Q1 2019 Commentary | Sextant Mutual Funds | Saturna Capital

 

 

Navigating Today's Volatile Markets

 

As Goes Q1, So Goes the Year?

The first quarter of 2019 presented a sea change from the fourth quarter of last year.  The S&P 500 index was down -13.52% in the fourth quarter of 2018, but it saw a double digit rebound in the first quarter of 2019, returning 13.65%.  This change in sentiment (or animal spirits) between the fourth quarter and the first had to do with two main issues: Federal Reserve Open Market Committee (FOMC) actions and trade tensions with China. 

We saw the fourth interest rate hike of 2018 last December yet bond yields continued to fall through the first quarter of 2019.  It seems that the bond market has some disagreement with the FOMC economic expectations – anticipating the Fed to have finished its tightening cycle, perhaps even forecasting one or two rate cuts in the current year.  We don’t think the Fed needs to hit the panic button just yet and cause investors to revise their growth forecasts lower, start worrying about recession, or making plans for pulling back capital investments. 

Trade tensions with China seemed to ramp up at the end of last year and ebb in the first quarter of 2019, but have since ratcheted back up again.  Consumer products manufacturers sourcing in China recovered as the US and China appeared more committed to settling their trade differences.  With China, momentum has also been building with its “Belt and Road” initiative, an effort often described as building a modern silk road, improving China's infrastructure links to large swaths of the globe.

The Tax Reform Act of 2018 had a substantial positive impact on profit margins and earnings expectations, but new concerns have arisen in the first quarter, specifically low unemployment and resulting wage pressures.  The first quarter was slow, but it typically is a weaker GDP quarter.  Economic forecasting, an uncertain science in the best of times, is especially difficult in an environment of rising trade tensions, while the impact on market sentiment of American-Chinese disagreements seems wholly negative.  The United States and other countries have legitimate trade grievances with China, but the process of resolving those differences will be a rocky one.

 

 

Sextant Growth Fund

During the first quarter the Sextant Growth Fund topped broad market indices, rising 15.48% versus the S&P 500 Index gain of 13.65%.  The Fund performed in line with the Morningstar Large Growth Category, which gained 15.67%.

The rebound in technology stocks led to their dominating the top contributors list for the quarter.  Amazon, Apple, Adobe, Microsoft, and Alphabet all did well, while 5G chip leader Xilinx enjoyed a stunning quarter.  Our interest in the growth of e-commerce and electronic payments spurred our investment in Worldpay, which was already performing well before Fidelity National Information Services announced an agreed offer for the company in March.  Heart valve manufacturer Edwards benefitted from the release of a large study showing the efficacy of its products in lower risk patients as an alternative to open heart surgery.  Previously, the product had been largely limited to higher-risk patients for whom open heart surgery was deemed too dangerous.

With the exception of Alaska Air and JP Morgan Chase, the stock moves among the detractors were minor.  Alaska has suffered disruption from its merger with Virgin America but the process is nearing completion and earnings are expected to improve sharply over the next few years.  While anecdotal, our experience flying indicates the demand for air travel remains strong.  We have reduced our position in JP Morgan due to the likelihood that interest rate developments will squeeze net interest margins going forward.  JPM has other levels to pull but we find these opaque.

RPM, Home Depot and JP Morgan Chase all dropped out of the top 10 holdings list and were replaced by Worldpay, Lowe’s, and Stanley Black & Decker.

As of March 31, 2019

10 Largest Contributors Return Contribution
Amazon.com 18.56% 1.17
Apple 20.94% 1.17
Worldpay, Class A 48.50% 1.17
Mastercard, Class A 25.02% 1.13
Adobe 17.79% 1.02
Microsoft 16.62% 0.85
Xilinx 49.35% 0.84
Alphabet, Class A 12.63% 0.72
Edwards Lifesciences 24.91% 0.58
Costco Wholesale 19.19% 0.50
10 Largest Detractors Return Contribution
Alaska Air Group -7.29% -0.08
RPM International -0.61% -0.04
Amgen  -1.65% -0.03
Bristol-Myers Squibb 1.75% -0.02
Texas Instruments -0.65% -0.01
Qualcomm 1.34% 0.00
DowDupont 2.34% 0.02
Booking Holdings 1.31% 0.03
Sensata Technologies Holding 0.40% 0.03
JP Morgan Chase 4.55% 0.16
Top 10 Holdings Portfolio Weight
Amazon.com  6.85%
Apple  6.55%
Adobe Inc.  6.23%
Alphabet, Class A  5.91%
Microsoft  5.61%
Mastercard, Class A  5.28%
Abbott Laboratories  4.18%
Worldpay, Class A  3.43%
Lowe's  3.08%
Stanley Black & Decker  2.97%
 

