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

       

 

 

Taiwan — 0.2%

     

 

 

Communication Services — 0.0%

     

 

 

Gamania Digital Entertainment

 

90,000

 

 

191,606

       

 

 

Consumer Discretionary — 0.2%

     

 

 

momo.com

 

53,768

 

 

877,942

PChome Online

 

66,000

 

 

89,011

       

 

966,953

Total Taiwan

     

 

1,158,559

       

 

 

United States — 0.4%

     

 

 

Information Technology — 0.4%

     

 

 

Ebix

 

12,182

 

 

203,439

Freshworks, Cl A*

 

68,542

 

 

1,499,014

Total United States

     

 

1,702,453

       

 

 

Uruguay — 0.2%

     

 

 

Financials — 0.2%

     

 

 

Dlocal, Cl A*

 

36,500

 

 

782,560

       

 

 

Total Common Stock
(Cost
$590,168,932)

     

 

495,018,305

       

 

 

SHORT-TERM INVESTMENT — 0.8%

     

 

 
       

 

 

United States — 0.8%

     

 

 

Invesco Government & Agency Portfolio, Cl Institutional, 5.250% (D)(E)

 

4,160,255

 

 

4,160,255

       

 

 

Total Short-Term Investment
(Cost $4,160,255)

     

 

4,160,255

       

 

 

Total Investments in
Securities — 100.6%
(Cost
$594,329,187)

     

$

499,178,560

Percentages are based on net assets of $496,366,917.

*

 

Non-income producing security.

(A)

 

This security or a partial position of this security is on loan at August 31, 2023. The total value of securities on loan at August 31, 2023 was $3,782,429.

(B)

 

Level 3 security in accordance with fair value hierarchy.

(C)

 

Security is fair valued.

(D)

 

This security was purchased with cash collateral held from securities on loan. The total value of such securities as of August 31, 2023 was $4,160,255.

(E)

 

The rate shown is the 7-day effective yield as of August 31, 2023.

     

ADR —  American Depositary Receipt

Cl —  Class

GDR —  Global Depositary Receipt

JSC — Joint-Stock Company

  

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

11

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Schedule of Investments

August 31, 2023 (Concluded)

The following is a summary of the inputs used as of August 31, 2023 in valuing the Fund’s investments carried at value:

Investments in Securities

 

Level 1

 

Level 2

 

Level 3(1)

 

Total

Common Stock

 

 

   

 

   

 

 

 

 

 

 

Argentina

 

$

222,926

 

$

 

$

 

 

$

222,926

Brazil

 

 

47,247,036

 

 

 

 

 

 

 

47,247,036

China

 

 

287,432,493

 

 

 

 

1,393

 

 

 

287,433,886

Germany

 

 

155,391

 

 

 

 

 

 

 

155,391

Hong Kong

 

 

2,924,701

 

 

 

 

 

 

 

2,924,701

India

 

 

64,299,269

 

 

 

 

 

 

 

64,299,269

Indonesia

 

 

3,366,946

 

 

 

 

 

 

 

3,366,946

Japan

 

 

4,433,926

 

 

 

 

 

 

 

4,433,926

Kazakhstan

 

 

9,822,377

 

 

 

 

 

 

 

9,822,377

Poland

 

 

3,128,478

 

 

 

 

 

 

 

3,128,478

Russia

 

 

 

 

 

 

5,817

(2)

 

 

5,817

Singapore

 

 

13,011,078

 

 

 

 

 

 

 

13,011,078

South Africa

 

 

19,298,815

 

 

 

 

 

 

 

19,298,815

South Korea

 

 

35,815,056

 

 

 

 

 

 

 

35,815,056

Sweden

 

 

209,031

 

 

 

 

 

 

 

209,031

Taiwan

 

 

1,158,559

 

 

 

 

 

 

 

1,158,559

United States

 

 

1,702,453

 

 

 

 

 

 

 

1,702,453

Uruguay

 

 

782,560

 

 

 

 

 

 

 

782,560

Short-Term Investment

 

 

   

 

   

 

 

 

 

 

 

United States

 

 

4,160,255

 

 

 

 

 

 

 

4,160,255

Total Investments in Securities

 

$

499,171,350

 

$

 

$

7,210

 

 

$

499,178,560

(1)

 

A reconciliation of Level 3 investments and disclosures of significant unobservable inputs are presented when the Fund has a significant amount of Level 3 investments at the end of the period in relation to Net Assets. Management has concluded that Level 3 investments are not material in relation to Net Assets.

(2)

 

During the year ended August 31, 2023, QIWI ADR (Russian Level 3 Security) was sold in a tender offer which impacted Realized Gain/(Loss) by ($344,319) and Change in Unrealized Gain/(Loss) by $430,088. At August 31, 2023, all Russian Level 3 Investments had a combined ($18,771,995) Unrealized Gain/(Loss). These securities were impacted by the invasion of Ukraine and sanctions on market conditions in Russia. From the start of the conflict in Ukraine until August 31, 2023, Russian-held investments were valued at an approximately 99 percent discount from their last traded prices.

     

  

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

12

FMQQ

The Next Frontier Internet & Ecommerce ETF

Schedule of Investments

August 31, 2023

Description

 

Shares

 

Fair Value

COMMON STOCK — 99.8%

     

 

 
       

 

 

Argentina — 0.2%

     

 

 

Consumer Discretionary — 0.2%

     

 

 

Despegar.com*

 

4,860

 

$

38,637

       

 

 

Brazil — 20.8%

     

 

 

Consumer Discretionary — 9.5%

     

 

 

Afya, Cl A*

 

2,302

 

 

34,691

GRUPO DE MODA SOMA

 

43,509

 

 

65,910

Magazine Luiza*

 

251,357

 

 

140,631

MercadoLibre*

 

1,097

 

 

1,505,479

Pet Center Comercio e Participacoes

 

29,711

 

 

33,006

       

 

1,779,717

Financials — 11.1%

     

 

 

Inter*

 

24,850

 

 

101,137

NU Holdings, Cl A*

 

121,228

 

 

830,412

Pagseguro Digital, Cl A*

 

17,716

 

 

159,090

StoneCo, Cl A*

 

21,365

 

 

261,935

XP, Cl A

 

29,322

 

 

743,020

       

 

2,095,594

Information Technology — 0.2%

     

 

 

Locaweb Servicos de Internet

 

29,761

 

 

42,679

Total Brazil

     

 

3,917,990

       

 

 

Germany — 0.1%

     

 

 

Consumer Discretionary — 0.1%

     

 

 

Jumia Technologies ADR*

 

8,778

 

 

26,948

       

 

 

India — 28.2%

     

 

 

Communication Services — 2.2%

     

 

 

Affle India*

 

4,296

 

 

55,953

Brightcom Group*

 

106,218

 

 

21,812

Info Edge India

 

5,985

 

 

313,144

Nazara Technologies*

 

2,791

 

 

26,193

       

 

417,102

Description

 

Shares

 

Fair Value

India (continued)

     

 

 

Consumer Discretionary — 5.8%

     

 

 

Easy Trip Planners*

 

38,073

 

$

19,108

FSN E-Commerce Ventures*

 

89,522

 

 

144,416

Jubilant Foodworks

 

32,001

 

 

197,933

MakeMyTrip*

 

5,127

 

 

203,337

Zomato*

 

447,552

 

 

527,637

       

 

1,092,431

Energy — 7.5%

     

 

 

Reliance Industries

 

48,657

 

 

1,414,696

       

 

 

Financials — 9.9%

     

 

 

Angel One

 

2,755

 

 

62,226

Bajaj Finance

 

13,966

 

 

1,208,395

ICICI Securities

 

7,090

 

 

53,514

Indian Energy Exchange

 

66,804

 

 

101,836

Jio Financial Services*

 

45,877

 

 

129,397

One 97 Communications*

 

13,853

 

 

142,887

PB Fintech*

 

18,049

 

 

168,889

       

 

1,867,144

Industrials — 1.6%

     

 

 

IndiaMart InterMesh

 

2,396

 

 

88,593

Indian Railway Catering & Tourism

 

26,251

 

 

213,087

       

 

301,680

Information Technology — 1.2%

     

 

 

Happiest Minds Technologies

 

5,911

 

 

66,278

Intellect Design Arena

 

6,153

 

 

54,628

Route Mobile

 

2,265

 

 

42,968

Tanla Platforms

 

5,632

 

 

66,381

       

 

230,255

Total India

     

 

5,323,308

       

 

 

Indonesia — 3.1%

     

 

 

Consumer Discretionary — 2.7%

     

 

 

Bukalapak.com*

 

4,547,900

 

 

69,278

GoTo Gojek Tokopedia, Cl A*

 

70,938,600

 

 

447,151

       

 

516,429

Financials — 0.4%

     

 

 

Bank Jago*

 

444,300

 

 

67,973

Total Indonesia

     

 

584,402

       

 

 

Japan — 4.0%

     

 

 

Communication Services — 4.0%

     

 

 

