Guinness Atkinson Asia Focus Fund (IASMX) N-CSRCertified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-08360

GUINNESS ATKINSON FUNDS

(Exact name of registrant as specified in charter)

251 South Lake Avenue, Suite 800

Pasadena, CA 91101

(Address of principal executive offices) (Zip code)

(Name and address of agent for service)

James J. Atkinson, Jr.

251 South Lake Avenue, Suite 800

Pasadena, CA 91101

Registrant’s telephone number, including area code: (800-915-6566) 

Date of fiscal year end: December 31

Date of reporting period: December 31, 2023

Item 1. Reports to Stockholders.

The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:

Guinness Atkinson™ Funds

Annual Report

December 31, 2023

TABLE OF CONTENTS

Dear Guinness Atkinson Funds Shareholders,

Calendar year 2023 was a mixed year for the Guinness Atkinson Funds with three of the Funds producing positive returns and three Funds in the red for the year.

Global Innovators Fund had an exceptional year, producing a total return of 39.34% (investor class) and 39.70% (institutional class). We’d be remiss if we didn’t mention that this fund had a major milestone during the year as it celebrated its 25th anniversary in December. We know we’ve had many shareholders in this fund from the very beginning and we’re pleased that we can report such a positive 25^th year and, indeed what we believe is an excellent long-term track record.

The Asia Focus Fund produced a positive return for the year, finishing with a total return of 5.95%. The Global Energy Fund also had a positive year, finishing with a total return of 2.60%.The remaining three Guinness Atkinson Funds were in the red for the year: the Renminbi Yuan & Bond Fund down 0.09%; the Alternative Energy Fund down 2.39% and the China & Hong Kong Fund down 14.51% for the year.

This year marks some major milestones for some of the Guinness Atkinson Funds. The China & Hong Kong Fund will celebrate it’s 30^th anniversary in June. The Global Energy Fund will turn 20, also in June. It doesn’t seem like 30 years since we launched the China & Hong Kong Fund. One heck of a lot has happened since then, and the world has changed in ways that we couldn’t even imagine 30 years ago. Many of these changes have been quite positive and contribute mightily to the human condition. Other changes have been less positive. Such is the nature of change. As we’ve pointed out in previous communications, change is not just occurring at a breakneck pace, the rate of change is accelerating. That change can cause angst is understood…but the ever-increasing rate of change is itself a bit unnerving. But it is our reality. We choose to embrace rapid change and seek opportunities.

The performance tables adjacent to this letter provide the details for the performance and Morningstar ratings for each of the Guinness Atkinson Funds. Throughout this report are detailed commentaries on each of the Guinness Atkinson Funds prepared by our portfolio managers.

As usual, we appreciate the confidence you have placed in us and our management team and look ahead to what we hope is a great 2024.

We encourage you to visit gafunds.com for the latest news and announcements on the Guinness Atkinson Funds. You’re also encouraged to visit smartetfs.com where you can find information regarding the SmartETFs, a family of ETFs from Guinness Atkinson.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment in any Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of a Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gafunds.com, or calling (800) 915-6565.

Mutual fund investing involves risk. Principal loss is possible.

Sincerely,

The table below provides total return data for each of the Funds over the one, three, five, ten year and from inception periods through December 31, 2023. Also included in the table is the expense ratio data from the most recent prospectus dated May 1, 2023.

Periods of greater than one year are average annualized returns; one year and shorter period returns are actual returns. All returns are for the periods ending December 31, 2023.

Performance data shown for the Global Innovators, Institutional Class (GINNX), prior to its launch date on December 31, 2015, uses performance data from the Global Innovators, Investor Class (IWIRX).

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Current performance of the Funds may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.gafunds.com.

Expense ratios are from the most recent prospectus (dated May 1, 2023) and are from the most recent audited financials (period ending December 31, 2022) at the time that prospectus was completed.

The Adviser has contractually agreed to reduce its fees and/or pay Fund expenses in order to limit the Fund’s Total Annual Operating Expenses to through June 30, 2026. Total returns reflect a fee waiver in effect & in the absence of this waiver, the total returns would be lower.

Morningstar Ratings Through December 31, 2023

Morningstar Ratings Disclosure 

Global Innovators Fund ratings shown were given for the Investor Share Class.

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% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in distribution percentages.)

© 2024 Morningstar, Inc. All Rights Reserved.  The information contained herein (1) is proprietary to Morningstar (2) may not be copied or distributed and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

GUINNESS ATKINSON FUNDS

Expense Examples (Unaudited)

As a shareholder of the Funds, you incur two types of costs: (1) redemption fees (applicable to the Asia Focus Fund, the China & Hong Kong Fund, and the Renminbi Yuan & Bond Fund); and (2) ongoing costs, including advisory fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period shown and held for the entire period from July 01, 2023, to December 31, 2023.

Actual Expenses

For each Fund, the first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid during Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

For each Fund, the second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any redemption fees. Therefore, the second line for each Fund of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these redemption fees were included, your costs would have been higher.

GUINNESS ATKINSON FUNDS

Expense Examples (Unaudited)

GUINNESS ATKINSON ALTERNATIVE ENERGY FUND

ANNUAL REPORT FOR THE PERIOD ENDED

DECEMBER 31, 2023

1.   Performance

Gross 1.70% & Net 1.10%. The Adviser has contractually agreed to reduce its fees and/or pay Fund expenses in order to limit the Fund’s Total Annual Operating Expenses to 1.10% through June 30, 2026. For the Fund’s current one-year expense ratios, please refer to the Financial Highlights section of this report.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gafunds.com, or calling (800) 915-6565.

2.   Review

After a year of highly accommodative fiscal policy in 2022, the dominant driver for 2023 became tightening monetary policy. A rapid rise in interest rates together with pockets of sluggish inflation led the economics of renewable projects to suffer relative to competing fossil fuel alternatives but, post these factors, we find that renewable energy generation continues to be relatively more economic than fossil fuels. Better relative economics as well as security of supply considerations will help to sustain strong demand for sustainable energy activities during 2024 and will keep the long-term driver of renewables adoption intact.

Much of the key policy support for the energy transition in 2023 was enacted with a focus on improved energy efficiency, energy security and access to critical material supply chains, including the following:

Around 520 Gigawatts (GW) of new renewable generation capacity was installed in 2023, 100GW higher than the record installations seen in 2022 and well over double the 194GW installed pre-COVID in 2019. Solar was dominant (at just over 400 GW) with wind in second place (around 100 GW) followed by hydropower, then bioenergy. Renewable electricity generation in 2023 increased by around 2.5%, reaching over 9,200TWh, and outpacing global electricity demand (estimated 1% growth in 2023).

Electric vehicles saw continued adoption in 2023, albeit at a slower pace than seen in recent years. After growing at over 100% and over 50% in 2021 and 2022, sales of plug-in vehicles grew by around 35% in 2023 to around 14 million units, representing an 18% penetration rate. After increasing in 2022, lithium-ion battery pack costs fell by 14% in 2023 to $139/kWh, driven by lithium and nickel prices that fell by 80% and 40% respectively.

The solar industry grew rapidly in 2023, with installations likely to have exceeded 400 GW for the full year (up tenfold over the last decade and 65% higher than 2022). This is materially ahead of our prior 2023 expectation of 310 GW and will represent the fastest annual growth rate since 2010 (following several years of 20%+ annual growth).

The wind industry returned to growth and is likely to have delivered record installations in excess of 100 GW, despite high-profile company profitability and growth concerns.

The onshore wind sector is likely to have delivered 91GW, with China accounting for 60% of the total and nearly 90% of the year-on-year growth. Offshore wind installations are likely to have reached 12GW (also led heavily by China) with clear policy support for the struggling industry at the end of the year.

Against this backdrop, the Guinness Atkinson Alternative Energy Fund delivered a total return (USD) of -2.39% in 2023 vs its benchmark the MSCI World Index (net return) of 23.79%. For comparison, the MSCI World Alternative Energy Index was down by 25.20%. The underperformance of the Fund resulted almost entirely from multiple compression rather than earnings downgrades, with the Fund trading at a one year forward price/earnings (P/E) discount of 6% to the MSCI World Index at the end of the year. Since repositioning five years ago, the Fund has delivered a return in excess of its investment universe, based on an equal weighted average calculation.

3.   Activity

During the period, we exited out position in Tianneng Power International and initiated positions in Legrand, Orsted and Installed Building Products.

The portfolio was actively rebalanced during the period and, over the year, the weighting to consumption (i.e. the demand side of the energy transition) increased slightly from 44.1% at the end of 2022 to 44.3% at the end of December 2023 while the weighting to renewables (i.e. supply side) grew from 50.3% to 52.3%.

