AMANA
INCOME FUND GROWTH FUND
ANNUAL REPORT
MAY 31,1998
(GRAPHIC OMITTED)
May 31, 1998
It's been another very good year for stock market investors. Amana Trust's
assets are almost $30 million, up a healthy 33% for the year. Our 2,909 active
shareowner accounts are spread to 38 states and 27 foreign countries. Inside,
please find the details of the fiscal year's operations and the year-end
portfolios. For the fiscal year ended May 31, Amana's INCOME FUND total return
was 23.5% a good performance considering its investment restrictions and
income-oriented nature. Smaller companies again underperformed the large-cap
market during the last year, and the GROWTH FUND appreciated 12.4%. In
comparison, the S&P 500 (large caps) provided a total return of 30.7% and the
Russell 2000 (smaller caps), 21.4% for the last year. The strong markets of the
last several years have pushed prices to rich levels by most historical
standards . Our frank expectation is that near-term, returns are unlikely to be
as good. Financial problems in Japan and the rest of Asia have yet to be fully
addressed, while US corporate earnings growth has dramatically slowed. We
continue to focus the Funds' investments in value-based businesses, in part to
avoid the volatility we expect in some market sectors. Your board is proud to
note Amana Income Fund's 12 years of successful operation. One of the lessons of
the marketplace is that experience matters. Demonstrated capability to provide
successful management and quality service in good times and bad is highly
important in the volatile financial markets. During the course of this year,
transaction volume has increased with more investors taking advantage of our
true "no-load" structure. Our free Automatic Investment Plan and free retirement
plans are increasingly popular. Saturna Capital's site on the Internet's World
Wide Web is an excellent source of information (http://www.saturna.com/amana).
As always, we appreciate your investing with us. If you have any questions or
need help, please call us at 1-800/SATURNA.
Respectfully,
NICHOLAS KAISER, PRESIDENT BASSAM OSMAN, CHAIRMAN
June 15, 1998
<PAGE>
Discussion of Fund Performance
(GRAPHIC OMITTED)
Stocks continue to perform well. The unusually good returns for the two previous
fiscal years continued for the year ended May 31, 1998. Amana Income Fund's
total return was 23.5% , and Amana Growth Fund's total return was 12.4%. For the
last three years, Amana Income's average annual return was
------
21.3% and Amana Growth's average annual return was 17.3%
As usual, market results varied by sector. The bigger companies did best, as
evidenced by twelve-month total return for the S&P 500 Composite (+30.7%).
Smaller companies fared less well, as shown by the Russell 2000 (+21.4%) and the
S&P 600 SmallCap Index (+24.3%). Since these unmanaged, expense-free indices are
not directly comparable to an actively managed portfolio that has transaction
and other costs (including advisory fees), it is useful to consider the
performance of other mutual funds. Comparable Lipper mutual fund averages are
Equity-Income Funds (+25.6%) and Small Company Growth Funds (+23.2%).
When evaluating the performance of the Amana Funds, it is important to remember
their specialized nature, as well as a number of factors applicable to mutual
funds in general. AMANA INCOME FUND's primary objective is current income, with
preservation of capital the secondary objective. In following these objectives,
the Income Fund buys income-producing equity securities. AMANA GROWTH FUND's
primary objective is long-term capital growth. The Funds may also hold cash when
market conditions appear uncertain. It is not the objective of either Fund to
"beat" any specific market index.
All mutual funds have investment restrictions that affect investment
performance. In addition to these other restrictions, Amana's Funds are
restricted to buying only U.S.-traded equity securities of companies whose
business operations are generally consistent with Islamic principles. This
special restriction affects performance in a number of ways. The Funds, for
example, are not allowed to earn interest on cash balances. Neither do the Funds
invest in businesses that have substantial earnings from interest, such as
banks. COMPARISON TO MARKET INDICES
The following line graphs compare Fund performances to representative market
indices. The index returns include reinvested dividends and don't allow for
operating expenses such as those paid by all mutual funds. The first graph shows
that $10,000 invested in Amana Income ten years ago (May 1988) would have grown
to $32,427 at the end of May 1998. While not strictly comparable, the S&P 500
Composite Index is a traditional U.S. securities market benchmark. If $10,000
could have been invested in the S&P 500 at the end of May 1988, that would have
grown to $52,759 over the same 10 years.
2
<PAGE>
(GRAPHIC OMITTED)
ANNUAL REPORT
(GRAPHIC OMITTED)
VALUE OF 10-YEAR $10,000 INVESTMENT IN AMANA INCOME FUND
COMPARED TO S & P 500
(GRAPH OMITTED)
AVERAGE ANNUAL RETURN
- ---------------------
1 YEAR 5 YEAR 10 YEAR
- ---- ----- -----
+23.5% +14.3% +12.5%
DATE S&P 500 AMANA
May-88 $10,000 $10,000
May-98 $52,759 $32,427
Of course, past performance is not a guarantee of future results.
