Under normal circumstances, the Fund will invest at least 80% of its net assets (plus borrowings for investment purposes) in instruments in its Underlying Index or in instruments that have economic characteristics similar to those in the Underlying Index. The Underlying Index includes the China A-Shares of 100 Chinese companies with high historical returns on equity, dividend yields and growth in net profits that have listed China A-Shares, as determined by the index provider, China Securities Index Co., Ltd (“CSI”). China A-Shares are Chinese renminbi (“RMB”)-denominated equity securities issued by companies incorporated in mainland China and listed on the Shenzhen or Shanghai Stock Exchanges.

As of each annual reconstitution of the Underlying Index: the “Index Universe” is comprised of all Chinese companies that offer China A-Shares, except those that have been listed for less than 500 trading days or are subject to trading suspensions. CSI first screens the Index Universe to exclude stocks of companies whose total liabilities exceed their total assets. CSI next excludes the bottom 70% of each industry group, as classified by CSI’s industry classification system, based on operating revenue, average daily float and average daily trading value during the prior year. CSI then calculates the average return on equity of each remaining stock during the prior five years, adjusts for variability, and removes the stocks in the bottom 50%. The 100 stocks with the highest average dividend yield and growth rate of net profits over the last five years are then included in the Underlying Index, weighted according to free-float market capitalization, subject to a 5% cap.

Direct investments in China A-Shares are possible only through the trading and clearing facilities of a participating exchange located outside of mainland China (“Stock Connect Programs”) or Qualified Foreign Investor (“QFI”) license. Exposure to A-Shares can also be obtained indirectly by investing in funds that invest in A-Shares. Currently, the Fund plans to achieve its investment objective principally by investing in China A-Shares through the Stock Connect Programs.

The Fund may invest up to 20% of its assets in instruments that are not included in the Underlying Index, but that the Fund’s investment adviser, Krane Funds Advisors, LLC (“Krane” or “Adviser”), believes will help the Fund track the Underlying Index. These investments may include equity securities and depositary receipts of issuers whose securities are not constituents of the Underlying Index, derivative instruments (including swaps, futures, forwards, structured notes and options), other investment companies (including exchange traded funds or “ETFs”) and cash or cash equivalents (including money market funds). The other investment companies in which the Fund may invest may be advised, sponsored or otherwise serviced by Krane and/or its affiliates.

In addition to China A-Shares, which are described above, the following China-related securities may be included in this 20% basket:

Although the Fund reserves the right to replicate (or hold all constituents of) the Underlying Index, the Fund expects to use representative sampling to track the Underlying Index. “Representative sampling” is a strategy that involves investing in a representative sample of securities that collectively have an investment profile similar to the Underlying Index.

As of May 31, 2023, the Underlying Index included 100 securities of companies with a market capitalization range of approximately $0.5 billion to $158.3 billion and had an average market capitalization of approximately $12.7 billion. The Underlying Index is rebalanced and reconstituted semi-annually.

The Fund is non-diversified. To the extent the Underlying Index is concentrated in a particular industry, the Fund is expected to be concentrated in that industry. As of May 31, 2023, issuers in the Financials sector (36.6%), Industrials sector (18.1%) and Consumer Discretionary sector (12.5%) each represented a significant portion of the Underlying Index.

The Fund may engage in securities lending.