4.   Portfolio Positioning

At 31 December 2023, the Guinness Atkinson Alternative Energy Fund traded on a one year forward (2024) P/E ratio of 16.6x, around 13% lower than the same one year forward metric published in our last annual outlook. Over the year, the fund valuation fell from a one year forward P/E premium to the MSCI World of 35% to a discount of 13% in October (the largest discount since March 2020) before closing the year at a discount of 6%. Over the year, consensus 2024 earnings expectations for the portfolio fell by around 6%, implying that the weak performance of the fund versus the MSCI World Index in 2023 resulted almost entirely from multiple compression (i.e the re-rating of the MSCI World) rather than earnings downgrades.

We believe that the earnings growth outlook for the Fund continues to remain attractive. Updating for recent earnings and guidance announcements, we find that the portfolio consensus earnings per share growth outlook for the Fund remains strong at 19.1% pa forecast between 2023-2026, relative to the MSCI World at 8.4% pa – a premium of over 10% pa. This is broadly in line with the absolute and index relative growth outlook that we published in our last outlook. Looking by sub sector, we find that all sub sectors are forecast by consensus to see EPS growth between 2023 and 2026 that is in excess of the MSCI World.

Based on consensus expectations, the Fund offers more than double the earnings growth of the MSCI World, despite trading at a discounted one year forward P/E ratio. Current valuation multiples appear, therefore, to discount an earnings outcome that is far worse than that implied by current interest rates and inflationary conditions. Looking longer-term, we believe that the portfolio is likely to deliver normalised earnings growth of around 14%pa, well ahead of EPS growth in the MSCI World Index, that will bring the Fund P/E ratio down from the current 16.6x for 2024E to around 10.6x in 2027E.

5.   Outlook

Looking ahead to 2024 and beyond, we expect further acceleration of the transition:

Renewable power generation is expected to grow at around 7-8%, displacing some coal and gas power, which would result in the electricity sector’s CO2 emissions declining. Grid investment will increase to support the growth, growing at twice its historic rate from $300bn in 2022 to over $800bn per annum (pa) in the 2040s.

Building efficiency and electrification will see sharply greater investment, increasing from $340bn in 2022 to $600bn pa from 2026-30 (10% pa growth versus a historic rate of 5%pa) driven by energy security, economics and tightening building standards.

EV sales should exceed 16 million in 2024, representing around 20% of total passenger vehicle sales and coming in one year earlier than our long-held target of 20% EV penetration by 2025. Improved economics (lower lithium-ion battery prices in 2024) as well as better range and quicker charging times are the key drivers of improved EV sales. We expect the EV/ICE economic parity benchmark for EVs versus internal combustion engine vehicles (ICEs) of $100/kWh battery prices to come in 2027.

Solar remains the cheapest form of new electricity supply. We expect record low module prices at the end of 2023 to spur growth in all major geographies, with full-year global installations likely topping 500GW in 2024. China will still represent more than half of all installations with European and US solar demand set to rise to 70GW and 38GW respectively.

Global wind installations will grow in 2024 to a new record of 115GW, driven by policy support in China, Europe and the US. Beyond 2025 many of the current bottlenecks will dissipate, allowing installations to grow to around 170GW, a growth rate of 7% pa. Offshore installations are set to grow to 40GW by 2030, a 20% pa growth rate.

The outlook we summarise here is broadly consistent with current government activity and observable investment plans. To be clear, however, the growth described falls well short of the energy transition activity needed to achieve a net zero / 1.5 degree scenario in 2050, as targeted by the Intergovernmental Panel on Climate Change (IPCC) and reiterated at COP28. In a net zero scenario, the deployment of renewable generation capacity, penetration of EVs and battery storage, use of alternative fuels and implementation of energy efficiency measures will need to accelerate markedly.

At 31 December 2023, the Guinness Atkinson Alternative Energy Fund traded on a one year forward (2024) P/E ratio of 16.6x, around 13% lower than one year ago. Over the year, the fund’s one-year forward P/E fell from a premium to the MSCI World of 35% to a discount of 13% in October (the largest discount since March 2020) before closing the year at a discount of 6%.

The consensus earnings per share growth outlook for the Fund remains strong at 19.1% pa, forecast between 2023-2026, relative to the MSCI World at 8.4% pa – a premium of over 10% pa. Each sub sector within the Fund is also forecast to see growth in excess of the MSCI World Index. Current valuation multiples appear, therefore, to discount an earnings outcome that is far worse than that implied by current interest rates and inflationary conditions.

We expect further positive catalysts in the year ahead. The sector would be a beneficiary of looser monetary policy and lower inflation, while higher fossil fuel prices would further improve the relative economics of renewable technologies. In terms of policy, further clarity around IRA tax credits and actions related to the EU Net Zero Industrial Act will help to bring greater investment into the sector. We expect investor interest in sustainable energy equities to recover in 2024, reflecting these catalysts, and that the current attractive valuation level will act as a further catalyst. Beyond these, the continuing importance of energy security and the increased individual, social and government pressures for consumers to become more energy efficient and for producers to increase their share of sustainable energy generation will support further growth in the sector. We believe that the Guinness Atkinson Alternative Energy portfolio of 30 broadly equally weighted positions, chosen from our universe of around 250 companies, provides concentrated exposure to the theme at attractive valuation levels that are particularly attractive relative to consensus earnings growth expectations.

Will Riley and Jonathan Waghorn

January 2024

The Fund invests in foreign securities, which involves political, economic and currency risks, greater volatility, and differences in accounting methods. These risks are greater for emerging markets. The Fund’s focus on the energy sector to the exclusion of other sectors exposes the Fund to greater market risk and potential monetary losses than if the Fund’s assets were diversified among various sectors. The Fund invests in smaller companies, which involves additional risks such as limited liquidity and greater volatility.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay. This index is unmanaged, not available for investment and does not incur expenses.

PER or P/E – Price to Earnings ratio is calculated by dividing current price of the stock by the company's trailing months' earnings per share.

EV/EBITDA multiple - A ratio used to determine the value of a company.

EPS – Earnings per Share.

Please refer to the Schedule of Investments for details on Fund holdings. Current and future portfolio holdings are subject to risk.

The information provided herein represents the opinion of Guinness Atkinson Asset Management, Inc. for the period stated and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Opinions, Fund holdings and sector allocations are subject to change at any time, and are not recommendations to buy or sell any security.

Alternative Energy Fund

Growth of $10,000 (Unaudited)

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.gafunds.com.

Total returns for certain periods reflect a fee waiver in effect and in the absence of this waiver, the total returns would be lower. Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay.

FUND HIGHLIGHTS at December 31, 2023

GUINNESS ATKINSON ALTERNATIVE ENERGY FUND

GUINNESS ATKINSON ALTERNATIVE ENERGY FUND

Schedule of Investments

at December 31, 2023

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON ALTERNATIVE ENERGY FUND

Schedule of Investments

at December 31, 2023

PLC - Public Limited Company

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON ASIA FOCUS FUND

ANNUAL REPORT FOR THE PERIOD ENDED

DECEMBER 31, 2023

1.   Performance

(All performance data given in USD terms)

Gross 2.36% & Net 1.98%. The Adviser has contractually agreed to reduce its fees and/or pay Fund expenses in order to limit the Fund’s Total Annual Operating Expenses to 1.98% through June 30, 2026.

For the Fund’s current one-year expense ratios, please refer to the Financial Highlights section of this report.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gafunds.com, or calling (800) 915-6565.

In 2023, the Fund outperformed the benchmark by 2.95% with the Fund rising 5.95% versus the benchmark’s 3.00%.

The first half of the year was characterised by high interest rates and persistent inflation, fuelling fears of a looming recession. The US raised interest rates four times in the first seven months, peaking at 5.5%, the highest it has been in 22 years, and where it has remained. This put some US regional banks under pressure but ultimately, a systemic crisis was averted. By November, US inflation had fallen from its June 2022 peak of 9.1% to 3.2% and economic growth had proven to be surprisingly robust. Sentiment rose further as the market increasingly expected the Federal Reserve to pivot to a more dovish outlook with the possibility of a greater number of anticipated rate cuts in 2024 than had been expected.

Asian market returns in 2023 were dragged down by the performances of markets in China, Hong Kong and Thailand. China has faced a number of challenges this year, leading to low investor confidence and making it and Hong Kong some of the weakest markets in 2023. Despite a strong start to the year, led by a post-COVID valuation rerating, persistently weaker-than-expected macro data and global banking scares have led to a weak performance in China this year. Domestic demand has remained below forecasts and domestic policies are being focussed on sectors and industries that the government consider long-term competitive growth drivers, such as technology, specialty materials and healthcare, rather than sectors that absorb high quantities of resources with diminishing returns, notably the property sector.