Nexon

 

37,600

 

 

763,700

       

 

 

Kazakhstan — 6.1%

     

 

 

Financials — 6.1%

     

 

 

Kaspi.KZ JSC GDR

 

11,348

 

 

1,155,226

  

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

13

FMQQ

The Next Frontier Internet & Ecommerce ETF

Schedule of Investments

August 31, 2023 (Continued)

Description

 

Shares

 

Fair Value

Poland — 2.9%

     

 

 

Communication Services — 1.1%

     

 

 

CD Projekt

 

5,611

 

$

200,887

       

 

 

Consumer Discretionary — 1.8%

     

 

 

Allegro.eu*

 

36,617

 

 

293,380

CCC*

 

4,500

 

 

48,644

       

 

342,024

Total Poland

     

 

542,911

       

 

 

Russia — 0.0%

     

 

 

Communication Services — 0.0%

     

 

 

VK GDR* (A)(B)

 

7,810

 

 

78

Yandex, Cl A* (A)(B)

 

10,305

 

 

103

       

 

181

Consumer Discretionary — 0.0%

     

 

 

Ozon Holdings ADR* (A)(B)

 

8,369

 

 

84

       

 

 

Financials — 0.0%

     

 

 

TCS Group Holding GDR* (A)(B)

 

5,934

 

 

59

       

 

 

Industrials — 0.0%

     

 

 

HeadHunter Group ADR* (A)(B)

 

1,664

 

 

17

Total Russia

     

 

341

       

 

 

Singapore — 7.5%

     

 

 

Communication Services — 4.4%

     

 

 

Sea ADR*

 

22,138

 

 

833,053

Industrials — 3.1%

     

 

 

Grab Holdings, Cl A*

 

151,930

 

 

572,776

Total Singapore

     

 

1,405,829

       

 

 

South Africa — 0.6%

     

 

 

Communication Services — 0.6%

     

 

 

MultiChoice Group

 

27,045

 

 

111,808

       

 

 

South Korea — 23.8%

     

 

 

Communication Services — 12.5%

     

 

 

AfreecaTV

 

687

 

 

42,465

CJ ENM

 

889

 

 

39,145

Com2uSCorp

 

684

 

 

24,529

Kakao

 

19,293

 

 

702,094

Kakao Games*

 

3,189

 

 

68,642

NAVER

 

7,245

 

 

1,175,754

NCSoft

 

1,367

 

 

260,110

Neowiz*

 

1,041

 

 

27,763

NHN*

 

1,227

 

 

24,136

       

 

2,364,638

Description

 

Shares

 

Fair Value

South Korea (continued)

     

 

 

Consumer Discretionary — 9.4%

     

 

 

Coupang, Cl A*

 

64,015

 

$

1,215,005

Delivery Hero*

 

15,635

 

 

572,296

       

 

1,787,301

Financials — 1.9%

     

 

 

KakaoBank

 

13,783

 

 

274,773

Kakaopay*

 

2,100

 

 

71,893

       

 

346,666

Total South Korea

     

 

4,498,605

Sweden — 0.2%

     

 

 

Information Technology — 0.2%

     

 

 

Truecaller, Cl B*

 

11,505

 

 

36,039

       

 

 

United States — 1.6%

     

 

 

Information Technology — 1.6%

     

 

 

Ebix

 

2,113

 

 

35,287

Freshworks, Cl A*

 

11,893

 

 

260,100

Total United States

     

 

295,387

       

 

 

Uruguay — 0.7%

     

 

 

Financials — 0.7%

     

 

 

Dlocal, Cl A*

 

6,332

 

 

135,758

       

 

 

Total Common Stock
(Cost $23,234,925)

     

 

18,836,889

       

 

 

Total Investments in Securities — 99.8%
(Cost $23,234,925)

     

$

18,836,889

Percentages are based on net assets of $18,867,573.

*

 

Non-income producing security.

(A)

 

Level 3 security in accordance with fair value hierarchy.

(B)

 

Security is fair valued.

     

ADR —  American Depositary Receipt

Cl —  Class

GDR —  Global Depositary Receipt

JSC — Joint-Stock Company

  

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

14

FMQQ

The Next Frontier Internet & Ecommerce ETF

Schedule of Investments

August 31, 2023 (Concluded)

The following is a summary of the inputs used as of August 31, 2023 in valuing the Fund’s investments carried at value:

Investments in Securities

 

Level 1

 

Level 2

 

Level 3(1)

 

Total

Common Stock

 

 

   

 

   

 

   

 

 

Argentina

 

$

38,637

 

$

 

$

 

$

38,637

Brazil

 

 

3,917,990

 

 

 

 

 

 

3,917,990

Germany

 

 

26,948

 

 

 

 

 

 

26,948

India

 

 

5,323,308

 

 

 

 

 

 

5,323,308

Indonesia

 

 

584,402

 

 

 

 

 

 

584,402

Japan

 

 

763,700

 

 

 

 

 

 

763,700

Kazakhstan

 

 

1,155,226

 

 

 

 

 

 

1,155,226

Poland

 

 

542,911

 

 

 

 

 

 

542,911

Russia

 

 

 

 

 

 

341

 

 

341

Singapore

 

 

1,405,829

 

 

 

 

 

 

1,405,829

South Africa

 

 

111,808

 

 

 

 

 

 

111,808

South Korea

 

 

4,498,605

 

 

 

 

 

 

4,498,605

Sweden

 

 

36,039

 

 

 

 

 

 

36,039

United States

 

 

295,387

 

 

 

 

 

 

295,387

Uruguay

 

 

135,758

 

 

 

 

 

 

135,758

Total Investments in Securities

 

$

18,836,548

 

$

 

$

341

 

$

18,836,889

(1)

 

A reconciliation of Level 3 investments and disclosures of significant unobservable inputs are presented when the Fund has a significant amount of Level 3 investments at the end of the period in relation to Net Assets. Management has concluded that Level 3 investments are not material in relation to Net Assets.

  

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

15

EMQQ/FMQQ

Statements of Assets and Liabilities

August 31, 2023

  

 

EMQQ
The Emerging
Markets
Internet &
Ecommerce
ETF

 

FMQQ
The Next
Frontier
Internet &
Ecommerce
ETF

Assets:

 

 

 

 

 

 

 

 

Investments at Cost

 

$

594,329,187

 

 

$

23,234,925

 

Foreign Currency at Cost

 

 

351,229

 

 

 

35,619

 

Investments at Fair Value*

 

$

499,178,560

 

 

$

18,836,889

 

Cash and Cash Equivalents

 

 

1,988,500

 

 

 

 

Foreign Currency at Value

 

 

351,082

 

 

 

35,611

 

Dividend, Interest and Securities Lending Income Receivable

 

 

192,384

 

 

 

22,206

 

Reclaims Receivable

 

 

18,183

 

 

 

 

Total Assets

 

 

501,728,709

 

 

 

18,894,706

 

   

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Payable Upon Return on Securities Loaned

 

 

4,160,255

 

 

 

 

Advisory Fees Payable

 

 

366,426

 

 

 

13,417

 

Payable to Custodian

 

 

 

 

 

13,716

 

Accrued Foreign Capital Gains Tax on Appreciated Securities

 

 

835,111

 

 

 

 

   

 

 

 

 

 

 

 

Total Liabilities

 

 

5,361,792

 

 

 

27,133

 

   

 

 

 

 

 

 

 

Net Assets

 

$

496,366,917

 

 

$

18,867,573

 

   

 

 

 

 

 

 

 

Net Assets Consist of:

 

 

 

 

 

 

 

 

Paid-in Capital

 

$

969,037,335

 

 

$

28,218,775

 

Total Distributable Earnings (Accumulated Losses)

 

 

(472,670,418

)

 

 

(9,351,202

)

   

 

 

 

 

 

 

 

Net Assets

 

$

496,366,917

 

 

$

18,867,573

 

   

 

 

 

 

 

 

 

Outstanding Shares of Beneficial Interest
(unlimited authorization – no par value)

 

 

15,950,000

 

 

 

1,750,000

 

Net Asset Value, Offering and Redemption Price Per Share

 

$

31.12

 

 

$

10.78

 

* Includes Value of Securities on Loan

 

$

3,782,429

 

 

$

 

Amounts designated as “—” are $0 or have been rounded to $0.

