EXCHANGE TRADED CONCEPTS TRUST

EMQQ The Emerging Markets Internet & Ecommerce ETF

FMQQ The Next Frontier Internet & Ecommerce ETF

 

Annual Report

August 31, 2022

 

EMQQ/FMQQ

Table of Contents

  

Management Discussion of Fund Performance

 

1

Schedule 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

Board Consideration of Approval of Advisory and Sub-Advisory Agreements

 

37

Disclosure of Fund Expenses

 

40

Notice to Shareholders

 

41

Supplemental Information

 

42

  

The Funds file their complete schedule of Fund holdings with the U.S. Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year as an exhibit to their reports on Form N-PORT within sixty days after the end of the period. The Funds’ Form N-PORT 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 the Funds’ Statement of Additional Information (the “SAI”). The SAI, as well as information relating to how the Funds voted proxies relating to the Funds’ securities during the most recent 12-month period ended June 30, is, or will be, available without charge, upon request, by calling 1-855-888-9892 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, 2022 (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 41.41% and the NAV decreased 41.13% while the S&P 500® Index and the MSCI Emerging Markets Index, returned negative 11.23% and negative 21.80%, respectively, over the same period. The Index returned negative 40.66%.

The returns of EMQQ during the Reporting Period were impacted by rising interest rates and inflationary pressures on currencies; Covid and, specifically, zero Covid policies; the threat of Chinese ADR’s being delisted; the on-going trade war between the U.S. and China; and a tightening regulatory environment for domestic Chinese companies and sectors.

The Fund commenced operations on November 12, 2014, and had 19,500,000 outstanding shares as of August 31, 2022. We appreciate your investment in EMQQ.

Sincerely,
J. Garrett Stevens
Chief Executive Officer
Exchange Traded Concepts, LLC

1

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Management Discussion of Fund Performance (Unaudited) (Continued)

  

The EMQQ The Emerging Markets Internet & Ecommerce IndexTM (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 1,387 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, Phillipines, 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, 2022

   

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

 

-41.13%

 

-41.41%

 

-1.87%

 

-2.04%

 

2.93%

 

2.83%

EMQQ The Emerging Markets Internet & Ecommerce IndexTM

 

-40.66%

 

-40.66%

 

-1.05%

 

-1.05%

 

3.84%

 

3.84%

S&P 500® Index

 

-11.23%

 

-11.23%

 

11.82% 

 

11.82% 

 

10.95% 

 

10.95% 

MSCI Emerging Markets Index

 

-21.80%

 

-21.80%

 

0.59% 

 

0.59% 

 

2.40% 

 

2.40% 

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, 2022 (the “Reporting Period”). The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the 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 56.82%, and the NAV decreased 56.59% while the MSCI Frontier Markets Index, a broad market index, returned negative 17.06% over the same period. The Index returned negative 56.85%.

The returns of FMQQ during the Reporting Period were impacted by higher inflation levels globally and rising interest rates (particularly in the U.S.), which led to a broader market sell-off of growth stocks despite strong underlying fundamentals. Over the past year, the drawdown in high growth stocks globally has generally been higher than the broader market. The Fund’s higher exposure to these growth companies helps explain the performance differential between the Fund and the MSCI Frontier Markets Index.

The Fund commenced operations on September 27, 2021 and had 1,350,000 outstanding shares as of August 31, 2022. We appreciate your investment in FMQQ.

Sincerely,
J. Garrett Stevens
Chief Executive Officer

Exchange Traded Concepts, LLC

5

FMQQ

The Next Frontier Internet & Ecommerce ETF

Management Discussion of Fund Performance (Unaudited) (Continued)

  

The FMQQ The New Frontier Internet & Ecommerce IndexTM (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)

 

CUMULATIVE TOTAL RETURN FOR
THE PERIOD ENDED AUGUST 31, 2022

   

Cumulative Inception to Date*

   

Net Asset
Value

 

Market
Price

FMQQ The Next Frontier Internet & Ecommerce ETF

 

-56.59%

 

-56.82%

FMQQ The Next Frontier Internet & Ecommerce ETF IndexTM

 

-56.85%

 

-56.85%

MSCI Frontier Markets Index

 

