Annual Report
May 31, 2017
Iman Fund
IMAN FUND
July 20, 2017
Dear Shareholder,
Assalamu Alaykum (Greetings of Peace),
I am pleased to report to you that Iman Fund (the Fund) did very well in its fiscal year ending on May 31, 2017 with a net return of 23.06%. The Fund outperformed comparable broad indexes and its peer funds averages such as the Morningstar US Large Growth funds average which returned 18.17%, the Lipper Multi-Cap Growth Funds which returned 18.31%, the Dow Jones Islamic Market US Index (IMUS) which returned 16.82%, and the Dow Jones Islamic Market World Index (DJIM) which returned 17.21%. Accordingly, the Fund outperformed by a significant 605 basis points the Fund’s benchmark (the blend of the above two indexes) which was up 17.01% versus the Fund’s 23.06%.
The Fund also outperformed the Standard & Poor’s 500 Index which had a total return of 15.01%, the Wilshire 5000 Total Market Index which increased by 17.90%, and the Russell 3000 Growth Index (up 20.23%), all in the same period.
In a stark reversal from 2016, growth-oriented stocks topped their value counterparts through the first few months of 2017. The U.S. unemployment rate fell to 4.3% in May, 2017, the lowest in ten years. This trend bolstered market optimism despite slow economic growth. Growth as measured by the real Gross Domestic Product, was off to a slow start in 2017 rising at an annual rate of 1.4% in the first quarter, one of the lowest in the past three years. However, expectations of pro-growth policies, lower tax rates, and infrastructure spending pushed the U.S. stock market higher. If these elements do not materialize, the market might correct. We will be vigilant and watching for such a possibility. However, we believe that global recession risks remain low, but upside growth may be constrained. We believe that global monetary accommodation and low interest rates will result in a modest non-inflationary global expansion which is likely to help stock investors. We will be especially watching some future factors that are likely to affect valuation such as China’s growth, the Federal Reserve’s approach to interest rates, and oil prices.
In the year ending on May 31, 2017 the financial sector performed very well. The Fund does not own financial stocks as this sector is composed mostly of banks. In spite of this, the Fund still did very well as it was helped by individual stock selection and its large holdings in the sectors of information technology, health care, materials, and industrials which did well. The Fund’s very limited holdings (0.42%) in real estate stocks (which we avoid as they often have large borrowing) and in consumers staples (1.79%) helped the Fund’s performance as these sectors underperformed while owning energy stocks detracted from performance.
We are now operating in an environment with frequent commentary about mature stock market and extended valuations by some market watchers. We read and follow these analyses carefully. In this critical time we will continue to adhere to our valuation discipline which has served us well. We believe we own a solid portfolio of relatively undervalued market leaders, stocks in industries with improving supply/demand trends, and some strong companies that might be temporarily out of favor. We focus, among other things, on companies with dominant competitive position, customer loyalty, proven marketing ability, long-term growth, positive capital stewardship, franchise value, and intellectual capital, to identify the most favorable areas to invest in.
At Iman Fund, we take our mission to provide investors the best chance of investment success while adhering to Islamic principles very seriously. Our work is grounded in maintaining perspective, long term discipline, and vigilance. We thank you for entrusting your assets to us and for giving us the opportunity to help you reach your financial goals in the years to come.
Very Truly Yours,
Bassam Osman, President
IMAN FUND
Past performance does not guarantee future results.
The above discussion and analysis of the Fund reflect the opinions of the Adviser as of July 2017, are subject to change and any forecasts made cannot be guaranteed and should not be considered investment advice.
Mutual Fund investing involves risk; principal loss is possible. The Fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. Historically, the Adviser believes that the Islamic restrictions placed on the Fund have not adversely affected the Fund; however, it is possible that these restrictions may result in the Fund not performing as well as mutual funds not subject to such restrictions. Investments in smaller companies involve additional risk, such as limited liquidity and greater volatility.
The Dow Jones Islamic Market USA Index is a diversified compilation of U.S. equity securities considered by Dow Jones to be in compliance with Islamic principles. The Dow Jones Islamic Market World Index measures the global universe of investable equities considered by Dow Jones to be in compliance with Islamic principles. The benchmark for the Fund is a 50/50 blend of the Dow Jones Islamic Market USA Index and Dow Jones Islamic Market World Index. The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. The Wilshire 5000 Total Market Index is a market capitalization-weighted index composed of more than 6,700 publicly-traded companies that are headquartered in the United States, are actively traded on an American stock exchange and have pricing information that is widely available to the public. The Russell 3000 Growth Index is a market capitalization-weighted index based on the Russell 3000 Index used to provide a gauge of the performance of growth stocks in the U.S and includes companies that display signs of above average growth. You cannot invest directly in an index.
Growth stocks typically are more volatile than value stocks, however, value stocks have a lower expected growth rate in earnings and sales.
The Morningstar U.S. Large-Growth Classification portfolios invest primarily in big U.S. companies that are projected to grow faster than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields). Most of these portfolios focus on companies in rapidly expanding industries.
The Lipper Multi-Cap Growth Funds Classification includes funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time.
A Basis Point is equal to 1/100th of 1% (0.0001).
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of Fund holdings, please refer to the Schedule of Investments included in this report.
IMAN FUND
EXPENSE EXAMPLE
May 31, 2017 (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (12/1/2016 - 5/31/2017).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. Although the Fund charges no sales load or transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund’s transfer agent. If you request a redemption be made by wire transfer, currently a $15.00 fee is charged by the Fund’s transfer agent. IRA accounts will be charged a $15.00 annual maintenance fee. The example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the example below does not include portfolio trading commissions and related expenses, and other extraordinary expenses as determined under generally accepted accounting principles. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Please note that Iman Fund does not have any sales charge (loads), redemption fees, or exchange fees.
| | Beginning | Ending | Expenses Paid |
| | Account Value | Account Value | During Period |
| | 12/1/16 | 5/31/17 | 12/1/16 - 5/31/17* |
| Actual | $1,000.00 | $1,158.90 | $7.21 |
| Hypothetical (5% return before expenses) | 1,000.00 | 1,018.25 | 6.74 |
| * | Expenses are equal to the Fund’s annualized expense ratio of 1.34% multiplied by the average account value over the period multiplied by 182/365 (to reflect the one-half year period). |
IMAN FUND
ALLOCATION OF PORTFOLIO ASSETS
(Calculated as a percentage of net assets)
May 31, 2017 (Unaudited)
IMAN FUND
Total Rate of Return
For the Period May 31, 2007 to May 31, 2017
(Unaudited)
This chart assumes an initial investment of $10,000 made on May 31, 2007 and held through May 31, 2017.
Performance data quoted represents past performance and does not guarantee future results. 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. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the recent month end may be obtained by visiting www.investaaa.com.
