SmartETFs

 

Semi-Annual Report

 

June 30, 2022

 

TABLE OF CONTENTS

 

Letter to Shareholders (Unaudited) 3
Management’s Discussion of Fund Performance (Unaudited) and Schedules of Investments  
Smart Transportation & Technology ETF (MOTO) 6
Advertising & Marketing Technology ETF (MRAD) 16
Sustainable Energy II ETF (SOLR) 23
Asia Pacific Dividend Builder ETF (ADIV) 30
Dividend Builder ETF (DVIS) 36
Statements of Assets and Liabilities 43
Statements of Operations 45
Statements of Changes in Net Assets 47
Financial Highlights 50
Notes to Financial Statements 55

Other Information (Unaudited)

63

Privacy Notice 68

 

Dear SmartETF Shareholders,

 

You don’t need us to tell you that 2022 hasn’t been a good year—at least so far. Hopefully the second half of the year will be better. This has been a turbulent year (or should we say century?) so far. The markets in 2022 have been less than optimal and the returns for the SmartETFs might also be described as less than optimal. The adjacent performance table has all total return figures over various time periods ending June 30, 2022. The headline for YTD and last 12 months performance is consistent and can be characterized as negative with all the SmartETFs producing negative returns over these time periods.

 

Despite this less-than-optimal YTD outcome, there are some bright spots. The two dividend ETFs have weathered the storm better than most and that can be seen in their Morningstar ratings. The Dividend Builder ETF (DIVS) is a five-star Morningstar rated ETF across all time periods and the Asia Pacific Dividend Builder (ADIV) is an overall four-star rated ETF and over most time periods. Despite the negative year-to-date performance for both ETFs, their longer-term results are, we think, pretty darn good.

 

The Advertising & Marketing Technology ETF (MRAD), the Smart Transportation & Technology ETF (MOTO) and the Sustainable Energy II ETF (SOLR), have all had a rougher time thus far in 2022. We’d be remiss if we didn’t point out the most disappointing return figure among the YTD performance of the SmartETFs family. MRAD has produced negative total return of nearly 50% for the first six months of 2022.

 

While we much rather write these letters with nothing but positive returns over all time periods (which we were able to do just six months ago) it needs to be mentioned that we’re undaunted by recent performance. The SmartETFs are all about opportunities stemming from a changing world. While change is a constant, we believe change is occurring with greater rapidity than ever before. This change presents opportunities. It also means periods of uncertainty and volatility. We’ve been through periods like this before and we’re not worried about the future.

 

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 of these 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

Page 3

 

Fund
Symbol
Inception date
YTD 1-year 3-year 5-year 10-year Since
Inception
Expense
Ratio
Advertising & Marketing
Technology ETF
MRAD
December 31, 2020
-46.96% -50.35% - - - -31.60% 0.68%
net;
4.90%
gross
Asia Pacific Dividend
Builder
ADIV
March 31, 2006
-13.07% -13.37% 5.46% 4.86% 6.89% 5.66% 0.78%
net;
4.27%
gross
 
Dividend Builder ETF
DIVS
March 30, 2012
-13.14% -4.93% 9.92% 9.60% 10.33% 9.83% 0.65%
net;
1.08%
gross
Smart Transportation &
Technology ETF
MOTO
November 15, 2019
-27.06% -23.12% - - - 14.68% 0.68%
net;
0.88%
gross
Sustainable Energy II
ETF
SOLR
November 11, 2020
-21.84% -18.39% - - - 2.24% 0.79%
net;
2.84%
gross

 

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 June 30, 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.gafunds.com.

 

Expense ratios are from the most recent prospectus (dated May 1, 2022) and are from the most recent audited financials (period ending December 31, 2021) at the time that prospectus was completed.

Page 4

 

Morningstar Ratings Through June 30, 2022

 

Fund Category Overall 3-Year 5-Year 10-Year
Asia Pacific Dividend
Builder
ADIV
Pacific/Asia ex-
Japan Stock
4 ««««
(54 funds)
4 ««««
(54 funds)
3 «««
(49 funds)
4 ««««
(36 funds)
Dividend Builder
DIVS
World Large-
Stock Blend

 5 «««««
(304 funds)

5 ««««
(304 funds)
5 «««««
(272 funds)
5 «««««
(168 funds)

 

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.)

 

© 2022 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.

Page 5

 

SMARTETFS SMART TRANSPORTATION & TECHNOLOGY ETF

SEMI-ANNUAL REPORT FOR THE PERIOD ENDED

JUNE 30, 2022

 

1. PERFORMANCE

 

Average annual Total returns

6
MONTHS
(ACTUAL)
 
1
Year
SINCE
INCEPTION
11/15/2019

Smart Transportation & Technology ETF (Net Asset Value)

-27.06% -23.12% 14.68%

Smart Transportation & Technology ETF (Market Price)

-27.33% -23.51% 14.36%
       

Benchmark Index:

     

MSCI World Index (Net Return)

-20.51% -14.34% 5.87%

 

For the Fund’s current six-month 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.

 

2. REVIEW

 

In the first half of 2022 the Guinness Atkinson SmartETFs Smart Transportation ETF produced a total return (USD) of -27.06% vs the MSCI World Index (net return) of -20.51%. The fund therefore underperformed the index by 6.55% 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.

Page 6

 

Holdings by category

 

Source: Guinness

 

The strongest category was Services, delivering an average -7.6% total return over the period. Quanta Services was a notable performer, delivering a positive return of +9.5%, predominantly as a result of strong quarterly results and boosting full year guidance.

 

The weakest category was Equipment, where the average company delivered -28.7%. Within this category, the average Components name returned -29.6% and the average Semiconductor name returned -26.7% in the period. Within this category, NVIDIA and Infineon were the weakest performers at -48.4% and -47.1% respectively. This poor performance reflects concerns around slower economic growth impacting demand for automotive components and semiconductors.

Page 7

 

Individual stock performance over 6m (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 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 21.4% exposure to EV manufacturers, of which 4.7% is invested in EV Dominated names and 16.7% 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 64.3% weight to equipment providers split across Components (40.2%) and Semiconductors (24.1%). Within Components we have 12.9% exposure to Autonomous, 18.4% exposure to Car Components, and 9.0% 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 24.1% exposure to Semiconductors across Power (7.5%), General (8.5%), and Connectivity (8.2%) applications. For example, onsemi provides power semiconductors for traction inverters and on-board chargers.

Page 8

 

The portfolio provides 8.4% 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

 

Electric vehicle (EV) sales have seen a strong start to the year with 3.2m units sold to the end of May, up 65% on the same period last year. This growth continues to compare favourably against broader passenger vehicle sales which shrank 4% over the same period thanks to a combination of semiconductor shortages, conflict driven supply chain disruptions and consumers delaying purchases due to higher living costs. Some of these pressures can be seen in the EV market also, with 12-month rolling EV sales growth slowing from +135% yoy in August 2021 to +78% yoy in May 2022. Guinness estimates that the 12-month rolling EV sales penetration rate at the end of May 2022 stood at 9.2% versus 5.0% and 2.4% at the end of May 2021 and May 2020. Guinness forecasts 20% of global passenger vehicle sales will be electric by 2025 and 50% by 2030.

 

Global EV sales growth (rolling 12-month basis)

 

Source: Guinness, EV-Sales, Cleantechnica

 

China has extended its dominance as the largest plug-in vehicle market in the world, selling 1.8m units in January through May 2022, more than the 965k for Europe and 480k for the rest of the world combined. China’s turbocharged rate of adoption drove monthly penetration rates to 31% in May 2022 compared to 12% in May 2021 and 4% in May 2020.

