Global Innovators Fund - gafunds.com · § Verifone, the electronic payment technology company,...
Transcript of Global Innovators Fund - gafunds.com · § Verifone, the electronic payment technology company,...
Forregisteredinvestmentprofessionaluseonly
GlobalInnovatorsFundReviewofthe4thQuarter2017
2Contents
§ Introductiontofund§ Marketperformance§ Summaryfundperformance§ Performancedriversandattribution§ Changestoportfolio§ Sectorallocation§ Geographicallocation§ Portfoliotodayandoutlook§ Portfoliocharacteristics§ Marketcommentary
3Portfoliomanagers
Source: GuinnessAtkinsonAssetManagement
MatthewPage,CFAPortfolioManager
• JoinedGuinnessAtkinsonAssetManagementin2005• PreviouslyworkedforGoldmanSachsasananalystinFixed
IncomeCurrenciesandCommodities(FICC)• GraduatedfromUniversityofOxford,withaMastersdegree
inPhysicsin2004• ManagerofDividendBuildersincelaunchin2012
DrIanMortimer,CFAPortfolioManager• JoinedGuinnessAtkinsonAssetManagementin2006• GraduatedfromUniversityofOxford,withaD.Phil.inPhysics
in2006• GraduatedfromUniversityCollegeLondon,Universityof
London,withaMastersdegreeinPhysicsin2003• ManagerDividendBuildersincelaunchin2012
Global Innovators
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
TimGuinness Manager
MatthewPage - - Analyst Manager
IanMortimer - - - - - - Analyst Manager
JoshuaCole - - - - - - - - - - - - - - Analyst
SagarThanki - - - - - - - - - - - - - - Analyst
4Analystteam
JoshuaColeAnalyst• JoinedGuinnessAtkinsonAssetManagementin2017• PreviouslyworkedatCastleTrust,aspecialistfinance
firmintheCityofLondonasaquantitativeanalyst• GraduatedfromUniversityofBristolin2013witha
Master’sdegreeinMechanicalEngineering.In2016,JoshuapassedLevelIIoftheCFAProgram.
SagarThankiAnalyst• JoinedGuinnessAtkinsonAssetManagementin2017• PreviouslyworkedforBloombergasanequityspecialist,
withinFinancialAnalyticsandSales• GraduatedfromUniversityofCambridge,withaMaster’s
degreeinEconomics,andhassincecompletedLevelIoftheCFAProgram.
Source: GuinnessAtkinsonAssetManagement
5Whydowelookforinnovativecompanies?
§ Webelieveitisasuperiorwaytoidentifygoodgrowthcompanies
§ Basedonourexperience,traditionalmethodologiesdonotwork
§ Historicgrowthisapoorpredictoroffuturegrowth
§ Analystforecastsofgrowthratesareunreliableatbest
§ Insteadtrytofindcompaniesdoingsomethinginnovative…whichwebelieve,ifsuccessful,shouldleadtohigherreturnoncapitalandhigherprobabilityoffuturegrowth
Source: GuinnessAtkinsonAssetManagement
6GlobalInnovatorsphilosophy
Conviction
TheFundtypicallyhas30equallyweightedpositions
Wetargetalowturnoverwithaverageof3– 5yearinvestmenthorizon
Innovation
Weuseinnovationasalenstoidentifygoodgrowthcompanies
Webelieveinnovativecompaniesshouldbeabletogenerateahighreturnoncapitalinthefuture
Growth
Welookforcompaniesthatcangrowprofitably-notjustgrowthforgrowth’ssake
Welookforcompanieswithgoodmarginsthatdonotrequiresignificantexternalcapitaltogrow
Quality
Wefocusoncompaniesthatearnareturnoncapitalabovetheircostofcapitalandhavehistoricallygrowntheireconomicprofit
Weavoidhighlyleveragedcompanies
Thefundseeksaconcentratedportfolioofhighquality,innovative,growthcompanies
Source: GuinnessAtkinsonAssetManagement
7Howdoweassessinnovation:Innovationmatrix
Disruptive Accelerating Continuous
Science/Technology
Scientificbreakthroughleadingtonewtechnologywithsignificantpotential
impact
Rapidimprovements inyoungtechnology
Smallcontinuousadvancesinanestablished
technologythatwillprovideincrementalbenefitstoenduser
Product/Service
Anew product/servicethathasthepotentialtoquicklytakemarketshareand
changethedynamicsofanindustry
Rapidadvancesinadoptionof
product/service
Smalladvancesinproduct/serviceorenduserexperience that
maintainsorgrowsmarketshareorcompetitive
positioning
BusinessModel
Anewrevenue/costmodelortheconfluenceoftechnologiesthathassignificantimpacton
incumbents
Rapidadoptionofbusinessmodelleadstorapid
growthinmarketshare
Continuous evolutionofbusinessmodeltomaintain
competitivestrength
LevelofinnovationKe
ydriverso
finno
vatio
n
Source: GuinnessAtkinsonAssetManagement
8Howdoweidentifyinnovativecompanies?