Indices mentioned are unmanaged and used to measure stock markets. You cannot invest directly in an index.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares.
| | Six | One | Five | Ten |
| Average Annual Total Return as of May 31, 2017 | Months | Year | Years | Years |
| Iman Fund | 15.89% | 23.06% | 14.77% | 6.90% |
| Blended Dow Jones Islamic Market USA Index*/ | | | | |
| Dow Jones Islamic Market World Index** | 13.82% | 17.01% | 12.79% | 6.24% |
| * | The Dow Jones Islamic Market USA Index is a diversified compilation of U.S. equity securities considered by Dow Jones to be in compliance with Islamic principles. The index is constructed from stocks in the Dow Jones Indexes (DJGI) family. Dow Jones believes that these stocks are accessible to investors and are well traded. The DJGI methodology removes issues that are not suitable for global investing. Prior to July 31, 2013, the performance of the Dow Jones Islamic Market USA Index does not include the reinvestment of dividends. |
| ** | The Dow Jones Islamic Market World Index is a compilation of 56 country-level benchmark indexes considered by Dow Jones to be in compliance with Islamic principles. The index provides a definitive standard for measuring stock market performance for Islamic investors on a global basis, in accordance with Dow Jones Indexes’s established index methodology. Prior to April 30, 2008, the performance of the Dow Jones Islamic Market World Index does not include the reinvestment of dividends. |
IMAN FUND
SCHEDULE OF INVESTMENTS
May 31, 2017
(Classifications are based on the North American Industry Classification System)
| Number of | | | | | |
| Shares | | | | Value | |
| | |
| COMMON STOCKS - 97.3% | |
| | | | | | |
| | | APPAREL KNITTING | | | |
| | | MILLS - 0.2% | | | |
| | 2,500 | | Columbia Sportswear Co. | | $ | 135,700 | |
| | | | | | | | |
| | | | AUDIO & VIDEO EQUIPMENT | | | | |
| | | | MANUFACTURING - 0.5% | | | | |
| | 8,200 | | Dolby Laboratories, Inc. - Class A | | | 413,198 | |
| | | | | | | | |
| | | | AUTOMOTIVE PARTS, | | | | |
| | | | ACCESSORIES & | | | | |
| | | | TIRE STORES - 1.1% | | | | |
| | 3,300 | | Advance Auto Parts, Inc. | | | 440,979 | |
| | 1,890 | | O’Reilly Automotive, Inc. (a) | | | 457,531 | |
| | | | | | | 898,510 | |
| | | | | | | | |
| | | | BASIC CHEMICAL | | | | |
| | | | MANUFACTURING - 0.8% | | | | |
| | 4,900 | | Air Products and Chemicals, Inc. | | | 705,894 | |
| | | | | | | | |
| | | | BUILDING MATERIAL & | | | | |
| | | | SUPPLIES DEALERS - 1.0% | | | | |
| | 5,600 | | The Home Depot, Inc. | | | 859,656 | |
| | | | | | | | |
| | | | CHEMICAL & ALLIED | | | | |
| | | | PRODUCTS MERCHANT | | | | |
| | | | WHOLESALERS - 0.4% | | | | |
| | 2,200 | | Acuity Brands, Inc. | | | 358,402 | |
| | | | | | | | |
| | | | CLOTHING STORES - 0.4% | | | | |
| | 4,600 | | Ross Stores, Inc. | | | 294,032 | |
| | | | | | | | |
| | | | COMMERCIAL & SERVICE | | | | |
| | | | INDUSTRY MACHINERY | | | | |
| | | | MANUFACTURING - 0.6% | | | | |
| | 3,600 | | The Middleby Corp. (a) | | | 462,096 | |
| | | | | | | | |
| | | | COMMUNICATIONS EQUIPMENT | | | | |
| | | | MANUFACTURING - 2.2% | | | | |
| | 47,600 | | BlackBerry Ltd. (a)(b) | | | 503,132 | |
| | 24,000 | | QUALCOMM, Inc. | | | 1,374,480 | |
| | | | | | | 1,877,612 | |
| | | | | | | | |
| | | | COMPUTER & PERIPHERAL | | | | |
| | | | EQUIPMENT | | | | |
| | | | MANUFACTURING - 2.5% | | | | |
| | 13,900 | | Apple Inc. | | | 2,123,364 | |
| | | | | | | | |
| | | | COMPUTER SYSTEMS DESIGN | | | | |
| | | | & RELATED SERVICES - 6.6% | | | | |
| | 11,100 | | Accenture PLC - Class A (b) | | | 1,381,617 | |
| | 19,300 | | Amdocs Ltd. (b) | | | 1,250,254 | |
| | 10,110 | | Baidu, Inc. - ADR (a)(b) | | | 1,881,471 | |
| | 2,700 | | F5 Networks, Inc. (a) | | | 345,951 | |
| | 6,500 | | VMware, Inc. - Class A (a) | | | 631,475 | |
| | | | | | | 5,490,768 | |
| | | | | | | | |
| | | | CUT & SEW APPAREL | | | | |
| | | | MANUFACTURING - 0.8% | | | | |
| | 11,700 | | lululemon athletica Inc. (a) | | | 564,759 | |
| | 2,300 | | VF Corp. | | | 123,740 | |
| | | | | | | 688,499 | |
| | | | | | | | |
| | | | DATA PROCESSING, HOSTING | | | | |
| | | | & RELATED SERVICES - 0.6% | | | | |
| | 1,860 | | CoStar Group Inc. (a) | | | 486,520 | |
| | | | | | | | |
| | | | DRUGS & DRUGGISTS’ | | | | |
| | | | SUNDRIES MERCHANT | | | | |
| | | | WHOLESALERS - 0.6% | | | | |
| | 5,500 | | The Procter & Gamble Co. | | | 484,495 | |
| | | | | | | | |
| | | | ELECTRICAL EQUIPMENT | | | | |
| | | | MANUFACTURING - 3.5% | | | | |
| | 115,700 | | ABB Ltd. - ADR (b) | | | 2,907,541 | |
| | | | | | | | |
| | | | ELECTRONIC SHOPPING & | | | | |
| | | | MAIL-ORDER HOUSES - 3.3% | | | | |
| | 2,730 | | Amazon.com, Inc. (a) | | | 2,715,313 | |
| | | | | | | | |
| | | | ELECTRONICS & | | | | |
| | | | APPLIANCE STORES - 0.2% | | | | |
| | 3,100 | | Best Buy Co., Inc. | | | 184,109 | |
| | | | | | | | |
| | | | EMPLOYMENT SERVICES - 0.6% | | | | |
| | 5,200 | | ManpowerGroup Inc. | | | 529,724 | |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
SCHEDULE OF INVESTMENTS (Continued)
May 31, 2017
(Classifications are based on the North American Industry Classification System)
| Number of | | | | | |
| Shares | | | | Value | |
| | |
| COMMON STOCKS - 97.3% (Continued) | |
| | | | | | |
| | | ENGINE, TURBINE & POWER | | | |
| | | TRANSMISSION EQUIPMENT | | | |
| | | MANUFACTURING - 0.2% | | | |
| | 900 | | Cummins, Inc. | | $ | 141,930 | |
| | | | | | | | |
