<Page>
As filed with the Securities and Exchange Commission on 09/10/04
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08360
---------
GUINNESS ATKINSON FUNDS
-----------------------
(Exact name of registrant as specified in charter)
21550 OXNARD STREET, SUITE 750, WOODLAND HILLS, CALIFORNIA 91367
----------------------------------------------------------------
(Address of principal executive offices) (Zip code)
JAMES J. ATKINSON, JR.
21550 OXNARD STREET, SUITE 750, WOODLAND HILLS, CALIFORNIA 91367
----------------------------------------------------------------
(Name and address of agent for service)
Copies to:
Susan Penry-Williams, Esq.
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
(800) 915-6566
--------------
Registrant's telephone number, including area code
Date of fiscal year end: DECEMBER 31, 2004
-----------------
Date of reporting period: JUNE 30, 2004
-------------
<Page>
ITEM 1. REPORT TO STOCKHOLDERS.
<Page>
[GRAPHIC]
[GUINNESS ATKINSON FUNDS LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 2004
- - ASIA FOCUS FUND
- - CHINA & HONG KONG FUND
- - GLOBAL INNOVATORS FUND
<Page>
Guinness Atkinson Funds
Semi-Annual Report
June 30, 2004
TABLE OF CONTENTS
<Table>
3 President's Letter to Shareholders
6 Asia Focus Fund
14 China & Hong Kong Fund
22 Global Innovators Fund
30 Statements of Assets and Liabilities
31 Statements of Operations
32 Statements of Changes in Net Assets
34 Financial Highlights
37 Notes to Financial Statements
45 Trustee and Officer Information
47 Guinness Atkinson Funds Information
</Table>
2
<Page>
LETTER TO SHAREHOLDERS
Dear Guinness Atkinson Funds Shareholders,
Once again it is a pleasure to present to you the semi-annual report for the
Guinness Atkinson Funds. This report marks a milestone for the China & Hong Kong
Fund which marked the conclusion of its 10th year. Launched on June 30, 1994,
this Fund continues to be a leader in its category. The China & Hong Kong Fund
ranks number one (of 17), number thirty-two (of 58) and number sixteen (of 71)
funds for total return in Morningstar's Pacific/Asia (ex-Japan) category over
the 10, 5 and 1 year period ending June 30, 2004. The Fund also received a
4-Star Overall Morningstar Rating(TM) among 68 funds (derived from a weighted
average of the Fund's three-, five- and ten-year risk adjusted return measures).
<Table>
<Caption>
SINCE
CALENDAR 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
YEAR TO AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
FUND NAME DATE ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED
---------------------------------------------------------------------------------------------
Asia Focus
Fund Inception:
4/29/1996 -6.52% 30.74% 14.90% .85% n/a -3.92%
China &
Hong Kong
Fund Inception:
6/30/1994 -4.05% 35.32% 6.23% 4.70% 5.14% 5.14%
Global Innovators
Fund Inception:
12/15/1998 3.03% 19.58% -6.38% -5.22% n/a 1.27%
</Table>
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. PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH END MAY BE OBTAINED BY VISITING www.gafunds.com. Total returns reflect a
fee waiver in effect and in the absence of this waiver, the total returns would
be lower.
3
<Page>
LETTER TO SHAREHOLDERS
The year to date total returns have not been as favorable as a year ago; while
the Global Innovators Fund has produced a positive return over the period, the
China & Hong Kong and Asia Focus Funds are both in negative territory year to
date. Despite this, all three of the Funds are up for the 12 month period ending
June 30. The table above provides comprehensive performance information for the
Funds.
Edmund Harriss and Tim Guinness each provide a discussion about the operations
and performance of the Funds over the last six months in their letters to
shareholders contained in this report.
We would like to take this opportunity to mention the latest addition to the
Guinness Atkinson Funds, the Global Energy Fund, which launched on June 30. We
encourage you to take a moment to review this Fund. Information, including a
research report titled THE FUTURE OF ENERGY is available at the Guinness
Atkinson Funds web site, www.gafunds.com. We believe that the world demand of
energy is growing rapidly while the supply is reaching the limits of production.
The convergence of supply and demand will, we believe, increase the cost of
energy and stimulate the development of alternative energy sources.
The world is facing dramatic change on a number of fronts including the rapid
development of China and the rest of Asia, the continued transformation of the
global economy as companies embrace (or fail) to adapt to the New Economy and
the potential depletion of the world's supply of fossil fuels. Everyday we see
evidence of these changes, not just in business and the economy but in politics
and culture. We believe these, and other, changes will have a profound impact on
the future. The markets react in the short-term to a variety of whims, but in
the long run these profound changes should have a significant impact. As always
we will manage the Funds with an eye on the long term.
We appreciate the opportunity to serve you and the other shareholders in the
Guinness Atkinson Funds.
Sincerely,
/s/ Timothy Guinness /s/ James Atkinson
Timothy Guinness James Atkinson
4
<Page>
(C) 2004 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. Past performance is no guarantee of future results.
Morningstar Ratings reflect a fund's historical risk-adjusted performance in
comparison to similar funds as of June 30, 2004 and are subject to change every
month. Morningstar Ratings are based on a Morningstar Risk-Adjusted Return
measure that accounts for variation in a fund's monthly performance, including
the effects of any sales charges, loads or redemption fees, and place more
emphasis on downward variations and rewarding consistent performance. The top
ten percent (10%) of funds in each category receive five (5) stars, the next
twenty-two percent (22%) receive four (4) stars, the next thirty-five percent
(35%) receive three (3) stars, the next twenty-two percent (22%) receive two (2)
stars and the bottom ten percent (10%) receive one (1) star. The Guinness
Atkinson China & Hong Kong Fund was rated against the following numbers of U.S.-
domiciled Pacific/Asia (ex-Japan) funds over the following time periods: 68, 58
and 17 funds for three, five and ten years respectively. With respect to these
Pacific.Asia (ex-Japan) funds, the China Hong Kong Fund received 3-Star, 4-Star
and 4-Star ratings for the three, five and ten year periods respectively.
Morningstar Rankings represent a fund's total-return percentile rank relative to
all funds that have the same Morningstar Category. The highest percentile rank
is one (1) and the lowest is one hundred (100). Morningstar Rankings are based
on Morningstar total returns, which includes both income and capital gains or
losses, and are not adjusted for sales charges or redemption fees.
The Funds invest in foreign securities which involves greater volatility and
political, economic and currency risks and differences in accounting methods.
5
<Page>
ASIA FOCUS FUND FOR THE PERIOD ENDED JUNE 30, 2004
1. PERFORMANCE
AVERAGE ANNUALIZED TOTAL RETURNS
<Table>
<Caption>
6 MONTHS 1 YEAR SINCE
(ACTUAL) (ACTUAL) 3 YEARS 5 YEARS INCEPTION
------------------------------------------------------------------------
Fund -6.52% 30.74% 14.90% 0.85% -3.92%
BENCHMARK INDEX:
MSCI AC Far East
Free Ex Japan -1.55% 29.67% 10.58% -2.18% -4.52%
S&P 500 3.44% 19.10% -0.69% -2.20% 8.65%
</Table>
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. PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH END MAY BE OBTAINED BY VISITING www.gafunds.com. Total returns reflect a
fee waiver in effect and in the absence of this waiver, the total returns would
be lower.
The Fund has been through a difficult six month period following the strong
performance of last year and has fallen further than its benchmark. Investors
have become decidedly more nervous in 2004 as uncertainties about China (of
which more is written about in the China & Hong Kong Fund letter), interest
rates, oil prices and geopolitical risks have piled on top of one another. As a
result, money has moved into more defensive markets or out of Asia altogether.
And yet, in spite of the stock market gains in 2003, there has been no collapse
in prices. With Asian economies still expected to grow at double the rate of the
developed world and where stock market valuations are still relatively cheap, we
expect that as uncertainties recede the region will once again start to perform.
The only markets that rose in the first half of the year have been the south
Asian markets of Malaysia, Singapore and the Philippines. These were treated as
safe havens when equity markets generally sold off in April and May. In Asia,
the falling markets were led by China and Thailand. China fell very abruptly on
policy changes designed to rein in excessive investment in
6
<Page>
the aluminium, cement, steel and auto sectors that has starved other sectors
where capital is sorely needed such as power and transportation. Thailand, too,
has had a poor six months driven mainly by profit-taking as growth momentum has
slowed.
Asian economies however, remain in good shape in spite of the rising tide of
uncertainty that has blighted world markets this year. Export growth has been
robust and capital has continued to flow into the region. In contrast to the run
up to the crisis years of 1997/8, all countries have a current account surplus.
External debt has been significantly reduced over that time and all have seen
significant growth in foreign exchange reserves ensuring ample resources to meet
obligations as they fall due, meaning no currency pressures. Inflation remains
low, and even in China where inflationary concerns have been building, headline
inflation is standing at 5% and may have peaked. Consumer growth has been slow
in coming, with the exception of Korea which has to work through a recent period
of consumer excess, but banks are generally under-leveraged and having restored
their base capital, are now in a position to resume lending.
Therefore, while we may worry about the ability of Korea to generate a domestic
recovery or about the shape of demand for electronic equipment from Taiwan there
is no sense of an imminent crisis. Rising interest rates in the U.S. will
certainly have an effect on external demand and so on export growth but we do
not expect Asia to have to follow these rises either in the timing or in degree.
