China s Currency Conver0bility. Por1olio Manager Por1olio Manager

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1 China s Currency Conver0bility Edmund Harriss James Weir Por1olio Manager Por1olio Manager

2 Asia Investment Team Por9olio Managers Edmund Harriss Edmund is the lead manager of Guinness Atkinson s Asian fund range and is the lead por1olio manager of the Guinness Atkinson Renminbi Yuan & Bond Fund since its launch on June 30, He served as an analyst on the China & Hong Kong Fund from 1994 before moving to Hong Kong in 1998 and becoming the Fund s lead manager. He became lead manager of the Asia Focus Fund in 2003 and has managed the Asia Pacific Dividend Fund since its launch in March Edmund graduated from Christ Church, University of Oxford, with a Masters degree in Management Studies and has a Bachelors degree in History from the University of York. James Weir James joined Guinness Atkinson in October Previously he worked for AtlanZs Investment Management for five years as an investment analyst and then fund manager looking a\er Asia ex Japan segregated accounts. Before joining AtlanZs, James was a Senior Research Analyst at InternaZonal Data Corp and concentrated on European IT services. James has a BA in Economics from the University of No_ngham and an MSc in Investment Management from Cass Business School, City University in London. 2

3 The RMB Exchange Rate (1/2/81 6/18/13) Renminbi exchange rate vs. USD Source: Bloomberg 3 Past performance is no guarantee of future results.

4 China s Economic Development 1980s AlleviaZon of poverty and mobilizazon of labor 1990s IndustrializaZon & heavy investment 2000s Emergence of the middle income consumer Developed manufacturing industry, service sector and high income consumers. 4

5 Achievements The world s second largest economy and the largest importer & exporter of goods The world s largest car market, even though car penetrazon is szll only at the level the US had achieved in The largest foreign exchange reserves at over $3.3 trillion li\ed more than 680m people out of poverty that s more than the current populazon of LaZn America BUT Accompanied by debt, income inequality, overcapacity and 5 inefficiency.

6 The Renminbi s Role Pegged from to provide exchange rate stability. Protected by capital controls to provide financial system stability. Kept undervalued to support export manufacturing and industry. In 2005 the peg was removed and the currency appreciated. 6

7 China Trade Growth in China s Merchandise Trade (US$ bn.) For the first Zme in 2012, China (just barely) exceeded US trade of $3,863 bn. 4,500 4,000 3,867 3,500 3,000 2,500 2,000 2,174 1,500 1, Sources: China Customs General AdministraZon, US Census Bureau 7

8 China s Trade Surplus China s Annual Trade Surplus (US$ bn.) Source: China Customs General AdministraZon

9 China Auto Sales Growth of 32% per annum (p.a.) since 2001; growth of 19.7% p.a. since ,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, China Car Sales US car Sales Source: China - China AutomoZve informazon Net; US - Ward s AutomoZve Group 9

10 Renminbi Flexibility and Conver0bility A stronger currency alleviates external inflazonary pressures. In 2012 China imported: 5.4m barrels of oil a day - 60% of its needs 743.6bn tonnes of iron ore 41% of its needs 4.6m tonnes of copper 63% of its needs A flexible currency provides another, albeit double- edged, monetary policy tool. ConverZbility on the current account (trade and services) has been achieved. ConverZbility for long term capital and por1olio flows is the next goal. 10 It is beginning once again in Shenzhen, in the Qianhai Shenzhen Hong Kong Modern Service Industry Co- operazon Zone.

11 The Renminbi The process of internazonalizazon began with trade seqlement and then renminbi denominated investment outside China. A broad array of commercial banking and investment services is now available in Hong Kong, London, Singapore and Taiwan including: 11 Foreign exchange Leqers of credit Trade finance Commercial lending & Syndicated loans Risk management through currency hedging and swaps Bonds, Commercial paper, CerZficates of deposit

12 The Offshore RMB Exchange Rate Onshore and Offshore Renminbi Exchange Rate vs. USD Offshore Renminbi (CNH : $1) Onshore Renminbi (CNY : $1) 7 Source: Bloomberg 12 Past performance is no guarantee of future results.

13 Offshore RMB Bonds Total Return and Yield The durazon of the market as measured by HSBC Offshore (CNH) Renminbi Index is 2.58 years /31/2010 1/31/2011 2/28/2011 3/31/2011 4/30/2011 5/31/2011 HSBC Offshore (CNH) Renminbi Bond Index Yield (ending at 3.91% on 6/18/13) 6/30/2011 7/31/2011 8/31/2011 9/30/ /31/ /30/ /31/2011 1/31/2012 2/29/2012 3/31/2012 4/30/2012 5/31/2012 6/30/2012 7/31/2012 8/31/2012 9/30/ /31/ /30/ /31/2012 1/31/2013 2/28/2013 3/31/2013 4/30/2013 5/31/ Source: Bloomberg, HSBC. Past performance is no guarantee of future results.

14 The Offshore RMB Bond Market by Sector As of 5/31/13, there are 301 issues outstanding worth $45bn vs. 195 issues worth $29bn a year ago. 14 Source: Guinness Atkinson

15 The Offshore RMB Bond Market by Country As of 5/31/13, there are 301 issues outstanding worth $45bn vs. 195 issues worth $29bn a year ago. 15 Source: Guinness Atkinson

16 Guinness Atkinson Asset Management Inc. Contacts: Investment Management Edmund Harriss +44 (0) Queen Anne s Gate London SW1H 9AA Fax: +44 (0) Head office Jim Atkinson jim.atkinson@gafunds.com Oxnard Street, Suite 850, Woodland Hills, California Fax: Website: 16

17 Guinness Atkinson Asset Management Inc. This informa,on is authorized for use when preceded or accompanied by a prospectus for the Guinness Atkinson Funds. The prospectus contains more complete informa,on including investment objec,ves, risks, fees and expenses related to an ongoing investment in the Fund. Please read it carefully before inves,ng. Mutual fund inves0ng involves risk and loss of principal is possible. Investments in foreign securi0es involve greater vola0lity, poli0cal, economic and currency risks and differences in accoun0ng methods. Non- diversified funds concentrate assets in fewer holdings than diversified funds. Therefore, non- diversified funds are more exposed to individual stock vola0lity than diversified funds. Investments in smaller companies involve addi0onal risks such as limited liquidity and greater vola0lity. HSBC Offshore (CNH) Renminbi Index tracks total return performance of renminbi- denominated and renminbi- seqled bonds and cerzficates of deposit issued outside the People s Republic of China. One cannot invest directly in an index. Index performance is not indica0ve of fund s performance. Current performance can be obtained by calling The Guinness Atkinson Funds are distributed by Quasar Distributors, LLC 17