Page 9

 

Chinese plug-in electric vehicle monthly market share

 

Source: Guinness, EV-Sales, Cleantechnica

 

Bloomberg New Energy Finance (BNEF) recently updated its Long-Term Electric Vehicle Outlook, validating our forecasts by updating their estimates to suggest that plug-in vehicles would make up 23% of new passenger vehicles globally in 2025, up from 16% in their previous outlook. According to BNEF there are now almost 20m passenger EVs (representing 1.5% of the global fleet), over 1.3m commercial EVs (buses, delivery vans, trucks) and over 280m electric two/three wheelers (mopeds, scooters, motorcycles, etc) on the road today. In 2021, these vehicles are estimated to have displaced 1.5 million barrels of oil per day (c1.5% of global oil demand). BNEF see the continued electrification of transportation leading to EVs of all types displacing c2.5 million barrels of oil per day by 2025, peak gasoline demand by 2026, and peak oil demand from road transport by 2027.

 

Oil demand avoided by EVs

 

 

Source: Guinness, BNEF

 

The success of EVs is being driven by multiple factors including policy support, improvements to battery technology, and greater model variety and availability.

 

Despite being increasingly competitive on a total cost of ownership basis, EVs are still more expensive to purchase than their ICE equivalents, meaning that policy support is still the most important pillar to support growth going forwards. According to the IEA, public spending on subsidies and incentives for EVs nearly doubled in 2021 to nearly $30bn. In addition to this, a number of countries and regions have pledged to phase out internal combustion engines (ICEs) such as the EU’s plan to eliminate carbon emissions from new cars by 2035. This combination of carrot and stick alongside the will to remain competitive is pushing vehicle manufacturers (OEMs) to announce plans to electrify their fleets ahead of policy targets.

Page 10

 

Huge investments are being made by OEMs to climb the learning curve and bring new models to market at a broader range of price points. In 2021, there were over 450 electric car models available to buy, five times higher than in 2015. That means, in addition to the $30,000 Nissan LEAF-style family hatch-backs which have been widely available since the early 2010s, consumers now have the option to purchase mini EVs such as the Wuling Hongguang Mini (c$5,000), trucks and SUVs like the Ford F-150 Lightning or Tesla Model Y (c$60,000), and even sports cars such as the Porsche Taycan (c$150,000).

 

In addition to the range of models improving, average driving range has also been trending upwards. Combined with the grinding 3-4% annual improvements in battery energy density and the 18% observed learning rate for battery costs, we are fast approaching a scenario where consumers can be offered a wide variety of affordable EVs with anxiety alleviating range. IEA data suggests that the average EV sold in 2021 was capable of delivering in excess of the psychological hurdle of 200 miles (220 miles / 350km in 2021) in a single charge. A real world illustration of these improvements over time comes from the Nissan LEAF, one of the longest and best selling EVs of all time. According to an article on Cleantechnica, increases in battery size and energy density have meant that the LEAF’s range has evolved from just 73 miles for the 2011 model to over 215 miles for the 2020 model.

 

 

 

The downside of EVs becoming more affordable, more practical, and more available is that demand is now outstripping supply. This problem has been exacerbated by a perfect storm of supply chain disruptions due to COVID lockdowns, semiconductor shortages, and most recently the Russian invasion of Ukraine. Coupled with soaring energy prices, this has led to a far more challenging environment for automotive OEMs.

 

Despite battery prices falling in 2021 to $132/kWh (from $140/kWh in 2020), we have seen the prices of a number of battery metals increase sharply since the end of 2020. The dollar cost of lithium carbonate, cobalt, and nickel per tonne have increased >800%, 120% and 40% respectively since December 2020. This battery metal cost inflation feeds through to the price of cathode materials, then battery packs, and ultimately the end product, electric vehicles. Cathode materials represent c30% of the cost of the battery pack. If the price of cathode materials increase by 50-100%, this could increase the cost of the battery pack by 15-30%.

 

It is likely that cathode material costs increase at a slower rate than the underlying battery metals due to a number of factors including incremental improvements in battery energy density, continued battery manufacturing efficiencies, a mix shift towards cheaper LFP chemistries, long term commodity pricing contracts, and increasing vertical integration in the battery supply chain. Nevertheless, we are starting to see signs that OEMs are passing these higher costs on to consumers with some of Tesla’s models costing almost 10% more than at the start of 2022. Soaring demand and cost inflation have also led to price increases across electric models at Rivian, Lucid, Ford, and General Motors. The Ford Finance CEO admitted that rising costs have made EVs such as the Ford Mustang Mach-E essentially unprofitable.

Page 11

 

Despite these speed bumps in the road towards electrified transport, we believe many of these headwinds are short term and 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

July 2022

 

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.

Page 12

 

SmartETFs Smart Transportation & Technology ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks: 91.7%   Value ($)  
        Auto/Trucks Parts & Equipment: 3.5%        
  6,776     Gentherm Inc. *   $ 422,890  
                 
        Commerical Services: 4.8%        
  4,662     Quanta Services Inc.     584,335  
                 
        Rubber-Tires: 1.4%        
  2,506     Continental AG     174,640  
                 
        Smart Transportation: 30.6%        
  2,954     Aptiv PLC     263,113  
  2,373     Daimler Truck AG     61,946  
  7,000     Denso Corp.     371,806  
  154,000     Geely Automobile Holdings Ltd.     350,136  
  12,642     Johnson Matthey PLC     296,269  
  6,286     KiaCorp     376,997  
  5,250     Mercedes-Benz Group AG     303,806  
  7,560     Sensata Technologies Holding *     312,304  
  840     Tesla Inc. *     565,673  
  112,000     Tianneng Power International     121,184  
  23,800     Toyota Motor Corp.     368,299  
  500     Vitesco Technologies Group AG     19,335  
  18,592     Volvo AB Class B     287,806  
              3,698,674  
                 
        Technology: 2.8%        
  4,214     Taiwan Semiconductor Manufacturing Co., Ltd. - ADR     344,495  
                 
        Technology & Transportation: 48.6%        
  196     Alphabet Inc. Class C *     428,740  
  5,852     Amphenol Corp. Class A     376,752  
  2,730     Analog Devices Inc.     398,826  
  18,578     Dana Inc.     261,392  
  3,220     Eaton Corp. PLC     405,688  
  32,942     Hanon Systems     256,862  
  31,850     Hexagon AB Class B     330,759  
  12,250     Infineon Technologies AG - ADR     296,415  
  8,092     Intel Corp.     302,722  
  2,450     Lear Corp.     308,430  
  742     LG Chem Ltd.     297,056  
  2,268     NVIDIA Corp.     343,806  
  2,310     NXP Semiconductors NV     341,949  
  10,080     ON Semiconductor Corp. *     507,125  
  5,320     Power Integrations Inc.     399,053  
  896     Samsung SDI Co., Ltd.     369,831  
  2,772     Skyworks Solutions Inc.     256,798  
              5,882,204  
                 
        Total Common Stocks (Cost $12,421,605)     11,107,238  

 

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

Page 13

 

SmartETFs Smart Transportation & Technology ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks: 91.7%   Value ($)  
        Preferred Stocks        
        Smart Transportation: 2.2%        
  2,030     Volkswagen AG     271,065  
        Total Preferred Stocks (Cost $392,904)     271,065  
                 
        Total Investments (Cost $12,814,509): 93.9%     11,378,303  
        Other Assets in Excess of Liabilities 6.1%     733,935  
        Total Net Assets - 100.0%   $ 12,112,238  

 

* Non-income producing security.