2. PORTFOLIO POSITION
The portfolio has the bulk of its investments in China, Hong Kong, Korea, Taiwan
and Thailand. The Fund has limited exposure to Singapore and Malaysia and
recently added a position in Indonesia. The Fund is well-diversified across a
dozen sectors with the bulk of assets in the consumer, energy, industrial,
materials and technology sectors. We remain focused on Asia's growth story which
is presently being driven by exports but should increasingly become a consumer
story. We are concentrating on those stocks that have generated improving
returns on investment, are growing their earnings and offer value. Markets have
been whipped around by global uncertainties while the companies themselves are
continuing to report solid results. There have been some downgrades in forecast
earnings but these have not been significant. In short, we believe the Fund is
7
<Page>
fundamentally well positioned to outperform once investors' nerves settle and
the global outlook becomes a little clearer.
3. OUTLOOK & STRATEGY
Three issues in particular have been hanging over world markets since April this
year: Is China's economy going to crash? What happens when U.S. interest rates
go up and by how much will they need to rise? How high is the oil price set to
rise? The visibility on the first two of these issues at least is beginning to
improve.
Investment in China is slowing and broad money growth has slowed to within the
Central Bank's target for the first time in almost two years. The next area to
watch out for is whether lending can be resumed to businesses currently starved
of working capital. Without a resumption of lending companies are likely to hit
trouble and banks may see a rise in non-performing loans. Nevertheless, progress
is being made, the government is alive to the companies' liquidity needs and a
crash looks very unlikely. Likewise, with U.S. interest rates it has been
difficult to gauge the true picture of underlying demand with forecasts
oscillating between continued softness and unexpected strength. Alan Greenspan
has been adamant that as matters now stand interest rates rising at a measured
pace is what markets should expect.
Greater clarity on these issues should allow investors to recalibrate their
assessments of what is offering growth and value. We believe that Asia's profile
looks attractive and that this is a key reason why Asia has not collapsed but
has survived a period of intense volatility. Asian economies appear sound and
banks around the region are now emerging from their post-crisis hibernation with
strong balance sheets and a renewed willingness to lend. Consumers have
generally been cautious and therefore policy is geared favourably toward that
sector. This is especially so since we expect to see export growth moderate in
coming months. Earnings' growth is looking robust and while expectations can
always be downgraded we have only seen a moderate scaling back and then only in
cyclical sectors such as technology and petrochemicals. Recently announced
company results have tended still to meet or exceed expectations.
The fund strategy therefore, is to position the fund in fundamentally sound
companies generating good returns on investment, which are growing
8
<Page>
earnings and are exposed to the key growth areas of Asia. These are the
companies that should out perform when the current risk aversion subsides.
/s/ Edmund Harriss
Edmund Harriss
Portfolio Manager
The MSCI AC Far East Free Ex Japan Index is a market-capitalization weighted
index of over 450 stocks traded in eight Asian markets, excluding Japan. The
Standard & Poor's 500 Index is a market-capitalization weighted index composed
of 500 widely held common stocks of U.S. companies. These indices are unmanaged,
not available for investment and do not incur expenses.
The Fund invests in foreign securities which involves greater volatility and
political, economic and currency risks and differences in accounting methods.
Please refer to the Schedule of Investments for details on fund holdings. Fund
holdings are subject to change at any time are not recommendations to buy or
sell any security.
9
<Page>
FUND HIGHLIGHTS AT JUNE 30, 2004 (UNAUDITED)
GUINNESS ATKINSON ASIA FOCUS FUND
<Table>
# of Holdings in Portfolio: 45
Portfolio Turnover: 19.7%
% of Stocks in Top 10: 41.9%
</Table>
FUND MANAGERS:
Edmund Harriss;
Timothy W.N. Guinness
TOP 10 HOLDINGS (% OF NET ASSETS)
<Table>
Samsung Electronics 9.8%
Esprit Holdings, Ltd. 4.2%
Techtronic Industries Co. 4.1%
Taiwan Semiconductor
Manufacturing Co, Ltd. 3.8%
Denway Motors, Ltd. 3.8%
Yanzhou Coal Mining Co., Ltd. 3.6%
POSCO 3.6%
China Steel Corp. 3.4%
Huaneng Power
International, Inc. 2.8%
CNOOC, Ltd. 2.8%
</Table>
TOP 5 SECTORS (% OF NET ASSETS)
<Table>
Electrical Components &
Equipment 10.7%
Banks 8.9%
Iron / Steel 8.1%
Oil & Gas 7.2%
Agriculture 6.0%
</Table>
TOP 5 COUNTRIES (% OF NET ASSETS)
<Table>
Hong Kong 26.2%
South Korea 24.4%
Taiwan 14.8%
China 14.6%
Thailand 10.5%
</Table>
10
<Page>
SCHEDULE OF INVESTMENTS IN SECURITIES
AT JUNE 30, 2004 (UNAUDITED)
GUINNESS ATKINSON ASIA FOCUS FUND
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS: 99.8%
CHINA: 14.6%
416,000 Anhui Conch Cement Co., Ltd. $ 461,360
2,076,000 China Telecom 725,311
878,000 Huaneng Power International, Inc. 782,366
1,288,000 PetroChina Co., Ltd. 594,496
1,420,000 Sinopec Shanghai Petrochemical 473,361
918,000 Yanzhou Coal Mining Co., Ltd. 1,000,442
--------------
4,037,336
--------------
HONG KONG: 26.2%
1,000,000 Brilliance China Automotive Holdings, Ltd. 294,889
604,000 Chen Hsong Holdings, Ltd. 340,738
1,846,000 CNOOC, Ltd. 781,045
2,892,000 Denway Motors, Ltd. 1,047,483
257,840 Esprit Holdings, Ltd. 1,153,735
697,000 Giant Wireless Technology 137,739
914,000 Global Bio-Chem Technology Group Co., Ltd. 662,102
114,250 Global Bio-Chem Technology Group Co., Ltd.,
warrants, Exp 5/31/04* 7,471
30,400 HSBC Holdings Plc 457,975
1,792,000 Skyworth Digital Holdings, Ltd. 471,002
422,000 Suface Mount Technology Holdings, Ltd. 228,108
713,000 Techtronic Industries Co. 1,138,123
1,503,905 Victory City International Holdings, Ltd. 544,715
--------------
7,265,125
--------------
INDONESIA: 1.5%
1,400,000 Bank Danamon Indonesia Tbk PT 420,633
--------------
MALAYSIA: 4.0%
39,000 British American Tobacco (Malaysia) Berhad 518,289
280,000 IOI Corp. Berhad 600,526
--------------
1,118,815
--------------
</Table>
See accompanying Notes to Financial Statements.
11
<Page>
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS: 99.8% CONTINUED
SINGAPORE: 3.8%
76,368 Jardine Cycle & Carriage, Ltd. $ 284,077
560,000 Neptune Orient Lines, Ltd. 768,149
--------------
1,052,226
--------------
SOUTH KOREA: 24.4%
11,500 Daelim Industrial Co. 360,277
22,000 Hana Bank 464,561
15,250 Hyundai Mobis 677,045
38,000 INI Steel Co. 302,882
23,420 Korea Tobacco & Ginseng Corp. 541,163
5,500 LG Electronics, Inc. 260,839
7,700 POSCO 992,903
4,500 Samsun SDI Co., Ltd. 473,172
6,560 Samsung Electronics 2,708,022
--------------
6,780,864
--------------
TAIWAN: 14.8%
325,510 Acer, Inc. 457,688
164,000 AU Optronics Corp. 248,633
1,008,325 China Steel Corp. 953,173
110,000 HON HAI Precision Industry 408,740
164,000 Novatek Microelectronics Corp., Ltd. 541,142
557,000 Taishin Financial Holdings Co., Ltd. 458,647
728,329 Taiwan Semiconductor
Manufacturing Co., Ltd.* 1,047,894
--------------
4,115,917
--------------
THAILAND: 10.5%
282,000 Advanced Info Service Public Co., Ltd. 627,586
247,500 Electricity Generating Public Co., Ltd. 417,645
524,700 Kasikornbank PCL* 667,263
94,000 PTT Exploration & Production
Public Co., Ltd. 616,092
99,000 Siam Cement Co., Ltd. 590,756
--------------
2,919,342
--------------
TOTAL COMMON STOCKS
(cost $22,635,299) 27,710,258
--------------
TOTAL INVESTMENTS IN SECURITIES
(cost $22,635,299): 99.8% 27,710,258
Other Assets less Liabilities: 0.2% 61,659
--------------
NET ASSETS: 100.0% $ 27,771,917
==============
</Table>
* NON-INCOME PRODUCING SECURITY.
See accompanying Notes to Financial Statements.
12
<Page>
SCHEDULE OF INVESTMENTS BY INDUSTRY
AT JUNE 30, 2004 (UNAUDITED)
ASIA FOCUS FUND
<Table>
<Caption>
INDUSTRY % OF NET ASSETS
Commercial Banks 11.5%
Diversified Operations 9.7
Electric-Integrated 6.3
Distribution/Wholesale 6.2
Mach Tools&Rel Products 6.0
Oil Comp-Integrated 5.3
Electric-Generation 5.3
Auto-Cars/Light Trucks 5.2
Oil Comp-Exploration & Production 4.8
Cellular Telecom 4.2
Coal 3.6
Telecom Services 3.3
Oil Refining & Marketing 3.3
Petrochemicals 2.8
Real Estate Operations/Development 2.5
Audio/Video Products 2.3
Rental Auto/Equipment 2.2
Machinery-General Industrial 2.1
Agricultural Biotech 2.1
Textile-Products 1.9
Building Products-Cement 1.8
Transport-Marine 1.5
Electronic Components-Misc 1.4
Steel-Producers 1.2
Wireless Equipment 1.1
Computers-Other 0.9
Building-Heavy Construction 0.8
Retail-Apparel/Shoe 0.3
Airlines 0.2
------
TOTAL INVESTMENTS IN SECURITIES 99.8
Other Assets less Liabilities 0.2
------
Net Assets 100.00%
======
</Table>
See accompanying Notes to Financial Statements.
