SmartETFs

Annual Report

December 31, 2022

TABLE OF CONTENTS

Dear SmartETF Shareholders,

Two words describe 2022: not good. And yet, there are some very positive things to point out with respect to SmartETFs. We will, of course, get to these highlights, but given the calamity that was 2022 it seems disingenuous not to acknowledge some of the lowlights.

We’ll start with some comments about MRAD, the SmartETFs Advertising & Marketing Technology ETF. Our two-word descriptor for 2022, not good, understates how we might characterize the year for MRAD. The Fund was down 53.56% over the course of the year. From inception, the Fund is down 29.58% on an annualized basis. One four letter word that comes to mind is “ouch.”

Notwithstanding 2021 we remain very optimistic about the prospects for MRAD. The decline in the AdTech and MarTech sectors was extreme for two reasons. First, economic conditions lead to a general decline in advertising and marketing spending, and second, the rise in interest rates, which is the main economic theme of 2021, was particularly punishing to higher growth/higher PE multiple stocks. Because of the rapid change in (and rapid growth prospects for) the AdTech and MarTech sector, these stocks generally have a higher price to earnings (PE) multiple when compared to the rest of the market. These economic conditions won’t last, and indeed the market seems to be looking ahead in early 2023 to a more welcoming environment. All the while AdTech and MarTech companies continue to disrupt the marketing and advertising industries. The value proposition these companies offer to the industry is compelling and we are confident that the sector has a promising future.

MOTO, the SmartETFs Smart Transportation & Technology ETF produced a negative total return for the year of 26.77%. The good news is that, despite this decline, MOTO has still provided a 10.91% annualized total return over the three years ending December 31, 2022, and 12.32% over the life of the Fund. The thesis behind MOTO is that the global vehicle fleet is in the process of becoming all electric and autonomous.

In November of 2022 MOTO celebrated its third birthday. This three year milestone is important because it made the Fund eligible for a Morningstar rating and the Fund debuted with, and maintains, a Five Star Morningstar rating.

ADIV, the SmartETFs Asia Pacific Dividend Builder produced a negative total return of 16.92% for the year. ADIV is also highly rated by Morningstar with a 4-Star rating overall.

SOLR, the SmartETFs Sustainable Energy II ETF delivered a negative total return of 12.23% for the year but has provided a positive total return of 7.39% over its lifetime (inception date of November 11, 2020) ending December 31, 2022.

DIVS, the SmartETFs Dividend Builder ETF continues to deliver. Yes, it too had a negative 2022, with a negative total return for the year of 9.39%. But we are proud of its longer-term results: Over the three year period, DIVS produced an annualized return of 7.93%; for five years the return is 8.84%; over ten years 10.03% and from inception March 30, 2012), 9.8%. DIVS continues to maintain a Five Star rating from Morningstar. 

Our objective with SmartETFs is not just to provide investors with excellent investment opportunities but to also inform and engage. If you haven’t already done so we encourage you to sign up to follow us on Twitter (“SmartETFs”) and/or sign up for our email service. You can do both from the SmartETFs website at www.SmartETFs.com. Or, if you prefer, simply visit the website occasionally to see the latest news and views from our portfolio managers.

We appreciate the confidence you’ve placed in us and look forward to serving you.

Regards,

Jim Atkinson 

President 

SmartETFs 

The total expense ratio for MOTO ETF is 0.68% net and 0.88% gross. For SOLR ETF, the expense ratio is 0.79% net and 2.84% gross. For MRAD ETF, the expense ratio is 0.68% net and 4.90% gross. For ADIV ETF, the expense ratio is 0.78% net and 4.27% gross. For DIVS ETF, the expense ratio is 0.65% net and 1.08% gross. All returns are for the periods ending December 31, 2022. The Adviser has contractually agreed to reduce its fees and/or pay ETF expenses in order to limit the Fund's total annual operating expenses through June 30, 2025. Performance would have been lower without fee waivers in effect.

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, 2022.

The Asia Pacific Dividend Builder ETF and the Dividend Builder ETF converted from traditional open-end mutual funds to exchange traded funds on March 29, 2021. Performance data shown for these two ETFs includes their performance history as traditional open-end mutual funds.

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.smartetfs.com.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. 

Investing involves risk including the loss of principal.

Shares of the SmartETFs Funds are distributed by Foreside Fund Services, LLC.

Morningstar Ratings Through December 31, 2022

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.)

© 2023 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.

SMARTETFS SMART TRANSPORTATION & TECHNOLOGY ETF
ANNUAL REPORT FOR THE PERIOD ENDED
DECEMBER 31, 2022

1. PERFORMANCE

The Fund’s total expense ratio is 0.88% and the net expense ratio is 0.68%. The Adviser has contractually agreed to reduce its fees and/or pay ETF expenses in order to limit the Fund's total annual operating expenses to 0.68% through June 30, 2025. 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.SmartETFs.com, or calling (866) 307-5990.

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.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns. SmartETFs NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the Mid-Point between the Bid and Ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times.

2.   REVIEW

In 2022, the SmartETFs Smart Transportation & Technology ETF produced a total return (NAV, USD) of -26.77% vs the MSCI World Index (net return) of -18.14%. The fund therefore underperformed the index by 8.63% over the period.

The equities held within the MOTO ETF are categorized into 3 broad categories; EV Manufacturers (split into EV-Transition and EV-Dominated), Equipment Manufacturers (split into Components and Semiconductors) and Services. 

Holdings by category

Source: Guinness

The strongest category was Services, delivering an average -7.2% total return over the period. Quanta Services was a notable performer, delivering a positive return of +24.6% driven by its continued ability to post strong quarterly results despite a deteriorating macroeconomic environment. The company’s earnings resilience comes from its exposure to long term secular growth trends (electric grid maintenance and upgrades) and exposure to regulated utilities with capital spending plans which are less sensitive to shorter-term macroeconomic volatility.

The weakest category was EV manufacturers, where the average company delivered -28.4%. Within this category, Tesla was the weakest performer, delivering a return of -65.0% for the year. Tesla shares have come under pressure as CEO Elon Musk sold stock to fund his acquisition of Twitter. Musk has sold around $40bn of Tesla shares in 2022. This was exacerbated by concerns around cuts to output and pricing due to slowing electric vehicle demand growth and increasing competition. 

Individual stock performance over 12m (total return USD)

3.   ACTIVITY

There were no stock switches in the ETF during the period.

We exited our position in Hella. Hella was a German listed, EUR7bn market capitalisation automotive parts supplier specialising in lighting and electronics. In August 2020, Faurecia offered to take over Hella for EUR60/share. The SmartETFs Smart Transportation & Technology ETF accepted this offer, receiving the cash consideration for these shares in January 2022.

Daimler AG, the parent company of all Mercedes-Benz passenger car brands, officially changed its name to Mercedes-Benz Group AG in the period. The rebrand follows the spin-off of Daimler Trucks in 2021.