  

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

16

EMQQ/FMQQ

Statements of Operations

For the Year Ended August 31, 2023

  

 

EMQQ
The Emerging
Markets
Internet &
Ecommerce ETF

 

FMQQ
The Next
Frontier
Internet &
Ecommerce ETF

Investment Income:

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

Dividend Income

 

$

2,736,910

 

 

$

116,398

 

Interest Income

 

 

42,370

 

 

 

419

 

Income from Securities Lending (Net)

 

 

188,349

 

 

 

 

Less: Foreign Taxes Withheld

 

 

(117,069

)

 

 

(9,372

)

   

 

 

 

 

 

 

 

Total Investment Income

 

 

2,850,560

 

 

 

107,445

 

   

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

Advisory Fees

 

 

4,573,353

 

 

 

138,851

 

   

 

 

 

 

 

 

 

Total Expenses

 

 

4,573,353

 

 

 

138,851

 

   

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

(1,722,793

)

 

 

(31,406

)

   

 

 

 

 

 

 

 

Net Realized Gain (Loss) on:

 

 

 

 

 

 

 

 

Investments(1)

 

 

(101,446,596

)

 

 

(1,531,443

)

Foreign Currency Transactions

 

 

(167,325

)

 

 

(15,886

)

Foreign Capital Gains Tax

 

 

(1,247

)

 

 

42

 

   

 

 

 

 

 

 

 

Net Realized Gain (Loss)

 

 

(101,615,168

)

 

 

(1,547,287

)

   

 

 

 

 

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

 

 

 

 

 

 

 

 

Investments

 

 

90,198,765

 

 

 

1,192,179

 

Accrued Foreign Capital Gains Tax on Appreciated Securities

 

 

38,965

 

 

 

 

Foreign Currency Translation

 

 

(2,596

)

 

 

1,779

 

   

 

 

 

 

 

 

 

Net Change in Unrealized Appreciation (Depreciation)

 

 

90,235,134

 

 

 

1,193,958

 

Net Realized and Unrealized Gain (Loss)

 

 

(11,380,034

)

 

 

(353,329

)

   

 

 

 

 

 

 

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

$

(13,102,827

)

 

$

(384,735

)

(1)

 

Includes realized gains (losses) as a result of in-kind transactions, if any (See Note 4 in Notes to the Financial Statements).

Amounts designated as “—” are $0 or have been rounded to $0.

  

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

17

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Statements of Changes in Net Assets

 

 

For the
Year Ended
August 31, 2023

 

For the
Year Ended
August 31, 2022

Operations:

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

$

(1,722,793

)

 

$

(261,432

)

Net Realized Gain (Loss)(1)

 

 

(101,615,168

)

 

 

(189,276,729

)

Net Change in Unrealized Appreciation (Depreciation)

 

 

90,235,134

 

 

 

(337,189,450

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

 

(13,102,827

)

 

 

(526,727,611

)

   

 

 

 

 

 

 

 

Capital Share Transactions:

 

 

 

 

 

 

 

 

Issued

 

 

14,554,115

 

 

 

13,935,847

 

Redeemed

 

 

(120,237,767

)

 

 

(228,007,759

)

Increase (Decrease) in Net Assets from Capital Share Transactions

 

 

(105,683,652

)

 

 

(214,071,912

)

Total Increase (Decrease) in Net Assets

 

 

(118,786,479

)

 

 

(740,799,523

)

   

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

 

 

Beginning of Year

 

 

615,153,396

 

 

 

1,355,952,919

 

End of Year

 

$

496,366,917

 

 

$

615,153,396

 

   

 

 

 

 

 

 

 

Share Transactions:

 

 

 

 

 

 

 

 

Issued

 

 

550,000

 

 

 

300,000

 

Redeemed

 

 

(4,100,000

)

 

 

(6,100,000

)

Net Increase (Decrease) in Shares Outstanding from Share Transactions

 

 

(3,550,000

)

 

 

(5,800,000

)

(1)

 

Includes realized gains (losses) as a result of in-kind transactions, if any (See Note 4 in Notes to the Financial Statements).

  

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

18

FMQQ

The Next Frontier Internet & Ecommerce ETF

Statements of Changes in Net Assets

 

 

For the
Year Ended
August 31, 2023

 

For the
Period Ended
August 31, 2022
*

Operations:

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

$

(31,406

)

 

$

(61,601

)

Net Realized Gain (Loss)(1)

 

 

(1,547,287

)

 

 

(3,330,862

)

Net Change in Unrealized Appreciation (Depreciation)

 

 

1,193,958

 

 

 

(5,592,011

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

 

(384,735

)

 

 

(8,984,474

)

   

 

 

 

 

 

 

 

Capital Share Transactions:

 

 

 

 

 

 

 

 

Issued

 

 

4,138,711

 

 

 

24,098,071

 

Increase (Decrease) in Net Assets from Capital Share Transactions

 

 

4,138,711

 

 

 

24,098,071

 

Total Increase (Decrease) in Net Assets

 

 

3,753,976

 

 

 

15,113,597

 

   

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

 

 

Beginning of Year/Period

 

 

15,113,597

 

 

 

 

End of Year/Period

 

$

18,867,573

 

 

$

15,113,597

 

   

 

 

 

 

 

 

 

Share Transactions:

 

 

 

 

 

 

 

 

Issued

 

 

400,000

 

 

 

1,350,000

 

Net Increase (Decrease) in Shares Outstanding from Share Transactions

 

 

400,000

 

 

 

1,350,000

 

*

 

Commenced operations on September 27, 2021.

(1)

 

Includes realized gains (losses) as a result of in-kind transactions, if any (See Note 4 in Notes to the Financial Statements).

Amounts designated as “—” are $0 or have been rounded to $0.

  

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

19

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Financial Highlights

  

Selected Per Share Data & Ratios

For the Years Ended August 31,

For a Share Outstanding Throughout the Year

 

Net Asset 
Value, 
Beginning 
of Year

 

Net 
Investment 
Income 
(Loss)*

 

Net Realized 
and 
Unrealized 
Gain 
(Loss) on 
Investments

 

Total from 
Operations

 

Distributions 
from 
Investment 
Income

 

Total 
Distributions

 

Net Asset 
Value, 
End of Year

 

Net Asset 
Value, Total 
Return
(1)

 

Net Assets 
End of Year 
(000)

 

Ratio of 
Expenses to
Average Net
Assets 

 

Ratio of Net 
Investment 
Income
(Loss) to
Average Net
Assets

 

Portfolio 
Turnover
(2)

2023

 

$

31.55

 

$

(0.10

)

 

$

(0.33

)

 

$

(0.43

)

 

$

 

 

$

 

 

$

31.12

 

(1.36

)%

 

$

496,367

 

0.86

%

 

(0.32

)%

 

21

%

2022

 

 

53.59

 

 

(0.01

)

 

 

(22.03

)

 

 

(22.04

)

 

 

 

 

 

 

 

 

31.55

 

(41.13

)

 

 

615,153

 

0.86

 

 

(0.03

)

 

44

 

2021

 

 

54.11

 

 

(0.38

)

 

 

(0.03

)**

 

 

(0.41

)

 

 

(0.11

)

 

 

(0.11

)

 

 

53.59

 

(0.77

)

 

 

1,355,953

 

0.86

 

 

(0.61

)

 

71

 

2020

 

 

32.08

 

 

0.50

 

 

 

21.98

 

 

 

22.48

 

 

 

(0.45

)

 

 

(0.45

)

 

 

54.11

 

70.85

 

 

 

965,858

 

0.86

 

 

1.28

 

 

25

 

2019

 

 

33.05

 

 

(0.16

)

 

 

(0.81

)

 

 

(0.97

)

 

 

 

 

 

 

 

 

32.08

 

(2.93

)

 

 

378,601

 

0.86

 

 

(0.53

)

 

25

 

*

 

Per share data calculated using average shares method.

**

 

Realized and unrealized gains per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Statement of Operations due to share transactions for the period.

(1)

 

Total return is for the period indicated. Returns do not reflect the deduction of taxes the shareholder would pay on fund distributions or redemption of Fund shares.

(2)

 

Portfolio turnover rate is for the period indicated. Excludes effect of securities received or delivered from processing in-kind creations or redemptions.

Amounts designated as “—“ are $0.

  

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

20

FMQQ

The Next Frontier Internet & Ecommerce ETF

Financial Highlights

  

Selected Per Share Data & Ratios
For the Year Ended August
31, 2023 and the Period Ended August 31, 2022

For a Share Outstanding Throughout the Year or Period

 

Net Asset 
Value, 
Beginning of 
Year/Period

 

Net 
Investment 
Income 
(Loss)*

 

Net Realized 
and 
Unrealized 
Gain 
(Loss) on 
Investments

 

Total from 
Operations

 

Net Asset 
Value, End of 
Year/Period

 

Net Asset 
Value, Total 
Return
(1)

 

Net Assets
End of Year/
Period
(000)

 

Ratio of
Expenses to
Average Net
Assets 

 

Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets

 

Portfolio
Turnover
(2)

2023

 

$

11.20

 

$

(0.02

)

 

$

(0.40

)

 

$

(0.42

)

 

$

10.78

 

(3.75

)%

 

$

18,868

 

0.86

%

 

(0.19

)%

 

24

%

2022

 

 

25.80

 

 

(0.07

)

 

 

(14.53

)

 

 

(14.60

)

 

 

11.20

 

(56.59

)

 

 

15,114

 

0.86

(3)

 

(0.58

)(3)

 

66

 

*

 

Per share data calculated using average shares method.

 

The Fund commenced operations on September 27, 2021.