Sextant International

In the weak international stock market environment of 2018, the Sextant International Fund provided impressive downside protection.1  In the first quarter markets reversed, moving sharply higher.  In that environment, the Sextant International Fund continued to outpace the benchmarks, rising 14.01%, compared to a 10.13% gain in the MSCI EAFE Index, and the 13.00% appreciation of the Morningstar Foreign Large Growth Category. 

Despite the deteriorating economic conditions in Argentina and the end of the honeymoon period for Brazilian President Bolsonaro, MercadoLibre, the eBay/Amazon of South America, soared to new heights on good growth in the merchandise business and a rapidly expanding payments pillar.  In early March, MercadloLibre announced a $1 billion public offering and a $750 million strategic investment from PayPal.  The funds from the capital raise will be used to strengthen MELI’s e-commerce platform, its proprietary logistics infrastructure and its payments solutions.  French technology company Dassault Systemes, Dutch information media firm Wolters Kluwer, and Dutch global lithography leader ASML have regularly appeared among the top contributors and we see further opportunities for all three to expand their businesses.

Strong market performance during the quarter resulted in only two stocks making a negative contribution to Fund returns.  Belmond has agreed to be acquired by LVMH, but the stock could experience minor gyrations around the acquisition price.  Sinopharm had been performing strongly, but an earnings miss in March returned the shares to start-of-the-year levels. We remain confident about the opportunity for Sinopharm in the growing Chinese healthcare market.

 

 

 

 

1 The Sextant International Fund Investor Shares returned -3.71% for the 12 months ended December 31, 2018, versus -13.36% for the MSCI EAFE and -14.08% for the Morningstar Foreign Large Growth Category.

As of March 31, 2019

10 Largest Contributors Return Contribution
MercadoLibre 73.38% 3.36
Dassault Systemes ADR 26.71% 1.68
Wolters Kluwer 15.38% 1.41
ASML Holding 20.84% 1.02
NICE Systems ADR 13.22% 0.86
Novartis ADR 15.60% 0.66
Novo Nordisk ADR 15.28% 0.54
Unilever ADR 11.37% 0.45
BCE 13.82% 0.43
Toronto-Dominion Bank 10.35% 0.43
10 Largest Detractors Return Contribution
Belmond, Class A -0.40% -0.03
Sinopharm Group -0.86% -0.01
Subaru ADR 4.22% 0.02
Toyota Motor ADS 1.67% 0.04
Mitsubishi UFJ Financial ADR 1.64% 0.04
Nutrien 13.30% 0.16
Copa Holdings, Class A 3.17% 0.17
Industria De Diseno Textil 15.11% 0.18
Australia & New Zealand Banking ADR 8.62% 0.20
Koninklijke Philips 16.38% 0.20
Top 10 Holdings Portfolio Weight
Wolters Kluwer 9.89%
Dassault Systemes ADR 7.36%
MercadoLibre 7.36%
NICE Systems ADR 7.11%
Belmond, Class A 6.14%
ASML Holding NY 5.45%
Novartis ADR 4.60%
BASF ADR 4.28%
Unilever ADR 4.18%
Fomento Economico Mex ADR (FEMSA) 4.01%
 

Sextant Global High Income

The Sextant Global High Income Fund returned 7.27% in the first quarter of 2019, ending the period with $10.1 million of total net assets, including 11.5% of cash and equivalents.  The Fund underperformed its equity benchmark, the S&P Global 1200 Index, which returned 12.27%, but outperformed the Bloomberg Barclays Global High Yield fixed-income benchmark, which returned 6.43%.  It underperformed its Morningstar World Allocation peer group, which returned 7.81%.

