ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

TABLE OF CONTENTS

 

Page

Letter to Shareholders (unaudited)

 

1

Performance Summary (unaudited)

 

2

Schedule of Investments

 

4

Statement of Assets and Liabilities

 

6

Statement of Operations

 

7

Statement of Changes in Net Assets

 

8

Financial Highlights

 

9

Notes to Financial Statements

 

10

Report of Independent Registered Public Accounting Firm

 

1 8

Disclosure of Fund Expenses (unaudited)

 

19

Other Information (unaudited)

 

20

Board of Trustees of the Trust (unaudited)

 

21

 

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

LETTER TO SHAREHOLDERS

(unaudited)

U.S. economic growth has re -accelerated coming into the fourth quarter of 2021, after a pause caused by the resurgence of COVID -19 during the third quarter. A broad set of forward -looking economic indicators, including the regional Federal Reserve’s (“Fed”) manufacturing business surveys new orders, jobless claims, National Association of Home Builders (“NAHB”) Housing Market Index, etc., have all resonated with the underlying strength of the U.S. economy. The growth peak might have passed, but we continue to expect slower but healthy growth in the coming fiscal year.

Our proprietary Esoterica Market Cycle Indicator (“EMCI”) demonstrates a relatively optimistic view of risk -taking . Incorporating the U.S. treasury yield curve, corporate credit spread, and the U.S. 10 -Year Treasury Bill real yield, EMCI gauges market risk premium’s cyclicality. When the yield curve steepens, the credit spread tightens, and the real yield stays low and stable, it indicates an excellent environment to take the risk, and vice versa.

The fear of inflation out of control has dominated the market narratives for a good part of the year. The inflation expectation reached a historical high after the Fed started self -doubting if the inflation was truly transitory after the September Federal Open Market Committee (“FOMC”) meeting. President Joe Biden’s hesitation over who will be the next person commanding the Fed doesn’t help either. As such, we see a flattening yield curve, indicating markets are worried that the Fed might end the cycle early. The cost of capital, measured by the real yield, managed to stay low and stable, thanks to the unabating liquidity despite the Fed having announced its plan to taper. If this market dynamic continues, as we see it, investors shouldn’t quit taking risks but be more mindful of where to take the risk. We believe large -cap , high -quality growth equities with solid earnings power are the place to be in such an environment.

The Esoterica NextG Economy ETF (“WUGI” or the “Fund”) is an actively -managed exchange traded fund (“ETF”) that invests in U.S. and non -U .S. equity securities of companies that are meaningfully participating in a digital economy enabled by a fifth -generation digital cellular network (“5G”) technology. Esoterica believes that 5G will empower the next generation of technology that will give rise to a global digital economy. WUGI invests in companies that are exposed to, and benefit from, advanced silicon architecture and manufacturing, the convergence of 5G wireless network and cloud computing, a new software stack that addresses the exponential growth of data, and enabling technologies across a range of verticals.

We constructed our portfolio around the transition to the digital economy, identifying the companies that we believe will benefit the most during the process. During the fiscal year ended October 31, 2021, the Fund outperformed broad -based equity indexes, measured by the S&P 500 Index and MSCI All Country World Index.

The top contributors to WUGI’s performance were Sea Ltd. (S.E.), NVIDIA Corp. (NVDA), Cloudflare Inc. (NET), Advanced Micro Devices, Inc. (AMD), and Marvell Technology, Inc. (MRVL). The biggest detractors from WUGI’s performance were Agora (API), Meituan (3690 HK), Qualcomm, Inc. (QCOM), Pinduoduo, Inc. (PDD), and Tencent Holdings, Ltd. (700 HK).

1

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

PERFORMANCE SUMMARY

(unaudited)

COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ESOTERICA NEXTG ECONOMY ETF (“WUGI” OR “FUND”), THE MSCI ALL COUNTRY WORLD INDEX INDEX SM AND THE S&P 500 INDEX ® FROM MARCH 30, 2020* TO OCTOBER 31, 2021

The following graph depicts the performance of Esoterica NextG Economy ETF (Net Asset Value and Market Value) vs. the MSCI All Country World Index SM and the S&P 500 Index®

Average Annual Return as of October 31, 2021

 

One Year

 

Since Inception
(03/30/2020)*

Esoterica NextG Economy ETF (NAV)

 

46.53%

 

76.84%

Esoterica NextG Economy ETF (Market Price)

 

46.27%

 

76.61%

MSCI All Country World Index SM1

 

37.28%

 

40.48%

S&P 500 Index® 2

 

42.89%

 

44.62%

The Fund’s performance assumes the reinvestment of all dividends and all capital gains. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the sale of Fund shares.

