SmartETFs

Annual Report

December 31, 2023

TABLE OF CONTENTS

Dear SmartETF Shareholders,

This past year was, on balance, positive for the SmarETFs. Four of the five ETFs posted a positive return for the year. The one sour note was the Sustainable Energy II Fund (SOLR) whose total return was a negative 0.95%.

The top performing SmartETF was MOTO, the Smart Transportation & Technology ETF, which produced a total return of 26.69% (Net Asset Value) for the year. MRAD, the Advertising & Marketing Technology ETF wasn’t far behind with a total return for the year of 22.86% (Net Asset Value). DIVS, the Dividend Builder ETF provided a total return of 15.99% (Net Asset Value) for the year. The Asia Pacific Dividend Builder ETF also produced a double-digit total return for the year, coming in at 11.51% (Net Asset Value).

We’ll take this opportunity to highlight the Dividend Builder Fund, DIVS. We acknowledge that there are higher yielding dividend funds in the marketplace. In fact, we will speculate that among dividend funds, most likely offer a higher yield. But we believe that investing in quality companies is more important than reaching for yield. We like to think that this approach is working as our long-term performance is, we believe, quite good. You’ll see in the adjacent table that DIVS is a Morningstar Five-Star Fund. We like to think that our focus on quality versus yield may be the main reason for this high rating.

If you haven’t already done so we encourage you to sign up to follow us on X (formerly, Twitter) (“SmartETFs”) and/or sign up for our email service. You can do both from the SmartETFs website at [email protected]. Or, if you prefer, simply visit the website occasionally to see the latest news and views from our portfolio managers. You’re also encouraged to check out the Guinness Atkinson Funds, our family of traditional open-end funds. More information is available at www.gafunds.com.

More detailed commentary for each of the SmartETFs from our portfolio managers is contained in this report. 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 0.92% gross. For SOLR ETF, the expense ratio is 0.79% net and 3.29% gross. For MRAD ETF, the expense ratio is 0.68% net and 7.51% gross. For ADIV ETF, the expense ratio is 0.78% net and 4.94% gross. For DIVS ETF, the expense ratio is 0.65% net and 1.22% gross. All returns are for the periods ending December 31, 2023. 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, 2026. Performance would have been lower without fee waivers in effect.

Periods 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.

The Asia Pacific Dividend Builder ETF and the Dividend Builder ETF converted from traditional open-end mutual funds to exchange traded funds on March 27, 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 sold, 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.

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.

Morningstar Ratings Through December 31, 2023 (Based on Risk Adjusted Return) 

Fund	Category	Overall	3-Year	5-Year	10-Year
Advertising & Marketing Technology ETF MRAD	Communications	1 (44 funds)	1 (44 funds)
Asia Pacific Dividend Builder ADIV ETF	Pacific/Asia ex- Japan Stock	5 (46 funds)	5 (46 funds)	5 (46 funds)	5 (33 funds)
Dividend Builder DIVS ETF	Global Large- Stock Blend	5 (339 funds)	5 (339 funds)	5 300 funds)	5 (203 funds)
Smart Transportation & Technology ETF MOTO	Global Large- Stock Blend	1 (339 funds)	1 (339 funds)
Sustainable Energy II ETF SOLR	Equity Energy	1 (69 funds)	1 69 funds)

Morningstar Ratings Disclosure

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.

SMARTETFS SMART TRANSPORTATION & TECHNOLOGY ETF 

ANNUAL REPORT FOR THE YEAR ENDED 

DECEMBER 31, 2023

The Fund’s total expense ratio is 0.92% 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, 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.SmartETFs.com, or calling (866) 307-5990.

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.