4.   PORTFOLIO POSITIONING

Our portfolio is typically allocated across 35 equally weighted equities providing exposure across the value chain of Smart Transportation.

We hold 18.3% exposure to EV manufacturers, of which 2.4% is invested in EV Dominated names and 15.9% is invested in EV Transition names. Within this category we hold Tesla, one of the largest electric vehicle manufacturers in the world and an innovator in the autonomous driving space with its Autopilot and Full Self-Driving offerings. 

We hold a 72.0% weight to equipment providers split across Components (46.9%) and Semiconductors (25.1%). Within Components we have 15.0% exposure to Autonomous, 20.9% exposure to Car Components, and 11.0% exposure to Battery equipment providers. For example, Sensata sells sensors vital to autonomous mobility; Vitesco produces components for electrified drivetrains; and Samsung SDI manufactures batteries for electric vehicles. The portfolio also provides 25.1% exposure to Semiconductors across Power (7.5%), General (8.4%), and Connectivity (9.2%) applications. For example, onsemi provides power semiconductors for electric vehicle traction inverters and on-board chargers.

The portfolio provides 7.6% exposure to Services including Transportation-as-a-Service (TaaS). The fund is invested in Alphabet which owns Waymo LLC, the operator of a commercial self-driving taxi service in Phoenix, Arizona.

5.    OUTLOOK

2022 was a challenging year for companies involved in the electrification of transportation. Despite continued strength in EV demand, growing ~50% year over year, the industry contended with raw material cost inflation and a weakening macroeconomic environment. Below, we reflect on activity in 2022 and consider the outlook for both the lithium-ion battery and electric vehicle markets.

Batteries

The speedy adoption of lithium-ion batteries in recent years has been spurred on by a vast improvement in economics. According to BNEF, the volume weighted average price of a lithium-ion battery fell 88% from 2010 to 2020. Prices fell a further 6% in 2021 but this was offset by a 7% increase in 2022 due to higher prices for the key battery metals, lithium and nickel. This represented the first observed increase since 2010, taking the average price to $151/kWh.

At the time of writing, lithium and nickel prices are trading 800% and 60% higher than levels seen in December 2020 as supply has struggled to keep pace with strong demand for electric vehicles. Lithium carbonate prices in China reached new peaks in 2022, exceeding $78,000 per tonne, as the market suffered from COVID-19 disruptions and long lead times (5-8 years) for new projects. Nickel prices peaked at $100,000 per tonne in April following Russia’s invasion of Ukraine and a short squeeze on the London Metal exchange. This has since moderated to $29,000 per tonne, but future concerns over Russia’s ability to supply its 17% share of the world’s class 1 nickel could keep prices elevated.

In 2020, the expectation was that the industry battery pack cost target of $100/kWh (the price at which EVs reach price parity with ICE vehicles) would be hit by 2024. On our estimates, higher lithium and nickel prices are now likely to delay this until 2027. The $50/kWh cost reduction over the next five years is likely to come equally from i) moderation of commodity prices, ii) improvements to cell chemistry and iii) improvements in pack design and manufacturing. If the current learning rate of 17% is maintained, battery pack prices could fall as low as $77/kWh by 2030 and $62/kWh by 2035.

Electric Vehicles

Electric vehicle (EV) adoption continued apace in 2022 with just under 8 million plug-in vehicles sold between January and October, more than in 2019 and 2020 combined. Battery electric vehicles (BEVs) made up just under 10% of new car sales with total plug-in penetration (BEV + Plug-in Hybrids) reaching 13%. Global sales are currently growing 60% year-over-year driven largely by China, which now accounts for 60% of sales. Europe is a distant second, with around one quarter of overall EV sales, while the US trails at under 10%. 

Much of this growth has been driven by policy, with governments now subsidizing 10-30% of the price of an electric vehicle, while bringing forward the timeline on banning internal combustion (ICE) sales. Governments cannot maintain subsidies long-term, and it will be interesting to see how the Chinese markets develops in 2023 now that the long-existing NEV subsidy program has completely ended, meaning that no NEVs purchased after 1 January 2023 will be subsidized. Nonetheless, looking ahead, we believe that we are now at a tipping point where improving economics, driving range, and charging times begin to drive mass adoption.

The recent rapid growth in electric vehicle sales has caught many forecasters by surprise, leading to swift revisions to long-term adoption rates. For example, BNEF revised its 2025 forecast for EV sales penetration up to 23% in its 2022 outlook report, up from 16% in 2021. Our long-held forecast is that electric vehicles will make up 20% of new global vehicle sales by 2025, 50% by 2030 and predominantly all new vehicle sales by 2040. At that point, it implies an overall population of one billion EVs, over 60 times greater than the global stock in 2021 of 16.5 million.

Despite the near-term speed bumps in the road towards electrified mobility, we believe these headwinds fail to challenge the structural trend towards cleaner, safer, and connected travel. The MOTO ETF will remain positioned to benefit from these themes.

Will Riley and Jonathan Waghorn 

January 2023

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

The companies in which the Fund invests may be subject to rapid changes in technology, intense competition, rapid obsolescence of products and services, loss of intellectual property protections, evolving industry standards and frequent new product productions and changes in business cycles and government regulations.

These risks could adversely affect the value of companies in which the Fund invests. Limitations on applications for autonomous or electric vehicles could adversely affect the value of companies in which the Fund invests.

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. One cannot invest directly in an index.

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. 

Smart Transportation & Technology ETF

FUND PERFORMANCE AND SUMMARY 

As of December 31, 2022 (Unaudited) 

The performance data quoted represents past performance and past performance is not a guarantee of 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 theFund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.smartetfs.com.

Total returns reflect the reinvestment of distributions made by the Fund, if any. The deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares is not reflected in the total returns.

The Fund's shares are listed on an exchange. The price of the Fund's shares is based on market price, and because the exchange-traded fund shares trade at market prices rather and net asset value, shares may trade at a price greater than net asset value (premium) or less than net asset value (discount).

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 duduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay. 

SmartETFs Smart Transportation & Technology ETF 

Schedule of Investments

at December 31, 2022 

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

SmartETFs Smart Transportation & Technology ETF 

Schedule of Investments 

at December 31, 2022

ADR - American Depository Receipt 

PLC - Public Limited Company

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

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

SMARTETFS ADVERTISING & MARKETING TECHNOLOGY ETF
ANNUAL REPORT FOR THE PERIOD ENDED
DECEMBER 31, 2022

1. PERFORMANCE

The Fund’s total expense ratio is 4.90% and the net expense ratio is 0.68%. The Adviser has contractually agreed to reduce its fees and/or pay ETF expenses in order to limit the Fund’s total annual operating expense to 0.68% through June 30, 2025. 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.SmartETFs.com, or calling (866) 307-5990.

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.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns. SmartETFs NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the Mid-Point between the Bid and Ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times

2.   REVIEW

The SmartETFs Advertising and Marketing Technology ETF launched on December 31, 2020.

