Annual Report DBX ETF Trust
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May 31, 2021 Annual Report DBX ETF Trust Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS) Xtrackers MSCI All China Equity ETF (CN) Xtrackers MSCI China A Inclusion Equity ETF (ASHX) DBX ETF Trust Table of Contents Page Shareholder Letter ....................................................................... 1 Management’s Discussion of Fund Performance ............................................. 3 Performance Summary Xtrackers Harvest CSI 300 China A-Shares ETF ........................................... 6 Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF .................................. 8 Xtrackers MSCI All China Equity ETF .................................................... 10 Xtrackers MSCI China A Inclusion Equity ETF ............................................ 12 Fees and Expenses ....................................................................... 14 Schedule of Investments Xtrackers Harvest CSI 300 China A-Shares ETF ........................................... 15 Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF .................................. 20 Xtrackers MSCI All China Equity ETF .................................................... 28 Xtrackers MSCI China A Inclusion Equity ETF ............................................ 33 Statements of Assets and Liabilities ........................................................ 42 Statements of Operations ................................................................. 43 Statements of Changes in Net Assets ....................................................... 44 Financial Highlights ...................................................................... 46 Notes to Financial Statements ............................................................. 48 Report of Independent Registered Public Accounting Firm .................................... 58 Liquidity Risk Management ................................................................ 59 Board Considerations in Approval of Investment Advisory and Sub-Advisory Contracts ........... 60 Board Members and Officers .............................................................. 66 Additional Information .................................................................... 69 Privacy Policy Notice ..................................................................... 70 This Page is Intentionally Left Blank To our Shareholders: (Unaudited) Dear Shareholder, We are pleased to provide this annual report for our flagship ETFs tracking China’s equity market for the period ended May 31, 2021. Last year was a year of surprises, we saw the pace at which the pandemic spread, the severity of the lockdowns, the size of the stimulus measures, and the magnitude of the rebounds in equity markets. Perhaps, the biggest surprise is that global equities have gained significantly since the beginning of last year. The U.S. economy exhibited strong growth in Q1 2021, reflecting the reopening of establishments and continued government response to ease the pandemic- induced adversities. However, the Eurozone economy contracted in Q1 2021, as member nations implemented lockdowns amid the third wave of coronavirus infections. Germany, France, Spain, and the Netherlands fell back into contraction territory, while Italy’s economy posted modest growth. Although the vaccine progress is contributing to the acceleration in the rebound, there are still lingering concerns about new COVID-19 variants. On the bright side, the evidence so far is that the countries with successful vaccination programs are experiencing sustained downtrends in infections and hospitalizations. Despite a weak start to 2020, China made a strong comeback in 2021, with the economy advancing 18.3% year-on-year in Q1 2021, boosted by strengthening domestic and global demand, strict virus containment measures, and continued fiscal and monetary support. The People’s Bank of China left its benchmark interest rates steady for the 13th straight month at its May fixing. China expects economic growth to be strong in 2021. However, the services sector and smaller firms still face challenges, while consumer inflation has remained moderate so far. China’s urban unemployment rate eased to 5.1% in April 2021 compared with 6% in the same period last year. Exports continued to surge in May, fueled by strong global demand, as more economies around the world opened up, while imports soared, boosted by rising commodity prices. The Manufacturing PMI1 was at a five-month high in May 2021, while the non-manufacturing PMI expanded further. Chinese technology stocks declined amid heightened government scrutiny. The regulators fined tech companies that violated antitrust laws after they failed to get approval for past acquisitions or joint-venture deals. Coming on the back of a record fine on Alibaba, the recent moves against tech giants are twofold — those running financial services are being reined in, while firms that deal with consumers are also being told to clean up their act. Dual-listed tech giants — Alibaba, Baidu, JD.com, and Netease — came under renewed pressure after the SEC stated that it would implement a law passed by the Trump administration to delist Chinese companies that do not follow American audit requirements. Meanwhile, Beijing adopted a new economic development strategy called “dual circulation”. The strategy calls for China to lean on its vast domestic market for economic growth and advances in technology while drawing in foreign investment, with an eye toward reducing dependence on exports. The strategy is seen as the regime’s response to navigating an increasingly hostile world and reducing its reliance on the West. Looking ahead, analysts see China’s market becoming more earnings-driven, with corporate earnings expected to rise sharply, according to estimates. Vaccination remains a key to recovery and China has administered more than 809 million doses as of June 10. This, along with the large U.S. fiscal stimulus, has shifted investors from worrying that growth will be too slow to now fearing that growth will be too fast, putting upward pressure on interest rates. Overall, China remains well-positioned to join the U.S. as twin engines for a global recovery in 2021. 1 Our team appreciates your trust and looks forward to serving your investment needs through innovative index-driven strategies. Sincerely, /s/ Freddi Klassen Freddi Klassen President and Chief Executive Officer 1 Purchasing Managers’ Indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. Assumptions, estimates and opinions contained in this document constitute our judgment as of the date of the document and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results. 2 DBX ETF Trust Management’s Discussion of Fund Performance (Unaudited) Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 300 Index (the ASHR Index). The ASHR Index is designed to reflect price fluctuations and performance of the China A-share market and is composed of the 300 largest and most liquid stocks in the China A-share market. ASHR is sub-advised by Harvest Global Investments. The continued strategic partnership between DWS and Harvest Global Investments provides investors with unique access to the expansive Chinese economy and stock market. For the 12-month period ended May 31, 2021, ASHR shares returned 55.46%, compared with the ASHR Index’s 57.11%. All sectors contributed positively to performance during the period with the greatest contribution coming from Financials, Consumer Staples and Consumer Discretionary. Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS) The Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS) seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 500 Index (the ASHS Index). The ASHS Index tracks 500 small-cap companies listed on the Shanghai and Shenzhen Stock Exchanges. ASHS is sub-advised by Harvest Global Investments. The continued strategic partnership between DWS and Harvest Global Investments provides investors with unique access to the expansive Chinese economy and stock market. For the 12-month period ended May 31, 2021, ASHS fund returned 38.66%, compared with the ASHS Index’s 39.83%. The majority of sectors contributed positively to performance during the period with the greatest contribution coming from Materials, Industrials and Consumer Discretionary. The Communication Services sector was the only negative contributor to performance. Xtrackers MSCI All China Equity ETF (CN) The Xtrackers MSCI All China Equity ETF (CN) seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI China All Shares Index (the CN Index). The CN Index captures large and midcap representations across China A-shares, B-shares, H-shares, Red-chips, and P-chips. The index aims to reflect the opportunity set of China share classes listed in Hong Kong, Shanghai, and Shenzhen. It is based on the concept of the integrated MSCI China equity universe, with China A-shares included. The Fund, using a passive or indexing approach, attempts to approximate