The result has been akin to a perfect storm, but one we believe China can withstand. Slower external demand has hurt exports; declining property prices have undermined consumer confidence, already weakened by three long years of harsh Covid restrictions; the e-commerce companies are cutting costs and scaling back rather than absorbing large numbers of new graduates; and youth unemployment overall, is well above the national average. However, while investors are focusing on the here and now it is worth remembering that China is far from broken. The country is well capitalised, its banking system is liquid and stable, and the country is still generating net positive trade flows (i.e. a trade surplus). The country dominates in several of the key industries it has focused on (Solar, Wind, EVs, batteries, 5G telephony). To judge by the share of citations in leading academic journals from Chinese researchers (in subjects ranging from AI technology, Advanced communications, Advanced materials and manufacturing, Transportation, Sensing, Energy & Environment) there is the intellectual capital to back it up.

Taiwan and Korea were the strongest markets in the region despite them offering the biggest year on year earnings contraction for 2023. Investors were looking through these numbers, which has been reflected in 2022’s market returns, into 2024. Both markets are seen as being heavily influenced by the global outlook, especially in technology. The headlines have focused on AI, especially since NVIDIA shocked the market by the strength of demand for its chipsets and certainly, some of our stocks have benefitted from this. But there have also been other bright spots. Demand for Personal Computers is returning to growth after two years of contraction post the 2020 COVID spike and demand for flash memory is also staging a cyclical recovery to benefit of Korea’s major producers, and market heavyweights, Samsung Electronics and SK Hynix. The other area of strength has come from China and from consumer electronics customers ranging from smartphones to tablets and TVs.

All five of the Fund’s top five performers came from the Information Technology sector: Elite Material, Broadcom, Applied Materials, Largan Precision and Samsung Electronics. Four of our 5 weakest performers suffered from ongoing negative sentiment related to China’s outlook. These companies are JD.com, Wuxi Lead Intelligent Equipment and China Merchants Bank. The fifth was LG Household & Healthcare.

2.   Portfolio Changes

In 2023 we sold out of LG Household and Healthcare a South Korean company that sells cosmetics, household goods and beverages. The company counts Chinese tourists as a key customer demographic and has been challenged with weaker than expected demand as the post-COVID Chinese economy did not recover as quickly as markets had expected. As a result, margins compressed, and the company released disappointing results.

3.   Portfolio Position

The Fund’s major exposure is to China, accounting for 53% of the Fund. The other main exposures are 15% to Taiwan 9% to Korea and 7% to Australia. We also have 11% invested in US-listed companies that derive over 50% of their revenues from Asia.

The Chinese exposure reflects our views on the long-term structural growth that we see across diverse sectors. Our stocks here continue to be driven by long-term structural growth themes we have identified in China, giving a wider selection names than the typically benchmark-dominating e-commerce and technology companies.

4.   Outlook

2024 will be a busy year from an electoral perspective. In January, we will see Taiwan’s presidential elections, where investors will be interested in the winning candidate’s approach towards China. March brings the Russian presidential elections, where Vladimir Putin is expected to run again, a move that could ensure his continued leadership until 2030. In April, Narendra Modi will be aiming to win a third term in India, now the world’s most populous country and 5th largest economy by GDP. In the same month, South Korea will be holding elections for the National Assembly, their legislative body. This may well be a pivotal moment for President Yoon Suk Yeol as his party, the People Power Party, currently holds the minority in the National Assembly. The European Parliament elections will be held in June and of course, the US presidential election is due in November. Both the UK and South Africa have announced general elections in 2024 but at the time of writing this not, neither government have confirmed dates.

When it comes to China, the deep level of scepticism the market has shown through 2023 is evident. For the first time in 25 years, foreign direct investment into China turned negative with outflows of more than $140 billion of long-term investments in the first nine months of 2023. In the same vein, over 75% of foreign money invested into the Chinese stock markets from January to July had pulled out by the end of November. We believe that for China to become more attractive to investors, earnings estimates need to stabilise. Earnings forecasts for China are still stronger than those for developed markets. However, they have been scaled back, so while companies are still expected to generate good growth, the expected rate has been persistently lowered. Once earnings estimates stabilise, we think both domestic and foreign investors are likely to find China more attractive, which could begin a valuation rerating in addition to earnings growth.

Edmund Harriss 

January 2024

The Fund invests in foreign securities, which involves political, economic and currency risks, greater volatility, and differences in accounting methods. These risks are greater for emerging markets. The Fund is non-diversified, meaning that its assets may be concentrated in fewer individual holdings than diversified funds. Therefore, the Fund is more exposed to individual stock volatility than diversified funds. Investments focused in a single geographic region may be exposed to greater risk and more volatility than investments diversified among various geographies. The Fund invests in smaller companies, which involves additional risks such as limited liquidity and greater volatility.

The MSCI AC (All Country) Far East ex Japan Index is a free float-adjusted market capitalization-weighted index that is designed to measure equity market performance of the Far East, excluding Japan. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay. This index is unmanaged and is not available for investment, and does not incur expenses.

Please refer to the Schedule of Investments for details on Fund holdings. Current and future portfolio holdings are subject to risk.

The information provided herein represents the opinion of Guinness Atkinson Asset Management, Inc. for the period stated and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Opinions, Fund holdings and sector allocations are subject to change at any time, and are not recommendations to buy or sell any security.

Asia Focus Fund

Growth of $10,000 (Unaudited)

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.gafunds.com.

Total returns for certain periods reflect a fee waiver in effect and in the absence of this waiver, the total returns would be lower. Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares.

The MSCI All Country Far East Free ex-Japan Index (MSCI AC Far East Free ex-Japan Index) is a free float-adjusted, capitalization-weighted index that is designed to measure equity market performance of the Far East region excluding Japan. The index referenced in this chart is not available for investment and does not incur expenses. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay.

FUND HIGHLIGHTS at December 31, 2023

GUINNESS ATKINSON ASIA FOCUS FUND

GUINNESS ATKINSON ASIA FOCUS FUND

Schedule of Investments

at December 31, 2023

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON ASIA FOCUS FUND

Schedule of Investments

at December 31, 2023

ADR - American Depository Receipt

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON CHINA & HONG KONG FUND

ANNUAL REPORT FOR THE PERIOD ENDED

December 31, 2023

1.   PERFORMANCE

The Fund’s total expense ratio is 1.71%. For the Fund’s current one-year expense ratio, please refer to the Financial Highlights section of this report.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gafunds.com, or calling (800) 915-6565. The Fund imposes a 2.00% redemption fee on shares held less than 30 days. Performance data quoted does not reflect this fee. If it had, total return would be lower.

In 2023, the Fund fell 14.51% compared to the Hang Seng Composite Index which fell 10.69%. Therefore, the Fund underperformed by 3.82%.

The year started off strongly for China, with markets continuing their post-reopening rally in January led by a valuation rerating. However, this rally proved to be short-lived as global banking issues and China concerns took centre stage. China’s macro data was generally weaker than expected in 2023 with domestic demand remaining below forecasts. The government is trying to re-direct policy and capital toward sectors and industries which it sees underpinning long term competitive strength, growth and prosperity. Such areas include advanced manufacturing especially in sustainable areas such as energy, cars and transport as well as in areas including technology, specialty materials and healthcare.

This focus has come at the expense of sectors seen as absorbing high quantities of resources, capital and talent but which deliver diminishing returns or are less central to China’s longer-term goals of industry leadership. A decade ago, this was the heavy industry segment of the steel producers and aluminum smelters. Now it is the turn of the property sector. The government has made clear, with its adherence to the tight credit restrictions it has imposed on property developers, and with its unwillingness to bail out the companies or those that invested in or lent to them, that the era of debt fueled growth is over.

The situation in the technology sector is rather more nuanced. The regulators have clamped down on forays into the finance sector (electronic payments systems morphing into deposit taking and lending), on monopolistic behaviour (under the framework of an ‘eco-system’ that sets unfairly one-sided terms for inclusion) and in those areas seen to be potentially socially detrimental including online education (very high fees and doubtful quality) and video games. E-commerce as a commercial activity is not seen as a problem from a regulatory perspective beyond anti-competitive practices that may hurt merchants and consumers. In this case, these issues have emerged in a maturing industry as competition between large players (Alibaba, Tencent, JD.Com, Bytedance, Pindoduo, Meituan) and the regulatory framework is trying to keep up.