Micro Focus International, a company the Fund purchased in the fourth quarter of 2018, was the best performer in the first quarter, with a return of 53.38%.  Our expectation for a share price revaluation based on the strength of the company’s core business came to fruition rather quickly, and we sold part of the position in the quarter with the company trading near our assessment of fair value.

The Chinese oil company CNOOC was the Fund’s next best performer, returning 21.85% in the first quarter.  The company was buoyed in part by an increase in the price of crude oil of about $15 during the quarter.

Applied Materials, another company whose shares the Fund purchased during the fourth quarter of 2018, was the Fund’s third best performer, with a return of 21.76%.  The share price of Applied Materials had declined more than 50% between March and December of 2018 due to fears of a slowdown in semiconductor demand.  The company and the industry have tended to have severe price swings in response to ebbs and flows in demand in the past, and investors seem to be conditioned to rush for the exits at the first sign of trouble.  However, our analysis led us to believe that the current episode of demand weakness would be more transient than past cycles — driven by trade tensions and logistics issues, and that we had a good case to “look through” the abbreviated cycle to robust pipeline of semiconductor demand in the years to come.

The Fund’s worst performer during the quarter was ADR of SK Telecom, which returned -8.62%.  Its share price has oscillated in a range between the low and high $20s during the past two years, but offers a dividend yield of above 4% and has had a low correlation (0.39) to the MSCI World Index during this time. Shares of the Nordic bank Skadinaviska Enskilda fell 4.02% in the quarter due to concerns about links to money laundering in its Baltic operations.  The company’s board sacked the CEO; despite these concerns, we believe reaction of the company’s shareholders and board to this issue was indicative of strong governance and values, and we added to our position during the quarter.

The Fund also added three new equity investments during the quarter: Subaru, Western Digital, and AT&T. All three companies sport attractive dividend yields and good prospects for recoveries in their beleaguered share prices. The Fund liquidated its holdings of Nutrien (formerly Potash) and National Oilwell Varco. 

Equity markets throughout the world staged a strong rebound on the heels of a steep selloff at the end of 2018.  Interestingly, however, US bond yields declined sharply at the end of the quarter, seeming to tell a different story than equities about risks to economic growth, while more or less forecasting the end of the tightening cycle the Federal Reserve has been engaged in for the past several years.  It is difficult to reconcile the behavior of bonds and equities with a cohesive world-view, and seems likelier that prices in one of these markets have diverged too far from the other.  With prices in both bond and equity markets having rallied significantly during the quarter (bond yields fall as a result of higher bond prices), the attractiveness of both markets has decreased.  Despite this, we continue to find decent opportunities to put cash to work.

As of March 31, 2019

10 Largest Contributors Return Contribution
Micro Focus International ADR 53.38% 1.22
CNOOC ADR 21.85% 0.58
Microchip Technology 15.82% 0.49
Applied Materials 21.76% 0.46
BHP Group ADR 20.57% 0.45
South32 ADR 14.24% 0.34
Western Digital 12.57% 0.28
Novartis ADR 15.60% 0.26
Mexico Bonos Desarrollo (6.50% 06/10/2021) 5.16% 0.24
GlaxoSmithKline ADR 10.98% 0.22
10 Largest Detractors Return Contribution
SK Telecom ADR -8.62% -0.22
Republic of Argentina (7.5% 4/22/2026) -1.59% -0.04
Federal Republic of Brazil (12.50% 01/05/2022) -2.36% -0.04
Subaru ADR -2.07% -0.04
Skandinaviska Enskilda Banken, Class A -4.02% -0.04
Colony TX NFM Sales Tax Revenue (7.625% 10/01/2042) -1.97% -0.01
United States T-Bill (05/07/2019) 0.02% 0.00
United States T-Bill (05/21/2019) 0.03% 0.00
Orange ADR 0.68% 0.00
Goodrich Petroleum 0.74% 0.00
Top 10 Holdings Portfolio Weight
United States Treasury Bond (6.125% 11/15/2027) Bond 5.10%
United States T-Bill (05/21/2019) Bond 4.93%
Mexico Bonos Desarrollo (6.50% 06/10/2021) Bond 4.22%
Microchip Technology Equity 2.87%
T-Mobile (6.50% 01/15/2026) Bond 2.64%
Jefferies Group (5.125% 01/20/2023) Bond 2.62%
Equinor ASA ADR Equity 2.61%
United States T-Bill (05/07/2019) Bond 2.47%
South32 ADR Equity 2.46%
Western Digital Equity 2.38%
 

