FINANCIAL
HIGHLIGHTS

2002

2002

2001

2000

NOTES TO FINANCIAL STATEMENTS

Note 1 - Organization
Amama 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 investment company under the Investment Company Act of 1940, as amended. The Trust restricts its investments to those acceptable to Muslims by investing in accordance with Islamic principles. Two portfolio series have been created. The Income Fund was first authorized to sell shares of beneficial interest to the public on June 23, 1986. The Growth Fund began operations on February 3, 1994.

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 exchange and NASDAQ’s National Market are valued at the price carried by the composite tape of all national exchanges at 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 closing bid price.

The cost of securities is the same for accounting and Federal income tax purposes. Security 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.

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 it distributes all of its taxable income. It is the Funds' policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders.

At May 31, 2003 the Income Fund and the Growth Fund had capital losses of $21,637 and $443,337, respectively, during the period November 1, 2002 through May 31, 2003, which are treated for federal income tax purposes as arising during the Fund's tax year ending May 31, 2004. Thsee "post-October" losses may be utilized in future years to offset net realized capital gains prior to distributing such gains to shareholders.

At May 31, 2003 the Income Fund had capital loss carryforwards of $1,226,858, of which $35,530 expire in 2009, $972,807 expire in 2010 and $218,521 expire in 2011; Growth Fund had capital loss carryforwards of $1,459,013 of which expire $204,148 expire in 2010 and $1,254,865 expire in 2011.

Capital accounts:
The Fund accounts and reports for distributions to shareholders in accordance with the American Institute of Certified Public Accountant's Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital and Return of Capital Distributions by Investment Companies.

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.

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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 3 - Transacations with Affiiliated Persons
Under a contract approved annually by independent trustees, 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 year ended May 31, 2003, Income Fund and Growth Fund paid advisory fee expenses of $170,737 and $186,361, respectively.

Saturna Capital also acts as transfer agent for the Trust, for which it was paid $49,125 and $70,011 for the Income and Growth Fund, respectively, for the year ended May 31, 2003.

Saturna Brokerage Services, Inc. (“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 year ended May 31, 2003 Income Fund and Growth Fund paid $39,743 and $43,432, respectively, to the Advisor. SBS is the primary stockbrokerage used to effect portfolio transactions for the Trust, and was paid $22,333 in commissions at discount rates during the year ended May 31, 2003.

The Fiqh Council of North America is the religious consultant to Saturna regarding Islamic principles. The Islamic Society of North America provides Saturna with advice regarding the provision of Amana’s services to its members. From its advisory fee, Saturna pays each of these consultants a fee equal to .10% of the Trust’s average daily net assets. These consultant fees amounted to $56,504 for the fiscal year ending May 2003.

All trustees serve without compensation. As of June 11, 2003, officers and trustees (plus affiliated entities), as a group, owned 1.38% and ..76% of the Income Fund and the Growth Fund, respectively.

Note 4 - Dividends
Income Fund dividends from net investment income were $.098 per share paid December 31, 2002 and $.099 per share paid May 31, 2003. Total distributions, all ordinary income dividends, for Income Fund were $250,317 in fiscal 2003 and $188,174 in fiscal 2002.

Growth Fund paid no dividends in fiscal 2003 or 2002.

As of May 31, 2003, the components of distributable earnings on a tax basis were as follows:

Income Fund
Capital loss carryforward, $(1,226,858)
Unrealized appreciation, $3,784,603

$2,557,745

Growth Fund
Capital loss carryforward, $(1,459,013)
Unrealized appreciation, $2,106,160

$647,147

The difference between book and tax-basis unrealized appreciation is attributed primarily to post-October losses.

Note 5 - Investments
At May 31, 2003, for Income Fund the net unrealized appreciation of investments of $3,806,240 comprised gross unrealized gains of $4,781,169 and gross unrealized losses of $974,929. During the year ended May 31, 2003, the Income Fund purchased $3,212,678 of securities and sold $883,989 of securities.

Two

Independent Trustee
(since 2001)

Indepedent Trustee
(since 1986)

Nicholas Kaiser, CFA
1300 N. State Street
Bellingham, WA 98225
Age: 57

President, Saturna Capital Corporation
President, Saturn Brokerage Services, Inc.

Monem A. Salam
1300 N. State Street
Bellingham, WA 98225
Age: 31

Christopher Fankhauser
1300 N. State Street
Bellingham, WA 98225
Age: 31

Ethel D. Beltran
1300 N. State Street
Bellingham, WA 98225
Age: 31

Secretary
(since 2003)

Clifford Alexander, Esq.
1800 Massachusetts Ave.
Washington, DC 20036
Age: 60

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.