topdownfocusonthethemes
bottomupfocusonthemetrics
GlobalInnovatorsUniversecandidatesforinclusioninthe
Source: GuinnessAtkinsonAssetManagement
9
§ Anotherstrongquarter– MSCIWorldup5.62%(totalreturninUSD)– followingpositivereturnsinQ1,Q2,andQ3§ RegionalquarterlyperformancebroadlyfollowedYTDtrendswithstrongmarketsinAsiaex-JapanandEM.However,Japan
hadstrongestreturns(whichwerealsostronginlocalcurrencyterms),therewasbetterrelativeUSperformancethanseeninrestoftheyearandEuropeex-UKwasnoticeablyweaker.
§ WeakerUSdollarboostedreturnsofnon-USmarketsinUSDterms
Marketperformance- regions
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
10
§ IT,Materials,andConsumerDiscretionarysectorsleadingthepackagain,withEnergycontinuingitsrecoveryalongsideoilpricerises.
§ Telcos,HealthCare,andUtilitiesnoticeableunderperformers§ Startingtoseeamorepronounceddivergenceinsectorperformances§ Yeartodate:InformationTechnologystillsignificantoutperformer
Marketperformance- sectors
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
11
§ Growthcontinuedtooutperformvalue,butenergyrecoveryhelpedboostvalueperformanceinthequarter
§ ValuesignificantlyunderperforminggrowthYTD(delta=10.51%)
Marketperformance- styles
§ Marketcapnotasignificantdriverofperformanceoverthequarter,orYTD
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
12Performancevs.benchmark
Performancedataquotedrepresentspastperformanceanddoesnotguaranteefutureresults.Theinvestmentreturnandprincipalvalueofaninvestmentwillfluctuatesothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost.CurrentperformanceoftheFundsmaybelowerorhigherthantheperformancequoted.Totalreturnsreflectafeewaiverineffectandintheabsenceofthiswaiver,thetotal returnswouldbelower.Performancedatadoesnotreflectthe2%redemptionfeeforsharesheldlessthan30daysandifdeductedthefeewouldreducetheperformancequoted.Forperformancecurrenttothemostrecentmonthendpleasevisitwww.gafunds.com/our-funds orcall800-915-6565.
TheAdviserhascontractuallyagreedtoreimburseexpenses(excludingAcquiredFundFeesandExpenses,interest,taxes,dividendsonshortpositionandextraordinaryexpenses)inordertolimittheTotalAnnualOperatingExpensesforInstitutionalSharesandfortheInvestorClassto0.99%and1.24%respectivelythroughJune30,2018
PerformancedatashownforGlobalInnovators,InstitutionalClass(GINNX),priortoitslaunchdateon12.31.2015,usesperformancedatafromtheGlobalInnovators,InvestorClass(IWIRX).
