SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-CSRS/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 002-96924
AMANA MUTUAL FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
1300 N. State Street
Bellingham, Washington 98225-4730
(Address of Principal Executive Offices, including ZIP Code)
Nicholas F. Kaiser
1300 N. State Street
Bellingham, Washington 98225-4730
(Name and Address of Agent for Service)
Registrant’s Telephone Number- (360) 734-9900
Date of fiscal year end: May 31, 2007
Date of reporting period: November 30, 2006
Fellow Shareowners:
The Amana Funds continue to provide good results. For the six-month fiscal period ended November 30, 2006, Amana Income Fund’s total return was +10.84%, slightly ahead of Amana Growth Fund’s total return of +9.49%. It was a strong period for stock markets, and the S&P 500 Index returned 11.33% and the Dow Jones Islamic Market US Index returned 10.28% [dividends omitted] for the same period.
Helped by thousands of new investors plus market appreciation, total Trust assets grew dramatically: 52% to $441 million at November 30. Please find details of each Fund’s operations for the first half of its fiscal year and the November 30, 2006 investment portfolios inside.
For the calendar year 2006, Amana Income Fund’s total return was +21.20%, also ahead of Amana Growth Fund’s total return of +15.41% (see table below and following page). When evaluating mutual funds, we recommend investors consider longer periods than one year, and give most weight to the results over the last ten years. For the Income Fund and Growth Fund, the average return for the ten years ending December 31, 2006 was 9.70% and 13.13%, respectively.
The higher assets allowed the Funds to increase their investments in our best performing companies as well as pursue greater portfolio diversification. Both Funds favor companies with strong financial histories and robust outlooks for the future. This year, companies in our favored Energy, Mining, Steel, Technology, and Health industries all did well.
The Funds also diversify globally with approximately 23% of each portfolio invested in non-USA equities. The international exposure benefited both Funds during the year as the US dollar broadly fell.
While consistently outperforming benchmark indices brings with it a sense of pride and accomplishment, Fund management’s primary focus remains long-term, value investing. The Amana Funds benefited this year by adhering to this approach. However, shareowners are cautioned that these exceptional results may not continue in the future. The Funds discourage speculation with a 30-day early redemption penalty. It is crucial for investors to understand that long-term growth comes with risk and volatility.
Saturna Capital is opening branch offices in the Washington DC area and New York City to better serve our investors. Our representatives increasingly appear at Islamic gatherings to educate on investing and Islamic finance. Please visit www.amanafunds.com for the presentations schedule plus other useful information, or call 1-888/73-AMANA.
Respectfully,
Performance data quoted in this report represents past performance, is before any taxes payable by shareowners, and is no guarantee of future performance. Mutual Fund performance changes over time and currently may be significantly higher or lower than that stated. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any and do not include the potential deduction of a 2% redemption fee on shares held less than 30 days. Share price, yield and return will vary and you may have a gain or loss when you sell your shares. Please consider an investment’s objectives, risks, charges and expenses carefully before investing. To obtain a free prospectus that contains this and other important information on the Amana Funds, as well as performance data current to the most recent month-end, please visit www.amanafunds.com or call toll free 1-800-73AMANA. | (graphic omitted) Nicholas Kaiser,
(graphic omitted) Talat Othman, |
Additional Performance Information:
| Average Annnual Returns (before any taxes paid by shareowners, as of 12/31/2006) | ||||
1 year | 3 years | 5 years | 10 years | |
| Amana Income Fund | 21.20% | 17.96% | 12.17% | 9.70% |
| Amana Growth Fund | 15.41% | 19.51% | 11.34% | 13.13% |
| 2 | Semi-Annual Report November 30, 2006 |
Performance Review:
The Amana Funds performed well for the semi-annual period ended November 30, 2006. While we caution investors that the outstanding performance may not continue, we are pleased to report some of the recognition our performance history has generated.
As of November 30, 2006, the U.S. mutual fund rating service, Morningstar, honored Amana by awarding both Funds their highest rating: ***** Overall. The strong performance history of both Funds is also illustrated in their high "% Rank in category" standings. Here are the details 1:
| As of November 30, 2006 | Overall | 1 year | 3 years | 5 years | 10 years |
| Amana Income Fund - "Large Value" Category | |||||
| Morningstar Rating™ | ***** | ***** | ***** | **** | |
| % Rank in category | 2 | 1 | 4 | 31 | |
| Funds in category | 1,085 | 1,352 | 1,085 | 811 | 394 |
| Amana Growth Fund - "Large Growth" Category | |||||
| Morningstar Rating™ | ***** | ***** | ***** | ***** | |
| % Rank in category | 4 | 1 | 1 | 2 | |
| Funds in category | 1,400 | 1,697 | 1,400 | 1,100 | 425 |
Amana also garnered high marks with Lipper Inc. (A Reuters Company). We are especially pleased to note that both Amana funds outperformed every other mutual fund in their respective categories for the past three years 2:
| As of November 30, 2006 | 1 year | 3 years | 5 years | 10 years |
| Amana Income Fund - "Equity Income" Category | ||||
| Quintile Rank | 1st | 1st | 1st | 2nd |
| Absolute Rank / Funds in category | 11/236 | 1/175 | 14/122 | 30/80 |
| Amana Growth Fund - "Multi-Cap Growth" Category | ||||
| Quintile Rank | 1st | 1st | 1st | 1st |
| Absolute Rank / Funds in category | 37/502 | 1/416 | 16/330 | 12/119 |
Performance data quoted in this report represents past performance, is before any taxes payable by shareowners, and is no guarantee of future performance. Mutual Fund performance changes over time and currently may be significantly lower than that stated. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Share price, yield and return will vary and you may have a gain or loss when you sell your shares. Please consider an investment's objectives, risks, charges and expenses carefully before investing. To obtain a free prospectus that contains this and other important information on the Amana Funds, as well as performance data current to the most recent month-end, please visit www.amanafunds.com or call toll free 1-800-73AMANA.
1 Source: Morningstar 11/30/2006. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% in each category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars and the bottom 10% receive 1 star. The Overall Morningstar Rating for a fund is derived from a weighted average of performance figures associated with its 3-, 5- and 10-year (if applicable) Morningstar Rating metrics.
Morningstar calculates total return by taking the change in a fund’s NAV, assuming the reinvestment of all income and capital gains distributions (on the actual reinvestment date used by the fund) during the period, and then dividing by the initial NAV. Unless marked as load-adjusted total returns, Morningstar does not adjust total return for sales charges or for redemption fees. (Morningstar Return, Morningstar Risk-Adjusted Ratings, and the load-adjusted returns do incorporate those fees.) Total returns do account for management, administrative, and 12b-1 fees and other costs automatically deducted from fund assets.
