14% 2.16
Estée Lauder, Class A 60.33% 1.80
Intuit 34.11% 1.61
L3Harris Technologies 49.21% 1.55
Taiwan Semiconductor ADS 64.81% 1.34
Qualcomm 60.67% 1.22
TJX Companies 38.77% 1.21
Keysight Technologies 65.32% 1.04
10 Largest Detractors YTD Return Contribution
Alphabet, Class A -0.03% 0.01
Bristol-Myers Squibb CVR 44.02% 0.01
Clorox 2.24% 0.05
Bristol-Myers Squibb 13.79% 0.07
Synnex 61.73% 0.11
Gartner 20.54% 0.25
Eli Lilly & Co 16.15% 0.31
Oracle 19.33% 0.31
Lincoln Electric Holdings 25.40% 0.35
PepsiCo 27.37% 0.35
Top 10 Holdings Portfolio Weight
Apple 6.65%
Adobe 5.93%
Intuit 5.30%
Estee Lauder, Class A 4.26%
ASML Holding 4.10%
Amgen 3.85%
TJX Companies 3.84%
Church & Dwight 3.80%
L3Harris Technologies 3.47%
Agilent Technologies 3.45%

Asset Weighted Average Debt to Market Cap: 10.6%


Amana Developing World Fund


During the fourth quarter, the Amana Developing World Fund Investor Shares gained 7.98%, significantly less than the 11.84% jump in the MSCI Emerging Markets Index.  Nonetheless, the Fund’s full year return of 18.68% eclipsed the 18.42% gain in the benchmark index.  The Morningstar Diversified Emerging Markets category also outperformed, and the Fund finished in the 54th percentile for the year.  Political and economic disruptions throughout large parts of the developing world, especially Latin America, combined with governance and economic concerns surrounding benchmark heavyweight China, led to the Fund maintaining a large cash balance during the year.  Its outperformance rested largely on our decision to increase the Technology weighting, boosted by strong selection within the sector. 

Taiwanese Technology firm Silergy, which produces power integrated circuits for the consumer, industrial, computer, and communications industries, topped the contribution table after more than doubling during the year.  The company is well-positioned with leading edge products directed toward high-growth end uses and will be a beneficiary of 5G, the Internet of Things, automation, and other long-term industrial trends.  Semiconductor companies experienced a strong year in 2019 and, as the world’s largest foundry, Taiwan Semiconductor participated fully.  VF was punished in the 2018 fourth quarter sell-off but rebounded strongly in the current year.  Its North Face and Vans brands are performing well.  Trade battles made 2018 a challenging year for power tool manufacturer Techtronic but it also enjoyed a strong comeback, boosted by a robust housing market in the US.  Despite the macro-economic challenges facing South Africa, Clicks Group is an outstanding retailer and has continued to perform well in a difficult environment.  Trade friction also dinged Kansas City Southern in 2018 but the stock, which has the majority of its track in Mexico, staged a solid rally, especially in the fourth quarter following the agreement on the USMCA trade pact among the US, Mexico, and Canada.  Despite Japan-South Korean political friction which has made access to certain materials difficult, Samsung rallied sharply in the fourth quarter after lackluster trading earlier in the year.  Chinese mobile gaming, messaging, and electronic payments giant Tencent stumbled in the second quarter when Chinese authorities placed restrictions on gaming but has subsequently recovered.  Advantech, a leader in robust industrial computers, rounds out the Taiwan troika of top performers.  Finally, the rally in gold prices pushed Barrick Gold sharply higher.

Samsonite suffered from weakening travel and corporate governance issues and has been sold.  Ramayana caters to the lower income shopper in Indonesia and seemed well-placed to grow its business.  It performed well through the first part of the year but then dropped on missed sales.  Baidu suffered from increasing search competition from other large Chinese players but is expected to return to solid growth, and recovered some of its lost ground in the fourth quarter.  We have exited the holding in Aspen Pharma after acquisitions changed the nature of the business.  Taiwanese waste disposal company Sunny Friend has a good business and tremendous opportunities in China, although they may take time to realize. Regulatory issues hit Manila Electric in the fourth quarter.  We believe the Philippines remains a growth market.  Currency weakness boosted wheat import expense for Brazilian pasta and cookie leader M. Dias Branco.  South African media conglomerate Naspers transferred its holdings in Tencent to a new company called Prosus, which began trading in the Netherlands in the fourth quarter.  Finally, International Flavors has agreed to a merger with DuPont’s nutrition and biosciences unit and we are evaluating whether that combination merits continued inclusion in the Fund. 

Kansas City Southern moved into the top 10 holdings list on easing trade tensions with Mexico and the apparent deal on the USMCA.  It replaced Colgate-Palmolive.