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
1InvestorclassTicker:IWIRXInception12.15.1998Expenseratioasof5/3/17*1.24%(net);1.35%(gross)
2Institutionalclass Ticker:GINNXInception12.31.2015Expenseratioasof5/3/17*0.99%(net);1.38%(gross)
asof12.31.2017(inUSD)
YTD 1year 3yearsannualized
5yearsannualized
10yearsannualized
Sinceinceptionannualized
GlobalInnovators,InvestorClass1 34.75 34.75 12.68 18.53 9.29 8.24
GlobalInnovators,InstitutionalClass2 35.07 35.07 12.87 18.65 9.35 8.27
MSCIWorldIndex 23.10 23.10 9.91 12.30 5.68 6.00
13Fundperformance
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
Performancedataquotedrepresentspastperformanceanddoesnotguaranteefutureresults.Theinvestmentreturnandprincipalvalueofaninvestmentwillfluctuatesothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost.CurrentperformanceoftheFundsmaybe lowerorhigherthantheperformancequoted.Totalreturnsreflectafeewaiverineffectandintheabsenceofthiswaiver,thetotalreturnswouldbelower.Performancedatadoesnotreflectthe2%redemptionfeeforsharesheldlessthan30daysandifdeductedthefeewouldreducetheperformancequoted.Forperformancecurrenttothemostrecentmonthendpleasevisitwww.gafunds.com/our-funds orcall800-915-6565.
10.8
9%
11.8
2% 18.7
6%
21.1
7%
-45.
42%
45.2
0%
17.0
0%
-6.5
1%
19.9
1%
45.2
9%
12.5
5%
-3.0
4%
9.51
%
34.7
5%
15.2
8%
10.0
8% 20.7
0%
9.66
%
-40.
30%
30.8
7%
12.4
1%
-4.9
9%
16.5
6% 27.4
3%
5.58
%
-0.2
8%
8.19
%
23.1
0%
-50%-40%-30%-20%-10%
0%10%20%30%40%50%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Guinness Atkinson Global Innovators MSCI World Index
-50%0%
50%100%150%200%250%300%350%400%
Total return (USD)
14Performanceattributioncommentary
§ OverweightInformationTechnologyandunderweightHealthCarewerethelargestcontributorstopositiveperformanceintermsofassetallocationrelativetothebenchmarkinthequarter
§ UnderweightMaterialsandEnergysectorswereasmalldragonperformanceoverthequarter
§ Stockselectionwasgenerallypositive,butunderperformedrelativetobenchmarkinInformationTechnologysectorduetolackofexposuretosomemega-capstocks(e.g.Apple,Microsoft)thatarealargeweightinbenchmarkandperformedwellinthequarter
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
15Notableperformancedriversinquarter
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
§ WisdomTree,thespecialistETFprovider,isnowup~45%(TRinUSD)fromAugustlows.GoodperformanceinlargestETFproductsdrivingassetsundermanagementhigher.AcquisitionofGuggenheimETFbusinessbyInvescoannouncedinSeptemberathighvaluationmultiples alsoseenasshowingWisdomTree undervalued.
§ Intel reportedstrongthird-quarterresults.Broad-basedrevenuegrowthandoperatingmarginimprovementsalongsidebetterthanexpecteddatacenter revenue growth(7%year-on-year).
§ NikeaddressedmanyinvestorconcernsatanalystdayinOctober(productpipeline,inventorymanagement,competitiontobrand,distributionstrategy)highlightingabullishlong-termstrategyleadingtore-ratinginmultiple.
§ Fanuc,therobotmanufacturer,outperformedthestrongJapaneseequitymarketinthequarterasthecompanyhighlightedstrongdemand foritsproductsfromavarietyofsectors.
§ BoeingcontinuedstrongrecentperformanceasQ3reportedearningsexceededestimatesagain.Hasbeatearningsestimatesin7outof last8quarters.
§ Verifone,theelectronicpaymenttechnologycompany,modestlybeatearningsbutmarginexpansionandrevenuegrowthpressuresstillnotcomingthroughasfastasmarketwouldlike.Thisisreflectedinlowmultipleof~11.5Xforwardearnings.
§ CheckPoint stockfell12.5%ondayofQ3earningsrelease.EarningsbetterthanexpectedbutUSrevenuegrowthweaker.Beforeearningsreleasestockupover39%YTD,outperformingMSCIWorldby>20%.