% Rank in Category: This is the fund’s total-return percentile rank for the specified time period relative to all funds that have the same Morningstar category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1. Percentile ranks within categories are most useful in those categories that have a large number of funds.
2 Source: Lipper Inc., A Reuters Company, 11/30/2006. Lipper Inc. Is a nationally recognized organization that ranks performance of mutual funds within a universe of funds that have similar investment objectives. Rankings are based on past performance with capital gains and dividends reinvested.
(graphic omitted)
| Semi-Annual Report November 30, 2006 | 3 |
(graphic omitted)
Income Fund
Investments
| Issue | Number of Shares | Cost | Market Value | Percentage of Assets |
| Common Stocks (94.2%) | ||||
| Aerospace | ||||
| United Technologies | 27,000 | $1,660,588 | $1,742,310 | 1.6 |
| Parker-Hannifin | 25,000 | 1,828,895 | 2,087,000 | 1.8 |
Subtotal | 3,489,483 | 3,829,310 | 3.4 | |
| Automotive | ||||
| Genuine Parts | 33,000 | 1,353,634 | 1,547,370 | 1.4 |
| Building | ||||
| Hanson plc ADS | 30,000 | 1,294,042 | 2,164,800 | 1.9 |
| Plum Creek Timber | 50,000 | 1,595,865 | 1,863,000 | 1.7 |
| Weyerhauser | 20,000 | 1,303,161 | 1,293,600 | 1.2 |
Subtotal | 4,193,068 | 5,321,400 | 4.8 | |
| Chemicals | ||||
| Air Products and Chemicals | 15,000 | 1,057,942 | 1,037,100 | 0.9 |
| BASF AG ADS | 21,000 | 1,564,582 | 1,944,810 | 1.7 |
| RPM | 65,000 | 919,500 | 1,311,050 | 1.2 |
Subtotal | 3,542,024 | 4,292,960 | 3.8 | |
| Computer Hardware | ||||
| Microchip Technology | 30,000 | 1,003,860 | 1,022,700 | 0.9 |
| Taiwan Semiconductor ADS | 120,000 | 1,082,844 | 1,290,000 | 1.2 |
Subtotal | 2,086,704 | 2,312,700 | 2.1 | |
| Computer Software | ||||
| Microsoft | 50,000 | 1,447,000 | 1,468,000 | 1.3 |
| Cosmetics & Toiletries | ||||
| Procter & Gamble | 30,000 | 1,680,353 | 1,883,700 | 1.7 |
| Diversified Operations | ||||
| Honeywell International | 31,000 | 1,228,806 | 1,332,380 | 1.2 |
| 3M | 25,000 | 1,881,600 | 2,036,500 | 1.8 |
Subtotal | 3,110,406 | 3,368,880 | 3.0 | |
| Energy | ||||
| BP plc ADS | 27,000 | 1,171,090 | 1,838,160 | 1.6 |
| ConocoPhillips | 21,000 | 1,046,915 | 1,413,300 | 1.3 |
| EnCana | 50,000 | 1,534,786 | 2,610,500 | 2.3 |
| Exxon Mobil | 30,000 | 766,681 | 2,304,300 | 2.1 |
Subtotal | 4,519,472 | 8,166,260 | 7.3 | |
| Food | ||||
| Kellogg | 26,000 | 1,167,411 | 1,294,280 | 1.2 |
| Unilever PLC ADS | 50,000 | 1,177,262 | 1,346,500 | 1.2 |
Subtotal | 2,344,673 | 2,640,780 | 2.4 | |
| Machinery | ||||
| Manitowoc | 40,000 | 318,034 | 2,409,600 | 2.2 |
| Medical | ||||
| Abbott Laboratories | 41,000 | 1,778,357 | 1,913,060 | 1.7 |
Continued on next page | ||||
| 4 | Semi-Annual Report November 30, 2006 | The accompanying notes are an integral part of these financial statements. |
Investments
| Issue | Number of Shares | Cost | Market Value | Percentage of Assets |
| Common Stocks (94.2%) | ||||
| Medical (continued) | ||||
| Bristol-Meyers Squibb | 50,000 | $967,922 | $1,241,500 | 1.1 |
| GlaxoSmithKline plc ADR | 30,000 | 1,584,330 | 1,593,900 | 1.4 |
| Lilly (Eli) | 26,000 | 1,533,236 | 1,393,340 | 1.3 |
| Pfizer | 52,000 | 1,225,580 | 1,429,480 | 1.3 |
| Wyeth | 30,000 | 871,441 | 1,448,400 | 1.3 |
Subtotal | 7,960,866 | 9,019,680 | 8.1 | |
| Metal Products | ||||
| Worthington Industries | 25,000 | 439,740 | 462,500 | 0.4 |
| Mining | ||||
| BHP Billiton Ltd ADS | 50,000 | 1,534,446 | 2,071,500 | 1.9 |
| Phelps Dodge | 20,000 | 1,225,446 | 2,460,000 | 2.2 |
| Rio Tinto plc ADS | 9,000 | 521,085 | 1,931,310 | 1.7 |
Subtotal | 3,280,977 | 6,462,810 | 5.8 | |
| Office Material | ||||
| Avery Dennison | 15,000 | 976,057 | 1,012,050 | 0.9 |
| Paper & Paper Products | ||||
| Kimberly-Clark | 15,000 | 991,025 | 997,050 | 0.9 |
| Louisiana-Pacific | 45,000 | 1,259,480 | 949,500 | 0.8 |
Subtotal | 2,250,505 | 1,946,550 | 1.7 | |
| Publishing | ||||
| McGraw-Hill | 35,000 | 1,475,088 | 2,332,750 | 2.1 |
| Pearson plc ADS | 70,000 | 960,714 | 1,034,600 | 0.9 |
Subtotal | 2,435,802 | 3,367,350 | 3.0 | |
| Real Estate | ||||
| Duke Realty | 50,000 | 1,492,325 | 2,176,000 | 2.0 |
| Public Storage International | 21,000 | 910,123 | 2,021,880 | 1.8 |
Subtotal | 2,402,448 | 4,197,880 | 3.8 | |
| Soap & Cleaning Preparants | ||||
| Colgate-Palmolive | 15,000 | 973,688 | 975,750 | 0.9 |
| Steel | ||||
| Nucor | 32,000 | 1,030,747 | 1,915,200 | 1.7 |
| United States Steel | 30,000 | 791,343 | 2,243,700 | 2.0 |
| Tenaris | 30,000 | 1,080,366 | 1,410,300 | 1.3 |
Subtotal | 2,902,456 | 5,569,200 | 5.0 | |
| Telecommunications | ||||
| AT&T | 55,000 | 1,460,450 | 1,865,050 | 1.7 |
| BCE | 55,000 | 1,114,533 | 1,352,450 | 1.2 |
| Bell Aliant Regional Communications 1 | 2,175 | 64,384 | 47,807 | *0.0 |
| Chunghwa Telecom ADR | 25,000 | 459,165 | 475,000 | 0.5 |
| Telecom Corp New Zealand ADS | 15,000 | 520,190 | 372,300 | 0.3 |
| Telefonica SA ADS | 35,000 | 636,788 | 2,133,950 | 1.9 |
| Telus | 42,000 | 1,353,989 | 2,017,680 | 1.8 |
Continued on next page. | ||||
The accompanying notes are an integral part of these financial statements. | Semi-Annual Report November 30, 2006 | 5 |