(1)

 

Total return is for the period indicated and has not been annualized for periods less than one year. Returns do not reflect the deduction of taxes the shareholder would pay on fund distributions or redemption of Fund shares.

(2)

 

Portfolio turnover rate is for the period indicated and periods of less than one year have not been annualized. Excludes effect of securities received or delivered from processing in-kind creations or redemptions.

(3)

 

Annualized.

  

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

21

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023

 

1. ORGANIZATION

Exchange Traded Concepts Trust (the “Trust”) is a Delaware statutory trust formed on July 17, 2009. The Trust is registered with the Commission under the Investment Company Act of 1940 (the “1940 Act”) as an open-end management investment company with multiple investment portfolios. The financial statements herein are those of EMQQ The Emerging Markets Internet & Ecommerce ETF and FMQQ The Next Frontier Internet & Ecommerce ETF (each a “Fund”, and together the “Funds”). The EMQQ The Emerging Markets Internet & Ecommerce ETF 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 IndexTM. The FMQQ The Next Frontier Internet & Ecommerce ETF 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 IndexTM. Exchange Traded Concepts, LLC (the “Adviser”), an Oklahoma limited liability company, serves as the investment adviser for the Funds. Each Fund is classified as “non-diversified” under the 1940 Act (see “Non-Diversification Risk” under Note 6). The EMQQ The Emerging Markets Internet & Ecommerce ETF commenced operations on November 12, 2014. The FMQQ The Next Frontier Internet & Ecommerce ETF commenced operations on September 27, 2021.

Shares of the Funds are listed and traded on the NYSE Arca, Inc. (the “Exchange”). Market prices for shares of a Fund may be different from their net asset value (“NAV”). The Funds issue and redeem shares on a continuous basis to certain institutional investors (typically market makers or other broker-dealers) at NAV only in large blocks of shares called “Creation Units.” Creation Units are available for purchase and redemption on each business day and are offered and redeemed on an in-kind basis, together with a specified cash amount, or for an all cash amount. Once created, shares trade in a secondary market at market prices that change throughout the day in share amounts less than a Creation Unit.

2. SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies, which are consistently followed in the preparation of the financial statements of the Trust, are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for investment companies. The accompanying financial statements have been prepared in accordance with U.S. GAAP on the accrual basis of accounting. Management has reviewed Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services — Investment Companies (“ASC 946”), and concluded that the Funds meet the criteria of an “investment company,” and therefore, the Funds prepare their financial statements in accordance with investment company accounting as outlined in ASC 946.

Use of Estimates and Indemnifications — Each Fund is an investment company in conformity with U.S. GAAP. Therefore, the Funds follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

In the normal course of business, the Trust, on behalf of the Funds, enters into contracts that contain a variety of representations which provide general indemnifications. Each Fund’s maximum exposure under these arrangements cannot be known; however, the Funds expect any risk of loss to be remote.

Security Valuation — The Funds record their investments at fair value. Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on the NASDAQ Stock Market (“NASDAQ”)), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded (or at approximately 4:00 pm Eastern Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale, at the most recent quoted bid price for long positions and at the most recent quoted ask price for short positions. For securities traded on NASDAQ the NASDAQ Official Closing Price will be used. If available, debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the last reported sales price if the security is actively traded.

22

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

The third-party pricing agents may also value debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the fair value for such securities. Debt obligations with remaining maturities of sixty days or less when acquired will be valued at their market value. If a market value is not available from a pricing vendor or from an independent broker, the security shall be fair valued according to the Trust’s fair value procedures. Prices for most securities held in the Funds are provided daily by recognized independent pricing agents. If a security price cannot be obtained from an independent, third-party pricing agent, the Funds seek to obtain a bid price from at least one independent broker.

Rule 2a-5 under the 1940 Act establishes requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund’s investment adviser to perform fair-value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are “readily available” for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. Rule 31a-4 under the 1940 Act, sets forth recordkeeping requirements associated with fair-value determinations.

Pursuant to the requirements of Rule 2a-5, the Trust’s Board of Trustees (the “Board”) (i) has designated the Adviser as the Board’s valuation designee to perform fair-value determinations for a Fund through the Adviser’s Valuation Committee and (ii) approved the Adviser Valuation Procedures.

Some of the more common reasons that may necessitate that a security be valued using fair value procedures include: the security’s trading has been halted or suspended; the security has been de-listed from a national exchange; the security’s primary trading market is temporarily closed at a time, when under normal conditions, it would be open; the security has not been traded for an extended period of time; the security’s primary pricing source is not able or willing to provide a price; or trading of the security is subject to local government-imposed restrictions. In addition, a Fund may fair value its securities if an event that may materially affect the value of the Fund’s securities that traded outside of the United States (a ‘‘Significant Event’’) has occurred between the time of the security’s last close and the time that the Fund calculates its net asset value. A Significant Event may relate to a single issuer or to an entire market sector. Events that may be Significant Events include, but are not limited to government actions, natural disasters, armed conflict, acts of terrorism and significant market fluctuations. If the Adviser becomes aware of a Significant Event that has occurred with respect to a security or group of securities after the closing of the exchange or market on which the security or securities principally trade, but before the time at which the Fund calculates its net asset value, it may request that a Committee meeting be called. When a security is valued in accordance with the fair value procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee.

In accordance with the authoritative guidance on fair value measurements and disclosure under U.S. GAAP, the Funds disclose fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

        Level 1 — Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date;

        Level 2 — Quoted prices which are not active, or inputs that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

        Level 3 — Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity).

23

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

The valuation techniques used by the Funds to measure fair value during the year ended August 31, 2023, maximized the use of observable inputs and minimized the use of unobservable inputs. Investments are classified within the level of the lowest significant input considered in determining fair value.

Federal Income Taxes — It is each Funds’ intention to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, no provisions for Federal income taxes have been made in the financial statements.

The Funds’ policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on their Statements of Operations. As of August 31, 2023, the Funds did not have any interest or penalties associated with the underpayment of any income taxes. Current tax years remain open and subject to examination by tax jurisdictions. The Funds have reviewed all major jurisdictions and concluded that there is no impact on the Funds’ net assets and no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on its tax returns.

Foreign Taxes — The Funds may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Funds accrue and apply such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains earned.

In addition to the requirements of the Code, each Fund may also be subject to capital gains tax in India and potentially other foreign jurisdictions, on gains realized upon the sale of securities, payable upon repatriation of sales proceeds. Any realized losses in excess of gains in India may be carried forward to offset future gains. Funds with exposure to Indian securities and potentially other foreign jurisdictions accrue a deferred tax liability for unrealized gains in excess of available loss carryforwards based on existing tax rates and holding periods of the securities.

For the year ended August 31, 2023, accrued foreign capital gains tax on appreciated securities as shown on the Statements of Assets and Liabilities and recorded net changes in unrealized appreciation on Accrued Foreign Capital Gains Tax on Appreciated Securities as shown on the Statements of Operations were:

 

Accrued
Foreign
Capital
Gains Tax

 

Net Change
in Unrealized
Appreciation
(Depreciation)
on Deferred
Capital
Gains Tax

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

$

835,111

 

$

38,965

FMQQ The Next Frontier Internet & Ecommerce ETF

 

 

 

 

Security Transactions and Investment Income — Security transactions are accounted for on trade date. Costs used in determining realized gains and losses on the sale of investment securities are based on specific identification. Dividend income is recorded on the ex-dividend date. Interest income is recognized on the accrual basis. Withholding taxes and reclaims on foreign dividends, if any, have been provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates.

Foreign Currency Translation — The books and records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars on the date of valuation. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the relevant rates of exchange prevailing on the respective dates of such transactions. The Funds do not isolate that portion of realized or unrealized gains and losses resulting from changes in the foreign exchange rate from fluctuations arising from changes in the market prices of the securities. These gains and losses are included in net realized and unrealized gains and losses

24

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

on investments on the Statements of Operations. Net realized and unrealized gains and losses on foreign currency transactions represent net foreign exchange gains or losses from foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between trade and settlement dates on securities transactions and the difference between the amount of the investment income and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent amounts actually received or paid. The Funds may be subject to foreign taxes related to foreign income received, capital gain on the sale of securities and certain foreign currency transactions (a portion of which may be reclaimable). All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Funds invest.

Cash and Cash Equivalents — Idle cash may be swept into various overnight demand deposits and is classified as Cash and Cash equivalents on the Statements of Assets and Liabilities. The Funds maintain cash in bank deposit accounts which, at times, may exceed United States federally insured limits. Amounts swept overnight are available on the next business day.

Dividends and Distributions to Shareholders — Each Fund pays out dividends from its net investment income and distributes its net capital gains, if any, to investors at least annually. All distributions are recorded on ex-dividend date.