| | | | FOOTWEAR | | | | |
| | | | MANUFACTURING - 0.2% | | | | |
| | 3,100 | | NIKE, Inc. - Class B | | | 164,269 | |
| | | | | | | | |
| | | | FREIGHT TRANSPORTATION | | | | |
| | | | ARRANGEMENT - 0.5% | | | | |
| | 900 | | C.H. Robinson Worldwide, Inc. | | | 60,309 | |
| | 6,400 | | Expeditors International | | | | |
| | | | of Washington, Inc. | | | 341,632 | |
| | | | | | | 401,941 | |
| | | | | | | | |
| | | | GROCERY & RELATED | | | | |
| | | | PRODUCT MERCHANT | | | | |
| | | | WHOLESALERS - 0.6% | | | | |
| | 8,600 | | Unilever PLC - ADR (b) | | | 478,332 | |
| | | | | | | | |
| | | | HOUSEHOLD APPLIANCE | | | | |
| | | | MANUFACTURING - 0.9% | | | | |
| | 7,900 | | iRobot Corp. (a) | | | 732,488 | |
| | | | | | | | |
| | | | HOUSEHOLD APPLIANCES & | | | | |
| | | | ELECTRICAL & ELECTRONIC | | | | |
| | | | GOODS MERCHANT | | | | |
| | | | WHOLESALERS - 2.9% | | | | |
| | 31,000 | | TE Connectivity Ltd. (b) | | | 2,444,350 | |
| | | | | | | | |
| | | | LAWN & GARDEN EQUIPMENT | | | | |
| | | | & SUPPLIES STORES - 0.4% | | | | |
| | 4,000 | | MSC Industrial Direct Co., | | | | |
| | | | Inc. - Class A | | | 335,760 | |
| | | | | | | | |
| | | | LOCAL MESSENGERS | | | | |
| | | | & LOCAL DELIVERY - 0.6% | | | | |
| | 4,500 | | United Parcel Service, | | | | |
| | | | Inc. (UPS) - Class B | | | 476,865 | |
| | | | | | | | |
| | | | MACHINERY, EQUIPMENT | | | | |
| | | | & SUPPLIES MERCHANT | | | | |
| | | | WHOLESALERS - 0.6% | | | | |
| | 9,100 | | Hexcel Corp. | | | 468,013 | |
| | | | | | | | |
| | | | MANAGEMENT, SCIENTIFIC | | | | |
| | | | & TECHNICAL CONSULTING | | | | |
| | | | SERVICES - 1.0% | | | | |
| | 9,400 | | salesforce.com, Inc. (a) | | | 842,616 | |
| | | | | | | | |
| | | | MEDICAL EQUIPMENT & | | | | |
| | | | SUPPLIES MANUFACTURING - 5.9% | | | | |
| | 2,900 | | ABIOMED, Inc. (a) | | | 398,547 | |
| | 3,100 | | Align Technology, Inc. (a) | | | 450,120 | |
| | 1,400 | | Baxter International Inc. | | | 83,034 | |
| | 2,300 | | C.R. Bard, Inc. | | | 707,089 | |
| | 5,000 | | Dentsply Sirona Inc. | | | 317,600 | |
| | 5,800 | | Edwards Lifesciences, Corp. (a) | | | 667,406 | |
| | 11,600 | | Globus Medical, Inc. - Class A (a) | | | 356,700 | |
| | 980 | | Intuitive Surgical, Inc. (a) | | | 896,386 | |
| | 4,900 | | Nevro Corp. (a) | | | 337,267 | |
| | 5,100 | | Stryker Corp. | | | 729,096 | |
| | | | | | | 4,943,245 | |
| | | | | | | | |
| | | | METAL ORE MINING - 0.5% | | | | |
| | 6,100 | | Franco-Nevada Corp. (b) | | | 455,182 | |
| | | | | | | | |
| | | | MISCELLANEOUS DURABLE | | | | |
| | | | GOODS MERCHANT | | | | |
| | | | WHOLESALERS - 1.1% | | | | |
| | 3,320 | | 3M Co. | | | 678,840 | |
| | 2,000 | | Honeywell International, Inc. | | | 265,980 | |
| | | | | | | 944,820 | |
| | | | | | | | |
| | | | MISCELLANEOUS | | | | |
| | | | NONDURABLE GOODS | | | | |
| | | | MERCHANT WHOLESALERS - 0.6% | | | | |
| | 1,620 | | The Sherwin-Williams Co. | | | 537,467 | |
| | | | | | | | |
| | | | MOTOR VEHICLE BODY & | | | | |
| | | | TRAILER MANUFACTURING - 0.9% | | | | |
| | 40,900 | | Gentex Corp. | | | 776,282 | |
| | | | | | | | |
| | | | MOTOR VEHICLE | | | | |
| | | | MANUFACTURING - 1.0% | | | | |
| | 2,350 | | Tesla Inc. (a) | | | 801,374 | |
| | | | | | | | |
| | | | MOTOR VEHICLE PARTS | | | | |
| | | | MANUFACTURING - 0.3% | | | | |
| | 1,900 | | WABCO Holdings Inc. (a) | | | 231,458 | |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
SCHEDULE OF INVESTMENTS (Continued)
May 31, 2017
(Classifications are based on the North American Industry Classification System)
| Number of | | | | | |
| Shares | | | | Value | |
| | |
| COMMON STOCKS - 97.3% (Continued) | |
| | | | | | |
| | | NAVIGATIONAL, MEASURING, | | | |
| | | ELECTROMEDICAL & | | | |
| | | CONTROL INSTRUMENTS | | | |
| | | MANUFACTURING - 2.1% | | | |
| | 4,500 | | Agilent Technologies, Inc. | | $ | 271,530 | |
| | 5,800 | | Coherent, Inc. (a) | | | 1,439,270 | |
| | | | | | | 1,710,800 | |
| | | | | | | | |
| | | | NEWSPAPER, PERIODICAL, | | | | |
| | | | BOOK & DIRECTORY | | | | |
| | | | PUBLISHERS - 2.3% | | | | |
| | 90,300 | | RELX PLC - ADR (b) | | | 1,957,704 | |
| | | | | | | | |
| | | | NONMETALLIC MINERAL | | | | |
| | | | MINING & QUARRYING - 0.6% | | | | |
| | 2,340 | | Martin Marietta Materials, Inc. | | | 524,394 | |
| | | | | | | | |
| | | | OFFICE ADMINISTRATIVE | | | | |
| | | | SERVICES - 0.3% | | | | |
| | 5,000 | | Baker Hughes, Inc. | | | 275,750 | |
| | | | | | | | |
| | | | OIL & GAS EXTRACTION - 1.2% | | | | |
| | 5,000 | | Diamondback Energy Inc (a) | | | 463,800 | |
| | 1,300 | | EOG Resources, Inc. | | | 117,403 | |
| | 15,000 | | Parsley Energy, Inc - Class A (a) | | | 444,750 | |
| | | | | | | 1,025,953 | |
| | | | | | | | |
| | | | OTHER FABRICATED | | | | |
| | | | METAL PRODUCT | | | | |
| | | | MANUFACTURING - 0.6% | | | | |
| | 3,050 | | Snap-on, Inc. | | | 493,063 | |
| | | | | | | | |
| | | | OTHER GENERAL | | | | |
| | | | MERCHANDISE STORES - 0.2% | | | | |
| | 2,300 | | Dollar General Corp. | | | 168,797 | |
| | | | | | | | |
| | | | OTHER INFORMATION | | | | |
| | | | SERVICES - 6.2% | | | | |
| | 2,335 | | Alphabet Inc. - Class A (a) | | | 2,304,855 | |
| | 1,320 | | Alphabet Inc. - Class C (a) | | | 1,273,616 | |
| | 10,300 | | Facebook Inc. - Class A (a) | | | 1,560,038 | |
| | | | | | | 5,138,509 | |
| | | | | | | | |
| | | | OTHER LEATHER & | | | | |
| | | | ALLIED PRODUCT | | | | |
| | | | MANUFACTURING - 0.2% | | | | |
