Form 485APOS Krane Shares Trust


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As Filed
with the U.S. Securities and Exchange Commission on June 16, 2021

 

File Nos. 333-180870 and 811-22698

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-1A

REGISTRATION STATEMENT

UNDER

  THE SECURITIES ACT OF 1933 ☒ 
  Pre-Effective Amendment No.
  Post-Effective Amendment No. 283

and/or

REGISTRATION STATEMENT

UNDER

  THE INVESTMENT COMPANY ACT OF
1940
☒ 
  Amendment No. 287

 

KRANESHARES TRUST

(Exact Name of Registrant as Specified in Charter)

 

280 Park Avenue, 32nd Floor

New York, New York 10017

(Address of Principal Executive Offices, Zip Code)

 

(212) 933-0393

(Registrant’s Telephone Number, including
Area Code)

 

Jonathan Krane

280 Park Avenue, 32nd Floor

New York, New York 10017

(Name and Address of Agent for Service)

 

Copy to:

Stacy L. Fuller

K&L Gates LLP

1601 K Street NW

Washington, D.C. 20006-1600

 

It is proposed that this filing will become
effective (check appropriate box):

 

  Immediately upon filing pursuant to paragraph (b) of Rule 485

 

  On (date) pursuant to paragraph (b)(1)(iii) of Rule 485

 

  60 days after filing pursuant to paragraph (a)(1) of Rule
485

 

  On (date) pursuant to paragraph (a)(1) of Rule 485

 

  ☒  75 days after filing pursuant to paragraph (a)(2) of Rule 485

 

  On (date) pursuant to paragraph (a)(2) of Rule 485

 

 

THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

 

Subject
to completion, dated June 16, 2021

 

KraneShares
Trust

 

Prospectus

 

[   ], 2021

 

KraneShares China Innovation
ETF – (        )

 

Fund shares are not individually redeemable. Fund
shares will be listed on NYSE Arca, Inc. (“Exchange”).

 

These securities have not been approved or disapproved
by the U.S. Securities and Exchange Commission (“SEC”), nor has the SEC passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.

 

As permitted by regulations adopted by the Securities
and Exchange Commission, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically
request paper copies of the reports from the Fund (if you hold your Fund shares directly with the Fund) or from your financial intermediary,
such as a broker-dealer or bank (if you hold your Fund shares through a financial intermediary). Instead, the reports will be made available
on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

If you already elected to receive shareholder
reports electronically, you will not be affected by this change and you need not take any action. If you hold your Fund shares directly
with the Fund, you may elect to receive shareholder reports and other communications electronically from the Fund by contacting the Fund
at 855-857-2638 or, if you hold your Fund shares through a financial intermediary, you can contact your financial intermediary.

 

You may elect to receive all future reports in
paper free of charge. If you hold your Fund shares directly with the Fund, you can inform the Fund that you wish to continue receiving
paper copies of your shareholder reports at 855-857-2638 or, if you hold your Fund shares through a financial intermediary, you can contact
your financial intermediary. Your election to receive reports in paper will apply to all of the KraneShares Funds you hold directly with
series of the Trust or through your financial intermediary, as applicable.

 

 

KraneShares Trust

Table of Contents

 

 

KraneShares China Innovation ETF

 

Investment Objective

 

The KraneShares China Innovation ETF (the “Fund”)
seeks growth of capital.

 

Fees and Expenses of the Fund

The following table describes the fees and expenses
you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples below.

 

Shareholder Fees (fees paid directly from your investment) None

Annual Fund Operating Expenses

(expenses that you pay each year as a
percentage of the value of your investment)

 
Management Fees [0.25]%
Distribution and/or Service (12b-1) Fees* 0.00%
Other Expenses** [0.01]%
Acquired Fund Fees and Expenses** [0.73]%
Total Annual Fund Operating Expenses [0.99]%

*Pursuant to a Distribution Plan, the Fund may
bear a Rule 12b-1 fee not to exceed 0.25% per year of the Fund’s average daily net assets. However, no such fee is currently
paid by the Fund, and the Board of Trustees has not currently approved the commencement of any payments under the Distribution Plan.

**Based on estimated amounts for the current fiscal
year. “Acquired Fund Fees and Expenses” are expenses incurred indirectly by the Fund through its ownership of shares of other
investment companies (such as exchange-traded funds). They are not direct operating expenses paid by Fund shareholders and are not used
to calculate the Fund’s net asset value (“NAV”). In addition, “Acquired Fund Fees and Expenses” will not
be reflected in the Fund’s Financial Statements in its shareholder report. Therefore, the amounts listed in “Total Annual
Fund Operating Expenses” and “Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement” will
differ from those presented in the Fund’s Financial Highlights.