The result has been akin to a perfect storm, but one we believe China can withstand. Slower external demand has hurt exports; declining property prices have undermined consumer confidence, already weakened by three long years of harsh Covid restrictions; the e-commerce companies are cutting costs and scaling back rather than absorbing large numbers of new graduates; and youth unemployment overall, is well above the national average. However, while investors are focusing on the here and now it is worth remembering that China is far from broken. The country is well capitalised, its banking system is liquid and stable, and the country is still generating net positive trade flows (i.e. a trade surplus). The country dominates in several of the key industries it has focused on (solar, wind, EVs and batteries). To judge by the share of citations in leading academic journals from Chinese researchers (in subjects ranging from AI technology, advanced communications, advanced materials and manufacturing, transportation, sensing, energy & environment) there is the intellectual capital to back it up. In this context, the revelation that China can produce semiconductors to a 7-nanometre standard, albeit to a limited extent, seems less surprising.

Compared to the MSCI China Index, areas which aided the Fund’s performance year-to-date were:

Areas which detracted from the Fund’s performance year-to-date were:

2.   ACTIVITY

In 2023, we sold one position and bought one position.

We sold Shengyi Technology which makes copper clad laminates (CCLs) for printed circuit boards (PCBs). Given weaker global demand for consumer technology, the earnings outlook for the business had deteriorated. On a total return basis, the prospects for TravelSky were more attractive.

We bought TravelSky, which provides services used for flight bookings such as ticket pricing, reservation and inventory systems and airport passenger processing. It also operates a centralised settlement service between airlines and travel agents. Now that China has moved on from its zero-covid policy, we are expecting a large rebound in both outbound and inbound tourism, which is likely to bode well for TravelSky.

3.   OUTLOOK

From an investment perspective, we remind readers that returns can be broken down into three components: changes in valuation multiples, earnings growth and dividends. Below we break down each component to argue why investors should be allocating to China and specifically, the Fund.

(Data from 31/12/08 to 12/31/23, source: Bloomberg, Guinness Atkinson calculations. Calculations assume an equally weighted portfolio)

The chart above shows the historic forward year price/earnings ratio, in aggregate, for the current holdings in the Fund. While we normally show the past 10 years of history, we now show the past 15 years to get a longer look at the historic valuations of our holdings. This must be viewed with one caveat, however – not all of our holdings were listed in 2008, and of those that that were, some did not have analyst coverage. With this in mind, it is clear that the Fund’s holdings, which trade at a forward price/earnings ratio of 11.7x, are trading at close to two standard deviations below their 15-year average. This is despite the fact the Fund has minimal exposure to the areas that investors are most cautious on China - real estate and the banks. Our holdings’ valuations are being dragged down by the “China” discount, despite their strong track record of earnings growth across various economic environments.

(Source: Bloomberg, MSCI, Guinness Atkinson calculations. Data as of 31/12/2023. Earnings in USD. Fund series assumes $1m equally weighted into current holdings. Data for the Fund is a simulation based on actual, aggregate, historic data for the Funds’ current holdings. Index data uses historic holdings as of the end of each year)

In the long-term, we believe it is earnings growth which is likely to deliver returns for shareholders. Over the past decade, our holdings in aggregate have grown earnings by 8% a year. This compares favourably to the MSCI China Index, where earnings have actually contracted by 1% a year over the past decade. Based on consensus analyst estimates, we believe the Fund’s holdings in aggregate could grow earnings by 23% in 2023, 16% in 2024 and 14% in 2025. For context, the MSCI World Index is expected to grow earnings by 1% in 2023, 9% in 2024 and 10% in 2025. Therefore, despite the negative headlines on China, our companies are actually expected to grow earnings at a rate far higher than developed markets. At current valuations, we consider the Fund represents outstanding value to investors for the growth on offer. We argue that in summary, the risk-reward ratio for our high quality, compounding companies, looks very favourable for investors.

We believe that for China to become more attractive to investors, earnings estimates need to stabilise. Earnings forecasts for China are still stronger than those for developed markets, but they have been scaled back, so while companies are still expected to generate good growth, the expected rate has been persistently lowered. Once earnings estimates stabilise, we think both domestic and foreign investors are likely to find China more attractive, which could begin a valuation rerating in addition to earnings growth.

What could stabilise earnings estimates? Given the size of the real estate sector to the economy, its slump is strong enough to offset the growth in China’s future pillar industries, which though are growing quickly, are not yet large enough to power overall economic growth. During this transition period, stimulus from the government is needed. Next year we can see the government cutting interest rates slightly and further lowering the required reserve ratio. But we argue loose monetary policy is a blunt tool. The economy is facing a negative wealth effect from falling property prices and even if credit becomes cheaper, often demand is the problem, not supply.

To address this issue, fiscal stimulus is likelier a better tool but even here there are constraints. Some local governments have high levels of debt and are facing issues servicing debt given their revenue shortfalls. Income from land sales makes up ~50% of local government revenue and since land sales are weak, local government revenues are under significant strain. So the central government will have to take on the brunt of fiscal easing. Here, we see signs the government may agree. In October, the government increased the official fiscal deficit from 3.0% to 3.8% of GDP, allowing it to issue RMB 1 trn in central government bonds, the proceeds of which will be spent on infrastructure in areas with recent natural disasters. With more government spending, which can come in various forms, the stimulus can better offset the weakness from property.

Edmund Harriss

Sharukh Malik

January 2024

The Fund invests in foreign securities, which involve political, economic and currency risks, greater volatility, and differences in accounting methods. These risks are greater for emerging markets. The China and/or Hong Kong stock markets in which the Fund invests may experience periods of volatility and instability. These fluctuations may cause a security to be worth less than it was at the time of purchase. Market risk applies to individual securities, a particular sector or the entire economy. China and/or Hong Kong stocks may fall out of favor with investors, the value of Chinese currencies may decline relative to the U.S. dollar and/or China or Hong Kong stock markets may decline generally. The Fund invests in invest in small-cap or mid-cap, which involve additional risks such as limited liquidity and greater volatility, than investments in larger companies.

The Hang Seng Composite Index is a market capitalization weighted index that covers about 95% of the total market capitalization of companies listed on the main board of the Hong Kong Stock Exchange. This index is unmanaged, not available for investment and does not incur expenses.

The MSCI China Index captures large and mid-cap representation covering about 85% of this China equity universe. This index is unmanaged and is not available for investment, and does not incur expenses.

The Caixin PMI measures the performance of the manufacturing sector and is derived from a survey of more private companies.

The NBS PMI measures the performance of the manufacturing sector and is derived from a survey of state companies.

Earnings Growth - The actual or expected increase in profits over two comparable periods of time.

Price/Earnings Ratio – the ratio of a company's share (stock) price to the company's earnings per share. 

Please refer to the Schedule of Investments for details on Fund holdings. Current and future portfolio holdings are subject to risk.

The information provided herein represents the opinion of Guinness Atkinson Asset Management, Inc. for the period stated and it is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Opinions, Fund holdings and sector allocations are subject to change at any time, and are not recommendations to buy or sell any security.

Compound annual growth rate (CAGR) refers to the compound annual growth rate between two periods.

China & Hong Kong Fund

Growth of $10,000 (Unaudited)

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.gafunds.com.

Total returns for certain periods reflect a fee waiver in effect and in the absence of this waiver, the total returns would be lower. Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares.

The Hang Seng Composite Index is a market-capitalization weighted index that comprises the top 200 companies listed on the Hong Kong Stock Exchange, based on the average market capitalization for the past twelve months. The index referenced in this chart is not available for investment and does not incur expenses. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay.

FUND HIGHLIGHTS at December 31, 2023

GUINNESS ATKINSON CHINA & HONG KONG FUND

GUINNESS ATKINSON CHINA & HONG KONG FUND

Schedule of Investments

at December 31, 2023

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON CHINA & HONG KONG FUND

Schedule of Investments

at December 31, 2023

ADR - American Depository Receipt

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON GLOBAL ENERGY FUND

ANNUAL REPORT FOR THE PERIOD ENDED

DECEMBER 31, 2023

1.   Performance

Gross 1.91% & Net 1.46%. The Adviser has contractually agreed to reduce its fees and/or pay Fund expenses in order to limit the Fund’s Total Annual Operating Expenses to 1.45% through June 30, 2026.

For the Fund’s current one-year expense ratio, please refer to the Financial Highlights section of this report.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gafunds.com, or calling (800) 915-6565.