As of December 31, 2019

10 Largest Contributors YTD Return Contribution
Silergy 115.82% 1.95
Taiwan Semiconductor ADS 64.81% 1.50
VF 51.72% 1.39
Techtronic Industries 56.32% 1.36
Clicks Group 40.66% 1.29
Kansas City Southern 62.35% 1.24
Samsung Electronics 41.79% 1.06
Tencent Holdings ADR 21.97% 1.02
Advantech 50.03% 1.00
Barrick Gold 38.98% 0.98
10 Largest Detractors YTD Return Contribution
Samsonite International -35.02% -0.81
Ramayana Lestari Sentosa -33.93% -0.54
Baidu ADS -20.30% -0.35
Aspen Pharmacare Holdings -28.02% -0.22
Sunny Friend Environmental Tech -9.15% -0.17
Manila Electric -9.78% -0.15
KPJ Healthcare -6.35% -0.14
M. Dias Branco -13.93% -0.14
Prosus ADR -5.81% -0.05
International Flavors & Fragrances -1.68% -0.03
Top 10 Holdings Portfolio Weight
Tencent Holdings ADR 4.75%
Clicks Group 3.93%
SM Prime Holdings 3.67%
Silergy 3.62%
Taiwan Semiconductor ADS 3.35%
VF 3.29%
Samsung Electronics 3.15%
Techtronic Industries 3.14%
Barrick Gold 3.05%
Kansas City Southern Industries 2.73%

Asset Weighted Average Debt to Market Cap: 14.2%


Amana Participation Fund


For the fourth quarter, the Amana Participation Fund Institutional Shares returned 0.18% and the Investor Shares returned 0.02%, compared to the FTSE Sukuk Index's gain of 0.70%.  For the year ended December 31, 2019, the Institutional Shares returned 6.95% and the  Investor Shares returned 6.61%, compared to the FTSE Sukuk Index's return of 10.80%.  The Funds’ performance can be attributed, in part, to the GCC region’s favorable investment climate but also to our investment process that emphasizes ownership of high-quality issuers led by management teams exercising prudence and demonstrating sound long-term financial practices. 

We'd like investors to note that the FTSE Sukuk benchmark is constructed differently than the Fund.  The benchmark aims to measure the performance of global sukuk and has a 18.30% allocation to Indonesia and 16.08% to Saudi Arabia, while retaining a 34.27% weighting in issues with a duration of seven years and longer.4  The Amana Participation Fund’s exposure to Indonesia was 2.12%, with 8.72% of issues from Saudi Arabia.  The Participation Fund is required to maintain a duration between three to five years.

The Amana Participation Fund Institutional Shares provided a 30-day yield of 2.38%, and the Investor Shares provided a 30-day yield of 2.17%.  The Fund reported an effective duration of 3.20 years.  The Fund is diversified among 30 separate issues to meet its investment objectives of capital preservation and current income, while being entirely invested in US dollar denominated securities.

Sukuk investors were rewarded in 2019 with favorable investment returns, as the market continued to mature and develop.  In recent years, the Gulf Cooperation Council region has evolved to become an active issuer of both conventional debt and Sharia-compliant investment certificates (sukuk).  As can be observed in the accompanying illustration, the GCC region issued $95.4 billion in conventional debt and Sharia-compliant investment securities, an increase of 25.9% from the prior year’s issuance of $75.7 billion, and a three-year compound annual growth rate (CAGR) of 15.2%!  Over the last four years, Sharia-compliant investment securities have represented, on average, 20.8% of the total issuance, with 2019’s total issuance coming in at 20.7%. 

GCC Issuance Trends of USD Denominated Debt and Sharia Compliant Investment Certificates

The GCC region has come a long way over the past decade in both security issuance and its ability to attract investors. This is due to their desirable credit ratings, large financial reserves, enormous stockpiles of hydrocarbon assets, and favorable yield enhancement relative to other sovereign issues, such as US Treasurys.  The accompanying illustration highlights the GCC members’ high credit ratings compared to other developed economies.  While there are many appealing attributes in the region, it is still nascent and subject to geopolitical risks, like the recent drone attack on the Saudi Aramco’s oil processing facilities in Abqaiq on September 14, 2019.