*      The inception date is the date the Fund started accruing expenses and commenced operations. Shares of WUGI were listed on the Cboe BZX Exchange, Inc. on March 30, 2020.

1            The MSCI All Country World Index (“ACWI”) is a market -cap-weighted global equity index that tracks emerging and developed markets. It currently monitors nearly 3,000  large- and  mid -cap stocks in 49 countries.

2              The Standard & Poor’s (“S&P”) 500 Index is an unmanaged index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market -weighted index (stock price times number of shares outstanding) with each stock’s weight in the Index proportionate to its market value.

The Fund’s performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.

The performance shown represents past performance. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal will fluctuate so that an investor’s shares when sold may be worth more or less than the original cost. The Fund’s most recent month -end performance can be obtained by calling 1 -866-979-1710 . Returns for less than one year are not annualized.

The annual net operating expense ratio as provided in the Prospectus dated February 26, 2021 was 0.75%. The Adviser has contractually agreed to reduce its fees and/or reimburse expenses of the Fund until at least February 28, 2022, to ensure that total annual fund operating expenses after fee waiver and/or reimbursement (exclusive of: (i) any front -end or contingent deferred loads; (ii) brokerage fees and commissions; (iii) unaffiliated acquired fund fees and expenses; (iv) fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses); (v) borrowing

2

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

PERFORMANCE SUMMARY

(unaudited) (continued)

costs (such as interest and dividend expense on securities sold short) (vi) taxes; (vii) foreign custody transaction costs and foreign account set up fees and (viii) extraordinary expenses such as litigation expenses (which may include indemnification of Fund officers and Trustees, and contractual indemnification of Fund service providers, including the Adviser)) will not exceed 0.75% of the Fund’s net assets. The Fund’s total returns would have been lower had the Adviser not waived a portion of the Fund’s expenses.

Net asset value (“NAV”) returns are based on the dollar value of a single share of the ETF, calculated using the value of the underlying assets of the ETF minus its liabilities, divided by the number of shares outstanding. The NAV is typically calculated at 4:00 pm Eastern time on each business day the Cboe BZX Exchange is open for trading. Market returns are based on the trade price at which shares are bought and sold on the Cboe BZX Exchange, Inc. using the last share trade. Market performance does not represent the returns you would receive if you traded shares at other times. The Fund’s performance assumes the reinvestment of all dividends and capital gains on ex -date for NAV returns and payable date for Market Price returns. The market price of the ETF’s shares may differ significantly from their NAV during periods of market volatility. The referenced indices are shown for informational purposes only and are not meant to represent the Fund.

This material must be preceded or accompanied by a prospectus.

One cannot invest directly in an index.

3

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

SCHEDULE OF INVESTMENTS

October 31, 2021

Security Description

 

Country

 

Shares

 

Value

Common Stocks – 97.9%

         

 

 
           

 

 

Entertainment – 13.4%

         

 

 

Bilibili, Inc., ADR (a)

 

China

 

15,327

 

$

1,123,469

Netflix, Inc. (a)

 

United States

 

1,582

 

 

1,092,070

Sea Ltd., ADR (a)

 

Singapore

 

11,525

 

 

3,959,645

           

 

6,175,184

Interactive Media & Services – 8.0%

         

 

 

Alphabet, Inc. Class C (a)

 

United States

 

652

 

 

1,933,447

Meta Platforms, Inc. Class A (a)

 

United States

 

3,730

 

 

1,206,916

Tencent Holdings Ltd.

 

China

 

8,592

 

 

531,267

           

 

3,671,630

Internet & Direct Marketing Retail – 8.9%

         

 

 

Amazon.com, Inc. (a)

 

United States

 

481

 

 

1,622,139

Meituan Class B (a) (b)

 

China

 

59,608

 

 

2,065,846

Pinduoduo, Inc., ADR (a)

 

China

 

4,450

 

 

395,694

           

 

4,083,679

IT Services – 12.2%

         

 

 

Adyen NV (a) (b)

 

Netherlands

 

167

 

 

504,507

Cloudflare, Inc. Class A (a)

 

United States

 

6,417

 

 

1,249,518

MongoDB, Inc. Class A (a)

 

United States

 

2,662

 

 

1,387,674

PayPal Holdings, Inc. (a)

 

United States

 

2,475

 

 

575,660

Snowflake, Inc. Class A (a)

 

United States

 

1,246

 

 

440,885

Square, Inc. Class A (a)

 

United States

 

1,940

 

 

493,730

Twilio, Inc. Class A (a)

 

United States

 

3,302

 

 

962,071

           

 

5,614,045

Semiconductors & Semiconductor Equipment – 38.3%

         

 

 

Advanced Micro Devices, Inc. (a)

 

United States

 

19,182

 

 

2,306,252

Marvell Technology, Inc.

