Under normal circumstances, the Fund invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of “Artificial Intelligence (“AI”) and Technology” companies and other instruments that have economic characteristics similar to such securities. The Fund considers a company to be an “AI and Technology” company if it is classified in the Technology economy within the FactSet Revere Business Industry Classification system (“RBICS”), which requires a company to generate at least 50% of its revenue from within the Technology economy, and has an AI Exposure Score greater than zero. An “AI and Technology” company will generally operate in the following industries as categorized by RBICS: computer peripherals, data processing services, information technology services, internet retail, internet software/services, packaged software, semiconductors, or telecommunications equipment. An AI Exposure Score is a proprietary score used by the Underlying Index (as defined below) that attempts to quantify the exposure of a company with regards to AI. It is measured in a range from 0 (no exposure) to 5 (highest exposure) and is based on the company's public business descriptions, public filings, press releases, and financial disclosures that directly indicate involvement in AI-related business or the incorporation of AI technologies into their key operations, offerings and research and development activities.

Under normal circumstances, the Fund invests principally in instruments in the Solactive Etna Artificial General Intelligence Index (the “Underlying Index”) and, with respect to these investments in instruments in the Underlying Index, the Fund seeks to provide investment results that, before fees and expenses, track the performance of the Underlying Index. The Fund also may invest in the securities of private companies with exposure to AI businesses, which are not securities included in the Underlying Index.

The Underlying Index is a modified, free float adjusted market capitalization weighted index designed to measure the equity performance of companies in developed markets with exposure to AI businesses. Solactive AG (“Index Provider”) defines developed countries as the following countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Poland, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, or United States.

To be eligible for inclusion in the Underlying Index, a security must meet the following criteria:

The issuers included in the Underlying Index may include small-cap, mid-cap and large-cap companies.

The Sub-Adviser (as defined below) assigns each eligible security a proprietary AI Exposure Score from zero to five on a quarterly basis and the Index Provider categorizes each security into one of three categories: AI Applications, AI Hardware, or AI Infrastructure. The AI Hardware category includes semiconductor and data center companies that power the training of large language models; the AI Infrastructure category includes companies that provide cloud, security and data management for large language models; and the AI Applications category includes companies that leverage AI technologies within their business models, products and services to drive efficiencies cost savings, new revenue streams or improved customer experience services.

The Underlying Index is weighted such that no more than 40% of the Underlying Index is composed of securities within each category. Within each category, each constituent’s weight is determined by a combination of the security’s AI Exposure Score and the security’s free-float market capitalization subject to a maximum weight of 10% and a minimum weight of 0.5%. If any weights above 5% add up to more than 50% of the Underlying Index, the Index Provider will cap such weights at 10% 9% 8% 7% 6% and 4.5%, accordingly. The Underlying Index is rebalanced and reconstituted quarterly. The Index Provider is not affiliated with the Fund, the Fund’s investment adviser, Krane Funds Advisors, LLC (“Krane” or “Adviser”), or the Fund’s sub-adviser, Etna Capital Management Company Ltd. (“Etna” or “Sub-Adviser”).

The Fund may invest in instruments that are not included in 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). Certain other investment companies in which the Fund may invest may be advised, sponsored or otherwise serviced by Krane and/or its affiliates.

Although the Fund expects to replicate (or hold all components of) the Underlying Index, the Fund reserves the right to use representative sampling for the portion of the Fund that tracks 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 June 28th, 2024, the Underlying Index included 41 securities of companies with a capitalization range of approximately $8.3 billion to $3.1 trillion and an average market capitalization of approximately $440.6 billion. 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 June 28th, 2024, issuers in the Technology economy sector (92.6%) represented significant portions of the Underlying Index.

The Fund may invest in the securities of private companies with exposure to AI businesses. In selecting securities of private companies, the Sub-Adviser looks for companies with exposure to AI businesses that are similar to companies in the Underlying Index that may be preparing for an initial public offering. However, the Sub-Adviser may also invest in companies in earlier stages of development.

The Fund may engage in securities lending.