13
<Page>
CHINA & HONG KONG FUND FOR THE PERIOD ENDED JUNE 30, 2004
1. PERFORMANCE
AVERAGE ANNUALIZED TOTAL RETURNS
<Table>
<Caption>
6 MONTHS 1 YEAR
(ACTUAL) (ACTUAL) 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------------------------
Fund -4.05% 35.32% 6.23% 4.70% 5.14%
BENCHMARK INDEX:
Hang Seng
Composite -1.92% 36.03% N/A N/A N/A
Hang Seng -0.77% 33.21% 1.65% 1.17% 6.74%
S&P 500 3.44% 19.10% -0.69% -2.20% 11.81%
</Table>
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. PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH END MAY BE OBTAINED BY VISITING www.gafunds.com. Total returns reflect a
fee waiver in effect and in the absence of this waiver, the total returns would
be lower.
In the first six months of this year stock markets have been significantly more
volatile than in 2003. Chinese and Hong Kong equities began in the first three
months of the year where they had left off, but during April as uncertainties
crowded in, many investors did not wait around to find out what was going on and
China-related stocks slumped before rebounding once again to recover most of
their losses. In light of these events the Fund performed creditably and, as we
shall discuss later, looks set for further gains.
The major change this year was the recognition by the Chinese government that
investment in certain sectors was growing at an unsustainable pace. Money was
pouring into plants to produce steel, cement, aluminium and autos; there was
also a sharp pickup in local urban re-development projects. None of these were
co-ordinated and thus much of this new investment was going into overlapping
projects, which left unchecked, would ensure that many would never cover their
costs. It is important to note however, that
14
<Page>
while it is indisputable there has been overheating in certain sectors, it is
very hard to make the argument that there is an economy-wide bubble. Chinese
domestic stock markets have been depressed for the last three years; real estate
prices, with the exceptions of certain sub-areas within Shanghai and Beijing,
have been rising at a normal rate; and inflation remains low at 5% with core
inflation around 1%.
Many external commentators and investors took one look at China's policy changes
and concluded that draconian measures would be enforced and a crash would
follow. It has not turned out like that, hence the recovery in stock prices. The
measures that are still in place consist of restricting further lending to the
sectors identified above, where investment has been excessive. Instead, they
seek to boost lending to sectors starved of capital such as power, transport and
water. Key to understanding what is going on is the realization that China does
not want to slow its economy since it depends on growth to create jobs; instead
it is seeking to correct the glaring misallocation of capital that is causing
major imbalances.
The latest position shows that these measures appear to have been remarkably
successful in as much as fixed asset investment has slowed, broad money growth
has fallen back to a sustainable 16%, in line with nominal economic growth and
within the Central Bank's target. At the same time, the export and consumer
sectors have seen continued growth, as was intended. The effect of this on the
stock market has been to bring in a period of stability following the turbulence
of April and May. Investors are now looking for some of these measures to be
rolled back in the fairly near future.
2. PORTFOLIO POSITION
The portfolio is positioned similarly to how it was at the end of 2003 with the
main focus being on China-related businesses operating in the export
manufacturing and consumer areas. Exposure to the problem sectors was low before
the restraining measures were put in place but this has been increased following
the sell-down in May. Hong Kong stocks and stocks generally considered more
defensive have performed a little better in the first half of the year but the
portfolio has remained oriented toward China's growth, which we believe is the
true story. Recent economic data and stock performance would tend to support
that view and when the uncertainty rolls back with some of the administrative
measures we expect these to be the stocks that will perform.
15
<Page>
3. OUTLOOK & STRATEGY
World equity markets, not just those in China and Hong Kong, have been hit by a
veritable barrage of fears and uncertainties about the effect of Chinese policy
measures; about the impact of rising interest rates; and the continued strength
in oil prices. We would expect visibility on at least the first two of these
issues to improve in the coming months but we should warn investors that
volatility will remain with us for some time yet.
In China we expect to see an easing of policy measures controlling lending and
in particular easier access to working capital loans. Without a resumption of
working capital lending companies are likely to hit trouble and banks may see a
rise in non-performing loans. The good news is that Central Government is
already alive to this issue. Inflation is also something to watch but with raw
materials prices off their highs and an expected bumper harvest to check rising
food prices, it looks as though inflation may already have peaked. This means
that an interest rate rise, which was going to be modest anyway, has been
deferred. The risk to all this is that once policy is eased we will see a
renewed pickup in investment, forcing the re-imposition of controls resulting in
a period of stop-start activity. Overall however, it does appear that the battle
is being won even if it is as yet too early to announce victory.
We are concerned that new capacity coming on stream from over-investment will
hurt corporate margins in certain sectors, which have held up hitherto. The
investment strategy then, remains focused on China's ongoing consumer and export
growth story. The middle class is still growing in number and in affluence and
this is dependent not upon the investment we have been so worried about, but
upon China's export manufacturing sector. As long as China is the manufacturing
centre of preference for mass-market goods, this sector of society will continue
to develop. Next year quotas on textile and clothing production will be lifted
under the terms of China's entry into the World Trade Organization. At the same
time barriers to China's economy are being lifted to foreign entrants. Finally,
China-related stocks are still not expensive trading in aggregate on a multiple
of less than 12 times forward earnings, which the consensus expects to grow by
more than 20%.
/s/ Edmund Harriss
Edmund Harriss
Portfolio Manager
16
<Page>
The Hang Seng Composite Index is a market-capitalization weighted index that
comprises the top 200 companies listed on the Hong Kong Stock Exchange, based on
the average market-capitalization for the past twelve months. The Hang Seng
Composite Index commenced on January 3, 2000 and therefore does not have
five-year returns or returns since the Fund's inception. The Hang Seng Index is
a barometer of the Hong Kong Stock Market which comprises 33 constituent stocks,
whose aggregate market-capitalization accounts for about 70% of the total
market-capitalization of the Stock Exchange of Hong Kong Limited. The Standard &
Poor's 500 Index is a market-capitalization weighted index composed of 500
widely held common stocks of U.S. companies. These indices are unmanaged, not
available for investment and do not incur expenses.
The Fund invests in foreign securities which involves greater volatility and
political, economic and currency risks and differences in accounting methods.
Please refer to the Schedule of Investments for details on fund holdings. Fund
holdings are subject to change at any time are are not recommendations to buy or
sell any security.
17
<Page>
FUND HIGHLIGHTS AT JUNE 30, 2004 (UNAUDITED)
GUINNESS ATKINSON CHINA & HONG KONG FUND
<Table>
# of Holdings in Portfolio: 46
Portfolio Turnover: 8.8%
% of Stocks in Top 10: 48.8%
</Table>
FUND MANAGERS:
Edmund Harriss;
Timothy W.N. Guinness
TOP 10 HOLDINGS (% OF NET ASSETS)
<Table>
HSBC Holdings Plc 7.5%
Esprit Holdings, Ltd. 6.2%
Techtronic Industries Co. 6.0%
CLP Holdings, Ltd. 5.0%
CNOOC, Ltd. 4.8%
China Mobile (Hong Kong), Ltd. 4.2%
Petrochina Co., Ltd. 4.0%
Denway Motors, Ltd. 3.8%
Huaneng Power
International, Inc. 3.7%
Yanzhou Coal Mining Co., Ltd. 3.6%
</Table>
TOP 5 SECTORS (% OF NET ASSETS)
<Table>
Oil & Gas 13.4%
Electric 11.6%
Banks 11.5%
Holding Companies -
Diversified 9.7%
Telecommunications 8.6%
</Table>
TOP COUNTRY (% OF NET ASSETS)
<Table>
Hong Kong 72.9%
China 26.8%
</Table>
18
<Page>
SCHEDULE OF INVESTMENTS IN SECURITIES
AT JUNE 30, 2004 (UNAUDITED)
GUINNESS ATKINSON CHINA & HONG KONG FUND
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS: 99.7%
AGRICULTURAL BIOTECHNOLOGY: 2.1%
2,700,000 Global Bio-Chem Technology Group Co., Ltd. $ 1,955,882
337,500 Global Bio-Chem Technology Group Co., Ltd.,
warrant, Exp 5/31/07* 22,069
--------------
1,977,951
--------------
AIRLINES: 0.2%
560,000 China Southern Airlines Co., Ltd. 220,782
--------------
AUDIO/VIDEO PRODUCTS: 2.3%
8,400,000 Skyworth Digital Holdings, Ltd. 2,207,820
--------------
AUTO - CARS/LIGHT TRUCKS: 5.2%
4,390,000 Brilliance China Automotive Holdings, Ltd. 1,294,562
10,214,000 Denway Motors, Ltd. 3,699,515
--------------
4,994,077
--------------
BUILDING - HEAVY CONSTRUCTION: 0.8%
313,000 Cheung Kong Infrastructure 754,454
--------------
BUILDING PRODUCTS - CEMENT: 1.8%
1,596,000 Anhui Conch Cement Co., Ltd. 1,770,025
--------------
CELLULAR TELECOMMUNICATIONS: 4.2%
1,335,000 China Mobile (Hong Kong), Ltd. 4,039,464
--------------
COAL: 3.6%
3,222,000 Yanzhou Coal Mining Co., Ltd. 3,511,356
--------------
COMMERCIAL BANKS: 11.5%
50,770 Dah Sing Banking Group, Ltd.* 83,320
253,850 Dah Sing Financial Holdings 1,497,151
481,310 HSBC Holdings Plc 7,250,922
379,400 Wing Hang Bank, Ltd. 2,252,209
--------------
11,083,602
--------------
COMPUTERS: 0.9%
7,500,000 Group Sense International, Ltd. 836,587
--------------
</Table>
See accompanying Notes to Financial Statements.