ADR - American Depository Receipt

PLC - Public Limited Company

 

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

Page 14

 

SmartETFs Smart Transportation & Technology ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Country Breakdown    Percent of Total
Net Assets
Common Stocks    
United States   48.5%
South Korea   10.7%
Germany   7.1%
Japan   6.1%
Sweden   5.1%
Hong Kong   2.9%
Taiwan   2.8%
Netherlands   2.8%
United Kingdom   2.5%
Ireland   2.2%
China   1.0%
Total Common Stocks   91.7%
Preferred Stocks    
Germany   2.2%
Total Preferred Stocks   2.2%
Total Investments   93.9%
Other Assets in Excess of Liabilities   6.1%
Total Net Assets   100.0%

 

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

Page 15

 

SMARTETFS ADVERTISING & MARKETING TECHNOLOGY ETF

SEMI-ANNUAL REPORT FOR THE PERIOD ENDED

JUNE 30, 2022

 

1. PERFORMANCE

 

Average annualized Total returns 6 months
(Actual)
1 year SINCE
INCEPTION
12/31/2020
Advertising & Marketing Tech ETF (Net Asset Value) -46.96% -50.35% -31.60%
Advertising & Marketing Tech ETF (Market Price) -47.17% -50.81% -31.92%
       
Benchmark Index:      
MSCI World Index (Net Return) -20.51% -14.34% -2.12%

 

For the Fund’s current six-month 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

 

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 the first half of 2022, the SmartETFs Advertising & Marketing Technology ETF produced a total return of - 46.96% (NAV, in USD), versus the MSCI World Index (net return) of -20.51% (in USD). The Fund therefore underperformed by 26.45%.

 

At quarter end, the Fund’s AUM was $1.4mn.

 

Market commentary

The first six months of 2022 marked the worst beginning of a year in developed equity markets for more than 50 years. In the context of rapidly accelerating inflation, the first quarter saw global Central Banks pivot sharply towards more hawkish monetary policy, with the outbreak of war in Europe also heavily denting sentiment and adding further stress to global supply chains. Similar themes echoed across markets into the second quarter, with inflation continuing to run at 40-year highs in the US, and 30-year highs in Europe. As markets priced in higher and more rapid rate increases, equities continued on their downward trajectory.

 

Inflation was driven by a number of factors. With economies unlocking themselves from Covid-19 induced ‘lockdowns’ at varying rates, global supply chains continue to suffer disruption, particularly in manufacturing and delivery. Further coronavirus outbreaks in China (Shenzhen and Shanghai), led to subsequent lockdowns and shutdowns of manufacturing, a gentle reminder that the world is still very much subject to Covid related struggles. This impact was often noted in corporate earnings as upstream manufacturers struggled to get products into Chinese factories, and downstream retailers dealt with disruption to inventories. The Russia-Ukraine war complicated the situation further, particularly in areas of close proximity and those with close economic ties. Political tensions between Europe and Russia exacerbated the energy crisis, a core component of the acceleration in inflation, as concerns over the security of supply have caused spikes in oil and gas prices.

Page 16

 

These inflationary pressures have led to a high level of volatility in market interest rates expectations over 2022, with the speed and magnitude of rate hikes by global central banks brought to the forefront of investor attention. It was not until the end of November last year that the Fed “retired” the word transitory from describing inflation. Since then, the Fed has delivered rate hikes of 25bps, 50bps (the first 50bps hike since 2000) and 75bps (the first 75bps hike since 1994) in three successive FOMC meetings. ‘Higher duration’ growth stocks – firms whose expected future cash flows are weighted further into the future - were hit particularly hard.

 

The Fed’s difficult balancing act – taming inflation without significantly crimping growth – was brought firmly into focus towards the end of May, with Jay Powell, the chair of the Federal Reserve, stating that the Fed couldn’t guarantee a soft landing. Solidifying these concerns were signs of downward pressure on the economic growth outlook and investors went from primarily worrying about inflation, to also worrying about recession.

 

Fund attribution analysis

Value outperformed growth in the first half of the year given the higher interest rate expectations. The style rotation proved a drag on the Fund’s performance given it holds high growth adtech and martech names. 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 the first half of 2022.

BOUGHT: Amazon, Next Fifteen Communications

SOLD: iClick Interactive Asia Group, Quinstreet

Page 17

 

4. PORTFOLIO POSITIONING

 

 

 

5. ASSET ALLOCATION

 

 

 

 

Page 18

 

 

 

6. OUTLOOK

 

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

As of 06/30/2022

1-yr forward

earnings growth 

1-yr forward

sales growth

MRAD 20.8% 15.9%
MSCI World Index 7.3% 3.4%

Source: Bloomberg; SmartETFs. Earnings growth is not representative of the fund’s future performance

 

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. 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 post-COVID 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

July 2022

 

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.

 

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

Page 19

 

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.

Page 20

 

SmartETFs Advertising & Marketing Technology ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks: 96.0%   Value ($)  
        Advertising: 51.9%        
  12,025     AcuityAds Holdings Inc.   $ 27,778  
  30     Alphabet Inc.*     65,378  
  450     Baidu Inc.*     66,929  
  5,000     CyberAgent Inc.     49,777  
  1,770     Digital Turbine Inc.     30,922  
  310     Meta Platforms *     49,988  
  2,210     Future PLC     46,345  
  3,790     Magnite Inc.*     33,655  
  3,270     Perion Network Ltd.     59,449  
  2,550     PubMatic Inc.     40,520  
  410     Roku Inc.*     33,677  
  870     TechTarget Inc.*     57,176  
  1,000     Trade Desk Inc/The*     41,890  
  4,852     Tremor International Ltd.*     42,115  
  2,200     ValueCommerce Co., Ltd.*     50,823  
  1,280     Yandex NV*     13  
  15,600     Z Holdings Corp.     45,568  
              742,003  
                 
        Ecommerce: 4.5%        
  600     Amazon.com Inc.     63,726  
                 
        Enterprise Software/Services: 3.4%        
  260     Atlassian Corp PLC*     48,724  
                 
        Internet Content: 3.8%        
  1,200     Tencent Holdings Ltd.     54,200  
                 
        Marketing Technology: 32.4%        
  170     Adobe Inc.     62,230  
  2,500     Criteo SA     61,000  
  160     HubSpot Inc.*     48,104  
  1,430     LiveRamp Holdings Inc.     36,908  
  3,760     Next Fifteen Communication Group PLC     41,187  
  790     Pegasystems Inc.     37,794  
  12,280     S4 Capital PLC*     34,256  
  380     salesforce.com Inc.*     62,715  
  61,000     Weimob Inc.     41,669  
  1,110     ZoomInfo Technologies Inc.*     36,896  
              462,759  
                 
        Total Common Stocks (Cost $2,401,683)     1,371,412  
                 
        Total Investments (Cost $2,401,683) - 96.0%     1,371,412  
        Other Assets in Excess of Liabilities - 4.0%     57,587  
        Total Net Assets - 100.0%   $ 1,428,999  

 

* Non-income producing security.

ADR - American Depository Receipt

PLC - Public Limited Company

 

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

Page 21

 

SmartETFs Advertising & Marketing Technology ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Country Breakdown   Percent of Total
Net Assets
Common Stocks    
United States   49.1%
China   11.4%
Japan   10.2%
United Kingdom   8.5%
Israel   7.1%
France   4.3%
Australia   3.4%
Canada   2.0%
Total Investments   96.0%
Other Assets in Excess of Liabilities   4.0%
Total Net Assets   100.0%

 

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

Page 22

 

SMARTETFS SUSTAINABLE ENERGY II ETF

SEMI-ANNUAL REPORT FOR THE PERIOD ENDED

JUNE 30, 2022

 

1. PERFORMANCE

 

Average annualized Total returns 6
MONTHS
(ACTUAL)
1
YEAR
SINCE
INCEPTION
11/11/2020
Sustainable Energy II ETF (Net Asset Value) -21.84% -18.39% 2.24%
Sustainable Energy II ETF (Market Price) -21.67% -18.63% 3.46%
       
Benchmark Index:      
MSCI World Index (Net Return) -20.51% -14.34% 2.42%

 

For the Fund’s current six-month 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 the first half of 2022 the SmartETFs Sustainable Energy ETF produced a total return (USD, NAV) of -21.84% vs the MSCI World Index (net return) of -20.51%. The ETF therefore underperformed the index by 1.33% over the period.