In 2023 the SmartETFs Smart Transportation ETF produced a total return (NAV, USD) of 26.69% vs the MSCI World Index (net return) of 23.79%. The fund therefore outperformed the index by 2.90% 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 Semiconductors, delivering an average 34.1% total return over the period. Renesas was a notable performer, delivering a positive return of +100.3% after its 2030 targets were well received by the market. At its capital markets day, the company announced that it is targeting over $20bn in sales, a doubling of business scale and a tripling in its valuation multiple resulting in a sixfold increase in market capitalization by the end of the decade. After years of trading at a discount to peers, Renesas announced that it would attempt to raise its multiple by focusing on managing profit margins throughout the downcycle, increasing shareholder returns via dividends and share buybacks, and improving its free cashflow conversion.

Strong performance was also seen from NVIDIA, which appreciated by 239% after releasing stellar Q1 results and raising guidance by 53% relative to consensus expectations. The key driver for the beat was an inflection in Generative AI leading to explosive growth in its data centre business which led analysts to raise EPS estimates by 40-50% in each of the next three years.

The weakest category was Components, where the average company delivered 27.1%. Within this category, battery manufacturers Samsung SDI and LG Chem underperformed, delivering returns of -21.7% and -18.5% respectively for the year. Both were weighed down by concerns over slowing electric vehicle demand and forecasts of meaningful overcapacity in China. Despite weak near-term investor sentiment, we remain constructive on both names as we believe that medium- and long-term forecasts for EV adoption remain intact and that a material proportion of announced capacity additions may not come to fruition due to funding constraints at tier 2 suppliers.

Geely shares were also weak over the past 12 months, falling 23%, suffering from China’s macroeconomic slowdown, a withdrawal of EV subsidies, and a fierce price war which hampered profitability.

Individual stock performance over 12m (total return USD)

A number of switches were made in the year, with the following portfolio level impacts:

Specific buys and sells are discussed below:

Buys

BYD – Smart Transportation

BYD is a Chinese conglomerate which manufactures electric vehicles, batteries, semiconductors, and consumer electronics. They launched the world’s first plug in hybrid vehicle (F3DM) in 2008 and the company is now the world’s largest manufacturer of electric vehicles, having sold over 6 million units to date. It is also a leader in lithium iron phosphate batteries and the first company to employ cell-to-body technology, integrating battery cells into a car’s chassis.

TE Connectivity – Transportation Technology

TE Connectivity is an American Swiss-domiciled technology company sells connectors and sensors into automotive, industrial and communication end markets. It is the largest electrical connector manufacturer in the world, selling connectors, sensors, relays, antennas, wire and cables. It is the dominant player in automotive connectors with ~40% market share, with products designed into every major EV platform globally.

Mobileye – Smart Transportation

Mobileye is a US-listed Israeli developer of advanced driver assistance systems (ADAS) and autonomous driving technologies including cameras, computer chips and software. Spun out of Intel in 2022, it holds over 70% market share of the global ADAS market with solutions installed on over 125 million vehicles across over 800 models sold by over 50 auto manufacturers worldwide.

Renesas – Transportation technology

Japanese semiconductor supplier with 40-50% exposure to automotive end markets. Top 5 global automotive semiconductor supplier, holding leading market share in microcontrollers (MCUs) that serve as the brains of a variety of electronic functions in a car. Exposed to electric vehicles through advanced MCUs for motor control units and battery management systems.

Darling Ingredients – Other

Darling Ingredients is one of the largest rendering companies in the world. It is the largest publicly traded company turning edible by-products and food waste into new products, serving customers in the food, pet food, pharmaceutical, fuel, bioenergy and fertilizer industries. Through its joint venture with Valero, Darling has a 50% stake in a world leading renewable diesel facility.

Sells

Lear

US listed tier 1 automotive supplier specialising in seating, electronics, and high voltage cabling. We believe margins for legacy suppliers with a high level of dependence on automotive end markets will be structurally lower in the next 5-10 years than they were in the past 5-10 years as car makers squeeze their suppliers for extra margin whilst undergoing the margin dilutive transition to electric vehicles and fighting off price competition from lower cost electric vehicle first and Asian manufacturers.