| | 3,800 | | Coach, Inc. | | | 175,598 | |
| | | | | | | | |
| | | | OTHER MISCELLANEOUS | | | | |
| | | | MANUFACTURING - 0.5% | | | | |
| | 3,700 | | Pool Corp. | | | 440,781 | |
| | | | | | | | |
| | | | PAINT, COATING & ADHESIVE | | | | |
| | | | MANUFACTURING - 0.1% | | | | |
| | 800 | | PPG Industries, Inc. | | | 85,088 | |
| | | | | | | | |
| | | | PETROLEUM & COAL PRODUCTS | | | | |
| | | | MANUFACTURING - 2.0% | | | | |
| | 20,500 | | Exxon Mobil Corp. | | | 1,650,250 | |
| | | | | | | | |
| | | | PHARMACEUTICAL & MEDICINE | | | | |
| | | | MANUFACTURING - 10.8% | | | | |
| | 12,000 | | Alkermes PLC (a)(b) | | | 693,120 | |
| | 5,400 | | Alnylam Pharmaceuticals, Inc. (a) | | | 353,484 | |
| | 627 | | Bioverativ Inc. (a) | | | 34,542 | |
| | 3,200 | | Bristol-Myers Squibb Co. | | | 172,640 | |
| | 2,400 | | IDEXX Laboratories, Inc. (a) | | | 404,136 | |
| | 4,400 | | Ionis Pharmaceuticals, Inc. (a) | | | 201,476 | |
| | 13,400 | | Johnson & Johnson | | | 1,718,550 | |
| | 18,400 | | Merck & Co., Inc. | | | 1,198,024 | |
| | 58,700 | | Nektar Therapeutics (a) | | | 1,166,956 | |
| | 27,500 | | Novartis AG - ADR (b) | | | 2,248,675 | |
| | 300 | | Regeneron Pharmaceuticals, Inc. (a) | | | 137,718 | |
| | 6,800 | | Seattle Genetics, Inc. (a) | | | 435,064 | |
| | 2,300 | | Vertex Pharmaceuticals Inc. (a) | | | 284,280 | |
| | | | | | | 9,048,665 | |
| | | | | | | | |
| | | | PROFESSIONAL & | | | | |
| | | | COMMERCIAL EQUIPMENT | | | | |
| | | | & SUPPLIES MERCHANT | | | | |
| | | | WHOLESALERS - 0.7% | | | | |
| | 9,000 | | Paycom Software, Inc. (a) | | | 588,960 | |
| | | | | | | | |
| | | | RUBBER PRODUCT | | | | |
| | | | MANUFACTURING - 0.2% | | | | |
| | 1,300 | | Carlisle Companies Incorporated | | | 131,729 | |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
SCHEDULE OF INVESTMENTS (Continued)
May 31, 2017
(Classifications are based on the North American Industry Classification System)
| Number of | | | | | |
| Shares | | | | Value | |
| | | | |
| COMMON STOCKS - 97.3% (Continued) | | | |
| | | | | | |
| | | SCHEDULED AIR | | | |
| | | TRANSPORTATION - 1.4% | | | |
| | 19,900 | | Southwest Airlines Co. | | $ | 1,195,791 | |
| | | | | | | | |
| | | | SCIENTIFIC RESEARCH & | | | | |
| | | | DEVELOPMENT SERVICES - 2.1% | | | | |
| | 2,020 | | Biogen Idec Inc. (a) | | | 500,495 | |
| | 23,500 | | Exact Sciences Corp. (a) | | | 857,045 | |
| | 2,400 | | Waters Corp. (a) | | | 431,088 | |
| | | | | | | 1,788,628 | |
| | | | | | | | |
| | | | SEMICONDUCTOR & OTHER | | | | |
| | | | ELECTRONIC COMPONENT | | | | |
| | | | MANUFACTURING - 10.0% | | | | |
| | 95,800 | | Advanced Micro Devices, Inc. (a) | | | 1,072,002 | |
| | 7,200 | | Amphenol Corp. - Class A | | | 537,120 | |
| | 1,100 | | Analog Devices, Inc. | | | 94,336 | |
| | 11,100 | | Applied Materials, Inc. | | | 509,268 | |
| | 4,780 | | Broadcom Ltd. (b) | | | 1,144,714 | |
| | 5,683 | | Cavium, Inc. (a) | | | 414,689 | |
| | 24,600 | | Intel Corp. | | | 888,306 | |
| | 19,800 | | Jabil Circuit, Inc. | | | 592,416 | |
| | 9,600 | | NVIDIA Corp. | | | 1,385,760 | |
| | 8,700 | | Texas Instruments Inc. | | | 717,663 | |
| | 14,800 | | Xilinx, Inc. | | | 987,308 | |
| | | | | | | 8,343,582 | |
| | | | | | | | |
| | | | SERVICES TO BUILDINGS | | | | |
| | | | & DWELLINGS - 0.8% | | | | |
| | 800 | | Automatic Data Processing, Inc. | | | 81,896 | |
| | 14,100 | | Rollins, Inc. | | | 607,287 | |
| | | | | | | 689,183 | |
| | | | | | | | |
| | | | SHIP & BOAT BUILDING - 1.1% | | | | |
| | 16,400 | | Brunswick Corp. | | | 906,264 | |
| | | | | | | | |
| | | | SHOE STORES - 0.1% | | | | |
| | 800 | | Foot Locker, Inc. | | | 47,528 | |
| | | | | | | | |
| | | | SOAP, CLEANING COMPOUND | | | | |
| | | | & TOILET PREPARATION | | | | |
| | | | MANUFACTURING - 0.6% | | | | |
| | 9,900 | | Church & Dwight Co, Inc. | | | 511,434 | |
| | | | | | | | |
| | | | SOFTWARE PUBLISHERS - 7.7% | | | | |
| | 6,000 | | ANSYS, Inc. (a) | | | 757,980 | |
| | 5,300 | | Autodesk, Inc. (a) | | | 592,381 | |
| | 4,900 | | Citrix Systems, Inc. (a) | | | 404,446 | |
| | 1,400 | | Intuit Inc. | | | 196,896 | |
| | 500 | | MercadoLibre Inc. | | | 137,555 | |
| | 20,800 | | Microsoft Corp. | | | 1,452,672 | |
| | 9,800 | | PTC, Inc. (a) | | | 564,284 | |
| | 10,000 | | Red Hat, Inc. (a) | | | 895,700 | |
| | 6,900 | | Splunk Inc. (a) | | | 422,556 | |
| | 7,400 | | Synopsys, Inc. (a) | | | 554,038 | |
| | 2,900 | | Tyler Technologies, Inc. (a) | | | 495,552 | |
| | | | | | | 6,474,060 | |
| | | | | | | | |
| | | | TRAVEL ARRANGEMENT & | | | | |
| | | | RESERVATION SERVICES - 1.2% | | | | |
| | 528 | | The Priceline Group, Inc. (a) | | | 991,104 | |
| | | | | | | | |
| | | | WHOLESALE ELECTRONIC | | | | |
| | | | MARKETS & AGENTS | | | | |
| | | | & BROKERS - 0.2% | | | | |
| | 2,200 | | Genuine Parts Co. | | | 203,764 | |
| | | | TOTAL COMMON STOCKS | | | | |
| | | | (Cost $65,971,858) | | | 81,359,204 | |
| | |
| PREFERRED STOCK - 2.4% | |
| | | | | | | | |
| | | | WIRED TELECOMMUNICATIONS | | | | |
| | | | CARRIERS - 2.4% | | | | |
| | 139,800 | | Telefonica Brasil S.A. (b) | | | 2,000,538 | |
| | | | TOTAL PREFERRED STOCK | | | | |
| | | | (Cost $1,693,789) | | | 2,000,538 | |
| | | | Total Investments | | | | |
| | | | (Cost $67,665,647) - 99.7% | | | 83,359,742 | |
| | | | Other Assets in | | | | |
| | | | Excess of Liabilities - 0.3% | | | 221,435 | |
| | | | TOTAL NET ASSETS - 100.0% | | $ | 83,581,177 | |
Percentages are stated as a percent of net assets.