Given the weaker oil and gas price environment versus the previous year, plus strength in other equity sectors, 2023 resulted in underperformance for energy equities. A quick tour of some of the main energy sub-sectors paints a picture for the overall performance of energy equities in 2023:

Generally, companies in the fund that underperformed over the year were those with greatest operational leverage to declining oil and gas prices. Two of our US shale oil-biased E&P companies (Devon Energy Corp -22%; EOG Resources -2%) were amongst the weaker performers for this reason. Devon also saw weaker operational performance. Amongst our US E&P holdings, Pioneer Natural Resources (+5%) bucked the trend, thanks to its proposed acquisition by Exxon.

European mid caps were mixed, with OMV (-4%) and Equinor (flat) having the highest leverage to falling international gas prices. By contrast, ENI (+27%) and Galp (+15%) were outperformers.

We saw relative strength from our Canadian holdings, in particular Imperial Oil (+21%) and Canadian Natural Resources (+23%). Canadian oil benchmarks (Western Canadian Select) started 2023 at an unusually wide discount to US benchmarks (WTI), with the gap closing somewhat over the year as demand for heavier Canadian crude improved.

Larger European integrateds (BP +8%; Shell +21%) also outperformed, with the market warming to both companies announcing greater focus on oil and gas production when compared to long-term plans previously announced. The European majors also enjoyed 10-15% dividend increases, whilst maintaining very high dividend cover.

China was also a stronger area, with Petrochina shares up 57% over the period. Petrochina benefitted from both the fall in oil prices, which boosted the company’s refining profits, and the fall in natural gas prices, which improved midstream earnings (Petrochina had been importing Russian gas at a loss).

2.   PORTFOLIO POSITION

The sector and geographic weightings of the portfolio at 31 December 2023 were as follows:

3.   MARKET BACKGROUND

The year of 2023 saw strong global oil demand growth, particularly from areas of the market still recovering from COVID (China; aviation). Demand growth was matched by a robust supply response, with Russia continuing to divert its oil to the east, and Iran raising production to a four-year high. Oil prices were fairly quiet, trading mainly around $75-85/bl, a level which coincides with the long-term incentive price and the ‘floor’ which Saudi are seeking. Natural gas prices have somewhat normalized after the extraordinary highs of 2022, helped by warmer weather and price-induced switching to other fuels. Oil and gas equities underperformed the broader market in 2023, despite rising dividends.

The Brent oil price started the year at $80/bl and, with a slight loosening in inventories in January and February, fell towards $70/bl. The announcement in early April of an OPEC+ quota cut resulted in a brief rebound, but for much of the early summer, Brent continued to trade in the $70s. On the one hand, the demand story looked robust through this period, with the International Energy Agency (IEA) posting several upgrades to its global demand forecast for 2023. Set against this, stronger-than-expected production from Russia, Iran and the US kept a lid on price. Further production cuts from Saudi and Russia in late summer pushed the price above $90/bl, a level that supported through October by the threat of great supply disruption stemming from the Israel/Hamas conflict. Towards the end of the year, however, the Brent oil price settled back in the $70s, as the market in the short term looked well supplied.

Brent oil price: spot vs five year forward ($/bl)

Source: Bloomberg; Guinness Atkinson Asset Management. Data to 31.12.2023

Global oil demand in 2023 was forecasted last January by the IEA to be up 1.7m b/day versus 2022, putting demand around 1m b/day ahead of its previous peak in 2019. Today, the forecast for 2023 demand growth has been upgraded to 2.2m b/day, a function of normalizing economic activity in China after COVID, underestimated strength in Russian and African consumption, and a continued recovery from the aviation sector globally. Against these factors, European demand was downgraded by 0.3m b/day, as slow economic growth and greater energy efficiency filtered through.

Despite the upgrades to demand, OPEC+ opted in April to reduce its production quotas by 1.2m b/day, effective for the rest of the year. The group’s actions were supplemented by a further unliteral cut announced by Saudi in early June of 1m b/day, then additional cuts announced by various OPEC+ members at the end of November. OPEC+’s actions appeared to be defending a Brent oil price of $80/bl+, though Saudi tend not be explicit in their messaging.

How to explain the apparent disconnect, then, between rising demand forecasts and deeper OPEC+ cuts? The answer appears to lie with stronger production from certain OPEC+ members operating under sanctions, plus some non-OPEC suppliers. At the start of the year, Russian oil supply was expected to fall by 0.8m b/day in 2023 as G7 sanctions in relation to the invasion of Ukraine started to bite. The reality has been quite different, with most Russian oil being diverted to Eastern consumers, albeit under a price cap. Production from Iran has also been strong, reported for November to be running at around 3.3m b/day, up from 2.6m b/day in January.

As expected, there has also been reasonable growth in supply from US shale oil, which looks to be up by around 0.7m b/day since the start of the year. Production in the US was assisted by small improvements in drilling productivity. We have also seen continued reliance on wells that were previously drilled but left uncompleted (DUCs), which have formed a meaningful proportion of completed wells this year.

Elsewhere in the non-OPEC world, there has been growth from Brazil (0.3m b/day), as six offshore production vessels in the Santos Basin that started production in 2022 ramped up towards full capacity. Production from Guyana (+0.1m b/day) also moved higher. Together, the US, Brazil and Guyana are thought to account for over 85% of non-OPEC growth in 2023.

For natural gas, the year started with prices outside the US near record highs, driven by the limiting of flows of Russian gas into Europe after the Russian invasion of Ukraine. Europe had spent several months having to outbid other parts of the world for marginal LNG cargoes to ensure that gas in storage was sufficient through the winter. The last twelve months have seen a reversal, with European and Asian prices dropping to the $10-15/mcf range, still c.50-100% above pricing before COVID, but welcome relief when compared to peak prices at $40-50/mcf+. The turnaround can be explained by an unseasonably warm 2022/23 winter, particularly in Europe, which dampened heating demand for gas, and a concerted effort to swap gas for cheaper substitutes, such as gasoil. A normalizing of the supply/demand balance for gas in international markets helped to lower US natural gas prices, which dropped from $4.50/mcf in January to $2.51/mcf by the end of December.

Global natural gas prices (US$/mcf)

Source: Bloomberg; Guinness Atkinson Asset Management

4.   OUTLOOK

After several years of COVID-related disruption, 2024 brings more normalized conditions to oil markets. Global oil demand growth of around 1m b/day will be met by a combination of US shale, Guyana, Brazil and Canada, meaning that OPEC production is unlikely to grow meaningfully. We believe the oil price desired by OPEC is at around $80/bl, though they will accept a higher outcome if it does not destabilise the global economy. By contrast, we see energy equities currently reflecting a long-term oil price of around $65/bl, implying good valuation upside.

The path for oil demand will be less affected COVID than last year, as COVID-related distortions fade. The IEA estimate demand growth of 1.1m b/day (to 102.8m b/day) with the non-OECD up by 1.3m b/day and the OECD down by 0.2m b/day. China is expected to deliver the largest oil demand growth of 0.8m b/day, with India in distant second. Even with electric vehicles approaching 20% sales penetration this year, we continue to see global oil demand growing until around 2030, reaching a peak of somewhere between 105-110m b/day.

OPEC continues to signal a high degree of flexibility in 2024 to adjust their production, thereby attempting to put a ‘soft’ floor under oil prices should the supply/demand balance falter. We believe the oil price desired by OPEC is at around $80/bl, though they will accept a higher outcome if it does not destabilise the global economy.

We expect slower growth from US shale production, with average production by around 0.4m b/day versus 2023. Improving capital efficiency continues to be promoted over growth by shale oil producers. Non-OPEC (ex US shale) supply will move moderately higher in 2024, led by Brazil, Guyana and Canada.

For natural gas, an international price range of $10-14/mcf should be sufficient to incentivise new US and Qatari LNG supply sources to come online from 2025. It would also allow Europe to displace permanently almost all its Russian gas imports. An international gas price in the $10-14/mcf is well down on the highs seen in 2022, but would leave the market at around a 50% higher price point than that seen in the few years prior to COVID and the Russian invasion of Ukraine.

Despite the strength of the energy sector in 2022, energy equity valuations remain attractive. The MSCI World Energy Index now trades on a price to book ratio of 1.7x, versus the S&P500 at 4.5x. The relative P/B of energy vs the S&P500 remains more than two standard deviations below the long-term relationship.

Most oil and gas companies continue to promote capital discipline over organic growth, manifested in lower levels of debt and a return of free cash to shareholders. Assuming a $80/bl Brent oil price, we forecast an average free cashflow yield for our portfolio in 2024 of around 11%.

Energy equities offer good upside if our oil price, profitability and free cashflow scenarios play out. We believe energy equities currently discount an oil price of around $65/bl. Adopting $80/bl Brent as a long-term oil price (consistent with the bottom end of OPEC’s desired range), we see 30-35% upside across the energy complex.