The second graph shows that $10,000 invested in Amana Growth at inception
(February 1994) would have grown to $16,284 at the end of May 1998. If $10,000
could have been invested in the Russell 2000 (a broad index of mid- and
smaller-cap equities) at the beginning of February 1994, that would have grown
to $18,170 over that same period.
(GRAPH OMITTED)
VALUE OF $10,000 INVETMENT AT INCEPTION IN AMANA GROWTH FUND
COMPARED TO RUSSELL 2000 INDEX
AVERAGE ANNUAL RETURN
- --------------------
1 YEAR LIFE OF FUND
- ----- -----------
+12.4% +12.0%
DATE RUSSELL 2000 AMANA
2/3/94 $10,000 $10,000
May,98 $18,170 $16,284
Of course, past performance is not a guarantee of future results.
3
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
Amana Mutual Funds Trust
We have audited the accompanying statement of assets and liabilities of the
Amana Income Fund and the Amana Growth Fund, each a series of shares of the
Amana Mutual Funds Trust, including the schedules of investments as of May 31,
1998, and the related statements of operations for the year then ended and the
statement of changes in net assets and the financial highlights for each of the
two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights presented for the year ended May
31, 1996 and prior were audited by other auditors whose report dated June 20,
1996, expressed an unqualified opinion on those statements. We conducted our
audits in accordance with generally accepted auditing standards. 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, 1998, by correspondence with the
custodian. Our 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 Amana Income Fund and Amana Growth Fund as of May 31,
1998, the results of their operations for the year then ended, the changes in
their net assets and their financial highlights for each of the two years in the
period then ended, in conformity with generally accepted accounting principles.
/s/Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 12, 1998
4
<PAGE>
INCOME INVESTMENTS ANNUAL REPORT
(Graphic Omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Issue Number of Shares Cost Market Value
- ---------------------------------------- ---------------- --------- -------------
COMMON STOCKS (95.6%) - - -
AEROSPACE (1.8%) - - -
Raytheon Co-Cl A 318 - 16,953
AUTOMOTIVE (1.8%) - - -
General Motors 5,000 328,966 360,625
BUSINESS SERVICES (2.8%) - - -
Dun & Bradstreet 6,500 123,900 219,375
Cognizant 6,500 177,891 346,125
--------- -------------
SUB-TOTAL - 301,791 565,500
CHEMICALS (4.4%) - - -
ARCO Chemical 6,500 238,792 362,375
Chemed 14,000 511,314 515,375
--------- -------------
SUB-TOTAL - 750,106 877,750
MACHINERY (5.6%) - - -
Manitowoc Company 27,000 276,657 1,107,000
MEDICAL (12.6%) - - -
American Home Products 20,000 242,862 966,250
Bristol-Myers Squibb 9,280 206,068 998,760
Glaxo-Wellcome plc ADR 10,000 260,427 539,375
--------- -------------
SUB-TOTAL - 709,357 2,504,385
MINING (2.3%) - - -
Rio Tinto plc ADS 9,000 521,086 454,500
OIL & GAS PRODUCTION (12.2%) - - -
Atlantic Richfield 8,000 447,255 631,000
Exxon 10,000 307,279 705,000
Mobil 7,000 395,105 546,000
Enron 11,000 432,158 551,375
--------- -------------
SUB-TOTAL - 1,581,797 2,433,375
PAPER & PAPER PRODUCTS (3.3%) - - -
Consolidated Papers 8,000 218,215 231,500
Boise Cascade 13,000 426,205 433,875
--------- -------------
SUB-TOTAL - 644,420 665,375
PAINT AND ALLIED PRODUCTS (2.2%) - - -
RPM, Inc 25,390 182,267 431,630
<PAGE>
PHARMACEUTICALS (12.6%)
American Home Products 20,000 $ 242,862 $ 966,250
Bristol-Myers Squibb 9,280 206,068 998,760
Glaxo-Wellcome plc ADR 10,000 260,427 539,375
------------- -----------
SUB-TOTAL - 709,357 2,504,385
TELECOMMUNICATIONS (21.5%) - - -
BCE, Inc 26,000 436,370 1,197,625
Cable & Wireless PLC ADR 20,000 408,073 693,750
GTE 10,000 410,441 583,125
SBC Communications 20,480 375,304 796,160
Telefonica de Espana, ADR 7,500 202,956 1,008,750
--------- -------------
SUB-TOTAL - 1,833,144 4,279,410
TOOLS (3.3%) - - -
Regal-Beloit Corporation 20,000 357,762 652,500
TRANSPORTATION (1.5%)
Canadian Pacific Ltd. 10,000 266,577 290,625
UTILITIES- GAS & ELECTRIC (22.0%)
Edison International 13,000 287,969 383,500
Enova Corporation 26,000 584,022 664,625
FPL Group 10,000 344,874 614,375
NIPSCO Industries 24,000 469,159 645,000
Pacific Gas & Electric 20,000 458,942 630,000
Piedmont Natural Gas 20,200 286,927 640,088
Puget Sound Energy 10,000 285,992 261,250
Washington Water Power 25,000 441,582 540,625
--------- -------------
SUB-TOTAL - 3,159,467 4,379,463
--------- -------------
TOTAL INVESTMENTS (95.6%) - $ 10,913,397 $19,019,091
============= ===========
Other Assets (net of liabilities) (4.4%) - - 867,121
-------------
TOTAL NET ASSETS (100%) - - $19,886,212
===========
</TABLE>
(Graphic Omitted)
AMANA INVESTMENTS INCOME 6
<PAGE>
INCOME FINANCIAL HIGHLIGHTS ANNUAL REPORT
Selected data per share of capital stock outstanding throughout each period.