 

The key events, both positive and negative for sector sentiment, that have affected the energy transition, company profitability and share price performance so far this year have included:

 

The energy transition has accelerated as a result of the Russian invasion of the Ukraine and the increasing importance of energy security.

Despite raw material inflation, the relative economics of sustainable energy generation versus fossil fuels have improved during 2022.

The run rate of activity in solar, wind, electric vehicles and energy efficiency are well ahead of growth expectations at the start of the year.

Solar and wind installation companies as well as generation companies outperformed in the first half of the year. Displacement and electrification underperformed.

M&A activity was high across the portfolio, indicating pockets of value. KKR announced an acquisition of Albioma, Siemens announced a deal for Siemens Gamesa and Standard Investments announced a new 5%+ ownership stake in Johnson Matthey.

For the remainder of 2022 and beyond, we expect further acceleration of the energy transition driven by improved relative economics and security of supply concerns.

Page 23

 

Drivers of fund performance

 

The Russian invasion of Ukraine brought the ‘weaponization’ of energy flows to the forefront of attention for investors in the first half of 2022. Prior to this, the focus for energy investors has been around government and societal ambitions to control carbon emissions and global temperature increases (COP26 in November 2021) but this has been eclipsed by the topic of energy security. We believe that the invasion of Ukraine will accelerate the energy transition, especially in Europe, and we consider key impacts and issues towards the end of this report.

 

Shortly after the invasion, the EU responded to the threat of supply disruption with the ‘REPowerEU’ deal, designed to increase the resilience of the EU energy system. The deal includes increasing domestic renewable energy capacity and improving energy efficiency while taking higher non-Russian LNG and pipeline gas imports together with larger volumes of biomethane and renewable hydrogen. The plan builds on the EU’s ‘Fit for 55’ proposals which are designed to deliver a 55% reduction in GHG emissions by 2030 (vs 1990) and is expected to reduce Europe’s reliance on natural gas by a further 12 bcf/d (30% of current European gas demand).

 

Sustainable energy companies will be beneficiaries of the energy transition that is likely to accelerate as a result of these issues but, in the first half of this year, they were not immune to some continued business headwinds:

 

Record natural gas and electricity prices impact the cost of manufacturing clean energy products and are difficult to pass on quickly.

 

Raw material inflationary conditions have led to solar module and battery price increases of around 30%, as an example. However, while these were inflationary in the first half of 2022, we are seeing signs that prices are now starting to roll over.

 

Supply chain pressures remain for most companies though, like raw material costs, they are starting to show signs of levelling off.

 

These inflationary and supply chain issues will increase the cost of installing and generating renewable power (and increasing energy efficiency) in the near term. However, with sharp rises in oil, gas and coal prices, the relative economics of sustainable energy generation have improved. We believe that improved relative economics as well as security of supply considerations will help to sustain strong demand for sustainable energy activities during any potential recession. In the first half of this year, demand growth has been very robust with expectations for solar, wind, EVs and energy efficiency improving further during the first half of the year.

 

In terms of solar, at the start of 2022, market estimates for global solar installations were around 215GW in 2022 (up from 173GW in 2021) but a strong end to 2021 and start to 2022 leads us to expect installations will now be more like 250GW (up 66GW or 36% vs revised 2021 installations of 184GW). The growth has come from Asia and Europe and is likely to be achieved despite regulatory issues (for example the withhold release order (WRO) as well as anti-dumping/countervailing duty (AD/CVD) investigations) that almost made US utility solar installations grind to a halt in the first half of the year).

 

The wind industry is now also likely to see installation growth in 2022, a shift from initial estimates of a 5GW decline. A recent forecast from BNEF indicates record installations of around 105GW this year with over half of the installations, and most of the new growth, being in China. We see the continued growth as a confirmation of the economic rationale for wind-based power generation.

 

The take up of electric vehicles continues to surprise to the upside and 2022 EV sales estimates are likely to do the same. Overall demand for EVs is strong despite inflation in the cost of the lithium-ion battery (the most expensive component of an EV) and reflects policy support, consumer preference for EVs and total cost of ownership savings as a result of higher gasoline and diesel prices. According to BNEF, a California EV owner could save $1,700 per year ($1,400 national average) on fuel alone versus an ICE vehicle if they charged their EV during off-peak times.

Page 24

 

The topic of energy efficiency has been thrust into the forefront of consumers’ and policy makers’ minds as a result of supply disruptions and energy price inflation so far this year. As the IEA often points out, energy efficiency is the ‘first fuel’ to achieve clean energy transitions in a secure manner and, as such, it is garnering solid policy support. Within REPowerEU, the European Commission recognises that energy efficiency is the cheapest, cleanest, and quickest way to reduce the bloc’s reliance on fossil fuel imports and reduce energy bills, and the EU has increased energy efficiency targets from 9% to 13% accordingly. The increased investment and activity as of mid-2022 remains well behind levels needed to satisfy broader policy goals.

 

These areas remain the most attractive and, while overall investment in energy is lagging, investment in the clean energy activities mentioned above are starting to see increased absolute investment and relative share.

 

Within the portfolio, outperforming sectors included solar and (to a lesser extent) wind installation companies as well as our generation companies. Underperforming sectors included our displacement and electrification sectors.

 

Solar equipment was the strongest individual sector, with Enphase and Canadian Solar delivering positive contribution and SolarEdge and Xinyi Solar outperforming the Fund on average. The improving solar demand outlook described earlier was a key factor behind the outperformance combined with a re-rating after a year of weak performance in 2021. Within wind, we saw Siemens Energy announce a bid for the remaining shares in Siemens Gamesa that it did not already own, an action that confirms long-term value in the wind industry once near-term pressures are overcome. Our generation companies were a safe haven in the period as a result of their lower volatility earnings profile, with all but one outperforming relatively. Albioma’s was the best individual performance as it was subject to a bid from private equity firm KKR and, as with the Siemens bid, we see this as highlighting some of the pockets of long-term value in the portfolio.

 

All but one of our electrification holdings were relative underperformers as the global auto cycle weakened amid China’s Covid-related slowdowns and growing recessionary fears. As noted earlier, EV sales continue to increase, but our EV-related portfolio holdings still have exposure to the ICE vehicle market. The one outperformer in the group was Johnson Matthey, which performed well after Standard Investments (the investment arm of Standard Industries) announced a new 5%+ ownership stake in the company, thus creating speculation over a full acquisition. Our displacement holdings were underperformers, with Nibe and Ameresco particularly weak on the weaker economic outlook and the broader unwinding of premium valuation for quality/growth companies that we have seen across the broader market.

 

2. Activity

 

During the period, we exited out position in Hella. Hella was a German listed, EUR7bn market capitalization automotive parts supplier specializing in lighting and electronics. In August 2020, Faurecia offered to take over Hella for EUR60/share. The SmartETFs Sustainable Energy ETF accepted this offer, receiving the cash consideration for these shares in January 2022.

 

The portfolio was actively rebalanced during the period and the weighting to Displacement (Demand) fell from 43.7% at the end of 2021 to 36.1% at the end of June 2022 while the weighting to Renewables (Supply) increased from 51.5% to 57.0%.

 

3. Outlook

 

Looking at the remainder of 2022 and beyond, we expect further acceleration of the energy transition driven by improved relative economics and security of supply concerns, albeit slowed near term by continued inflationary and supply chain headwinds. Importantly, new policy schemes like REPowerEU are not yet contributing to the strong demand outlook; their impact is still to be felt over a number of years ahead and will be supportive of multi-year and decade growth outlooks.