Fund Investment Team

The Fund invests in foreign securities, which involve political, economic, currency risks, greater volatility, and differences in accounting methods. These risks are greater for emerging markets. The Fund is non-diversified, meaning that its assets may be invested in fewer individual holdings than diversified funds. Therefore, the Fund is more exposed to individual stock volatility than diversified funds. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility. The Fund’s focus on the energy sector to the exclusion of other sectors exposes the Fund to greater market risk and potential monetary losses than if the Fund’s assets were diversified among various sectors.

The MSCI World Energy Index is an unmanaged index composed of more than 1,400 stocks listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand and the Far East. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay. This index is unmanaged and is not available for investment, and do not incur expenses.

MCF is an abbreviation denoting a thousand cubic feet of natural gas.

Price to Book Ratio (P/B Ratio) a ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.

P/E – Price to Earnings ratio is calculated by dividing current price of the stock by the company’s trailing months’ earnings per share.

Please refer to the Schedule of Investments for details on Fund holdings. Current and future portfolio holdings are subject to risk.

The information provided herein represents the opinion of Guinness Atkinson Asset Management, Inc. for the period stated and it is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Opinions, Fund holdings and sector allocations are subject to change at any time, and are not recommendations to buy or sell any security.

Global Energy Fund

Growth of $10,000 (Unaudited)

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.gafunds.com.

Total returns for certain periods reflect a fee waiver in effect and in the absence of this waiver, the total returns would be lower. Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares.

The MSCI World Energy Index is an unmanaged index composed of more than 1,400 stocks listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand and the Far East. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay. This index is unmanaged and is not available for investment, and do not incur expenses.

FUND HIGHLIGHTS at December 31, 2023

GUINNESS ATKINSON GLOBAL ENERGY FUND

GUINNESS ATKINSON GLOBAL ENERGY FUND

Schedule of Investments

at December 31, 2023

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON GLOBAL ENERGY FUND

Schedule of Investments

at December 31, 2023

PLC - Public Limited Company

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON GLOBAL INNOVATORS FUND

ANNUAL REPORT FOR THE PERIOD ENDED

December 31, 2023

Fund performance (Total Return in USD). Bloomberg and Guinness Atkinson Asset Management

*Institutional Class shares commenced on December 31, 2015. The performance figures for the Institutional Class shares include the performance of Investor Class shares for the period prior to the inception date of the Institutional Class shares.

Investor Class Gross 1.27% & Net 1.24%; Institutional Class Gross 1.10% & Net 0.99%. The Adviser has contractually agreed to reduce its fees and/or pay Fund expenses in order to limit the Fund’s Total Annual Operating Expenses for Investor Class and for Institutional Class shares to 1.24% and 0.99% through June 30, 2026.

For the Fund’s current one-year expense ratios, please refer to the Financial Highlights section of this report.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gafunds.com, or calling (800) 915-6565.

Summary

Over the year of 2023, the investor class shares of the Guinness Atkinson Global Innovators Fund produced a total return of 39.34% (in USD) vs the MSCI World Index net total return of 23.79% (in USD). The fund therefore outperformed the benchmark by 15.55%.

Performance

2023 can be split into a number of distinct performance periods, each with different drivers and leaders from both a style and sector perspective.

Source: MSCI, Guinness Atkinson Asset Management, Bloomberg, as of 31^st December 2023

(1) – Recovery Rally

Many of the key market concerns from 2022 abated (inflation, China’s Covid policy, recessionary risks and an energy crisis) during the period, with renewed hope of a soft-landing. As risk-on sentiment returned, the more cyclically orientated sectors that underperformed in 2022, outperformed. Paired with a market view of an earlier pivot towards looser monetary policy, this drove the outperformance of ‘growth’ during the period. This rotation towards growth and cyclicals was a positive for Fund performance, relative to the benchmark.

(2) – Market Reversal And Banking Crises

The market reversed course in early February. Employment and inflation data came in surprisingly ‘hot’ in the US and Europe, and Federal Reserve (Fed) Chair Jay Powell followed with hawkish rhetoric over the future path of interest rates. The collapse of Silicon Valley Bank in early March initially spurred a sharp sell-off, as fears of financial contagion grew. A strong policy response from regulators restored a level of calm back into equity markets, which rebounded over the subsequent weeks. The crises led to a tightening of credit conditions, typically a headwind for economic growth, driving a rotation towards higher quality companies with strong balance sheets and margins. However, tighter credit conditions were also expected to play a part in reducing inflation, supporting growth stocks as expectations of an earlier ‘pivot’ surfaced once again. Despite the outperformance of growth over the period, the Fund only performed in-line with the MSCI World, with weakness in the Fund’s largest overweight industry (semiconductors) in the latter half of the period a key detractor to performance, as well as off-benchmark name Anta Sports also falling significantly.

(3) AI Driven Growth Rally

Despite rising interest rate expectations, growth outperformed as a narrow selection stocks exposed to Artificial Intelligence (the Magnificent Seven), led the index higher. Renewed enthusiasm over AI was driven by the launch of Chat GPT earlier in the year, which had captured the imagination of consumers, media and businesses alike, and catalysed management teams to investigate the best way to incorporate the technology into their revenue streams, business models and operations. Investment into Artificial Intelligence was not just evident in company earnings calls, but in company fundamentals too. Nvidia added $184bn to their market cap on the day following their Q1 earnings, as the firm guided for revenues over 50% higher than the $7bn estimated by analysts. Soaring demand for chips required for generative AI purposes was clearly much greater than the market expected, creating a tailwind for AI-exposed stocks in particular. Whilst the market rally broadened to other areas of the market in the first month of Q3, momentum in equity markets continued on the improved prospects of a ‘soft landing’. Exposure to six of the ‘Magnificent Seven, alongside significant overweight positions to industries, which were likely to benefit most from renewed Artificial Intelligence enthusiasm such as Semiconductors and Software, drove strong relative Fund performance. Having higher exposure to ‘cyclically’ orientated sectors benefitted the fund, whilst having limited exposure to ‘defensives’ such as staples, utilities and energy was also a tailwind.

(4) – Higher For Longer Rate Expectations

The strong equity performance seen in the prior periods faltered over the latter two months of Q3, with consecutive months of equity declines (in USD terms). Over the period, the 10 year US treasury yield rose to 5.0%, levels not seen since 2007. The core driver was expectations of higher-for-longer interest rates. This was supported by the Federal Reserve’s September dot plot, which indicated just two rate cuts in 2024 from the four rate cuts estimated in the committee’s June meeting. The increase in yields not only enticed investors away from equities, but created a headwind for ‘high-duration’ growth stocks in particular – both the high dividend yield sectors such as Utilities, and companies with valuation linked to higher future growth in the Information Technology sector. With rising yields placing pressure on growth stocks in particular, the Fund slightly underperformed over the period. Defensives also outperformed, as markets began to price in higher for longer rates and an increasing view that the fed would need to implement rates hikes and bring the economy into recession – also a headwind to relative Fund performance over the period.

(5) – Interest Rate Cut Hopes

Equity markets rapidly rebounded in November, as equities posted their strongest monthly returns in 3 years (in USD terms). This momentum continued into December, as the improving prospect of a ‘goldilocks’ scenario of falling inflation and a growing economy lifted both valuations and earnings expectations higher. The Federal Reserve held rates flat for a second and then a third consecutive meeting and minutes reflected dual concerns about higher-than expected inflation, and for the first time, the impact interest rates may have on economic growth. Markets focused on the latter, giving fuel to hopes of earlier-than-expected interest rate cuts. At the end of the year, markets were pricing in c. six rate cuts by the end of 2024, compared to the c. three priced in at the beginning of November. The resulting bond rally and the broad downward shift in treasury yields across US maturities served to lift equity valuations higher. Third quarter earnings season saw an acceleration in earnings growth for the S&P 500 for the first time in 2 years (and a return to positive growth of 4.1% for the first time in a year), surprising to the upside by +7.8% - the largest surprise in 2 years. A strong earnings season and improved macro-outlook drove broad earnings upgrades across sectors, with a risk-on appetite driving the outperformance of cyclically orientated stocks. As interest rate expectations reversed and the prospect of a ‘goldilocks’ scenario increased, all equities were driven higher, with cyclicals and growth leading the way, a benefit for the Fund. Positive earnings revisions, particularly within the tech sector/ semiconductor industry, served as a tailwind for relative Fund outperformance.

Over 2023, fund performance relative to the MSCI World Net TR Index can be attributed to a number of factors:

Activity

As part of our one-in-one-out process, we sold one position and initiated one new position over the course of 2023, leaving the portfolio with 30 positions at the end of the year. This switch occurred during Q3.