ADR – American Depositary Receipt
| (a) | Non Income Producing |
| (b) | Foreign Issued Securities |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2017
| Assets: | | | |
| Investments, at value (cost $67,665,647) | | $ | 83,359,742 | |
| Cash | | | 152,727 | |
| Receivable for investments sold | | | 2,607,401 | |
| Receivable for capital shares sold | | | 29,652 | |
| Dividends receivable | | | 243,288 | |
| Other assets | | | 23,373 | |
| Total Assets | | | 86,416,183 | |
| | | | | |
| Liabilities: | | | | |
| Payable for investments purchased | | | 2,685,310 | |
| Payable to Adviser (Note 3) | | | 68,502 | |
| Payable for professional fees | | | 30,808 | |
| Payable for Trustee fees | | | 4,499 | |
| Accrued expenses and other liabilities | | | 45,887 | |
| Total Liabilities | | | 2,835,006 | |
| Net Assets | | $ | 83,581,177 | |
| | | | | |
| Net assets consist of: | | | | |
| Paid-in capital | | $ | 62,727,268 | |
| Accumulated net investment income | | | 240,554 | |
| Accumulated net realized gain on investments | | | 4,919,260 | |
| Net unrealized appreciation on investments | | | 15,694,095 | |
| Net Assets | | $ | 83,581,177 | |
| | | | | |
| Shares of beneficial interest outstanding | | | | |
| (unlimited number of shares authorized, no par value) | | | 6,569,251 | |
| Net asset value, redemption price and offering price per share | | $ | 12.72 | |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
STATEMENT OF OPERATIONS
For the Year Ended May 31, 2017
| Investment income: | | | |
| Dividend income (Net of foreign withholding tax of $26,579) | | $ | 1,218,349 | |
| Total investment income | | | 1,218,349 | |
| | | | | |
| Expenses: | | | | |
| Advisory fees (Note 3) | | | 721,891 | |
| Administration fees | | | 75,200 | |
| Transfer agent fees and expenses | | | 49,799 | |
| Fund accounting fees | | | 36,750 | |
| Federal and state registration fees | | | 27,133 | |
| Trustees’ fees and related expenses | | | 18,999 | |
| Legal fees | | | 14,812 | |
| Audit fees | | | 13,500 | |
| Custody fees | | | 9,074 | |
| Reports to shareholders | | | 9,009 | |
| Other expenses | | | 1,628 | |
| Total expenses | | | 977,795 | |
| Net investment income | | | 240,554 | |
| | | | | |
| Realized and unrealized gain on investments: | | | | |
| Net realized gain from security transactions | | | 7,290,807 | |
| Change in net unrealized appreciation on investments | | | 7,902,371 | |
| Realized and unrealized gain on investments | | | 15,193,178 | |
| Net increase in net assets from operations | | $ | 15,433,732 | |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
| | | Year Ended | | | Year Ended | |
| | | May 31, 2017 | | | May 31, 2016 | |
| From operations: | | | | | | |
| Net investment income | | $ | 240,554 | | | $ | 18,210 | |
| Net realized gain on investments | | | 7,290,807 | | | | 2,974,184 | |
| Change in net unrealized appreciation (depreciation) on investments | | | 7,902,371 | | | | (1,766,045 | ) |
| Net increase in net assets from operations | | | 15,433,732 | | | | 1,226,349 | |
| | | | | | | | | |
| From distributions: | | | | | | | | |
| Net investment income | | | (18,196 | ) | | | — | |
| Net realized gain on investments | | | (5,298,215 | ) | | | (2,930,010 | ) |
| Net decrease in net assets | | | | | | | | |
| resulting from distributions paid | | | (5,316,411 | ) | | | (2,930,010 | ) |
| | | | | | | | | |
| From capital share transactions: | | | | | | | | |
| Proceeds from sale of shares | | | 15,744,727 | | | | 8,464,219 | |
| Net asset value of shares issued in | | | | | | | | |
| reinvestment of distributions to shareholders | | | 5,274,998 | | | | 2,914,842 | |
| Payments for shares redeemed | | | (8,623,103 | ) | | | (17,048,574 | ) |
| Net increase (decrease) in net assets | | | | | | | | |
| from capital share transactions | | | 12,396,622 | | | | (5,669,513 | ) |
| | | | | | | | | |
| Total increase (decrease) in net assets | | | 22,513,943 | | | | (7,373,174 | ) |
| | | | | | | | | |
| Net assets: | | | | | | | | |
| Beginning of period | | | 61,067,234 | | | | 68,440,408 | |
| End of period (includes accumulated net investment | | | | | | | | |
| income of $240,554 and $9,374, respectively) | | $ | 83,581,177 | | | $ | 61,067,234 | |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout Each Period
| | | Year Ended May 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Net asset value, beginning of period | | $ | 11.15 | | | $ | 11.40 | | | $ | 11.59 | | | $ | 9.99 | | | $ | 8.35 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss)(1) | | | 0.03 | | | | 0.00 | (2) | | | (0.00 | )(2) | | | (0.01 | ) | | | (0.03 | ) |
| Net realized and unrealized gains on investments | | | 2.42 | | | | 0.22 | | | | 1.13 | | | | 2.02 | | | | 1.67 | |
| Total from investment operations | | | 2.45 | | | | 0.22 | | | | 1.13 | | | | 2.01 | | | | 1.64 | |
| | | | | | | | | | | | | | | | | | | | | |
| Less distributions paid: | | | | | | | | | | | | | | | | | | | | |
| From net investment income | | | (0.00 | )(2) | | | — | | | | — | | | | — | | | | — | |
| From net realized gain on investments | | | (0.88 | ) | | | (0.47 | ) | | | (1.32 | ) | | | (0.41 | ) | | | — | |
| Total distributions paid | | | (0.88 | ) | | | (0.47 | ) | | | (1.32 | ) | | | (0.41 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
| Net asset value, end of period | | $ | 12.72 | | | $ | 11.15 | | | $ | 11.40 | | | $ | 11.59 | | | $ | 9.99 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total return | | | 23.06 | % | | | 1.99 | % | | | 10.22 | % | | | 20.30 | % | | | 19.64 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000’s) | | $ | 83,581 | | | $ | 61,067 | | | $ | 68,440 | | | $ | 59,221 | | | $ | 45,207 | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratio of expenses to average net assets | | | 1.35 | % | | | 1.39 | % | | | 1.42 | % | | | 1.48 | % | | | 1.59 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Ratio of net investment income (loss) | | | | | | | | | | | | | | | | | | | | |
| to average net assets | | | 0.33 | % | | | 0.03 | % | | | (0.02 | )% | | | (0.09 | )% | | | (0.36 | )% |
| | | | | | | | | | | | | | | | | | | | | |
| Portfolio turnover rate | | | 74.7 | % | | | 70.6 | % | | | 72.0 | % | | | 71.7 | % | | | 109.5 | % |
| (1) | Net investment income (loss) per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
| (2) | Less than one cent per share. |
The accompanying notes are an integral part of these financial statements.
