As of September 1, 2020, Mr. Nicholas F. Kaiser directly and indirectly through his ownership interest in Saturna Capital owned 4.79%, and 2.29% of these Funds, respectively. As of September 1, 2020, Mrs. Jane K. Carten directly and indirectly through her ownership interest in Saturna Capital owned 6.08% and 2.91% of these funds, respectively.
The Control Persons and Principal Holders of Securities tables show the only persons known to the Trust to be the owners of record or beneficial owners of more than 5% or more of any Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser and Administrator
Saturna Capital Corporation, 1300 N. State Street, Bellingham, Washington 98225 is the Investment Adviser and Administrator (the "adviser") for the Trust. Saturna Capital Corporation is also the Trust's transfer agent. Mrs. Jane K. Carten, president of Saturna Capital, through her ownership of 52% of its voting stock, is a control person of the adviser. Mr. Nicholas F. Kaiser, chairman of Saturna Capital, through his ownership of 41% of its voting stock, is a control person of the adviser. Mr. Kaiser is also a trustee and president of Amana Mutual Funds Trust. A discussion regarding the Trustees' approval of the continuance of the investment advisory and administration agreements is available in the Trust's semi-annual report published every January.
Under their Advisory and Administration Agreements, effective June 1, 2019, the Amana Growth Fund, Amana Income Fund, and Amana Developing World Fund each pay the adviser an advisory and administration fee of 0.80% on the first $1 billion of a Fund's average daily net assets, 0.70% on the next $1 billon, and 0.60% on assets over $2 billion. Under the Advisory and Administration Agreement for the Participation Fund, the Fund pays the adviser an advisory and administration fee of 0.50% annually of the average daily net assets. The adviser, at its own expense and without additional cost to the Funds, furnishes office space, office facilities and equipment, personnel (including executive officers), and clerical and bookkeeping services required to conduct the Funds' business.
The
Advisory and Administration Fees
table at left shows amounts Saturna Capital Corporation was paid as the Funds' investment adviser and administrator for the three most recent fiscal years ended May 31.
The advisory agreements also provide that in the event the total expenses of a Fund (excluding taxes, commissions and extraordinary items) for any fiscal year exceed 2% of average daily net assets, the Fund shall be reimbursed for such excess. No reimbursements have been required.
The Investment Advisory and Administrative Services Agreement is renewable from year to year with respect to each Fund, so long as its continuance is approved at least annually (1) by the vote of a majority of the Disinterested Trustees, cast in person at a meeting called for the purpose of voting on such
Advisory and Administration Fees |
2020 |
2019 |
2018 |
Income Fund |
$10,128,959 |
$10,997,138 |
$11,597,627 |
Growth Fund |
$15,651,450 |
$14,999,230 |
$13,564,420 |
Developing World Fund |
$265,217 |
$245,744 |
$282,925 |
Participation Fund |
$506,370 |
$335,549 |
$250,321 |
| |
Transfer Agent Fees |
2020 |
2019 |
2018 |
| Income Fund Investor Shares (AMANX) |
$0 |
$12,430 |
$14,991 |
| Income Fund Institutional Shares (AMINX) |
$0 |
$16,355 |
$15,452 |
| Growth Fund Investor Shares (AMAGX) |
$0 |
$15,917 |
$19,616 |
| Growth Fund Institutional Shares (AMIGX) |
$0 |
$21,136 |
$18,730 |
| Developing World Fund Investor Shares (AMDWX) |
$0 |
$1,583 |
$2,755 |
| Developing World Fund Institutional Shares (AMIDX) |
$0 |
$3,457 |
$3,106 |
| Participation Fund Investor Shares (AMAPX) |
n/a |
n/a |
n/a |
| Participation Fund Institutional Shares (AMIPX) |
n/a |
n/a |
n/a |
| |
Retirement Plan Custodian Fees |
2020 |
2019 |
2018 |
| Income Fund Investor Shares (AMANX) |
$118 |
$44 |
$119 |
| Income Fund Institutional Shares (AMINX) |
$80,743 |
$46,175 |
$47,292 |
| Growth Fund Investor Shares (AMAGX) |
$178 |
$58 |
$226 |
| Growth Fund Institutional Shares (AMIGX) |
$112,188 |
$60,846 |
$60,654 |
| Developing World Fund Investor Shares (AMDWX) |
$22 |
$1 |
$32 |
| Developing World Fund Institutional Shares (AMIDX) |
$20,354 |
$9,340 |
$12,205 |
| Participation Fund Investor Shares (AMAPX) |
$118 |
$50 |
$31 |
| Participation Fund Institutional Shares (AMIPX) |
$9,327 |
$3,595 |
$3,129 |
| |
12b-1 Fees |
2020 |
2019 |
2018 |
Income Fund Investor Shares (AMANX) |
$1,972,765 |
$2,156,144 |
$2,377,788 |
Growth Fund Investor Shares (AMAGX) |
$3,270,042 |
$3,048,273 |
$2,830,976 |
Developing World Fund Investor Shares (AMDWX) |
$36,939 |
$37,360 |
$37,701 |
Participation Fund Investor Shares (AMAPX) |
$50,692 |
$48,096 |
$35,917 |
approval, and (2) by the vote of a majority of the Trustees or by a majority vote of the outstanding shares of the Fund (as defined by the 1940 Act).