Tianneng Power

Chinese manufacturer of lead acid batteries with leading market share for lead acid motive batteries sold to electric 2/3 wheelers. We are selling out of this name due to the penetration of lithium-ion batteries in 2/3 wheelers.

Intel

We originally bought Intel for its exposure to Mobileye, an ADAS leader. We have chosen to sell Intel and buy Mobileye.

Toyota

Toyota is the world’s largest legacy mass-market automotive manufacturer, selling 9-10m units per annum. Despite being a leader in light hybrid technologies, their investments in hydrogen fuel cells do not appear to have paid off and they have been slow to adopt battery electric models. We do not believe they have a competitive advantage in battery electric vehicles and are concerned about the longevity of their franchise in the context of the rapid expansion of low-cost Chinese EV exports.

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

We hold 20.9% exposure to EV manufacturers, of which 5.8% is invested in EV Dominated names and 15.1% 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 68.5% weight to equipment providers split across Components (40.6%) and Semiconductors (27.9%). Within Components we have 19.0% exposure to Autonomous, 14.8% exposure to Car Components, and 6.8% 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 27.9% exposure to Semiconductors across Power (9.1), General (9.7%), and Connectivity (9.1%) applications. For example, onsemi provides power semiconductors for electric vehicle traction inverters and on-board chargers.

The portfolio provides 9.0% 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.

Despite seeing a reversal of last year’s raw material cost inflation, 35% growth in EV sales and record penetration rates, 2023 threw up a few speedbumps for companies involved in the electrification of transportation. Lower subsidies, rising interest rates, and increasing price competition led to concerns around customer affordability, slowing adoption and the profitability of EV manufacturing. Below, we reflect on the events of 2023 and consider the outlook for both the lithium-ion battery and electric vehicle markets.

Batteries

In last year’s outlook, we reported that 2022 was the first year on record that lithium-ion battery pack costs had increased, driven by soaring metal prices. In 2023, this trend reversed, with lithium and nickel prices cooling by 80% and 40% respectively due to slower electric vehicle demand growth. Shrinking commodity costs helped to drive a 14% decline in average battery pack prices to $139/kWh. According to Bloomberg New Energy Finance (BNEF), this meant that real battery prices have fallen by 90% since 2010 and are forecast to fall below the EV/ICE parity benchmark of $100/kWh in 2027.

Cumulative demand for LiB packs (MWh) vs battery pack price ($/kWh)

Source: BNEF, Guinness Global Investors

In the year, the industry faced oversupply concerns, with CRU Group suggesting that planned Chinese capacity would be 2.5-3x higher than global demand from 2025-2030. While we do see overcapacity in the sector, we believe this is likely overstated. The top 6 battery manufacturers (CATL, BYD, LGES, Samsung SDI, SK On, and Panasonic) are responsible for 85% of electric vehicle battery volumes. These six companies are behind just 50% of planned capacity additions out to 2025, with capital expenditure plans typically underpinned by supply arrangements with EV manufacturers. The remaining 50% of additions are expected to be brought online by more indebted and less profitable tier 2 suppliers. A lot of this tier 2 capacity ultimately may not come online as declining share and poor cashflows lead to funding constraints and sector consolidation.

Top 6 battery manufacturer volume-based market share

Source: EV-Volumes, HSBC, Guinness Global Investors

The last 12 months have also seen legislators wrestle for control over battery supply chains to reduce their dependence on Chinese imports. The EU announced its Critical Raw Materials Act and the US released guidance that EVs with Chinese battery components would not be eligible for full IRA tax benefits. With China processing around 75% of the world’s lithium and supplying over 50% of battery components globally, we believe it will be incredibly challenging to extricate Chinese companies from western supply chains.