-17.06%

 

-17.06%

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, 2022

Description

 

Shares

 

Fair Value

COMMON STOCK — 100.2%

     

 

 
       

 

 

Argentina — 0.0%

     

 

 

Consumer Discretionary — 0.0%

     

 

 

Despegar.com*

 

37,759

 

$

298,674

       

 

 

Brazil — 6.4%

     

 

 

Communication Services — 0.0%

     

 

 

VTEX, Cl A*

 

32,373

 

 

140,175

       

 

 

Consumer Discretionary — 4.5%

     

 

 

Afya, Cl A*

 

20,963

 

 

272,938

Americanas

 

255,931

 

 

802,223

Arco Platform, Cl A* (A)

 

15,945

 

 

215,417

CVC Brasil Operadora e Agencia de Viagens*

 

139,375

 

 

204,987

GRUPO DE MODA SOMA

 

306,000

 

 

798,518

Magazine Luiza*

 

1,812,600

 

 

1,504,378

MercadoLibre*

 

27,618

 

 

23,623,333

Pet Center Comercio e Participacoes

 

186,900

 

 

389,240

       

 

27,811,034

Financials — 1.3%

     

 

 

NU Holdings, Cl A* (A)

 

967,178

 

 

4,739,172

XP, Cl A*

 

156,355

 

 

3,008,270

       

 

7,747,442

Information Technology — 0.6%

     

 

 

Locaweb Servicos de Internet*

 

224,900

 

 

405,870

Pagseguro Digital, Cl A*

 

122,748

 

 

1,907,504

StoneCo, Cl A*

 

148,569

 

 

1,408,434

       

 

3,721,808

Total Brazil

     

 

39,420,459

Description

 

Shares

 

Fair Value

China — 63.4%

     

 

 

Communication Services — 21.6%

     

 

 

Autohome, Cl A

 

299,424

 

$

2,630,358

Baidu, Cl A*

 

1,435,704

 

 

25,883,042

Bilibili, Cl Z*

 

178,176

 

 

4,315,442

China Literature*

 

242,600

 

 

989,088

DouYu International
Holdings ADR*

 

196,818

 

 

295,227

Fire Rock Holdings* (B)

 

1,092,000

 

 

77,912

Hello Group ADR

 

98,054

 

 

504,978

HUYA ADR*

 

54,045

 

 

177,808

iDreamSky Technology
Holdings* (A)

 

440,400

 

 

296,823

iQIYI ADR* (A)

 

241,099

 

 

882,422

Kanzhun ADR*

 

240,097

 

 

5,639,878

Kingsoft

 

591,800

 

 

1,809,590

Kuaishou Technology, Cl B*

 

1,147,200

 

 

10,055,914

Meitu*

 

1,340,500

 

 

143,463

NetDragon Websoft Holdings

 

140,500

 

 

306,102

NetEase

 

1,604,580

 

 

28,988,889

Sohu.com ADR*

 

23,696

 

 

422,263

Tencent Holdings

 

1,067,492

 

 

44,501,218

Tencent Music Entertainment Group ADR*

 

482,532

 

 

2,465,739

Weibo, Cl A*

 

86,884

 

 

1,881,840

XD*

 

148,200

 

 

370,082

Zhihu, Cl A*

 

189,780

 

 

498,094

       

 

133,136,172

Consumer Discretionary — 36.8%

     

 

 

Alibaba Group Holding*

 

3,606,408

 

 

43,329,185

Alibaba Health Information Technology*

 

2,494,000

 

 

1,445,779

ATRenew ADR* (A)

 

85,939

 

 

256,958

Baozun, Cl A* (A)

 

118,535

 

 

329,983

China Ruyi Holdings*

 

2,928,799

 

 

746,300

Dada Nexus ADR*

 

156,818

 

 

1,014,613

JD Health International*

 

620,350

 

 

4,319,375

JD.com, Cl A

 

1,294,094

 

 

40,691,617

Maoyan Entertainment* (A)

 

216,000

 

 

182,182

Meituan, Cl B*

 

1,680,800

 

 

40,644,915

Pinduoduo ADR*

 

612,091

 

 