Sextant Short-Term Bond Fund, Sextant Bond Income Fund

The Sextant Short-Term Bond Fund returned 1.62% in the first quarter, performing relatively better than its benchmark, the FTSE US BIG Govt/Corp 1-3 Year Bond Index, which returned 1.22%.  The Morningstar Short-Term Bond Category returned 1.71%.  The Sextant Bond Income Fund returned 3.58% during the quarter, compared to the 2.95% return of its benchmark, the FTSE US BIG Bond Index, and the 5.80% average return of the Morningstar Long-Term Bond category. 

During the first quarter, European and Chinese growth softened. Purchasing Managers Indexes slipped, and trade sanctions inhibited trade.  The US Federal Reserve Bank quickly put policy normalization on hold.  Their announcement triggered a risk-on reaction in the bond markets.  Yields continued their fourth quarter decline by dropping another 0.20% to 0.40%, with US Credit spreads narrowing further. Central Bank policies in the Eurozone, Japan, and China remained highly accommodative, in conflict with the US Fed’s plan to keep raising rates.  The US Fed Fund’s rate may remain in the 2.25% to 2.50% range for the rest of 2019.

The Fed chose the word “hold” carefully to avoid any misconception that the policy pause was a precursor to a policy reversal or a recession flag.  The Fed has yet to relinquish the position that the neutral rate of interest may still be around 3.00%.  The Fed’s “hold” terminology affords them the leeway to continue normalizing rates (upward) in the future should inflation recover.  The possible resolution to the US and China trade negotiations, an eventual conclusion to Brexit, a seasonal return to better growth in the second half of 2019, and recent yield curve steepening all argue for a neutral policy at this time.  US Treasury yields seem to be forecasting a 0.50% cut in the Federal Funds rate in 2019. 

Yield curves in almost all sectors including investment grade and high-yield corporates, as well as investment grade municipal bonds, have maintained their positive slope.   Only the US Treasury yield curve (and derivative curves) display inversions and only between three-month T-Bills and intermediate term notes.  The yield spread between three-month T-Bills and 30-year Treasury bonds has remained positive by 0.50%.  Until the yield on three-month T-Bills exceeds the yield on 30-year bonds, the US Treasury yield curve is not forecasting a recession. 

The opportunity for US based investors to capture real yields continues.  While US Treasury security nominal yields have fallen another 20-40 basis points this quarter, real yields have moved from -2.00% to about 0.40% over the last few years.  Real bond yields remain attractive.

Finally, there should be no doubt that the top priority for all central banks is to prevent global deflation.  Weak asset prices and slowing economic growth in the early part of the first quarter exposed the US Federal Reserve’s hypersensitivity to slowing in the real economy.  The irony of weakening economic indicators moving asset prices higher because of an eventual Fed ease has returned.  The appeal of principal safety and fixed-income cash flows was evident in the quarter.

