Amana’s income fund leads its Morningstar category for ESG measures, but its long-term performance remains mixed.
However, unlike most mutual funds, the Funds reserve the right to redeem shares in kind rather than cash, which may cause delays in receiving redemption proceeds and hold more cash than indicated by market forecasts.
Fees
Amana Funds charge an advisory and administrative fee of 0.50% of their daily average net assets as an advisory and administrative fee, deducted from your total cost of investing and reflected in your share price. These fees apply regardless of how many accounts or types of accounts you hold in their family of funds; you can find more details in their semi-annual reports.
The Funds also pay brokerage commissions on purchases and sales of investments, although no bank line of credit exists; rather they expect to satisfy redemption requests in both normal and stressed market conditions by redeeming in-kind (i.e. providing portfolio securities instead of cash) or selling investment instruments to satisfy it. Alternatively, short-term investments of debt or equity securities as well as cash may be made temporarily to meet redemption requests.
Like any mutual funds, Amana Funds carry certain risks. These can include market fluctuations and illiquidity that could adversely impact the value of your investment, as well as foreign currency risks, political and economic instability in developing countries, reduced information about securities available publicly for market supervision purposes and regulatory changes that could impact Fund operations.
All three Amana Funds are committed to social responsibility and Islamic principles, refraining from investing in businesses that violate them like liquor, pork processing, insurance and gambling. Their restrictions helped set them apart from other large-cap value funds during 2008’s crisis as it helped protect them from stocks that collapsed – thus helping keep Amana Funds insulated against crashing financial stocks that caused havoc elsewhere.
Saturna Capital Corporation manages Amana’s Funds on an ongoing basis. Portfolio managers and senior investment analysts oversee daily management of these Funds; these professionals also monitor corporate developments including proxy proposals submitted to shareowners as well as taking into account environmental, social, and governance considerations when selecting investments.
Expenses
As with any investment, mutual fund management costs can have an effect on investor returns over time. Fees passed onto investors can have an outsized effect; as expenses mount up over time they reduce what money remains in your pocket at the end of each day – often listed in its prospectus or financial websites – with actively managed portfolios typically having lower expense ratios.
Amana Funds charge a management and administrative service fee, deducted from daily net assets of each fund. This fee covers expenses associated with administrating support provided by Saturna Capital Corporation as the Investment Adviser and Administrator, which vary depending on what share class it applies to.
Each Amana Funds investment objectives and policies vary, yet all adhere to Islamic principles. The Amana Income Fund primarily pursues current income and preservation of capital while Amana Growth Fund and Amana Developing World Fund aim for long-term capital appreciation; Amana Participation Fund offers current income preservation as well as opportunities to engage in global economies consistent with Islamic principles.
As opposed to many other funds, Amana Funds do not maintain bank lines of credit to meet short-term liquidity needs; instead they utilize approved financial intermediaries (such as brokers/dealers and retirement plan recordkeepers ) who can accept purchase, redemption and exchange orders on shares within their fund portfolios; furthermore these intermediaries may have special arrangements with Amana Funds in order to accept such orders.
Amana Funds vote their proxies according to their Advisory Agreements and investment objectives and policies, which involve careful examination of environmental, social and governance (ESG) issues. Unfortunately, investors do not receive comprehensive information on all ESG topics on which they vote due to some companies not disclosing relevant details – therefore the Amana Funds only vote for issues they consider material for their investment process.
Taxes
The Amana Funds invest in securities that adhere to Islamic principles. This means not accepting usury or interest and avoiding businesses forbidden by Islam such as alcohol, tobacco, pork processing, gambling, pornography weapons and fossil fuel extraction that limit opportunities and may inhibit performance.
Value, Growth, and Developing World Funds are exposed to similar economic and market risks as those present in the overall stock market. Furthermore, Value and Growth Funds tend to focus more heavily on certain industries than others and this may cause them to be more volatile than average.
Dividends and capital gains distributions are subject to tax in the year they are paid out and will appear on both your fourth quarter statement and IRS Form 1099-DIV that arrives late January. Dividends and capital gains distributions will typically be reinvested into additional Fund shares unless instructed to return them directly back to you by your broker, potentially increasing or decreasing your account balance as a result of this reinvestment process.
Amana’s investment team focuses on supporting small and mid-sized companies poised for global expansion, in keeping with Amana Funds’ goals of encouraging entrepreneurship, providing employment opportunities, driving innovation and economic development and diversifying portfolios by adding smaller companies as investments with long-term returns.
Dependent upon your location and tax situation, income from Amana Funds could be subject to backup withholding taxes in addition to state or local taxes applicable. To prevent this from occurring, when opening an account and every year thereafter it is imperative that you provide your Social Security or other taxpayer identification number as part of the application process and annual reports for tax compliance purposes.
The Funds provide daily non-public portfolio holdings information to service providers on a next day basis, such as their adviser, independent registered public accounting firm, custodian, financial printer and legal counsel for trustees of each Fund. These service providers utilize this data for statistical analysis as well as other services; all are bound by confidentiality agreements to avoid disclosing it without permission from each Fund.
Liquidity
Liquidity for amana mutual funds depends on the total outstanding units. Investors may request redemption of their shares at any time, though this process could take up to several days depending on whether it’s initiated through the AMC or via intermediaries. The AMC is responsible for setting market prices for securities as well as calculating net asset values as well as holding and safeguarding scheme members’ assets.
Contrary to many mutual funds, Amana Funds do not maintain a line of credit in order to meet redemption demands. Instead, these funds usually aim to meet redemption requests both during normal market conditions as well as under stressful market conditions by redeeming cash and/or portfolio securities redeemed from shareholders redeeming shares; sometimes this requires selling specific securities so shareholders may get paid out.
Amana Investment Fund invests in small and midsized US-based businesses. The Fund focuses on giving companies international market access, as well as social responsibility initiatives. Furthermore, Amana follows Islamic principles which require its investors to share in profit/loss with others while excluding investments that would violate Islam; its investors share in profit/loss proportionately while investing only in prohibited industries – an approach which helped it withstand the 2008 recession.
The primary objectives of the Fund are to generate income and capital growth through investing in a diversified selection of high quality long-term securities with potential. Furthermore, its primary goal is to enhance people in developing nations financially by helping them build sustainable enterprises.
Saturna Capital Corporation currently oversees management of Amana Funds through their transfer agent, Trust’s transfer agent. Mr. Nicholas Kaiser, MBA serves as the investment adviser. Investor and Institutional shares are offered, with minimum initial investments for Investor Shares being $100 (tax-sheltered accounts) and $100,000 respectively; both investor and Institutional shares sold at current market prices.