(graphic omitted)
Income Fund
Investments
| Issue | Number of Shares | Cost | Market Value | Percentage of Assets |
| Common Stocks (94.2%) | ||||
| Telecommunications(continued) | ||||
| Vodafone | 40,000 | $1,055,880 | $1,054,400 | 1.0 |
Subtotal | 6,665,379 | 9,318,637 | 8.4 | |
| Tools | ||||
| Regal-Beloit | 40,000 | 1,282,200 | 2,045,200 | 1.8 |
| Transportation | ||||
| Burlington Northern Santa Fe | 29,000 | 1,198,852 | 2,179,640 | 2.0 |
| Canadian National Railway | 38,000 | 1,640,167 | 1,788,660 | 1.6 |
| Canadian Pacific Railway Ltd | 28,000 | 609,276 | 1,560,160 | 1.4 |
| Hunt Transport Svcs (JB) | 50,000 | 1,123,740 | 1,093,495 | 1.0 |
| United Parcel Service-CL B | 19,000 | 1,380,098 | 1,480,480 | 1.3 |
Subtotal | 5,952,133 | 8,102,435 | 7.3 | |
| Utilities-Gas & Electric | ||||
| Avista | 60,000 | 1,224,530 | 1,615,800 | 1.4 |
| Duke Energy | 70,000 | 1,981,490 | 2,220,400 | 2.0 |
| FPL Group | 50,000 | 1,550,356 | 2,665,000 | 2.4 |
| IDACORP | 55,000 | 1,761,902 | 2,199,450 | 2.0 |
| National Fuel Gas | 55,000 | 1,740,542 | 2,084,500 | 1.9 |
| NiSource | 40,000 | 831,812 | 986,400 | 0.9 |
| Piedmont Natural Gas | 60,000 | 1,117,404 | 1,672,200 | 1.5 |
| Sempra Energy | 31,000 | 914,726 | 1,689,500 | 1.5 |
Subtotal | 11,122,762 | 15,133,250 | 13.6 | |
| Islamic Debt (0.1%) | ||||
| Halal Putable CD | ||||
| University Bank Putable CD | 100,000 | 100,000 | 100,000 | 0.1 |
| Total Investments | $76,829,864 | $104,954,252 | 94.2 | |
| Other Assets (net of liabilities) | 6,486,598 | 5.8 | ||
| Total Net Assets | $111,440,850 | 100.0 | ||
| ADS = American Depositary Share | ADR = American Depositary Receipt | *Amount is less 0.1% | ||
| 1 Restricted, non-income producing security. At the end of the period, the value of restricted securities was $47,807 or less than 0.1% of net assets. Additional information on each holding is as follows: | |||
| Security: | Acquisition Date: | Acquisition Cost: | Sold Date: |
| Bell Aliant Regional Communications | 7/11/06 | $64,384 | 1/9/07 |
| Top Ten Holdings | % of Fund Assets |
| FPL Group | 2.4 |
| EnCana | 2.3 |
| Phelps Dodge | 2.2 |
| Manitowoc | 2.2 |
| McGraw-Hill | 2.1 |
| Exxon Mobil | 2.1 |
| United States Steel | 2.0 |
| Duke Energy | 2.0 |
| IDACORP | 2.0 |
| Burlington Northern Santa Fe | 2.0 |
| 6 | Semi-Annual Report November 30, 2006 | The accompanying notes are an integral part of these financial statements. |
Financial Highlights
| Selected data per share of outstanding capital stock throughout each period: | Six months ended | For year ended May 31, | ||||||
Nov. 30, 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | |||
| Net asset value at beginning of period | $25.46 | $21.42 | $17.50 | $15.07 | $16.63 | $18.62 | ||
| Income from investment operations | |||||||
| Net investment income | 0.13* | 0.32* | 0.23* | 0.28 | 0.19 | 0.15 | |
| Net gains or losses on securities (both realized and unrealized) | 2.63 | 4.18 | 3.93 | 2.43 | (1.55) | (1.99) | |
| Total from investment operations | 2.76 | 4.50 | 4.16 | 2.71 | (1.36) | (1.84) | ||
| Less distributions | |||||||
| Dividends (from net investment income) | - | (0.29) | (0.24) | (0.28) | (0.20) | (0.15) | |
| Dividends (from capital gains) | - | (0.17) | - | - | - | - | |
| Total distributions | 0.00 | (0.46) | (0.24) | (0.28) | (0.20) | (0.15) | ||
| Paid-in capital from early redemption penalties | **0.00 | **0.00 | **0.00 | - | - | - | ||
| Net asset value at end of period | $28.22 | $25.46 | $21.42 | $17.50 | $15.07 | $16.63 | ||
| Total Return | 10.84% | 21.17% | 23.76% | 17.99% | (8.15)% | (9.88)% | ||
| Ratios / Supplemental Data | ||||||||
| Net assets ($000), end of period | $111,411 | $74,606 | $40,842 | $24,761 | $19,410 | $20,878 | ||
| Ratio of expenses to average net assets | ||||||||
| 0.70% | 1.50% | 1.61% | 1.72% | 1.89% | 1.71% | ||
| 0.70% | 1.49% | 1.60% | 1.71% | 1.87% | 1.70% | ||
| Ratio of net investment income to average net assets | 0.49% | 1.34% | 1.26% | 1.71% | 1.36% | 0.89% | ||
| Portfolio turnover rate | 6% | 10% | 9% | 3% | 5% | 8% | ||
*Calculated using average shares outstanding **Amount is less than $0.01 | ||||||||
Statement of Assets and Liabilities
As of November 30, 2006 | |||
| Assets | |||
| Common stocks (cost $76,829,864) | $104,954,252 | ||
| Cash | 5,979,734 | ||
| Receivable for Fund shares sold | 354,223 | ||
| Dividends/Income receivable | 285,657 | ||
| Insurance reserve premium | 2,529 | ||
| Total Assets | $111,576,395 | ||
| Liabilities | |||
| Payable to affiliates | 86,353 | ||
| Accrued expenses | 34,242 | ||
| Payable for Fund shares redeemed | 14,950 | ||
| Total liabilities | 135,545 | ||
| Net Assets | $111,440,850 | ||
| Fund Shares Outstanding | 3,948,480 | ||
| Analysis of Net Assets | |||
| Paid in Capital (unlimited shares authorized, without par value) | 81,533,325 | ||
| Accumulated net realized gain | 1,783,138 | ||
| Unrealized net appreciation on investments | 28,124,387 | ||
| Net Assets applicable to Fund shares outstanding | $111,440,850 | ||
| Net Asset Value, Offering and Redemption price per share | $28.22 | ||
The accompanying notes are an integral part of these financial statements. | Semi-Annual Report November 30, 2006 | 7 |
