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 is a free-float adjusted market capitalization weighted index, modified per the 10/40 Constraint (as defined below), which is designed to measure the equity market performance of Chinese companies that have high environmental, social and governance (“ESG”) ratings relative to their industry peers, as determined by MSCI Inc., the provider of the Underlying Index (“Index Provider”). The securities eligible for inclusion in the Underlying Index include all types of publicly issued shares of Chinese issuers, such as A-Shares, B-Shares, H-Shares, P-Chips and Red Chips, which are described below. The issuers included in the Underlying Index may include small-cap, mid-cap and large-cap companies.

In determining the securities eligible for inclusion in the Underlying Index, the Index Provider uses three screens.

To be included in the Underlying Index, a company must be positively assessed under the first two screens and identified by the Index Provider as not being materially involved in the businesses assessed under the third screen. Securities that do not meet the criteria for either of the first two screens are excluded from the Underlying Index. The Underlying Index may include issuers in the following sectors: Consumer Discretionary, Financials, Industrials, Health Care, Communication Services, Real Estate, Utilities, Information Technology, Consumer Staples, Materials, and Energy. For each sector, the Index Provider ranks each eligible security and includes securities with the highest ESG ratings representing 50% of the market capitalization in each sector, with a minimum cumulative sector coverage of 45%.

The Underlying Index is modified so that, as of the rebalance date, no issuer constitutes more than 10% of the Underlying Index and so that the cumulative weight of all constituents with a weight of over 5% does not exceed 40% of the Underlying Index (the “10/40 Constraint”).

The Fund may invest up to 20% of its assets in instruments that are not included in the Underlying Index, but that Krane believes will help the Fund track the Underlying Index. These investments are subject to the ESG screens and 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.

The following China-related securities may be included in the Underlying Index and/or represent investments of the Fund:

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 150 securities of companies with a market capitalization range of approximately $197 million to $94 billion and had an average market capitalization of approximately $5.7 billion. The Underlying Index is rebalanced quarterly.

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 Consumer Discretionary sector (30.33%) and Communication Services sector (17.74%) each represented a significant portion of the Underlying Index.

The Fund may engage in securities lending.