 

Example

This Example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the
time periods indicated. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on these assumptions, whether you do or do not sell your shares,
your costs would be:

 

1 Year 3 Years
$[   ] $[   ]

 

Portfolio Turnover

The Fund pays transaction costs, such as commissions,
when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in the Annual
Fund Operating Expenses or in the Example, affect the Fund’s performance. Because the Fund has not commenced investment operations
prior to the date of this prospectus, it does not have portfolio turnover information for the prior fiscal year to report.

 

 

Principal Investment Strategies

The Fund seeks to achieve its investment objective
by investing primarily in the Underlying ETFs shown below. Each Underlying ETF seeks to provide investment results, before fees and expenses,
corresponding to the price and yield performance of its respective underlying index and invests primarily in the publicly issued shares
of companies that are based in, operate in or are otherwise economically tied to China, including A-Shares, B-Shares, H-Shares, P-Chips
and Red Chips. The currently-projected allocation to each Underlying ETF is shown below:

 

Underlying ETFs Projected Allocation
KraneShares CSI China Internet ETF (KWEB) 30%
KraneShares MSCI All China Health Care Index ETF (KURE) 25%
KraneShares MSCI China Clean Technology ETF (KGRN) 20%
KraneShares CICC China 5G & Semiconductor ETF (KFVG) 15%
KraneShares SSE STAR Market 50 Index ETF (KSTR) 10%

 

KWEB seeks to provide investment results that correspond to the CSI Overseas China Internet Index, which
is designed to measure the performance of the investable universe of equities of publicly traded China-based companies that are listed
outside of mainland China and whose primary business or businesses are in the Internet and Internet-related sectors.
KURE seeks to provide investment results that correspond to the MSCI China All Shares Health Care 10/40
Index, which is designed measure the performance of equity securities of Chinese companies in the healthcare sector.
KGRN seeks to provide investment results that correspond to the MSCI China IMI Environment 10/40 Index,
which is designed to measure the performance of equity securities of Chinese companies that focus on contributing to a more environmentally
sustainable economy by making efficient use of scarce natural resources or by mitigating environmental degradation. Companies in the Underlying
Index derive at least 50% of their revenues from products and services economically tied to: (1) alternative energy; (2) sustainable
water; (3) green building; (4) pollution prevention; or (5) energy efficiency.
KFVG seeks to provide investment results that correspond to the CICC China Technology Leaders Index, which
includes the equity securities, or depositary receipts thereon, of the 30 largest Chinese companies by free-float market capitalization
engaged in 5G and Technology-Related Industries — namely, Semiconductors, Electronic Equipment & Instruments, Electronic Manufacturing
Services, Electronic Components, Communications Equipment, Internet Services & Infrastructure, Data Processing & Outsourced Services,
IT Consulting & Other Services and Electrical Components & Equipment.
KSTR seeks to provide investment results that correspond to the SSE Star Market 50 Component Index, which
includes the equity securities or depositary receipts of the 50 largest companies by free-float market capitalization that are listed
on the SSE STAR Market. The SSE STAR Market is a new listing exchange run by the Shanghai Stock Exchange that focuses on listing Chinese
science and technology companies, including companies in high-tech and strategic emerging industries, such as next-generation information
technology, biomedicine, and high-end equipment.

 

 

Krane Funds Advisors, LLC (“Krane”),
the Fund’s investment adviser, will monitor market conditions and revise the allocations to the Underlying ETFs from time to time
based on its assessment of market conditions, including the maturity of investment themes and the emergence of new themes.

 

In addition to investments in the Underlying ETFs,
the Fund may invest up to 15% of its net assets in the securities of private companies, including those that may be preparing for an initial
public offering. Krane generally expects to invest in private companies that are similar to (for example, in the same sector or industry
as,) companies that are eligible for inclusion in an underlying index of an Underlying ETF. However, from time to time, the Fund may invest
in other types of private companies, if Krane believes the investment represents an attractive opportunity for the Fund to invest in an
issuer engaged in innovation in China or the surrounding region. An investment by the Fund in the securities of private companies will
generally reduce the Fund’s projected allocation to each Underlying ETF approximately pro rata.

 

The Fund may engage in securities lending.