Electric vehicles

Electric vehicles (EVs) 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 are expected to have grown by around 35% in 2023 to around 14 million units, representing an 18% penetration rate. China will retain its crown as the largest market for EVs, representing 60% of global plugin vehicle sales, with monthly penetration rates approaching 40%. Europe will come in second, at 25% of global sales and penetration rates of around 25%, with the USA in third at around 10% of global sales, breaching 1 million units and seeing EVs making up over 10% of monthly sales for the very first time.

Monthly plug-in vehicle penetration rates by region

Source: Cleantechnica, AtlasEVhub, Guinness Global Investors

These regional differences largely reflect the main driver of adoption: affordability.

Global auto, ICE and EV population to 2050 

Source: US DOE, Guinness Global Investors

The decline in battery prices (and commensurate improvement in EV affordability) observed over recent years has coincided with increasing expectations of EV sales. We estimate that EV sales will continue to grow and that the MOTO ETF remains well-positioned to benefit from the long-term trend towards cleaner, safer, and more connected transportation.

Portfolio Managers

Will Riley and Jonathan Waghorn

January 2024

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.

SmartETFs Smart Transportation & Technology ETF 

FUND PERFORMANCE AND SUMMARY 

As of December 31, 2023 (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 distributions or the sale or redemption of Fund shares, and the expenses (if any) incurred in a sale 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, 2023

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

SmartETFs Smart Transportation & Technology ETF 

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.

SmartETFs Smart Transportation & Technology ETF    

Schedule of Investments    

at December 31, 2023  

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

SMARTETFS ADVERTISING & MARKETING TECHNOLOGY ETF

ANNUAL REPORT FOR THE PERIOD ENDED

DECEMBER 31, 2023

1. PERFORMANCE

The Fund’s total expense ratio is 7.51% 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, 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.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 distributions 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 2023, the Fund was up 22.86% (NAV, in USD) versus the MSCI World Index benchmark which was up 23.79% (in USD). The Fund therefore underperformed the Index by 0.93%.

Since launch the Fund is down -15.24% (NAV, in USD) versus the MSCI World Index benchmark which is up 7.27% (in USD). The Fund has therefore underperformed the Index by 22.51%, with most of that occurring between mid-November 2021 and October 2022 when value stocks were heavily favored over growth.

At year end, the Fund’s AUM was $1.2mn.

2023 market and fund commentary

● (1) Recovery Rally: Over the start of 2023, equities rallied hard with the growthiest parts of the market significantly outperforming – benefitting the Fund – as the factors which had performed worst over 2022, saw a strong reversal and led the market higher.

● (2) Market Reversal: The positive sentiment that had driven markets, quickly unwound. The rally had been led by a small number of seemingly fragile data points, but as new data emerged, investors reassessed their inflation expectations and the outlook became markedly more hawkish. With the prospect of higher rates for an extended period of time, longer duration assets were impacted the hardest, and markets retreated, as did the Fund’s relative performance.

● (3) Banking Crisis: Three large bank failures in the US and the Credit Suisse rescue in Europe showed growing stress in the banking sector and highlighted the impacts of an historically stringent monetary tightening cycle. However, after a short sell-off in early March, volatility abated, and risk aversion retreated as swift liquidity support by central banks (and several takeovers) prevented a widespread escalation. Over this period, the Financials and Energy sectors performed particularly poorly, but other parts of the market (notably Healthcare & IT) saw positive performance. The Fund also outperformed over the month.

● (4) AI Induced Rally: Since the end of March, a focus on Artificial Intelligence, and more specifically its potential use cases for a range of business cases, caused a sharp market rally. The largest gainers were the semiconductor names within the IT sector, as well as a range of associated sectors which have tangential exposure. It is worth noting that AI is not a new phenomenon but the launch of ChatGPT in early 2023 was the first consumer facing AI application and has therefore drawn attention to the technology. The number of S&P 500 companies citing AI on their earnings call has more than doubled over the last 6 months and, in many cases, has been richly rewarded by the market. More specifically, the optimism surrounding AI has focused on a handful of large cap names, which have driven the majority of performance. There is growing concern that such lack of breadth is not a stable base for an enduring bull market as the largest ten names in the S&P 500 have accounted for nearly all the index’s returns until the end of May. Whilst the Fund has some exposure to the large US tech names that have benefitted from this rally, it also has 50% invested in small and mid-cap market cap companies which lagged. Overall the Fund therefore underperformed over Q2.