Top5performingstocks Bottom5performingstocksTotalreturn
(inUSD)Totalreturn
(inUSD)
WisdomTreeInvestmentsInc 24.09% VeriFoneSystemsInc -12.67%IntelCorp 21.93% CheckPointSoftwareTechnologiesLtd -9.12%NIKEInc 21.04% SchlumbergerLtd* -8.10%FANUCCorp 18.78% SchneiderElectricSE -1.98%BoeingCo/The 16.64% CognizantTechnologySolutionsCorp -1.89%
*Soldorpurchasedintra-quarter
Holdingsaresubjecttochange.
16Changesmadeinthequarter
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
§ BuyAntaSports§ China-basedfootwearandapparelmanufacturerandtrader§ Verystrongcashflowreturnoninvestmentoverthelast15years§ Growththroughownbrandandadoptionofwesternbrandportfolios(e.g.Fila)§ Solidmargingrowth,andwellpositionedtobenefitfromthegrowingwealthinChina,andrecoveringeconomy,
andhasmaintainedlowdebtlevels
§ SellSchlumberger§ HeldinthefundsinceAugust2014§ Significantunderperformerrelativetofundfollowingoilpricedrop§ Lackofconvictiononearningsrecoveryanddropinreturnsoncapital
Buys SellsAntaSports Schlumberger
17Portfolioallocation:sector
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
4%
-9%
-5%
-3%
-3%
-3%
-6%
-12%
-5%
5%
8%
30%
-40% -30% -20% -10% 0% 10% 20% 30% 40%
Cash
ConsumerStaples
Materials
TelecommunicationServices
Utilities
RealEstate
Energy
Financials
HealthCare
ConsumerDiscretionary
Industrials
InformationTechnology
Over/underweights
9%
5%
3%
3%
3%
6%
18%
12%
12%
12%
17%
4%
0%
0%
0%
0%
0%
0%
6%
7%
17%
20%
47%
0% 10% 20% 30% 40% 50% 60%
Cash
ConsumerStaples
Materials
TelecommunicationServices
Utilities
RealEstate
Energy
Financials
HealthCare
ConsumerDiscretionary
Industrials
InformationTechnology
FundallocationvsMSCIWorldIndex
Fund
Index
§ SaleofSchlumbergerreducedEnergyweightingtozero§ PurchaseofAntaSportsincreasedConsumerDiscretionaryweightbyabout3.3%
§ OverallthefundmaintainsahigherweightingrelativetotheindexinInformationTechnology,Industrials,andConsumerDiscretionary
§ ThelargestunderweightsinthefundaretoFinancialsandConsumerstaples
§ ThefundmaintainsazeroweightingtoEnergy,Telcos,Utilities,RealEstate,Materials,andConsumerStaples
Sectorholdingsaresubjecttochange.
18Portfolioallocation:geography(bydomicile)
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)
4%
0%
0%
9%
24%
0%
62%
4%
0%
0%
3%
3%
16%
17%
57%
0% 10% 20% 30% 40% 50% 60% 70%
Cash
AsiaPacific(exJapan)
Other
MiddleEast
Japan
Europe
Emergingmarkets
NorthAmerica
FundallocationvsMSCIWorldIndex
Fund
Index
4%
-4%
0%
3%
-6%
-8%
17%
-5%
-10% -5% 0% 5% 10% 15% 20%
Cash
AsiaPacific(exJapan)
Other
MiddleEast
Japan
Europe
Emergingmarkets
NorthAmerica
Over/underweights
§ FundslightlyunderweightinUSpostsaleofSchlumberger(-5%)§ FundunderweightEuropebyabout8%§ Benchmark(MSCIWorld)doesnotincludeemergingmarkets.Fundhasabout17%exposuretothisregion§ ThefundcontinuestoholdonlyonecompanyinJapanandisthusunderweightthisregionbyabout4%
Sectorholdingsaresubjecttochange.
19Geographicexposure
Source: GuinnessAtkinsonAssetManagement(dataasof12.31.2017)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bydomicile Bysales
Other/undefined
LatinAmerica
Africa/ME
Asia-Pacific
UK
Europeex-UK
NorthAmerica
§ FundhasalowerexposuretoNorthAmericawhenconsideredinrevenues(about45%)versusbydomicile(about59%)
§ FundhasalargerexposuretoAsiaandemergingmarketsbyrevenues
Sectorholdingsaresubjecttochange.
