Response to SEC Comment Letter
KRAMER
LEVIN NAFTALIS & FRANKEL LLP
George
P.
Attisano
Special
Counsel
Phone
212-715-9555
Fax
212-715-8144
GAttisano@KRAMERLEVIN.com
March
14,
2006
VIA
EDGAR
Securities
and Exchange Commission
100
F
Street N.E.
Washington,
DC 20549
Attention:
Christian T. Sandoe
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Re:
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Guinness
Atkinson Funds
Post-Effective
Amendment No. 40
(File
Nos. 33-75340;
811-8360)
|
Dear
Mr.
Sandoe:
On
behalf
of our client, the Guinness Atkinson Funds (“Registrant”), we are responding to
oral comments from the staff of the Division of Investment Management relating
to post-effective amendment no. 40 to Registrant’s registration statement on
Form N-1A (the “Amendment”), which was filed on January 13, 2006 in connection
with the registration of shares of two new series of Registrant, the Alternative
Energy Fund and the Asia Pacific Dividend Fund.
You
conveyed the following comments to me in a telephone conversation on February
27, 2006. Each comment is followed by Registrant’s response.
Prospectus
Comments
A. Alternative
Energy Fund
1. Comment: With
reference to the Risk/Return Summary, under “Principal Investment Strategies,”
confirm supplementally that the Fund considers geothermal energy to be an
alternative energy source.
Response: Registrant
confirms that geothermal energy is an alternative energy source. In Registrant’s
view, geothermal energy is an alternative to energy sources that employ
traditional technologies and are based on the use of fossil fuels (that is,
oil,
natural gas, and coal).
Further,
Registrant represents that the Alternative Energy Fund will concentrate its
investments in following group of industries: solar energy, wind energy,
biofuels, hydrogen, geothermal energy, energy efficiency, and hydroelectricity.
Accordingly, Registrant has added the following disclosure to the Fund’s
prospectus and Statement of Additional Information (“SAI”) concerning this
policy and its corresponding risks:
1177 AVENUE OF THE AMERICAS NEW YORK NY 10036-2714 PHONE 212.715.9100 FAX 212.715.8000 WWW.KRAMERLEVIN.COM
ALSO AT 47 AVENUE HOCHE 75008 PARIS FRANCE
IN ALLIANCE WITH BERWIN LEIGHTON PAISNER: LONDON * BRUSSELS
KRAMER
LEVIN NAFTALIS &
FRANKEL LLP
Securities
and Exchange Commission
March
14,
2006
Page
2
Prospectus
(under “Risk/Return Summary — Principal Risks”)
The
Alternative Energy Fund will concentrate its investments (that is, invest more
than 25% of its total assets) in the following group of industries: solar
energy, wind energy, biofuels, hydrogen, geothermal energy, energy efficiency,
and hydroelectricity. A downturn in this group of industries would have a larger
impact on the Fund than on a fund that does not concentrate in these sectors.
The Advisor determines an issuer’s industry classification based on Standard
Industry Codes established by the Securities and Exchange Commission and the
Advisor’s evaluation of the issuer’s operations.
SAI
(under “Risk Factors and Special Considerations”)
Concentration
Risk
The
Alternative Energy Fund will concentrate its investments (that is, invest more
than 25% of its total assets) in the following group of industries: solar
energy, wind energy, biofuels, hydrogen, geothermal energy, energy efficiency,
and hydroelectricity (collectively, “Alternative Energy Companies”). The Fund’s
concentration in Alternative Energy Companies may present more risks than would
be the case with funds that invest more broadly in numerous industries and
sectors of the economy. A downturn in Alternative Energy Companies would have
a
larger impact on the Fund than on a fund that does not concentrate in these
sectors. Alternative Energy Companies can be significantly affected by the
supply of and demand for specific products and services, the supply and demand
for relevant energy sources, the price of those sources, capital investment,
government regulation, world events and economic conditions. Alternative Energy
Companies also can be significantly affected by events relating to international
political developments, energy conservation, commodity prices, and tax and
government regulations. At times, the performance of securities of Alternative
Energy Companies will lag the performance of securities of companies in other
sectors or the broader market as a whole.
KRAMER
LEVIN NAFTALIS &
FRANKEL LLP
Securities
and Exchange Commission
March
14,
2006
Page
3
2. Comment: In
the
Risk/Return Summary, under “Principal Risks,” clarify that the Fund is subject
to the risk that prices of energy (including traditional sources of energy
such
as oil, gas, or electricity) or alternative energy could decline.
Response: Registrant
has clarified this point.
3. Comment: In
the
Risk/Return Summary, under “Principal Risks,” describe the risk of investing in
securities of small- or mid-cap companies.
Response: Registrant
has included the following in this section of the prospectus:
[You
may
lose money by investing in the Alternative Energy Fund if . . . ]
The
Fund
has difficulty selling small-or mid-cap or emerging market stocks during a
down
market due to lower liquidity and higher volatility;
4. Comment: In
the
Risk/Return Summary, under “Fees and Expenses,” confirm supplementally that the
Fund’s estimated total annual fund operating expenses of 1.45% represents the
Fund’s estimated gross expenses for its first fiscal year of
operations.