Under its respective investment advisory agreement, each Fund pays its own taxes, brokerage commissions, trustees' fees, legal and auditing fees, insurance premiums, custodian fees, transfer agent fees, registrar and dividend disbursing agent fees, expenses incurred in complying with state and federal laws regulating the issue and sale of its shares, and mailing and printing costs for prospectuses, reports, and notices to shareowners.
As approved by the Board of Trustees on September 14, 2020, beginning December 1, 2020, the Amana Growth Fund, Amana Income Fund, and Amana Developing World Fund will each pay an advisory and administration fee of 0.80% on the first $1 billion of a Fund's average daily net assets, 0.65% on the next $1 billion, and 0.50% on assets over $2 billion. There will be no change to the Amana Participation Fund's advisory and administration fee of 0.50% of the Fund's average daily net assets.
The adviser's wholly-owned subsidiary, Saturna Brokerage Services, Inc., 1300 N. State Street, Bellingham, WA 98225, is a general securities brokerage firm and acts as distributor for the Trust.
Mr. Kaiser, an Interested Trustee, is chairman and director of Saturna Capital Corporation and Saturna Trust Company. Mrs. Jane Carten, an officer of the Trust, is president, chief executive officer, a director, and controlling shareowner of Saturna Capital Corporation; she is also president and a director of Saturna Brokerage Services, Inc. and a vice president and director of Saturna Trust Company. Mr. Fankhauser, an officer of the Trust, is chief operations officer and a director of Saturna Capital Corporation; he is also chief operations officer and a vice president of Saturna Brokerage Services, Inc. and a vice president, chief operations officer, and director of Saturna Trust company. All employees of the distributor are also employees of the adviser.
Under a separate service agreement, Saturna Capital Corporation also provides shareowner services as the transfer agent and dividend-paying agent for the Funds. As transfer agent, Saturna furnishes to each shareowner a confirmation after each transaction, a historical statement at the end of each year showing all transactions during the year, and Form 1099 and Form 1042 tax forms. Saturna also, on behalf of the Funds, responds to shareowners' questions and correspondence. Furthermore, the transfer agent regularly furnishes the Funds with current shareowner lists and information necessary to keep the shares in balance with the Funds' records. The transfer agent protects the privacy of shareowner information, but provides shareowner information to regulators and other parties with legal rights to such information, and to a mailing service, under a confidentiality agreement, to facilitate the distribution of shareowner reports. The transfer agent performs the mailing of all financial statements, notices, and prospectuses to shareowners. The transfer agent makes year-end zakah computations for shareowners requesting this service. Effective June 1, 2019, Saturna Capital has waived its transfer agent fee for each Fund. Prior to June 1, 2019, the transfer agent was paid a monthly fee of $0.25 per active account for each Fund other than the Participation Fund.
The
Transfer Agent Fees
table on page 16 shows the amounts Saturna Capital Corporation was paid as the Funds' shareowner servicing and transfer agent for the three most recent fiscal years ended May 31.
Saturna Trust Company, a wholly-owned subsidiary of Saturna Capital Corporation, is the Funds' retirement plan custodian and, as such, is paid compensation for maintaining records of contributions, disbursements, and assets as required for IRAs and other IRS-qualified retirement accounts. An annual fee of $10 per account for retirement plan services is paid by the Funds to Saturna Trust Company.
Retirement plans using Saturna Trust Company as the custodian, including IRAs, invest in Amana Institutional Shares (i.e., without 12b-1 plan expenses).
The
Retirement Plan Custodian Fees
table on page 16 shows the amounts Saturna Trust Company was paid as the Funds' retirement plan custodian for the three most recent fiscal years ended May 31.
Subsidiary Service Providers
The Subsidiary has entered into an agreement with the Trust's service providers for the provision of administrative, accounting transfer agency and custody services. The Subsidiary will bear the expenses associated with these services, which are not expected to be material in relation to the value of the Participation Fund's assets. It is also anticipated that the Fund's own expenses will be reduced to some extent as a result of the payment of such expenses at the Subsidiary level. Therefore, it is expected that the Fund's investment in the Subsidiary will not result in the Fund's paying duplicative fees for similar services provided to the Fund and the Subsidiary.
Effective July 19, 2013, the Trust entered into a distribution agreement with Saturna Brokerage Services, Inc. (the "distributor"), a broker-dealer registered under the Securities Exchange Act of 1934, pursuant to which the distributor acts as principal underwriter of Fund shares for sale to the public. Additionally, the Trust has adopted a Rule 12b-1 plan which provides for each Fund to reimburse the distributor monthly at a rate of up to 0.25% annually of that Fund's average daily net assets applicable to Income Fund, Growth Fund, Developing World Fund, and Participation Fund Investor Shares to finance the distribution of those shares and to furnish services to owners of Investor Shares. The plan reimburses the distributor only for expenses incurred and does not compensate the distributor regardless of expenses. The Trust does not participate in any joint distribution activities with another investment company.