43,642,088

Ping An Healthcare and Technology*

 

265,300

 

 

723,344

  

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

9

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Schedule of Investments

August 31, 2022 (Continued)

Description

 

Shares

 

Fair Value

China (continued)

     

 

 

Prosus

 

536,291

 

$

33,299,784

Tongcheng Travel Holdings*

 

636,800

 

 

1,312,730

Trip.com Group*

 

388,061

 

 

10,194,892

Vipshop Holdings ADR*

 

358,132

 

 

4,157,913

       

 

226,291,658

Consumer Staples — 0.1%

     

 

 

DingDong Cayman ADR* (A)

 

97,187

 

 

441,229

       

 

 

Financials — 1.9%

     

 

 

360 DigiTech ADR

 

69,852

 

 

1,116,235

FinVolution Group ADR

 

104,994

 

 

516,570

Futu Holdings ADR* (A)

 

49,285

 

 

2,419,401

LexinFintech Holdings ADR*

 

83,383

 

 

170,101

Lufax Holding ADR

 

1,417,029

 

 

6,192,417

Up Fintech Holding ADR* (A)

 

84,704

 

 

319,334

ZhongAn Online P&C Insurance, Cl H*

 

361,700

 

 

1,066,826

       

 

11,800,884

Health Care — 0.0%

     

 

 

Yidu Tech* (A)

 

218,200

 

 

197,383

       

 

 

Information Technology — 0.9%

     

 

 

Agora ADR*

 

58,572

 

 

242,488

Kingdee International Software Group*

 

1,607,000

 

 

3,136,668

Kingsoft Cloud Holdings ADR*

 

147,808

 

 

508,460

OneConnect Financial Technology ADR*

 

239,096

 

 

258,224

Tuya, Cl A*

 

265,112

 

 

353,309

Vnet Group ADR*

 

81,810

 

 

437,683

Weimob*

 

1,191,000

 

 

555,376

Yeahka*

 

106,400

 

 

219,880

       

 

5,712,088

Real Estate — 2.1%

     

 

 

KE Holdings, Cl A*

 

2,038,942

 

 

12,651,086

Phoenix Tree Holdings ADR*

 

179,833

 

 

       

 

12,651,086

Total China

     

 

390,230,500

       

 

 

Egypt — 0.0%

     

 

 

Information Technology — 0.0%

     

 

 

Fawry for Banking & Payment Technology Services SAE*

 

1,344,198

 

 

256,104

       

 

 

Germany — 0.1%

     

 

 

Consumer Discretionary — 0.1%

     

 

 

Jumia Technologies ADR*

 

61,915

 

 

457,552

Description

 

Shares

 

Fair Value

Hong Kong — 0.1%

     

 

 

Communication Services — 0.1%

     

 

 

Alibaba Pictures Group*

 

7,200,000

 

$

568,746

       

 

 

Information Technology — 0.0%

     

 

 

China Youzan*

 

9,172,000

 

 

147,241

Total Hong Kong

     

 

715,987

       

 

 

India — 9.1%

     

 

 

Communication Services — 0.5%

     

 

 

Affle India*

 

29,426

 

 

484,933

Brightcom Group

 

867,885

 

 

448,917

Info Edge India

 

42,234

 

 

2,309,104

Nazara Technologies*

 

20,260

 

 

167,941

       

 

3,410,895

Consumer Discretionary — 0.6%

     

 

 

FSN E-Commerce Ventures*

 

69,741

 

 

1,220,408

MakeMyTrip*

 

36,486

 

 

1,216,808

Zomato*

 

1,705,680

 

 

1,243,978

       

 

3,681,194

Energy — 6.9%

     

 

 

Reliance Industries

 

1,272,377

 

 

42,241,946

       

 

 

Financials — 0.4%

     

 

 

Angel One

 

21,569

 

 

354,868

ICICI Securities

 

51,663

 

 

326,104

Indian Energy Exchange

 

422,837

 

 

856,762

Motilal Oswal Financial Services

 

22,191

 

 

215,017

PB Fintech*

 

88,830

 

 

562,383

       

 

2,315,134

Industrials — 0.3%

     

 

 

IndiaMart InterMesh

 