Income Fund
| Statement of Changes in Net Assets | |||
| Six months ended November 30, 2006 | Year ended May 31, 2006 | ||
| Increase in Net Assets | |||
| From Operations | |||
| Net investment income | $448,586 | $719,982 | |
| Net realized gain (loss) on investments | (49,636) | 2,526,632 | |
| Net increase in unrealized appreciation | 9,894,174 | 6,436,764 | |
| Net increase in net assets | 10,293,124 | 9,683,378 | |
| Dividends to Shareowners From | |||
| Net investment income | - | (722,661) | |
| Capital gains distribution | - | (391,176) | |
0 | (1,113,837) | ||
| Fund Share Transactions | |||
| Proceeds from sales of shares | 46,157,291 | 36,625,192 | |
| Value of shares issued in reinvestment of dividends | - | 1,094,917 | |
46,157,291 | 37,720,109 | ||
| Early redemption penalties retained | 8,802 | 2,958 | |
| Cost of shares redeemed | (19,624,637) | (12,528,535) | |
| Net increase in net assets from share transactions | 26,541,456 | 25,194,532 | |
| Total increase in net assets | 36,834,580 | 33,764,073 | |
| Net Assets | |||
| Beginning of period | 74,606,270 | 40,842,197 | |
| End of period | 111,440,850 | 74,606,270 | |
| Shares of the Fund Sold and Redeemed | |||
| Number of shares sold | 1,772,076 | 1,501,489 | |
| Number of shares issued in reinvestment of dividends | - | 45,697 | |
1,772,076 | 1,547,186 | ||
| Number of shares redeemed | (753,882) | (524,008) | |
| Net increase in number of shares outstanding | 1,018,194 | 1,023,178 | |
| Statement of Operations | Six months ended November 30, 2006 | |||
| Investment Income | ||||
| Dividends/Income (net of foreign taxes of $10,883) | $1,080,318 | |||
| Miscellaneous income | 621 | |||
| Gross investment income | $1,080,939 | |||
| Expenses | ||||
| Invesment adviser and administration fees | 432,098 | |||
| Distribution fees | 113,711 | |||
| Shareowner servicing | 43,965 | |||
| Filing and registration | 15,721 | |||
| Professional fees | 10,398 | |||
| Other expenses | 9,239 | |||
| Printing and postage | 5,879 | |||
| Chief Compliance Officer expenses | 5,495 | |||
| Custodian fees | 342 | |||
| Total gross expenses | 636,848 | |||
| Less custodian fees waived | (4,495) | |||
| Net expenses | 632,353 | |||
| Net investment income | 448,586 | |||
| Net realized loss on investments | ||||
| Proceeds from sales | 5,009,330 | |||
| Less cost of securities sold (based on identified cost) | 5,058,966 | |||
| Realized loss on investments | (49,636) | |||
| Unrealized gain on investments | ||||
| End of period | 28,124,387 | |||
| Beginning of period | 18,230,213 | |||
| Increase in unrealized gain for the period | 9,894,174 | |||
| Net realized and unrealized gain on investments | 9,844,538 | |||
| Net increase in net assets resulting from operations | $10,293,124 | |||
| 8 | Semi-Annual Report November 30, 2006 | The accompanying notes are an integral part of these financial statements. |
Growth Fund
Investments
| Issue | Number of Shares | Cost | Market Value | Percentage of Assets |
| Common Stocks (96%) | ||||
| Automotive | ||||
| Genuine Parts | 80,000 | $3,576,361 | $3,751,200 | 1.1 |
| Toyota Motor ADS | 40,000 | 3,692,547 | 4,802,000 | 1.4 |
Subtotal | 7,268,908 | 8,553,200 | 2.5 | |
| Building | ||||
| Building Materials Holding | 80,000 | 1,864,457 | 1,971,200 | 0.6 |
| Fastenal | 110,000 | 4,138,242 | 3,958,900 | 1.2 |
| Lowe's Companies | 120,000 | 3,537,405 | 3,619,200 | 1.1 |
| Washington Group International | 100,000 | 5,768,910 | 5,878,000 | 1.8 |
Subtotal | 15,309,014 | 15,427,300 | 4.7 | |
| Business Services | ||||
| Convergys* | 150,000 | 3,575,844 | 3,618,000 | 1.1 |
| Gartner Group* | 60,000 | 1,009,929 | 1,156,800 | 0.3 |
| SumTotal Systems* | 50,000 | 334,377 | 351,000 | 0.1 |
Subtotal | 4,920,150 | 5,125,800 | 1.5 | |
| Computer Hardware | ||||
| Advanced Micro Devices* | 225,000 | 4,824,658 | 4,853,250 | 1.5 |
| Apple Computer* | 110,000 | 3,681,152 | 10,082,600 | 3.0 |
| Cisco Systems* | 225,000 | 5,031,230 | 6,054,750 | 1.8 |
| Cree Research* | 130,000 | 2,779,213 | 2,573,987 | 0.8 |
| Hewlett-Packard | 150,000 | 4,840,971 | 5,919,000 | 1.8 |
| International Business Machines | 50,000 | 4,133,310 | 4,596,000 | 1.4 |
| Quantum* | 300,000 | 538,408 | 708,000 | 0.2 |
| Taiwan Semiconductor ADS | 331,747 | 2,931,379 | 3,566,280 | 1.1 |
| Verigy LTD* | 12,243 | 200,008 | 218,415 | 0.1 |
Subtotal | 28,960,329 | 38,572,282 | 11.7 | |
| Computer Software | ||||
| Adobe Systems* | 160,000 | 5,051,549 | 6,425,600 | 2.0 |
| Business Objects SA ADS* | 120,000 | 3,615,202 | 4,658,400 | 1.4 |
| Intuit* | 160,000 | 3,559,948 | 5,043,200 | 1.5 |
Subtotal | 12,226,699 | 16,127,200 | 4.9 | |
| Electronics | ||||
| Agilent Technologies* | 130,000 | 4,274,341 | 4,139,200 | 1.3 |
| Canon ADS | 100,000 | 3,857,103 | 5,263,000 | 1.6 |
| EMCOR Group* | 84,000 | 2,358,283 | 5,012,280 | 1.5 |
| Harman International Industries | 38,000 | 3,413,115 | 3,945,920 | 1.2 |
| Harris | 100,000 | 4,069,676 | 4,211,000 | 1.3 |
| Motorola | 130,000 | 2,864,850 | 2,882,100 | 0.9 |
| Qualcomm | 140,000 | 3,613,580 | 5,122,600 | 1.5 |
| Trimble Navigation* | 95,000 | 3,412,615 | 4,557,150 | 1.4 |