20
PE PE
18Y 19Y
ContinentalAG Automobiles&Components 55.9 DE 3.4% 12.9 11.9AppliedMaterialsInc Semiconductors&Semiconductor 57.0 US 3.3% 12.7 11.7DanaherCorp HealthCareEquipment&Servic 65.2 US 3.3% 21.4 19.8ANTASportsProductsLtd ConsumerDurables&Apparel 12.3 CN 3.7% 21.7 18.3PayPalHoldingsInc Software&Services 92.2 US 3.3% 32.7 27.0SchneiderElectricSE CapitalGoods 51.9 FR 3.4% 16.6 15.3SiemensAG CapitalGoods 122.2 DE 3.4% 15.8 14.1NewOrientalEducation&TechnologyGroupInc ConsumerServices 16.1 CN 3.5% 41.8 30.9IntercontinentalExchangeInc DiversifiedFinancials 41.5 US 3.4% 20.6 18.5IntelCorp Semiconductors&Semiconductor 211.8 US 3.4% 14.2 13.7WisdomTreeInvestmentsInc DiversifiedFinancials 1.7 US 2.9% 34.0 25.7SamsungElectronicsCoLtd TechnologyHardware&Equipmen 312.7 KR 3.5% 7.1 6.9ComcastCorp Media 188.9 US 3.5% 17.8 16.1CognizantTechnologySolutionsCorp Software&Services 42.2 US 3.4% 16.3 14.2ShirePLC Pharmaceuticals,Biotechnology 47.7 US 3.4% 9.8 9.0AlphabetInc Software&Services 755.0 US 3.3% 21.4 17.6InfineonTechnologiesAG Semiconductors&Semiconductor 33.1 DE 3.4% 24.1 21.2FacebookInc Software&Services 538.9 US 3.3% 21.4 17.8NIKEInc ConsumerDurables&Apparel 103.6 US 3.5% 27.3 23.6CatcherTechnologyCoLtd TechnologyHardware&Equipmen 8.7 TW 3.4% 9.1 7.9BoeingCo/The CapitalGoods 177.4 US 3.4% 26.4 22.9CiscoSystemsInc TechnologyHardware&Equipmen 193.6 US 3.4% 15.6 14.8EatonCorpPLC CapitalGoods 36.0 US 3.5% 15.4 14.1NVIDIACorp Semiconductors&Semiconductor 128.8 US 3.3% 43.1 36.0SAPSE Software&Services 140.8 DE 3.3% 21.2 19.0AACTechnologiesHoldingsInc TechnologyHardware&Equipmen 23.5 CN 3.4% 19.4 15.8FANUCCorp CapitalGoods 52.1 JP 3.4% 32.2 29.4CheckPointSoftwareTechnologiesLtd Software&Services 17.2 IL 3.3% 18.1 16.7RoperTechnologiesInc CapitalGoods 26.8 US 3.4% 25.6 23.6VeriFoneSystemsInc TechnologyHardware&Equipmen 2.0 US 2.1% 12.0 10.3
Averagemkt.cap 118.6 Totalportfolio 17.5 15.7Medianmkt.cap 54.0 Y-o-Ygrowth 12%
MSCIWorldIndex 17.2 15.7Fundpremium/(discount) 2.0% -0.5%
NameCountryofdomicile
%NAVMkt.capIndustry
Portfolioprofile
Source: GuinnessAtkinsonAssetManagement,Bloomberg(dataasof12.31.2017)Fundholdingsaresubjecttochange.Forecastsareinherentlylimitedandcannotbereliedupon.
Fundonlytradingatasmallpremiumtobroadmarketatquarterend
21Portfolioallocationbyestimatedfuturelongtermgrowthrate
Portfoliotoday
Rangelast
10years
10–20%growth
20%+growth
33% 20-50%
60% 30-65%
7% 0-20%
0–10%growth
Source: GuinnessAtkinsonAssetManagementestimates(asof12.31.2017)EstimatesareusedareusedbyGuinnessAtkinsontohelpallocatetheportfolio,andmaynotbeindicativeoftheFund'sperformance.