(Graphic Omitted)
For Year Ended May 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year 1998 1997 1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- ------- ------- ------- -------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.61 $ 13.93 $ 12.92 $ 12.18 $ 12.86 $11.94 $11.36 $10.86 $10.39
-------- -------- -------- -------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS - - - - - - - - -
Net investment income 0.26 0.38 0.42 0.38 0.30 0.32 0.32 0.39 0.38
Net gains or losses on securities - - - - - - - - -
(both realized and unrealized) 3.58 2.86 1.76 0.8 (0.36) 0.92 0.58 0.46 0.53
-------- -------- -------- -------- -------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 3.84 3.24 2.18 1.18 (0.06) 1.24 0.90 0.85 0.91
-------- -------- -------- -------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS - - - - - - - - -
Dividends (from net investment income) (0.22) (0.42) (0.41) (0.44) (0.30) (0.32) (0.32) (0.35) (0.44)
Distributions (from capital gains) (0.47) (0.14) (0.76) 0.00 (0.32) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- ------- ------- ------- -------
Total distributions (0.69) (0.56) (1.17) (0.44) (0.62) (0.32) (0.32) (0.35) (0.44)
-------- -------- -------- -------- -------- ------- ------- ------- -------
NET ASSET VALUE END OF PERIOD $ 19.76 $ 16.61 $ 12.92 $ 12.18 $12.86 $11.94 $11.36 $10.86
======== ======== ======== ======== ======= ======= ======= =======
$ 13.93
========
TOTAL RETURN 23.51% 23.62% 17.03% 9.95% -0.63% 10.26% 7.88% 8.11% 8.85%
RATIOS / SUPPLEMENTAL DATA - - - - - - - - -
- -------------------------------------------
Net assets ($000), end of period 19,886 16,332 12,464 10,708 10,432 9,398 6,913 $5,868 $4,760
Ratio of gross expenses to Ave. net assets 1.36% 1.44% 1.57% 1.56% 1.58% 1.58% 1.58% 1.66% 1.76%
Ratio of net investment income to 1.43% 2.51% 3.06% 3.11% 2.22% 2.65% 2.75% 3.73% 3.67%
ave. net assets
Portfolio turnover rate 8% 14% 24% 29% 21% 29% 19% 29% 19%
<S> <C>
Year 1989
-------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 9.11
-------
INCOME FROM INVESTMENT OPERATIONS -
Net investment income 0.38
Net gains or losses on securities -
(both realized and unrealized) 1.29
-------
TOTAL FROM INVESTMENT OPERATIONS 1.67
-------
LESS DISTRIBUTIONS -
Dividends (from net investment income) (0.39)
Distributions (from capital gains) 0.00
-------
Total distributions (0.39)
-------
NET ASSET VALUE END OF PERIOD $10.39
=======
TOTAL RETURN 18.86%
RATIOS / SUPPLEMENTAL DATA -
- -------------------------------------------
Net assets ($000), end of period $3,645
Ratio of gross expenses to Ave. net assets 1.88%
Ratio of net investment income to 3.85%
ave. net assets
Portfolio turnover rate 71%
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
Amana Income Fund Calendar Year Returns (unaudited)
(Graph Omitted)
1988 13%
1989 18%
1990 -3%
1991 23%
1992 1%
1993 11%
1994 -6%
1995 27%
1996 12%
1997 24%
Note: 1998 year-to-date return is +12.9% (December 31,, 1997 through quarter
ending June 30, 1998). Highest return for a quarter was +15.9%. Lowest
return for a quarter was -8.8% (quarter ending September 28, 1990).