IMAN FUND
NOTES TO THE FINANCIAL STATEMENTS
May 31, 2017
1. Organization
Allied Asset Advisors Funds (the “Trust”), an open-end management investment company, was organized as a Delaware statutory trust on January 14, 2000. The Trust currently offers one series of shares to investors, the Iman Fund (the “Fund”), a diversified series of the Trust. Allied Asset Advisors, Inc. (“AAA” or the “Adviser”), a Delaware corporation, serves as investment adviser to the Fund.
The Trust is authorized to issue an unlimited number of shares without par value, of each series. The Trust currently offers one class of shares of the Fund.
The investment objective of the Fund is to seek growth of capital while adhering to Islamic principles. To achieve its investment objective, the Fund seeks investments that meet Islamic principles whose prices the Fund’s Adviser anticipates will increase over the long term. Under normal circumstances, the Fund invests its net assets in domestic and foreign securities chosen by the Adviser in accordance with Islamic principles. Islamic principles generally preclude investments in certain businesses (e.g., alcohol, pornography and gambling) and investments in interest bearing debt obligations. Any uninvested cash will be held in non-interest bearing deposits or invested in a manner following Islamic principles.
The Fund is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Use of Estimates: In preparing the financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from these estimates.
Security Valuation: Investment securities are carried at fair value determined using the following valuation methods:
| • | Equity securities listed on a U.S. securities exchange or NASDAQ for which market quotations are readily available are valued at the last quoted sale price on the valuation date. |
| | |
| • | Options, futures, unlisted U.S. securities and listed U.S. securities not traded on the valuation date for which market quotations are readily available are valued at the most recent quoted bid price. The Fund did not hold any such securities during the year ended May 31, 2017. |
| | |
| • | Securities or other assets for which market quotations are not readily available are valued at fair value as determined in good faith by the Adviser under direction of the Board of Trustees. The Fund did not hold any such securities during the year ended May 31, 2017. |
The Fund has adopted fair valuation accounting standards which establish an authoritative definition of fair value and a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes.
Summary of Fair Value Exposure at May 31, 2017
The Trust has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination. Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
| Level 1 - | Quoted prices in active markets for identical securities. |
IMAN FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
May 31, 2017
| Level 2 - | Other significant observable inputs (including quoted prices for similar securities in active markets, quoted prices for identical or similar instruments in markets that are not active, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, interest rates, prepayment speeds, credit risk, etc.) |
| | |
| Level 3 - | Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs that are used in determining a fair value of an investment may include price information, credit data, volatility statistics and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments and is affected by various factors such as the type of investment or similar investments in the marketplace. The inputs will be considered by the Adviser, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Adviser. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund’s net assets as of May 31, 2017:
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 81,359,204 | | | $ | — | | | $ | — | | | $ | 81,359,204 | |
| Preferred Stock | | | 2,000,538 | | | | — | | | | — | | | | 2,000,538 | |
| Total* | | $ | 83,359,742 | | | $ | — | | | $ | — | | | $ | 83,359,742 | |
| * | Additional information regarding the industry and/or geographical classification of these investments is disclosed in the Schedule of Investments. |
There were no transfers into or out of Level 1, Level 2 or Level 3 fair value measurements during the reporting period for the Fund, as compared to their classification from the most recent annual report. It is the Fund’s policy to consider transfers into or out of Level 1, Level 2 or Level 3 as of the end of the reporting period.
Foreign Securities: Investing in securities of foreign companies and foreign governments involves special risks and consideration not typically associated with investing in U.S. companies and the U.S. government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government. The Fund does not invest in securities of U.S. or foreign governments.
Federal Income Taxes: It is the Fund’s policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies, and the Fund intends to distribute all of its taxable income and net capital gains to shareholders. Therefore, no federal income tax provision is required.
As of and during the year ended May 31, 2017, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as other expenses in the Statement of Operations. During the year, the Fund did not incur any interest or penalties. The statute of limitations on the Fund’s tax returns remains open for the years ended May 31, 2014 through May 31, 2017.
IMAN FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
May 31, 2017
As of May 31, 2017, the components of distributable earnings on a tax basis were as follows:
| Cost of investments | | $ | 67,877,999 | |
| Gross tax unrealized appreciation | | $ | 17,161,741 | |
| Gross tax unrealized depreciation | | | (1,679,998 | ) |
| Net tax unrealized appreciation | | $ | 15,481,743 | |
| Undistributed ordinary income | | | 2,326,139 | |
| Undistributed long-term capital gains | | | 3,046,027 | |
| Total distributable earnings | | $ | 5,372,166 | |
| Other accumulated losses | | | — | |
| Total accumulated gain | | $ | 20,853,909 | |
The difference between book basis and tax basis unrealized appreciation is attributable primarily to the tax deferral of losses relating to wash sale transactions.
Under current tax laws, losses realized after October 31 may be deferred and treated as occurring on the first business day of the following fiscal year. For the fiscal year ended May 31, 2017, the Fund did not defer, on a tax basis, any post-October losses.
Distributions to Shareholders: The Fund will distribute substantially all of the net investment income and net realized gains that it has realized on the sale of securities. These income and gains distributions will generally be paid once each year, on or before December 31. The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense or gain items for financial reporting and tax reporting purposes.
The tax character of distributions paid were as follows:
| | | Year Ended | | | Year Ended | |
| | | May 31, 2017 | | | May 31, 2016 | |
| Ordinary Income | | $ | 1,726,529 | | | $ | 623,010 | |
| Long-term capital gains | | $ | 3,589,882 | | | $ | 2,307,000 | |
Dividend income and distributions to shareholders are recorded on the ex-dividend date. The Fund may periodically make reclassifications among certain of its capital accounts to reflect the tax character of permanent book/tax differences related to the components of the Fund’s net assets. These reclassifications have no impact on the net assets or net asset value of the Fund. For the fiscal year ended May 31, 2017, accumulated undistributed net investment income was increased by $8,822 and accumulated undistributed net realized gain was decreased by $8,822 resulting from such reclassification.
Other: Investment transactions and shareholder transactions are accounted for on the trade date. Net realized gains and losses on securities are computed on the basis of specific security lot identification. Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.
Recent Accounting Pronouncement: In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The updates to Regulation S-X are effective August 1, 2017, and may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments. These updates have no impact on the Fund’s net assets or results of operations.
Subsequent Events: In preparing these financial statements, management has performed an evaluation of subsequent events after May 31, 2017, through the date the financial statements were issued and determined that there were no significant subsequent events that would require adjustment to or additional disclosure in these financial statements.
3. Investment Advisory and Other Agreements
The Trust has an Investment Advisory Agreement (the “Agreement”) with the Adviser, with whom certain officers and a Trustee of the Trust are affiliated, to furnish investment advisory services to the Fund. Under the terms of the Agreement, the Trust, on behalf of the Fund, compensates the Adviser for its management services at the annual rate of 1.00% of the Fund’s daily average net assets.
IMAN FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
May 31, 2017
For the year ended May 31, 2017, the Fund had advisory expenses of $721,891 and as of May 31, 2017, the Fund had $68,502 payable to the Adviser.
The Trust has a distribution agreement and a servicing agreement with Quasar Distributors, LLC (the “Distributor”). Fees for such distribution services are paid to the Distributor by the Adviser.