Subtotal | 27,863,563 | 35,133,250 | 10.7 | |
Continued on next page. | ||||
The accompanying notes are an integral part of these financial statements. | Semi-Annual Report November 30, 2006 | 9 |
Growth Fund
Investments
| Issue | Number of Shares | Cost | Market Value | Percentage of Assets |
| Common Stocks (96%) | ||||
| Energy | ||||
| BP plc ADS | 90,000 | $5,818,001 | $6,127,200 | 1.9 |
| EnCana | 120,000 | 4,511,974 | 6,265,200 | 1.9 |
| Noble | 60,000 | 3,770,819 | 4,635,000 | 1.4 |
Subtotal | 14,100,794 | 17,027,400 | 5.2 | |
| Food Production | ||||
| Caribou Coffee* | 50,000 | 493,752 | 449,505 | 0.1 |
| Groupe Danone ADS | 60,000 | 1,952,481 | 1,959,000 | 0.6 |
| Hansen Natural* | 100,000 | 2,187,516 | 2,813,000 | 0.9 |
| PepsiCo | 100,000 | 5,809,057 | 6,197,000 | 1.9 |
| Potash Corp of Saskatchewan | 35,000 | 2,924,559 | 4,925,900 | 1.5 |
Subtotal | 13,367,365 | 16,344,405 | 5.0 | |
| Machinery | ||||
| Crane | 100,000 | 3,365,857 | 3,810,000 | 1.2 |
| Manitowoc | 100,000 | 2,919,769 | 6,024,000 | 1.8 |
Subtotal | 6,285,626 | 9,834,000 | 3.0 | |
| Medical | ||||
| Amgen* | 65,000 | 4,141,394 | 4,617,600 | 1.4 |
| Barr Laboratories* | 100,000 | 5,053,448 | 5,108,000 | 1.6 |
| Caremark Rx | 90,000 | 4,707,042 | 4,257,000 | 1.3 |
| DENTSPLY International | 120,000 | 3,279,825 | 3,831,600 | 1.2 |
| Genentech* | 60,000 | 4,063,694 | 4,905,000 | 1.5 |
| Humana* | 95,000 | 4,508,537 | 5,139,500 | 1.5 |
| IMS Health | 125,000 | 3,260,388 | 3,433,750 | 1.0 |
| Johnson & Johnson | 90,000 | 5,430,528 | 5,931,900 | 1.7 |
| Lilly (Eli) | 40,000 | 2,350,723 | 2,143,600 | 0.7 |
| Novartis AG ADR | 85,000 | 4,581,767 | 4,964,850 | 1.5 |
| Novo-Nordisk A/S ADS | 62,000 | 3,771,106 | 4,801,900 | 1.4 |
| Oakley | 80,000 | 1,258,157 | 1,473,600 | 0.5 |
| Pharmaceutical Product Development | 110,000 | 3,224,309 | 3,474,900 | 1.1 |
| VCA Antech* | 70,000 | 2,255,285 | 2,256,800 | 0.7 |
| Wyeth | 60,000 | 2,924,255 | 2,896,800 | 0.9 |
| Zimmer Holdings* | 70,000 | 5,149,907 | 5,107,200 | 1.5 |
Subtotal | 59,960,365 | 64,344,000 | 19.5 | |
| Mining | ||||
| Anglo-American plc ADR | 240,000 | 4,054,283 | 5,613,600 | 1.7 |
| Rio Tinto plc ADS | 21,000 | 3,058,833 | 4,506,390 | 1.4 |
Subtotal | 7,113,116 | 10,119,990 | 3.1 | |
| Paper & Publishing | ||||
| McGraw-Hill | 75,000 | 3,353,149 | 4,998,750 | 1.5 |
| Wiley (John) & Sons, Cl A | 80,000 | 2,705,730 | 3,182,400 | 1.0 |
Subtotal | 6,058,879 | 8,181,150 | 2.5 | |
Continued on next page. | ||||
| 10 | Semi-Annual Report November 30, 2006 | The accompanying notes are an integral part of these financial statements. |
Investments
| Issue | Number of Shares | Cost | Market Value | Percentage of Assets |
| Common Stocks (94.2%) | ||||
| Retail | ||||
| American Eagle Outfitters | 135,000 | $4,420,919 | $6,099,300 | 1.8 |
| Bed Bath & Beyond* | 85,000 | 3,255,154 | 3,296,300 | 1.0 |
| Best Buy | 105,000 | 5,446,855 | 5,771,850 | 1.8 |
| Coach Inc.* | 140,000 | 4,964,614 | 6,049,400 | 1.8 |
| PETsMART | 150,000 | 4,235,968 | 4,437,000 | 1.3 |
| Restoration Hardware* | 150,000 | 1,147,789 | 1,276,500 | 0.4 |
| Staples | 175,000 | 4,319,940 | 4,457,250 | 1.4 |
Subtotal | 27,791,239 | 31,387,600 | 9.5 | |
| Soap & Cleaning Preparants | ||||
| Clorox | 65,000 | 3,909,994 | 4,160,000 | 1.3 |
| Tools | ||||
| Lincoln Electric Holdings | 80,000 | 3,831,548 | 4,868,000 | 1.5 |
| Regal-Beloit | 80,000 | 3,330,057 | 4,090,400 | 1.2 |
Subtotal | 7,161,605 | 8,958,400 | 2.7 | |
| Telecommunications | ||||
| America Movil ADR | 110,000 | 1,997,158 | 4,891,700 | 1.5 |
| China Mobile Ltd. ADR | 100,000 | 2,502,162 | 4,220,000 | 1.3 |
Subtotal | 4,499,320 | 9,111,700 | 2.8 | |
| Transportation | ||||
| Canadian Pacific Railway Ltd. | 60,000 | 3,137,130 | 3,343,200 | 1.0 |
| LAN Airlines SA | 50,000 | 1,170,823 | 2,452,500 | 0.8 |
| Norfolk Southern | 100,000 | 4,296,693 | 4,925,000 | 1.5 |
| Supreme Industries | 16,361 | 98,594 | 106,674 | 0.0 |
| United Parcel Service, Cl B | 60,000 | 4,439,754 | 4,675,200 | 1.4 |
Subtotal | 13,142,994 | 15,502,574 | 4.7 | |
| Utilities-Electric | ||||
| Avista | 80,000 | 1,409,675 | 2,154,400 | 0.7 |
| Total Investments | $261,349,635 | $316,064,651 | 96.0 | |
| Other Assets (net of liabilities) | 13,150,286 | 4.0 | ||
| Total Assets | $329,214,937 | 100.0 | ||
| *Non-income producing security | ADS=American Depositary Share | ADR=American Depositary Receipt | ||
| Top Ten Holdings | % of Fund Assets |
| Apple Computer | 3.0 |
| Adobe Systems | 2.0 |
| EnCana | 1.9 |
| PepsiCo | 1.9 |
| BP plc ADS | 1.9 |
| American Eagle Outfitters | 1.8 |
| Cisco Systems | 1.8 |
| Coach Inc. | 1.8 |
| Manitowoc | 1.8 |
| Hewlett-Packard | 1.8 |
The accompanying notes are an integral part of these financial statements. | Semi-Annual Report November 30, 2006 | 11 |
Growth Fund
Financial Highlights
| Selected data per share of outstanding capital stock throughout each period: | Six months ended | For year ended May 31, | ||||||
Nov. 30, 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | |||
| Net asset value at beginning of period | $18.76 | $15.51 | $12.34 | $10.01 | $11.10 | $12.61 | ||
| Income from investment operations | |||||||