7
<PAGE>
INCOME
(Graphic Omitted)
As of May 31, 1998
STATEMENT OF ASSETS & LIABILITIES
<TABLE>
<CAPTION>
ASSETS - -
<S> <C> <C>
Common stocks (cost $10,913,397) $19,019,091
Cash 812,503
Dividends receivable 77,949
Insurance reserve premium 2,529
------------
Total Assets - $19,912,072
-----------
LIABILITIES - -
Payable to affiliate 25,057
Other liabilities 803
------------
Total liabilities - $ 25,860
-----------
NET ASSETS - $19,886,212
===========
FUND SHARES OUTSTANDING - 1,006,670
ANALYSIS OF NET ASSETS - -
Paid in Capital (unlimited shares authorized, without par) $11,826,749
Accumulated net realized (losses) (87,156)
Undistributed net investment income 40,925
Unrealized net appreciation on investments 8,105,694
------------
Net Asseets applicable to Fund shares outstanding - $19,886,212
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 19.76
============
</TABLE>
8
<PAGE>
STATEMENT OF OPERATIONS Year Ended May 31, 1998 (Graphic Omitted) INCOME ANNUAL
REPORT
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME - -
Dividends (Net of Foreign Taxes of $6729) $ 508,268
Miscellaneous income 420
-----------
Gross investment income - $ 508,688
EXPENSES - -
Investment Adviser and administration fees 172,680
Shareowner servicing 28,000
Filing and registration fees 14,500
Professional fees 12,251
Printing and postage 10,500
Other expenses 9,100
Custodial fees 2,372
-----------
Total gross expenses 249,403
Less earnings credits (2,372)
Net expenses - 247,031
----------
Net investment income - 261,657
----------
NET REALIZED GAIN ON INVESTMENTS - -
Proceeds from sales 1,857,379
Less cost of securities sold based on identified cost 1,536,769
-----------
Realized net gain - 320,610
UNREALIZED GAIN ON INVESTMENTS - -
End of period 8,105,694
Beginning of period 4,778,465
-----------
Increase in unrealized gain for the period - 3,327,229
----------
Net realized and unrealized gain on investments - 3,647,839
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS - $3,909,496
==========
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
9
<PAGE>
INCOME
STATEMENT OF CHANGES IN NET ASSETS
(GRAPHIC OMITTED)
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS Year ended Year ended
May 31,1998 May 31,1997
------------- -------------
FROM OPERATIONS - -
Net Investment Income $ 261,657 $ 357,730
Net realized gain on investmens 320,610 188,938
Net increase in unrealized appreciation 3,327,229 2,586,861
------------- -------------
Net increase in net assets 3,909,496 3,133,529
------------- -------------
DIVIDENDS TO SHAREOWNERS FROM - -
Net investment income (220,732) (410,453)
Capital gains distributions (471,050) (135,100)
------------- -------------
(691,782) (545,553
------------- -------------
FUND SHARE TRANSACTIONS - -
Proceeds from sales of shares 4,096,616 3,573,470
Value of shares issued in reinvestments of dividends 678,726 533,571
------------- -------------
4,775,342 4,107,041
Cost of shares redeemed (4,438,422) (2,827,835)
------------- -------------
Net increase in net assets from share transactins 336,920 1,279,206
------------- -------------
Total increase in net assets 3,554,634 3,867,182
NET ASSETS - -
Beginning of period 16,331,578 12,464,396
------------- -------------
End of period 19,886,212 16,331,578
============= =============
Shares of the Fund Sold and Redeemed - -
Number of shares sold 223,179 338,478
Number of shares issued in reinvestment of dividends 37,711 34,497
------------- -------------
260,890 372,975
Number of shares redeemed (237,572) (284,173)
------------- -------------
Net Increase in Number of Shares Outstanding 23,318 88,802
============= =============
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
10
<PAGE>
GROWTH INVESTMENTS
ANNUAL REPORT
(GRAPHIC OMITTED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Issue Number of Shares Cost Market Value
- ----------------------------------------- ---------------- ---------- -------------
COMMON STOCKS (84.3%) - - -
AUTO PARTS (1.0%) - - -
Genuine Parts 3,000 89,355 101,813
BUIDLING (1.6%) - - -