Buy - Novo Nordisk - Novo Nordisk is an innovative industry leader characterised by high Research & Development to sales expense and world class product innovation, driving sector beating cash returns. The firm have shown strong momentum in recent quarters, with weight loss drug Wegovy exhibiting positive early results and looks set to be a meaningful growth driver for the business going forward. Additionally, they are showing a broadening out of strength from the rest of the portfolio, particularly in Cardio Vascular which has a much wider addressable market. The firm’s has a very strong mix of both quality and growth characteristics, paired with a number of long term secular drivers – characteristics we look for within the Fund strategy.

Sell - Bristol Myers Squibb - Our sell decision was based on a view of a weakened outlook. In Q2 2023, management downgraded guidance for FY2023, previously seeing 2% topline growth and now seeing low single digit declines, primarily due to generic competition from biosimilars which hurt demand for its myeloma therapy, Revlimid. There are additional headwinds on the horizon, with BMS patents expiring on drugs such as Opdivo, a cancer drug, and Eliquis, a blood thinner. We therefore felt that Novo Nordisk presented a better opportunity, offering superior growth and quality characteristics that we seek.

Outlook

The Guinness Global Innovators fund seeks to invest in high-quality, innovative growth companies trading at reasonable valuations. By doing so, we seek to invest in companies that are experiencing faster profit growth, larger margins and with less susceptibility to cyclical pressures.

During the year, the Fund benefitted from a number of tailwinds, including a rotation back towards ‘growth’ over ‘value’, greater ‘risk-on’ sentiment driving the outperformance of ‘cyclicals’ vs ‘defensives’, alongside developments in Artificial Intelligence – one of the nine key innovation themes in which the Fund has significant exposure to. Whilst we would expect the Fund to outperform in such an environment, we are pleased with the magnitude of outperformance over the year, with returns not just ahead of the MSCI World Index, but the MSCI World Growth index too. What is particularly pleasing, however, is the Fund’s longer term performance. Our focus on quality growth-at-a-reasonable-price has helped the Fund in more difficult market environments, not only benefitting from businesses who are able to withstand more difficult demand periods with strong balance sheets and higher margins, but also avoiding the volatile non-profitable tech businesses that have swung between large rises and falls, and often underperforming over longer time frames.

In addition, the Fund has good exposure to the long term secular trend that it Artificial Intelligence, investing in a number of the leading enablers and integrators within the space, and this has been the key driver of performance over 2023. However, the Fund is diversified across a number of other long term secular themes, that we believe should benefit from continued growth prospects with less sensitivity to the broader economic cycle. In our view, a diversified approach helps protect the Fund against the boom/bust cycles that a single theme (such as AI) may experience, reducing volatility of returns whilst also capturing the long term growth trends that these companies are exposed to. Whilst we identify companies with exposure to a number of themes that are driving growth, disrupting incumbent business models or technology, or significantly improving current products or services, our focus is on high quality businesses with strong fundamental characteristics, rather than those at the more speculative end of the spectrum.

The table below illustrates how the portfolio at year-end reflects the four key tenets of our approach: growth, quality, value, and conviction. The Fund has superior growth characteristics to the broader market, with both a higher trailing revenue growth rate, alongside higher estimated growth over 2024 (vs 2023). Fund holdings, on average, offer higher quality attributes than the broader index, with a significantly greater Return on Capital and more robust balance sheets. The fund currently trades at a 28.2% premium to the benchmark on a 1 year forward P/E basis which we believe is a small price to pay for this attractive set of characteristics.

Portfolio metrics versus MSCI World Index

Source: Guinness Atkinson Asset Management, Bloomberg, as of 31st December 2023

Over the course of 2023, many of the key concerns held by the market at the start of the year had largely abated, and the outlook is certainly more positive than it may have looked a year ago. Economic growth in the US has proven far stronger than expected, propped up by resilient consumer spending and strong jobs numbers, and recessionary risks appear to have faded significantly. At the same time, inflation has continued to trend towards targeted levels, more than halving at the headline level over 2023 in the US (3.1% for November 2023), and the Fed’s preferred measure, Core Personal Consumption Expenditure (PCE), dropping to 3.2% in November (year-on-year seasonally adjusted figure) vs 4.9% at the beginning of the year. It appears that the Federal Reserve has greatly improved the chances of achieving a ‘goldilocks’ scenario - both taming inflation and avoiding a recession, and ultimately bringing the economy into a soft-landing, with positive (albeit low) economic growth now appearing to be the most likely outcome. Having held rates constant for three consecutive meetings and inflation continuing to return to target levels, interest rate cuts appear very likely during 2024, which should act as a tailwind for equities.

Whilst there is much to be positive about with respect to the outlook, we do not expect these positive trends to translate into a strong cyclical upswing in growth but a moderate demand environment, and we are certainly aware of a number of risks: the market had already priced in six interest rate cuts at the beginning of the year over the course of 2024, with the downside risk to equities being any number of rate-cuts less than this; equity market valuations remain ahead of long-run averages, and a correction may yet occur; even if inflation continues to fall and rates are cut as expected (neither of these are a given), if this is driven by substantially lower economic growth (i.e. a recession is not yet avoided), this has the potential to weigh on equity performance. Whilst these situations would not necessarily be our ‘base case’ scenario, we are certainly cognisant of the risk they may pose.

We believe there is a good argument for high quality stocks with exposure to long term secular growth themes in this current market environment, as these companies should continue to be able to grow even in a lower growth environment, whilst being protected by better fundamental characteristics in terms of margins and balance sheets but also performing well during cyclical upswings. We are confident that the Fund’s focus on high quality growth stocks, underpinned by structural changes stands us in good stead going forward. Our bottom up approach helps to identify these quality growth companies, whilst also maintaining a valuation discipline. In addition, our equally weighted positions limit over-reliance on any single company. We continue to focus on these key tenets in the Fund and remain confident of this process over the long term.

The Fund invests in foreign securities, which involve political, economic and currency risks, greater volatility, and differences in accounting methods. These risks are greater for emerging markets. The Fund is non-diversified, meaning that its assets may be invested in fewer individual holdings than diversified funds. Therefore, the Fund is more exposed to individual stock volatility than diversified funds. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility.

The approach of the Fund is not to provide access to the most innovative companies in the world but rather to look at companies using the ‘prism’ of innovation to highlight those we think might be winners in the future - and then only buy them if they are offering reasonable value compared to those future expectations. We are firm believers that innovative companies may outperform in the future and that a value discipline to stock selection has the potential to add to that performance.

The MSCI World Index (Net Return) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay. The NASDAQ Composite Index is a market capitalization-weighted index that is designed to represent the performance of the National Market System, which includes over 5,000 stocks traded only over-the-counter and not on an exchange. These indices are unmanaged and are not available for investment, and do not incur expenses.

Core PCE stands for ‘Core Personal Consumption Expenditures’, a measure of inflation in the United States. It is a variant of the Personal Consumption Expenditures (PCE) price index, which is a more comprehensive measure of the prices paid by consumers for goods and services. The "core" PCE excludes the volatile food and energy components from the calculation, aiming to provide a more stable and underlying measure of inflation trends.

Please refer to the Schedule of Investments for details on Fund holdings. Current and future portfolio holdings are subject to risk.

The information provided herein represents the opinion of Guinness Atkinson Asset Management, Inc. for the period stated and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Opinions, Fund holdings and sector allocations are subject to change at any time, and are not recommendations to buy or sell any security.

Global Innovators Fund

Growth of $10,000 (Unaudited)

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.gafunds.com.

The performance graph above is shown for the Fund's Investor Class shares; Institutional Class shares performance may vary.

Total returns for certain periods reflect a fee waiver in effect and in the absence of this waiver, the total returns would be lower. Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares.

The MSCI World Index (Net Return) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net Return reflects deduction for withholding tax but reflects no deduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay. The NASDAQ Composite Index is a market capitalization weighted index that is designed to represent the performance of the National Market System which includes over 5,000 stocks traded only over-the-counter and not on an exchange. The indices referenced in this chart are not available for investment and do not incur expenses.

FUND HIGHLIGHTS at December 31, 2023

GUINNESS ATKINSON GLOBAL INNOVATORS FUND

GUINNESS ATKINSON GLOBAL INNOVATORS FUND

Schedule of Investments

at December 31, 2023

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON GLOBAL INNOVATORS FUND

Schedule of Investments

at December 31, 2023

ADR - American Depository Receipt

PLC - Public Limited Company

The accompanying notes are an integral part of these financial statements. 