19
<Page>
CHINA & HONG KONG FUND
<Table>
SHARES VALUE
COMMON STOCKS: 99.7% CONTINUED
DISTRIBUTION/WHOLESALE: 6.2%
1,342,071 Esprit Holdings, Ltd. $ 6,005,254
--------------
DIVERSIFIED OPERATIONS: 9.7%
1,288,000 China Merchants Holdings
International Co., Ltd. 1,733,946
252,000 Hutchison Whampoa 1,720,484
412,000 Shanghai Industrial Holdings, Ltd. 758,018
536,500 Swire Pacific, Ltd. - Class A 3,473,694
579,000 Wharf Holdings, Ltd. 1,662,865
--------------
9,349,007
--------------
ELECTRIC - GENERATION: 5.3%
2,000,000 Datang International Power
Generation Co., Ltd. 1,551,372
3,970,000 Huaneng Power International, Inc. 3,537,576
--------------
5,088,948
--------------
ELECTRIC - INTEGRATED: 6.3%
886,000 CLP Holdings, Ltd. 4,850,562
299,000 Hong Kong Electric Holdings 1,238,238
--------------
6,088,800
--------------
ELECTRONIC COMPONENTS - MISCELLANEOUS: 1.4%
2,502,000 Suface Mount Technology Holdings, Ltd. 1,352,432
--------------
MACHINERY - GENERAL INDUSTRIAL: 2.1%
3,510,000 Chen Hsong Holdings, Ltd. 1,980,114
--------------
MACHINERY TOOLS & RELATED PRODUCTS: 6.0%
3,636,000 Techtronic Industries Co. 5,803,950
--------------
MEDICAL - DRUGS: 0.0%+
1,240,000 Far East Pharmaceutical Technology 10,811
--------------
OIL COMP: 10.1%
3,570,000 China Petroleum & Chemical Corp.* 1,304,498
10,957,000 CNOOC, Ltd. 4,635,921
8,256,000 PetroChina Co., Ltd. 3,810,681
--------------
9,751,100
--------------
OIL REFINING: 3.3%
3,326,000 Sinopec Zhenhai Refining &
Chemical Company, Ltd. 3,198,261
--------------
</Table>
See accompanying Notes to Financial Statements.
20
<Page>
<Table>
SHARES VALUE
COMMON STOCKS: 99.7% CONTINUED
PETROCHEMICALS: 2.7%
3,840,000 Sinopec Beijing Yanhua
Petrochemical Co., Ltd. $ 1,243,149
4,204,000 Sinopec Shanghai Petrochemical 1,401,414
--------------
2,644,563
--------------
REAL ESTATE OPERATOR/DEVELOPER: 2.5%
270,000 Cheung Kong 1,990,499
200,000 Hopewell Holdings 402,587
20,000 Hopewell Holdings, warrants, Exp 8/5/06* 2,692
--------------
2,395,778
--------------
RENTAL AUTO/EQUIPMENT: 2.2%
1,531,000 Cosco Pacific, Ltd. 2,129,783
--------------
RETAIL - APPAREL/SHOE: 0.3%
820,000 Glorious Sun Enterprises, Ltd. 249,694
--------------
STEEL - PRODUCERS: 1.2%
3,480,000 Maanshan Iron & Steel 1,126,604
--------------
TELECOM SERVICES: 3.3%
9,200,000 China Telecom Corp., Ltd. 3,214,288
--------------
TEXTILES: 1.9%
5,111,090 Victory City International Holdings, Ltd. 1,851,239
--------------
TRANSPORTATION: 1.5%
921,000 China Shipping Container Lines Co., Ltd.* 330,635
1,876,000 China Shipping Developmental Co., Ltd. 1,118,449
--------------
1,449,084
--------------
WIRELESS EQUIPMENT: 1.1%
5,072,000 Giant Wireless Technology 1,002,313
--------------
TOTAL COMMON STOCKS
(cost $66,367,657) 96,088,141
--------------
TOTAL INVESTMENTS IN SECURITIES
(cost $66,367,657): 99.7% 96,088,141
Other Assets less Liabilities: 0.3% 280,724
--------------
NET ASSETS: 100.0% $ 96,368,865
==============
</Table>
* NON-INCOME PRODUCING SECURITY.
+ LESS THAN 0.1% OF NET ASSETS.
See accompanying Notes to Financial Statements.
21
<Page>
GLOBAL INNOVATORS FUND FOR THE PERIOD ENDED JUNE 30, 2004
1. PERFORMANCE
AVERAGE ANNUALIZED TOTAL RETURNS
<Table>
<Caption>
6 MONTHS 1 YEAR SINCE
(ACTUAL) (ACTUAL) 3 YEARS INCEPTION
------------------------------------------------------------------
Fund 3.03% 19.58% -5.22% 1.27%
BENCHMARK INDEX:
S&P 500 3.44% 19.10% -0.69% 1.11%
NASDAQ Composite 2.22% 26.78% -1.35% 0.24%
</Table>
* PRICE RETURN, EXCLUDES DIVIDENDS
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. PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH END MAY BE OBTAINED BY VISITING www.gafunds.com. TOTAL RETURNS REFLECT A
FEE WAIVER IN EFFECT AND IN THE ABSENCE OF THIS WAIVER, THE TOTAL RETURNS WOULD
BE LOWER.
We're pleased to report the Global Innovators Fund has enjoyed a satisfactory
first six months of 2004, having regard to the returns achieved by its benchmark
indices, with a return of 3.03%. This compares favourably to the return of the
NASDAQ Index of 2.22%; and a little below the return for the S&P 500 Index of
3.44%. It is pleasing to note that the total return since launch now exceeds
that of BOTH its benchmark indices which is, of course, our longer term aim.
The period under review saw an evolution of the portfolio away from the very
high multiple stocks that bounced strongest during the 9-12 months after the
market turned in spring 2003 and towards a portfolio with an earnings multiple
in line with that of the S&P 500, but with higher long run earnings growth
prospects.
To achieve this we restructured the portfolio quite considerably.
Outright sales included AOL Time Warner, Affymetrix, Cisco, Walt Disney, EMC,
Incyte, JDS Uniphase, Millenium Pharmaceuticals, Monsanto, Qwest, Flextronics,
Intel, Walmart, Daimler Chrysler, Glaxo Smithkline, Schwab and Fedex. In
addition it was decided to sell out of any Sanofi stock we acquired post its
take over of Aventis which the fund held.
22
<Page>
New purchases included Axciom, L3 Communications, Aventis (but see its
subsequent takeover referred to above), Nucor, Cable & Wireless, Honda, Toyota,
Samsung, and Costco.
At the same time, retained holdings were trimmed or added to to bring them to
equal weighted positions.
The Portfolio is now down to 28 holdings. (We will not reduce the number
significantly from here). But we have now achieved a portfolio that on the 9
July , by our calculations, had a price-to-earnings ratio (2004) of 18.2X (very
similar to the S&P 500 at 9th July of 17.9X) and whose earnings are projected to
recover by 80% in 2004. Furthermore the stocks held by the portfolio are on
average 29.9% undervalued versus the market when we applied our discounted cash
flow model to the individual constituents.
The better performing holdings have been Nucor, Axciom, Sabre, Check Point
Software and L3 Communications. The worse performing holdings have been Taiwan
Semiconductor, Oracle, Nvidia, Vodafone and Nokia.
The changes over the last six months have not resulted in dramatic changes to
the sectoral or geographic weightings of the portfolio. The most notable changes
have been in the reduction of the exposure to telecommunications; and in
exposure to financials and with the sale of AOL the elimination of the last of
our pure "internet" exposure. These have been balanced by modest increases in
exposure to software; media/entertainment, consumer and basic materials.
Geographically there has been a reduction in the US and Europe exposure and an
increase particularly to Japan and Asia ex Japan.
GUINNESS ATKINSON INVESTMENT PROCESS.
In managing the Global Innovators Fund we seek companies that exhibit New
Economy characteristics using stocks that are in or have once been in the Wired
40 as our starting point. We pay close attention to four factors in screening
all stocks considered for purchase. These four factors are: (a) value, meaning a
disciplined quantitative methodology used to rank all companies on similar basis
projecting their internal cash flows using consensus forecast and historic trend
data and applying a common overall market determined discount rate to imply fair
value and compare this to actual price); (b) business quality (quantitatively
ranking companies for the attractiveness of their return on capital metrics);
(c) improving results
23
<Page>
(1 and 3 month earnings estimates revisions); and (d) good recent market price
performance (looking particularly for above trend momentum and rising
volatility). This screening approach is supported by appropriate due diligence
both on the quality of the quantitative inputs to the screening process, and of
a more traditional form. Also top down "thematic" judgements will be used in the
process of evaluating potential Fund purchases and a regular sell discipline
involving review of large movers in the portfolio is also employed
We hope that over the months and years to come investors will find their faith
in our fund management and in the prospects for this fund with its focus on the
future in particular will be rewarded.
/s/ Tim Guinness
Tim Guinness
Portfolio Manager
The Standard & Poor's 500 Index is a market-capitalization weighted index
composed of 500 widely held common stocks of U.S. companies. The NASDAQ
Composite Index is a market-capitalization weighted price-only index that tracks
the performance of domestic common stocks traded on the Nasdaq market, as well
as National Market System-traded foreign common stocks and ADRs. These indices
are unmanaged, not available for investment and do not incur expenses.