● (5) Higher for longer rate expectations: the 10-year US treasury yield rose to 4.6% driven by a.) the US credit downgrade; b.) greater supply of debt following the resolution of the US debt ceiling and c.) positive US economic data, suggesting a stronger economic growth outlook. Expectations of higher-for-longer interest rates was subsequently 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. This weighed on high duration stocks and contributed to weaker relative Fund performance.

● (6) Hopes of interest rate cuts: The final two months of the year saw very solid performance from equities, on growing excitement that central banks would cut interest rates in 2024, sooner than previously expected. This rally came amidst a backdrop of easing inflation and resulted in an ‘almost everything rally’ with all styles, factors and regions showing solid gains, although the tech stocks which dominated most over 2023 performed particularly well. The Fund’s higher beta names led it to outperform in this period.

3. ACTIVITY

We made 2 changes to the portfolio in 2023.
BOUGHT: Sprout Social, DoubleVerify
SOLD: Illumin Holdings, *

*2 buys replace 1 sell and 1 illiquid stock written down in the Fund (Yandex)

The Fund at quarter 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.

With inflation having peaked and global central banks set to lower interest rates this year, many of the earlier headwinds for equity markets, and growth stocks in particular, are looking more positive. 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 2024

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.

Beta is a measure of the volatility — or systematic risk — of a security or portfolio compared to the market as a whole. A beta higher than 1 can be interpreted as more volatile than the market.

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

Earnings growth is the annual compound growth rate (CAGR) of a company’s net income.

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, 2023 (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 distributions or the sale or redemption of Fund shares, and the expenses (if any) incurred in a sale 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, 2023

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, 2023  

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

SMARTETFS SUSTAINABLE ENERGY II ETF

ANNUAL REPORT FOR THE PERIOD ENDED

DECEMBER 31, 2023

The Fund’s total expense ratio is 3.29% 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 expense to 0.79% 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.SmartETFs.com, or calling (866) 307-5990.

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

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. We believe that 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 9,200 terawatt-hours (TWh), 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 per kilowatt-hour (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 SmartETFs Sustainable Energy II ETF delivered a total return (NAV, USD) of -0.95% in 2023 vs its benchmark the MSCI World Index (net return) of 23.79%. The underperformance of the ETF resulted almost entirely from multiple compression rather than earnings downgrades, with the ETF trading at a one year forward price/earnings (P/E) discount of 6% to the MSCI World Index at the end of the year.

During the period, we initiated positions in Legrand, Orsted and Installed Building Products.

The ETF was actively rebalanced during the period and, over the year, the weighting to consumption (i.e. the demand side of the energy transition) increased from 43.4% at the end of 2022 to 45.5% at the end of December 2023 while the weighting to renewables (i.e. supply side) grew from 50.9% to 54.3%.

At 31 December 2023, the SmartETFs Sustainable Energy II ETF traded on a one year forward (2024) price/earnings (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 ETF 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 ETF 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 ETF continues to remain attractive. Updating for recent earnings and guidance announcements, we find that the portfolio consensus earnings per share growth outlook for the ETF 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 ETF 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 ETF P/E ratio down from the current 16.6x for 2024 to around 10.6x in 2027.

Looking ahead to 2024 and beyond, we expect further acceleration of the transition with 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 Sustainable 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.

