EXCHANGE TRADED CONCEPTS TRUST

EMQQ The Emerging Markets Internet & Ecommerce ETF

FMQQ The Next Frontier Internet & Ecommerce ETF

 

Annual Report

August 31, 2023

 

EMQQ/FMQQ

Table of Contents

  

Management Discussion of Fund Performance

 

1

Schedules of Investments

 

9

Statements of Assets and Liabilities

 

16

Statements of Operations

 

17

Statements of Changes in Net Assets

 

18

Financial Highlights

 

20

Notes to the Financial Statements

 

22

Report of Independent Registered Public Accounting Firm

 

33

Trustees and Officers of the Trust

 

34

Disclosure of Fund Expenses

 

37

Notice to Shareholders

 

38

Supplemental Information

 

39

  

The Funds file their complete schedule of holdings with the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”) for the first and third quarters of each fiscal year as an exhibit to each Fund’s report on Form N-PORT within sixty days after the end of the period. Each Fund’s Form N-PORT reports are available on the Commission’s website at https://www.sec.gov.

Exchange Traded Concepts, LLC’s proxy voting policies and procedures are attached to each Fund’s Statement of Additional Information (the “SAI”). The SAI, as well as information relating to how each Fund voted proxies relating to each Fund’s securities during the most recent 12-month period ended June 30, is available without charge, upon request, by calling (855) 888-9892 and on the Commission’s website at https://www.sec.gov.

 

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)

EMQQ The Emerging Markets Internet & Ecommerce ETF

Dear Shareholders,

On behalf of the entire team, we want to express our appreciation for the confidence you have placed in the EMQQ The Emerging Markets Internet & Ecommerce ETF (“EMQQ” or the “Fund”). The information in this report relates to the operations of the Fund for the fiscal year ended August 31, 2023 (the “Reporting Period”).

The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of EMQQ The Emerging Markets Internet & Ecommerce Index™ (the “Index”). The Index is designed to measure the performance of an investable universe of publicly traded, emerging market internet and ecommerce companies.

The Fund had negative performance during the Reporting Period. The market price for EMQQ decreased 0.73% and the NAV decreased by 1.36% while the MSCI Emerging Markets Index, a broad market index, returned 1.25% over the same period. The Index returned negative 0.43%.

EMQQ was impacted largely by two major factors during the Reporting Period. One was the softer-than-expected economic recovery in China following the end of Zero Covid policies in the country. The second was a persistent negative sentiment towards China and Chinese companies stemming from geopolitical tensions. Headline risks have persisted despite continued strong underlying fundamentals in 2023.

The Fund commenced operations on November 12, 2014, and had 15,950,000 shares outstanding on August 31, 2023.

We appreciate your investment in EMQQ.

Sincerely,
J. Garrett Stevens
Chief Executive Officer
Exchange Traded Concepts, LLC, Adviser to the Fund

1

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)(Continued)

The Index is designed to measure the performance of an investable universe of publicly-traded, emerging market internet and ecommerce companies. The Index includes over 40 companies operating in emerging and frontier markets including, among others, China, India, Brazil, Russia, South Korea, Taiwan, South Africa, Mexico, Argentina, Malaysia, Thailand, Indonesia, Vietnam, Philippines, Turkey, Czech Republic, Poland and Colombia.

The S&P 500® Index is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation, with each stock’s weight in the index proportionate to its market value.

The MSCI Emerging Markets Index captures large and mid-cap representation across 24 Emerging Markets (EM) countries. With 1,421 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in each country. EM countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice.

2

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)(Continued)

Growth of a $10,000 Investment

(at Net Asset Value)

 

AVERAGE ANNUAL TOTAL RETURN
FOR THE YEAR ENDED AUGUST 31, 2023

   

One Year Return

 

Five Year Return

 

Annualized
Inception to Date*

   

Net Asset
Value

 

Market
Price

 

Net Asset
Value

 

Market
Price

 

Net Asset
Value

 

Market
Price

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

-1.36%

 

-0.73%

 

-0.91%

 

-0.91%

 

2.44%

 

2.42%

EMQQ The Emerging Markets Internet & Ecommerce IndexTM

 

-0.43%

 

-0.43%

 

-0.08%

 

-0.08%

 

3.35%

 

3.35%

S&P 500® Index

 

15.94%

 

15.94%

 

11.12%

 

11.12%

 

11.51%

 

