Saturna Sustainable Bond Fund
Overview
Investment Objective
Current income and capital preservation.
Principal Investment Strategies
Under normal conditions, the Fund invests at least 80% of its net assets in bonds of issuers located throughout the world (including emerging markets) that the Fund’s adviser believes demonstrate sustainable characteristics. The Fund typically invests in US and foreign government bonds, municipal bonds, asset-backed securities, high quality commercial paper, and bank obligations. For purposes of this investment policy, the Fund’s adviser (Saturna Capital Corporation) considers issuers with sustainable characteristics to be those issuers that are more established, consistently profitable, financially strong, and with robust policies in the areas of the environment, social responsibility, and corporate governance (“ESG”).
The Fund’s adviser employs a fundamental research driven approach to stock selection and portfolio construction. The adviser’s focus on sustainability considers financial and non-financial characteristics from diverse sources including regulatory filings, market data, and data supplied by third-party vendors. The adviser uses that information to identify issuers with strong balance sheets, capable management teams with a track record of success, good cash flow, prospects for sustainable above-average earnings growth, and to assess issuers’ business models, over the long term.
The Fund’s adviser employs a proprietary sustainable rating system based on its own, as well as third-party, data to identify issuers believed to present low risks in ESG. The use of third-party data does not include third-party ESG ratings or criteria established by third parties for third-party ratings. The Fund’s ESG evaluation process considers risks and opportunities holistically, meaning an issuer will not necessarily be excluded from investment due to any one particular factor if the overall analysis results in a favorable evaluation by the adviser. The Fund’s adviser also uses negative screening to exclude security issuers primarily engaged in higher ESG risk businesses such as alcohol, tobacco, pornography, weapons, gambling, and fossil fuel exploration, production, or refining. The Fund generally does not invest in any issuer with exposure to the foregoing businesses, but may invest in an issuer if the issuer is not primarily engaged in higher ESG risk businesses.
Under normal conditions, the Fund maintains a dollar-weighted average maturity of three years or more, invests at least 65% of its assets in bonds within the four highest grades (AAA, AA, A, or BBB) at the time of purchase, and may invest up to 35% in unrated and high-yield bonds (“junk bonds”).
Investment Style
The Saturna Sustainable Bond Fund actively seeks issuers that demonstrate sustainable financial characteristics as well as a commitment to identifying and managing environmental, social, and governance-related risks.
- Targeted to investors seeking capital preservation and current income
- Investment-grade emphasis with the ability to invest across the credit spectrum, including high-yield
- Flexible selection of duration, currencies, and issuer types
- Globally diversified
- Screens exclude security issuers primarily engaged in higher ESG risk businesses; no alcohol, tobacco, pornography, weapons, gambling, or fossil fuel extraction
- Positive ESG factors considered include resource efficiency, community and labor relations, board composition, and business ethics
- Characteristics of financial sustainability include management strength, low debt, and strong balance sheets
Portfolio Managers
Portfolio Manager since 2015
Deputy Portfolio Manager since 2019
Performance
Short Term Performance
| As of August 31, 2023 | Ticker | 3 Month | 6 Month | YTD | |||
|---|---|---|---|---|---|---|---|
| Saturna Sustainable Bond | SEBFX | 0.87% | 2.55% | 3.24% | |||
| FTSE World BIG Bond | -0.48% | 1.43% | 1.49% | ||||
| MSCI All Country World | 6.73% | 10.62% | 15.22% | ||||
Average Annual Total Returns
| Month-end, as of August 31, 2023 | Ticker | 1 Year | 3 Year | 5 Year | 10 Year | Expense Ratio² | 30-Day Yield¹ | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Saturna Sustainable Bond | SEBFX | 2.30% | -1.78% | 0.61% | n/a | 0.86% | 4.68% | ||||
| FTSE World BIG Bond | 0.22% | -6.58% | -1.37% | -0.02% | n/a | n/a | |||||
| MSCI All Country World | 14.53% | 7.73% | 7.98% | 9.11% | n/a | n/a | |||||
| Quarter-end, as of June 30, 2023 | Ticker | 1 Year | 3 Year | 5 Year | 10 Year | Expense Ratio² | 30-Day Yield¹ | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Saturna Sustainable Bond | SEBFX | 2.97% | -0.84% | 0.89% | n/a | 0.86% | 4.67% | ||||
| FTSE World BIG Bond | -1.11% | -5.41% | -1.25% | 0.13% | n/a | n/a | |||||
| MSCI All Country World | 17.13% | 11.51% | 8.63% | 9.30% | n/a | n/a | |||||
Performance data quoted represents past performance which is no guarantee of future results. 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. Current performance may be higher or lower than performance data quoted. Standardized returns current to the most recent month-end can be obtained by visiting our Month-end Returns Page or by calling toll free 1-800-728-8762. The Fund cannot guarantee that its investment objective will be met. Securities of the Fund are offered and sold only through the prospectus or summary prospectus.