The ETF invests in companies which are using technology to disrupt the advertising and marketing industries. These companies include those involved in programmatic advertising, targeted digital advertising, consumer data and targeting, customer relationship management, marketing automation, and other technologies that aid in advertising and marketing.

In 2022, the SmartETFs Advertising & Marketing Technology ETF produced a total return of -53.56% (NAV, in USD), versus the MSCI World Index (net return) of -18.14% (in USD). The Fund therefore underperformed by 35.42%.

At year end, the Fund’s AUM was $1.13mn. 

Market commentary 

Inflation, supply-chain shortages, Russia’s invasion of Ukraine, and higher interest rate expectations dominated financial headlines for most of the year, leading equity markets to end 2022 significantly lower.

Over the course of 2022, high levels of inflation and a strong jobs market spurred global central banks to tighten monetary policy at historic rates. This drove markets towards ‘value’ orientated stocks, with the MSCI World Value Index outperforming the MSCI World Growth Index by 23.3% in USD terms over the course of 2022. This acted as a significant headwind to the Fund.

In the context of tighter monetary policy, fears of an impending recession grew, and investors rotated towards more defensive areas of the market - particularly as the perceived chances of a ‘soft landing’ diminished and as equity analysts downgraded earnings forecasts. This was a headwind for the Fund’s overweight position to typically more ‘cyclical’ sectors, such as Information Technology and Communications. Nonetheless there was a divergence in performance between more ‘speculative’ stocks with more extreme valuations, and ‘quality growth’ stocks, where current valuations place lower weight on future growth prospects. The Goldman Sachs Unprofitable Tech Index, an example of ‘speculative’ tech stocks, fell 62.3% (USD) over the period.

Fund attribution analysis 

Higher rates used to discount future growth, reduces the valuation of such fast-growing companies. Further, the Fund is predominantly exposed to the Communications sector and US region, which both performed poorly in the period.

The cyclical nature of advertising and marketing has meant that both industries have struggled this year given the inflationary pressures and slower growth environment. This is unsurprising given that businesses face higher costs and greater uncertainty of rising demand for goods and services, and so discretionary advertising spend is cautiously lower. This can however change rapidly if new macroeconomic data and stock market movements points to optimism regarding inflation peaking and the economy reigniting.

3.    ACTIVITY

We made 2 changes to the portfolio in 2022. 

BOUGHT: Amazon, Next Fifteen Communications 

SOLD: iClick Interactive Asia Group, Quinstreet

Amazon is the world's largest online retailer and marketplace, smart speaker provider, cloud computing service through Amazon Web Services, live-streaming service through Twitch, and Internet company as measured by revenue and market share. Amazon’s ad business generates over $30 billion in revenue. Whilst that is still a footnote by the company's standards, accounting for 7% of all its revenue, it makes Amazon the world's 3rd largest generator of advertising revenue. Early last year, Amazon reported "Advertising" revenue for the first time, whereas previously it was reported within "Other". In 2021, the business made $31 billion in revenue. In 2020 it was $19 billion. That puts its ad revenue well ahead of the likes of Microsoft ($10 billion), Snap ($4.12 billion) and Pinterest ($2.6 billion). It is also larger than the $8.1 billion made by the company’s subscription business in 2021, which includes Amazon Prime Video’s monthly fees. At purchase, the Amazon stock was down c.32% year-to-date, compared to the S&P 500 Index down c.13%. 

Next Fifteen Communications Group is an international PR, corporate communications and digital marketing company with 3 operating segments: Brand Marketing, Data and Analytics, and Creative Technology. The Group owns or has stakes in over 20 public relations and corporate communications firms, and works with some of the biggest brands in technology and beyond, including Amazon, Facebook, Microsoft, Procter & Gamble, Sony, Telefonica, Hasbro, and Genentech. Next Fifteen Communications focuses on helping its clients to communicate effectively with stakeholders and to develop and promote their brands via a focus on customer insights, engagement, delivery, and business transformation The company also engages in acquiring businesses and offers its operational infrastructure and centralized resources to accelerate growth.

iClick Interactive Asia Group is an independent online marketing and enterprise data solutions provider in China. It serves as an integrated cross-channel gateway that provides marketers with innovative and cost-effective ways to optimize their online marketing efforts throughout their marketing cycle and achieve their branding and performance-based marketing goals. The company has seen weaker earnings results in recent times and faces risks from a Chinese economic growth slowdown and regulatory pressures.

QuinStreet provides a broad range of Internet marketing tools to clients in large, information-intensive industries (education, home services, healthcare, and financial services). QuinStreet partners with search engine companies to help build websites with flexible content and offerings that are customizable according to the user base. It generates revenue via a pay-for-performance model of pricing in which customers are charged based on the client's lead performance results. QuinStreet is reliant on customer's ad spend and in the current inflationary environment, where businesses are facing higher input costs, QuinStreet faces risks of budget cuts and a slowdown in revenue growth.

4.     ASSET ALLOCATION

5.    OUTLOOK

The table below shows the Fund’s 1-year forward earnings and sales growth (analyst consensus estimates) versus the MSCI World Index.¹

Source: Bloomberg; SmartETFs

The Fund at year end has higher expected sales and earnings growth vs the broad market and this is characteristic of the secular growth that the adtech/martech industries are expected to experience.

At the fund level, MRAD has also seen a multiple compression. At the start of the year, MRAD was trading on a 1-year forward price-to-earnings multiple of 26.9% vs the MSCI World Index at 20.3% - a premium of 50%. At the end of December, the Fund trades on a P/E multiple of 16.9% vs the Index at 15.5% - a premium of 9%.

With inflation seemingly moderating and global Central Banks appearing to slow the rate of growth hikes, and a significant de-rating in valuations having occurred, many of the 2022 headwinds for equity markets, and growth stocks in particular, are looking more positive. However, uncertainty remains as none of these issues have been resolved conclusively and second-order effects, or indeed new issues, may arise in the coming months. Indeed, with global growth expected to slow, the prospects of a recession remain high (particularly in Europe and Asia), potentially creating a meaningful dent into company earnings. In many respects, we believe these concerns have largely been ‘priced-in’ to earnings estimates, but this does not necessarily preclude further earnings downgrades to come.

Whilst there may be volatility in equity markets and for AdTech companies, there is good reason to be optimistic longer term. We continue to see an acceleration in technological transformations that will have a lasting effect on how consumers and businesses operate once the economic cycle turns to growth. As such, we believe this Fund and its holdings are well positioned to benefit from such transformations, which include the move from traditional to digital advertising.

Sagar Thanki

January 2023 

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

The companies in which the Fund invests may be subject to rapid changes in technology, intense competition, rapid obsolescence of products and services, loss of intellectual property protections, evolving industry standards and frequent new product productions and changes in business cycles and government regulations.

These risks could adversely affect the value of companies in which the Fund invests. Limitations on applications for autonomous or electric vehicles could adversely affect the value of companies in which the Fund invests.

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. One cannot invest directly in an index.

The S&P 500 Index is a free float-adjusted market capitalization weighted index of the 500 largest publicly traded companies in the US. One cannot invest directly in an index.

Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales.

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. 

SmartETFs Advertising & Marketing Technology ETF
FUND PERFORMANCE AND SUMMARY
As of December 31, 2022 (Unaudited)

The performance data quoted represents past performance and past performance is not a guarantee of 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 theFund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.smartetfs.com.

Total returns reflect the reinvestment of distributions made by the Fund, if any. The deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares is not reflected in the total returns.

The Fund's shares are listed on an exchange. The price of the Fund's shares is based on market price, and because the exchange-traded fund shares trade at market prices rather and net asset value, shares may trade at a price greater than net asset value (premium) or less than net asset value (discount).

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 duduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay.

SmartETFs Advertising & Marketing Technology ETF
Schedule of Investments
at December 31, 2022

PLC - Public Limited Company

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

SmartETFs Advertising & Marketing Technology ETF
Schedule of Investments
at December 31, 2022

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

SMARTETFS SUSTAINABLE ENERGY II ETF
ANNUAL REPORT FOR THE PERIOD ENDED
DECEMBER 31, 2022

The Fund’s total expense ratio is 2.84% and the net expense ratio is 0.79%. The Adviser has contractually agreed to reduce its fees and/or pay ETF expenses in order to limit the Fund's total annual operating expenses to 0.68% through June 30, 2025. For the Fund’s current one-year expense ratios, please refer to the Financial Highlights section of this report.

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.SmartETFs.com, or calling (866) 307-5990.

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.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns. SmartETFs NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the Mid-Point between the Bid and Ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times

The key takeaways for the ETF from 2022 are as follows:

Review

In 2022, energy security has become arguably the most important catalyst driving the energy transition, reflecting governments’ desire to reduce reliance on fossil fuels, whose prices spiked due to Russia’s invasion of Ukraine. This energy crisis is accelerating the transition towards sustainable energy sources that help to reduce energy-importing nations’ reliance on fossil fuel imports.

Much of the key policy support for the energy transition in 2022 was enacted with a focus on improved energy security, including:

Supporting these two significant policy steps were the Chinese 14^th renewable energy plan and the COP27 climate conference. The Chinese plan targets a 50% increase in renewable energy generation in 2025 (versus 2020) while the COP27 conference kept the higher end of the ambition of the Paris Agreement (a 1.5° temperature increase target) although was short on specific new targets.

While energy transition growth plans were ratchetted higher, the actual pace of the transition in 2022 also accelerated. We saw around 380 GW of new renewable generation capacity installed, 90 GW higher than the record installations seen in 2021 and around double the 194 GW installed in 2019. Solar represented nearly two-thirds of the new capacity additions, with wind installations at around 25% and hydro in third place. Renewable electricity generation increased by around 7% to over 8,500 TWh, outpacing global electricity demand growth (estimated at 3% in 2022). Electric vehicle sales surged, reaching around 13% of global light auto sales, up from just over 3% in 2020 driven by China (60% of the market) with Europe now a distant second.

High energy prices catalysed the need for efficiency and the IEA estimates that global energy intensity improved by 2% in 2022. This is meaningfully higher than the 0.5-0.6% levels seen in the pandemic years but still not enough to hit net zero by 2050, according to the IEA. Investment into energy efficiency reached $560bn in 2022 (versus $400bn pa from 2015-2020).

The disruption to energy markets in 2022 brought sharp energy price inflation to the world economy. Companies involved in the manufacturing of sustainable energy equipment were not immune to these inflationary pressures, with energy inflation eclipsing the post-COVID raw material cost inflation and supply chain issues that have started to abate. While inflation was acute in the key battery metals of lithium and nickel, battery companies were able to adjust their cathode chemistries and deliver economies of scale, helping to contain battery price increases at 7% in 2022, leading to prices being broadly flat versus 2020.

Whilst inflationary pressures increased the cost of installing and generating renewable power in 2022, we observe that renewable energy generation continued to become relatively more economic than fossil fuels as the year progressed. Improved relative economics as well as security of supply considerations will help to sustain strong demand for sustainable energy activities during any potential global recession.

Against this backdrop, the SmartETFs Sustainable Energy II ETF delivered a total return (USD) of -12.23%, outperforming the MSCI World Index (net return) at -18.14%. Solar equipment manufacturers were the strongest performing subsector, whilst our electrification sub sector (including electric vehicle-oriented companies) was the weakest. Eight of our top ten performing stocks were US listed companies, reflecting a strong positive swing in sentiment after the passage of the IRA. Three of the eight weakest performers were Chinese (Hong Kong) listed entities, reflecting the negative economic momentum and poor sentiment in that market.

During the period, we exited out position in Hella, Albioma, TransAlta Renewables and SiemensGamesa and replaced them with positions in Eaton, Trane Technologies and Sunnova Energy International.

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 to 44.1% at the end of December 2022 while the weighting to renewables (i.e. supply side) fell to 50.3%.

At December 31, 2022, the SmartETFs Sustainable Energy II ETF traded on a 2023 P/E ratio of 19.1x and 2023 EV/EBITDA multiple of 11.6x (around 10-20% lower than the same one year forward metrics published in our last annual outlook). The ETF trades at a premium to the MSCI World, reflecting greater expectation for growth from sustainable energy companies relative to the index. As a sense check, we see that consensus EPS growth (2021-2024E) of the portfolio (at 18.8%pa) is well ahead of the MSCI World (at 7.2%pa).

The growth outlook for the sector has improved in 2022 and the growth premium of the ETF versus the MSCI World (11.6%pa) is markedly higher than the 7.8%pa growth premium at the start of the year. Looking over the next five years, we believe that the portfolio is likely to deliver normalised earnings growth of around 14%pa, (earnings growth is not a projection of fund performance) well ahead of growth in the MSCI World Index, that will bring the ETF P/E ratio down from the current 19.1x for 2023E to around 13x in 2026E.

Looking ahead to 2023 and beyond, we expect further acceleration of the transition:

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 IPCC and reiterated at COP27. 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.

We expect investor interest in sustainable energy equities will continue to be high in 2023 reflecting the importance of energy security and increased individual, social and government pressures for consumers to become more energy efficient and for producers to increase their share of sustainable energy generation. We believe that the SmartETFs Sustainable Energy II ETF portfolio of 30 equally weighted equities, chosen from our universe of around 250 companies, provides concentrated exposure to the theme at attractive valuation levels. The ETF is positioned to benefit from this attractive outlook for sustainable energy.

Will Riley and Jonathan Waghorn
January 2023

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

The companies in which the Fund invests may be subject to rapid changes in technology, intense competition, rapid obsolescence of products and services, loss of intellectual property protections, evolving industry standards and frequent new product productions and changes in business cycles and government regulations.

These risks could adversely affect the value of companies in which the Fund invests. Limitations on applications for autonomous or electric vehicles could adversely affect the value of companies in which the Fund invests.

P/E Ratio is the price-to-earnings ratio and is a ratio for valuing a company that measures its current share price relative to its earnings per share.