 

Principal Risks

As with all exchange traded
funds (“ETFs”), a shareholder of the Fund is subject to the risk that his or her investment could lose money. The Fund may
not achieve its investment objective and an investment in the Fund is not by itself a complete or balanced investment program. An investment
in the Fund is not a deposit with a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. An investment in the Fund involves the risk of total loss. In addition to these risks, the Fund is subject to a number of additional
principal risks (either directly or through its investments in the Underlying ETFs) that may affect the value of its shares, including:

 

China Risk. The Chinese economy is
generally considered an emerging market and can be significantly affected by economic and political conditions in China and surrounding
Asian countries. In addition, the Chinese economy is export-driven and highly reliant on trade. A downturn in the economies of China’s
primary trading partners could slow or eliminate the growth of the Chinese economy and adversely impact the Fund’s investments.
The Chinese government strictly regulates the payment of foreign currency denominated obligations and sets monetary policy. The Chinese
government may introduce new laws and regulations that could have an adverse effect on the Fund. Although China has begun the process
of privatizing certain sectors of its economy, privatized entities may lose money and/or be re-nationalized.

 

In the Chinese securities
markets, a small number of issuers may represent a large portion of the entire market. The Chinese securities markets are subject to more
frequent trading halts, low trading volume and price volatility. Further, the Chinese economy is heavily dependent upon trading with key
partners. Recent developments in relations between the United States and China have heightened concerns of increased tariffs and restrictions
on trade between the two countries. An increase in tariffs or trade restrictions, or even the threat of such developments, could lead
to a significant reduction in international trade, which could have a negative impact on China’s export industry and a commensurately
negative impact on the Fund.

 

 

In recent years, Chinese entities have incurred
significant levels of debt and Chinese financial institutions currently hold relatively large amounts of non-performing debt. Thus, there
exists a possibility that widespread defaults could occur, which could trigger a financial crisis, freeze Chinese debt and finance markets
and make Chinese securities illiquid.

 

In addition, trade relations between the U.S.
and China have recently been strained.  Worsening trade relations between the two countries could adversely impact the Fund, particularly
to the extent that the Chinese government restricts foreign investments in on-shore Chinese companies or the U.S. government restricts
investments by U.S. investors in China.  Worsening trade relations may also result in market volatility and volatility in the price
of Fund shares.

 

A-Shares Risk. A-Shares
are issued by companies incorporated in mainland China and are traded on Chinese exchanges. Investments in A-Shares are made available
to domestic Chinese investors and certain foreign investors, including those who have been approved as a QFII or a RQFII and through the
Stock Connect Programs, which currently include the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Shanghai-London
Stock Connect, and China-Japan Stock Connect. Investments by foreign investors in A-Shares are subject to various restrictions, regulations
and limits. The Fund currently intends to gain exposure to A-Shares through the Stock Connect Programs. The Fund may also gain exposure
to A-Shares by investing in investments that provide exposure to A-Shares, such as other investment companies, or Krane may acquire a
QFII or RQFII license to invest in A-Shares for the Fund. Investments in A-Shares are heavily regulated and the recoupment and repatriation
of assets invested in A-Shares is subject to restrictions by the Chinese government. A-Shares may be subject to frequent and widespread
trading halts and may become illiquid. This could cause volatility in the Fund’s share price and subject the Fund to a greater risk
of trading halts.

 

Custody Risks. In accordance
with Chinese regulations and the terms of a QFII or RQFII license, as applicable, and insofar as Krane acquires a QFII or RQFII license,
A-Shares will be held in the joint names of the Fund and Krane. While Krane may not use such an account for any purpose other than for
maintaining the Fund’s assets, the Fund’s assets may not be as well protected as they would be if it were possible for them
to be registered and held solely in the name of the Fund. There is a risk that creditors of Krane may assert that the securities are owned
by Krane and that regulatory actions taken against Krane may affect the Fund. The risk is particularly acute in the case of cash deposited
with a People’s Republic of China (“PRC”) sub-custodian (“PRC Custodian”) because it may not be segregated,
and it may be treated as a debt owing from the PRC Custodian to the Fund as a depositor. Thus, in the event of a PRC Custodian bankruptcy,
liquidation, or similar event, the Fund may face difficulties and/or encounter delays in recovering its cash.