 

United States

 

40,493

 

 

2,773,771

MediaTek, Inc.

 

Taiwan

 

31,000

 

 

1,017,782

NVIDIA Corp.

 

United States

 

16,964

 

 

4,337,185

NXP Semiconductors NV

 

Netherlands

 

4,254

 

 

854,458

QUALCOMM, Inc.

 

United States

 

15,741

 

 

2,094,183

Taiwan Semiconductor Manufacturing Co. Ltd.

 

Taiwan

 

76,000

 

 

1,612,457

Xilinx, Inc.

 

United States

 

14,500

 

 

2,610,000

           

 

17,606,088

Software – 17.1%

         

 

 

Coupa Software, Inc. (a)

 

United States

 

538

 

 

122,503

Datadog, Inc. Class A (a)

 

United States

 

6,261

 

 

1,045,900

Elastic NV (a)

 

United States

 

8,192

 

 

1,421,394

Microsoft Corp.

 

United States

 

5,667

 

 

1,879,291

ServiceNow, Inc. (a)

 

United States

 

1,670

 

 

1,165,259

Splunk, Inc. (a)

 

United States

 

3,193

 

 

526,270

Workday, Inc. Class A (a)

 

United States

 

3,491

 

 

1,012,320

Zscaler, Inc. (a)

 

United States

 

2,115

 

 

674,389

           

 

7,847,326

           

 

 

Total Common Stocks (Cost $36,355,855)

         

 

44,997,952

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

4

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

SCHEDULE OF INVESTMENTS

October 31, 2021 (continued)

Security Description

 

Country

 

Principal

 

Value

Short-Term Investments – 0.5%

     

 

   

 

 

Time Deposits – 0.5%

     

 

   

 

 

JPMorgan Chase, New York, 0.005%, 11/01/2021 (c)

     

$

214,977

 

$

214,977

Total Short-Term Investments (Cost $214,977)

     

 

   

 

214,977

Total Investments – 98.4% (Cost $36,570,832) #

     

 

   

 

45,212,929

Other assets in excess of liabilities – 1.6%

     

 

   

 

749,312

Net Assets – 100.0%

     

 

   

$

45,962,241

ADR – American Depositary Receipt

(a)          Non -income producing security.

(b)          Restricted security that may be sold to “qualified institutional buyers” pursuant to the conditions of Rule 144A under the Securities Act of 1933, as amended. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees, unless otherwise noted. At October 31, 2021, the aggregate value of these securities amounted to $2,570,353 or 5.6% of net assets.

(c)          Time deposits bear interest at a variable rate that is based on a variety of factors, including but not limited to relevant overnight and short -term reference rates, the range of distribution between and among the interest rates paid by each eligible Institution on their respective deposits, and the weighted average distribution of interest rates on the deposits. The rate shown is as of October 31, 2021.

#      Cost for federal income tax purposes is $36,579,441. Net unrealized appreciation (depreciation) consists of:

       

Gross unrealized appreciation

 

$

10,988,248

 

Gross unrealized depreciation

 

 

(2,354,760

)

Net unrealized appreciation

 

$

8,633,488

 

Summary of Investments by Sector^

   

 

Information Technology

 

67.6

%

Communication Services

 

21.4

 

Consumer Discretionary

 

8.9

 

Short-Term Investments

 

0.5

 

Other assets in excess of liabilities

 

1.6

 

   

100.0

%

^     As a percentage of net assets.

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

5

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

STATEMENT OF ASSETS AND LIABILITIES

October 31, 2021

ASSETS

 

 

 

Investments in securities of unaffiliated issuers, at value

 

$

45,212,929

Receivable for investments sold

 

 

842,590

Receivable from investment adviser

 

 

3,381

Prepaid expenses

 

 

2,593

TOTAL ASSETS

 

 

46,061,493

   

 

 

LIABILITIES

 

 

 

Payables:

 

 

 

Chief Compliance Officer fees

 

 

4,167

Principal Financial Officer fees

 

 

4,167

Custody, accounting and administration fees

 

 

39,741

Audit fees

 

 

15,600

Legal fees

 

 

13,174

Shareholder reporting fees

 