7,964

 

 

442,014

Indian Railway Catering & Tourism

 

152,722

 

 

1,366,092

TeamLease Services*

 

6,205

 

 

264,418

       

 

2,072,524

Information Technology — 0.4%

     

 

 

Happiest Minds Technologies

 

24,724

 

 

321,083

Intellect Design Arena

 

41,735

 

 

310,892

One 97 Communications*

 

76,494

 

 

691,071

Route Mobile

 

14,771

 

 

282,433

Tanla Platforms

 

39,193

 

 

355,118

       

 

1,960,597

Total India

     

 

55,682,290

       

 

 

Indonesia — 2.1%

     

 

 

Consumer Discretionary — 1.8%

     

 

 

Bukalapak.com*

 

18,729,300

 

 

378,561

GoTo Gojek Tokopedia*

 

525,152,900

 

 

10,685,274

       

 

11,063,835

  

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

10

EMQQ

The Emerging Markets Internet & Ecommerce ETF

Schedule of Investments

August 31, 2022 (Continued)

Description

 

Shares

 

Fair Value

Indonesia (continued)

     

 

 

Financials — 0.3%

     

 

 

Bank Jago*

 

2,930,800

 

$

1,663,600

Total Indonesia

     

 

12,727,435

       

 

 

Japan — 0.9%

     

 

 

Communication Services — 0.9%

     

 

 

Nexon

 

274,100

 

 

5,514,625

       

 

 

Kazakhstan — 1.2%

     

 

 

Financials — 1.2%

     

 

 

Kaspi.KZ JSC GDR

 

119,445

 

 

7,202,533

       

 

 

Poland — 0.3%

     

 

 

Communication Services — 0.1%

     

 

 

CD Projekt (A)

 

40,786

 

 

731,149

Consumer Discretionary — 0.2%

     

 

 

Allegro.eu*

 

212,106

 

 

1,120,987

Total Poland

     

 

1,852,136

       

 

 

Russia (C) — 0.0%

     

 

 

Communication Services — 0.0%

     

 

 

VK GDR* (B)

 

117,354

 

 

1,174

Yandex, Cl A* (B)

 

224,241

 

 

2,242

       

 

3,416

Consumer Discretionary — 0.0%

     

 

 

Ozon Holdings ADR* (B)

 

125,832

 

 

1,258

       

 

 

Financials — 0.0%

     

 

 

TCS Group Holding GDR* (B)

 

89,202

 

 

892

       

 

 

Industrials — 0.0%

     

 

 

HeadHunter Group ADR (B)

 

25,106

 

 

251

       

 

 

Information Technology — 0.0%

     

 

 

QIWI ADR (B)

 

34,445

 

 

345

Total Russia

     

 

6,162

       

 

 

Singapore — 3.8%

     

 

 

Communication Services — 3.2%

     

 

 

Sea ADR*

 

316,970

 

 

19,652,140

       

 

 

Industrials — 0.6%

     

 

 

Grab Holdings, Cl A* (A)

 

1,211,394

 

 

3,452,473

Total Singapore

     

 

23,104,613

       

 

 

South Africa — 3.4%

     

 

 

Communication Services — 0.3%

     

 

 

MultiChoice Group (A)

 

222,485

 

 

1,509,088

       

 

 

Consumer Discretionary — 3.1%

     

 

 

Naspers, Cl N

 

135,917

 

 

19,343,795

Total South Africa

     

 

20,852,883

Description

 

Shares

 

Fair Value

South Korea — 8.8%

     

 

 

Communication Services — 5.8%

     

 

 

AfreecaTV

 

4,950

 

$

284,591

CJ ENM

 

6,352

 

 

466,825

Com2uS Holdings*

 

2,608

 

 

117,380

Com2uSCorp

 

5,021

 

 

304,064

Gravity ADR*

 

3,841

 

 

188,862

Kakao

 

180,964

 

 

9,930,663

Kakao Games*

 

21,301

 

 

840,860

Krafton*

 

16,182

 

 

2,982,216

NAVER

 

87,094

 

 

15,627,498

NCSoft

 

9,736

 

 

2,755,094

Neowiz*

 

8,071