Under normal circumstances, the Fund invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of the Underlying Index and other instruments that have economic characteristics similar to those in the Underlying Index.

The Underlying Index is designed to measure the performance of U.S. dollar denominated investment grade corporate debt securities with a maturity of up to one year that are compatible with the principal objective of the Paris Agreement, which seeks to limit temperature increases in this century to well below 2 degrees Celsius, preferably to 1.5 degrees Celsius, above pre-industrial levels (i.e., carbon reduction target levels).

To be eligible for inclusion in the Underlying Index, a bond or issuer must be a constituent of the Solactive 0-1 Year USD Corporate IG Index (the “Parent Index”), which requires constituent securities to have a credit rating from BBB- to AAA, as rated by Moody’s Investors Service, Inc., or Standard & Poor’s Financial Services LLC, and a maturity of one year or less. The Index Provider utilizes data from Institutional Shareholder Services Inc. (“ISS”) to exclude debt securities of the following issuers:

Some of these exclusions are categorical, and others are based on ownership or revenue thresholds. The Underlying Index updates the data from ISS related to the exclusions above on an annual basis. Additional information regarding these exclusions is contained in the “Additional Information about the Fund’s Underlying Index” section.

The Index Provider uses an optimization process to identify security weights that seeks (a) to ensure the Underlying Index’s compliance with carbon reduction target levels, (b) to minimize portfolio turnover, and (c) to minimize weight deviations from the Parent Index with respect to: (1) ratings, (2) sectors, and (3) issuers. Each security included in the Underlying Index will have a minimum weight of at least 0.1%.

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 securities 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 reserves the right to replicate (or hold all constituents of) the Underlying Index, the Fund expects to use a representative sampling strategy 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 that of the Underlying Index.

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, 2024, the Underlying Index was concentrated in Financials sector. As of May 31, 2024, the Underlying Index was comprised of 432 bonds with a modified duration of 0.41 years. The Fund’s average duration will be below one year (i.e., short duration). Duration is a measure of a fixed income security’s sensitivity to changes in interest rates. For every 1% change in interest rates, a bond’s price generally changes approximately 1% in the opposite direction for every year of duration. For example, if a portfolio of fixed income securities has an average weighted duration of three years, its value can be expected to fall about 3% if interest rates rise by 1%. Conversely, the portfolio’s value can be expected to rise approximately 3% if interest rates fall by 1%.

The Underlying Index is rebalanced and reconstituted monthly. The Underlying Index is provided and calculated by Solactive AG (“Index Provider”).

The Fund is non-diversified. The Fund may engage in securities lending.