11.51%

MSCI Emerging Markets Index

 

1.25%

 

1.25%

 

0.98%

 

0.98%

 

2.27%

 

2.27%

The performance data quoted herein represents past performance and the return and value of an investment in the Fund will fluctuate so that shares, when redeemed or sold in the market, may be worth more or less than their original cost. Past performance is no guarantee of future performance and should not be considered as a representation of the future results of the Fund. The Fund’s performance assumes the reinvestment of all dividends and all capital gains. Index returns assume reinvestment of dividends and, unlike the Fund’s returns, do not reflect any fees or expenses. If such fees and expenses were included in the index returns, the performance would have been lower. Please note that one cannot invest directly in an unmanaged index.

3

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)(Concluded)

Performance data current to the most recent month-end is available at www.emqqetf.com.

There are no assurances that the Fund will meet its stated objectives.

The Fund’s holdings and allocations are subject to change and should not be considered recommendations to buy individual securities.

Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

See definition of the S&P 500® Index and MSCI Emerging Markets Index in Management Discussion of Fund Performance.

4

FMQQ

The Next Frontier Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)

FMQQ The Next Frontier Internet & Ecommerce ETF

Dear Shareholders,

On behalf of the entire team, we want to express our appreciation for the confidence you have placed in the FMQQ The Next Frontier Internet & Ecommerce ETF (“FMQQ” or the “Fund”). The information in this report relates to the operations of the Fund for the fiscal year ended August 31, 2023 (the “Reporting Period”).

The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of FMQQ The Next Frontier Internet & Ecommerce Index™ (the “Index”). The Index is designed to measure the performance of an investable universe of publicly traded emerging market and frontier market internet and ecommerce companies.

The Fund had negative performance during the Reporting Period. The market price for FMQQ decreased 1.71% and the NAV decreased 3.75% while the MSCI Frontier Markets Index, a broad emerging market index, returned 0.43% over the same period. The Index returned negative 2.84%

The returns of FMQQ were impacted by higher inflation levels globally and rising interest rates (particularly in the U.S.), which led to dampening sentiment and reduced demand for growth stocks despite strong underlying fundamentals. The Fund’s higher exposure to growth stocks helps explain the performance differential between the Fund and the MSCI Frontier Markets Index.

The Fund commenced operations on September 27, 2021 and had 1,750,000 shares outstanding on August 31, 2023.

We appreciate your investment in FMQQ.

Sincerely,
J. Garrett Stevens
Chief Executive Officer
Exchange Traded Concepts, LLC, Adviser to the Fund

5

FMQQ

The Next Frontier Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)(Continued)

The Index is designed to measure the performance of an investable universe of publicly-traded, internet and ecommerce companies in emerging and frontier markets other than China. The Index includes over 40 companies operating in emerging and frontier markets including, among others, India, Brazil, Russia, South Korea, Taiwan, South Africa, Mexico, Argentina, Malaysia, Thailand, Indonesia, Vietnam, Philippines, Turkey, Czech Republic, Poland, Singapore, Netherlands, Cyprus, Kazakhstan and the United Arab Emirates.

The MSCI Frontier Markets Index captures large and mid-cap representation across 28 Frontier Markets (FM) countries. The index includes 99 constituents, covering about 85% of the free float-adjusted market capitalization in each country. Frontier Markets countries include: Bahrain, Bangladesh, Burkina Faso, Benin, Croatia, Estonia, Guinea-Bissau, Iceland, Ivory Coast, Jordan, Kenya, Lithuania, Kazakhstan, Mauritius, Mali, Morocco, Niger, Nigeria, Oman, Pakistan, Romania, Serbia, Senegal, Slovenia, Sri Lanka, Togo, Tunisia and Vietnam.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice.

6

FMQQ

The Next Frontier Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)(Continued)

Growth of a $10,000 Investment

(at Net Asset Value)

 

AVERAGE ANNUAL TOTAL RETURN
FOR THE YEAR ENDED AUGUST 31, 2023

   

One Year Return

 

Annualized
Inception to Date*

   

Net Asset
Value

 

Market
Price

 

Net Asset
Value

 

Market
Price

FMQQ The Next Frontier Internet & Ecommerce ETF

 

-3.75%

 

-1.71%

 

-36.43%

 

-35.92%

FMQQ The Next Frontier Internet & Ecommerce IndexTM

 

-2.84%

 

-2.84%

 

-36.33%

 