 

 

Capital Controls Risk. Economic
conditions, such as volatile currency exchange rates and interest rates, political events and other conditions may, without prior warning,
lead to intervention by government actors and the imposition of “capital controls.” Capital controls include the prohibition
of, or restrictions on, the ability to transfer currency, securities or other assets. Levies may be placed on profits repatriated by foreign
entities (such as the Fund). Although the RMB is not presently freely convertible, rather it is subject to the approval of the State Administration
of Foreign Exchange (“SAFE”) and other relevant authorities, repatriations by RQFIIs or through the Stock Connect Programs
are currently permitted daily and Chinese authorities have indicated their plans to move to a fully freely convertible RMB. There is no
assurance, however, that repatriation restrictions will not be (re-)imposed in the future

 

Tax Risk. Per a circular
(Caishui [2014] 79), the Fund is temporarily exempt from the Chinese tax on capital gains on trading in A-Shares as a QFII or RQFII or
the Shanghai Stock Exchange through the Shanghai-Hong Kong Stock Connect as of November 17, 2014, and the Shenzhen Stock Exchange through
the Shenzhen-Hong Kong Stock Connect as of December 5, 2016. There is no indication as to how long the temporary exemption will remain
in effect. Accordingly, the Fund may be subject to such taxes in the future. In addition, there is uncertainty as to the application and
implementation of China’s value added tax to the Fund’s activities. The Fund reserves the right to establish a reserve for
taxes which present uncertainty as to whether they will be assessed, although it currently does not do so. If the Fund establishes such
a reserve but is not ultimately subject to these taxes, shareholders who redeemed or sold their shares while the reserve was in place
will effectively bear the tax and may not benefit from the later release, if any, of the reserve. Conversely, if the Fund does not establish
such a reserve but ultimately is subject to the tax, shareholders who redeemed or sold their shares prior to the tax being withheld, reserved
or paid will have effectively avoided the tax. Investors should note that such provision, if any, may be excessive or inadequate to meet
actual tax liabilities (which could include interest and penalties) on the Fund’s investments. Any taxes imposed in connection with
the Fund’s activities will be borne by the Fund. As a result, investors may be advantaged or disadvantaged depending on the final
rules of the relevant tax authorities.

 

Capital Controls Risk. Economic
conditions, such as volatile currency exchange rates and interest rates, political events and other conditions may, without prior warning,
lead to intervention by government actors and the imposition of “capital controls.” Capital controls include the prohibition
of, or restrictions on, the ability to transfer currency, securities or other assets. Levies may be placed on profits repatriated by foreign
entities (such as the Fund). Although the RMB is not presently freely convertible, rather it is subject to the approval of the State Administration
of Foreign Exchange (“SAFE”) and other relevant authorities, repatriations by RQFIIs or through the Stock Connect Programs
are currently permitted daily and Chinese authorities have indicated their plans to move to a fully freely convertible RMB. There is no
assurance, however, that repatriation restrictions will not be (re-)imposed in the future.

 

Hong Kong Risk. The economy
of Hong Kong has few natural resources and any fluctuation or shortage in the commodity markets could have a significant adverse effect
on the Hong Kong economy. Hong Kong is also heavily dependent on international trade and finance. Additionally, the continuation and success
of the current political, economic, legal and social policies of Hong Kong is dependent on and subject to the control of the Chinese government.
China may change its policies regarding Hong Kong at any time. Any such change may adversely affect market conditions and the performance
of Chinese and Hong Kong issuers and, thus, the value of securities in the Fund’s portfolio.

 

 

Stock Connect Program Risk. The
Stock Connect Programs are subject to daily and aggregate quota limitations, and an investor cannot purchase and sell the same security
on the same trading day, which may restrict the Fund’s ability to invest in A-Shares through the Programs and to enter into or exit
trades on a timely basis. The Shanghai and Shenzhen markets may be open at a time when the participating exchanges located outside of
mainland China are not active, with the result that prices of A-Shares may fluctuate at times when the Fund is unable to add to or exit
its positions. Only certain China A-Shares are eligible to be accessed through the Stock Connect Programs. Such securities may lose their
eligibility at any time, in which case they could be sold but could no longer be purchased through the Stock Connect Programs. Because
the Stock Connect Programs are still evolving, the actual effect on the market for trading A-Shares with the introduction of large numbers
of foreign investors is still relatively unknown. Further, regulations or restrictions, such as limitations on redemptions or suspension
of trading, may adversely impact the program. There is no guarantee that the participating exchanges will continue to support the Stock
Connect Programs in the future.