Creation Units — The Funds issue and redeem shares at NAV and only in Creation Units, or multiples thereof. Purchasers of Creation Units (“Authorized Participants”) at NAV must pay a standard creation transaction fee of $750 and $1,550 for EMQQ The Emerging Markets Internet & Ecommerce ETF and FMQQ The Next Frontier Internet & Ecommerce ETF, respectively, per transaction, regardless of the number of Creation Units created in a given transaction. An Authorized Participant who holds Creation Units and wishes to redeem at NAV would also pay a standard minimum redemption transaction fee of $750 and $1,550 for EMQQ The Emerging Markets Internet & Ecommerce ETF and FMQQ The Next Frontier Internet & Ecommerce ETF, respectively, per transaction to the custodian on the date of such redemption, regardless of the number of Creation Units redeemed in a given transaction. The Funds may charge, either in lieu of or in addition to the fixed creation transaction fee, a variable fee for creations and redemptions in order to cover certain non-standard brokerage, tax, foreign exchange, execution, market impact and other costs and expenses related to the execution of trades resulting from such transaction. In all cases, such fees will be limited in accordance with the requirements of the Commission applicable to management investment companies offering redeemable securities.

The Adviser may retain all or a portion of the transaction fee to the extent the Adviser bears the expenses that otherwise would be borne by the Trust in connection with the purchase or redemption of a Creation Unit, which the transaction fee is designed to cover.

Except when aggregated in Creation Units, shares are not redeemable securities of the Funds. Shares of the Funds may only be purchased or redeemed by certain Authorized Participants. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company (“DTC”) participant and, in each case, must have executed an Authorized Participant Agreement with the Funds’ distributor. Most retail investors will not qualify as Authorized Participants or have the resources to buy and sell whole Creation Units. Therefore, they will be unable to purchase or redeem the shares directly from the Funds. Rather, most retail investors will purchase and sell shares in the secondary market with the assistance of a broker and will be subject to customary brokerage commissions or fees.

To the extent contemplated by an Authorized Participant Agreement, in the event an Authorized Participant has submitted a redemption request in proper form but is unable to transfer all or part of the shares comprising a Creation Unit to be redeemed to SEI Investments Distribution Co. (the “Distributor”), on behalf of a Fund, by the time as set forth in the Authorized Participant Agreement, the Distributor may nonetheless accept the redemption request in reliance on the undertaking by the Authorized Participant to deliver the missing shares as soon as possible, which undertaking shall be secured by the Authorized Participant’s delivery and maintenance of collateral equal to a percentage of the value of the

25

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

2. SIGNIFICANT ACCOUNTING POLICIES (concluded)

missing shares as specified in the Authorized Participant Agreement. An Authorized Participant Agreement may permit a Fund to use such collateral to purchase the missing shares, and could subject an Authorized Participant to liability for any shortfall between the cost of a Fund acquiring such shares and the value of the collateral. Amounts are disclosed as Segregated Cash Balance from Authorized Participants for Deposit Securities and Collateral Payable upon Return of Deposit Securities on the Statement of Assets and Liabilities, when applicable.

3. SERVICE PROVIDERS

Investment Advisory and Administrative Services

The Adviser is an Oklahoma limited liability company located at 10900 Hefner Pointe Drive, Suite 400, Oklahoma City, Oklahoma 73120, its principal place of business, and 295 Madison Avenue, New York, New York 10017. The Adviser serves as the investment adviser to each Fund pursuant to an investment advisory agreement with the Trust (the “Advisory Agreement”). Under the Advisory Agreement, the Adviser provides investment advisory services to each Fund. With respect to EMQQ The Emerging Markets Internet & Ecommerce ETF, the Adviser is responsible for, among other things, overseeing the sub-adviser (as defined below), including daily monitoring of the purchase and sale of securities by the sub-adviser and regular review of the sub-adviser’s performance. With respect to FMQQ The Next Frontier Internet & Ecommerce ETF, the Adviser is responsible for the day-to-day management of the Fund, including, among other things, implementing changes to the Fund’s portfolio in connection with any rebalancing or reconstitution of its Index, trading portfolio securities on behalf of the Fund, and selecting broker-dealers to execute purchase and sale transactions, subject to the oversight of the Board. For the services it provides to the Funds, each Fund pays the Adviser a fee, which is calculated daily and paid monthly, at an annual rate of 0.86% of average daily net assets of each Fund.

Effective January 2, 2023, ETC Platform Services, LLC (“ETC Platform Services”), a direct wholly-owned subsidiary of the Adviser, began providing services to the Fund. ETC Platform Services administers each Fund’s business affairs and provides office facilities and equipment, certain clerical, bookkeeping and administrative services, paying agent services under the Fund’s unitary fee arrangement (as described below), and its officers and employees to serve as officers or Trustees of the Trust. ETC Platform Services also arranges for transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Fund to operate. For the services it provides to the Fund, ETC Platform Services is paid a fee calculated daily and paid monthly based on a percentage of the Fund’s average daily net assets.

Under the Advisory Agreement, the Adviser has agreed to pay all expenses incurred by the Funds (including the fee charged by ETC Platform services) except for the advisory fee, interest, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution fees and expenses paid by the Funds under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act (“Excluded Expenses”).

EMQQ Global LLC is the sponsor of each Fund’s Index and each Fund (the “Sponsor”). In connection with an arrangement between the Adviser and the Sponsor, the Sponsor has agreed to assume the obligation of the Adviser to pay all expenses of the Funds (except Excluded Expenses) and, to the extent applicable, pay the Adviser a minimum fee. For its services, the Sponsor is entitled to a fee from the Adviser, which is calculated daily and paid monthly, based on a percentage of the average daily net assets of each Fund. The Sponsor does not make investment decisions, provide investment advice, or otherwise act in the capacity of an investment adviser to either Fund.

A Trustee and certain officers of the Trust are affiliated with the Adviser and receive no compensation from the Trust for serving as officers and/or Trustee.

26

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

3. SERVICE PROVIDERS (concluded)

Sub-Advisory Agreement (EMQQ The Emerging Markets Internet & Ecommerce ETF only)

Penserra Capital Management LLC (the “Sub-Adviser”), a New York limited liability company located at 4 Orinda Way, Suite 100-A, Orinda, California 94563, serves as the sub-adviser to EMQQ The Emerging Markets Internet & Ecommerce ETF pursuant to a sub-advisory agreement (the “Sub-Advisory-Agreement”). Under the Sub-Advisory Agreement, the Sub-Adviser is responsible for trading portfolio securities on behalf of the Fund, including selecting broker-dealers to execute purchase and sale transactions as instructed by the Adviser or in connection with any rebalancing or reconstitution of the Index, subject to the supervision of the Adviser and the Board. Under the Sub-Advisory Agreement, the Adviser pays the Sub-Adviser a fee calculated daily and paid monthly out of the fee the Adviser receives from the Fund, at an annual rate of 0.05% on the first $250 million, 0.04% on the next $250 million, and 0.035% on assets in excess of $500 million, subject to a $25,000 minimum fee.

The Sub-Adviser’s affiliated broker-dealer, Penserra Securities LLC, holds a minority interest in the Sub-Adviser. The Fund may execute brokerage or other agency transactions through registered broker dealer affiliates of the Fund, the Adviser, the Sub-Adviser or the distributor for a commission in conformity with the 1940 Act, the Securities Exchange Act of 1934 (the “1934 Act”) and rules promulgated by the Commission. For the year ended August 31, 2023, the Funds did not pay commissions to affiliated brokers.

Distribution Arrangement

The Distributor serves as each Fund’s underwriter and distributor of each Fund’s shares pursuant to a distribution agreement (the “Distribution Agreement”). Under the Distribution Agreement, the Distributor, as agent, receives orders to purchase shares in Creation Units and transmits such orders to the Fund’s custodian and transfer agent. The Distributor has no obligation to sell any specific quantity of a Fund’s shares. The Distributor bears the following costs and expenses relating to the distribution of shares: (i) the expenses of maintaining its registration or qualification as a dealer or broker under federal or state laws; (ii) filing fees; and (iii) all other expenses incurred in connection with the distribution services, that are not reimbursed by the Adviser, as contemplated in the Distribution Agreement. The Distributor does not maintain any secondary market in any Fund’s shares.

The Funds have adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Plan, the Funds are authorized to pay an amount up to 0.25% of its average daily net assets each year for certain distribution-related activities. For the year ended August 31, 2023, no fees were charged by the Distributor under the Plan and the Plan will only be implemented with approval of the Board.

Administrator, Custodian and Transfer Agent

SEI Investments Global Funds Services serves as the Funds’ administrator pursuant to an administration agreement. Brown Brothers Harriman & Co. serves as the Funds’ custodian and transfer agent pursuant to a custodian agreement and transfer agency services agreement. The Adviser of the Funds pays these fees.

An officer of the Trust is affiliated with the administrator and receives no compensation from the Trust for serving as an officer.

27

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

4. INVESTMENT TRANSACTIONS

For the year ended August 31, 2023, the purchases and sales of investments in securities, excluding in-kind transactions, long-term U.S. Government and short-term securities were:

 

Purchases

 

Sales and Maturities

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

$

113,305,467

 

$

180,140,219

FMQQ The Next Frontier Internet & Ecommerce ETF

 

 

5,841,099

 

 

3,928,267

For the year ended August 31, 2023, there were no purchases or sales of long-term U.S. Government securities by the Funds.