GUINNESS ATKINSON RENMINBI YUAN & BOND FUND

ANNUAL REPORT FOR THE PERIOD ENDED

DECEMBER 31, 2023

1.   Performance

* Net change in exchange rate versus U.S. dollar.

Gross 2.70% & Net 0.90%. The Adviser has contractually agreed to reduce its fees and/or pay Fund expenses in order to limit the Fund’s Total Annual Operating Expenses to 0.90% through June 30, 2026.

For the Fund’s current one-year expense ratios, please refer to the Financial Highlights section of this report.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gafunds.com, or calling (800) 915-6565. The Fund imposes a 2.00% redemption fee on shares held less than 30 days. Performance data quoted does not reflect this fee. If it had, total return would be lower.

In 2023 the Fund fell -0.09% compared to the Hang Seng Markit iBoxx Offshore RMB Overall Total Return Index which rose 0.50% in USD terms and the Offshore Renminbi (CNH) which fell -2.86% against the dollar.

Despite opening the review period on a positive, economic activity in China showed further signs of slowing in the first half of the year, particularly in the manufacturing, industrial and labour sectors, and the property market stuttered. Foreign Direct Investment also softened, expanding 0.1% year on year (yoy) in the first five months. China’s official manufacturing Purchasing Managers Index (PMI) did, however, improve in June, although still in contraction, while services expanded less than expected, and the June Caixin China General Manufacturing PMI came in stronger than expected, at 50.5 (a reading above 50 denotes expansion and below 50, contraction).

The second half of the year began more positively underpinned by monetary policy easing across key rates and improving geopolitical pressures. Moreover, a series of government stimulus measures to prop the property market, domestic consumption and the private sector resulted in an uplift in confidence. Furthermore, President Xi Jinping’s willingness to embrace private enterprise, was another sign of encouragement for foreign investors. Economic growth estimates also surprised to the upside, however, sentiment turned more mixed as key data was broadly subdued, and deflationary pressures began to mount. China’s National Bureau noted that the nation needs to achieve 4.4%economic growth of 4.4% in the last quarter to hit targeted growth, however, noted “that the external environment is becoming more complex and severe, domestic demand is still insufficient, and the foundation for economic recovery still needs to be consolidated”.

China exhibited a more active and strategic approach to managing its key risks, both domestically and internationally last month.  Positive progress was being made in international relations. In a marked shift in rhetoric, US President Biden and Chinese President Xi met at the Asia Pacific Economic Cooperation APEC, forum committing to restabilise their relationship. They agreed to reopen military communication channels, co-operate to address the US fentanyl crisis, and establish a framework for discussing AI. Then at a summit, which marked the first in-person meeting between China and EU officials in four years, Xi emphasised China's commitment to high-quality development and high-level openness, and its willingness to regard the EU as a strategic partner in economic and trade cooperation. He further stated that China seeks to forge a trusted partnership with the EU in industrial and supply chain cooperation, aiming to achieve mutual benefit and win-win outcomes.

Domestically, Beijing unleashed fresh fiscal stimulus to boost economic recovery. Reuters reported that some government advisers are recommending China lifts its 2024 budget deficit target beyond the 3% GDP. With private sector soft and consumer-led demand not as strong as hoped, longer-term reforms are required to ensure sustainable expansion. Around CNY1tn (just under USD140bn) of sovereign bonds are to be issued and used to fund water conservancy and flood prevention projects.  

China also adopted a more assertive stance in tackling the risks associated with its real estate market. The implementation of the "three not less than" policy regarding real estate loans is a crucial step. Furthermore, the discussion to "whitelist" 50 state-owned and private real estate companies, along with the consideration of allowing banks to extend unsecured short-term working capital loans to real estate companies, represents a significant policy shift. These initiatives should play a critical role in mitigating systemic risks in the real estate sector in 2024. 

2.   Portfolio Changes

Five positions matured in 2023: CBQ Finance 4%, BMW Finance 2.8%, Wharf REIC 3.2%, China Development Bank 3.03%, and China Construction Bank/Singapore 2.85%.

3.   Portfolio Position

Bonds issued by Government/Supranational organizations accounted for 22% of the portfolio. China financials accounted for 30% of the portfolio, and foreign financials accounted for 15%. Non-financial corporations accounted for 14% of the Fund. The valuation of the portfolio as measured by the yield to maturity was 3.18% and the duration of the portfolio was 0.98 years.

4.   Outlook

The renminbi should benefit from tightening interest rate differentials as the Federal Reserve Open Markets Committee, European Central Bank and other central banks ease domestic interest rates this year. Furthermore, the de-dollarisation process could witness further internationalisation of the renminbi. This year alone, Argentina, Brazil, and Bolivia embraced the renminbi for some Chinese imports, and ASEAN (Association of South-East Asian Nations) countries are actively pursuing regional payment networks and local currency transactions, all aiming to reduce reliance on established trade currencies.

Meanwhile, the World Bank's China Economic Update released in December 2023 predicts that China’s growth is projected at 5.2% in 2023 before slowing to 4.5 percent in 2024. The outlook is clouded by continued weakness in the real estate sector and persistently tepid global demand in the short term, as well as structural constraints to growth, including high debt levels, population ageing, and slower productivity growth than in the past.

We believe China's economic outlook could be supported by a mix of factors. Pent-up consumer demand, and targeted government support could fuel key sectors such as tech and green energy. Moreover, China's tech prowess is attracting global attention, and smart diversification of trade partners is creating new growth avenues.

Of course, we acknowledge the debt, property market and deflation headwinds, but China's proactive approach to managing risks and fostering stability inspires confidence. This adaptability, coupled with its sheer size and commitment to reform, makes China's economic outlook for 2024 cautiously optimistic. With its strong fundamentals and a focus on the future, China's economy is one to watch in 2024.

Edmund Harriss

January 2024

The Fund invests in foreign securities, which involve political, economic and currency risks, greater volatility, and differences in accounting methods. These risks are greater for emerging markets. The Fund is non-diversified, meaning that its assets may be concentrated in fewer individual holdings than diversified funds. Therefore, the Fund is more exposed to individual stock volatility than diversified funds. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility. Investments in debt securities typically decrease in value when interest rates rise, which can be greater for longer-term debt securities. The Fund may invest in derivatives, which involves risks different from, and in certain cases, greater than the risks presented by traditional investments.

Investments focused in a single geographic region may be exposed to greater risk than investments diversified among various geographic regions.

The Hang Seng Markit iBoxx Offshore RMB Bond Index family (“HSM iBoxx”) is designed to track the performance of the offshore RMB bond market. This index is unmanaged and not available for investment, and does not incur expenses.

Caixin China General Manufacturing PMI is a manufacturing survey compiled by S& P Global (NYSE: SPGI) and promoted by Caixin Insight Group which is a media group focused on financial and business news and data.

The RMB Cash Offshore (CNH) is the currency code for renminbi traded outside China in the offshore market.

The RMB Cash Onshore (CNY) is the international currency code for the renminbi.

Yield to maturity is the total return anticipated on a bond if the bond is held until it matures.

SEC 30-day Yield: 2.79% (subsidized); 0.44% (unsubsidized). The unsubsidized SEC yield is calculated with a standardized formula mandated by the SEC. The formula is based on maximum offering price per share and does not reflect waivers in effect.

Duration is expressed in the form of number of years and measures a bond's sensitivity to change in interest rates. To be specific, it measures the change in market value of security due to 1% change in interest rates.

Please refer to the Schedule of Investments for details on Fund holdings. Current and future portfolio holdings are subject to risk.

The information provided herein represents the opinion of Guinness Atkinson Asset Management, Inc. for the period stated and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Opinions, Fund holdings and sector allocations are subject to change at any time, and are not recommendations to buy or sell any security.

Renminbi Yuan & Bond Fund

Growth of $10,000 (Unaudited)

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.gafunds.com.

Total returns for certain periods reflect a fee waiver in effect and in the absence of this waiver, the total returns would be lower. Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares.

The iBoxx Hang Seng Markit Offshore RMB Overall Index (“HSM iBoxx”) captures the performance of debt denominated in Chinese yuan but issued and settled offshore. The index family offers a broad coverage of the offshore RMB bond universe.

FUND HIGHLIGHTS at December 31, 2023

GUINNESS ATKINSON RENMINBI YUAN & BOND FUND

GUINNESS ATKINSON RENMINBI YUAN & BOND FUND

Schedule of Investments

at December 31, 2023

CNH - The official currency of the People’s Republic of China.

The accompanying notes are an integral part of these financial statements.

GUINNESS ATKINSON™ FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

at December 31, 2023