¹ A Fund's 30-Day Yield, sometimes referred to as "standardized yield" or "SEC yield,” is expressed as an annual percentage rate using a method of calculation adopted by the Securities and Exchange Commission (SEC). The 30-Day Yield provides an estimate of a Fund's investment income rate, but may not equal the actual income distribution rate.
² Expense ratios shown are as stated in the Fund's most recent prospectus or summary prospectus dated March 31, 2023.
Growth of $10,000
This chart illustrates the performance of a hypothetical $10,000 invested at the beginning of the period and redeemed at the end of the period, and assumes reinvestment of all dividends and capital gains.
The FTSE WorldBIG Bond Index is a multi-asset, multi-currency benchmark, which provides a broad-based measure of the global fixed income markets. The MSCI All Country World Index covers approximately 85% of the global investable universe, with large- and mid-cap representation across 23 developed market and 23 emerging market countries. Investors cannot invest directly in the indices.
Distributions
| Record Date | Ex, Pay and Reinvest Date |
Ordinary Income |
Qualified Income |
Short-Term Capital Gains |
Long-Term Capital Gains |
Total Distributions (per share) |
|---|---|---|---|---|---|---|
| 12/14/2022 | 12/15/2022 | $0.05800 | $0.00 | $0.00 | $0.00 | $0.05800 |
| 12/15/2021 | 12/16/2021 | $0.04800 | $0.00 | $0.00400 | $0.18200 | $0.23400 |
| 01/26/2021 | 01/27/2021 | $0.01103 | $0.00 | $0.00 | $0.00 | $0.01103 |
| 09/30/2020 | 10/01/2020 | $0.00063 | $0.00 | $0.00 | $0.00 | $0.00063 |
| 08/31/2020 | 09/01/2020 | $0.01905 | $0.00 | $0.00 | $0.00 | $0.01905 |
| 08/27/2020 | 08/28/2020 | $0.00252 | $0.00 | $0.00 | $0.00 | $0.00252 |
| 06/04/2020 | 06/05/2020 | $0.00340 | $0.00 | $0.00 | $0.00 | $0.00340 |
| 03/31/2020 | 04/01/2020 | $0.00701 | $0.00 | $0.00 | $0.00 | $0.00701 |
| 02/28/2020 | 03/02/2020 | $0.01800 | $0.00 | $0.00 | $0.00 | $0.01800 |
| 01/31/2020 | 02/03/2020 | $0.01800 | $0.00 | $0.00 | $0.00 | $0.01800 |
The Saturna Sustainable Bond Fund intends to distribute its net investment income and net realized capital gains, if any, to its shareowners. The Fund pays income dividends daily, which are reinvested or distributed monthly. As a result of its investment strategy, the Fund expects that its dividends will consist primarily of ordinary income.
Distributions for the last four years are listed in the table above. For prior distributions, please contact a Saturna representative.
Regulations regarding distributions can be complex, and there are several methods for managing your tax liability. Please consult a tax advisor about your particular circumstances. You also may obtain helpful information by calling the Internal Revenue Service at 1-800-829-1040 or visiting www.irs.gov.
If applicable, distribution information will appear on Form 1099-DIV, typically sent in late January. For more information on tax documentation, please visit our Tax Documentation page.
The Fund pays per-share distributions to shareowners invested on the Record Date. On the Payable Date, the Fund's share price is reduced by the amount of its distribution.