Page 25

 

The IEA has described solar power as “the cheapest electricity in history” and, despite near-term headwinds and cyclical cost inflationary factors, large-scale solar remains at the bottom end of the cost curve and is likely to get economically more attractive in the year ahead. Chinese solar manufacturers are investing for further growth across polysilicon (+150% increase in capacity in 2023 vs 2Q 2022) as well as 10-30% increases in capacity in 2022 vs 4Q2021 across the remainder of the solar value chain. Rapid growth in solar installations is likely in the years ahead. European growth will accelerate sharply and sustain through to 2030 (partly thanks to RePowerEU) while the US solar industry is likely to return to growth in the second half of the year. We note a new optimism in the US following President Biden’s executive order to overrule import tariffs for 24 months. Legal challenges to the executive order, implementation of the new Uyghur human rights rules and the result of net metering discussions (at the end of 2022) could provide bumps in the road, but demand for solar in the US appears to be robust and supported by policy.

 

While global wind installations are expected to return to growth in 2022, the outlook for developed world wind companies continues to be blighted by flat global ex-China demand, supply chain issues and raw material cost inflation. Development of wind power is a key component in solving Europe’s security of supply issues but the longer-term development cycle means that onshore wind installations will not pick up meaningfully until the middle of the decade, and growth in offshore wind installations will only be small in absolute terms for a few more years yet. Importantly, policy support remains robust and economics are supportive, but the market remains tough for manufacturers.

 

Energy efficiency will continue to receive a good proportion of post-Covid stimulus spending, with a continued focus on buildings. We expect an acceleration in the penetration of LED lighting, insulation and heat pumps, as well as a focus on grid and transmission upgrades. The IEA estimates that to meet current government policies, energy efficiency spending needs to increase from a recent average level of around $250bn pa to around $375bn this decade and nearly $550bn in the 2030s. As an illustration of new policy commitments, the EU’s RePower Europe plan includes the ambition to install 10 million new heat pumps over 2021-25 and 30 million new pumps in total by 2030 (1.5x the number of currently installed heat pumps in the EU).

 

EV sales should exceed 10mn this year although ultimate EV sales could be weaker if economic conditions weaken sharply. The market remains very strong with Chinese sales data (May 2022) suggesting over 400,000 xEV sales in the month (up >100% on May 2021) and representing a 31% market share. Whatever the near-term demand, we believe that the rush to build lithium battery plants will continue unabated with 2022 investment in new manufacturing plant being double the level seen in 2021.

 

Despite long-term attractive growth, the near term is still likely to be held back somewhat as a result of energy and raw material inflation compounded by continuing supply chain pressures. These pressures will affect portfolio holdings in different ways with our displacement and installation subsectors seeing higher energy, raw material and finished product prices while our electrification subsector suffers similar issues (especially in battery metals and semiconductors) combined with the greatest exposure to recessionary factors. Our generation subsector remains relatively immune on existing power generation assets but higher material costs will require higher power prices for new installations. We would expect investment in new capacity to continue somewhat undeterred by economic conditions (utility-scale renewable investments were at record levels in 2021) since their new supply will likely be cheaper than existing sources and will represent a source of potential savings for consumers.

 

At June 30, 2022, the SmartETFs Sustainable Energy ETF traded on a 2022/23 P/E ratio of 20.8x/16.9x and 2022/23 EV/EBITDA multiple of 12.6x/10.3x. The Fund trades at about a 30% premium to the MSCI World Index, which we see as justified given the attractive growth rates available to invest in across the sector. As a sense check, consensus EPS growth (2021-2023E) of the portfolio (at c.20%pa) is well ahead of the MSCI World (at c.10%pa), and looking over the next five years, we believe that the portfolio is likely to deliver average earnings growth of around 13-14%pa, comfortably ahead of growth in the MSCI World.

Page 26

 

Will Riley and Jonathan Waghorn

July 2022

 

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.

Page 27

 

SmartETFs Sustainable Energy II ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks: 93.5%   Value ($)  
        Electrification: 31.9%        
  1,530     Aptiv PLC*   $ 136,277  
  2,466     Gentherm Inc.*     153,903  
  5,616     Infineon Technologies AG     135,891  
  2,574     Itron Inc.*     127,233  
  6,210     Johnson Matthey PLC     145,533  
  306     LG Chem Ltd.     122,505  
  3,744     ON Semiconductor Corporation*     188,361  
  360     Samsung SDI Co., Ltd.     148,593  
  1,404     Schneider Electric SE     166,112  
  3,744     Sensata Technologies Holding*     154,665  
              1,479,073  
        Energy Efficiency: 10.7%        
  3,348     Ameresco Inc.*     152,535  
  1,170     Hubbell Inc.     208,939  
  17,550     Nibe Industrier AB - B Shares     131,738  
              493,212  
                 
        Renewable Energy Generation: 24.5%        
  1,566     Albioma SA     81,858  
  95,994     China Longyuan Power Group Corp Ltd.     185,466  
  228,000     China Suntien Green Energy Corp Ltd.     116,229  
  20,105     Iberdrola SA     208,499  
  3,078     Nextera Energy Inc.     238,422  
  2,052     Ormat Technologies Inc.     160,774  
  11,196     TransAlta Renewables Inc.     143,076  
              1,134,324  
                 
        Renewable Equipment Manufacturing: 26.4%        
  5,454     Canadian Solar Inc.*     169,838  
  1,260     Eaton Corp. PLC     158,747  
  702     Enphase Energy Inc.*     137,058  
  2,520     First Solar Inc.*     171,688  
  7,506     Siemens Gamesa Renewable Energy SA     140,878  
  432     Solaredge Technologies Inc.*     118,230  
  2,250     TPI Composites Inc.*     28,125  
  5,724     Vestas Wind Systems A/S     120,892  
  116,000     Xinyi Solar Holdings Ltd.     179,177  
              1,224,633  
                 
        Total Common Stocks (Cost $5,483,409)     4,331,242  
                 
        Total Investments (Cost $5,483,409) - 93.5%     4,331,242  
        Other Assets in Excess of Liabilities - 6.5%     300,478  
        Total Net Assets - 100.0%   $ 4,631,720  

 

* Non-income producing security.

PLC - Public Limited Company

 

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

Page 28

 

SmartETFs Sustainable Energy II ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Country Breakdown    Percent of Total
Net Assets
Common Stocks    
United States   40.6%
China   10.4%
Spain   7.5%
Canada   6.8%
South Korea   5.9%
France   5.4%
Britain   3.1%
Ireland   2.9%
Germany   2.9%
Sweden   2.8%
Denmark   2.6%
Israel   2.6%
Total Investments   93.5%
Other Assets in Excess of Liabilities   6.5%
Total Net Assets   100.0%

 

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

Page 29

 

SMARTETFS ASIA PACIFIC DIVIDEND BUILDER ETF

SEMI-ANNUAL REPORT FOR THE PERIOD ENDED

JUNE 30, 2022

 

1. Performance

 

AVERAGE Annual Total Returns 6
months
(Actual)
1
Year
3
Year
5
Year
10
Year
Asia Pacific Dividend Builder ETF (Net Asset Value) -13.07% -13.37% 5.46% 4.86% 6.89%
Asia Pacific Dividend Builder ETF (Market Price) -12.90% -13.12% 5.67% 4.99% 6.96%
           
Benchmark Index:          
MSCI AC Pacific ex japan Index (net return) -15.71% -25.33% 1.39% 2.80% 5.04%

 

For the Fund’s current six-month 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

 

The Fund fell -13.07% in the first six months of 2022 compared to the MSCI AC Pacific ex Japan Net Total Return Index which fell -15.71%. Of the dividends declared in the first half (some of which will be paid in second half), 23 companies increased, 3 were unchanged, 9 fell and 1 was omitted.