The Trustees, in seeking shareowner approval for the distribution plan, expected that it would help the adviser and distributor have the flexibility to direct their distribution activities in a manner consistent with prevailing market conditions by using, subject to regular Trustee approval, a portion of Trust assets to make payments to the distributor or third parties for marketing, distribution, and other services. They expected that to the extent the adviser and distributor have greater flexibility and resources under the plan, additional sales of Income Fund, Growth Fund, Developing World Fund, and Participation Fund Investor Shares may result, and that this has the potential to benefit the Funds by reducing the possibility that a Fund would experience net redemptions, which might require the liquidation of portfolio securities in amounts and at times that could be disadvantageous for investment purposes. There can be no assurance that these events will occur.
The
12b-1 Fees
table on page 16 shows the amounts Saturna Brokerage Services was paid as the Funds' underwriter under the distribution plan for the three most recent fiscal years ended May 31.
Institutional Shares do not pay the 12b-1 fee.
No Trustee who is not an interested person of the Trust has a direct or indirect financial interest in the operation of the plan or related agreements. While Saturna Brokerage Services is paid fees under the plan, there is no benefit to Saturna Capital Corporation or its employees, including Mr. Kaiser, as the amounts spent by Saturna Capital Corporation (described below) substantially exceed the 12b-1 fees received.
Under the distribution plan, the distributor has entered into dealer selling agreements with a large number of brokerage firms. These selling agreements do not compensate dealers for actual sales (the Amana Funds pay no sales commissions), only for assets they hold and service for their customers.
During the fiscal year ended May 31, 2020, the Funds reimbursed the distributor the following amounts allocated to the following principal activities:
| Advertising: |
$- |
| Printing and mailing of prospectuses to other than current shareowners: |
$- |
| Compensation to underwriters: |
$- |
| Compensation to broker-dealers: |
$5,330,438 |
The adviser spent an additional $3,324,241 of its own resources to compensate broker-dealers. The adviser may pay such additional compensation, out of its own resources and not as an expense of the Funds, to brokers or other financial intermediaries, or their affiliates, in connection with the sale, distribution, retention, and/or servicing of Fund shares. To the extent that these resources are derived from advisory fees paid by Income Fund, Growth Fund, Developing World Fund, and Participation Fund Investor Shares, these payments could be considered "revenue sharing." In some cases, these payments may create an incentive for the intermediary or its employees to recommend or sell shares of the Funds to you. If you have purchased shares of a Fund through an intermediary, please contact your intermediary to learn more about any payments it receives from the adviser and/or its affiliates, as well as fees and/or commissions the intermediary charges. You should also consult disclosures made by your intermediary at the time of purchase. Any such payments will not change the net asset value or the price of a Fund's shares.
The Funds' custodian is UMB Bank, NA, 928 Grand Blvd, 5th Floor, Kansas City, Missouri 64155.
The custodian holds all securities and cash, settles all Fund portfolio securities transactions, receives (on behalf of the Funds) the money from sale of Fund shares, and on order of the Funds, pays the authorized expenses of the Funds. When investors redeem Fund shares, the proceeds are paid to the shareowner from a Fund's account at the custodian bank.
Independent Registered Public Accounting Firm
Tait, Weller and Baker LLP, 50 South 16th Street, Suite 2900, Philadelphia, PA 19102, is the independent registered public accounting firm for the Trust and the Funds. The accountants conduct an annual audit of the Funds as of May
31 each year. With pre-approval of the Trustees, they may provide related services such as preparing Fund tax returns.
PORTFOLIO MANAGERS
All Saturna Capital Corporation employees, including Elizabeth W. Alm, Patrick T. Drum, Bryce R. Fegley, Scott F. Klimo, Christopher E. Paul, Monem A. Salam, Levi Stewart Zurbrugg, and other portfolio managers are paid an annual salary, as set by the board of Saturna Capital. The board also pays bonuses that are partly dependent on the profits of Saturna Capital and may also reflect the results of specific managed accounts or specific businesses of Saturna Capital. As owners of shares and/or stock options of Saturna Capital Corporation, Ms. Alm and Messrs. Drum, Fegley, Klimo, Paul, Salam, and Stewart Zurbrugg may benefit from any increase in its value per share that might result from its operations or profits. They may also receive dividends on shares of Saturna Capital. All Saturna Capital employees are eligible for a retirement plan, health care, and other benefits, and a stock option plan. Stock options are annually awarded on the basis of years of service, and not individual performance. Mutual fund portfolio managers are paid a monthly bonus (which may be shared with other employees) when a Fund achieves an overall rating of 4 or 5 stars from Morningstar. The bonus is 1% of the adviser's net monthly fee (which is based on both assets and performance) for a 4-star rating and 2% of the monthly fee for a 5-star rating.