For the year ended August 31, 2023, in-kind transactions associated with creations and redemptions were:

 

Purchases

 

Sales

 

Realized Gain

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

$

5,775,530

 

$

46,202,750

 

$

9,137,305

FMQQ The Next Frontier Internet & Ecommerce ETF

 

 

2,309,157

 

 

 

 

5. TAX INFORMATION

The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent.

To the extent these differences are permanent in nature, they are charged or credited to paid-in capital and distributable earnings, as appropriate, in the period that the differences arise.

At August 31, 2023, the Fund reclassified the following permanent amount between paid-in capital and distributable earnings (accumulated losses), the reclassification is primarily related to in-kind redemptions:

 

Distributable
Earnings
(Accumulated
Losses)

 

Paid-in
Capital

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

$

(5,984,169

)

 

$

5,984,169

 

FMQQ The Next Frontier Internet & Ecommerce ETF

 

 

1

 

 

 

(1

)

There were no dividends paid by the Funds during the year ended August 31, 2023 or the year/period ended August 31, 2022.

As of August 31, 2023, the components of Distributable Earnings (Accumulated Losses) on a tax basis were as follows:

 

EMQQ The
Emerging
Markets
Internet &
Ecommerce ETF

 

FMQQ The
Next Frontier
Internet &
Ecommerce ETF

Undistributed Ordinary Income

 

$

1,778,022

 

 

$

20,950

 

Post-October Losses

 

 

(87,611,192

)

 

 

 

Capital Loss Carryforwards

 

 

(242,316,050

)

 

 

(4,347,431

)

Unrealized Depreciation

 

 

(144,521,190

)

 

 

(5,024,720

)

Other Temporary Differences

 

 

(8

)

 

 

(1

)

Total Distributable Earnings (Accumulated Losses)

 

$

(472,670,418

)

 

$

(9,351,202

)

28

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

5. TAX INFORMATION (concluded)

Post-October capital losses represent capital losses realized on investment transactions from November 1, 2022 through August 31, 2023, that, in accordance with Federal income tax regulations, the Funds may elect to defer and treat as having arisen on the first day of the fund’s next taxable year.

The Funds are permitted to utilize capital losses that are carried forward and will retain their character as either short-term or long-term capital losses. As of August 31, 2023, the Funds had the following capital loss carryforwards to offset capital gains for an unlimited period:

 

Non-Expiring
Short-Term

 

Non-Expiring
Long-Term

 

Total
Capital Loss
Carryforwards

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

$

108,070,449

 

$

134,245,601

 

$

242,316,050

FMQQ The Next Frontier Internet & Ecommerce ETF

 

 

3,734,434

 

 

612,997

 

 

4,347,431

For federal income tax purposes, the cost of securities owned at August 31, 2023, and the net realized gains or losses on securities sold for the period, were different from amounts reported for financial reporting purposes primarily due to wash sales, basis adjustments related to corporate actions, and investments in passive foreign investment companies.

The Federal tax cost and aggregate gross unrealized appreciation and depreciation on investments held by the Funds at August 31, 2023, were as follows:

 

Federal Tax
Cost

 

Aggregated
Gross
Unrealized
Appreciation

 

Aggregated
Gross
Unrealized
Depreciation

 

Net Unrealized
Appreciation
(Depreciation)

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

$

642,861,346

 

$

65,729,452

 

$

(209,415,531

)

 

$

(143,686,079

)*

FMQQ The Next Frontier Internet & Ecommerce ETF

 

 

23,861,592

 

 

2,168,535

 

 

(7,193,255

)

 

 

(5,024,720

)

*

 

The difference in Unrealized Appreciation (Depreciation) in the table above is due to the foreign capital gains tax on appreciated securities.

6. PRINCIPAL RISKS OF INVESTING IN THE FUNDS

As with all exchange traded funds (“ETFs”), each shareholder of a Fund is subject to the risk that his or her investment could lose money. The Funds are subject to the principal risks noted below, any of which may adversely affect a Fund’s NAV, trading price, yield, total return and ability to meet its investment objective. Risk information is applicable to each Fund unless otherwise noted. Additional principal risks are disclosed in the Funds’ prospectus. Please refer to the Funds’ prospectus for a complete description of the principal risks of investing in a Fund.

Currency Exchange Rate Risk:    The Funds may invest a relatively large percentage of its assets in securities denominated in non-U.S. currencies. Changes in currency exchange rates and the relative value of non-U.S. currencies will affect the value of the Funds’ investment and the value of your shares. Because the Funds’ NAV is determined in U.S. dollars, the Funds’ NAV could decline if the currency of the non-U.S. market in which the Funds invest depreciates against the U.S. dollar, even if the value of the Funds’ holdings, measured in the foreign currency, increases. Currency exchange rates can be very volatile and can change quickly and unpredictably. As a result, the value of an investment in the Funds may change quickly and without warning and you may lose money.

29

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

6. PRINCIPAL RISKS OF INVESTING IN THE FUNDS (continued)

Emerging Markets Securities Risk:    Emerging markets are subject to greater market volatility, lower trading volume, political and economic instability, uncertainty regarding the existence of trading markets and more governmental limitations on foreign investment than more developed markets. In addition, securities in emerging markets may be subject to greater price fluctuations than securities in more developed markets. Differences in regulatory, accounting, auditing, and financial reporting and recordkeeping standards could impede the Adviser’s or Sub-Adviser’s ability to evaluate local companies and impact the Funds’ performance. Investments in securities of issuers in emerging markets may also be exposed to risks related to a lack of liquidity, greater potential for market manipulation, issuers’ limited reliable access to capital, and foreign investment structures. Additionally, the Funds may have limited rights and remedies available to it to pursue claims against issuers in emerging markets.

Foreign Securities Risk:    Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to expropriation, nationalization or adverse political or economic developments. Foreign securities may have relatively low market liquidity and decreased publicly available information about issuers. Investments in non-U.S. securities also may be subject to withholding or other taxes and may be subject to additional trading, settlement, custodial, and operational risks. Non-U.S. issuers may also be subject to inconsistent and potentially less stringent accounting, auditing, financial reporting and investor protection standards than U.S. issuers. These and other factors can make investments in the Funds more volatile and potentially less liquid than other types of investments. In addition, where all or a portion of the Funds’ portfolio holdings trade in markets that are closed when the Funds’ market is open, there may be valuation differences that could lead to differences between the Funds’ market price and the value of the Funds’ portfolio holdings.

Frontier Market Risk:    Certain foreign markets are only in the earliest stages of development and may be considered “frontier markets.” Frontier financial markets generally are less liquid and more volatile than other markets, including markets in developing and emerging economies. Frontier markets have a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries. Securities may have limited marketability and be subject to erratic price movements. Frontier markets, particularly countries in the Middle East, have been, and may continue to be, impacted by political instability, war, terrorist activities and religious, ethnic and/or socioeconomic unrest. These and other factors make investing in frontier market countries significantly riskier than investing in developed market or emerging market countries.

Limited Authorized Participants, Market Makers and Liquidity Providers Concentration Risk:    Because the Funds are an ETF, only a limited number of institutional investors (known as “Authorized Participants”) are authorized to purchase and redeem shares directly from the Funds. In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occurs, the risk of which is higher during periods of market stress, shares of the Funds may trade at a material discount to NAV and possibly face delisting: (i) Authorized Participants exit the business or otherwise become unable to process creation and/or redemption orders and no other Authorized Participants step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions.

Market Risk:    The market price of an investment could decline, sometimes rapidly or unpredictably, due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic or political conditions throughout the world, changes in the general outlook for corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally. The market value of an investment also may decline because of factors that affect a particular industry or industries such as labor shortages, increased production costs, and competitive conditions. Local, regional, or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the market generally and on specific investments. For example, in recent years, the COVID-19 pandemic, the large expansion of government deficits and debt as a result of government actions to mitigate the effects of the pandemic, Russia’s invasion of Ukraine, and the rise of inflation have

30

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Continued)

 

6. PRINCIPAL RISKS OF INVESTING IN THE FUNDS (concluded)

resulted in extreme volatility in the global economy and in global financial markets. Economies and financial markets throughout the world are becoming increasingly interconnected. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to countries experiencing economic and financial difficulties, the value and liquidity of the Fund’s investments may be negatively affected.

Non-Diversification Risk:    The Funds are non-diversified, meaning that, as compared to a diversified fund, it can invest a greater percentage of its assets in securities issued by or representing a small number of issuers. As a result, the performance of these issuers can have a substantial impact on the Funds’ performance.