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 Sustainable Energy II ETF

FUND PERFORMANCE AND SUMMARY

As of December 31, 2023 (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 distributions or the sale or redemption of Fund shares, and the expenses (if any) incurred in a sale 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, 2023

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, 2023    

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, 2023

The Fund’s total expense ratio is 4.94% 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 expense to 0.78% through June 30, 2026. 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 funds’ 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 distributions or the sale or redemption of Fund shares, or the expenses, if any, incurred by a sale 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 rose 11.51% on an NAV-basis in 2023 compared to the MSCI AC Pacific ex Japan Net Total Return Index which rose 5.18%. All thirty-six companies in the portfolio reported dividends. Overall, twenty-one companies grew the dividend, three were unchanged, and twelve fell.

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 Fed 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.

As ever, a comparison between our asset allocation and this analysis would suggest we were in all the wrong places and out of all the right ones, but the fund still outperformed by over 7% in 2023 and the answer as to how lies in the stock selection. The Information Technology and Communication Services sectors both contributed via allocation and selection, whilst Consumer Discretionary and Health Care stock selection more than offset the small negative effects associated with allocation. Financials, which was a contributor to relative performance in 2022, was the Fund’s largest detractor in 2023. Not holding Energy or Materials companies further detracted from relative performance. As a reminder, we do not hold stocks within these two sectors as we believe the cyclical nature of stocks does not align with our investment process.

On a country basis, China, despite being a weak market, was actually a contributor to the Fund’s relative performance. Here, stock selection was key again; our positions in NetEase and China Medical Systems contributed to relative performance, as did avoiding holding the big internets names such as JD.com and Alibaba.

Of our top five performing stocks, four were from the Information Technology sector: Elite Material, Broadcom, Novatek Microelectronics and Largan Precision. These stocks have benefitted from the rising interest in AI, what we believe is the start of the PC replacement cycle and the trend for smartphone camera upgrades. The remaining stock, JB Hi-Fi, comes from the Consumer Discretionary sector. The laggards were all affected by the macro sentiment related to China. These were China Merchants Bank, Ping An Insurance, China Overseas Land & Investment, Link REIT, and BOC Hong Kong.

No portfolio changes were made in 2023.

The portfolio maintains a diversified exposure across sectors and geographies.

The largest country exposures in the Fund are to China at 29% followed by Taiwan at 22%, and Australia at 11%. The Fund also has 10% in US-listed companies (Aflac, Broadcom and Qualcomm) that derive over 50% of their revenues from the Asia pacific region. Versus the benchmark, we are underweight in Australia, in-line for China and slightly overweight in Taiwan.

From a sector perspective, the Fund is most exposed to Information Technology, Financials and Consumer Discretionary. Versus the benchmark, we are overweight in all three of those sectors, as well as in Real Estate. Note that we do not hold any Energy or Materials stocks as we believe these sectors have a classically cyclical nature and are therefore incompatible with our investment process.

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.

We also expect 2024 to continue to be an interesting period to navigate through with respect to interest rates and China related anxiety. It is increasingly clear that we are entering a new interest rate cycle. In a world where “higher-for-longer” seems to be persisting, one would expect the market to favour value sectors more that their growthier counterparts. Dividend generating strategies also tend to be looked upon more favourably. This brings us much delight as it aligns well with our own investment process. Our focus remains on companies with strong balance sheets which continue to generate returns above their cost of capital, and which have a history of providing a dividend. This strategy has allowed us to navigate through the COVID period and will help see us through the coming year.

When it comes to China, the deep level of skepticism 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.

The 2024 valuation multiple of 10.3x is at a 15% discount to market’s 12.1x. If the portfolio companies achieve an earnings growth trajectory 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 2024

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, 2023 (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 distributions or the sale or redemption of Fund shares, and the expenses (if any) incurred in a sale 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, 2023

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

SmartETFs Asia Pacific Dividend Builder ETF

Schedule of Investments

at December 31, 2023

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, 2023

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

SMARTETFS DIVIDEND BUILDER ETF

ANNUAL REPORT FOR THE PERIOD ENDED

DECEMBER 31, 2023

The Fund’s total expense ratio is 1.22% 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 expense to 0.65% 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.SmartETFs.com, or calling (866) 307-5990.