EV/EBITDA is the enterprise value (EV) to earnings before interest, taxes, depreciation, and amortization (EBITDA). This ratio is used by investment managers to measure a company’s return on investment.

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.

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.

Sustainable Energy II ETF

FUND PERFORMANCE AND SUMMARY

As of December 31, 2022 (Unaudited)

The performance data quoted represents past performance and past performance is not a guarantee of 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 theFund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.smartetfs.com.

Total returns reflect the reinvestment of distributions made by the Fund, if any. The deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares is not reflected in the total returns.

The Fund's shares are listed on an exchange. The price of the Fund's shares is based on market price, and because the exchange-traded fund shares trade at market prices rather and net asset value, shares may trade at a price greater than net asset value (premium) or less than net asset value (discount).

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 duduction for fees and expenses. Net Return is net of local withholding taxes that any investor would pay.

SmartETFs Sustainable Energy II ETF
Schedule of Investments
at December 31, 2022

PLC - Public Limited Company

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

SmartETFs Sustainable Energy II ETF
Schedule of Investments
at December 31, 2022

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

SMARTETFS ASIA PACIFIC DIVIDEND BUILDER ETF
ANNUAL REPORT FOR THE PERIOD ENDED
DECEMBER 31, 2022

The Fund’s total expense ratio is 4.27% and the net expense ratio is 0.78%. The Adviser has contractually agreed to reduce its fees and/or pay ETF expenses in order to limit the Fund's total annual operating expenses to 0.68% through June 30, 2025. For the Fund’s current one-year expense ratios, please refer to the Financial Highlights section of this report.

The SmartETFs Asia Pacific Dividend Builder ETF acquired the assets and liabilities of the predecessor mutual fund, the Guinness Atkinson Asia Pacific Dividend Builder Fund, on March 26, 2021. As a result of the transaction, the Fund adopted the accounting and performance history of its predecessor mutual fund Performance results shown prior to March 26, 2021, reflect the performance of the predecessor mutual fund. The Market Price returns shown prior to March 26, 2021 reflects the predecessor mutual fund's NAV.

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.smartetfs.com, or calling (866) 307-5990.

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.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns. SmartETFs NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the Mid-Point between the Bid and Ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times.

The Fund fell -16.92% on an NAV-basis in 2022 compared to the MSCI AC Pacific ex Japan Net Return Index which fell -18.75%. All thirty-six companies in the portfolio are dividend payers, following the resumption of distributions by Corporate Travel Management. Overall, twenty-four companies grew the dividend, three were unchanged, eight fell and one resumed.

China was being discussed in some quarters as being ‘uninvest-able’. In a hectic few weeks following the Party Congress and the confirmation of Xi Jinping’s third term as leader, China shifted on all five. On Covid, the shift could not have been more profound – from zero-COVID to the removal of all restrictions. In all other areas there were substantive changes: technology regulation retreated with new IPOs permitted and the take-up by the state of ‘golden shares’ giving it board representation; monetary support for the struggling property developers; a re-focus on accelerating economic growth with funds to back it; and a more conciliatory diplomatic drive caused investors to switch their focus from high risk to cheap valuations.

Consumer price inflation has not been as pressing in Asia as it has been in developed markets. It is true to say that in certain markets such as Indonesia and Korea inflation has breached 5% (India’s reached 7.8% but that is in the context of a 3-year average of 6.2%) but for the most part inflation has not gone much above 4%. Chinese economic weakness has kept CPI close to, or below 2% this year and so the aggregate regional inflation rate ended the year at 2.9% compared to US CPI inflation of 7.1% and US Core Inflation (less food and energy) of 5.7%.

Interest rates in Asia have moved higher as inflation has increased but for the most part the main concern has been to keep pace with US interest rate increases, to prevent the interest rate differential from widening sufficiently to bring about pressure on currency exchange rates against the dollar. Asian exchange rates, a reasonable barometer of economic health, moved in line with developed market currencies. In our view, this indicates that dollar strength is less of problem for the region as domestic consumption has increased in importance and reliance on exports as a growth driver has diminished.

Asian market returns in 2022 were dragged down by the performances of China, Korea and Taiwan which together account for 62% of the Fund’s benchmark index. As China wrestled with the multiple challenges of zero-Covid policies, intensified regulation and a property sector slowdown, investors took cover in Australia, India and south-east Asia. Korea and Taiwan are heavily exposed to global markets through technology products and components and, in Korea’s case to a wide array of capital and consumer products ranging from refrigerators and TVs to cars and ships. Indonesia and Thailand were the only two markets to record positive returns. Indonesia rose on the back of higher energy prices and a heavy (58%) index weighting to banks. Thailand saw broader-based strength on expectations of the return of tourists after a two-year absence. Tourist arrivals accelerated in the latter part of the year but reached only around 6 million for 2022 versus ~40 million visitors a year pre-Covid.

Stock selection contributed positively to outperformance in 2022 whereas asset allocation was a moderate detractor, which is in line with our stated focus on bottom-up stock analysis. Across sectors, our main contributions to relative performance came from financials, both in allocation and selection and from our stock selection in technology and real estate. The main detractors were the zero allocations to energy and materials whose cyclical characteristics do not conform to our investment philosophy and process. On a country basis, our stock selection in China and Taiwan contributed even as the allocation detracted, although the allocation to China turned into a positive contributor by year end.

Of our top five performing stocks, four were from the Financials sector (Aflac, DBS, BOC Hong Kong and Tisco) which benefitted from the rising rates environment, and one from the Real Estate sector, China Overseas Land & Investment. The laggards included Qualcomm, Elite Material and Tech Mahindra from the technology sector and two consumer discretionary names, Hanon Systems and Shenzhou International.

We bought two new positions in 2022. Industrial and Commercial Bank of China Ltd (ICBC) is one of China’s big four commercial banks. We bought this stock in January 2022 having previously sold it in 2019, when it was trading on a multiple of 6.5x forward earnings. At the end of 2022, it was trading at 3.6x, and had a 12-month trailing net dividend yield of 8.3%, which is above its 10-year historic yield of 5.7%. Dividends have grown annually since 2016, including through the pandemic period, with latest annual growth of 10.3%. The bank is priced for macro-economic stress, but we expect China's monetary backdrop to be one of counter-cyclical easing while the rest of the world tightens.

Broadcom Inc. is a designer. developer and manufacturer of semiconductors and infrastructure software services. We bought this stock in December 2022 after a period of weakness associated with the tech sector. It has strong cash flows, with 5yr compound annual growth rate of Cash Flow from Operations and Free Cash Flow of 20.6% and 24.4% respectively. The company has a 12-month trailing net dividend yield of 3%, which is above both the 5 year and 10-year averages (2.99% and 2.2%) and looks to be value compressed with a 13.6x PE1 multiple, below both the 5 year and 10-year averages (15.0x and 14.5x respectively).