Allocation
Thementionofanyindividualsecuritiesshouldneitherconstitutenorbeconstruedasarecommendationtopurchaseorsellsuch securities,andtheinformationprovidedregardingsuchindividualsecuritiesisnotasufficientbasisuponwhichtomakeaninvestmentdecision.
22Portfoliostatistics– arewedoingwhatwesaywewilldo?
Source:GuinnessAtkinsonAssetManagement,Bloomberg,CSHOLT(dataasat12.31.2017)
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. Total returns reflect a fee waiver in effect and in the absence of this waiver, the total returns would be lower. Performance data does not reflect the 2% redemption fee for shares held less than 30 days and if deducted the fee would reduce the performance quoted. For performance current to the most recent month end please visit www.gafunds.com/our-funds or call 800-915-6565.
ConvictionInnovation Quality Growth
Fund MSCIWorld
R&D/Sa les 7.8% 6.0%
CAPEX/Sa les
7.5% 9.0%
Fund MSCIWorld
CFROI(2017)
16% 12%
Netdebt/equity
-9% 67%
Fund MSCIWorld
Annualised3yrsa lesgrowth
13% 4%
Earningsgrowth
12% 10%
FCFyield 4.6% 4.5%
PE(2018) 17.5 17.2
Pos i tions 30
Top10%NAV 33%
Bottom10%NAV 30%
Activeshare 93%
23
§ TheglobalITsector
24TheITsectorhassignificantlyoutperformedtheMSCIWorldindex…
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
• ITsectorhasoutperformedMSCIWorldindexby76%sinceDec2010
25…withmostofthisoutperformancecomingfromfasterearningsgrowth
• Mostofthisoutperformancehascomefromfasterearningsgrowth
• MultipleexpansionofITstockshasbeenthesameasMSCIWorld
35%
35%
82%
22%
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
26
§ DoesthatmeanglobalITstocksarenowexpensive?
27GlobalITSector– atasmallpremiumtoMSCIWorldindex
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
28…butstillcheaprelativetohistoricaverage…
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
29…andexpectedearningsgrowthisabovehistoricaverage
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
30ITsector- significantdivergenceinperformanceamongsttechindustries
• SemiconductorsandSoftwarehaveledthewaywhileHardwarehaslagged
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
31EarningsgrowthhasbeenthemaincontributortoITperformance…
• Earningsgrowthhasdominatedreturnsacrossindustries
• Softwarehasseenthebiggestmultipleexpansion,whilesemisandhardwarehasbeenmodest
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
32…howevertherehasbeenwidedivergenceinindustryvaluationssinceDec2010
• Softwarecompaniesnowtradeatabouta50%premiumtoSemisandHardware
• Semisandhardwaremultipleexpansionhasbeenmodest
50% premium
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
33Analystsareforecastingstrongestearningsgrowthinsemiconductors
• Allthreeindustriesforecasttogrowearningsmorethan20%inthenext12months
• Notesemiconductorsareverycyclical
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
34Semiconductorsoffercompellingvaluewithstrongearningsgrowth
• Despitesemiconductorcyclicality,earningsgrowthsince2010hasoutpacedotherITindustries• Semiconductorsarecoretomanyinnovationthemes:bigdata,AI,EV’s/AV’s,VR/AR,IoT,ML,etc.• SemisarecheaperthanbroadITsectorandcheaperthanMSCIWorldIndex,yetwithfastergrowth
Source: GuinnessAtkinsonAssetManagement,Bloomberg(12.31.2017)
35
*TheAdvisorhascontractuallyagreedtoreimburseexpenses(excludingAcquiredFundFeesandExpenses,interest,taxes,dividendsonshortpositionandextraordinaryexpenses)inordertolimittheTotalAnnualOperatingExpensesforInstitutionalSharesand forInvestorClassto0.99%and1.24%respectivelythroughJune30,2018.TotheextentthattheAdvisorabsorbsexpensestosatisfythiscap,itmayrecoupaportionorallofsuchamountsabsorbedatanytimewithinthreefiscalyearsafterthefiscalyearinwhichsuchamountswereabsorbed,subjecttotheexpensecapinplaceatthetimerecoupmentissought,whichcannotexceedtheexpensecapatthetimeofwaiver.TheexpenselimitationagreementmaybeterminatedbytheBoardoftheFundatanytimewithoutpenaltyupon60days’ notice.