-36.33%

MSCI Frontier Markets Index

 

0.43%

 

0.43%

 

-9.06%

 

-9.06%

The performance data quoted herein represents past performance and the return and value of an investment in the Fund will fluctuate so that shares, when redeemed or sold in the market, may be worth more or less than their original cost. Past performance is no guarantee of future performance and should not be considered as a representation of the future results of the Fund. The Fund’s performance assumes the reinvestment of all dividends and all capital gains. Index returns assume reinvestment of dividends and, unlike the Fund’s returns, do not reflect any fees or expenses. If such fees and expenses were included in the index returns, the performance would have been lower. Please note that one cannot invest directly in an unmanaged index.

7

FMQQ

The Next Frontier Internet & Ecommerce ETF

Management Discussion of Fund Performance

(Unaudited)(Concluded)

Performance data current to the most recent month-end is available at www.fmqqetf.com.

There are no assurances that the Fund will meet its stated objectives.

The Fund’s holdings and allocations are subject to change and should not be considered recommendations to buy individual securities.

Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

See definition of the MSCI Frontier Markets Index in Management Discussion of Fund Performance.

8

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Schedule of Investments

August 31, 2023

Description

 

Shares

 

Fair Value

COMMON STOCK — 99.8%

     

 

 
       

 

 

Argentina — 0.1%

     

 

 

Consumer Discretionary — 0.1%

     

 

 

Despegar.com*

 

28,041

 

$

222,926

       

 

 

Brazil — 9.5%

     

 

 

Consumer Discretionary — 6.5%

     

 

 

Afya, Cl A*

 

13,347

 

 

201,139

GRUPO DE MODA SOMA

 

250,900

 

 

380,079

Magazine Luiza*

 

1,448,100

 

 

810,196

MercadoLibre*

 

22,381

 

 

30,714,789

Pet Center Comercio e Participacoes

 

171,500

 

 

190,519

       

 

32,296,722

Financials — 3.0%

     

 

 

Inter*

 

143,170

 

 

582,691

NU Holdings, Cl A*

 

1,082,513

 

 

7,415,214

Pagseguro Digital, Cl A*

 

102,080

 

 

916,679

StoneCo, Cl A*

 

123,086

 

 

1,509,034

XP, Cl A

 

168,927

 

 

4,280,610

       

 

14,704,228

Information Technology — 0.0%

     

 

 

Locaweb Servicos de Internet

 

171,600

 

 

246,086

Total Brazil

     

 

47,247,036

       

 

 

China — 57.9%

     

 

 

Communication Services — 20.4%

     

 

 

Baidu, Cl A*

 

1,136,854

 

 

20,209,449

Bilibili, Cl Z*

 

117,236

 

 

1,753,662

China Literature*

 

197,200

 

 

792,145

China Ruyi Holdings* (A)

 

2,872,799

 

 

762,001

Fire Rock Holdings (B)(C)

 

1,092,000

 

 

1,393

Hello Group ADR

 

74,631

 

 

644,065

Description

 

Shares

 

Fair Value

China (continued)

     

 

 

HUYA ADR*

 

45,272

 

$

121,329

iDreamSky Technology
Holdings* (A)

 

367,600

 

 

154,226

iQIYI ADR*

 

262,329

 

 

1,322,138

Kanzhun ADR*

 

174,045

 

 

2,575,866

Kingsoft

 

456,800

 

 

1,823,297

Kuaishou Technology, Cl B*

 

1,235,800

 

 

10,117,430

Maoyan Entertainment*

 

177,400

 

 

243,418

Meitu (A)

 

1,116,000

 

 

429,792

NetDragon Websoft Holdings

 

112,500

 

 

218,350

NetEase

 

921,980

 

 

19,258,498

Tencent Holdings

 

889,792

 

 

36,877,279

Tencent Music Entertainment Group ADR*

 

421,097

 

 

2,871,882

Weibo, Cl A (A)

 

41,860

 

 

543,418

XD*

 

133,200

 

 

293,518

       

 

101,013,156

Consumer Discretionary — 33.2%

     

 

 

Alibaba Group Holding*

 

3,546,608

 

 

40,794,981

JD.com, Cl A

 

1,180,044

 

 

19,382,111

Meituan, Cl B*

 

2,143,679

 

 

35,127,717

PDD Holdings ADR*

 

540,277

 

 

53,471,215

Tongcheng Travel Holdings*

 