Saturna's portfolio managers may manage multiple accounts, including mutual funds and separate accounts for individuals, investment partnerships, pension funds, and charities. Portfolio managers make investment decisions for each account based on the investment objectives, policies, practices, and other relevant investment considerations that the managers believe are applicable to that account. The management of multiple accounts may give rise to potential conflicts of interest when the accounts have similar or different objectives, benchmarks, time horizons, and fees because the portfolio manager must allocate his time and investment ideas across multiple accounts. Consequently, a manager may purchase (or sell) a security for one account and not for another. The adviser has adopted policies designed to fairly allocate securities purchased or sold on an aggregated basis. Transactions executed for one account may adversely affect the value of securities held by other accounts. Securities selected for some accounts may outperform the securities selected for others. Through an
Portfolio Managers (as of May 31, 2020) |
Portfolio Manager: |
Trust portfolios served as primary manager (assets): |
Other investment company portfolios served as primary manager (assets): |
Other pooled investment vehicles served as primary manager (assets): |
Other accounts (assets): |
Elizabeth W. Alm |
None |
Sextant Bond Income Fund
($13,497,064)¹
Idaho Tax-Exempt Fund
($14,130,041) |
None |
None |
Patrick T. Drum |
Amana Participation Fund
($116,569,725) |
Saturna Sustainable Bond Fund
($27,180,843) |
None |
None |
Bryce R. Fegley |
None |
Sextant Global High Income Fund
($8,285,992)¹
Sextant Core Fund
($17,101,202)¹ |
None |
None |
Scott F. Klimo |
Amana Growth Fund
($2,162,693,581) |
Sextant Growth Fund
($47,330,642)¹ |
None |
None |
Christopher E. Paul |
None |
Sextant International Fund
($74,010,160)¹
Sextant Core Fund
($17,101,202)¹ |
Five
($68,172,933)¹ |
None |
Monem A. Salam |
Amana Income Fund
($1,268,779,668)
Amana Dev. World Fund
($32,198,941) |
None |
None |
Forty
($44,820,933) |
Levi Stewart Zurbrugg |
None |
Sextant Short-Term Bond Fund
($11,481,692)¹ |
None |
None |
¹Assets managed with a performance fee |
Portfolio Manager Fund Ownership (as of May 31, 2020) |
| Dollar range of equity securities in Amana Mutual Funds Trust owned beneficially by Portfolio Managers |
Elizabeth W. Alm |
Amana Growth Fund Institutional Shares: $10,001-$50,000
Amana Participation Fund Institutional Shares: $1-$10,000 |
Patrick T. Drum |
Amana Participation Fund Investor Shares: $1-$10,000
Amana Participation Fund Institutional Shares: $1-$10,000 |
Bryce R. Fegley |
Amana Income Fund Institutional Shares: $50,001-$100,000
Amana Growth Fund Institutional Shares: over $100,00
Amana Developing World Fund Institutional Shares: $1-$10,000 |
Scott F. Klimo |
Amana Income Fund Institutional Shares: $100,001-$500,000
Amana Growth Fund Institutional Shares: $100,001-$500,000
Amana Developing World Fund Institutional Shares: $10,001-$50,000 |
Christopher E. Paul |
None |
Monem A. Salam |
Amana Income Fund Institutional Shares: $100,001-$500,000
Amana Growth Fund Institutional Shares: $100,001-$500,000
Amana Developing World Fund Institutional Shares: $50,001-$100,000 |
Levi Stewart Zurbrugg |
Amana Income Fund Institutional Shares: $1-$10,000
Amana Growth Fund Institutional Shares: $1-$10,000
Amana Developing World Fund Institutional Shares: $1-$10,000
Amana Participation Fund Institutional Shares: $1-$10,000 |
arrangement with Saturna Brokerage Services, accounts presently trade securities at zero commission, eliminating a potential conflict.
Amana's net monthly advisory fee is solely dependent on Fund assets. The net monthly fee from the Sextant Funds is partly based on Sextant Fund performance results. The Sextant International Fund (which Mr. Paul manages), Sextant Growth Fund (which Mr. Klimo manages), Sextant Global High Income Fund (which Mr. Fegley manages) and the Sextant Bond Income (which Ms. Alm manages), Sextant Core Fund (which Messrs. Fegley and Paul manage), and Sextant Short-Term Bond Fund (which Mr. Stewart Zurbrugg manages), pay a base fee of 0.50% of average daily net assets, adjusted up or down by up to 0.20% depending upon a Fund's performance over the previous 12 months compared to the average fund in its Morningstar category.
Since all fund assets vary over time with performance and investors favor mutual funds with superior investment records, the portfolio manager's bonus is a function of both performance and assets.
Three of the private pooled investment portfolios managed by Mr. Paul pay Saturna Capital Corporation as adviser a performance fee of 10% of the year's increase in net asset value achieved from the previous highest year-end net asset value. There is no base fee and no performance fee in years when the net asset value is below the highest previous value. As portfolio manager, Mr. Paul normally receives a significant portion of any fee earned as a bonus.
A portfolio manager's compensation plan may give rise to potential conflicts of interest. To reduce this risk, a mutual fund portfolio manager's account performance bonus depends upon the Fund's overall Morningstar™ rating, which derives from investment results over the last three, five, and ten years. A manager's compensation tends to increase with assets under management, which in turn may increase the value of Saturna Capital Corporation.
BROKERAGE ALLOCATION
The placing of purchase and sale orders as well as the negotiation of commissions is performed by the adviser and is reviewed by the Board of Trustees. Although it is permitted to do so, the adviser does not allocate brokerage to any broker in return for research or services.