  Moody's S&P Fitch Outlook
Qatar Aa3 AA- AA- Neg/Stable
Abu Dhabi Aa2 AA AA Stable
KSA A1 A- A- Stable
Dubai NR NR NR  
Bahrain B2 B+ BB- Stable
Oman Ba1 BB BB+ Neg/Stable
Kuwait Aa2 AA AA  
China Aa3 AA- A+ Stable
UK Aa2 AA+ AAA Stable
USA Aaa AA+ AAA Stable

However, by and large, the GCC region remains investor friendly for a variety of factors including an improving economic outlook, low inflation, government backed fiscal stimulus, government reforms, and increasing foreign direct investments.  According to the latest forecasts by the International Monetary Fund (IMF), GCC growth is expected to rebound to 2.5% in 2020, driven by real oil GDP growth of 1.9% (compared to 1.4% in 2019). This reflects a mix of rising oil production in Kuwait and Saudi Arabia, and a pickup in gas output in Oman and Qatar.  Non-oil GDP growth looks like it will increase to 2.8% in 2020, up from 2.4% in 2019; it’s expected to be supported by infrastructure spending in Kuwait and UAE due to a boost in tourism from Expo 2020.5 

The top two performing issues in 2019 included Oman sovereign sukuk and Indonesian sovereign, which returned 17.61% and 14.95%, respectively.  The two worst-performing issues over the year include United Arab Emirates’ (UAE) based healthcare firm, NMC Healthcare, and UAE based Emirates Islamic Bank, each returning -2.35% and 0.41%, respectively.

Over the upcoming year we anticipate a supportive investment climate for sukuk investors.

As of December 31, 2019

Top 10 Holdings Portfolio Weight
Almarai Sukuk 4.90%
QIB Sukuk 4.62%
 CD Sukuk 4.46%
DP World Crescent 4.35%
Oman Sovereign Sukuk 4.26%
DIB Sukuk 4.21%
SOQ Sukuk A 4.11%
KSA Sukuk 3.95%
DIFC Sukuk 3.91%
EMG Sukuk 3.91%
30-Day Yield
Investor Shares (AMAPX): 2.17%
Institutional Shares (AMIPX): 2.38%
Credit Profile
AA 4.11%
A 18.68%
BBB 40.02%
BB 7.84%
Not rated 24.38%
Cash and equivalents 4.98%

Credit ratings are the lesser of S&P Global Ratings or Moody’s Investors Service.  If neither S&P nor Moody’s rate a particular security, that security is categorized as not rated (except for US Treasury securities and securities issued or backed by US agencies which inherit the credit rating for the US government).  Ratings range from AAA (highest) to D (lowest).  Bonds rated BBB or above are considered investment grade.  Credit ratings BB and below are lower-rated securities (junk bonds).  Ratings apply to the creditworthiness of the issuers of the underlying securities and not the Fund or its shares.  Ratings may be subject to change.


Performance Summary

As of December 31, 2019

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Average Annual Total Returns (Before Taxes)   1 Year 3 Year 5 Year 10 Year 15 Year Expense Ratio
Amana Income Investor Shares (AMANX)   25.28% 13.05% 8.94% 10.54% 9.67% 1.06%
Amana Income Institutional Shares (AMINX)   25.57% 13.32% 9.21% n/a n/a 0.82%
S&P 500 Index   31.49% 15.26% 11.69% 13.55% 8.99% n/a
Amana Growth Investor Shares (AMAGX)   33.07% 20.70% 13.51% 12.81% 11.09% 1.03%
Amana Growth Institutional Shares (AMIGX)   33.41% 20.98% 13.77% n/a n/a 0.79%
S&P 500 Index   31.49% 15.26% 11.69% 13.55% 8.99% n/a
Amana Developing World Investor Shares (AMDWX)   18.68% 6.75% 0.38% 0.56% n/a 1.31%
Amana Developing World Institutional Shares (AMIDX)   18.72% 6.91% 0.59% n/a n/a 1.14%
MSCI Emerging Markets Index   18.42% 11.56% 5.61% 3.68% 7.48% n/a
Amana Participation Investor Shares (AMAPX)   6.61% 2.98% n/a n/a n/a 0.88%
Amana Participation Institutional Shares (AMIPX)   6.95% 3.21% n/a n/a n/a 0.64%
FTSE Sukuk Index   10.80% 5.03% 4.13% 4.99% n/a n/a

Expense ratios shown are as stated in the Funds' most recent Prospectus dated September 27, 2019.

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 1-800-728-8762 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 MSCI Emerging Markets Index, produced by Morgan Stanley Capital International, measures equity market performance in over 20 emerging market countries. The MSCI ACWI Ex-US Index, produced by Morgan Stanley Capital International, measures equity market performance throughout the world excluding US-based companies. The FTSE Sukuk Index measures the performance of global Islamic fixed income securities, also known as sukuk. The FTSE All-World Ex-US Index comprises Large and Mid cap stocks providing coverage of Developed and Emerging Markets excluding the US. The CBOE Volatility Index, known by its ticker symbol VIX, is a popular measure of the stock market's expectation of volatility implied by S&P 500 index options. 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 Participation Fund began operations September 28, 2015.

Income, Growth, Developing 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.