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.

Dividend Update

Based on year-end prices, the Fund had a 12-month trailing dividend yield of 1.8% (net of withholding taxes) vs the benchmark MSCI World Index dividend yield of 2.0% (gross of withholding taxes). In the Fund, the average dividend growth across all 35 companies was 6.3%.

In 2023, out of our 35 holdings:

Review

It was a volatile year for global equities given a difficult macroeconomic backdrop and a number of notable geopolitical shocks but, despite the wider uncertainties, equities saw their largest gain since 2019. For much of the year, investors were concerned with high inflation reads, the fastest rate hiking cycle on record, ongoing volatility in energy & commodity markets which was driven largely by the conflict in Ukraine and, more recently, developments in the Middle East. Whilst the combination of such headwinds may make the strong equity performance seem surprising, it was the emerging promise of Artificial Intelligence which drove the markets higher. Namely, a handful of large cap technology stocks, attributed the moniker ‘Magnificent 7’, all saw stellar gains over the year and played a dominant role in leading the index. Then in November a perceived dovish outlook for interest rates from the Federal Reserve released a broad-based rally across almost all risk assets which accelerated in the final weeks of the year as recession risks diminished.

Over 2023 as a whole, equities performed well (MSCI World Index +24.4% in USD) and markets ended the year with improved sentiment and a positive outlook for 2024.

Part 1: The Year in Review

Source: MSCI, data as of 31st December 2023

(5) Hopes of Interest Rate Cuts:

Source: MSCI, data as of 31st December 2023

It was a blow-out year for technology, with the IT sector (+54% USD) leading the market higher and contributing almost 50% towards the total gain of the MSCI World. Communication Services (+46%) and Consumer Discretionary (+36%) saw strong gains as well, but this was in large part due to the MSCI classification, which includes Meta & Google and Amazon & Tesla in these two sectors, respectively. Therefore, the sector performance chart (above) can clearly be viewed as a function of the strong gains from companies with material exposure to technology trends, namely artificial intelligence. This focus on AI over the year has not only supported areas with structural exposure (Semiconductors, Software, IT more broadly) but it has also driven performance across many other sectors which will likely benefit from a range of tangential AI uses cases.

Source: Bloomberg, data as of 31st December 2023

The US was the strongest region given its large overweight to both IT and Growth as a factor. In Europe, Value stocks started the year well but then faltered towards the back half of 2023, particularly as rate expectations disproportionately helped growthier parts of the market. As such, the value-oriented UK market underperformed and this was not helped by weakness in both the Energy and Healthcare sectors, two core areas of the UK index. Japanese equities gained (+20% in USD and +28% in Yen) given a range of positive tailwinds. Foreign interest in Japanese companies has gathered steam, following well-known investor Warren Buffet’s bullish outlook on the market. Additionally, as firms continue to diversify supply chains away from China, some of the high-end offshoring is relocating to Japan, especially for some of the advanced semiconductor manufacturing. This has seen improving investor sentiment in the market and has also been supported by a weaker yen, which improves relative valuation of assets. Conversely, Chinese equities struggled in 2023 and underperformance has been the case for much of the APAC region. China has been battling with its heavily indebted property sector which continues to weigh heavy on the domestic economy. GDP growth figures have been revised downwards and the country continues to fight with staggeringly high youth unemployment (which now exceeds 20%). Whilst the world’s second largest economy still has many attractive growth drivers, there is no doubt that 2023 was a challenging period and helps to explain the relative equity underperformance over the year.

Over the course of the year, the Fund’s overweight to Consumer Staples and Healthcare acted as a headwind as both these sectors underperformed the index. Additionally, the underweight allocation to IT was a further drag, given that it was the best performing sector over 2023. However, a zero allocation to Utilities and Energy was a positive, as these were 2 of the 3 worst performing sectors. Furthermore, strong stock selection within Industrials, Healthcare, and Financials was a tailwind for the Fund.