The primary consideration in effecting securities transactions for the Trust is to obtain the best price and execution which in the judgment of the adviser is attainable at the time and which would bring the best net overall economic result to a Fund. Factors taken into account in the selection of brokers include the price of the security, commissions paid on the transaction, the efficiency and cooperation with which the transaction is effected, the expediency of making settlement, and the financial strength and stability of the broker. The adviser may negotiate commissions at a rate in excess of the amount another broker would have charged if it determines in good faith that the overall net economic result is favorable to the Fund and is not required to execute trades in "over-the-counter" securities with primary market-makers if similar terms are available elsewhere. The adviser evaluates whether brokerage commissions are reasonable based upon available information about the general level of commissions paid by similar mutual funds for comparable services.
When consistent with best execution, brokerage may be directed to Saturna Brokerage Services, Inc., a wholly-owned subsidiary of the adviser, which engages in a discount brokerage business. Saturna Brokerage Services currently executes portfolio transactions for the Trust for free (no commissions). Transactions effected through other brokers are subject to commissions payable to that broker.
The
Commissions Paid To Saturna Brokerage Services
table on page 21 contains the commissions each Fund paid Saturna Brokerage for each of the last three fiscal years.
The
Commissions Paid To Other Broker-Dealers
table on page 21 contains the commissions each Fund paid to unaffiliated broker-dealers for each of the last three fiscal years.
The Trustees review brokerage activity in detail at each regular meeting. Meetings are held on a quarterly schedule.
CAPITAL STOCK
The Amana Mutual Funds Trust is organized as a "series" investment company. Each Fund of the Trust is divided into classes, which are further divided into shares of beneficial interest. Those Funds and classes are named: Income Fund Investor, Income Fund Institutional, Growth Fund Investor, Growth Fund Institutional, Developing World Fund Investor, Developing World Fund Institutional, Participation Fund Investor, and Participation Fund Institutional. There are no restrictions on shareowners' rights to freely retain or dispose of shares of any class. There are no material obligations or potential liabilities associated with owning a Fund's shares except the investment risks described in the Funds' prospectus and summary prospectuses, and in this statement of additional information in the section Fund Descriptions, Investments, and Risks on page 2. The shareowners of each separate Fund may look only to that Fund for dividends, income, capital gains or losses, redemption, liquidation, or termination. Each class of shares of a Fund will have (i) exclusive voting rights on any matter submitted to shareowners that relates solely to its arrangement and (ii) separate voting rights on any matter submitted to shareowners in which the interests of one
Commissions Paid To Saturna Brokerage Services |
| |
2020 |
2019 |
2018 |
% of 2020 aggregate brokerage commissions paid Saturna Brokerage |
% of 2020 aggregate dollar amount of transactions involving the payment of commissions through Saturna Brokerage |
Income Fund |
$0 |
$0 |
$0 |
0% |
0% |
Growth Fund |
$0 |
$0 |
$0 |
0% |
0% |
Developing World Fund |
$18 |
$0 |
$0 |
0% |
0% |
Participation Fund |
$0 |
$0 |
$0 |
0% |
0% |
Commissions Paid To Other Broker-Dealers |
| |
2020 |
2019 |
2018 |
Income Fund |
$- |
$- |
$- |
Growth Fund |
$130 |
$- |
$- |
Developing World Fund |
$9,314 |
$2,556 |
$2,569 |
Participation Fund |
$- |
$- |
$- |
class differ from the interest of any other class (however, the Participation Fund may impose a redemption fee). The voting rights of each class of shares can only be modified by a majority vote of that class. Shareowners may elect to convert eligible Investor Shares into corresponding Institutional Shares of the same series, provided that following the conversion the investor meets applicable eligibility requirements for the Institutional Shares. Any such conversion will occur at the next available respective net asset values of the share classes. There are no sinking fund provisions. The creditors and shareowners of each class of shares are limited to the assets of that class of shares for recovery of charges, expenses, and liabilities.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
See Purchase and Sale of Fund Shares in each Fund's Summary Prospectus and Fund Share Pricing in the Trust's Prospectus for an explanation about the ways to purchase or redeem shares. Both purchases and redemptions are made at net asset value per share.
Each Fund reserves the right, under certain conditions, to honor any request for redemption by making payment in whole or in part in securities valued as described in "Fund Share Pricing" in the prospectus. If payment is made in securities, a shareholder or Institution generally will incur brokerage expenses or other transaction costs in converting those securities into cash and will be subject to fluctuation in the market prices of those securities until they are sold. The Funds would do so when the Manager or the Fund Trustees determine that it is in the best interests of a Fund's shareholders as a whole.
It is important to note that there are differences between the two share classes. Investor Shares are subject to an annual distribution fee to compensate financial intermediaries for providing investors with ongoing account services. Institutional Shares are not subject to an annual distribution fee and, consequently, holders of Institutional Shares may not receive the same types or levels of services from financial intermediaries. In choosing between Investor Shares versus Institutional Shares, investors should weigh the benefits of the services to be provided by financial intermediaries against the annual distribution fee imposed upon some shares.