As of March 31, 2019

Sextant Short-Term Bond Fund (STBFX)
Top 10 Holdings Portfolio Weight
United States Treasury Note (3.625% 02/15/2021) 8.65%
United States Treasury Note (2.50% 08/15/2023) 4.74%
US T-Note (2.875% 10/31/2020) 4.73%
McCormick & Co. (2.70% 08/15/2022) 4.67%
Honeywell International (4.25% 03/01/2021) 4.37%
Burlington Northern Santa Fe (3.05% 09/01/2022) 3.80%
Gilead Sciences (2.55% 09/01/2020) 3.75%
Avalonbay Comunities (2.85% 03/15/2023) 3.74%
3M (2.00% 06/26/2022) 3.71%
Qualcomm (2.60% 01/30/2023) 3.71%
Sextant Bond Income Fund (SBIFX)
Top 10 Holdings Portfolio Weight
United States Treasury Note (3.625% 02/15/2021) 9.91%
United States Treasury Bond (5.375% 02/15/2031) 4.84%
Intel (4.00% 12/15/2032) 3.67%
Apple (4.50% 02/23/2036) 3.65%
Microsoft (4.20% 11/03/2035) 3.58%
Burlington Northern Santa Fe (5.05% 03/01/2041) 3.32%
United States Treasury Bond (6.125% 08/15/2029) 2.80%
United Technologies Corp (6.05% 06/01/2036) 2.77%
Statoil (7.15% 01/15/2029) 2.74%
Puget Sound Energy (7.02% 12/01/2027) 2.74%
 

Sextant Core Fund

During the first quarter of 2019, the S&P 500 Index posted a total return of 13.65%. For the same period, the Sextant Core Fund returned 8.48%, underperforming its benchmark, the Dow Jones Moderate Portfolio Index, which returned 8.79%. Both equities and fixed-income contributed to the quarterly performance.

Equities

The Sextant Core Fund ended the quarter with an equity allocation of 61.5%, up slightly from the end of 2018, and in line with the 60% allocation mandate.  The number of equity positions (58) and the average position size (1.1%) remained consistent. 

The Fund’s equity concentration remains weighted toward the technology (generally software and semiconductors) and healthcare (primarily pharmaceuticals and medical devices) sectors.  Positions in the technology sector (Xilinx, Micro Focus Group) led performance, with detractors concentrated in the healthcare sector (Bristol Myers, Amgen).

During the quarter, the Fund generated little turnover among equity positions – one position swapped for another with a lower valuation, higher dividend yield, and similar growth prospects – and remained consistent with the value investment mandate of income producing securities of more seasoned companies.

Fixed Income

The US Federal Reserve Bank chose the word “hold” carefully to avoid any misconception that the policy pause was a precursor to a policy reversal or a recession flag.  The Fed has yet to relinquish the position that the neutral rate of interest may still be around 3.00%.  The Fed’s “hold” terminology affords them the leeway to continue normalizing rates (upward) in the future should inflation recover.  The possible resolution to the US and China trade negotiations, an eventual conclusion to Brexit, a seasonal return to better growth in the second half of 2019, and recent yield curve steepening all argue for a neutral policy at this time.  US Treasury yields seem to be forecasting a 0.50% cut in the Federal Funds rate in 2019. 

Yield curves in almost all sectors including investment grade and high-yield corporates, as well as investment grade municipal bonds, have maintained their positive slope.  Only the US Treasury yield curve (and derivative curves) display inversions and only between three-month T-Bills and intermediate term notes.  The yield spread between three-month T-Bills and 30-year Treasury bonds has remained positive by 0.50%.  Until the yield on three-month T-Bills exceeds the yield on 30-year bonds, the US Treasury yield curve is not forecasting a recession. 

As of March 31, 2019

10 Largest Contributors Return Contribution
Xilinx 49.35% 0.53
Micro Focus International ADR 53.38% 0.51
Ally Financial 22.11% 0.27
Apple 20.94% 0.24
VF 22.56% 0.23
Fastenal 23.87% 0.21
Honeywell International 20.93% 0.20
Parker Hannifin 15.61% 0.20
Oracle 19.43% 0.20
Canadian National Railway 21.30% 0.19
10 Largest Detractors Return Contribution
Bristol-Myers Squibb -7.38% -0.08
Amdocs -7.14% -0.07
Pfizer -1.88% -0.03
Amgen -1.65% -0.02
HP -4.24% -0.02
RPM International -0.61% -0.01
Lake Washington SD 414 WA BAB (4.906% 12/01/2027) 0.91% 0.01
New York City Housing Dev (2.65% 05/01/2021) 1.13% 0.01
PartnerRe Finance B (5.50% 06/01/2020) 1.08% 0.01
Skagit SD #1 (4.613% 12/01/2022) 1.17% 0.01
Top 10 Holdings Portfolio Weight
United States Treasury Bond (6.25% 8/15/23) Bond 3.58%
Welltower (4.25% 4/15/2028) Bond 2.53%
United States Treasury Note (2.75% 11/15/2023) Bond 2.51%
Gilead Sciences (3.70% 04/01/2024) Bond 1.81%
United States Treasury Note (2.00% 11/30/2022) Bond 1.74%
Union Pacific (3.375% 02/01/2035) Bond 1.64%
Toronto-Dominion Bank Equity 1.59%
Johnson & Johnson Equity 1.57%
Abbott Laboratories Equity 1.51%
Xilinx Equity 1.51%
 