Morningstar Ratings™

As of December 31, 2019

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Morningstar Ratings™ A Overall 1 Year 3 Year 5 Year 10 Year Sustainability Rating™B
Amana Income Fund — "Large Blend" Category  
Investor Shares (AMANX) ★ ★ n/a ★ ★ ★ ★ ★ ★ ★
Morningstar Sustainability Rating: 1 Globe
    % Rank in Category n/a 85 62 75 86 93
Institutional Shares (AMINX) ★ ★ ★ n/a ★ ★ ★ ★ ★ ★ ☆ ☆
Morningstar Sustainability Rating: 1 Globe
    % Rank in Category n/a 85 57 71 84 93
    Number of Funds in Category 1,203 1,387 1,203 1,058 808 1,196
Amana Growth Fund — "Large Growth" Category  
Investor Shares (AMAGX) ★ ★ ★ ★ n/a ★ ★ ★ ★ ★ ★ ★ ★ ★ ★ ★
Morningstar Sustainability Rating: 5 Globes
    % Rank in Category n/a 42 25 30 66 8
Institutional Shares (AMIGX) ★ ★ ★ ★ n/a ★ ★ ★ ★ ★ ★ ★ ★ ☆ ☆ ☆
Morningstar Sustainability Rating: 5 Globes
    % Rank in Category n/a 38 24 27 63 8
    Number of Funds in Category 1,218 1,360 1,218 1,086 811 1,223
Amana Developing World Fund — "Diversified Emerging Markets" Category  
Investor Shares (AMDWX) ★ ★ n/a ★ ★ ★ ★
Morningstar Sustainability Rating: 4 Globes
    % Rank in Category n/a 54 91 97 99 16
Institutional Shares (AMIDX) ★ ★ n/a ★ ★ ☆ ☆
Morningstar Sustainability Rating: 4 Globes
    % Rank in Category n/a 53 90 97 97 16
    Number of Funds in Category 712 835 712 577 242 706
Amana Participation Fund — "Emerging Markets Bond" Category  
Investor Shares (AMAPX) n/a n/a n/a n/a
    % Rank in Category n/a 97 98 n/a n/a n/a
Institutional Shares (AMIPX) n/a n/a n/a n/a
    % Rank in Category n/a 94 97 n/a n/a n/a
    Number of Funds in Category 239 286 239 n/a n/a n/a

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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").

© 2019 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.

A Morningstar Ratings ("Star Ratings") are as of December 31, 2019.  The Morningstar Rating for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history.  Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes.  It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance (not including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance.  The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.  The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics.  The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

B Morningstar Sustainability Ratings are as of November 30, 2019. 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 Fund's portfolios are actively managed and is subject to change, which may result in a different Morningstar Sustainability Score and Rating each month.

The Funds were rated on the following percentages of Assets Under Management:

Amana Income Fund 100%
Amana Growth Fund 100%
Amana Developing World Fund 100%

As of November 30, 2019, the Amana Participation Fund did not receive a Sustainability 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.

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



1 Zein, Zafirah. 5 Trends That Will Shape Sustainability and Business in 2020, Eco-Business, January 2, 2020.

2 Bacchi, Umberto. Privacy Concerns Pushing People to Change Online Behavior, Poll Shows, Reuters, December 3, 2019. https://www.reuters.com/article/us-global-tech-privacy/privacy-concerns-pushing-people-to-change-online-behavior-poll-shows-idUSKBN1Y803D 

 3 Special Rapporteur on Extreme Poverty and Human Rights, United Nations Human Rights Office of the High Commissioner. https://www.ohchr.org/EN/Issues/Poverty/Pages/SRExtremePovertyIndex.aspx

4 FTSE Russell Factsheet, FTSE Sukuk Index.  December 31, 2019

5 Arablan, G.H., Barakat, M.S., and Naayem, J.H. Mena Daily Update, Bank Audi, December 30, 2019. https://www.bankaudigroup.com/GroupWebsite/openAudiFile1.aspx?id=4389


Important Disclaimers and Disclosure

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.

We note that unlike many funds, the Amana Funds' expenses are not subsidized by its adviser, Saturna Capital, therefore the 30-Day Yields presented are actual, according to the SEC's calculation methodology.

About the Authors

Nicholas Kaiser, MBA

Nick Kaiser MBA
Portfolio Manager Amana Income & Growth Funds

Scott Klimo

Scott Klimo CFA®
Chief Investment Officer
Portfolio Manager, Amana Developing World Fund
Deputy Portfolio Manager, Amana Income & Growth Funds

Patrick Drum

Patrick Drum MBA, CFA®
Portfolio Manager, Amana Participation Fund

Elizabeth Alm

Elizabeth Alm CFA®
Deputy Portfolio Manager, Amana Participation Fund

Levi Stewart Zurbrugg

Levi Stewart Zurbrugg MBA, CPA®
Senior Investment Analyst