Response: Registrant
confirms, that the estimated expense ratio, which has been increased to 1.98%,
represents the Fund’s estimated gross expenses for its first fiscal year of
operations.
B. Asia
Pacific Dividend Fund
5. Comment: In
the
Risk/Return Summary, under “Investment Objective,” clarify whether the goal of
long-term capital growth is consistent with the Fund’s name.
Response: Registrant
confirms that the goal of long-term capital growth is consistent with the Fund’s
name. Accordingly, Registrant has added the following disclosure:
The
Asia
Pacific Dividend Fund seeks to allow investors the opportunity to profit from
the transition of Asia Pacific economies as they move from developing to
developed economies. In the Adviser’s view, investing in dividend-paying stocks
permits investors to gain access to the more established companies in the
region. This strategy is designed to both reduce risk and provide some
income.
KRAMER
LEVIN NAFTALIS &
FRANKEL LLP
Securities
and Exchange Commission
March
14,
2006
Page
4
6. Comment: In
the
Risk/Return Summary, under “Principal Investment Strategies,” clarify that the
Fund intends to invest at least 80% of its net assets (plus any borrowings
for
investment purposes) in dividend-producing equity securities of Asia Pacific
companies.
Response: Registrant
has clarified this point.
7. Comment: In
the
Risk/Return Summary, under “Principal Investment Strategies,” indicate that the
Fund will consider an issuer to be an Asia Pacific company if the issuer has
its
headquarters in the Asia Pacific region, rather than having a principal office
in the region.
Response: Registrant
has made the requested change.
8. Comment: In
the
Risk/Return Summary, under “Principal Risks,” indicate that the Fund’s
investment in small- or mid-cap stocks is subject to higher
volatility.
Response: Registrant
has made the requested change.
9. Comment: In
the
Risk/Return Summary, under “Fees and Expenses,” confirm supplementally that the
Fund’s estimated total annual fund operating expenses of 1.45% represents the
Fund’s estimated gross expenses for its first fiscal year of
operations.
Response: Registrant
confirms, that the estimated expense ratio, which has been increased to 1.98%,
represents the Fund’s estimated gross expenses for its first fiscal year of
operations.
General
10. Comment: In
the
section entitled “Risks of Investing in the Funds — Risks of Investing in Small
Companies,” disclose that one of the risks of investing in these companies is
stock price volatility.
Response: Registrant
has re-named this section “Risks of Investing in the Funds — Risks of Investing
in Small- or Mid-Cap Companies” and has made the requested change, as well as
other changes conforming to the new name of the section.
11. Comment: On
the
back cover, revise the telephone number for the Securities and Exchange
Commission’s Public Reading Room to (202) 551-8090.
Response: Registrant
has made the requested change.
KRAMER
LEVIN NAFTALIS &
FRANKEL LLP
Securities
and Exchange Commission
March
14,
2006
Page
5
SAI
Comments
1. Comment: With
reference to the section entitled “Investment Restrictions and Policies,”
clarify whether the Alternative Energy Fund would concentrate its investments
in
an industry or group of industries.
Response: As
noted
in its response to Comment No. 1 to the prospectus, Registrant represents that
the Alternative Energy Fund will concentrate its investment in a group of
industries and has added appropriate prospectus and SAI. Accordingly, Registrant
will delete the investment restriction on industry concentration for this
Fund.
2. Comment: In
the
section entitled “Portfolio Managers,” revise the disclosure regarding other
accounts managed by the Funds’ portfolio managers to include all accounts,
rather than only those accounts that are managed in a similar manner to the
Funds.
Response: Registrant
has made the requested change.
3. Comment: In
the
section entitled “Portfolio Managers,” include a discussion of the conflicts of
interest that may arise from the portfolio managers’ management of the Funds’
investments, on the one hand, and those of other accounts managed by the
portfolio managers.
Response: Registrant
has added the following to this section of the SAI:
Conflicts
of Interest
It
may
happen that other accounts managed by the portfolio managers will hold the
same
securities as those held by the Funds. When these other accounts are
simultaneously engaged in the purchase or sale of the same security, the prices
and amounts will be allocated in accordance with a formula considered by
Guinness Atkinson to be equitable to each, taking into consideration such
factors as size of account, concentration of holdings, investment objectives,
tax status, cash availability, purchase cost, holding period and other pertinent
factors relative to each account. In some cases this system could have a
detrimental effect on the price or volume of the security as far as a Fund
is
concerned. In other cases, however, the ability of a Fund to participate in
volume transactions will produce better executions for the Fund.
* * *
KRAMER
LEVIN NAFTALIS &
FRANKEL LLP
Securities
and Exchange Commission
March
14,
2006
Page
6
In
connection with the filing of the Amendment, Registrant has represented to
us
that it: (i) confirms that the adequacy and accuracy of the disclosure in
the Amendment is the responsibility of Registrant; (ii) acknowledges that
staff comments or changes in responses to staff comments in the proposed
disclosure in the Amendment do not foreclose the Commission from taking any
action with respect to the Amendment; and (iii) acknowledges that a staff
comment may not be asserted as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United
States.
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Very
Truly yours, |
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/s/
George P. Attisano |
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George
P. Attisano |
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cc: |
Timothy
W.N. Guinness
James J.
Atkinson
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