Morningstar Sustainability Ratings™

As of March 31, 2019

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Sextant Growth Fund

 

Sextant Core Fund

Investor Shares (SSGFX) Morningstar Sustainability Rating - Above Average SCORX Morningstar Sustainability Rating - Above Average
Z Shares (SGZFX) Morningstar Sustainability Rating - Above Average Among 694 Allocation 50% — 70% Equity Funds
Among 1,254 Large Growth Funds
 

Sextant International Fund

 

Sextant Short-Term Bond Fund

Investor Shares (SSIFX) Morningstar Sustainability Rating - High STBFX Morningstar Sustainability Rating - Above Average
Z Shares (SSIFX) Morningstar Sustainability Rating - High Among 476 Short-Term Bond Funds
Among 366 Foreign Large Growth Funds
 
The Sextant Bond Income Fund has not yet received a Sustainability Rating.  

Sextant Global High Income Fund

SGHIX Morningstar Sustainability Rating - Average
Among 389 World Allocation Funds

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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.

Morningstar Sustainability Ratings are as of February 28, 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:

Sextant Growth Fund 97%
Sextant International Fund 94%
Sextant Core Fund 74%
Sextant Short-Term Bond Fund 68%
Sextant Global High Income Fund 65%

The Sextant Growth and Sextant International Funds offer two share classes – Investor Shares and Z Shares, each of which has different expense structures.

 

Performance Summary

As of March 31, 2019

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Average Annual Total Returns (Before Taxes) 1 Year 3 Year 5 Year 10 Year Expense RatioA
  Gross Net
Sextant Growth Investor Shares (SSGFX) 14.35% 13.36% 8.80% 12.82% 0.92% 0.92%
Sextant Growth Z Shares (SGZFX)B 14.67% n/a   n/a   n/a 0.70% 0.70%
S&P 500 Index 9.50% 13.54% 10.91% 15.92% n/a
 
Sextant International Investor Shares (SSIFX) 8.54% 12.88% 6.04% 7.56% 1.05% 1.04%
Sextant International Z Shares (SIFZX)B 8.86% n/a   n/a   n/a   0.84% 0.82%
MSCI EAFE Index -3.05% 7.82% 2.81% 9.47% n/a
 
Sextant Core (SCORX) 5.69% 7.08% 4.19% 7.46% 0.88% 0.87%
Dow Jones Moderate Portfolio Index 3.14% 7.68% 5.48% 9.84% n/a
 
Sextant Global High Income (SGHIX)C 5.18%  11.74% 4.82% n/a   0.97% 0.75%
S&P Global 1200 Index 4.16% 11.57% 7.48% 13.01% n/a
Bloomberg Barclays  Global High Yield Corporate Bond Index 2.99% 7.55% 3.64% 11.12% n/a
 
Sextant Short-Term Bond (STBFX) 3.21% 1.26% 1.19% 1.83% 0.91% 0.60%
FTSE USBIG Govt/Corp 1-3 Year Index 3.01% 1.31% 1.19% 1.55% n/a
 
Sextant Bond Income (SBIFX) 4.23% 2.54% 2.98% 4.42% 0.86% 0.65%
FTSE US Broad Investment-Grade Bond Index 4.49% 2.05% 2.74% 3.64% n/a

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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 www.sextantfunds.com. 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.