 

The big story in Asia is the easing of conditions in China as the lockdowns imposed during the first half are lifted. Inflation in China is more moderate than in the rest of the world with producer prices rising 6.4% YoY in May, well below the peak rate of 13% YoY hit in October 2021, and consumer prices rising 2.1% YoY. This compares favourably to the US where producer prices and consumer prices were running at 16.7% and 8.6% YoY respectively and to Europe. We believe that China’s monetary and cyclical position gives room to the government and central bank to direct policy toward reacceleration of growth whereas the US and Europe are forced to direct policy toward fighting inflation and accepting the real possibility of recession.

 

The outperformance of the Fund over the benchmark this year cannot simply be attributed to China alone. In the first four months of the year the Fund beat its benchmark by 2.8% during which time MSCI China underperformed the region by -6.5%. However, in May and June the Fund’s Chinese exposure did contribute to the Fund’s incremental outperformance of 0.3% by offsetting significant weakness elsewhere.

 

The best performing stock in the first half of the year was Chinese property developer, China Overseas Land & Investment (COLI). The company is financially strong, with low debt and none of the issues that have dragged on the wider sector. Indeed, COLI has been able to take advantage of others’ misfortunes by accumulating land for future development at lower prices in the absence of competitors who are occupied with shoring up their finances. The weakest stock was Novatek Microelectronics in Taiwan, a designer of semiconductors for use consumer electronics. The weakness is attributable to worries about semiconductor oversupply, rising competition and concerns about the outlook for consumer demand. The company is expected to deliver the highest dividend growth in the portfolio this year which is both good and bad. We welcome the higher dividend which reflects the higher earnings we have seen in recent years, but it suggests a lower growth outlook for the company.

Page 30

 

2. PORTFOLIO CHANGES

 

We made one switch in the portfolio, at the beginning of the year. We sold Korean tobacco company KT&G and bought back Industrial Commercial Bank of China (ICBC), which we sold in 2019. KT&G offered a yield of 6% but has a very modest earnings growth outlook over the next two years which is also reflected by the absence of dividend growth in 2021 and forecast for 2022. Nevertheless, the stock still trades on a valuation that is in line with its long run average. By contrast, ICBC was trading on a valuation that was at a 40% discount to its long run average, offered a yield at the time of purchase of 6.8%. After the purchase, the bank reported a 12% dividend increase on a 9% increase in 2021 earnings.

 

3. PORTFOLIO POSITION

 

The largest country exposures in the Fund are to China at 38% followed by Taiwan at 19%, Australia at 9.5% and Singapore at 8%. China exposure to equal to the benchmark weight; Singapore is 5% over and Taiwan is 4% over while Australia is 8% under the benchmark weight. Korea is 7% under-weight relative to the benchmark.

 

The Fund’s Chinese exposure is mainly focussed on the domestic market with only Shenzhou International (a 2.7% position) having significant overseas exposure as a supplier of fabrics to apparel makers like Adidas, Nike and Uniqlo. Of the 38% overall China exposure 10% is to consumer discretionary, 10% to banks, 3% to each of communication services (video games), dairy, health care, insurance, real estate and utilities. We do not have exposure to the big technology or e-commerce names that dominate the Chinese benchmark because they either do not pay or only pay a small dividend. Taiwanese exposure consists of seven positions of which six are in the technology sector, in semiconductors, electrical component makers and electronic assembly. We have no exposure to software services or to the more cyclical memory chip makers.

 

The three largest sector exposures are the 30% weight in Financials (21% banks, 9% insurance), 21% in Technology and 20% in Consumer discretionary. These three are overweight against the benchmark by 8%, 5% and 3% respectively. There is 12% in Real estate, making it 7% overweight, of which 8% is in Real Estate Investment Trusts (REITs). The biggest underweights are in Energy, Materials and Industrials where we have no exposure. The Energy and Materials complex did well for most of the first half of the year, but both have fallen back in the last two months.

 

The portfolio is 70% focused on companies with regional sales and 30% exposed to overseas markets. There is a 70% exposure to Emerging Asia and 30% 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 63% and 37%.

 

4. OUTLOOK

 

There is an unpleasant mix of factors coming together in developed markets. Inflation pressures are not solely the result of strong demand, which interest rates are well-suited to address, but also a product of supply side shortages where higher interest rates are less effective. The mix of higher prices from the supply side and weaker demand resulting from higher interest rates is the basis for a potentially stagflationary environment. Added to that, rising bond yields increase the interest burden on public finances following a significant increase in public debt during recent years of low interest rates and lifted further by COVID support programmes in 2020. This limits the options available for cyclical support and indeed could see a higher tax burden on business and consumers.

 

Our belief is that China’s monetary and cyclical position gives room to the government and central bank to direct policy toward reacceleration of growth whereas the US and Europe are forced to direct policy toward fighting inflation and accepting the real possibility of recession. There is of course, the possibility that Chinese inflation pressures may emerge as demand recovers but we think this will take time; the lockdowns were extensive and had a significant impact on consumer confidence so we believe this issue is unlikely to arise until next year by which time higher interest rates and weaker demand elsewhere may have reduced price pressures.

Page 31

 

The region may well benefit from a ‘China-pull’ as activity picks up, but it is likely to be domestic activity, rather than exports that is the driver in the short term. Fundamentally, it is our view that the Asian region, which is a global creditor rather than a debtor, is in a stronger position relative to other regions. Domestic or regionally focused companies account for 70% of the portfolio. Of the remaining 30%, technology accounts for 21% and this can be split further into products aimed at commercial & infrastructure customers (6%) and those for consumer electronics (15%). Non-tech consumer discretionary manufacturing exposure, where the US and Europe are meaningful end-markets is at 5% and the remaining 4% is in two Australian names, in travel and health care.

 

In this environment we will, therefore, keep a closer eye on the 5% in non-tech export manufacturers and on the 15% exposed to consumer electronics. Exposure to external factors does not mean we think we should exit. We believe we are in businesses that are centres of excellence in terms of management, production processes, product design and customer relationships, indicated by the return on capital achieved over time. Furthermore, we see that because of the cyclical headwinds their stock valuations are either in line or well below the average valuations over the last 15 years. If the headwinds are cyclical, as we believe, then this is the opportunity to add to these positions. Only structural changes to the business or sector, where we think returns on capital above the cost of capital can no longer be sustained would changes be justified.

 

Edmund Harriss and Mark Hammonds

July 2022

 

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.

Page 32

 

SmartETFs Asia Pacific Dividend Builder ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks:  99.2%   Value ($)  
        Australia:  10.0%        
  6,881     Corporate Travel Management Ltd.   $ 87,950  
  3,007     JB Hi-Fi Ltd.     79,815  
  36,910     Metcash Ltd.     108,007  
  3,853     Sonic Healthcare Ltd.     87,778  
              363,550  
        China:  37.1%        
  156,000     China Construction Bank Corp. - H Shares     104,775  
  56,000     China Lilang Ltd.     27,834  
  67,000     China Medical System Holdings     104,515  
  14,000     China Merchants Bank Co., Ltd. - H Shares     93,672  
  48,500     China Overseas Land & Investment Ltd.     153,290  
  20,000     China Resources Gas Group Ltd.     93,162  
  17,700     Inner Mongolia Yili Industrial Group Co., Ltd. - A Shares     103,009  
  228,000     Industrial and Commercial Bank of China Ltd.  - H Shares     135,407  
  1,016     NetEase Inc. - ADR     94,854  
  15,500     Ping An Insurance Group Company of China Ltd. - H Shares     105,387  
  5,100     Shenzhou International     61,779  
  40,900     Suofeiya Home Collection - A Shares     168,055  
  11,994     Zhejiang Supor Cookware - A Shares     100,966  
              1,346,705  
        Hong Kong:  6.5%        
  34,500     BOC Hong Kong Holdings Ltd.     136,302  
  12,224     Link REIT/The     99,704  
              236,006  
                 