 

7,336

Transfer agent fees

 

 

3,333

Trustee fees

 

 

2,844

Other expenses

 

 

8,890

TOTAL LIABILITIES

 

 

99,252

NET ASSETS

 

$

45,962,241

   

 

 

COMPONENTS OF NET ASSETS

 

 

 

Paid-in capital

 

 

38,357,808

Total distributable earnings

 

 

7,604,433

NET ASSETS

 

$

45,962,241

   

 

 

NET ASSET VALUE PER SHARE

 

 

 

Net Asset Value

 

$

63.33

Shares of beneficial interest outstanding (unlimited number of Shares authorized, no par value)

 

 

725,754

   

 

 

COST OF INVESTMENTS

 

 

 

Investments in securities of unaffiliated issuers, at cost

 

$

36,570,832

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

6

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

STATEMENT OF OPERATIONS

For the Year Ended October 31, 2021

INVESTMENT INCOME:

 

 

 

 

Dividends from securities of unaffiliated issuers (net of $15,720 foreign withholding tax)

 

$

159,204

 

Interest income

 

 

13

 

Total Investment Income

 

 

159,217

 

   

 

 

 

EXPENSES:

 

 

 

 

Investment advisory fees

 

 

305,215

 

Chief Compliance Officer fees

 

 

25,000

 

Principal Financial Officer fees

 

 

25,000

 

Custody, accounting and administration fees

 

 

97,818

 

Legal fees

 

 

79,065

 

Trustee fees

 

 

38,043

 

Audit fees

 

 

15,600

 

Shareholder reporting fees

 

 

13,207

 

Transfer agent fees

 

 

10,000

 

Registration fees

 

 

4,419

 

Other expenses

 

 

18,910

 

Total Expenses

 

 

632,277

 

Creation/Redemption Transaction fees waived by the Adviser

 

 

(1,000

)

Investment Advisory fee waiver/reimbursement

 

 

(324,870

)

Net Expenses

 

 

306,407

 

NET INVESTMENT INCOME (LOSS)

 

 

(147,190

)

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

 

 

 

 

Net realized gain (loss) on:

 

 

 

 

Investments in securities of unaffiliated issuers

 

 

(897,436

)

In-kind redemptions

 

 

4,576,773

 

Foreign currency transactions

 

 

(725

)

Net realized gain (loss)

 

 

3,678,612

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on:

 

 

 

 

Investments in securities of unaffiliated issuers

 

 

6,728,938

 

Net change in unrealized appreciation (depreciation) on investments

 

 

6,728,938

 

NET REALIZED AND UNREALIZED GAIN (LOSS)

 

 

10,407,550

 

INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

 

$

10,260,360

 

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

7

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

Statement of Changes in Net Assets

 

 

For the
Year Ended
October 31,
2021

 

For the
Period Ended
October 31,
2020*

OPERATIONS:

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

(147,190

)

 

$

(12,540

)

Net realized gain (loss) on investments, foreign currency transactions and in-kind redemptions

 

 

3,678,612

 

 

 

575,404

 

Net change in unrealized appreciation (depreciation) on investments

 

 

6,728,938

 

 

 

1,913,159

 

Net increase (decrease) in net assets resulting from operations

 

 

10,260,360

 

 

 

2,476,023

 

   

 

 

 

 

 

 

 

CAPITAL TRANSACTIONS:

 

 

 

 

 

 

 

 

Proceeds from Shares issued (a)

 

 

38,854,282

 

 

 

11,370,861

(b)

Cost of Shares redeemed (a)

 

 

(15,090,555

)

 

 

(2,029,663

)

Transaction Fees (Note 5)

 

 

20,182

 

 

 

751

(b)

Net increase (decrease) in net assets from capital transactions

 

 

23,783,909

 

 

 

9,341,949

 

Total increase (decrease) in net assets

 

 

34,044,269

 

 

 

11,817,972

 

   

 

 

 

 

 

 

 

NET ASSETS

 

 

 

 

 

 

 

 

Beginning of Period

 

 

11,917,972

 

 

 

   100,000

**

End of Peiod

 

$

45,962,241

 

 

$

11,917,972

 

   

 

 

 

 

 

 

 

CHANGES IN SHARES OUTSTANDING

 

 

 

 

 

 

 

 

Shares issued

 

 

725,000

 

 

 

325,000

 

Shares redeemed

 

 

(275,000

)

 

 

(53,246

)

Net increase (decrease) in Shares outstanding

 

 

450,000

 

 

 

271,754

 

Shares outstanding, Beginning of Period

 

 

275,754

 

 

 

   4,000

**

Shares outstanding, End of Period

 

 

725,754

 

 

 

275,754

 

*      The Fund commenced operations on March 30, 2020.