4. Capital Share Transactions
Capital Share Transactions of the Fund for the year ended May 31, 2017, were as follows:
| | | Amount | | | Shares | |
| Shares sold | | $ | 15,744,727 | | | | 1,352,655 | |
| Shares reinvested | | | 5,274,998 | | | | 470,982 | |
| Shares redeemed | | | (8,623,103 | ) | | | (730,745 | ) |
| Net increase | | $ | 12,396,622 | | | | 1,092,892 | |
| | | | | | | | | |
| Shares Outstanding | | | | | | | | |
| Beginning of period | | | | | | | 5,476,359 | |
| End of period | | | | | | | 6,569,251 | |
Capital Share Transactions of the Fund for the year ended May 31, 2016, were as follows:
| | | Amount | | | Shares | |
| Shares sold | | $ | 8,464,219 | | | | 766,430 | |
| Shares reinvested | | | 2,914,842 | | | | 264,986 | |
| Shares redeemed | | | (17,048,574 | ) | | | (1,560,494 | ) |
| Net decrease | | $ | (5,669,513 | ) | | | (529,078 | ) |
| | | | | | | | | |
| Shares Outstanding | | | | | | | | |
| Beginning of period | | | | | | | 6,005,437 | |
| End of period | | | | | | | 5,476,359 | |
5. Securities Transactions
During the year ended May 31, 2017, the cost of purchases and proceeds from sales of investment securities, other than short-term investments, were $61,738,045 and $53,841,163, respectively. There were no purchases or sales of U.S. government securities for the Fund.
6. Beneficial Ownership
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of May 31, 2017, the North American Islamic Trust (“NAIT”) held 49.90% of the Fund. NAIT is the parent company of the Adviser.
IMAN FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
Iman Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Iman Fund (the “Fund”) as of May 31, 2017, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2017, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Iman Fund as of May 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
COHEN & COMPANY, LTD.
Cleveland, Ohio
July 27, 2017
IMAN FUND
DISCLOSURE REGARDING THE BOARD OF TRUSTEES
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (Unaudited)
In approving the continuance of the investment advisory contract between Allied Asset Advisors Inc. (the “Adviser”) and the Iman Fund (the “Fund”), the Board of Trustees of the Fund (the “Board”) was advised by, and the independent Trustees of the Board met in executive session with, independent legal counsel to discuss the duties of the Trustees in consideration of the continuance of the agreement. The Board received and reviewed a substantial amount of information provided by the Adviser and third parties in response to the Board’s requests. Based on its evaluation of the information provided, the Board, at a meeting held April 17, 2017, approved continuation of the investment advisory contract for a period through June 29, 2018.
The Board reviewed and analyzed various factors in considering the contract and reaching its conclusions, including each of the factors described below.
1. Nature, Quality, and Extent of Services
The Board’s analysis of the nature, quality, and extent of the Adviser’s service to the Fund took into account the knowledge gained from the Board’s regular meetings with the Adviser throughout the prior year. In addition, the Board reviewed information on the key personnel involved in providing investment management services to the Fund and the Adviser’s performance of services for the Fund, such as stock selection, adherence to the Fund’s investment restrictions, and monitoring compliance with applicable Fund policies and procedures. The Board concluded that the nature, quality, and extent of the services provided by the Adviser to the Fund were appropriate and the Fund was likely to continue to benefit from services provided under its contract with the Adviser.
2. Investment Performance of the Fund and the Adviser
In considering the performance of the Fund and the Adviser, the Board compared the Fund’s performance with that of a universe of greater than 1,000 U.S. large cap growth mutual funds, as determined by Morningstar, an independent data service provider. The performance data was for one, three, five and ten year periods ended March 31, 2017. The Board also compared the Fund’s performance for the three month, six month and one, three, five and ten year periods ended March 31, 2017 with that of five benchmark indices: the Dow Jones Islamic Market US Index/Dow Jones Islamic Global Index blended rate (the “Blended Rate”), the Dow Jones Islamic Market US Index (the “IMUS”), the Dow Jones Islamic Global Index (the “DJIM”) and the Russell 1000 Index (the “RIY”). In addition, the Board also compared the Fund’s performance for the three month and one, three, five and ten year periods ended March 31, 2017 with five other mutual funds that follow Islamic principles.
The Board considered that the Fund had outperformed the Blended Rate, the IMUS and the DJIM for all periods ended March 31, 2017. The Board also considered that the Fund had underperformed the RIY for the six month, three year and five year periods ended March 31, 2017, but had outperformed the RIY for the three month and one year periods then ended.
The Board considered that the Fund had outperformed all of the Islamic principles peer funds for all periods ended March 31, 2017, with the exception of two of the funds for the three month period ended March 31, 2017.
The Board also reviewed the Fund’s performance against its peer universe, noting that the Fund outperformed its peer universe median for the one and three year periods, while underperforming its peer universe median for the five year and ten year periods ended March 31, 2017. The Board then discussed the principal reasons for the Fund’s underperformance and outperformance in various periods.
After considering all the information, the Board concluded that, although past performance cannot be a guarantee of future performance, the Fund and its shareholders were benefiting from the Adviser’s investment management of the Fund.
3. Costs of Services and Profits Realized by the Adviser
The Board examined the fee and expense information for the Fund as compared to that of other comparable funds and noted that the Adviser’s management fees, as a percentage of net assets, were in the fourth quartile of comparable funds and were higher than the peer group median reported by Morningstar. The Board noted, however, that the Fund’s special nature makes it distinct from most of the funds in its Morningstar peer group, which included many funds that are part of much larger families of funds and, therefore, realize economies of scale that the Fund does not.
IMAN FUND
DISCLOSURE REGARDING THE BOARD OF TRUSTEES
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (Unaudited), (Continued)
In addition, the Board considered the Adviser’s costs in serving as the Fund’s investment adviser and manager. The costs include those associated with the personnel and systems necessary to manage the Fund. The Board noted, also, that the costs included those associated with Rule 12b-1 expenses that the Adviser had paid on behalf of the Fund, since the Fund did not have a Rule 12b-1 Plan. The Board also considered the financial condition of the Adviser and, with the exception of the most recent three years, the losses incurred by the Adviser. The Board concluded that the management fee and the total expenses of the Fund were reasonable in light of the services provided and the performance the Fund achieved over various time periods, and that the other expenses of the Fund also were reasonable.
4. Economies of Scale
The Board considered the extent to which the Fund’s management fee reflected economies of scale for the benefit of Fund shareholders. The Board noted that because the Adviser was operating at a loss, up until the most recent three years, a discussion of economies of scale was not applicable with respect to the management fee received by the Adviser.
5. Other Benefits to the Adviser
The Board considered benefits that accrue to the Adviser from its relationship with the Fund. The Board noted that the Adviser did not employ soft-dollars and therefore did not derive research products or services from brokerage commissions paid by the Fund on its brokerage transactions.
After full consideration of the above factors as well as other factors, the Board, including all independent trustees, unanimously concluded that approval of the Fund’s Advisory contract was in the best interest of the Fund and its shareholders.