Champion Enterprise* 6,000 113,562 161,625
CHEMICALS (1.0%) - - -
RPM, Inc. 5,781 71,869 98,277
COMPUTER HARDWARE (11.1%) - - -
Adaptec* 4,000 95,394 60,750
Advanced Digital Information* 6,000 33,778 102,750
Apple 5,000 147,680 133,125
Compaq Computer* 10,000 92,663 273,750
Hewlett Packard 2,000 41,638 124,250
Intel 1,200 91,912 85,725
International Business Machines 1,500 156,659 176,250
Symbol Technologies 4,500 97,435 158,344
---------- -------------
-
SUB-TOTAL 757,159 1,114,944
COMPUTER SOFTWARE (11.3%) - - -
America Online 1,000 87,617 83,313
Adobe Systems 4,200 167,688 167,737
Cisco Systems* 3,000 194,368 226,875
Microsoft* 1,800 85,628 152,662
Olicom A/S* 6,000 112,707 172,125
Oracle* 7,000 154,548 165,375
PeopleSoft 4,000 173,332 174,750
---------- -------------
SUB-TOTAL - 975,888 1,142,837
ELECTRONICS (6.4%) - - -
FLIR* 8,000 109,013 150,000
Merix* 7,500 143,058 87,188
Motorola 3,000 164,632 159,000
Qualcomm* 3,500 121,548 182,437
World Access* 2,000 18,819 62,750
---------- -------------
SUB-TOTAL - 557,070 641,375
<PAGE>
- - -
AMANA GROWTH INVESTMENT
(GRAPHIC OMITTED)
FINANCIAL INFORMATION (0.6%) - - -
Reuters Holdings PLC-ADR 866 $ 43,333 59,321
FOOD PRODUCTION (2.3%) - - -
Pioneer Hi-Bred International 3,300 77,929 125,606
Potash Corp of Saskatchewan 1,200 87,709 103,275
---------- -------------
-
SUB-TOTAL 165,638 228,881
MACHINERY (4.3%) - - -
Crane 3,000 76,234 158,063
Manitowoc 3,000 104,325 123,000
Valley Forge 10,500 105,321 156,187
---------- -------------
-
SUB-TOTAL 285,880 437,250
MINING (2.6%) - - -
ASARCO 5,000 116,423 113,437
Rio Tinto plc ADS 3,000 160,897 151,500
---------- -------------
SUB-TOTAL - 277,320 264,937
OIL & GAS (5.7%) - - -
Atlantic Richfield 2,600 165,029 205,075
Schlumberger Ltd 1,500 120,031 117,094
Williams Companies 3,600 60,536 116,775
YPF S.A. ADS 4,500 99,630 140,062
---------- -------------
SUB-TOTAL - 445,226 579,006
PAPER & PUBLISHING (1.6%) - - -
McGraw-Hill 2,000 89,379 156,375
PHARMACEUTICALS (8.1%) - - -
Affymetrix* 3,000 104,150 80,625
Bone Care International* 10,000 116,370 97,500
Glaxo Wellcome plc ADR 2,500 55,379 134,844
Johnson & Johnson 2,000 91,871 138,125
Ligand Pharmaceuticals* 6,000 90,709 83,625
Lilly (Eli) 2,000 127,124 122,875
Novo-Nordisk A/S ADR 2,000 111,090 157,000
---------- -------------
SUB-TOTAL - 696,693 814,594
PHOTOGRAPHIC SUPPLIES (1.5%) - - -
Fuji Photo Film ADR 4,500 138,736 151,875
12
<PAGE>
ANNUA REPORT GROWTH INVESTMENTS - - -
(GRAPHIC OMITTED)
Issue Number of shares Cost Market Value
- ----------------------------------------- ---------------- ---------- -------------
REAL ESTATE (2.3%) - - -
Hutchison Wampoa ADR 2,000 62,091 52,750
Intrawest 9,000 151,959 178,313
---------- -------------
SUB-TOTAL - 214,050 231,063
RETAIL (4.2%) - - -
Gap 5,250 111,606 283,500
Starbucks* 3,000 133,491 144,000
---------- -------------
SUB-TOTAL - 245,097 427,500
STEEL (0.7%) - - -
AK Steel Holding 4,000 87,392 74,500
TELECOMMUNICATIONS (5%) - - -
Telebras ADS 1,200 137,100 127,800
Tele Danmark A/S ADR 3,000 76,615 139,125
Telefonica de Espana ADS 1,700 70,376 228,650
---------- -------------
SUB-TOTAL - 284,091 495,575
TOOLS (1.9%) - - -
Regal-Beloit 6,000 107,448 195,750
TRANSPORTATION (9.8%) - - -
Daimler Benz ADS 1,300 134,367 128,538
Fritz Companies* 8,500 101,198 110,500
Halter Marine Group* 6,000 80,457 112,500
KLM
Royal Dutch Airlines 4,000 155,823 155,750
Southwest Arilines 7,500 132,585 200,156
Trinity Industries 3,000 117,089 143,250
Virgin Express 8,000 168,782 138,000
---------- -------------
SUB-TOTAL - 890,301 988,694
WATER TREATMENT (1.3%) - - -
Ionics* 3,000 126,925 134,250
---------- -------------
TOTAL INVESTMENTS (84.3%) - $6,662,412 8,500,442
==========
OTHER ASSETS (NET OF LIABILITIES) (15.7%) - - 1,579,270
-------------
TOTAL NET ASSETS (100%) - - $ 10,079,712
=============
<FN>
*Non-income producing security
</FN>
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
13
<PAGE>
(Graphic Omitted)
GROWTH
FINANCIAL HIGHLIGHTS
For Year Ended May 31
Selected data per share of capital stock outstanding throughout each period.