These stocks replaced KT&G (Korea Tobacco and Ginseng) and clothing designer and maker, China Lilang, which were sold during the year. KT&G has a high historic yield of over 6% but does not, in our view, have the earnings growth to support it over the long term. Some excitement over its tie-up with Philip Morris and the prospect of access to new markets does not fire us with enthusiasm. At the end of last year, the company announced the indefinite suspension of its US business on regulatory grounds and thus we think the company's moves are primarily defensive or compensatory.

China Lilang is a designer and retailer of men’s clothing and was one of the smallest companies by market capitalisation in the portfolio. The business is well-managed and has demonstrated the ability to adapt to changing economic conditions. The Covid period has proven to be especially challenging however, and its comparatively smaller scale leaves the business vulnerable in our view. This, and the diminishing liquidity of its shares over the last two years have led us, a little reluctantly, to sell the position.

The portfolio maintains a diversified exposure across sectors and geographies. 

●           Consumer discretionary exposure for example is made up of clothing manufacturers and retailers, a car parts and equipment maker, electronics retailing, home furnishings and household appliances in Australia, China, Korea and Taiwan. 

●           Financials exposure is made up of commercial banks, diversified financial groups, life insurance and reinsurance in China, Hong Kong, Korea, Singapore, Thailand and Japan (via US-listed Aflac). 

●           The technology segment is more concentrated geographically with six holdings listed in Taiwan, one in India and two in the US. However, they serve a global market and they are divided between semiconductor makers or designers, electronic components makers, hardware, IT consulting, infrastructure software and manufacturing services. Broadcom, Elite Material, TSMC and Tech Mahindra derive revenue from both consumer electronics and IT infrastructure; the rest are more exposed to consumer electronics. 

●           Real estate comprises four positions, three of which are Real Estate Investment Trusts (REITs) listed in Hong Kong and Singapore which offer a steady income stream from rental income from industrial, commercial and retail properties in Australia, China, Hong Kong, Singapore, UK and US.

The largest country exposures in the Fund are to China at 32% followed by Taiwan at 19%, Australia and Singapore at 8%. China exposure is below the benchmark weight; Singapore is 6.5% over and Taiwan is 4% over. Australia is 10% below the benchmark weight and Korea is 7.5% under-weight.

The Fund’s Chinese exposure is mainly focussed on the domestic market with only Shenzhou International (a 2.8% position) having significant overseas exposure as a supplier of fabrics to apparel makers like Adidas, Nike and Uniqlo. Of the 32% overall China exposure 9% is to consumer discretionary, 8% to banks, 2% - 3% to each of communication services (video games), dairy, health care, insurance, property and utilities.

The portfolio is 71% focused on companies with regional sales and 29% exposed to overseas markets. There is a 66% exposure to Emerging Asia and 34% exposure to Developed Asia (Australia, Hong Kong, New Zealand and Singapore). The split between Consumer and non-Consumer is more subjective. Most banks we treat as non-consumer unless they lean heavily into consumer finance and private customers. We treat general and life insurance as primarily Consumer whereas we treat re-insurance as non-Consumer. Some technology component makers supply commercial customers, but where the end products are mainly consumer electronics, we categorise them as Consumer. We assess the split between Consumer and non-Consumer at 59% and 40%.

Our global outlook is shaped by expectations for US inflation, US interest rates and global growth prospects. The regional outlook is heavily influenced by China re-opening this year and over the 2023/2024 period, by expectations of possible recession followed by recovery. Finally, we discuss the prospects for the Fund whose investment strategy, while affected by macro conditions especially through valuations, is focused upon the operational strength and cash flow generation of the companies themselves.

Our expectation for US inflation and interest rates is more cautious than that of the broader market because while we can see headline inflation coming down (driven by falling commodity and transportation costs and by the base effect for year-on-year comparisons) we think that underlying price pressures may still be there. Inflation may slow, in other words, but prices may still be rising. We think the Federal Reserve is very aware of this and for that very reason may move rates higher and keep them there for longer than the market currently expects.

Global growth expectations have been scaled back in recent months as the lagged effect of higher interest rates continues to be felt. The World Bank in the January 2023 publication of its Global Economic Perspectives cut its estimated for World GDP growth to 1.7% for the coming year, half the level of its June 2022 forecast. The bright spots according to the World Bank are Asia, the Middle East and Africa. The story of a widening economic growth differential between Asia and the US from a gap of 1.8% in 2022 (3.7% vs 1.9%) to 4.3% in 2023 (4.7% in Asia vs 0.4% in the US) is a big part of the bull case for Emerging vs Developed markets this year. The cautionary note is that much of this is riding on a China re-opening story playing out as hoped with no additional disruptions or shocks.

The Fund’s outlook for the coming year looks attractive, especially following the recent weakness in absolute terms (outperformance, notwithstanding). Average annual earnings growth for the Fund over the next two years is forecast to be 6.6% compared to the 8% for the benchmark. The 2023 valuation multiple of 9.6x is some 12% below its average since launch of 10.8x and the discount to market of 19% is 5% below the average discount of 14% since launch. If the portfolio companies achieve an earnings growth trajectory which at 6.6% would be in line with their long run average, we think there is every reason to hope the valuation will also move back in line.

Edmund Harriss and Mark Hammonds
January 2023

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

The companies in which the Fund invests may be subject to rapid changes in technology, intense competition, rapid obsolescence of products and services, loss of intellectual property protections, evolving industry standards and frequent new product productions and changes in business cycles and government regulations.

These risks could adversely affect the value of companies in which the Fund invests. Limitations on applications for autonomous or electric vehicles could adversely affect the value of companies in which the Fund invests.

The MSCI AC Pacific Ex-Japan Index is a market capitalization weighted index that monitors the performance of stocks from the Pacific region, 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. The index is unmanaged and not available for investment, and do 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.

SmartETFs Asia Pacific Dividend Builder ETF
FUND PERFORMANCE AND SUMMARY
As of December 31, 2022 (Unaudited)

The SmartETFs Asia Pacific Dividend Builder ETF acquired the assets and liabilities of the predecessor mutual fund, the Guinness Atkinson Asia Pacific Dividend Builder Fund, on March 26, 2021. As a result of the transaction, the Fund adopted the accounting and performance history of its predecessor mutual fund Performance results shown prior to March 26, 2021, reflect the performance of the predecessor mutual fund. The Market Price returns shown prior to March 26, 2021 reflects the predecessor mutual fund's NAV.

The performance data quoted represents past performance and past performance is not a guarantee of 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 theFund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.smartetfs.com.

Total returns reflect the reinvestment of distributions made by the Fund, if any. The deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares is not reflected in the total returns.

The Fund's shares are listed on an exchange. The price of the Fund's shares is based on market price, and because the exchange-traded fund shares trade at market prices rather and net asset value, shares may trade at a price greater than net asset value (premium) or less than net asset value (discount).

The MSCI All Country Pacific Free ex-Japan Index (MSCI AC Pacific ex-Japan Index) is a free float-adjusted, capitalization-weighted index that is designed to measure equity market performance in the Pacific region including 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.