Fees & Minimums
The following tables describe the fees and expenses mutual fund shareowners may pay. There are no shareowner fees (fees paid directly from an investment). The Fund imposes no sales charge (load) on purchases or reinvested dividends, or any deferred sales charge (load) upon redemption. There are no exchange fees or account fees. Investments in mutual funds are subject to ongoing expenses. Saturna endeavors to keep these fees low. We encourage you to compare the following fees with similar fees of other no-load mutual funds:
Shareowner Fees (fees paid directly from your investment)
None.
| Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | |
| Management Fees | 0.55% |
| Other Expenses | 0.19% |
| Total Annual Fund Operating Expenses | 0.74% |
| Fee Waiver and Expense Reimbursement | -0.09% |
| Total Annual Fund Operating Expenses after Fee Waiver and Expense Reimbursement | 0.65% |
The investment adviser has committed through March 31, 2024, to waive fees and/or reimburse expenses to the extent necessary to ensure that the Fund’s net operating expenses, excluding brokerage commissions, interest, taxes, and extraordinary expenses do not exceed the net operating expense ratio of 0.65%. This expense limitation agreement may be changed or terminated only with approval of the Board of Trustees.
Investment Minimum
The minimum initial investment is $1,000 (for tax-sheltered accounts, there is no minimum).
Principal Risks of Investing in the Fund
Market risk: The value of the Fund’s shares rises and falls as the market value of the securities in which the Fund invests goes up and down. Consider investing in the Fund only if you are willing to accept the risk that you may lose money. Fund share prices, yields, and total returns will change with the fluctuations in the securities markets as well as the fortunes of the industries and companies in which the Fund invests.
Investment strategy risk: The adviser believes that sustainable investing may mitigate security-specific risk, but the screens used in connection with sustainable investing reduce the investable universe, which limits opportunities and may increase the risk of loss during market declines.
Interest rate risk: Changes in interest rates impact prices of fixed-income and related investments. When interest rates rise, the value of fixed-income investments (paying a lower rate of interest) generally will fall. Investments with shorter terms may have less interest rate risk, but generally have lower returns and, because of the more frequent maturity dates, may involve higher re-investment costs.
Credit risk: Corporate and sovereign issuers of the notes and certificates in which the Fund invests may not be able or willing to make payments when due, which may lead to default or restructuring of the investment. In addition, if the market perceives deterioration in the creditworthiness of an issuer, the value and liquidity of the issuer’s securities may decline.
Sector risk: From time to time, based on market or economic conditions, the Fund may have significant positions in one or more sectors of the market. To the extent the Fund invests more heavily in particular sectors, its performance will be especially sensitive to developments that significantly affect those sectors. Individual sectors may be more volatile, and may perform differently, than the broader market. The industries that constitute a sector may all react in the same way to economic, political or regulatory events.
High yield risk: Bonds that are unrated or rated below investment grade, which are known as “junk bonds,” typically offer higher yields to compensate investors for increased credit risk. Issuers of high-yield securities generally are not as strong financially and are more vulnerable to changes that could affect their ability to make interest and principal payments. High-yield securities generally are more volatile and less liquid (harder to sell), which may make such securities more difficult to value. Unrated securities present additional uncertainty because of the difficulties in determining their comparability to rated securities. Unrated securities are often comparable to below investment-grade securities.
Foreign investing risk: The Fund may invest in securities that are not traded in the United States when market conditions or investment opportunities arise that, in the judgment of the adviser, warrant such investment. Investments in the securities of foreign issuers may involve risks in addition to those normally associated with investments in the securities of US issuers. All foreign investments are subject to risks of: (1) foreign political and economic instability; (2) adverse movements in foreign exchange rates; (3) currency devaluation; (4) the imposition or tightening of exchange controls or other limitations on repatriation of foreign capital; (5) changes in foreign governmental attitudes towards private investment, including potential nationalization, increased taxation, or confiscation of assets; and (6) differing reporting, accounting, and auditing standards of foreign countries.
Emerging markets risk: There are heightened risks when investing in emerging markets, which are generally less liquid and more volatile than more developed securities markets. These risks include greater political or economic uncertainties; delays and disruptions in securities settlement procedures; weaker corporate governance, accounting, auditing, and financial reporting standards; and less publicly available information about issuers. Emerging market countries’ governments may also be more likely to impose capital controls or nationalize an industry.
Liquidity risk: Liquidity risk exists when particular investments are difficult to sell and may be more difficult to value. If the Fund is forced to sell these investments during unfavorable conditions to meet redemptions or for other cash needs, the Fund may lose money on its investments. As a result, the Fund may be unable to achieve its objective.