**    Beginning capital of $100,000 was contributed from Esoterica Capital LLC, investment adviser to the Fund, in exchange for 4,000 Shares of the Fund in connection with the seeding of the Trust.

(a)          For the period ended October 31, 2021 the Fund had 725,000 Shares contributed in -kind with total proceeds in the amount of $38,854,252 and 275,000 Shares redeemed in -kind with total cost in the amount of $15,090,555. For the period ended October 31, 2020, the Fund had 325,000 Shares contributed in -kind with total proceeds in the amount of $11,370,861 and 50,000 Shares redeemed in -kind with total cost in the amount of $1,929,663.

(b)          Due to certain Statement of Changes presentation reclassifications, these amounts may differ from what was presented in previous shareholder reports.

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

8

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

Financial Highlights

Selected Data for a Share of Common Stock Outstanding Throughout each Period Indicated:

 

For the
Year Ended
October 31,
2021

 

For the
Period Ended
October 31,
2020*

NET ASSET VALUE, Beginning of Period

 

$

43.22

 

 

$

25.60

(a)

   

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

Net investment income (loss) (b)

 

 

(0.20

)

 

 

(0.07

)

Net realized and unrealized gain (loss)

 

 

20.28

 

 

 

17.69

 

Total income (loss) from operations

 

 

20.08

 

 

 

17.62

 

   

 

 

 

 

 

 

 

Capital Shares Transaction:

 

 

 

 

 

 

 

 

Transaction fees (Note 5)

 

 

0.03

 

 

 

(c) (d)

   

 

 

 

 

 

 

 

NET ASSET VALUE, End of Period

 

$

63.33

 

 

$

43.22

 

MARKET VALUE, End of Period ( e )

 

$

63.20

 

 

$

43.21

 

   

 

 

 

 

 

 

 

NET ASSET VALUE, Total Return ( f )

 

 

46.53

%

 

 

68.85

%

MARKET PRICE, Total Return ( e ) ( g )

 

 

46.27

%

 

 

68.80

%

   

 

 

 

 

 

 

 

Net assets, End of Period ($ thousands)

 

$

45,962

 

 

$

11,918

 

   

 

 

 

 

 

 

 

Ratios of Average Net Assets

 

 

 

 

 

 

 

 

Total Expenses

 

 

1.55

%

 

 

   3.90

%**

Net Expenses

 

 

0.75

%

 

 

   0.75

%**

Net Investment Loss

 

 

(0.36

)%

 

 

   (0.29

)%**

Portfolio turnover ( h )

 

 

29

%

 

 

   130

%

*      The Fund commenced operations on March 30, 2020.

**    Annualized.

(a)          The net asset value at the beginning of the period differs from the beginning net asset value reflected on the Statement of Changes in Net Assets due to a change in unrealized gain/(loss) from the inception date, March 30, 2020, to when the initial basket was created.

(b)          Per share amounts have been calculated using the average shares method.

(c)          Less than $0.005

(d)          Due to certain Financial Highlights presentation reclassifications, these amounts may differ from what was presented in previous shareholder reports.

( e )          Unaudited.

( f )          Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total return calculated for a period of less than one year is not annualized.

( g )          Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all distributions at net asset value during the period and sale at the market price on the last day of the period. Total return calculated for a period of less than one year is not annualized.

( h )          Portfolio turnover rate is not annualized for periods less than one year and does not include in -kind transactions, if any, from processing creations or redemptions.

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

9

ESOTERICA THEMATIC TRUST

Esoterica NextG Economy ETF

NOTES TO FINANCIAL STATEMENTS

October 31, 2021

NOTE 1 – ORGANIZATION

Esoterica Thematic Trust (the “Trust”) is an open -end management investment company. The Trust currently consists of one investment portfolio, the Esoterica NextG Economy ETF (the “Fund”). The Fund is a non -diversified management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund is actively managed. The Trust was organized as a Delaware statutory trust on July 2, 2019. The shares of the Fund are referred to herein as “Shares.” Esoterica Capital LLC (“Esoterica” or the “Adviser”) serves as the investment adviser to the Fund, and Vident Investment Advisory, LLC (“VIA” or the “Trading Sub -Adviser ”) serves as the trading sub -adviser to the Fund.

The investment objective of the Fund is capital appreciation.

The net asset value (“NAV”) of Shares is determined a