SmartETFs Asia Pacific Dividend Builder ETF
Schedule of Investments
at December 31, 2022

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

SmartETFs Asia Pacific Dividend Builder ETF
Schedule of Investments
at December 31, 2022

ADR - American Depository Receipt

PCL - Public Company Limited

REIT - Real Estate Investment Trust

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

SmartETFs Asia Pacific Dividend Builder ETF
Schedule of Investments
at December 31, 2022

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

SmartETFs Dividend Builder ETF
ANNUAL REPORT FOR THE PERIOD ENDED
DECEMBER 31, 2022

The Fund’s total expense ratio is 1.08% and the net expense ratio is 0.65%. The Adviser has contractually agreed to reduce its fees and/or pay ETF expenses in order to limit the Fund's total annual operating expenses to 0.65% through June 30, 2025. For the Fund’s current one-year expense ratios, please refer to the Financial Highlights section of this report.

The SmartETFs Dividend Builder ETF acquired the assets and liabilities of the predecessor mutual fund, the Guinness Atkinson Dividend Builder Fund, on March 26, 2021. As a result of the transaction, the Fund adopted the accounting and performance history of its predecessor mutual fund Performance results shown prior to March 26, 2021, reflect the performance of the predecessor mutual fund. The Market Price returns shown prior to March 26, 2021 reflects the predecessor mutual fund’s NAV.

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.SmartETFs.com, or calling (866) 307-5990.

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.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns. SmartETFs NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the Mid-Point between the Bid and Ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times

Review

2022 was a tumultuous year for global equity markets, which had to contend with a range of geopolitical and economic headwinds after the Covid-era fallout. Inflation measures reached 40-year highs resulting from ultra-stimulative fiscal and monetary policies, supply chain disruptions, shifting consumer spend towards goods from services, robust employment and wage gains, the Russia-Ukraine war, and China’s zero-covid policies. 

Global equity markets saw broad based declines as a new set of market conditions played out. Since the Global Financial Crisis in 2007/08, and broadly over much of the past 40 years, developed equity markets have benefited from the low interest rate, high growth environment. Low interest rates have also been supported by cheap and available capital led by accommodative central bank policies including quantitative easing and asset purchases. However, as the ‘transitory’ narrative maintained throughout 2021 by central bankers (and in particular the Fed) started to unwind, a rapid and widespread monetary policy shift occurred. The Fed started reducing its bond purchases in November 2021 and began raising interest rates in March 2022, kicking off one of the quickest rate-hiking cycles on record, as central banks around the world followed suit. Over 80 central banks tightened in 2022, including 15 of the 20 most important central banks for markets globally. The Fed hiked the overnight funds rates by 425bps across the final seven meetings in 2022 - the equivalent of 17 25bp rate hikes. At the start of 2022, markets were pricing in just three 25bp rate hikes.

Jittery markets over the past year were accompanied by similar weak performance across all regions bar the UK. The US equity market - which has the largest weighting in the benchmark Index - fared poorly given its greater exposure to growth sectors, whilst the UK was the best performing region given its higher weighting to defensive areas of the market.

Source: Bloomberg, data as of December 31st, 2022

Inflation was the predominant force driving global markets in 2022. Over 2022, US prices increased by 7.1%, Eurozone by 10%, UK by 10.7% and certain developing market outliers saw triple digit inflation. Food (+10.3% YoY) and Energy (+13% YoY) were particularly large drivers in the US and also impacted global prices with equal effect. However, the US is currently experiencing lower inflation than many of its developed market peers, in part due to more normalized commodity prices and moderating service inflation.

Over the year, a handful of exogenous shocks, particularly on the supply side, also drove prices higher. Namely, China’s Covid lockdowns and the Russian invasion of Ukraine proving two of the most significant factors. China’s Zero-Covid policy, whilst somewhat abating at present, caused significant disruption to global trade routes, and caused container shipping prices to remain at elevated levels, before easing over the back end of the year. Furthermore, the Russian invasion of Ukraine in February brought havoc to commodity markets with key material shortages from wheat, barley, and grain causing food shortages whilst a limited oil and natural gas supply to western markets, caused energy prices to surge.

In response to the exogenous shocks and shifting economic conditions, central banks were forced to tighten rates with some vigour - particularly given the magnitude of loose monetary policy over the past two years. The Bank of England first increased rates in February, the Fed in March, and the ECB in July. Since then, the past six months have seen the most rapid tightening of western monetary policy in more than two decades, with the Fed, ECB, and Bank of England all increasing in 75bp increments, and the central banks of Canada and Australia raising by 100bps. In short, the speed and scale of increases has been unprecedented in recent times. 

Source: Bloomberg, data as of December 31st, 2022

All sectors, bar Energy, saw declines in 2022. Driven by hawkish monetary policy, defensive sectors fared better than cyclical ones, and we also saw that the areas of the market that performed strongly over 2020 and 2021 (growth stocks, unprofitable technology, software) corrected most strongly, weakening investor sentiment. Information Technology and Communications closed the year down -31% and 37% respectively after performing strongly over the last couple of years, whilst the Consumer Discretionary sector also performed poorly, ending the year down -33%. Behind the poor performance was a significant decline in real incomes given high inflation and the erosion of consumer purchasing power, which presented a challenge for companies reliant on discretionary spend. Since tighter monetary policy is designed to slow the economy, investors focused on the difficulty the Fed would likely have in achieving a soft landing, and thus the strong likelihood of a recession, with an associated effect of a fall in earnings.

Aforementioned exogenous events (Chinese lockdowns and the Ukraine conflict) further undercut market sentiment, however, the Energy sector emerged as a clear beneficiary. The MSCI World Energy closed the year up +48%, as a combination of Russian energy diversion from Western markets, sweeping OPEC production cuts, and sustained demand from reopening economies caused prices to soar. Natural gas hit a peak of 9.2 USD/MMBtu in August 2022, a 300% increase from January, whilst Brent Crude hit $120 a barrel. Whilst the Energy sector, which the Fund does not own, was a clear beneficiary of higher prices, the impacts of higher input cost were felt throughout the economy, especially for the energy intensive Materials and Industrials sectors.

In the Fund, over the course of the year, being overweight Consumer Staples and underweight IT and Consumer Discretionary sectors benefitted relative performance. Further, strong stock selection within the IT, Industrials and Consumer Staples sectors also aided the Fund’s performance. Having zero exposure to Communication Services and Banks was beneficial over the year, whilst owning no Energy stocks proved a drag.

When we look at how individual companies within the portfolio performed in 2022, we see that out of the top ten, we have four Industrials (BAE Systems, Emerson Electric, Atlas Copco, Raytheon Technologies), two Consumer Staples (BATS, Mondelez), two Health Care (AbbVie, Novo Nordisk), and two financial stocks (Aflac, Arthur J Gallagher). This highlights the benefit of our moderate dividend yield and sector-agnostic approach, which can identify opportunities outside of the traditional high-yield or ‘defensive’ areas typically associated with income funds. 