A By regulation, expense ratios shown are as stated in a Fund’s most recent prospectus or summary prospectus, dated March 27, 2019, and incorporate results from the fiscal year ended November 30, 2019. Higher expense ratios may indicate higher returns relative to a Fund’s benchmark. The Adviser has voluntarily capped actual expenses of Sextant Global High Income at 0.75%, Sextant Short-Term Bond at 0.60% and actual expenses of Sextant Bond Income at 0.65% through March 31, 2020.

B Z Shares of Sextant Growth and Sextant International Funds began operations June 2, 2017.

C Sextant Global High Income Fund began operations March 30, 2012. Its annualized since inception return as of March 31, 2019, was 5.56%.

The S&P 500 Index is an index comprised of 500 widely held common stocks considered to be representative of the US stock market in general. The MSCI EAFE Index is an international index focused on Europe, Australasia, and the Far East. The MSCI ACWI Ex-US Index, produced by Morgan Stanley Capital International, measures equity market performance throughout the world excluding US-based companies. The S&P Global 1200 Index is a global stock market index covering nearly 70% of the world's equity markets. The Bloomberg Barclays Global High Yield Corporate Bond Index is a rules-based, market-value weighted index engineered to measure the non-investment grade, fixed-rate, taxable, global corporate bond market. The Dow Jones Moderate Portfolio Index is a broad-based index of stock and bond prices. The FTSE Gov./Corp. Investment Grade Index 1-3 Years is a broad-based index of shorterterm investment grade US government and corporate bond prices. The FTSE US Broad Investment-Grade Bond Index is a broad-based index of medium and long-term investment grade bond prices. Investors cannot invest directly in the indices.

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.

 

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.

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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.

Forward price-to-earnings is a quantification of the ratio of price-to-earnings (PE) using forecasted earnings for the PE calculation. While the earnings used are estimates and are not as reliable as current earnings data, the benefit in using estimated PE is that the forecasted earnings can either be for the next 12 months or for the next full-year fiscal period.

The Axios Harris Poll 100 uses a two step process to rank the reputations of the most visible companies in the United States.  First, the poll identifies the top of mind awareness of companies who either excelled or faltered in society, then a second group of survey participants ranks the companies across key dimensions of corporate reputation.  For more information visit theharrispoll.com/axios-harrispoll-100/

Lowess smoothing (locally weighted scatterplot smoothing) is a technique used in statistical analysis that allows for fitting a smooth or curved line to data points, especially where data is noisy or sparse.

The Growth Fund may invest in smaller companies, which involve higher investment risks in that they often have limited product lines, markets and resources, or their securities may trade less frequently and have greater price fluctuation than those of larger companies.

The International Fund involves risks not typically associated with investing in US securities. These include fluctuations in currency exchange rates, less public information about securities, less governmental market supervision, and lack of uniform financial, social, and political standards.

The Core Fund involves the risks of both equity and debt investing, although it seeks to mitigate these risks by maintaining a widely diversified portfolio that includes domestic stocks, foreign stocks, short and long-term bonds, and money market instruments.

Investment in the Global High Income Fund entails the risks of both equity and debt securities, although it seeks to mitigate these risks through a widely diversified portfolio that includes foreign and domestic stocks and bonds. Issuers of high-yield securities are generally not as strong financially as those issuing higher quality securities. Investments in high-yield securities can be speculative in nature. High-yield bonds may have low or no ratings and may be considered “junk bonds.”

The risks inherent in the Short-Term Bond and Bond Income Funds depend primarily on the terms and quality of the obligations in their portfolios, as well as on bond market conditions. When interest rates rise, bond prices fall. When interest rates fall, bond prices rise. Bonds with longer maturities (such as those held by the Bond Income Fund) usually are more sensitive to interest rate changes than bonds with shorter maturities (such as those held by the Short-Term Bond Fund). The Funds entail credit risk, which is the possibility that a bond will not be able to pay interest or principal when due. If the credit quality of a bond is perceived to decline, investors will demand a higher yield, which means a lower price on that bond to compensate for the higher level of risk.