When we look at how individual companies within the portfolio performed in 2023, we see that out of the top ten, we have five Industrials, two IT, one Consumer Staples, one Health Care, and one Financials stock. 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.

Activity

In 2023, we sold one position (VF Corp) and replaced it with Assa Abloy, leaving the portfolio with 35 positions at the end of the year. This was done in the fourth quarter of the year.

In terms of sector allocation, this meant we sold one Consumer Discretionary stock and replaced it with an Industrial stock. However, the overall positioning of the Fund remained largely unchanged.

Regionally, this change increased our European ex-UK exposure, and reduced our US exposure slightly.

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).

The Fund also has zero weighting to Energy, Utilities, Materials, Real Estate, Communication Services, and Consumer Discretionary. 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 2023

In terms of geographic exposure (chart below), the largest overweight remains Europe ex-UK, though we are diversified around the world with 57% in the US, 38% in Europe & UK 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 2023

Outlook

Whilst the Fund has historically traded at a discount to the broader market, but at the end of the year the Fund was trading on 19.5x 2024 expected earnings; a 9% premium to the MSCI World. This is primarily a result of two aspects: (1) the very low multiple of the Energy sector within the benchmark relative to history has pulled the overall index multiple lower and (2) the changes we have made to the portfolio as outlined above (and the stocks we have held on to) which can be viewed as a move ‘up in quality’, somewhat at the expense of valuation and dividend yield. However, we still believe the desirable characteristics that the fund exhibits (persistently high returns on capital, strong balance sheets, sustainable growth) the premium the fund currently trades on is reasonable, and may be considered good value in context.

As we look ahead to 2024, we are confident that the companies we own in the Fund will continue to navigate the changing macroeconomic environment, as has been the case over 2023. The current consensus is for a soft landing - low (but positive) economic growth, falling inflation and continued strength in employment. Whilst few would have foreseen this just one year prior, the current consensus view is that we avoid a global recession and, at time of writing, the market is pricing in 6 rate cuts by the Fed over the coming year. With inflation moderating and central banks showing willingness to tone down their hawkish rhetoric, it is reasonable to expect a number of rate cuts over 2024. However, there is of course the risk that the market is overly optimistic with regards to both timing and magnitude.

It is therefore prudent to note alongside this optimistic scenario the downside risks, in our view, that remain present:

It is worth noting, as ever, that consensus thinking when taken on wholesale rarely reflects the reality of what actually happens and today’s consensus carries high expectations, considering the still difficult path that central banks need navigate. We do not try to predict what will happen from a macro perspective for just these reasons and instead try to create a portfolio that can weather different economic environments and provide the return outcomes we seek to provide on a consistent basis.

As such, we believe that focusing on the high-quality businesses that have shown the ability to perform over numerous economic cycles provides the fund with a good balance and helps to mitigate against some of these downside risks. We also note that the defensive nature of the portfolio – which has outperformed in all market corrections since launch in 2010 – gives us confidence heading into 2024. Additionally, we believe the holdings we have selected in the Fund remain robust and 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 2024.

Matthew Page & Ian Mortimer

January 2024

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 as of December 31, 2023:

Subsidized (after waivers) – 1.35%

Unsubsidized – 0.90%

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, 2023 (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 distributions or the sale or redemption of Fund shares, and the expenses (if any) incurred in a sale 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, 2023

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

SmartETFs Dividend Builder ETF

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.

SmartETFs Dividend Builder ETF  

Schedule of Investments

at December 31, 2023

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

SmartETFs

STATEMENTS OF ASSETS AND LIABILITIES

at December 31, 2023

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

SmartETFs  

STATEMENTS OF ASSETS AND LIABILITIES

at December 31, 2023

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

SmartETFs

STATEMENTS OF OPERATIONS

For the year ended December 31, 2023