 

Investments in China A-Shares may not
be covered by the securities investor protection programs of either exchange and, without the protection of such programs, will be subject
to the risk of default by the broker. Because of the way in which China A-Shares are held in the Stock Connect Programs, the Fund may
not be able to exercise the rights of a shareholder and may be limited in its ability to pursue claims against the issuer of a security,
and may suffer losses in the event the depository of the Chinese exchange becomes insolvent.

 

B-Shares Risk. The China
B-Share market is generally smaller, less liquid and has a smaller issuer base than the China A-Share market. The issuers that compose
the B-Share market include a broad range of companies, including companies with large, medium and small capitalizations. Further, the
B-Shares market may behave very differently from other portions of the Chinese equity markets, and there may be little to no correlation
between the performance of the two.

 

H-Shares Risk. H-Shares
are foreign securities which, in addition to the risks described herein, are subject to the risk that the Hong Kong stock market may behave
very differently from the mainland Chinese stock market. There may be little to no correlation between the performance of the Hong Kong
stock market and the mainland Chinese stock market.

 

N-Shares Risk. N-Shares
are securities of companies with business operations in mainland China and listed on an American stock exchange, such as the NYSE or NASDAQ.
Because companies issuing N-Shares have business operations in China, they are subject to certain political and economic risks in China.
The American stock market may behave very differently from the mainland Chinese stock market, and there may be little to no correlation
between the performance of the two.

 

 

P-Chip Companies Risk. P-Chip
companies are often run by the private sector and have a majority of their business operations in mainland China. P-Chip shares are traded
in Hong Kong dollars on the Hong Kong Stock Exchange, and may also be traded by foreigners. Because they are traded on the Hong Kong Stock
Exchange, P-Chips are also subject to risks similar to those associated with investments in H Shares. They are also subject to risks affecting
their jurisdiction of incorporation, including any legal or tax changes.

 

Red Chip Companies Risk. Red
Chip companies are controlled, either directly or indirectly, by the central, provincial or municipal governments of the PRC. Red Chip
shares are traded in Hong Kong dollars on the Hong Kong Stock Exchange and may also be traded by foreigners. Because Red Chip companies
are controlled by various PRC governmental authorities, investing in Red Chips involves risks that political changes, social instability,
regulatory uncertainty, adverse diplomatic developments, asset expropriation or nationalization, or confiscatory taxation could adversely
affect the performance of Red Chip companies. Red Chip companies may be less efficiently run and less profitable than other companies.

 

S-Chip Companies Risk. The
Fund may invest in shares of companies with business operations in mainland China and listed on the Singapore Exchange (“S-Chips”).
S-Chip shares are issued by companies incorporated anywhere, but many are registered in Singapore, the British Virgin Islands, the Cayman
Islands, or Bermuda. They are subject to risks affecting their jurisdiction of incorporation, including any legal or tax changes. S-Chip
companies may or may not be owned at least in part by a Chinese central, provincial or municipal government and be subject to the types
of risks that come with such ownership described herein. There may be little or no correlation between the performance of the Singapore
stock market and the mainland Chinese stock market.

 

As the Underlying ETFs, or the Fund’s allocations
among the Underlying ETFs, change from time to time, or to the extent that the total annual fund operating expenses of any Underlying
ETF changes, the weighted average operating expenses borne by the Fund may increase or decrease.

 

Internet Companies Risk. Investments
in Internet companies may be volatile. Internet companies are subject to intense competition, the risk of product obsolescence, changes
in consumer preferences and legal, regulatory and political changes. They are also especially at risk of hacking and other cybersecurity
events. In addition, it can be difficult to determine what qualifies as an Internet company.

 

Environmental Issuers Risk. Issuers engaged
in environmentally beneficial business lines may be difficult to identify and investments in them maybe volatile. They may be highly dependent
upon government subsidies, contracts with government entities, and the successful development of new and proprietary technologies. Such
technologies risk rapid product obsolescence, short product cycles, and competition from new market entrants. Current valuation methods
used to value companies involved in alternative and clean power technology sectors have not been in widespread use for a significant period
of time, and it is difficult to value share prices of such issuers. In addition, seasonal weather conditions, fluctuations in supply of
and demand for clean energy products (including, in relation to traditional energy products, such as oil and gas), changes in energy prices,
and international political events may cause fluctuations in the performance of these issuers and the prices of their securities. Other
countries, including the U.S., may take steps against Chinese companies engaged in environmentally beneficial services and products, such
as through the imposition of tariffs and anti-dumping duties. Even companies that are classified as being involved in environmentally
beneficial services and products may not necessarily compare favorably with respect to their environmental practices and impact to those
of other issuers.