The Fund invests in foreign securities which involves greater volatility and
political, economic and currency risks and differences in accounting methods.
Price to earnings ratio is a common tool for comparing the prices of different
common stocks and is calculated by dividing the current market price of a stock
by the earnings per share.
Please refer to the Schedule of Investments for details on fund holdings. Fund
holdings are subject to change at any time are not recommendations to buy or
sell any security.
24
<Page>
FUND HIGHLIGHTS AT JUNE 30, 2004 (UNAUDITED)
GUINNESS ATKINSON GLOBAL INNOVATORS FUND
<Table>
# of Holdings in Portfolio: 28
Portfolio Turnover: 42.9%
% of Stocks in Top 10: 36.0%
</Table>
FUND MANAGERS:
Timothy W.N. Guinness;
Edmund Harriss
TOP 10 HOLDINGS (% OF NET ASSETS)
<Table>
Honda Motor, Ltd. 3.7%
Dell, Inc. 3.7%
Samsung Electronics 3.7%
First Data Corp. 3.6%
Cemex SA de CV 3.6%
Nucor Corp. 3.6%
Sun Microsystems, Inc. 3.6%
Oracle Corp. 3.5%
Check Point Software
Technologies 3.5%
Microsoft Corp. 3.5%
</Table>
TOP 5 SECTORS (% OF NET ASSETS)
<Table>
Software 14.0%
Telecommunications 9.0%
Computers 7.3%
Auto Manufacturers 7.2%
Semiconductors 6.3%
</Table>
TOP 5 COUNTRIES (% OF NET ASSETS)
<Table>
United States 59.6%
United Kingdom 6.6%
South Korea 3.7%
Mexico 3.6%
Israel 3.5%
</Table>
25
<Page>
SCHEDULE OF INVESTMENTS IN SECURITIES
AT JUNE 30, 2004 (UNAUDITED)
GUINNESS ATKINSON GLOBAL INNOVATORS FUND
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS: 91.1%
ADVERTISING AGENCIES: 3.4%
29,470 WPP Group Plc $ 1,509,748
------------
AEROSPACE/DEFENSE: 3.5%
23,000 L-3 Communications Holdings, Inc. 1,536,400
------------
AUTO MANUFACTURERS: 7.2%
68,300 Honda Motor Company ADR 1,661,056
18,800 Toyota Motor Corp. 1,534,456
------------
3,195,512
------------
BLAST FURN/MILL: 3.6%
20,900 Nucor Corp. 1,604,284
------------
COMMUNICATIONS EQUIPMENT: 2.4%
73,542 Nokia Corp. 1,069,301
------------
COMPUTER SYSTEMS DESIGN: 3.6%
368,090 Sun Microsystems, Inc.* 1,597,510
------------
COMPUTER RELATED SERVICES: 3.3%
59,400 Acxiom Corp. 1,474,902
------------
DATA PROCESSING AND PREPARATION: 3.6%
36,264 First Data Corp. 1,614,473
------------
ELECTRICAL COMPONENTS & EQUIPMENT: 3.7%
7,900 Samsung Electronics Co., Ltd. 1,625,425
------------
ELECTRONIC COMPUTERS: 3.7%
45,700 Dell, Inc.* 1,636,974
------------
FIRE, MARINE, AND CASUALTY INSURANCE: 3.3%
20,795 American International Group, Inc. 1,482,268
------------
</Table>
See accompanying Notes to Financial Statements.
26
<Page>
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS: 91.1% CONTINUED
NATIONAL COMMERCIAL BANKS: 6.3%
29,800 Citigroup, Inc. $ 1,385,700
28,574 State Street Corp. 1,401,269
------------
2,786,969
------------
NEWSPAPER PUBLISHING: 3.5%
43,342 News Corp. Ltd. ADR 1,535,174
------------
PASSENGER TRANSPORTATION ARRANGEMENT: 3.3%
53,490 Sabre Holdings Corp. 1,482,208
------------
PHARMACEUTICAL PREPARATIONS: 3.2%
11,000 Aventis S.A. 836,770
17,600 Pfizer, Inc. 603,328
------------
1,440,098
------------
PREPACKAGED SOFTWARE: 10.5%
58,200 Check Point Software Technologies, Ltd.* 1,570,818
54,028 Microsoft Corp. 1,543,040
131,930 Oracle Corp.* 1,573,925
------------
4,687,783
------------
RADIO & TV COMMUNICATIONS EQUIPMENT: 3.2%
37,808 Sony Corp. 1,438,594
------------
RADIOPHONE COMMUNICATIONS: 3.2%
63,648 Vodafone Group Plc 1,406,621
------------
READY-MIXED CONCRETE: 3.6%
55,263 Cemex SA de CV 1,608,153
------------
SEMICONDUCTORS: 6.3%
68,200 Nvidia Corp.* 1,398,100
167,913 Taiwan Semiconductor Manufacturing Co., Ltd. 1,395,354
------------
2,793,454
------------
TELECOMMUNICATIONS SERVICES: 3.4%
215,500 Cable & Wireless Plc 1,527,895
------------
</Table>
See accompanying Notes to Financial Statements.
27
<Page>
GLOBAL INNOVATORS FUND
<Table>
<Caption>
SHARES VAULE
COMMON STOCKS: 91.1% CONTINUED
VARIETY STORE: 3.3%
35,300 Costco Wholesale Corp. $ 1,449,771
------------
TOTAL COMMON STOCKS
(cost $38,418,504) 40,503,517
------------
TOTAL INVESTMENTS IN SECURITIES
(cost $38,418,504): 91.1% 40,503,517
Other Assets less Liabilities: 8.9% 3,955,753
------------
NET ASSETS: 100.0% $ 44,459,270
============
</Table>
* NON-INCOME PRODUCING SECURITY.
See accompanying Notes to Financial Statements.
28
<Page>
(This page is Intentionally Left Blank)
29
<Page>
STATEMENTS OF ASSETS AND LIABILITIES
AT JUNE 30, 2004 (UNAUDITED)
<Table>
<Caption>
ASIA CHINA & GLOBAL
FOCUS HONG KONG INNOVATORS
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at cost $ 22,635,299 $ 66,367,657 $ 38,418,504
=============== =============== ===============
Investments in securities, at value $ 27,710,258 $ 96,088,141 $ 40,503,517
Cash -- -- 3,989,196
Cash denominated in foreign currency
(cost of $6,602, $50,180, $0, respectively) 6,506 50,185 --
Receivables:
Securities sold -- 702,545 --
Fund shares sold 1,163 14,000 3,007
Dividends and interest 119,051 255,768 74,618
Tax Reclaim -- -- 10,742
Prepaid expenses 21,141 24,940 11,733
--------------- --------------- ---------------
Total assets 27,858,119 97,135,579 44,592,813
--------------- --------------- ---------------
LIABILITIES
Cash overdraft 12,032 559,997 --
Payables:
Unrealized loss on forward foreign currency contracts -- 86 --
Due to advisor 25,445 86,282 36,013
Accrued administration expense 5,730 19,555 1,817
Accrued expenses 29,746 75,215 72,508
Deferred trustees' compensation 13,249 25,579 23,205
--------------- --------------- ---------------
Total liabilities 86,202 766,714 133,543
--------------- --------------- ---------------
NET ASSETS $ 27,771,917 $ 96,368,865 $ 44,459,270
=============== =============== ===============
NUMBER OF SHARES ISSUED AND
OUTSTANDING (unlimited shares authorized no par value) 3,124,374 5,973,004 3,535,329
=============== =============== ===============
NET ASSET VALUE PER SHARE $ 8.89 $ 16.13 $ 12.58
=============== =============== ===============
COMPONENTS OF NET ASSETS
Paid-in capital $ 109,225,557 $ 114,701,589 $ 90,597,891
Undistributed net investment income (loss) 140,395 1,722,864 (72,128)
Accumulated net realized loss on
investments and foreign currency (86,668,866) (49,775,910) (48,151,506)
Net unrealized appreciation (depreciation) on:
Investments 5,074,959 29,720,484 2,085,013
Foreign Currency (128) (162) --
--------------- --------------- ---------------
Net Assets $ 27,771,917 $ 96,368,865 $ 44,459,270
=============== =============== ===============
</Table>
See accompanying Notes to Financial Statements.
30
<Page>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
<Table>
<Caption>
ASIA CHINA & GLOBAL
FOCUS HONG KONG INNOVATORS
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends* $ 483,868 $ 1,803,838 $ 310,289
Interest 462 2,338 644
--------------- --------------- ---------------
Total income 484,330 1,806,176 310,933
--------------- --------------- ---------------
EXPENSES
Advisory fees (Note 3) 182,066 570,732 212,875
Administration fees (Note 3) 45,517 142,683 11,826
Transfer agent fees 27,514 66,292 72,206
Custody fees 19,504 28,038 2,601
Fund accounting fees 18,044 30,650 14,993
Audit fees 10,669 10,767 11,228
Legal fees 9,395 17,557 10,999
Trustees' fees 7,615 13,594 9,405
Reports to shareholders 7,533 20,361 19,996
Registration expense 5,693 10,456 6,943
Interest expense 5,488 6,008 3,753
Insurance expense 3,144 10,036 4,102
Miscellaneous 1,753 2,134 2,134
--------------- --------------- ---------------
Total expenses 343,935 929,308 383,061
--------------- --------------- ---------------
Net investment income (loss) 140,395 876,868 (72,128)
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain (loss) on:
Investments 2,006,153 562,474 (1,468,646)
Foreign currency (32,688) (2,061) --
Net unrealized gain (loss) on:
Investments (4,580,036) (6,509,243) 3,002,688
Foreign currency (348) (163) --
--------------- --------------- ---------------
Net realized and unrealized gain (loss)
on investments and foreign currency (2,606,919) (5,948,993) 1,534,042
--------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from operations $ (2,466,524) $ (5,072,125) $ 1,461,914
=============== =============== ===============
</Table>
* NET OF FOREIGN TAX WITHHELD OF $50,752 FOR ASIA FOCUS FUND AND $19,994 FOR
GLOBAL INNOVATORS FUND.