594,000

 

 

1,331,657

Trip.com Group*

 

262,161

 

 

10,343,688

Vipshop Holdings ADR*

 

255,412

 

 

4,032,956

       

 

164,484,325

Consumer Staples — 1.1%

     

 

 

Alibaba Health Information Technology*

 

2,356,000

 

 

1,391,052

Dada Nexus ADR*

 

125,541

 

 

677,921

DingDong Cayman ADR*

 

72,047

 

 

147,696

JD Health International*

 

507,000

 

 

2,734,861

Ping An Healthcare and Technology*

 

260,400

 

 

649,526

       

 

5,601,056

Financials — 0.9%

     

 

 

FinVolution Group ADR

 

83,664

 

 

419,993

LexinFintech Holdings ADR

 

69,923

 

 

181,101

Lufax Holding ADR

 

1,152,597

 

 

1,394,642

Qifu Technology ADR

 

71,766

 

 

1,220,022

Up Fintech Holding ADR* (A)

 

74,514

 

 

365,864

Yeahka*

 

84,400

 

 

167,901

ZhongAn Online P&C Insurance, Cl H*

 

348,200

 

 

1,034,598

       

 

4,784,121

  

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

9

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Schedule of Investments

August 31, 2023 (Continued)

Description

 

Shares

 

Fair Value

China (continued)

     

 

 

Health Care — 0.0%

     

 

 

Yidu Tech*

 

234,000

 

$

118,466

       

 

 

Industrials — 0.6%

     

 

 

Full Truck Alliance ADR*

 

434,581

 

 

2,911,693

       

 

 

Information Technology — 0.8%

     

 

 

Agora ADR*

 

43,344

 

 

121,363

China Youzan*

 

7,700,000

 

 

131,578

Kingdee International Software Group

 

1,306,000

 

 

2,018,519

Kingsoft Cloud Holdings
ADR* (A)

 

127,489

 

 

725,413

Vnet Group ADR*

 

64,811

 

 

243,041

Weimob* (A)

 

1,092,000

 

 

570,944

       

 

3,810,858

Real Estate — 0.9%

     

 

 

KE Holdings, Cl A (A)

 

908,642

 

 

4,710,211

Phoenix Tree Holdings
ADR* (A)(C)

 

179,833

 

 

       

 

4,710,211

Total China

     

 

287,433,886

Germany — 0.0%

     

 

 

Consumer Discretionary — 0.0%

     

 

 

Jumia Technologies ADR*

 

50,616

 

 

155,391

       

 

 

Hong Kong — 0.6%

     

 

 

Communication Services — 0.1%

     

 

 

Alibaba Pictures Group*

 

5,880,000

 

 

389,913

       

 

 

Financials — 0.5%

     

 

 

Futu Holdings ADR*

 

42,530

 

 

2,534,788

Total Hong Kong

     

 

2,924,701

       

 

 

India — 13.0%

     

 

 

Communication Services — 0.5%

     

 

 

Affle India*

 

24,781

 

 

322,760

Brightcom Group*

 

612,211

 

 

125,717

Info Edge India

 

34,555

 

 

1,807,969

Nazara Technologies*

 

16,143

 

 

151,502

       

 

2,407,948

       

 

 

Consumer Discretionary — 1.3%

     

 

 

Easy Trip Planners*

 

220,595

 

 

110,716

FSN E-Commerce Ventures*

 

515,812

 

 

832,103

Jubilant Foodworks

 

184,801

 

 

1,143,032

MakeMyTrip*

 

29,555

 

 

1,172,151

Zomato*

 

2,578,091

 

 

3,039,414

       

 

6,297,416

Description

 

Shares

 

Fair Value

India (continued)

     

 

 

Energy — 6.9%

     

 

 

Reliance Industries

 

1,182,104

 

$

34,369,528

Financials — 3.7%

     

 

 

Angel One

 

15,972

 

 

360,751

Bajaj Finance

 

135,033

 

 

11,683,599

ICICI Securities

 

40,922

 

 

308,869

Indian Energy Exchange

 

386,129

 

 

588,618

Jio Financial Services*

 

1,212,888

 

 

3,420,971

One 97 Communications*

 

79,836

 

 

823,470

PB Fintech*

 

104,000

 

 

973,152

       

 

18,159,430

Industrials — 0.3%

     

 

 

IndiaMart InterMesh

 

13,722

 

 