Each Fund computes its price per share of each share class on each business day by dividing the value of all securities and other assets, less liabilities, attributable to each share class, by the number of shares outstanding of that class. The daily price is determined for each class of each Fund as of the close of trading on the New York Stock Exchange (generally 4 p.m. Eastern time) on each day the Exchange is open for trading. The Exchange is generally closed on New Year's Day, Martin Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. See the balance sheet in the Annual Report or Semi-Annual Report for a specimen sheet showing how the Funds calculate net asset value, which is the price used for both purchase and redemption of shares.
Pricing of Foreign Equity Securities
Foreign securities traded outside the US are valued on the basis of their most recent closing market prices at 4 p.m. Eastern time.
Foreign markets may close before the time at which the Funds' prices are determined. Because of this, events occurring after the close of a foreign market and before the determination of the Funds' NAVs may have a material effect on the Funds' foreign security prices. To account for this, the Funds may use independent pricing services for valuation of securities.
In developing valuations for foreign securities, the independent pricing services review a variety of factors, including developments in foreign markets, the performance of US securities markets, and the performance of instruments trading in US markets that represent foreign securities and baskets of foreign securities. The Funds may also fair value securities in other situations, for example, when a particular foreign market is closed but the Fund is open.
The Funds routinely compare closing market prices, the next day's opening prices in the same markets, and adjusted prices and other factors they believe are relevant for such testing. Other mutual funds may adjust the prices of their securities by different amounts.
Investors should be aware that intermediaries might have policies different from the Funds' policies regarding trading and redemptions, and these may be in addition to or in place of the Funds' policies. For more information about these restrictions and policies, please contact your broker, retirement plan administrator, or other intermediary.
It is the responsibility of the investor to ensure that Saturna Capital Corporation maintains a correct address for the investor's account(s). An incorrect address may cause an investor's account statements and other mailings to be returned. If Saturna Capital Corporation is unable to locate the investor, then it will determine whether the investor's account has been legally abandoned. Saturna Capital Corporation is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction.
TAXATION OF THE TRUST
Each Fund is a separate economic entity and as such, the tax status and tax consequences to shareowners of each Fund may differ, depending upon the investment objectives, operations, income, gain or loss, and distributions from each Fund.
Each Fund intends to qualify as a regulated investment company for U.S. federal income tax purposes. In order to so qualify, a Fund must satisfy certain requirements with respect to the types of income that it earns each year (the "Income Requirement") and satisfy other requirements with respect to diversifying its investment holdings, measured at the end of each quarter of its taxable year (the "Diversification Requirement").
Each Fund intends to distribute to shareowners substantially all of its net investment income and net realized capital gains, if any, and to comply, as each has since inception, with the provisions of the Internal Revenue Code applicable to regulated investment companies (Subchapter M), which relieve mutual funds of federal income tax on the amounts so distributed.
If a Fund failed to qualify for treatment as a regulated investment company for any taxable year, (a) it would be taxed as an ordinary corporation on the full amount of its taxable income for that year without being able to deduct the distributions it makes to its shareowners and (b) the shareowners would treat all those distributions, including distributions of net capital gain, as dividends to the extent of that Fund's earnings and profits, taxable as ordinary income (except that, for individual shareowners, the part thereof that is "qualified dividend income" would be subject to federal income tax at the rate for net capital gains – a maximum rate of 20%) and eligible for the dividends-received deduction available to corporations under certain circumstances. In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying for regulated investment company treatment.
The Trust's custodian may use foreign sub-custodians to hold securities of a Fund outside the US, which can subject the Fund to foreign withholding or other taxes. Working with its custodian, the Fund can normally reclaim such foreign taxes.
As of May 31, 2020, the components of distributable earnings on a tax basis were as follows:
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Undistributed ordinary income |
|
|
$193,587 |
|
|
|
Accumulated capital gains |
|
|
$32,961,690 |
|
|
|
|
|
|
|
|
|
|
|
|
$33,155,277 |
|
|
|
|
|
|
|
$793,872,807 |
|
|
|
Total accumulated earnings |
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|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Undistributed ordinary income |
|
|
$3,443,948 |
|
|
|
Accumulated capital gains |
|
|
$130,747,992 |
|
|
|
|
|
|
|
|
|
|
|
|
$134,191,940 |
|
|
|
|
|
|
|
$1,529,974,805 |
|
|
|
Total accumulated earnings |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Accumulated capital and other losses |
|
|
$(7,920,210 |
) |
|
|
|
|
|
|
$5,082,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Accumulated capital and other losses |
|
|
$(299,556 |
) |
|
|
Undistributed ordinary income |
|
|
$5,486 |
|
|
|
|
|
|
|
|
|
|
|
|
$(294,070 |
) |
|
|
|
|
|
|
$1,104,871 |
|
|
|
Total accumulated earnings |
|
|
|
|
The Funds' transfer agent must withhold and remit to the US Treasury 24% of dividends, capital gains distributions, and redemption proceeds (regardless of the extent to which gains or losses may be realized) otherwise payable to any individual or certain other non-corporate shareowner who fails to properly furnish the transfer agent with a correct Social Security or other taxpayer identification number. Withholding at that rate also is required from a Fund's dividends and capital gains distributions otherwise payable to such a shareowner who is subject to backup withholding for any other reason. Backup withholding is not an additional tax, and any amounts so withheld may be credited against a shareowner's federal income tax liability or refunded.
