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
1 | ||
9 | ||
16 | ||
17 | ||
18 | ||
20 | ||
22 | ||
33 | ||
34 | ||
Board Consideration of Approval of Advisory and Sub-Advisory Agreements |
37 | |
40 | ||
41 | ||
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.
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 | ||||||||||||
One Year Return |
Five Year Return |
Annualized
| ||||||||||
Net Asset
|
Market
|
Net Asset
|
Market
|
Net Asset
|
Market
| |||||||
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 | ||||
Cumulative Inception to Date* | ||||
Net Asset
|
Market
| |||
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
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
|
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
|
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 |
|
238,048 | ||
Netmarble |
13,297 |
|
631,273 | ||
NHN* |
10,537 |
|
199,703 | ||
Pearl Abyss* |
16,039 |
|
681,108 | ||
Webzen* |
10,439 |
|
145,165 | ||
|
35,393,350 | ||||
Consumer Discretionary — 2.4% |
|
||||
Coupang, Cl A* |
632,316 |
|
10,686,140 | ||
Delivery Hero* |
103,681 |
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