<TABLE>
<CAPTION>
2/3/94 (Inception)
to
1998 1997 1996 1995 May 31,1994
---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 7.07 $ 6.86 $ 5.04 $ 4.69 $ 5.00
-------- -------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.03) (0.02) (0.05) (0.04) (0.00)
Net gains or losses on securities
(both realized and unrealized) 0.90 0.32 1.95 0.39 (0.30)
-------- -------- -------- -------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.87 0.30 1.90 0.35 (0.30)
-------- -------- -------- -------- ---------
LESS DISTRIBUTIONS
Dividends (from net investment income) 0.00 0.00 0.00 0.00 (0.01)
Distributions (from capital gains) (0.16) (0.09) (0.08) 0.00 0.00
-------- -------- -------- -------- ---------
Total distributions (0.16) (0.09) (0.08) 0.00 (0.01)
-------- -------- -------- -------- ---------
NET ASSET VALUE AT END OF PERIOD $ 7.78 $ 7.07 $ 6.86 $ 5.04 $ 4.69
======== ======== ======== ======== =========
TOTAL RETURN 12.39% 4.46% 37.20% 7.46% (6.20)%
RATIOS / SUPPLEMENTAL DATA
- --------------------------------------------------
Net assets ($000), end of period $10,080 $ 5,924 $ 4,151 $ 1,974 $ 952
Ratio of gross espenses to Ave. net assets 1.54% 1.69% 1.94% 2.00% *0.62%
Ratio of net investment income to ave. net assets (0.40)% (0.60)% (0.79)% (0.82)% *(0.35)%
Portfolio turnover rate 25% 25% 22% 38% *6%
<FN>
(*not annualized)
(The accompanying notes are an integral part of these financial statement.)
</FN>
</TABLE>
Amana Growth Fund Calendar Year Returns (unaudited)
(Graph Omitted)
1995 35%
1996 4%
1997 18%
Note: 1998 year-to-date return is +8.2% (December 31, 1997 through quarter
ending March 31, 1998). Highest return for a quarter was +15.4% (quarter ending
September 30, 1997). Lowest return for a quarter was -7.1% (quarter ending
December 31, 1997).
14
<PAGE>
GROWTH
ANNUAL REPORT
(Graphic Omitted)
As of May 31, 1998
STATEMENT OF ASSETS & LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS - -
Common stocks (cost $6,662,412) $8,500,442 -
Cash 1,505,141 -
Receivable for Security Sales 65,111 -
Dividends receivable 22,188 -
----------
Total Assets - $10,092,882
-----------
LIABILITIES
Payable to affiliate 13,170
----------
Total liabilities - 13,170
-----------
NET ASSETS - $10,079,712
===========
FUND SHARES OUTSTANDING - 1,295,087
ANALYSIS OF NET ASSETS
Paid in Capital (unlimited shares authorized, without par) $8,241,682
Unrealized net appreciation on investments 1,838,030
----------
Net Assets applicable to Fund shares outstanding $10,079,712
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 7.78
===========
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
15
<PAGE>
GROWTH
(Graphic Omitted)
STATEMENT OF OPERATIONS
For the yar ended May 31, 1998
<TABLE>
<CAPTION>
INVESTMENT INCOME - -
<S> <C> <C>
Dividends (net of foreign taxes of $4,584) $ 84,156 -
Miscellaneous income 2,906
-----------
Gross investment income $ 87,062
EXPENSES - -
Investment Adviser and administration fees 75,008 -
Shareowner servicing 15,347 -
Filing and registration fees 13,000 -
Professional expenses 6,500 -
Printing and postage 4,700 -
Micellaneous expenses 4,628 -
Custodial fees 3,464 -
-----------
Total gross expenses 122,647
Less earnings credits (3,464)
-----------
Net expenses 119,183
---------
Net investment income (loss) (32,121)
---------
NET REALIZED GAIN ON INVESTMENTS - -
Proceeds from sales 1,552,447 -
Less cost of securities sold based on identified cost -
1,395,476
-----------
Realized net gain 156,971
UNREALIZED GAIN ON INVESTMENTS -
End of period 1,838,030 -
Beginning of period 1,210,050 -
-----------
Increase in unrealized gain for the period -
627,980
---------
Net realized and unrealized gain on investments -
784,951
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS - $752,830
=========
</TABLE>
(The accompanying notes are an integral part of these financial statements).