 

 

Equity Securities Risk. The values
of equity securities are subject to factors such as market fluctuations, changes in interest rates and perceived trends in stock prices.
Equity securities may be more volatile than other asset classes and are generally subordinate in rank to debt and other securities of
the same issuer.

 

Emerging Markets Risk. The
Fund’s investments in emerging markets are subject to greater risk of loss than investments in developed markets. This is due to,
among other things, greater market volatility, greater risk of asset seizures and capital controls, lower trading volume, political and
economic instability, greater risk of market shutdown, and more governmental limitations on foreign investments than typically found in
developed markets. The economies of emerging markets, and China in particular, may be heavily reliant upon international trade and may
suffer disproportionately if international trading declines or is disrupted.

 

Foreign Securities Risk. Investments
in securities of non-U.S. issuers may be less liquid than investments in U.S. issuers, may have less governmental regulation and oversight,
and are typically subject to different investor protection standards than U.S. issuers. Investments in non-U.S. securities entail the
risk of loss due to foreign currency fluctuations and political or economic instability. Foreign market trading hours, clearance and settlement
procedures, and holiday schedules may limit the Fund’s ability to buy and sell securities. These factors could result in a loss
to the Fund.

 

Geographic Focus Risk. The Fund’s
investments are expected to be focused in a particular country, countries, or region to the same extent as an Underlying ETF and therefore
the Fund may be susceptible to adverse market, political, regulatory, and geographic events affecting that country, countries or region.
Such geographic focus also may subject the Fund to a higher degree of volatility than a more geographically diversified fund.

 

Pre-IPO Investments Risk. Investments in
private companies that have not yet issued securities publicly in an initial public offering (“IPO”) (“pre-IPO shares”),
involve greater risks than investments in securities of companies that have traded publicly on an exchange for extended periods of time.
Investments in these companies are generally less liquid than investments in securities issued by public companies and may be difficult
for the Fund to value. Compared to public companies, private companies may have a more limited management group and limited operating
histories with narrower, less established product lines and smaller market shares, which may cause them to be more vulnerable to competitors’
actions, market conditions and consumer sentiment with respect to their products or services, as well as general economic downturns. In
addition, private companies may have limited financial resources and may be unable to meet their obligations. The Fund may only have limited
access to a private company’s actual financial results and there is no assurance that the information obtained by the Fund is reliable.
These companies may not ever issue shares in an IPO and a liquid market for their shares may never develop, which could adversely affect
the Fund’s liquidity. If the company does issue shares in an IPO, IPOs are risky and volatile and may cause the value of the Fund’s
investment to decrease significantly. Moreover, because securities issued by private companies are generally not freely or publicly tradable,
the Fund may not have the opportunity to purchase, or the ability to sell, these securities in the amounts, or at the prices, the Fund
desires.

 

 

Currency Risk. The Fund’s net
asset value (“NAV”) is determined on the basis of the U.S. dollar, therefore, the Fund may lose value if the local currency
of a foreign market depreciates against the U.S. dollar, even if the local currency value of the Fund’s holdings goes up. Currency
exchange rates can be very volatile and can change quickly and unpredictably, which may adversely affect the Fund. The Fund may also be
subject to delays in converting or transferring U.S. dollars to foreign currencies for the purpose of purchasing portfolio investments.
This may hinder the Fund’s performance, including because any delay could result in the Fund missing an investment opportunity and
purchasing securities at a higher price than originally intended, or incurring cash drag.

 

Non-Diversified Fund Risk. Because
the Fund is non-diversified and may invest a greater portion of its assets in fewer issuers than a diversified fund, changes in the market
value of a single portfolio holding could cause greater fluctuations in the Fund’s share price than would occur in a diversified
fund. This may increase the Fund’s volatility and cause the performance of a single portfolio holding or a relatively small number
of portfolio holdings to have a greater impact on the Fund’s performance.

 

Concentration Risk. The Fund’s
assets are expected to be concentrated in an industry or group of industries to the extent that an Underlying ETF concentrates in a particular
industry or group of industries. The securities of companies in an industry or group of industries could react similarly to market developments.
Thus, the Fund is subject to loss due to adverse occurrences that affect one industry or group of industries or sector While the Fund’s
sector and industry exposure is expected to vary over time based on the composition of the Underlying ETFs, the Fund is currently subject
to the principal risks described below.