IMAN FUND
SUPPLEMENTAL INFORMATION (Unaudited)
Information pertaining to the Trustees and Officers of the Fund is set forth below. Each Trustee will serve until the termination of the Trust or his earlier death, resignation, retirement, incapacity or removal. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request by calling (877) 417-6161 or writing to Iman Fund, c/o Allied Asset Advisors, Inc., 715 Enterprise Drive, Suite 100, Oak Brook, IL 60523.
| | | | | |
| | | No. of | Principal | Other |
| | | Funds in | Occupation(s) | Trusteeships / |
| Name, Age, Address | Date First | Complex | during the past | Directorships |
| Position with Trust | Elected | Overseen | 5 years | by Trustee |
| Bassam Osman*, 65 | President | 1 | 1980 to present – Medical | None |
| 715 Enterprise Drive | since 2000 | | Doctor; 2000 to present – | |
| Oak Brook, IL 60523 | | | Portfolio Manager | |
| Trustee and President | | | to the Fund | |
| Abdalla Idris Ali, 67 | 2000 | 1 | 2011 to present – | None |
| 715 Enterprise Drive | | | Secretary General of | |
| Oak Brook, IL 60523 | | | “ISNA Canada” | |
| Independent Trustee | | | | |
| Mohammed Kaiseruddin, 72 | Chairperson | 1 | 1973 to present – | None |
| 715 Enterprise Drive | since 2006 and | | Nuclear Engineer, | |
| Oak Brook, IL 60523 | Independent | | Sargent & Lundy | |
| Chairperson and | Trustee | | | |
| Independent Trustee | since 2000 | | | |
| Muhammad Kudaimi, 60 | 2009 | 1 | 1988 to present – | None |
| 715 Enterprise Drive | | | Medical Doctor | |
| Oak Brook, IL 60523 | | | | |
| Independent Trustee | | | | |
| Mohammad Basheeruddin, 66 | Treasurer | 1 | 2001 to present – | N/A |
| 715 Enterprise Drive | since 2003 | | Accounting Manager, | |
| Oak Brook, IL 60523 | | | North American | |
| Treasurer | | | Islamic Trust (NAIT) | |
| Azam Nizamuddin, 48 | Chief Compliance | 1 | General Counsel and Deputy | N/A |
| 715 Enterprise Drive | Officer since | | Executive Director of NAIT | |
| Oak Brook, IL 60523 | 2015 | | since April, 2015; | |
| Chief Compliance Officer | | | 1998 to 2015 – | |
| | | | Attorney in Private Practice | |
| Salah Obeidallah, 59 | Secretary | 1 | Executive Director of NAIT | N/A |
| 715 Enterprise Drive | since 2015 | | since March, 2015; President | |
| Oak Brook, IL 60523 | | | of Allied Asset Advisors | |
| Secretary | | | since June, 2015; | |
| | | | 2000 to 2015 – Owner, | |
| | | | Manager of Paulison Car | |
| | | | Wash & Detailing Inc. | |
| * | This trustee is deemed to be an “interested person” of the Trust as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, because he is an officer of the Trust and is a director and officer of Allied Asset Advisors, Inc. |
IMAN FUND
SUPPLEMENTAL INFORMATION (Unaudited), (Continued)
Tax Information
The Fund designates 68.32% of its ordinary income distribution for the year ended May 31, 2017 as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003.
For the year ended May 31, 2017, 55.22% of the dividends paid from net ordinary income for the Fund qualifies for the dividends received deduction available to corporate shareholders.
For the year ended May 31, 2017, 98.95% of the percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(C).
IMAN FUND
ADDITIONAL INFORMATION
May 31, 2017
Proxy Voting Policies and Procedures (Unaudited)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (877) 417-6161 or by accessing the Fund’s website at http://www.investaaa.com. Furthermore, you can obtain the description on the SEC’s website at http://www.sec.gov.
Proxy Voting Record (Unaudited)
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling (877) 417-6161. Furthermore, you can obtain the Fund’s proxy voting records on the SEC’s website at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule (Unaudited)
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The filing will be available, upon request, by calling (877) 417-6161. Furthermore, you will be able to obtain a copy of the filing on the SEC’s website at http://www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
PRIVACY POLICY
In the course of servicing your account, we collect the following nonpublic personal information about you:
| • | Information we receive from you on or in applications or other forms, correspondence, or conversations, including, but not limited to, your name, address, phone number, social security number, assets, income and date of birth; and |
| | |
| • | Information about your transactions with us, our affiliates, or others, including, but not limited to, your account number and balance, parties to transactions, cost basis information, and other financial information. |
| | |
| • | Information collected from our website (including from the use of “cookies”) |
We do not disclose any nonpublic personal information about our current or former shareholders to nonaffiliated third parties, except as permitted by law. For example, we are permitted by law to disclose all of the information we collect, as described above, to our transfer agent to process your transactions. Furthermore, we restrict access to your nonpublic personal information to those persons who require such information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with industry standards to guard your nonpublic personal information.
In the event that you hold shares of the Fund through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your financial intermediary shares nonpublic personal information with nonaffiliated third parties.
INVESTMENT ADVISER
Allied Asset Advisors, Inc.
Oak Brook, Illinois
DISTRIBUTOR
Quasar Distributors, LLC
Milwaukee, Wisconsin
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Cohen & Company, Ltd.
Cleveland, Ohio
ADMINISTRATOR, TRANSFER AGENT,
AND FUND ACCOUNTANT
U.S. Bancorp Fund Services, LLC
Milwaukee, Wisconsin
CUSTODIAN
U.S. Bank, N.A.
Milwaukee, Wisconsin
LEGAL COUNSEL
Latham & Watkins
Chicago, Illinois
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus. Quasar Distributors, LLC is the Distributor for the Fund.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any substantive amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. The Registrant’s code of ethics is incorporated herein by reference to its form N-CSR filed on August 9, 2007.
Item 3. Audit Committee Financial Expert.
The Registrant’s board of trustees has determined that it does not have an audit committee financial expert serving on its audit committee. At this time, the Registrant believes that the experience provided by each member of the audit committee together offers the Registrant adequate oversight for the Registrant’s level of financial complexity.
Item 4. Principal Accountant Fees and Services.
The Registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the Registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
| | FYE 5/31/2017 | FYE 5/31/2016 |
| Audit Fees | 13,500 | 13,500 |
| Audit-Related Fees | - | - |
| Tax Fees | - | - |
| All Other Fees | - | - |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre‑approve all audit and non‑audit services of the Registrant, including services provided to any entity affiliated with the Registrant.
The percentages of fees billed by Cohen & Company, Ltd. applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
| | FYE 5/31/2017 | FYE 5/31/2016 |
| Audit-Related Fees | 0% | 0% |
| Tax Fees | 0% | 0% |
| All Other Fees | 0% | 0% |
All of the principal accountant’s hours spent on auditing the Registrant’s financial statements were attributed to work performed by full‑time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the Registrant’s accountant for services to the Registrant and to the Registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the last two years. The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the Registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.
| Non-Audit Related Fees | FYE 5/31/2017 | FYE 5/31/2016 |
| Registrant | - | - |
| Registrant’s Investment Adviser | - | - |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
| (a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed‑End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) The Registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d‑15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.
(b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
| (a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporated by reference to the Registrant’s Form N-CSR filed August 9, 2007. |
(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c‑1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
| (b) | Certifications pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Allied Asset Advisors Funds
By /s/ Bassam Osman
Bassam Osman, President
Date August 8, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/ Bassam Osman
Bassam Osman, President
Date August 8, 2017
By /s/ Mohammad Basheeruddin
Mohammad Basheeruddin, Treasurer
Date August 9, 2017