507,376

Indian Railway Catering & Tourism

 

151,240

 

 

1,227,659

       

 

1,735,035

Information Technology — 0.3%

     

 

 

Happiest Minds Technologies

 

34,148

 

 

382,888

Intellect Design Arena

 

35,597

 

 

316,041

Route Mobile

 

13,092

 

 

248,362

Tanla Platforms

 

32,463

 

 

382,621

       

 

1,329,912

Total India

     

 

64,299,269

       

 

 

Indonesia — 0.7%

     

 

 

Consumer Discretionary — 0.6%

     

 

 

Bukalapak.com*

 

26,213,300

 

 

399,310

GoTo Gojek Tokopedia, Cl A*

 

408,638,200

 

 

2,575,789

       

 

2,975,099

Financials — 0.1%

     

 

 

Bank Jago*

 

2,561,300

 

 

391,847

Total Indonesia

     

 

3,366,946

       

 

 

Japan — 0.9%

     

 

 

Communication Services — 0.9%

     

 

 

Nexon

 

218,300

 

 

4,433,926

       

 

 

Kazakhstan — 2.0%

     

 

 

Financials — 2.0%

     

 

 

Kaspi.KZ JSC GDR

 

96,487

 

 

9,822,377

       

 

 

Poland — 0.6%

     

 

 

Communication Services — 0.2%

     

 

 

CD Projekt (A)

 

32,335

 

 

1,157,666

       

 

 

Consumer Discretionary — 0.4%

     

 

 

Allegro.eu*

 

210,947

 

 

1,690,135

CCC*

 

25,965

 

 

280,677

       

 

1,970,812

Total Poland

     

 

3,128,478

  

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

10

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Schedule of Investments

August 31, 2023 (Continued)

Description

 

Shares

 

Fair Value

Russia — 0.0%

     

 

 

Communication Services — 0.0%

     

 

 

VK GDR* (B)(C)

 

117,354

 

$

1,174

Yandex, Cl A* (B)(C)

 

224,241

 

 

2,242

       

 

3,416

Consumer Discretionary — 0.0%

     

 

 

Ozon Holdings ADR* (B)(C)

 

125,832

 

 

1,258

       

 

 

Financials — 0.0%

     

 

 

TCS Group Holding GDR* (B)(C)

 

89,202

 

 

892

       

 

 

Industrials — 0.0%

     

 

 

HeadHunter Group ADR* (B)(C)

 

25,106

 

 

251

Total Russia

     

 

5,817

       

 

 

Singapore — 2.6%

     

 

 

Communication Services — 1.9%

     

 

 

Sea ADR*

 

258,069

 

 

9,711,137

       

 

 

Industrials — 0.7%

     

 

 

Grab Holdings, Cl A*

 

875,316

 

 

3,299,941

Total Singapore

     

 

13,011,078

       

 

 

South Africa — 3.9%

     

 

 

Communication Services — 0.1%

     

 

 

MultiChoice Group (A)

 

155,573

 

 

643,161

       

 

 

Consumer Discretionary — 3.8%

     

 

 

Naspers, Cl N

 

109,806

 

 

18,655,654

Total South Africa

     

 

19,298,815

       

 

 

South Korea — 7.2%

     

 

 

Communication Services — 3.9%

     

 

 

AfreecaTV

 

3,998

 

 

247,125

CJ ENM

 

5,166

 

 

227,472

Com2uSCorp

 

3,982

 

 

142,801

Kakao

 

146,911

 

 

5,346,260

Kakao Games*

 

18,407

 

 

396,201

NAVER

 

70,901

 

 

11,506,158

NCSoft

 

7,897

 

 

1,502,626

Neowiz*

 

6,048

 

 

161,295

NHN*

 

7,091

 

 

139,486

       

 

19,669,424

Consumer Discretionary — 2.9%

     

 

 

Coupang, Cl A*

 

571,680

 

 

10,850,486

Delivery Hero*

 

90,085

 

 

3,297,426

       

 

14,147,912

Financials — 0.4%

     

 

 

KakaoBank

 

79,431

 

 

1,583,512

Kakaopay*

 

12,099

 

 

414,208

       

 

1,997,720

Total South Korea

     

 

35,815,056

Description

 

Shares

 

Fair Value

Sweden — 0.0%

     

 

 

Information Technology — 0.0%

     

 

 

Truecaller, Cl B*

 

66,731

 

$

209,031