Annual Report DBX ETF Trust
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May 31, 2021 Annual Report DBX ETF Trust Xtrackers Eurozone Equity ETF (EURZ) Xtrackers International Real Estate ETF (HAUZ) Xtrackers Japan JPX-Nikkei 400 Equity ETF (JPN) DBX ETF Trust Table of Contents Page Shareholder Letter ....................................................................... 1 Management’s Discussion of Fund Performance ............................................. 3 Performance Summary Xtrackers Eurozone Equity ETF ......................................................... 4 Xtrackers International Real Estate ETF .................................................. 6 Xtrackers Japan JPX-Nikkei 400 Equity ETF .............................................. 8 Fees and Expenses ....................................................................... 10 Schedules of Investments Xtrackers Eurozone Equity ETF ......................................................... 11 Xtrackers International Real Estate ETF .................................................. 16 Xtrackers Japan JPX-Nikkei 400 Equity ETF .............................................. 25 Statements of Assets and Liabilities ........................................................ 30 Statements of Operations ................................................................. 31 Statements of Changes in Net Assets ....................................................... 32 Financial Highlights ...................................................................... 34 Notes to Financial Statements ............................................................. 36 Report of Independent Registered Public Accounting Firm .................................... 44 Liquidity Risk Management ................................................................ 45 Board Considerations in Approval of Investment Advisory Contracts ........................... 46 Board Members and Officers .............................................................. 49 Additional Information .................................................................... 52 Privacy Policy Notice ..................................................................... 53 To our Shareholders: (Unaudited) Dear Shareholder, We are pleased to provide this annual report for three of our sector ETFs for the period ended May 31, 2021. While the global economy faced divergent recoveries amid high uncertainty, it had positioned itself on firmer ground with the world’s biggest economies — the U.S. and China — driving the rally during the reporting period. Rapid vaccine rollouts in a few large economies has increased global trade in merchandise and manufactured goods to pre-pandemic levels. The sudden revival of the global economy spiked inflation concerns as prices around the world rose sharply, but core inflation is expected to remain transitory in most inflation-targeting countries. The Federal Open Market Committee decided to leave its monetary policy of near-zero interest rates and monthly bond purchases unchanged, to continue to support the U.S. in reopening the economy. China saw GDP1 growth plunge in Q1 2021, facing its weakest quarterly growth rate since the contraction in Q1 2020. Emerging-market equities lagged developed-market equities as increases in virus mutations and fatalities moderated their pace of growth. The reopening of Eurozone countries in the summer of 2020 triggered a spike in COVID-19 cases, pushing the region into recession again. Labor markets in the region remained robust, as indicated by a steady decline in unemployment rates. Germany, Europe’s largest economy, saw consumer spending decline substantially while its unemployment rate improved slightly as it managed to stave of mass layoffs by relying heavily on subsidised short-time work schemes known as “Kurzarbeit”. The driving force of France’s economic activity, household consumption, contracted and remained in negative territory. Spain witnessed higher economic activity after a slump at the start of the year, as indicated by a J-curve recovery in the services purchasing managers index (PMI2). In its first monetary policy meeting in 2021, the European Central Bank stated that it would keep key interest rates in the Eurozone and other pandemic policy responses unchanged. Japan witnessed renewed weakness in its economy due to virus-related containment efforts and slow vaccine rollouts. Private consumption fell, mainly due to the Japanese government declaring targeted state-of-emergency measures in multiple cities to combat the spread of the virus ahead of the much-anticipated Tokyo 2020 Olympics. The tourism sector is expected to take a hard hit, as the organizers have announced a ban on spectators from overseas. While exports grew as a result of a rebound in global demand for cars and electronics, the pace of increase slowed sharply due to supply-chain disruptions, dragging down capital spending as well. China witnessed a steady decline in its manufacturing PMI in the first half of the reporting period, but bounced back with exports inching higher as more countries reopened their economies. The resurgence of new daily COVID-19 cases at the beginning of 2021 led to most major Latin American economies re-imposing lockdown measures. Service-sector growth, especially in countries such as Brazil and Mexico, was impacted as a result. Historically low borrowing costs and global monetary easing have made the yield spread between global real estate markets and other asset classes extremely compelling to investors. In the U.S., prices of lumber skyrocketed, together with copper, which saw a similar uptick in price due to constraints caused by a lack of investment by large miners and the transition to a carbon- free world. In contrast to residential real estate, global office real estate markets remained subdued owing to the increase in working from home, rising concern for the wellbeing of employees and the eroded appeal of long commutes in big cities. An uneven global recovery is expected as differing circumstances and policy responses of the respective countries will determine their advancement. The recovery of smaller economies and developing countries will depend heavily on that of major economies and economic blocs. Catalysts for success in the post-pandemic era will be each country’s policies and capacities, recovery driven by vaccine rollouts, integration into major economic blocs, ability to provide and monitor fiscal and monetary stimulus, and restoration of solvency in the private sector. 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. The gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. 2. 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 Eurozone Equity ETF (EURZ) Xtrackers Eurozone Equity ETF (EURZ) seeks investment results that correspond generally to the performance, before fees and expenses, of the NASDAQ Eurozone Large Mid Cap Index (the EURZ Index). The EURZ Index is designed to track the performance of equity securities of large- and mid-capitalization companies based in the countries in the Economic and Monetary Union (the “EMU” or “Eurozone”) of the European Union (“EU”). For the 12-month period ended May 31, 2021, EURZ shares returned 48.83%, compared to the EURZ Index return of 48.28%. All sectors contributed positively to performance during the period with the greatest contribution coming from Consumer Discretionary, Financials and Industrials. From a geographical perspective, France, Germany and Netherlands were the major positive contributors. Xtrackers International Real Estate ETF (HAUZ) Xtrackers International Real Estate ETF (HAUZ), seeks investment results that correspond generally to the performance, before fees and expenses, of the iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index (the HAUZ Index). The HAUZ index is a free-float capitalization weighted index that provides exposure to publicly traded real estate securities in countries outside the United States, Pakistan and Vietnam. For the 12-month period ended May 31, 2021, HAUZ shares returned 32.24%, compared to the HAUZ Index return of 31.98%. All sectors contributed positively to performance during the period with the greatest contributions from Real Estate Operating Companies, Diversified REITs and Retail REITs. From a geographical perspective, Japan, Australia and Hong Kong were the major positive contributors, while Chile and Turkey detracted from performance. Xtrackers Japan JPX-Nikkei 400 Equity ETF Xtrackers (JPN) Japan JPX-Nikkei 400 Equity ETF (JPN) seeks investment results that correspond generally to the performance, before fees and expenses, of the JPX-Nikkei 400 Net Total Return Index (the JPN Index). The JPN Index is designed to track the performance of equity securities of issuers who are primarily listed on the JASDAQ Stock Exchange (JASDAQ)