Dividend Update

Based on year-end prices, the Fund had a 12-month trailing dividend yield of 1.91% (net of withholding taxes) vs the benchmark MSCI World Index dividend yield of 2.27% (gross of withholding taxes). In the Fund, the average dividend growth across all 35 companies was 7.8%.

In 2022, out of our 35 holdings: 

Activity

In 2022 we sold 4 positions and replaced them with 4 new positions, leaving the portfolio with 35 positions at the end of the year. All four changes were made in the third quarter of the year.

We sold positions in British American Tobacco, Imperial Brands, BAE Systems and Raytheon Technologies. The four companies we sold each ranked within the top five best performing companies in the portfolio between the start of the year and the date of sale, and we felt that there was an opportunity to bank the strong relative performance of these names.

As part of our one-in-one-out process, we bought new positions in Coca Cola, Mondelez, Emerson Electric and Atlas Capco.

In terms of sector allocation, having bought and sold two Consumer Staple stocks and two Industrial stocks, the overall positioning of the Fund remained largely unchanged. Regionally, the changes increased our US and European ex-UK exposure, whilst reducing our UK exposure.

Portfolio Positioning

We continue to maintain a fairly even balance between quality defensive and quality cyclical/growth companies. We have approximately 45% in quality defensive companies (e.g. Consumer Staples and Healthcare companies) and around 55% in quality cyclical or growth-oriented companies (e.g. Industrials, Financials, Consumer Discretionary, Information Technology, etc.)

The Fund also has zero weighting to Energy, Utilities, Materials, Real Estate and Communications. The largest overweight is to Consumer Staples. 

Sector breakdown of the fund versus MSCI World Index.

Source: Guinness Atkinson Asset Management, Bloomberg. Data as of December 31^st, 2022

In terms of geographic exposure (chart below), the largest overweight remains Europe ex-UK, though we are diversified around the world with 60% in the US, 33% in Europe and 5% in Asia-Pacific. Within the Asia-Pacific region we have one company listed in Taiwan (Taiwan Semiconductor) and one company listed in Australia (Sonic Healthcare).

Regional breakdown of the fund versus MSCI World Index. Source:

Guinness Atkinson Asset Management, Bloomberg. Data as of December 31^st, 2022  

Outlook

The four key tenets to our approach are: quality, value, dividend, and conviction. We follow these metrics at the portfolio level to make sure we are adhering to them.

Whilst the Fund tends to trade at a discount to the broader market, at the end of the year the Fund was trading on 18.5x 2023 expected earnings; a c.22% premium to the broad market. This has been as a result of the Fund’s relative outperformance in the near term and potentially reflects a market multiple which is already discounting a drop in earnings. If the ‘E’ in the market P/E ratio is actually expected to fall (as many commentators are alluding to, due to the slow reaction of company analysts to a changing macro environment) then, all things equal, the P/E ratio of the market should, in fact, be higher. This blunt analysis also assumes that the Fund’s ‘E' is less likely to fall - which we can argue makes sense given the higher quality characteristics seen across the Fund’s holdings. We will have to wait and see how this progresses in 2023, but it is clear that the market is anticipating the upcoming earnings seasons to result in downgrades of earnings at the index level. We also note the outsized effect of the Energy sector on Index multiples today. Despite accounting for approximately 6% of the benchmark, the Energy sector currently trades at P/E levels of 7.7X 2023 and looking at the benchmark ex-Energy we estimate the P/E to be around 16.1X, a c.15% discount to the Fund. 

As we look ahead to 2023, we are confident that the companies in the portfolio are well placed from a pricing power perspective, and we note the defensive nature of the portfolio gives us confidence heading into what, currently, appears uncertain markets. We believe the holdings we have selected in the Fund remain very robust and are well placed to weather whatever the new year brings; our perpetual approach of focusing on quality compounders and dividend-growers should continue to stand us in good stead in our search for rising income streams and long-term capital growth.

As ever, we would like to thank you for your continued support, and we wish you all a prosperous 2023.

Matthew Page & Ian Mortimer 

January 2023

The Fund’s strategy of investing in dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and could reduce or eliminate the payment of dividends in the future or the anticipated acceleration of dividends could not occur. 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 invests in small- or mid-cap companies, which involve additional risks such as limited liquidity and greater volatility than larger companies. When inflation rate is greater than expected, that markets may respond differently to changes in the inflation rate than the Advisor expects, or inflation may manifest in such a way that the Fund is unable to provide reasonable protection against inflation.

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. This index is unmanaged and is not available for investment, and does not incur expenses.

The S&P 500 Index is a free float-adjusted market capitalization weighted index of the 500 largest publicly traded companies in the US. One cannot invest directly in an index

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.

Earnings growth is not a measure of the Fund’s future performance.

SEC 30-day Yield:

Subsidized (after waivers) - 1.61% 

Unsubsidized - 0.97% 

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.

Dividend yield is calculated by annualizing the last quarterly dividend paid and dividing it by the current share price.

Diversification does not assure a profit nor protect against loss in a declining market.

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. 

SmartETFs Dividend Builder ETF

FUND PERFORMANCE AND SUMMARY

As of December 31, 2022 (Unaudited)

The SmartETFs Dividend Builder ETF acquired the assets and liabilities of the predecessor mutual fund, the Guinness Atkinson Dividend Builder Fund, on March 26, 2021. As a result of the transaction, the Fund adopted the accounting and performance history of its predecessor mutual fund Performance results shown prior to March 26, 2021, reflect the performance of the predecessor mutual fund. The Market Price returns shown prior to March 26, 2021 reflects the predecessor mutual fund's NAV.

The performance data quoted represents past performance and past performance is not a guarantee of 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 theFund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.smartetfs.com.

Total returns reflect the reinvestment of distributions made by the Fund, if any. The deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares is not reflected in the total returns.

The Fund's shares are listed on an exchange. The price of the Fund's shares is based on market price, and because the exchange-traded fund shares trade at market prices rather and net asset value, shares may trade at a price greater than net asset value (premium) or less than net asset value (discount).

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. 

SmartETFs Dividend Builder ETF

Schedule of Investments

at December 31, 2022

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

SmartETFs Dividend Builder ETF

Schedule of Investments

at December 31, 2022

ADR - American Depository Receipt

PLC - Public Limited Company

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

SmartETFs Dividend Builder ETF

Schedule of Investments

at December 31, 2022

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

SmartETFs

STATEMENTS OF ASSETS AND LIABILITIES

at December 31, 2022

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

SmartETFs

STATEMENTS OF ASSETS AND LIABILITIES

at December 31, 2022

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

SmartETFs

STATEMENTS OF OPERATIONS 

For the year ended December 31, 2022

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

SmartETFs

STATEMENTS OF OPERATIONS

For the year ended December 31, 2022

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

SmartETFs

STATEMENTS OF CHANGES IN NET ASSETS

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

SmartETFs

STATEMENTS OF CHANGES IN NET ASSETS