7. Securities Lending

The Funds have entered into a Securities Lending Agreement with Brown Brothers Harriman & Co. (the “Lending Agent”) to lend portfolio securities to brokers, dealers and other financial organizations that meet capital and other credit requirements or other criteria established by the Trust’s Board. These loans, if and when made, may not exceed 33⅓% of the total asset value of the Funds (including the loan collateral). The Funds will not lend portfolio securities to the Adviser or its affiliates unless permissible under the 1940 Act and the rules and promulgations thereunder. Loans of portfolio securities will be fully collateralized by cash, letters of credit or U.S. government securities, and the collateral will be maintained in an amount equal to at least 102% of the value of domestic equity securities and American Depositary Receipts and 105% of the value of foreign equity securities (other than ADRs). However, due to market fluctuations during the day, the value of securities loaned on a particular day may, during the course of the day, exceed the value of collateral. On each business day, the amount of collateral is adjusted based on the prior day’s market fluctuations and the current day’s lending activity. Income from lending activity is determined by the amount of interest earned on collateral, less any amounts payable to the borrowers of the securities and the lending agent. Lending securities involves certain risks, including the risk that the Funds may be delayed or restricted from recovering the loaned securities or disposing of the collateral for the loan, which could give rise to loss because at adverse market actions, expenses and/or delays in connection with the disposition of the underlying securities. Any gain or loss in the market price of the securities loaned and income from lending activity by a Fund that might occur during the term of the loan would be for the account of the Fund. Cash collateral received in connection with securities lending is invested in short-term investments by the lending agent.

Securities lending transactions are entered into by the Funds under the Securities Lending Agreement, which permits the Funds, under certain circumstances such as an event of default, to offset amounts payable by a Fund to the same counterparty against amounts receivable from the counterparty to create a net payment due to or from the Fund.

The following is a summary of securities lending agreements held by the EMQQ The Emerging Markets Internet & Ecommerce ETF, with cash collateral of overnight maturities and non-cash collateral, which would be subject to offset as of August 31, 2023:

 

Gross Amount
of Recognized
Assets (Value of
Securities on
Loan)

 

Value of Cash
Collateral
Received
(1)

 

Value of Non-
Cash Collateral
Received

 

Net Amount

   

$

3,782,429

 

$

3,782,429

 

$

 

$

 

(1)

 

Collateral received in excess of market value of securities on loan is not presented in this table. The total cash collateral received by the Fund is disclosed in the Statements of Assets and Liabilities.

31

EMQQ/FMQQ

Notes to the Financial Statements

August 31, 2023 (Concluded)

 

7. Securities Lending (concluded)

The value of loaned securities and related collateral outstanding at August 31, 2023 are shown in the Schedules of Investments. The value of the collateral held may be temporarily less than that required under the lending contract. As of August 31, 2023, the cash collateral was invested in a Short-Term Investment with the following maturity:

EMQQ The Emerging Markets Internet & Ecommerce ETF:

 

Overnight and
Continuous

 

<30 Days

 

Between
30 & 90 Days

 

>90 Days

 

Total

Short-Term Investment

 

$

4,160,255

 

$

 

$

 

$

 

$

4,160,255

8. OTHER

At August 31, 2023, the records of the Trust reflected that 100% of the EMQQ The Emerging Markets Internet & Ecommerce ETF and FMQQ The Next Frontier Internet & Ecommerce ETF total shares outstanding were held by four and two Authorized Participant(s) respectively, in the form of Creation Units. However, the individual shares comprising such Creation Units are listed and traded on the Exchange and have been purchased and sold by persons other than Authorized Participants.

9. RECENT MARKET EVENTS

Local, regional, or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the market generally and on specific securities. Periods of market volatility may occur in response to such events and other economic, political, and global macro factors. The COVID-19 pandemic, Russia’s invasion of Ukraine, and higher inflation have resulted in extreme volatility in the financial markets, economic downturns around the world, severe losses to some sectors of the economy and individual issuers, and reduced liquidity of certain instruments. These events have caused significant disruptions to business operations, including business closures; strained healthcare systems; disruptions to supply chains and employee availability; large fluctuations in consumer demand; large expansion of government deficits and debt as a result of government actions to mitigate the effects of such events; and widespread uncertainty regarding the long-term effects of such events.

Governments and central banks, including the Federal Reserve in the United States, took extraordinary and unprecedented actions to support local and global economies and the financial markets in response to the COVID-19 pandemic, including by keeping interest rates at historically low levels for an extended period. The Federal Reserve concluded its market support activities in 2022 and began to raise interest rates in an effort to fight inflation. The Federal Reserve may determine to raise interest rates further. This and other government intervention into the economy and financial markets to address the pandemic, inflation, or other significant events in the future may not work as intended, particularly if the efforts are perceived by investors as being unlikely to achieve the desired results.

10. SUBSEQUENT EVENTS

The Funds have evaluated the need for additional disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no additional disclosures and/or adjustments were required to the financial statements.

32

EMQQ/FMQQ

Report of Independent Registered Public Accounting Firm

To the Shareholders of EMQQ The Emerging Markets Internet & Ecommerce ETF and FMQQ The Next Frontier Internet & Ecommerce ETF and Board of Trustees of Exchange Traded Concepts Trust

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Exchange Traded Concepts Trust comprising the funds listed below (the “Funds”) as of August 31, 2023, the related statements of operations, the statements of changes in net assets, the related notes, and the financial highlights for each of the periods indicated below (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of August 31, 2023, the results of their operations, the changes in net assets, and the financial highlights for each of the periods indicated below in conformity with accounting principles generally accepted in the United States of America.

Fund Name

Statements of Operations

Statements of Changes
in Net Assets

Financial Highlights

EMQQ The Emerging Markets
Internet & Ecommerce ETF

For the year ended
August 31, 2023

For the years ended
August 31, 2023 and 2022

For the years ended
August 31, 2023, 2022,
2021, 2020, and 2019

FMQQ The Next Frontier Internet &
Ecommerce ETF

For the year ended
August 31, 2023

For the year ended August 31, 2023 and for the period
from September 27, 2021 (commencement of operations)
through August 31, 2022

Basis for Opinion

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2023, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more investment companies advised by Exchange Traded Concepts, LLC since 2012.

COHEN & COMPANY, LTD.

Cleveland, Ohio

October 20, 2023

33

EMQQ/FMQQ

Trustees and Officers of the Trust

(Unaudited)

Set forth below is information about the Trustees of the Trust. The address of each Trustee of the Trust is c/o Exchange Traded Concepts Trust, 10900 Hefner Pointe Drive, Suite 400, Oklahoma City, Oklahoma 73120. The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Trustees. The SAI may be obtained without charge by calling 1-855-888-9892.

Name and
Year of Birth

Position(s) Held
with the Trust

Term of Office
and Length of
Time Served
(1)

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios in
Fund Complex
Overseen By
Trustee
(2)

Other Directorships
held by Trustee
During Past 5 Years

Interested Trustee(3)

 

 

 

 

 

J. Garrett Stevens
(1979)

Trustee and President

Trustee
since 2009;
President
since 2011

Investment Adviser/Vice President, T.S. Phillips Investments, Inc. (since 2000); Chief Executive Officer, Exchange Traded Concepts, LLC (since 2009); President, Exchange Traded Concepts Trust (since 2011); President, Exchange Listed Funds Trust (since 2012)

18

None

Independent Trustees

 

 

 

 

Timothy Jacoby
(1952)

Trustee

Since 2014

None

37

Independent Trustee, Bridge Builder Trust (14 portfolios)(since 2022); Independent Trustee, Edward Jones Money Market Fund (since 2017); Audit Committee Chair, Perth Mint Physical Gold ETF (2018 to 2020)

34

EMQQ/FMQQ

Trustees and Officers of the Trust

(Unaudited) (Continued)

Name and
Year of Birth

Position(s) Held
with the Trust

Term of Office
and Length of
Time Served
(1)

Principal Occupation(s)
During Past 5 Years

Number of
Portfoli
os in
Fund Complex

Overseen By
Trustee
(2)

Other Directorships
held by Trustee
During Past 5 Years

Independent Trustees (continued)

 

 

 

 

Linda Petrone
(1962)

Trustee

Since 2019

Founding Partner,
Sage Search Advisors
(since 2012)

37

None

Stuart Strauss
(1953)

Trustee

Since 2021

Partner, Dechert LLP
(2009 to 2020)

37

None.

Mark Zurack
(1957)

Trustee

Since 2011

Professor, Columbia Business School (since 2002)

18

Independent Trustee, AQR Funds (36 portfolios) (since 2014); Independent Trustee, Exchange Listed Funds Trust (2019)

(1)

 

Each Trustee shall serve during the continued life of the Trust until he or she dies, resigns, is declared bankrupt or incompetent by a court of competent jurisdiction, or is removed.

(2)

 

The fund complex includes each series of the Trust and of Exchange Listed Funds Trust.

(3)

 

Mr. Stevens is an “interested person” of the Trust, as that term is defined in the 1940 Act, by virtue of his employment with, and ownership interest in, the Adviser.