| Net investment income (loss) | *(0.05) | *(0.09) | *(0.13) | (0.11) | (0.11) | (0.12) | |
| Net gains or losses on securities (both realized and unrealized) | 1.83 | 3.34 | 3.30 | 2.44 | (0.98) | (1.39) | |
| Total from investment operations | 1.78 | 3.25 | 3.17 | 2.33 | (1.09) | (1.51) | ||
| Paid-in capital from early redemption penalties | **0.00 | **0.00 | **0.00 | - | - | - | ||
| Net asset value at end of period | $20.54 | $18.76 | $15.51 | $12.34 | $10.01 | $11.10 | ||
| Total Return | 9.49% | 20.95% | 25.69% | 23.28% | (9.82)% | (11.97)% | ||
| Ratios / Supplemental Data | ||||||||
| Net assets ($000), end of period | $329,215 | $214,809 | $53,874 | $32,778 | $22,143 | $23,965 | ||
| Ratio of expenses to average net assets | ||||||||
| 0.70% | 1.42% | 1.66% | 1.75% | 1.96% | 1.74% | ||
| 0.69% | 1.41% | 1.65% | 1.73% | 1.93% | 1.73% | ||
| Ratio of net investment income to average net assets | (0.25)% | (0.51)% | (0.87)% | (1.00)% | (1.20)% | (1.09)% | ||
| Portfolio turnover rate | 9% | 5% | 2% | 13% | 16% | 8% | ||
*Calculated using average shares outstanding **Amount is less than $0.01 | ||||||||
Statement of Assets and Liabilities
As of November 30, 2006 | |||
| Assets | |||
| Common stocks (cost $261,349,635) | $316,064,651 | ||
| Cash | 11,744,244 | ||
| Receivable for Fund shares sold | 1,697,174 | ||
| Dividends receivable | 265,203 | ||
| Total Assets | $329,771,272 | ||
| Liabilities | |||
| Payable to affiliates | 256,282 | ||
| Payable for Fund shares redeemed | 240,774 | ||
| Accrued expenses | 59,279 | ||
| Total liabilities | 556,335 | ||
| Net Assets | $329,214,937 | ||
| Fund Shares Outstanding | 16,024,875 | ||
| Analysis of Net Assets | |||
| Paid in Capital (unlimited shares authorized, without par value) | 273,090,805 | ||
| Accumulated net realized gain | 1,409,116 | ||
| Unrealized net appreciation on investments | 54,715,016 | ||
| Net Assets applicable to Fund shares outstanding | $329,214,937 | ||
| Net Asset Value, Offering and Redemption price per share | $20.54 | ||
| 12 | Semi-Annual Report November 30, 2006 | The accompanying notes are an integral part of these financial statements. |
| Statement of Changes in Net Assets | |||
| Six months ended November 30, 2006 | Year ended May 31, 2006 | ||
| Increase in Net Assets | |||
| From Operations | |||
| Net investment loss | $(592,297) | $(657,097) | |
| Net realized gain on investments | 2,757,446 | 377,224 | |
| Net increase in unrealized appreciation | 19,334,334 | 17,863,131 | |
| Net increase in net assets | 21,499,483 | 17,583,258 | |
| Fund Share Transactions | |||
| Proceeds from sales of shares | 139,164,924 | 178,028,911 | |
| Early redemption penalties retained | 16,176 | 27,848 | |
| Cost of shares redeemed | (46,274,376) | (34,705,104) | |
| Net increase in net assets from share transactions | 92,906,724 | 143,351,655 | |
| Total increase in net assets | 114,406,207 | 160,934,913 | |
| Net Assets | |||
| Beginning of period | 214,808,730 | 53,873,817 | |
| End of period | $329,214,937 | $214,808,730 | |
| Shares of the Fund Sold and Redeemed | |||
| Number of shares sold | 7,076,964 | 9,839,484 | |
| Number of shares redeemed | (2,500,154) | (1,865,262) | |
| Net increase in number of shares outstanding | 4,576,810 | 7,974,222 | |
| Statement of Operations | Six months ended November 30, 2006 | |||
| Investment Income | ||||
| Dividends/Income (net of foreign taxes of $49,237) | $1,039,885 | |||
| Miscellaneous income | 748 | |||
| Gross investment income | $1,040,633 | |||
| Expenses | ||||
| Invesment adviser and administration fees | 1,120,866 | |||
| Distribution fees | 294,963 | |||
| Shareowner servicing | 132,342 | |||
| Professional fees | 26,539 | |||
| Filing and registration fees | 20,277 | |||
| Other expenses | 18,688 | |||
| Chief Compliance Officer expenses | 13,302 | |||
| Printing and postage | 11,174 | |||
| Custodian fees | 991 | |||
| Total gross expenses | 1,639,142 | |||
| Less custodian fees waived | (6,212) | |||
| Net expenses | 1,632,930 | |||
| Net investment loss | (592,297) | |||
| Net realized gain on investments | ||||
| Proceeds from sales | 22,106,518 | |||
| Less cost of securities sold (based on identified cost) | 19,349,072 | |||
| Realized net gain | 2,757,446 | |||
| Unrealized gain on investments | ||||
| End of period | 54,715,016 | |||
| Beginning of period | 35,380,682 | |||
| Increase in unrealized gain for the period | 19,334,334 | |||
| Net realized and unrealized gain on investments | 22,091,780 | |||
| Net increase in net assets resulting from operations | $21,499,483 | |||
The accompanying notes are an integral part of these financial statements. | Semi-Annual Report November 30, 2006 | 13 |
Expenses
All mutual funds have operating expenses. As an Amana mutual fund shareowner, you incur ongoing costs, including management fees; distribution (or service) 12b-1 fees; and other fund expenses such as shareowner reports (like this one). Operating expenses, which are deducted from a fund’s gross earnings, directly reduce the investment return of a fund. All mutual funds (unlike some other financial investments) only report their results after deduction of operating expenses.