        India: 2.1%        
  5,969     Tech Mahindra LTD     75,590  
                 
        Malaysia:  3.1%        
  114,700     Public Bank Bhd     113,724  
                 
        Singapore: 9.1%        
  52,354     Ascendas Real Estate Investment Trust - REIT     107,403  
  74,200     CapitaLand Mall Trust - REIT     115,900  
  4,986     DBS Group Holdings Ltd.     106,521  
              329,824  
        South Korea:  4.4%        
  8,991     Hanon Systems     70,107  
  13,332     Korean Reinsurance Co     86,888  
              156,995  

 

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

Page 33

 

SmartETFs Asia Pacific Dividend Builder ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks:  99.2%   Value ($)  
        Taiwan:  17.6%        
  18,000     Catcher Technology Co., Ltd.   $ 100,212  
  14,000     Elite Material Co., Ltd.     84,065  
  29,517     Hon Hai Precision Industry Co., Ltd.     108,230  
  1,400     Largan Precision Co., Ltd.     81,239  
  8,000     Nien Made Enterprise Co., Ltd.     78,851  
  10,500     Novatek Microelectronics Corp.     106,671  
  991     Taiwan Semiconductor Manufacturing Co., Ltd.     81,014  
              640,282  
                 
        Thailand:  2.9%        
  41,300     Tisco Financial Group PCL/Foreign     103,543  
                 
        United States:  6.4%        
  2,253     Aflac Inc.     124,659  
  846     QUALCOMM Inc.     108,068  
              232,727  
                 
        Total Common Stocks (Cost $2,994,673)     3,598,946  
                 
        Total Investments (Cost $2,994,673): 99.2%     3,598,946  
        Other Assets in Excess of Liabilities - 0.8%     29,687  
        Net Assets: 100.0%   $ 3,628,633  

 

ADR - American Depository Receipt

PCL - Public Company Limited

REIT - Real Estate Investment Trust

 

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

Page 34

 

SmartETFs Asia Pacific Dividend Builder ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Industry Breakdown   Percent of Total
 Net Assets
Common Stocks    
Financial   43.7%
Consumer, Cyclical   18.6%
Technology   12.9%
Consumer, Non-cyclical   11.1%
Industrial   10.3%
Utilities   2.6%
Total Investments   99.2%
Liabilities in Net Excess of Other Assets   0.8%
Total Net Assets   100.0%

 

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

Page 35

 

SMARTETFS DIVIDEND BUILDER ETF

SEMI-ANNUAL REPORT FOR THE PERIOD ENDED

JUNE 30, 2022

 

AVERAGE Annual Total Returns 6
months
(Actual)
1
Year
3
Year
5
Year
10
Year
Dividend Builder ETF (Net Asset Value) -13.14% -4.93% 9.92% 9.60% 10.33%
Dividend Builder ETF (Market Price) -12.71% -4.63% 10.06% 9.68% 10.38%
           
Benchmark Index:          
MSCI World Index (net return) -20.51% -14.34% 6.98% 7.66% 9.50%

 

For the Fund’s current six-month 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 Review

 

The Fund’s dividend yield at the end of the quarter was 2.1% (net of withholding tax) vs the MSCI World Index’s 2.2% (gross of withholding tax).

 

So far, in 2022, we have had dividend updates from 26 of our 35 holdings.

 

23 companies announced increases for their 2022 dividend vs 2021

3 companies announced a flat dividend

0 companies announced dividend cuts

0 companies announced dividend cancellations

 

Performance Review

 

The SmartETFs Dividend Builder ETF in the first six months of 2022 produced a total return of -13.14% (in USD), versus the MSCI World Index return of -20.51% (in USD). The fund therefore outperformed by 7.37%.

 

The first 6 months of 2022 was the worst beginning of the year in developed equity markets for more than 50 years with inflation the main concern on investor’s minds. Indeed, inflation continued to climb to decade-highs across developed markets, with the US reaching 8.6% in May whilst the Eurozone reached 8.1%. Whilst inflation is a global issue, it is important to note the regional differences driving these headline numbers; in the US, wage growth continued to be a significant factor with the latest figures at 5.1%, whereas in Europe and the UK, commodity prices (principally energy and food) have continued to climb, exacerbated by Russia’s invasion of Ukraine, and have been the primary inflationary driver.

Page 36

 

In response to the global issue of inflation, central banks have continued to tighten monetary policies, realising a stark change in opinion – most notably the Fed which retired their labelling of inflation as ‘transitory’. The market is now focused on how fast and how aggressive central banks will be. Indeed, in Q2, the Fed continued to be reactive to new data, raising rates by 75bps to 1.75%, the largest rate hike since 1994. With this, the market now expects rates in the US to rise to over 3% by year-end – a significant acceleration from the <1% policy rate markets had expected at the end of 2021.

 

With this increasingly aggressive stance that central banks are having to take to control inflation, investors are progressively more worried that tighter monetary policies will push economies into recession. Whilst analysts have generally been positive on earnings upgrades year-to-date, recessionary concerns are beginning to cause these to flatten and, in some regions, trend down.

 

In H1 2022, the Fund’s outperformance versus the MSCI World Index can be attributed to:

 

Value continued to outperform growth (albeit with a late rotation back in favor of growth mid-June), which acted as a tailwind to Fund performance.

Dividend-paying stocks as a group were in favor, as the market rewarded those companies with higher shareholder returns in a period of slower growth.

The Fund’s largest overweight sector position relative to the benchmark, Consumer Staples, was the largest contributor to the Fund’s outperformance through both asset allocation and stock selection. 4 of the top 5 Fund performers were from this sector, including our two tobacco holdings British American Tobacco (+17.8% in USD YTD) and Imperial Brands (+6.3%).

Industrials was the sector largest contributor, primarily through stock selection as BAE Systems ended the first 6 months of the year as the Fund’s top performer (+38.2% in USD YTD).

Conversely, 3 sectors in which we do not have exposure, Energy, Utilities, and Real Estate, were relative drags on performance as these areas performed well over the 1H 22 (with Energy the top performing sector overall, + 24.7% in USD).

 

Activity

 

We made no changes to the portfolio in the first half of the year.

 

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) and around 55% in quality cyclical or growth-oriented companies (e.g. Industrials, Financials, Consumer Discretionary, Information Technology, etc.)

 

While the defensive names tend to have lower beta and hold up better when markets are falling, the cyclical holdings allow the Fund to capture performance when markets are rebounding and rising. However, it is important to note that we believe that within these more cyclical sectors we are owning the ‘quality’ businesses. All the companies we seek to invest in have strong balance sheets and a history of performing well in difficult market environments. Within Financials, for example, we hold no Banks, which helps to dampen the cyclicality of our Financials, but we do own exchange groups such as CME and Deutsche Boerse (which do well in periods of market volatility as volumes tend to increase).

 

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

 

In terms of geographic exposure, the largest difference between the Fund and the benchmark is our exposure to the US (as measured by country of domicile). The Fund at quarter end had c.54% weighting to North America, which compares to the index at c.71%.

Page 37

 

The largest geographic overweight remains Europe ex-UK and the UK, though we are diversified around the world with 54% in the US, 40% in Europe and 5% in Asia Pacific. Within Asia Pacific we have one company listed in Taiwan (Taiwan Semiconductor Manufacturing) and one company listed in Australia (Sonic Healthcare).

 

Outlook

 

Whilst the Fund tends to trade at a discount to the broader market, at the end of the quarter the Fund was trading on a small premium to the broad market. This has been 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 PE 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 PE ratio of market should, in fact, be higher. This blunt analysis also assumes that the fund ‘E’ is less likely to fall – which we can argue makes sense with the higher quality characteristics seen across the fund holdings. We will have to wait and see how this progresses, but it is clear the market is anticipating the upcoming earnings season may result in downgrades of earnings at the index level.