 

Communication Services Sector Risk. The
communication services sector may be dominated by a small number of companies which may lead to additional volatility in the sector. Communication
services companies are particularly vulnerable to the potential obsolescence of products and services due to technological advances and
the innovation of competitors. Communication services companies may also be affected by other competitive pressures, such as pricing competition,
as well as research and development costs, substantial capital requirements, and government regulation. Fluctuating domestic and international
demand, shifting demographics, and often unpredictable changes in consumer demand can drastically affect a communication services company’s
profitability. Compliance with governmental regulations, delays or failure to receive regulatory approvals, or the enactment of new regulatory
requirements may negatively affect the business of telecommunication services companies. Certain companies in the communication services
sector may be particular targets of network security breaches, hacking and potential theft of proprietary or consumer information, or
disruptions in services, which would have a material adverse effect on their businesses.

 

 

Consumer Discretionary Sector Risk. The
success of consumer product manufacturers and retailers is tied closely to the performance of the overall domestic and international economy,
interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending. Changes
in demographics and consumer tastes can also affect the demand for, and success of, consumer products in the marketplace.

 

Information Technology Sector Risk.  Market
or economic factors impacting information technology companies and companies that rely heavily on technology advances could have a major
effect on the value of stocks in the information technology sector. The value of stocks of technology companies and companies that rely
heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government
regulation and competition, both domestically and internationally, including competition from competitors with lower production costs.
Information technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies,
tend to be more volatile than the overall market. Information technology companies are heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the information technology sector
may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel.

 

Healthcare Sector Risk. The profitability
of companies in the healthcare sector may be affected by government regulations and government healthcare programs, government reimbursement
for medical expenses, increases or decreases in the cost of medical products and services, limited product lines, increased emphasis on
the delivery of healthcare through outpatient services and product liability claims. Many healthcare companies are heavily dependent on
patent protection, which may be time consuming and costly, and the expiration of a company’s patent may adversely affect that company’s
profitability. Healthcare companies are subject to competitive forces that may result in pricing pressure, including price discounting,
and may be thinly capitalized and susceptible to product obsolescence. Many new products in the healthcare sector require significant
research and development and may be subject to regulatory approvals, which may be time consuming and costly and with no guarantee that
the product will come to market.

 

Industrials Sector Risk. The
industrials sector may be affected by changes in the supply and demand for products and services, product obsolescence, claims for environmental
damage or product liability and general economic conditions, among other factors. Government regulation will also affect the performance
of investments in such industrials sector issuers, particularly aerospace and defense companies, which rely to a significant extent on
government demand for their products and services. Transportation companies, another component of the industrials sector, are subject
to sharp price movements resulting from changes in the economy, fuel prices, labor agreements and insurance costs.

 

Materials Sector Risk. The
materials sector may be adversely impacted by the volatility of commodity prices, exchange rates, depletion of resources, over-production,
litigation and government regulations, among other factors.

 

 

ETF Risk. As an ETF,
the Fund is subject to the following risks:

 

Authorized Participants Concentration
Risk. 
The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot
or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in,
shares of the Fund may trade like closed-end fund shares at a significant discount to NAV and may face delisting from the Exchange.

 

Cash Transaction Risk. Like
other ETFs, the Fund sells and redeems its shares only in large blocks called Creation Units and only to “Authorized Participants.”
Unlike many other ETFs, however, the Fund expects to effect its creations and redemptions at least partially or fully for cash, rather
than in-kind securities. Thus, an investment in the Fund may be less tax-efficient than an investment in other ETFs as the Fund may recognize
a capital gain that it could have avoided by making redemptions in-kind. As a result, the Fund may pay out higher capital gains distributions
than ETFs that redeem in-kind. Further, paying redemption proceeds in cash rather than through in-kind delivery of portfolio securities
may require the Fund to dispose of or sell portfolio investments to obtain the cash needed to distribute redemption proceeds at an inopportune
time.

 

International Closed Market Trading
Risk
. To the extent the Fund’s investments trade in markets that are closed when the Fund and Exchange are open, there are likely
to be deviations between current pricing of an underlying security and stale pricing, resulting in the Fund trading at a discount or premium
to NAV greater than those incurred by other ETFs.

 

Premium/Discount Risk. There
may be times when the market price of the Fund’s shares is more than the NAV intra-day (at a premium) or less than the NAV intra-day
(at a discount). As a result, shareholders of the Fund may pay more than NAV when purchasing shares and receive less than NAV when selling
Fund shares. This risk is heightened in times of market volatility or periods of steep market declines. In such market conditions, market
or stop-loss orders to sell Fund shares may be executed at prices well below NAV.