With the Amana funds, unlike many mutual funds, you do not incur sales charges (loads) on purchase payments, reinvested dividends, or other distributions. You do not incur redemption fees, exchange fees, or fees related to Individual Retirement Accounts. However, to discourage speculation, you may incur a penalty for redemption of shares held less than 30 days. You may incur fees related to extra services requested by you for your account, such as a checkbook to use for redemptions or bank wires.
Examples
The examples, one for each Fund, are based on an investment of $1,000 invested for the semi-annual period ended November 30, 2006 [Thursday, June 1, 2006 to Thursday, November 30, 2006].
Actual Expenses
The first line of each table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you have invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under heading entitled “Expenses Paid During Year” to estimate the expenses you paid on your account during this fiscal year. The Funds also charge the following fees for extra services rendered on request, which you may need to add to determine your total expenses: $10 per checkbook, $25 per bank wire, $15 per overnight courier delivery.
Hypothetical Example For Comparison Purposes
The second line of each table provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio (based on the last six months) 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 year. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareowner reports of the other funds. You may wish to add other fees that are not included in the expenses shown in the table, such as IRA fees (there are no IRA fees with the Amana Funds), and charges for extra services such as check writing and bank wires.
Please note that the expenses shown in the tables 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 (note that the Amana Funds do not have any such transactional costs). Therefore, the second line of each table is useful in comparing ongoing costs only, and may not help you determine the relative total costs of owning different funds.
| Income Fund | Beginning Account Value [Thursday, Jun. 1, 2006] | Ending Account Value [Thursday, Nov. 30, 2006] | Expenses Paid During the Period* |
| Actual (10.84% return after expenses) | $1,000.00 | $1,108.40 | $7.40 |
| Hypothetical (5% annual return before expenses) | $1,000.00 | $1,018.05 | $7.08 |
* Expenses are equal to Amana Income Fund’s annualized expense ratio of 1.40% (based on the most recent semi-annual period of June 1, 2006 through November 30, 2006), multiplied by the average account value of $1,054.20 over the period, multiplied by 183/365 to reflect the semi-annual period.
| Growth Fund | Beginning Account Value [Thursday, Jun. 1, 2006] | Ending Account Value [Thursday, Nov. 30, 2006] | Expenses Paid During the Period* |
| Actual (9.49% return after expenses) | $1,000.00 | $1,094.90 | $7.35 |
| Hypothetical (5% annual return before expenses) | $1,000.00 | $1,018.05 | $7.08 |
* Expenses are equal to Amana Growth Fund’s annualized expense ratio of 1.40% (based on the most recent semi-annual period of June 1, 2006 through November 30, 2006), multiplied by the average account value of $1,047.45 over the period, multiplied by 183/365 to reflect the semi-annual period.
| 14 | Semi-Annual Report November 30, 2006 |
Notes To Financial Statements
Organization
Amana Mutual Funds Trust (the “Trust”) was established under Indiana law as a Business Trust on July 26, 1984. The Trust is registered under the Investment Company Act of 1940 as an open-end management investment company. The Trust restricts its investments to those acceptable to Muslims by investing in accordance with Islamic principles. Two portfolio series have been created (the “Funds”). The Income Fund was first authorized to sell shares of beneficial interest to the public on June 23, 1986. The investment objective of the Income Fund is current income and preservation of capital. The Growth Fund began operations on February 3, 1994. The investment objective of the Growth Fund is long-term capital growth
Unaudited Information
The information in this interim report has not been subject to independent audit.
Significant Accounting Policies
The following is a summary of the significant accounting policies followed by the Funds.
Security valuation:
Investments in securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price. Securities for which quotations are not readily available are valued at fair value as determined by the board of trustees.
Federal income taxes:
As a qualified investment company under Subchapter M of the Internal Revenue Code, the Funds are not subject to income taxes to the extent that they distribute their taxable income. It is the Funds’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all taxable income to shareowners.
Dividends and distributions to shareowners:
Dividends and distributions to shareowners are recorded on the ex-dividend date. Dividend payable dates are the end of May and December. Shareowners electing to reinvest dividends and distributions purchase additional shares at net asset value on the payable date.
Other:
The cost of securities is the same for accounting and Federal income tax purposes. Securities transactions are recorded on trade date. Realized gains and losses are recorded on the identified cost basis.
Cash dividends from equity securities are recorded as income on the ex-dividend date. Expenses incurred by the Trust on behalf of the Funds (e.g., professional fees) are allocated to the Funds on the basis of relative daily average net assets. Withholding taxes on foreign dividends have been provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates.
Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets during the reporting period. Actual results could differ from those estimates.
Transactions with Affiliated Persons
Under a contract approved by shareowners, Saturna Capital Corporation provides investment advisory services and certain other administrative and distribution services and facilities required by each Fund to conduct its business. For such services, each Fund pays an annual fee equal to .95% of its average daily net assets. For the six months ended November 30, 2006, Income Fund and Growth Fund paid advisory fee expenses of $432,098 and $1,120,866, respectively.
Saturna Capital also acts as transfer agent for the Trust, for which it was paid $43,965 and $132,342 for the Income and Growth Fund, respectively, for the six months ended November 30, 2006.
Saturna Brokerage Services (“SBS”, a subsidiary of Saturna Capital) is registered as a broker-dealer and distributes Fund shares. The Funds have adopted a Distribution Plan in accordance with Rule 12b-1 under the 1940 Act. The plan provides that the Funds will pay a fee to SBS at an annual rate of up to 0.25% of the average net assets of the Funds. The fee is paid to SBS as reimbursement for expenses incurred for distribution related activity. For the six months ended November 30,2006 Income Fund and Growth Fund paid $113,711 and $294,963, respectively, to SBS. SBS is also the primary stockbrokerage used to effect portfolio transactions for the Trust. The adviser has undertaken to waive SBS’ brokerage commissions entirely on Trust portfolio transactions through December 31, 2007.
The independent trustees serve without compensation. The other officers are paid by Saturna Capital, and not the Trust. The trustees, officer’s families, and affiliates as a group owned 2.17% of the Income Fund’s and 0.87% of the Growth Fund’s outstanding shares on December 20, 2006. The Trust pays travel expenses for trustees attending meetings. Regulations require the Trust to designate a Chief Compliance Officer: Mr. James D. Winship was retained by the Trust and paid $18,797, plus travel expenses, for the six months ended November 30, 2006.
Dividends
Income Fund qualified dividends from net investment income were $.116 per share paid May 31, 2006 and $.078 per share paid December 31, 2006. Income Fund also paid a capital gains distribution of $.377 per share on December 31, 2006.