TheFund’sinvestmentobjectives,risks,chargesandexpensesmustbeconsideredcarefullybeforeinvesting.Thestatutoryandsummaryprospectuscontainsthisandotherimportantinformationabouttheinvestmentcompany,anditmaybeobtainedbycalling800-915-6566orvisitinggafunds.com.Pleasereaditcarefullybeforeinvesting.
Diversificationdoesnotassureaprofitorprotectagainstlossinadecliningmarket
Mutualfundinvestinginvolvesriskandlossofprincipalispossible.Investmentsinforeignsecuritiesinvolvegreatervolatility,political,economicandcurrencyrisksanddifferencesinaccountingmethods.TheFundalsoinvestsinsmallercompanies,whichwillinvolveadditionalriskssuchaslimitedliquidityandgreatervolatility.TheFundisnon-diversifiedmeaningitsassetsmaybeconcentratedinfewerindividualholdingsthandiversifiedfunds.Therefore,theFundismoreexposedtoindividualstockvolatilitythandiversifiedfunds.
Opinionsexpressedaresubjecttochangeandshouldnotbeconsideredinvestmentadvice.
Cashflowisthetotalamountofmoneybeingtransferredintoandoutofabusiness.
Fundholdingsandsectorallocationsaresubjecttochangeandarenotrecommendationstobuyorsellanysecurity.
PricetoEarningsRatio(P/E)isAvaluationratioofacompany'scurrentsharepricecomparedtoitsper-shareearnings.
ReturnonCapitalis areturnfromaninvestmentthatisnotconsideredincome.
Disclosure
36Disclosure
Marketcapitalization(cap)iscalculatedbymultiplyingacompany'ssharesoutstandingbythecurrentmarketpriceofoneshare.Theinvestmentcommunityusesthisfiguretodetermineacompany'ssize,asopposedtosalesortotalassetfigures.
TheMSCIWorldIndexisafreefloat-adjustedmarketcapitalizationweightedindexthatisdesignedtomeasuretheequitymarketperformanceofdevelopedmarkets.
TheMSCIEuropeexUKIndexcaptureslargeandmidcaprepresentationacross14DevelopedMarkets(DM)countriesinEurope.Theindexcoversapproximately85%ofthefreefloat-adjustedmarketcapitalization acrossEuropeanDevelopedMarkets excludingtheUK.
TheMSCIACAsiaex-JapanIndexcaptureslargeandmidcaprepresentationacross2of3DevelopedMarkets(DM)countries*(excludingJapan)and9EmergingMarkets(EM)countriesinAsia.Theindexcoversapproximately85%ofthefreefloatadjustedmarketcapitalizationineachcountry.
TheMSCIEmergingMarketsIndexcaptureslargeandmidcaprepresentationacross24EmergingMarkets(EM)countries.With 845constituents,theindexcoversapproximately85%ofthefreefloat-adjustedmarketcapitalizationineachcountry.
TheMSCI JapanIndexisdesignedtomeasuretheperformanceofthelargeandmidcapsegmentsoftheJapanesemarket.With320constituents,theindexcoversapproximately85%ofthefreefloat-adjustedmarketcapitalizationinJapan.
TheMSCIUKIndexisdesignedtomeasuretheperformanceofthelargeandmidcapsegmentsoftheUKmarket.With109constituents,theindexcoversapproximately85%ofthefreefloat-adjustedmarketcapitalizationintheUK.
TheMSCIUSIndexisdesignedtomeasuretheperformanceofthelargeandmidcapsegmentsoftheUSmarket.With635constituents,theindexcoversapproximately85%ofthefreefloat-adjustedmarketcapitalizationintheUS.Markets excludingtheUK.
Onecannotinvestdirectlyinanindex.
DistributedbyForesideFundServices,LLC