35

EMQQ/FMQQ

Trustees and Officers of the Trust

(Unaudited) (Concluded)

Set forth below is information about each of the persons currently serving as officers of the Trust. The address of J. Garrett Stevens, James Baker Jr., Richard Hogan, Christopher Roleke, and Matthew Fleischer is c/o Exchange Traded Concepts Trust, 10900 Hefner Pointe Drive, Suite 400, Oklahoma City, Oklahoma 73120; the address of Eric Olsen is SEI Investments Company, One Freedom Valley Drive, Oaks, Pennsylvania 19456.

Name and
Year of Birth

Position(s)
Held with the Trust

Term of Office
and Length of
Time Served
(1)

Principal Occupation(s) During Past 5 Years

Officers

 

 

 

J. Garrett Stevens
(1979)

Trustee and President

Trustee
since 2009;
President
since 2011

Investment Adviser/Vice President, T.S. Phillips Investments, Inc. (since 2000); Chief Executive Officer, Exchange Traded Concepts, LLC (since 2009); President, Exchange Listed Funds Trust (since 2012).

Richard Malinowski
(1983)

Vice President and Secretary

Since 2022

General Counsel, Exchange Traded Concepts, LLC (since 2022); Senior Vice President and Senior Managing Counsel, Ultimus Fund Solutions LLC (2020 to 2022); Senior Vice President, Ultimus Fund Solutions LLC (2017 to 2020).

James Baker Jr.
(1951)

Vice President

Since 2015

Managing Partner, Exchange Traded Concepts, LLC (since 2011).

Christopher Roleke
(1972)

Treasurer

Since 2022

Controller, Exchange Traded Concepts, LLC (since 2022); Managing Director/Fund Principal Financial Officer, Foreside Management Services, LLC (2011 to 2022).

Eric Olsen
(1970)

Assistant Treasurer

Since 2021

Director, Fund Accounting, SEI Investments Global Funds Services (since 2021); Deputy Head of Fund Operations, Traditional Assets, Aberdeen Standard Investments (2013 to 2021).

Matthew B. Fleischer
(1983)

Chief Compliance Officer

Since 2021

Chief Compliance Officer, Exchange Traded Concepts Trust (since 2021); Chief Compliance Officer, Exchange Listed Funds Trust (since 2021); Vice President, Compliance, Goldman Sachs Asset Management Funds (2017 to 2021).

(1)

 

Each officer serves at the pleasure of the Board of Trustees.

36

EMQQ/FMQQ

Disclosure of Fund Expenses

(Unaudited)

All ETFs have operating expenses. As a shareholder of a Fund you incur an advisory fee. In addition to the advisory fee, a shareholder may pay brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses (including acquired fund fees and expenses), if any. It is important for you to understand the impact of these ongoing costs on your investment returns. Shareholders may incur brokerage commissions on their purchases and sales of Fund shares, which are not reflected in these examples.

The following examples use the annualized expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in each Fund and to compare these costs with those of other funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period (March 1, 2023 to August 31, 2023) (unless otherwise noted below). The table below illustrates each Fund’s cost in two ways:

Actual Fund Return.    This section helps you to estimate the actual expenses after fee waivers that your Fund incurred over the period. The “Expenses Paid During Period” column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the “Ending Account Value” number is derived from deducting that expense cost from the Fund’s gross investment return.

You can use this information, together with the actual amount you invested in the Fund, to estimate the expenses you paid over that period. Simply divide your actual account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply that ratio by the number shown for your Fund under “Expenses Paid During Period.”

Hypothetical 5% Return.    This section helps you compare your Fund’s costs with those of other funds. It assumes that the Fund had an annual 5% return before expenses during the year, but that the expense ratio (Column 3) for the period is unchanged. This example is useful in making comparisons because the Commission requires all funds to make this 5% calculation. You can assess your Fund’s comparative cost by comparing the hypothetical result for your Fund in the “Expenses Paid During Period” column with those that appear in the same charts in the shareholder reports for other funds.

NOTE:    Because the return is set at 5% for comparison purposes — NOT your Fund’s actual return — the account values shown may not apply to your specific investment.

 

Beginning
Account
Value
3/1/2023

 

Ending
Account
Value
8/31/2023

 

Annualized
Expense
Ratios

 

Expenses
Paid
During
Period
(1)

EMQQ The Emerging Markets Internet & Ecommerce ETF

 

 

   

 

       

 

 

Actual Fund Return

 

$

1,000.00

 

$

1,024.40

 

0.86%

 

$

4.39

Hypothetical 5% Return

 

$

1,000.00

 

$

1,020.87

 

0.86%

 

$

4.38

   

 

   

 

       

 

 

FMQQ The Next Frontier Internet & Ecommerce ETF

 

 

   

 

       

 

 

Actual Fund Return

 

$

1,000.00

 

$

1,062.10

 

0.86%

 

$

4.47

Hypothetical 5% Return

 

$

1,000.00

 

$

1,020.87

 

0.86%

 

$

4.38

(1)

 

Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

37

EMQQ/FMQQ

Notice to Shareholders

(Unaudited)

For shareholders that do not have an August 31, 2023 tax year end, this notice is for informational purposes only. For shareholders with an August 31, 2023 tax year end, please consult your tax advisor as to the pertinence of this notice.

For the fiscal year ended August 31, 2023, the Fund is designating the following items with regard to distributions paid during the year.

Long-Term
Capital Gain
Distributions

 

Ordinary
Income
Distributions

 

Total
Distributions

 

Qualifying
For Corporate
Dividend
Received
Deduction
(1)

 

Qualifying
Dividend
Income
(2)

 

U.S.
Government
Interest
(3)

 

Qualified
Interest
Income
(4)

 

Qualified
Short-Term
Capital Gain(5)

 

Qualifying
Business
Income
(6)

 

Foreign Tax
Credit

EMQQ The Emerging Markets Internet & Ecommerce ETF

                   

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

FMQQ The Next Frontier Internet & Ecommerce ETF

                   

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

(1)

 

Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of ordinary income distributions (the total of short-term capital gain and net investment income distributions).

(2)

 

The percentage in this column represents the amount of “Qualifying Dividend Income” as created by the Jobs and Growth Relief Reconciliation Act of 2003 and its reflected as a percentage of ordinary income distributions (the total of short-term capital gain and net investment income distributions). It is the intention of the Fund to designate the maximum amount permitted by law.

(3)

 

U.S. Government Interest represents the amount of interest that was derived from U.S. Government obligations and distributed during the fiscal year. Generally, interest from direct U.S. Government obligations is exempt from state income tax.

(4)

 

The percentage in this column represents the amount of “Qualifying Interest Income” as created by the American Jobs Creation Act of 2004 and is a percentage of net investment income that is exempt from U.S. withholding tax when paid for foreign investors.

(5)

 

The percentage in this column represents the amount of “Qualifying Short-Term Capital Gain” as created by the American Jobs Creation Act of 2004 and is reflected as a percentage of short-term capital gain distributions that is exempt from U.S. withholding tax when paid to foreign investors.

(6)

 

The percentage in this column represents the amount of ordinary income that qualifies for 20% Business Income Deduction.

The information reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2023. Complete information will be computed and reported in conjunction with your 2023 Form 1099-DIV.

38

EMQQ/FMQQ

Supplemental Information

(Unaudited)

NAV is the price per share at which a fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing fund shares. The “Market Price” of a fund generally is determined using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. A fund’s Market Price may be at, above or below its NAV. The NAV of a fund will fluctuate with changes in the market value of the fund’s holdings. The NAV of a fund may also be impacted by the accrual of deferred taxes. The Market Price of a fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand.

Premiums or discounts are the differences (expressed as a percentage) between the NAV and Market Price of a fund on a given day, generally at the time NAV is calculated. A premium is the amount that a fund is trading above the reported NAV, expressed as a percentage of the NAV. A discount is the amount that a fund is trading below the reported NAV, expressed as a percentage of the NAV.

Further information regarding premiums and discounts is available on the Funds’ website at www.emqqetf.com and www.fmqqetf.com, respectively.

39

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10900 Hefner Pointe Drive, Suite 400

Oklahoma City, OK 73120

Investment Adviser:

Exchange Traded Concepts, LLC

10900 Hefner Pointe Drive, Suite 400

Oklahoma City, OK 73120

Investment Sub-Adviser

(EMQQ The Emerging Markets Internet & Ecommerce ETF only):

Penserra Capital Management LLC

4 Orinda Way, 100-A

Orinda, CA 94563

Distributor:

SEI Investments Distribution Co.

One Freedom Valley Drive

Oaks, PA 19456

Administrator:

SEI Investments Global Funds Services

One Freedom Valley Drive

Oaks, PA 19456

Legal Counsel:

Morgan, Lewis & Bockius LLP

1111 Pennsylvania Avenue, NW

Washington, DC 20004

Independent Registered Public Accounting Firm:

Cohen & Company, Ltd.

1350 Euclid Avenue, Suite 800

Cleveland, OH 44115

This information must be preceded or accompanied by a current prospectus for the Funds.

EMQ-AR-001-0900