If the IRS determines that a Fund should be fined or penalized for inaccurate or missing or otherwise inadequate reporting of a Tax Identification Number, the amount of the IRS fee or penalty will be directly assessed to the shareowner account involved.
Dividends a Fund pays to a foreign shareowner, other than (1) dividends paid to a foreign shareowner whose ownership of shares is effectively connected with a US trade or business the shareowner carries on and (2) capital gains distributions paid to a non-resident alien individual who is physically present in the United States for no more than 182 days during the taxable year, generally will be subject to a federal withholding tax of 30% (or lower treaty rate). Two categories of dividends, however, "interest-related dividends" and "short-term capital gain dividends," if properly designated by a Fund, will be exempt from that tax.
INVESTMENT IN THE SUBSIDIARY
The Participation Fund will invest up to 25% of its total assets (by value) in the Subsidiary which is expected to provide the Fund with exposure to sukuk, murahaba and wakala within the limitations of the Income Requirement and the Diversification Requirement. The Subsidiary will be classified as a corporation for federal tax purposes and, as a foreign corporation, generally will not be subject to federal income taxation unless it is engaged in a US trade or business. A foreign corporation that is not a dealer in stocks, securities, or commodities may engage in the following activities without being deemed to be so engaged: (1) trading in stocks or securities (including contracts or options to buy or sell securities) for its own account; and (2) trading in commodities that are "of a kind customarily dealt in on an organized commodity exchange . . . if the transaction is of a kind customarily consummated at such place" for its own account. It is expected that the Subsidiary will conduct its securities trading activities to comply with the foregoing.
In general, a foreign corporation that does not conduct a US trade or business is nonetheless subject to federal income tax at a flat rate of 30% (or lower treaty rate) on the gross amount of certain US-source income, including dividends and certain interest income, which is not effectively connected with a US trade or business. There is no tax treaty in force between the United States and the Cayman Islands that would reduce the 30% rate. The 30% tax does not apply to US-source capital gains (whether long-term or short-term), interest paid to a foreign corporation on its deposits with US banks, or "portfolio interest" (which includes interest, including OID, on certain obligations in registered form and, under certain circumstances, interest on bearer obligations).
The Subsidiary will be a "controlled foreign corporation" ("CFC") if, on any day of its taxable year, more than 50% of the voting power or value of its stock is directly, indirectly, or constructively owned by "United States shareholders." A United States shareholder is defined as a "United States person" (as defined in Internal Revenue Code section 957(c)) who directly, indirectly, or constructively owns 10% or more of the total combined voting power or 10% or more of the total value of all classes of a foreign corporation's voting stock. Because the Fund is a United States shareholder of the Subsidiary – it is a United States person that owns and will continue to own at least 10% of the voting power or 10% or more of the total value of the Subsidiary's stock – that owns all of the Subsidiary's stock, the Subsidiary thus is a CFC. As a United States shareholder, the Fund annually is required to include in its gross income all of the Subsidiary's "subpart F income" – which includes interest, OID, dividends, net gains from the disposition of stocks or securities, receipts with respect to securities loans, net payments received with respect to equity swaps and similar derivatives, and net gains from transactions (including futures and forwards) in commodities and is expected to constitute all of the Subsidiary's income – regardless of whether the Subsidiary distributes that income to the Fund. The Fund's recognition of the Subsidiary's subpart F income increases its tax basis in its stock in the Subsidiary. Distributions by the Subsidiary to the Fund, if any, will be tax-free, to the extent of its previously undistributed subpart F income, and will correspondingly reduce the Fund's tax basis in the Subsidiary's stock. Subpart F income is generally treated as ordinary income, regardless of the character of the Subsidiary's underlying income.
UNDERWRITERS
Effective July 19, 2013, the Trust entered into a distribution agreement with Saturna Brokerage Services, Inc. (the "distributor"), a broker-dealer registered under the Securities Exchange Act of 1934, pursuant to which distributor acts as principal underwriter of the Funds' shares for sale to the public. The distributor is a member of the the Financial Industry Regulatory Authority and a wholly-owned subsidiary of Saturna Capital Corporation. All employees of the distributor are also employees of the adviser. Additionally, the Trust has adopted a Rule 12b-1 Plan, under which the distributor is reimbursed by the Trust on a monthly basis at a rate of up to 0.25% annually of the Funds' average daily net assets applicable to Investor Shares to finance the distribution of Income Fund, Growth Fund, Developing World Fund, and Participation Fund Investor Shares and to furnish services to owners of Investor Shares. See Rule 12b-1 Plan on page 18 for more information.
In accordance with its contract with the Trust, the distributor devotes appropriate efforts to effect the sales of shares of each of the Funds, but is not obligated to sell any certain number of shares. The offering of shares is continuous.
FINANCIAL STATEMENTS
The most recent audited annual report accompanies this Statement of Additional Information.