See accompanying Notes to Financial Statements.
31
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
ASIA FOCUS FUND
-------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2004* DECEMBER 31, 2003
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income (loss) $ 140,395 $ 244,712
Net realized gain (loss) on:
Investments 2,006,153 2,508,291
Foreign currency (32,688) (232,309)
Net unrealized gain (loss) on:
Investments (4,580,036) 10,250,784
Foreign currency (348) (4,228)
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (2,466,524) 12,767,250
---------------- -----------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 10,060,050 44,459,406
Proceeds from shares transferred due to mergers -- --
Cost of shares redeemed (15,992,005) (37,677,486)
Redemption fee proceeds (Note 3) 9,444 137,499
---------------- -----------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS (5,922,511) 6,919,419
---------------- -----------------
Total increase (decrease) in net assets (8,389,035) 19,686,669
NET ASSETS
Beginning of year 36,160,952 16,474,283
---------------- -----------------
End of year $ 27,771,917 $ 36,160,952
================ =================
Accumulated net investment income (loss) $ 140,395 $ --
CAPITAL SHARE ACTIVITY
Shares sold 1,018,870 6,115,337
Shares issued on merger -- --
Shares redeemed (1,697,484) (5,152,897)
---------------- -----------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (678,614) 962,440
================ =================
</Table>
* UNAUDITED.
See accompanying Notes to Financial Statements.
32
<Page>
<Table>
<Caption>
CHINA & HONG KONG FUND
-------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2004* DECEMBER 31, 2003
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income (loss) $ 876,868 $ 1,564,186
Net realized gain (loss) on:
Investments 562,474 (1,926,993)
Foreign currency (2,061) (7,754)
Net unrealized gain (loss) on:
Investments (6,509,243) 42,612,213
Foreign currency (163) 1
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (5,072,125) 42,241,653
---------------- -----------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 13,336,775 36,949,642
Proceeds from shares transferred due to mergers -- 9,581,080
Cost of shares redeemed (28,455,776) (29,161,486)
Redemption fee proceeds (Note 3) 19,358 16,771
---------------- -----------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS (15,099,643) 17,386,007
---------------- -----------------
Total increase (decrease) in net assets (20,171,768) 59,627,660
NET ASSETS
Beginning of year 116,540,633 56,912,973
---------------- -----------------
End of year $ 96,368,865 $ 116,540,633
================ =================
Accumulated net investment income (loss) $ 1,722,864 $ 845,996
CAPITAL SHARE ACTIVITY
Shares sold 762,684 2,840,447
Shares issued on merger -- 968,053
Shares redeemed (1,721,957) (2,469,845)
---------------- -----------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (959,273) 1,338,655
================ =================
<Caption>
GLOBAL INNOVATORS FUND
-------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2004* DECEMBER 31, 2003
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income (loss) $ (72,128) $ (334,301)
Net realized gain (loss) on:
Investments (1,468,646) (1,236,492)
Foreign currency -- --
Net unrealized gain (loss) on:
Investments 3,002,688 16,126,769
Foreign currency -- --
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS 1,461,914 14,555,976
---------------- -----------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 739,717 1,724,346
Proceeds from shares transferred due to mergers -- --
Cost of shares redeemed (7,520,650) (12,406,081)
Redemption fee proceeds (Note 3) 415 811
---------------- -----------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS (6,780,518) (10,680,924)
---------------- -----------------
Total increase (decrease) in net assets (5,318,604) 3,875,052
NET ASSETS
Beginning of year 49,777,874 45,902,822
---------------- -----------------
End of year $ 44,459,270 $ 49,777,874
================ =================
Accumulated net investment income (loss) $ (72,128) $ --
CAPITAL SHARE ACTIVITY
Shares sold 59,134 164,601
Shares issued on merger -- --
Shares redeemed (601,934) (1,199,022)
---------------- -----------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (542,800) (1,034,421)
================ =================
</Table>
33
<Page>
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ------------------------------------------------------
ASIA FOCUS FUND JUNE 30, 2004(1) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.51 $ 5.80 $ 6.18 $ 5.16 $ 9.51 $ 6.73
----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.06 (0.05) 0.01 -- 0.05
Net realized and unrealized gain (loss)
on investments (0.67) 3.61 (0.37) 1.01 (4.35) 2.81
----------------------------------------------------------------------
Total from investment operations (0.62) 3.67 (0.42) 1.02 (4.35) 2.86
----------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income -- -- -- -- -- (0.08)
----------------------------------------------------------------------
Total distributions -- -- -- -- -- (0.08)
----------------------------------------------------------------------
Redemption Fee Proceeds --(2) 0.04 0.04 -- -- --
----------------------------------------------------------------------
Net asset value, end of period $ 8.89 $ 9.51 $ 5.80 $ 6.18 $ 5.16 $ 9.51
======================================================================
Total return (6.52)%(3) 63.97% (6.15)% 19.77% (45.74)% 42.43%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 27.8 $ 36.2 $ 16.5 $ 17.1 $ 14.2 $ 37.7
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.89%(4) 2.16% 2.62% 3.08% 2.67% 2.39%
After fees waived 1.89%(4) 1.95% 1.98% 1.98% 1.98% 1.98%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS:
Before fees waived 0.77%(4) 0.75% (1.26)% (0.89)% (0.71)% 0.07%
After fees waived 0.77%(4) 0.96% (0.62)% 0.21% (0.02)% 0.48%
Portfolio turnover rate 19.74%(3) 114.90% 188.96% 43.91% 61.77% 67.24%
</Table>
(1) UNAUDITED.
(2) AMOUNT REPRESENTS LESS THAN $0.01 PER SHARE.
(3) NOT ANNUALIZED.
(4) ANNUALIZED.
See accompanying Notes to Financial Statements.
34
<Page>
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
CHINA & HONG SIX MONTHS ENDED ------------------------------------------------------
KONG FUND JUNE 30, 2004(1) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.81 $ 10.17 $ 11.67 $ 15.75 $ 17.65 $ 10.77
----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.17 0.20 0.13 0.09 0.05 0.23
Net realized and unrealized gain (loss)
on investments (0.85) 6.44 (1.66) (3.79) (1.28) 6.91
----------------------------------------------------------------------
Total from investment operations (0.68) 6.64 (1.53) (3.70) (1.23) 7.14
----------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income -- -- -- (0.38) (0.67) (0.26)
From net realized gains -- -- -- -- -- --
----------------------------------------------------------------------
Total distributions -- -- -- (0.38) (0.67) (0.26)
----------------------------------------------------------------------
Redemption Fee Proceeds --(2) --(2) 0.03 -- -- --
----------------------------------------------------------------------
Net asset value, end of period $ 16.13 $ 16.81 $ 10.17 $ 11.67 $ 15.75 $ 17.65
======================================================================
Total return (4.05)%(3) 65.29% (12.85)% (23.45)% (6.97)% 66.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 96.4 $ 116.5 $ 56.9 $ 76.8 $ 118.5 $ 163.4
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.63%(4) 1.81% 2.02% 1.85% 1.76% 1.86%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 1.54%(4) 2.01% 1.08% 0.56% 0.13% 1.45%
Portfolio turnover rate 8.77%(3) 28.57% 60.95% 31.54% 38.83% 29.49%
</Table>
(1) UNAUDITED.
(2) AMOUNT REPRESENTS LESS THAN $0.01 PER SHARE.
(3) NOT ANNUALIZED.
(4) ANNUALIZED.
See accompanying Notes to Financial Statements.
35
<Page>
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
GLOBAL INNOVATORS SIX MONTHS ENDED ------------------------------------------------------
FUND JUNE 30, 2004(1) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.21 $ 8.98 $ 13.04 $ 18.38 $ 23.52 $ 13.95
----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.02) (0.08) (0.08) (0.14) (0.19) (0.12)
Net realized and unrealized gain (loss)
on investments 0.39 3.31 (3.98) (5.20) (3.45) 9.69
----------------------------------------------------------------------
Total from investment operations 0.37 3.23 (4.06) (5.34) (3.64) 9.57
----------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income -- -- -- -- -- --(2)
From net realized gains -- -- -- -- (1.50) --
----------------------------------------------------------------------
Total distributions -- -- -- -- (1.50) --(2)
----------------------------------------------------------------------
Redemption Fee Proceeds --(2) --(2) --(2) -- -- --
----------------------------------------------------------------------
Net asset value, end of period $ 12.58 $ 12.21 $ 8.98 $ 13.04 $ 18.38 $ 23.52
======================================================================
Total return 3.03%(3) 35.97% (31.13)% (29.05)% (16.78)% 68.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 44.5 $ 49.8 $ 45.9 $ 79.3 $ 153.0 $ 164.0
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.62%(4) 1.76% 2.03% 1.46% 1.23% 1.38%
After fees waived 1.62%(4) 1.56% 1.35% 1.35% 1.24% 1.35%
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS:
Before fees waived (0.31)%(4) (0.90)% (1.34)% (0.89)% (0.79)% (0.92)%
After fees waived (0.31)%(4) (0.70)% (0.66)% (0.78)% (0.80)% (0.89)%
Portfolio turnover rate 42.91%(3) 0.00% 54.15% 50.03% 27.41% 39.82%
</Table>
(1) UNAUDITED.