 

The Fund continues to offer a portfolio of consistently highly profitable companies with strong balance sheets and pricing power to pass on higher costs. We believe there is a strong case for dividend investing in general, and particularly in low growth environments such as we are experiencing today. Further, we believe that sustainable and growing dividends may offer better opportunities than a ‘high yield’ dividend approach, as ‘high yield’ stocks can often be in more economically sensitive sectors, or sectors with greater regulatory influence, which have historically performed poorly in recessionary-type environments.

 

As ever, we believe our unchanging 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.

 

Ian Mortimer

Matthew Page

July 2022

 

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.

Page 38

 

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

 

SEC 30-day Yield:

 

Subsidized (after waivers) – 1.54%

Unsubsidized – 0.95%

 

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.

Page 39

 

SmartETFs Dividend Builder ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks:  99.6%   Value ($)  
        Australia:  2.4%        
  22,314     Sonic Healthcare Ltd.   $ 508,354  
                 
        Denmark:  4.6%        
  8,627     Novo Nordisk A/S     956,840  
                 
        France:  4.5%        
  8,600     Danone SA     479,999  
  4,019     Schneider Electric SE     475,502  
              955,501  
        Germany:  4.5%        
  3,693     Deutsche Boerse AG     617,665  
  5,364     Henkel AG & Company KGaA     330,414  
              948,079  
        Ireland:  2.2%        
  5,112     Medtronic PLC     458,802  
                 
        Switzerland:  8.4%        
  19,404     ABB Ltd.     517,549  
  5,355     Nestle SA     625,175  
  1,838     Roche Holding AG     613,373  
              1,756,097  
        Taiwan:  2.0%        
  5,241     Taiwan Semiconductor Manufacturing Co., Ltd.     428,452  
                 
        United Kingdom:  18.1%        
  87,149     BAE Systems PLC     880,585  
  15,251     British American Tobacco PLC     653,289  
  14,265     Diageo PLC     612,963  
  29,126     Imperial Tobacco Group PLC     650,848  
  6,733     Reckitt Benckiser Group PLC     505,615  
  10,836     Unilever PLC     490,744  
              3,794,044  
        United States:  52.9%        
  5,793     AbbVie Inc.     887,256  
  11,520     Aflac Inc.     637,402  
  4,779     Arthur J Gallagher & Co.     779,168  
  820     BlackRock Inc.     499,413  
  1,281     Broadcom Inc.     622,323  
  11,910     Cisco Systems Inc.     507,842  
  2,925     CME Group Inc.     598,748  
  4,346     Eaton Corp. PLC     547,553  
  2,709     Illinois Tool Works Inc.     493,715  
  3,679     Johnson & Johnson     653,059  
  2,431     Microsoft Corp.     624,354  
  8,873     Otis Worldwide Corp.     627,055  

 

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

Page 40

 

SmartETFs Dividend Builder ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Shares     Common Stocks:  99.6%   Value ($)  
        Common Stocks (Continued)        
        United States (Continued)        
  6,081     Paychex Inc.   $ 692,444  
  4,265     PepsiCo Inc.     710,805  
  4,484     Procter & Gamble Co/The     644,754  
  7,603     Raytheon Techologies Corp.     730,724  
  3,549     Texas Instruments Inc.     545,304  
  7,520     VF Corp.     332,158  
              11,134,077  
                 
        Total Common Stocks (Cost $17,001,345)     20,940,246  
                 
        Total Investments in Securities (Cost $17,001,345): 99.6%     20,940,246  
        Other Assets less Liabilities: 0.4%     92,220  
        Net Assets: 100.0%   $ 21,032,466  

 

ADR - American Depository Receipt

PLC - Public Limited Company

 

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

Page 41

 

SmartETFs Dividend Builder ETF

Schedule of Investments

at June 30, 2022 (Unaudited)

 

Industry Breakdown   Percent of Total
 Net Assets
Common Stocks    
Consumer, Non-cyclical   46.5%
Industrial   20.3%
Financial   14.9%
Technology   13.9%
Communications   2.4%
Consumer, Cyclical   1.6%
Total Investments   99.6%
Other Assets in Excess of Liabilities   0.4%
Total Net Assets   100.0%

 

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

Page 42

 

SmartETFs

 

STATEMENTS OF ASSETS AND LIABILITIES

at June 30, 2022 (Unaudited)

 

    Smart
Transportation &
Technology ETF
    Advertising &
Marketing
Technology ETF
    Sustainable
Energy II ETF
 
Assets:                        
Investments in securities, at cost   $ 12,814,509     $ 2,401,683     $ 5,483,409  
Investments in securities, at value   $ 11,378,303     $ 1,371,412     $ 4,331,241  
Cash     713,363       102,443       317,399  
Foreign currency, at value                        
(Cost $0, $0, and $569, respectively)     -       -       569  
Receivables:                        
Dividends receivable     23,096       14       12,564  
Tax reclaim     9,855       54       3,256  
Due from Advisor, net     -       7,963       7,043  
Total Assets   $ 12,124,617     $ 1,481,886     $ 4,672,072  
                         
Liabilities:                        
Due to Advisor, net     3,526       -       -  
Custody fees and expenses     -       10,346       8,365  
Transfer agent fees and expenses     -       9,958       5,898  
Fund Accounting expense     -       12,061       18,768  
Audit fees payable     6,486       9,066       4,656  
Printing     -       6,089       863  
Legal fees payable     1,324       1,912       643  
CCO fees payable     644       701       120  
Trustee's fees payable     399       2,253       142  
Fund Administration fees     -       140       193  
Other accrued payable     -       361       704  
Total Liabilities     12,379       52,887       40,352  
                         
Net Assets   $ 12,112,238     $ 1,428,999     $ 4,631,720  
                         
Composition of Net Assets:                        
Paid-in capital   $ 13,324,162     $ 2,574,416     $ 5,787,554  
Total distributable earnings     (1,211,924 )     (1,145,417 )     (1,155,834 )
Net Assets   $ 12,112,238     $ 1,428,999     $ 4,631,720  
                         
Number of shares issued and outstanding                        
(unlimited number of shares authorized, no par value)     350,002       100,001       180,000  
Net Asset Value, Offering and Redemption Price Per Share   $ 34.61     $ 14.29     $ 25.73  

 

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

Page 43

 

SmartETFs

 

STATEMENTS OF ASSETS AND LIABILITIES

at June 30, 2022 (Unaudited)

 

    Asia Pacific Dividend
Builder ETF
    Dividend Builder ETF  
Assets:                
Investments in securities, at cost   $ 2,994,673     $ 17,001,345  
Investments in securities, at value   $ 3,598,946     $ 20,940,246  
Cash     129,917       165,191  
Foreign currency, at value (Cost $0 and $7,540)     -       7,540  
Receivables:                
Investment securities sold     493       -  
Dividends receivable     17,815       5,892  
Tax reclaim     -       56,935  
Due from Advisor, net     10,784       2,623  
Total Assets   $ 3,757,955     $ 21,178,427  
                 
Liabilities:                
Payable for securities purchased     58,721       -  
Deferred foreign tax liability     945       -  
Dividend Payable     30,877       109,188  
Custody fees and expenses     7,721       7,842  
Audit fees payable     6,403       6,230  
Transfer agent fees and expenses     9,791       9,025  
Fund Accounting expense     11,146       10,056  
Legal fees payable     499       593  
CCO fees payable     518       542  
Printing     1,428       713  
Fund Administration fees     341       930  
Trustee's fees payable     364       377  
Other accrued payable     568       465  
Total Liabilities     129,322       145,961  
                 
Net Assets   $ 3,628,633     $ 21,032,466  
                 
Composition of Net Assets:                
Paid-in capital   $ 3,043,520     $ 17,059,896  
Total distributable earnings     585,113       3,972,570  
Net Assets   $ 3,628,633     $ 21,032,466