There is incorporated by reference into this Registration Statement the following financial information in the Annual Report to shareowners for the fiscal year ended May 31, 2020:
- Report of Tait, Weller & Baker LLP, Independent Registered Public Accounting Firm
- Statements of Assets and Liabilities as of May 31, 2020
- Financial Highlights – Years ended May 31, 2020, 2019, 2018, 2017, and 2016
- Statements of Operations – Year ended May 31, 2020
- Statements of Changes in Net Assets – Years ended May 31, 2020, and 2019
- Investments – As of May 31, 2020
- Notes to Financial Statements
Exhibits included with this filing:
Items marked with an asterisk (*) are incorporated by reference to exhibits previously filed with the Registration Statement for Amana Mutual Funds Trust and amendments thereto.
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Instruments Defining Rights of Security Holders. Included in (a) and (b). |
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Investment Advisory Contracts.
(1) Agreement for Investment Advisory and Administrative Services for the Income, Growth, Developing World, and Participation Funds of the Amana Mutual Funds Trust, effective September 24, 2018, filed as Exhibit EX-99.d-1 to Post Effective Amendment No. 53 on September 27, 2019.
(2) Investment Advisory and Administrative Services Fee Schedule for the Income, Growth, Developing World, and Participation Funds of the Amana Mutual Funds Trust, effective June 1, 2019, filed as Exhibit EX-99.d-2 to Post Effective Amendment No. 53 on September 27, 2019. |
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Bonus or Profit Sharing Contracts. Not applicable. |
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Omitted Financial Statements. Not applicable. |
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are now embedded within the inline XBRL document. |
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Persons Controlled by or Under Common Control with Registrant
No person or persons are directly or indirectly controlled by or under common control with the Registrant.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. LIMITATION OF LIABILITY. All persons contracting with or having any claim against the Trust or a particular Series shall look only to the assets of the Trust or Assets belonging to such Series, respectively, for payment under such contract or claim; and neither the Trustees nor any of the Trust's officers or employees, whether past, present or future, shall be personally liable therefor. Every written instrument or obligation on behalf of the Trust or any Series may contain a statement to the foregoing effect, but the absence of such statement shall not operate to make any Trustee or officer of the Trust liable thereunder. Provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Trust, the Trustees and officers of the Trust shall not be responsible or liable for any act or omission or for neglect or wrongdoing of them or any officer, agent, employee, investment adviser, principal underwriter or independent contractor of the Trust, but nothing contained in this Trust Instrument or in the Delaware Act shall protect any Trustee or officer of the Trust against liability to the Trust or to Shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Section 2.INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer or employee of the Trust ("Covered Person") shall be indemnified by the Trust or the appropriate Series to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a Covered Person and against amounts paid or incurred by him or her in the settlement thereof.
(ii) as used herein, the words "claim," "action," "suit" or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened, and the words "liability" and "expenses" shall include, without limitation, attorney's fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office or (B) not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Trust; or
(ii) in the event of a settlement, if there has been a determination that such Covered Person engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office: (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the matter based upon a review of readily available facts (as opposed to a full trial-type inquiry); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry).
(c)The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled and shall inure to the benefit of the heirs, executors and administrators of a Covered Person.
(d)To the maximum extent permitted by applicable law, expenses in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in subsection (a) of this Section shall be paid by the Trust or applicable Series from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him or her to the Trust or applicable Series if it is ultimately determined that he or she is not entitled to indemnification under this Section; provided, however, that any such advancement will be made in accordance with any conditions required by the Commission.
(e)Any repeal or modification of this Article IX by the Shareholders, or adoption or modification of any other provision of this Trust Instrument or the By-laws inconsistent with this Article, shall be prospective only, to the extent that such repeal or modification would, if applied retrospectively, adversely affect any limitation on the liability of any Covered Person or indemnification available to any Covered Person with respect to any act or omission which occurred prior to such repeal, modification or adoption.
Section 3. INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder or former Shareholder of any Series is held personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives or, in the case of any entity, its general successor) shall be entitled out of the Assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Series, shall, upon request by such Shareholder or former Shareholder, assume the defense of any claim made against him or her for any act or obligation of the Series and satisfy any judgment thereon from the Assets belonging to the Series.
Business and Other Connections of Investment Adviser
The answer to this item is fully disclosed in Part A and Part B of the Form N-1A.
Please see: "Investment Adviser" on page 16 of Part A; "Management of the Trust" on pages 8 through 13 of Part B; "Investment Advisory and Other Services" on pages 15 through 19 of Part B; and, "Portfolio Managers" on pages 19 through 20 of Part B.
Effective September 25, 2018, the Trust entered into a distribution agreement with Saturna Brokerage Services, Inc. (the "distributor"), a broker-dealer registered under the Securities Exchange Act of 1934, pursuant to which distributor acts as principal underwriter of shares of the funds of the Trust for sale to the public. The distributor is a member of the Financial Industry Regulatory Authority and a wholly-owned subsidiary of Saturna Capital Corporation. All employees of the distributor are also employees of the adviser. The distribution plan provides that the distributor is reimbursed by the Trust on a monthly basis at a rate of up to 0.25% annually of the Funds' average daily net assets applicable to Investor shares to finance the distribution of Income Fund, Growth Fund, Developing World Fund, and Participation Fund Investor shares and to furnish services to owners of Investor shares.