(2) AMOUNT REPRESENTS LESS THAN $0.01 PER SHARE.
(3) NOT ANNUALIZED.
(4) ANNUALIZED.
See accompanying Notes to Financial Statements.
36
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1
ORGANIZATION
Guinness Atkinson Funds (the "Trust"), formerly the Investec Funds, was
organized on April 28, 1997 as a Delaware business trust and registered under
the Investment Company Act of 1940 as a non-diversified, open-end management
investment company. Currently, the Trust offers four separate series all of
whose long-term objective is capital appreciation: Guinness Atkinson Asia Focus
Fund (the "Asia Focus Fund"), formerly Investec Asia Focus Fund, Guinness
Atkinson China & Hong Kong Fund (the "China & Hong Kong Fund"), formerly
Investec China & Hong Kong Fund, and Guinness Atkinson Global Innovators Fund
(the "Global Innovators Fund"), formerly Investec Wired(R) Index Fund, and
Guinness Atkinson Global Energy Fund ("the Global Energy Fund"). The first three
of which (each a "Fund" and collectively, the "Funds") are covered by this
report. The China & Hong Kong Fund began operations on June 30, 1994, the Asia
Focus Fund began operations on April 29, 1996, and the Global Innovators Fund
began operations on December 15, 1998. The Global Energy Fund began operations
on June 30, 2004.
NOTE 2
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with accounting
principles generally accepted in the United States of America.
A. SECURITY VALUATION. Investments in securities traded on a principal exchange
(U.S. or foreign) or Nasdaq are valued at the official closing price on each
day that the exchanges are open for trading; securities traded on an exchange
or Nasdaq for which there have been no sales, and other over-the-counter
securities are valued at the mean between the bid and asked prices.
Securities for which quotations are not readily available are valued at their
respective fair values as determined in good faith by, or under procedures
established by, the Board of Trustees. Due to the inherent uncertainty of
valuation, those estimated values of not readily marketable securities may
differ significantly from the values that would have been used had a ready
market for the securities existed. The differences could be material.
Short-term investments are stated at
37
<Page>
cost, which when combined with accrued interest, approximates market value.
Realized gains and losses from securities transactions are calculated using
the identified cost method.
Foreign securities are recorded in the financial statements after translation
to U.S. dollars based on the applicable exchange rate at the end of the
period. The Funds do not isolate that portion of the results of operations
resulting from changes in the currency exchange rate from the fluctuations
resulting from changes in the market prices of investments.
Foreign dividend income is translated using the exchange rate in existence on
the date the income is accrued. Exchange gains and losses related to the
translation of interest income are included in dividend income on the
accompanying Statement of Operations.
B. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Funds may utilize forward
foreign currency exchange contracts ("forward contracts") to hedge against
foreign exchange fluctuations on foreign denominated investments under which
they are obligated to exchange currencies at specific future dates and at
specified rates. All commitments are "marked-to-market" daily and any
resulting unrealized gains or losses are included as unrealized appreciation
(depreciation) on foreign currency denominated assets and liabilities. The
Funds record realized gains or losses at the time the forward contract is
settled. Risks may arise upon entering these contracts from the potential
inability of a counter party to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar or other currencies. Counterparties to these contracts are major
U.S. financial institutions.
C. SECURITY TRANSACTIONS, DIVIDEND INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL INCOME TAXES. The Funds intend to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute all of their taxable income to their shareholders. Therefore, no
federal income tax provision is required.
E. CONCENTRATION OF RISK. The Asia Focus Fund invests substantially all of its
assets in the Asian region. The China & Hong Kong Fund invest substantially
all of its assets in securities that are traded in China or Hong Kong or that
are issued by companies that do a substantial part of their business in
China. The consequences of political, social, or economic changes in the
countries or business sectors in which the
38
<Page>
securities are offered or the issuers conduct their operations may affect the
market prices of the Funds' investments and any income generated, as well as
the Funds' ability to repatriate such amounts.
F. USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
NOTE 3
COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
The Trust, on behalf of each Fund, entered into an Investment Advisory Agreement
with Guinness Atkinson Asset Management, LLC (the "Advisor") on April 26, 2003,
which provided the Funds with investment management services under an investment
advisory agreement. Prior to April 26, 2003, Investec Asset Management U.S.
Limited ("Investec") served as the Trust's investment advisor. The Advisor
furnishes all investment advice, office space, facilities, and most of the
personnel needed by the Funds. As compensation for its services, the Advisor is
entitled to a monthly fee at the following annual rates based upon the average
daily net assets of the Funds:
<Table>
Asia Focus Fund 1.00%
China & Hong Kong Fund 1.00%
Global Innovators Fund 0.90% on the first $100 million
0.75% on the next $100 to $500 million and
0.60% on assets over $500 million
</Table>
The Funds are responsible for their own operating expenses. Effective April 26,
2003, the Advisor has contractually agreed to limit the Funds' total operating
expenses, through April 25, 2005, by reducing all or a portion of their fees and
reimbursing the Funds' for expenses so that its ratio of expenses to average
daily net assets will not exceed the following levels:
<Table>
Asia Focus Fund 1.98%
China & Hong Kong Fund 1.98%
Global Innovators Fund 1.88%
</Table>
39
<Page>
Prior to April 26, 2003, the operating expense limit for the Global Innovators
Fund was 1.35% and there was no operating expense limit for the China & Hong
Kong Fund.
Expenses reimbursed by the Advisor will be limited to three years from the year
of the reimbursement, and are subject to the Funds' ability to effect such
reimbursement and remain in compliance with applicable expense limitations.
Under certain circumstances, a redemption fee of 1-2% will be charged to
shareholders of the Funds who redeem shares purchased less than 30 or 90 days
prior to redemption.
U.S. Bancorp Fund Services, LLC (the "Administrator") acts as the Funds'
administrator under an administration agreement. The Administrator prepares
various federal and state regulatory filings, reports and returns for the Funds;
prepares reports and materials to be supplied to the Trustees; monitors the
activities of the Funds' custodian, transfer agent and accountants; coordinates
the preparation and payment of the Funds' expenses and reviews the Funds'
expense accruals. For its services, the Administrator receives a monthly fee
from each Fund at the following annual rates with a minimum of $20,000
(excluding the China & Hong Kong Fund):
<Table>
<Caption>
FUND ASSET BASED FEE
-----------------------------------------------------------------------------
China & Hong Kong Fund 0.25% of average daily net assets subject to
$40,000 annual minimum.
Asia Focus Fund 0.25% of average daily net assets
Global Innovators Fund 0.05% of average daily net assets.
</Table>
For the six months ended June 30, 2004, the following Administration fees were
incurred:
<Table>
Asia Focus Fund $ 45,517
China & Hong Kong Fund $ 142,683
Global Innovators Fund $ 11,826
</Table>
Quasar Distributors, LLC (the "Distributor") acts as the Funds' principal
underwriter in a continuous public offering of the Funds' shares. The
Distributor is an affiliate of the Administrator.
40
<Page>
On August 14, 1998, the Trust approved a Deferred Compensation Plan for Trustees
(the "Plan"). Trustees can elect to receive payment in cash or defer payments
provided for in the Plan. If a trustee elects to defer payment, the Plan
provides for the creation of a deferred payment account (Phantom Share Account).
This account accumulates the deferred fees earned, and the value of the account
is adjusted at the end of each quarter to reflect the value that would have been
earned if the account had been invested in designated investments. The Funds
recognize as trustee expense amounts accrued as meetings are attended plus the
change in value of the Phantom Share Account.
For the six months ended June 30, 2004, the change in the value of the phantom
share account included unrealized depreciation were as follows:
<Table>
Asia Focus Fund $ 287
China & Hong Kong Fund $ 762
Global Innovators Fund $ 751
</Table>
Certain officers of the Funds are also officers and/or Directors of the Advisor
and Administrator.
NOTE 4
INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities during the six
months ended June 30, 2004, excluding short-term investments, to indicate the
volume of transactions in each Fund.
<Table>
<Caption>
FUND PURCHASES SALES
------------------------------------------------------
Asia Focus Fund $ 7,054,735 $ 12,076,086
China & Hong Kong Fund 9,830,256 20,755,112
Global Innovators Fund 20,091,677 30,434,403
</Table>
41
<Page>
NOTE 5
FORWARD FOREIGN CURRENCY CONTRACTS
In order to hedge their portfolios and to protect them against possible
fluctuations in foreign exchange rates pending the settlement of securities
transactions, the Funds may enter into forward currency contracts which obligate
them to exchange currencies at specified future dates. At the maturity of a
forward contract, the Funds may either make delivery of the foreign currency
from currency held, if any, or from the proceeds of the portfolio securities
sold. It may also terminate its obligation to deliver the foreign currency at
any time by purchasing an offsetting contract. The forward value of amounts due
are netted against the forward value of the currency to be delivered, and the
net amount is shown as a receivable or payable in the financial statements. Open
forward contracts at June 30, 2004 were as follows:
<Table>
<Caption>
CURRENCY DELIVERY UNREALIZED
FUNDS CURRENCY PAYABLE DELIVERABLE DATE LOSS
----------------------------------------------------------------------------
China & US$ $ 702,459 Hong Kong 07/02/04 $ (86)
Hong Kong Fund Dollar 5,479,534
</Table>
NOTE 6
TAX MATTERS
As of June 30, 2004, the tax basis of investments were as follows:
<Table>
<Caption>
CHINA & GLOBAL
ASIA FOCUS HONG KONG INNOVATORS
FUND FUND FUND
-----------------------------------------------------------------------------------------------
Cost of investment for tax purposes $ 22,643,366 $ 66,940,429 $ 43,045,887
Gross unrealized appreciation 6,335,786 32,940,429 482,602
Gross unrealized (depreciation) (1,268,894) (3,204,201) (3,024,972)
Net unrealized appreciation (depreciation)
on investment 5,066,892 29,147,712 (2,542,370)
</Table>
42
<Page>
As of December 31, 2003, the following funds have capital loss carryforwards
available to offset future realized capital gains:
CAPITAL LOSSES EXPIRING IN:
<Table>
<Caption>
CHINA & GLOBAL
ASIA FOCUS HONG KONG INNOVATORS
FUND FUND FUND
- --------------------------------------------------------------------------
2005 $ (14,746,462) $ -- $ --
2006 (62,854,581) (35,994,195) --
2007 (7,599,516) -- --
2008 -- -- --
2009 (2,794,130) -- (17,621,884)
2010 (638,053) (3,556,242) (19,915,748)
2011 -- (10,213,093) (4,517,845)
Total (88,632,742) (49,763,530) (42,055,477)
</Table>
For the China & Hong Kong Fund ($3,332,384) of the ($10,213,093) capital loss
carryforward expiring in 2011 was acquired in the reorganization with the
Mainland China Fund.