<PAGE>
GROWTH
(Graphic Omitted)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS Year ended Year ended
- - May 31,1998 May 31,1997
------------- -------------
FROM OPERATIONS - -
Net investment income $ (32,121) $ (31,525)
Net realized gain on investments 156,971 80,406
Net increase in unrealized appreciation 627,980 325,603
------------- -------------
Net increase in net assets 752,830 374,484
------------- -------------
DIVIDENDS TO SHAREOWNERS FROM - -
Net investment income - -
Capital gains distributions (161,000) (74,024)
------------- -------------
(161,000) (74,024)
------------- -------------
FUND SHARE TRANSACTIONS - -
Proceeds from sales of shares 4,765,715 3,083,797
Value of shares issued in reinvestment of dividends 160,607 71,472
------------- -------------
4,926,322 3,155,269
Cost of shares redeemed (1,362,492) (1,682,459)
------------- -------------
Net increase in net assets from share transactions 3,563,830 1,472,810
------------- -------------
Total increase in net assets 4,155,660 1,773,270
NET ASSETS - -
Beginning of period 5,924,052 4,150,782
------------- -------------
End of period $ 10,079,712 $ 5,924,052
============= =============
Shares of the Fund Sold and Redeemed - -
Number of shares sold 612,017 497,832
Number of shares issued in reinvestment of dividends 21,587 11,116
------------- -------------
633,604 508,948
Number of shares redeemed (175,890) (276,621)
------------- -------------
Net increase in Number of Shares Outstanding 457,714 232,327
======= =======
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
(GRAPHIC OMITTED)
NOTE 1 - ORGANIZATION
Amana Mutual Funds Trust (the "Trust") was established under Indiana Law as a
Business Trust on July 26, 1984. The Trust is registered as a no-load, open-end
diversified series in-vestment company under the Investment Company Act of 1940,
as amended. The Trust restricts its in-vestments to those acceptable to Muslims
by investing in accordance with Islamic principles. Two portfolio series have
been created to date, the Income Fund and the Growth Fund (collectively, the
"Funds"). NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The following is a summary of
the significant accounting policies followed by the Funds. INVESTMENTS:
Securities traded on a national ex-change and NASDAQ's National Market are
valued at the price carried by the composite tape of all na-tional exchanges
after 4 p.m. New York time or, in the absence of any sale on that date, the 4
p.m. bid price. Securities traded in the over-the-counter market are valued at
the clos-ing bid price. The cost of securities is the same for accounting and
Federal income tax purposes. Realized gains and losses are recorded on the
identified cost basis. Cash dividends from equity secu-rities are recorded as
income on the ex-div-idend 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. FEDERAL INCOME TAXES: The Funds have elected
to be taxed as regulated investment companies under the Internal Revenue Code
and distribute sub-stantially all of their taxable net invest-ment income and
realized net gains on in-vest-ments. Therefore, no provision for Federal income
taxes is required.
The Income Fund has post October losses $87,156 which are treated for federal
income tax purposes as arising in the tax year ending May 31, 1999.
DIVIDENDS AND DISTRIBUTIONS TO SHAREOWNERS:
Dividends and distributions to share-owners are recorded on the ex-dividend
date. Dividend payable dates are the end of May and December. Shareowners
electing to reinvest dividends and distributions pur-chase additional shares at
the net asset value on the payable date. ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. NOTE 3 - TRANSACTIONS WITH AFFILIATED PERSONS Under a contract
approved by shareowners on December 28, 1989, Saturna Capital Corporation
provides investment advisory services and cer-tain other administrative and
distribu-tion services and facilities required by the Trust to conduct its
business. For such services, each Fund pays an annual fee equal to .95% of its
aver-age daily net assets. For the year ended May 31, 1998, the Income Fund and
Growth Fund paid advisory fee expenses of $172,680 and $75,008, respectively.