By policy, Growth Fund seeks to avoid paying income dividends. It paid no dividends in 2005 and 2006.
Investments
As of November 30, 2006, the components of distributable earnings on a tax basis were as follows:
| Income Fund | |
| Capital Gains | 1,783,138 |
| Unrealized appreciation | 28,124,387 |
| $29,907,525 | |
| Growth Fund | |
| Capital Gains | 1,409,116 |
| Unrealized appreciation | 54,715,016 |
| $56,124,132 | |
During the six months ended November 30, 2006, the Income Fund purchased $34,436,722 of securities and sold $5,009,330 of securities. The Growth Fund purchased $106,972,647 of securities and sold $22,106,518 of securities.
Custody Credits
Under an agreement with the custodian bank, custody fees are reduced by credits for cash balances. Such reduction amounted to $4,495 and $6,212 for the Income Fund and Growth Fund, respectively, for the six months ended November 30, 2006.
| Semi-Annual Report November 30, 2006 | 15 |
Renewal of Investment Advisory Contract
On September 1, 2006, the Amana Trustees approved continuation of the Funds’ investment advisory and administration contracts with Saturna Capital Corporation. In doing so, the Trustees considered a number of factors and made specific determinations relevant to that approval.
In addition to information provided throughout the year, the Trustees utilized a comparison of services, performance and fees for six funds with roughly comparable objectives and sizes that the Trustees had previously selected as a relevant peer group, The Trustees found such information helpful in establishing expectations regarding Saturna’s performance and whether to continue the advisory contracts.
In their review, the Trustees noted that the Funds offer a full range of high-quality investor services, including unique services for Islamic investors. The Trustees reviewed enhancements in Saturna’s operations during the last year. An important factor in the consideration by the Trustees was Saturna’s experience, ability and continued commitment to perform internally shareowner servicing, administration, accounting, marketing and distribution to maintain quality servicing at a reasonable expense.
The Trustees also reviewed Morningstar and Lipper mutual fund ratings, and found that the performance of each of the Funds, both in absolute numbers and relative to peers, was exceptional. Lipper’s Leader Scorecard ranked Amana Growth in the top quintile (20%) of its Multi-Cap Core category on total return and tax efficiency, second quintile on consistent return, and the middle quintile on preservation. Lipper’s Scorecard ranked Amana Income in the top quintile (20%) of its Equity Income category on total return, consistent return, preservation and tax efficiency.
The Trustees also noted that the Funds’ primary objective – making investments appropriate for Islamic investors – has consistently been achieved by Saturna. They recognized that the requirements of Islamic investing affect Fund performance relative to major market indices, and that performance has been achieved despite such requirements. They understood this specialized focus – compliance with Islamic Sharia – increases Saturna’s research expenses and obligations. The Trustees expressed satisfaction with the positive publicity generated by Saturna’s efforts with Amana.
The Trustees also took into consideration Saturna’s continued avoidance of significant operational problems, its efforts to comply with increased investment company rules and regulations, and substantial investments in compliance, personnel, training and equipment to meet present, and anticipated, increased demands for service. In addition, they recognized Saturna’s efforts to improve compensation to attract and retain increasingly qualified, experienced, and specialized staff.
The Trustees reviewed the fees and expenses of the Funds. They found each Fund’s expense ratio to be comparable to those of other funds in its peer group and to be fair given the size of the Fund and the services provided and expenses incurred by the adviser. They also considered the fees charged by Saturna to other kinds of accounts and the different services provided to those accounts, as well as the ways in which Saturna’s service and work done for other accounts it manages benefits the Funds. The Trustees recognized that the Funds’positive performance record had likely contributed to their growth in asset size, which resulted in fixed costs being spread over a larger asset base. Noting the decrease in Fund expense ratios, the Trustees saw no need for advisory fee changes or breakpoints. The Trustees noted that to the extent in the future it were determined that material economies of scale had not been shared with the Funds, the Trustees would seek to have those economies of scale shared with the Funds.
The Trustees reviewed Saturna’s profitability with respect to the Funds as part of their evaluation of whether the fees under the advisory contract bear a reasonable relationship to the mix of services provided by Saturna, including the nature, extent and quality of such services. The Trustees also considered potential benefits to Saturna from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading in the Funds’ portfolios, and that Saturna continues to voluntarily waive brokerage commissions for Fund portfolio trades, resulting in lower Fund expenses. The Trustees concluded that the fees paid by the Funds to Saturna were reasonable in light of the services provided, comparative performance, expense and advisory fee information, costs of services provided and profits to be realized and benefits derived or to be derived by Saturna from its relationship with the Funds.
Availability of Proxy Voting Information
- A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (a) without charge, upon request, by calling Saturna Capital at 888/73-AMANA; (b) on the Funds’ website at http://www.amanafunds.com; and (c) on the SEC’s website at http://www.sec.gov.
- Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (a) without charge, upon request, by calling Saturna Capital at 888/73-AMANA; (b) on the Funds’ website at http://www.amanafunds.com; and (c) on the SEC’s website at http://www.sec.gov.
Availability of Amana Portfolio Information
- The Amana Funds file complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.
- The Funds’ Forms N-Q are available on the SEC’s website at http:// www.sec.gov.
- The Funds’ Forms N-Q may be reviewed and copied at the SEC���s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by caling 1-800-SEC-0330.
- The Funds’ make a complete schedule of portfolio holdings after the end of each month available to investors at http://www. amanfunds.com.
This report is issued for the information of the shareowners of the Funds. It is not authorized for distribution to prospective investors unless it is accompanied or preceded by an effective prospectus relating to the securities of the Funds.
Custodian: National City Bank
Distributor: Saturna Brokerage Services, Inc.
Investment Adviser, Administrator, Transfer Agent:
1300 North State Street
Bellingham, WA 98225
(800) SATURNA
www.saturna.com
CONTROLS AND PROCEDURES
(a) Internal control over financial reporting is under the supervision of the principal executive and financial officers. On December 29, 2006, Mr. Nicholas Kaiser (President) and Mr. Christopher Fankhauser (Treasurer) reviewed the internal control procedures for Amana Mutual Funds Trust and found them reasonable and adequate.
(b) No change.
EXHIBITS
Exhibits included with this filing:
(a)Code of Ethics. (Not required)
(b) Certifications.
(1) Nicholas Kaiser, President, Amana Mutual Funds Trust
(2) Christopher Fankhauser, Treasurer, Amana Mutual Funds Trust
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.
AMANA MUTUAL FUNDS TRUST
By:
/s/ Nicholas Kaiser
Nicholas Kaiser, President
Date: April 3, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment 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/ Nicholas Kaiser
Nicholas Kaiser, President
Date: April 3, 2008
By:
/s/ Christopher Fankhauser
Christopher Fankhauser, Treasurer
Date: April 3, 2008