NOTE 7
FUND REORGANIZATION
On April 25, 2003, China & Hong Kong Fund (the "Acquiring Fund") acquired the
assets and assumed the liabilities of Mainland China Fund (the "Acquired Fund")
in a tax-free reorganization in exchange for shares of the Acquiring Fund,
pursuant to a plan of reorganization approved by the Acquired Fund's
shareholders. The number and value of shares issued by the Acquiring Fund are
presented in the Schedules of Changes in Net Assets. Net assets and unrealized
depreciation as of the reorganization date were as follows:
<Table>
<Caption>
TOTAL NET ASSETS OF
TOTAL NET ASSETS OF TOTAL NET ASSETS OF ACQUIRING FUND AFTER ACQUIRED FUND
ACQUIRED FUND ACQUIRING FUND ACQUISITION UNREALIZED DEPRECIATION
- ---------------------------------------------------------------------------------------------
$ 9,296,766 $ 53,077,636 $ 62,374,402 $ 287,235
</Table>
43
<Page>
NOTE 8
PROXY VOTING PROCEDURES
The Advisor of the Funds votes proxies relating to portfolio securities in
accordance with procedures that have been approved by the Board of Trustees of
the Funds. You may obtain a description of these procedures, free of charge, by
calling "toll-free" 800-915-6566. This information is also available through the
Securities and Exchange Commission's website at http://www.sec.gov.
44
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
PRINCIPAL IN FUND
POSITION(S) OCCUPATION(S) COMPLEX OTHER
NAME, ADDRESS, HELD WITH DATE DURING THE OVERSEEN DIRECTORSHIPS
AND AGE TRUSTS ELECTED+ PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
- ---------------------------------------------------------------------------------------------------
Timothy W.N. Trustee August Chairman of 4 Guinness Investec Global
Guinness 1998 Guinness Asset Atkinson Strategy Fund
19 Lord North Management Funds Limited, Investec
Street London, Ltd., investment International
SWIP 3LD U.K. adviser in Accumulation
(57) London, since Fund Limited,
2003. Investec Select
Chairman/CIO of Funds Plc, Investec
Guinness High Income Trust
Atkinson, since Plc, SR Europe
November 2002. Investment Trust
Joint Chairman Plc. Atlantis Japan
of Investec Asset Growth Fund Ltd.,
Management Ltd. New Boathouse
September 1998 Capital Ltd.
to March 2003 Guinness Asset
Management Ltd.
James I. Fordwood* Trustee April 1994 CFO and 4 Guinness J.L. Energy, Inc.,
21550 Oxnard Managing Atkinson Intoil, Inc., Fior
Street, Suite 750 Member of Funds D'Italia.
Woodland Hills, CA Prima Marketing
91367 LLC (network of
(57) convenience
stores)
Dr. Gunter Dufey* Trustee April 1994 Pacific 4 Guinness Independent
21550 Oxnard International Atkinson director, four
Street, Suite 750 Buisiness Funds subsidiaries of
Woodland Hills, CA Associates, a GMAC in the
91367 consulting firm United States and
(64) in Singapore Canada.
since 2002.
Professor (em.)
of MBS at The
University of
Michigan, where
he served from
1968-2002.
Dr. Bret A. Herscher* Trustee April 1994 President of 4 Guinness Strawberry Tree
21550 Oxnard Pacific Atkinson Inc.
Street, Suite 750 Consultants, a Funds
Woodland Hills, CA technical and
91367 technology
(44) management
consulting
company serving
the Electronic
industry and
venture capital
community that
he co-founded.
</Table>
- ----------
* Not an "interested person", as that is defined by the 1940 Act.
+ Trustees and officers of the Fund serve until their resignation, removal or
retirement.
45
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
PRINCIPAL IN FUND
POSITION(S) OCCUPATION(S) COMPLEX OTHER
NAME, ADDRESS, HELD WITH DATE DURING THE OVERSEEN DIRECTORSHIPS
AND AGE TRUSTS ELECTED+ PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
- ---------------------------------------------------------------------------------------------------
J. Brooks Reece, Jr.* Trustee April 1994 Vice President of 4 Guinness Adcole Far East
21550 Oxnard Adcole Corp. a Atkinson Ltd.
Street, Suite 750 manufacturer of Funds
Woodland Hills, CA precision
91367 measuring
(57) machines and
sun angle
sensors for space
satellites.
Jim Atkinson President April 2003 Chief Executive N/A N/A
21550 Oxnard Officer and
Street, Suite 750 Director of
Woodland Hills, CA Guinness
91367 Atkinson since
(47) November 2002.
Principal of
ORBIS
Marketing, a
mutual fund
marketing and
advertising
firm since
November 2001.
President of
MAXfunds.com
from
September 2000
to March 2001.
Managing
Director of
Guinness Flight
Global Asset
Management US
(1993-2000).
Eric M. Banhazl Treasurer April 1994 Senior Vice N/A N/A
2020 E. Financial and President, U.S.
Way, Suite 100 Secretary Bancorp Fund
Glendora, CA Services, LLC.
91741 since July 2001.
(47) Executive Vice
President of the
Investment
Company
Administration
LLC (1990-
July 2001).
</Table>
- ----------
* Not an "interested person", as that is defined by the 1940 Act.
+ Trustees and officers of the Fund serve until their resignation, removal or
retirement.
46
<Page>
INFORMATION
BOARD OF TRUSTEES
J. Brooks Reece, Jr., Chairman
Dr. Gunter Dufey
James I. Fordwood
Timothy W.N. Guinness
Dr. Bret A. Herscher
CONTACT GUINNESS ATKINSON FUNDS
P.O. Box 701
Milwaukee, WI 53201-0701
Shareholder Services: 800-915-6566
Literature Request: 800-915-6565
Website: www.gafunds.com
Email: mail@gafunds.com
GUINNESS ATKINSON FUNDS
<Table>
<Caption>
FUND CUSIP TICKER FUND#
--------------------------------------------------------------------
Asia Focus Fund 402031 10 8 IASMX 1096
China & Hong Kong Fund 402031 20 7 ICHKX 1094
Global Innovators Fund 402031 30 6 IWIRX 1095
Global Energy Fund 402031 40 5 GAGEX 1098
</Table>
47
<Page>
www.gafunds.com
123S0204--P
<Page>
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE FOR SEMI-ANNUAL REPORTS.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE FOR SEMI-ANNUAL REPORTS.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NOT APPLICABLE FOR SEMI-ANNUAL REPORTS.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable for periods ending before July 9, 2004.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASES.
Not applicable to open-end investment companies.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Registrant does not have any procedures by which shareholders may recommend
nominees to the Registrant's board of trustees.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Registrant's President and Treasurer have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940 (the "1940 Act")) are
effective as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph, based on the evaluation
of these
1
<Page>
controls and procedures required by Rule 30a-3(b) under the 1940 Act and
Rules 15d-15(b) under the Securities Exchange Act of 1934, as amended.
(b) There were no significant changes in the Registrant's internal controls
over financial reporting that occurred during the Registrant's last fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a) (1) ANY CODE OF ETHICS OR AMENDMENT THERETO, THAT IS SUBJECT OF THE
DISCLOSURE REQUIRED BY ITEM 2, TO THE EXTENT THAT THE REGISTRANT INTENDS TO
SATISFY ITEM 2 REQUIREMENTS THROUGH FILING AN EXHIBIT. Not Applicable for
Semi Annual Reports.
(2) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002. Filed herewith.
(3) ANY WRITTEN SOLICITATION TO PURCHASE SECURITIES UNDER RULE 23c-1 UNDER
THE ACT SENT OR GIVEN DURING THE PERIOD COVERED BY THE REPORT BY OR ON
BEHALF OF THE REGISTRANT TO 10 OR MORE PERSONS. Not applicable to open-end
investment companies.
(b) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Furnished herewith.
2
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) GUINNESS ATKINSON FUNDS
By (Signature and Title) /s/ James J. Atkinson, Jr.
--------------------------------------------
James J. Atkinson, Jr., President
Date 9/7/04
---------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James J. Atkinson, Jr.
-------------------------------------------
James J. Atkinson, Jr., President
Date 9/7/04
---------------------------------------------------------------
By (Signature and Title)* /s/ Eric M. Banhazl
-------------------------------------------
Eric M. Banhazl, Treasurer
Date 9/10/04
---------------------------------------------------------------
* PRINT THE NAME AND TITLE OF EACH SIGNING OFFICER UNDER HIS OR HER SIGNATURE.
3