Saturna Capital also acts as transfer agent for the Trust, for which it was paid
$28,000 and $15,347 for the Income and Growth Fund, respectively, for the year
ended May 31, 1998. The Trust acts as distributor of its own shares, except in
those states in which Investors National Corporation (a subsidiary of Saturna
Capital Corporation) is itself registered as a broker-dealer and acts as
distributor without compensation. Investors National Corporation is the primary
stockbrokerage used to effect portfolio transactions for the Trust, and was paid
$12,712 in commissions at deep-discount rates during the year ended May 31,
1998. North American Islamic Trust, Inc., is the religious consultant to Saturna
regarding issues of Islamic principles under an agreement with Saturna as
adviser. From its advisory fee, Saturna pays a fee to North American Islamic
Trust, Inc. equal to .20% of the average daily net assets of the Trust. This fee
amounted to $53,133 for the year ended May 31, 1998. One trustee of the Trust is
also a trustee of North American Islamic Trust.
18
<PAGE>
All trustees serve without compen-sation.
The Trustees, officers and their immediate families, and
North American Islamic Trust as a group owned 3.00% of the Income Fund's and
1.46% of the Growth Fund's outstanding shares on May 31, 1998. NOTE 4 -
DIVIDENDS Income Fund dividends from net investment income were $.14 per share
paid December 31, 1997, and $.079 per share paid May 31, 1998. Income Fund
distributions from net realized long-term capital gains were $.466 per share
paid December 31, 1997. The Growth Fund distributions from net realized
long-term capital gains were $.159 per share paid December 31, 1997. From its
inception to May 31, 1998, the Income Fund has realized net long-term gains from
sales of securities of $1,604,430 and has distributed realized net long-term
gains of $1,695,430, while the Growth Fund has realized net long-term gains from
sales of securities of $286,976 and has distributed realized net long-term gains
of $279,789. NOTE 5 - INVESTMENTS At May 31, 1998, for Income Fund the net
unreal-ized appreciation of investments of $8,105,694 comprised gross unrealized
gains of $8,197,021 and gross unrealized losses of $91,327. During the year
ended May 31, 1998, the Income Fund purchased $1,349,113 of securities and sold
$1,857,379 of securities. At May 31, 1998, for Growth Fund the net unreal-ized
appreciation of investments of $1,838,030 comprised gross unrealized gains of
$2,096,489 and gross unrealized losses of $258,459. During the period ended May
31, 1998, the Fund purchased $3,642,425 of securities and sold $1,552,446 of
securities. NOTE 6 - CUSTODY CREDITS Under an agreement with the custodian bank,
custody fees are reduced by credits for cash balances. Such reduction amounted
to $2,372 and $3,464 for the Income Fund and Growth Fund, respectively, for the
year ended May 31, 1998.
TRUSTEES AND OFFICERS
(Graphic Omitted)
ANNUAL REPORT
Bassam Osman, MD
Chairman, Trustee
Neurologist
Chairman, North American Islamic Trust
- -
- ---
Nicholas Kaiser, MBA
President, Trustee
President, Saturna Capital Corporation
- -
- ---
M. Yaqub Mirza, PhD
Treasurer, Independent Trustee
President, Mar-Jac Investments, Inc.
Director, Mylex Corporation
Chairman, Jugos Concentrados SA
- -
- ---
Jamal M. al-Barzinji, PhD
Independent Trustee
Chairman, Mar--Jac Poultry, Inc.
Director, Safa Trust, Inc.
- -
- ---
Iqbal Unus, PhD
Independent Trustee
Dean of Students/Registrar,
School of Islamic and Social Sciences
- -
- ---
- -
- ---
M. Naziruddin Ali
Vice President
General Manager, North American Islamic Trust
- -
- ---
P. Larner
Secretary
Saturna Capital Corporation
- -
- ---
T. K. Anderson, MBA
Assistant Treasurer
Saturna Capital Corporation
- -
- ---
19
<PAGE>
AMANA MUTUAL FUNDS TRUST
-----------
GROWTH INCOME
ANNUAL REPORT
May 31, 1998
(Graphic Omitted)
Amana Mutual Funds Trust began operations in 1986. Saturna Capital Corporation,
with extensive experience in mutual funds, invests the Fund portfolios and
handles daily operations by direction of the Board of Trustees (see reverse
side).
Investment Advisor and Administrator Saturna Capital Corporation
- ---------------------------------------------------------------------------
Religious Consultant North American Islamic Trust
- ---------------------------------------------------------------------------
Custodian National City Bank of Indiana
- ---------------------------------------------------------------------------
Auditors Tait, Weller & Baker, Philadelphia
- ---------------------------------------------------------------------------
Legal Counsel Sommer & Barnard, Indianapolis
This report is for the information of the shareowners of the Trust. It is not
authorized for distribution to prospective investors unless it is accompanied or
preceded by an effective prospectus.
1300 N. State Street
Bellingham, WA 98225-4730
1-800/SATURNA
(1-800/728-8762)
email: [email protected]