 

Secondary Market Trading Risk. Investors
buying or selling shares in the secondary market will normally pay brokerage commissions, which are often a fixed amount and may be a
significant proportional cost for investors buying or selling relatively small amounts of shares. Secondary market trading is subject
to bid-ask spreads and trading in Fund shares may be halted by the Exchange because of market conditions or other reasons. If a trading
halt occurs, a shareholder may temporarily be unable to purchase or sell shares of the Fund. In addition, although the Fund’s shares
are listed on the Exchange, there can be no assurance that an active trading market for shares will develop or be maintained or that the
Fund’s shares will continue to be listed.

 

New Fund Risk. If the Fund
does not grow in size, it will be at greater risk than larger funds of wider bid-ask spreads for its shares, trading at a greater premium
or discount to NAV, liquidation and/or a stop to trading.

 

 

Liquidity Risk. The Fund’s investments
are subject to liquidity risk, which exists when an investment is or becomes difficult to purchase or sell at a reasonable time and price.
If a transaction is particularly large or if the relevant market is or becomes illiquid, it may not be possible to initiate a transaction
or liquidate a position, which may cause the Fund to suffer significant losses and difficulties in meeting redemptions. If a number of
securities held by the Fund stop trading, it may have a cascading effect and cause the Fund to halt trading. Volatility in market prices
will increase the risk of the Fund being subject to a trading halt. Certain countries in which the Fund may invest may be subject to extended
settlement delays and/or foreign holidays, during which the Fund will unlikely be able to convert holdings to cash.

 

Small- and Mid-Capitalization
Company Risk. 
Investing in the securities of small and medium capitalization companies involves greater risk and the possibility
of greater price volatility than investing in larger capitalization companies. Since small and medium-sized companies may have limited
operating histories, product lines and financial resources, the securities of these companies may be less liquid and more volatile. They
may also be sensitive to (expected) changes in interest rates and earnings.

 

Large Capitalization Company Risk. Large
capitalization companies may be unable to respond quickly to new competitive challenges and attain the high growth rate of successful
smaller companies, especially during extended periods of economic expansion. As such, returns on investments in stocks of large capitalization
companies could trail the returns on investments in stocks of small and mid-capitalization companies.

 

Passive Investment Risk. There is
no guarantee that the Underlying ETFs will create the desired exposure and the Underlying ETFs are not actively managed. An Underlying
ETF does not seek to “beat” its underlying index or take temporary defensive positions when markets decline. Therefore, an
Underlying ETF may purchase or hold securities with current or projected underperformance.

 

Management Risk. The Fund is actively-managed
and may not meet its investment objective based on the Adviser’s success or failure to implement investment strategies for the Fund.
The Adviser’s evaluations and assumptions regarding investments, and other factors may not successfully achieve the Fund’s
investment objective given actual market conditions.

 

Tracking Error Risk. An Underlying
ETF’s return may not match or achieve a high degree of correlation with the return of its respective underlying indexes. This may
be due to, among other factors, the Underlying ETFs holding cash under certain circumstances in lieu of securities of its underlying index,
such as when the Underlying ETF is subject to delays converting U.S. dollars into a foreign currency to purchase foreign securities and
unable to invest in certain components of the Underlying ETFs due to regulatory constraints, trading suspensions, and legal restrictions
imposed by foreign governments. To the extent that an Underlying ETF employs a representative sampling strategy or calculates its NAV
based on fair value prices and the value of an Underlying ETF is based on securities’ closing prices on local foreign markets, an
Underlying ETF’s ability to track the underlying index may be adversely affected.

 

 

Market Risk. The values of the Fund’s
holdings could decline generally or could underperform other investments. In addition, there is a risk that policy changes by the U.S.
Government, Federal Reserve, and/or other government actors could cause volatility in global financial markets and negative sentiment,
which could have a negative impact on the Fund and could result in losses. Geopolitical and other risks, including environmental and public
health risks may add to instability in world economies and markets generally. Changes in value may be temporary or may last for extended
periods. Further, the Fund is susceptible to the risk that certain investments may be difficult or impossible to sell at a favorable time
or price. Market developments may also cause the Fund’s investments to become less liquid and subject to erratic price movements.

 

High Portfolio Turnover Risk. The
Fund may incur high portfolio turnover rates, which may increase the Fund’s brokerage commission costs and negatively impact the
Fund’s performance. Such portfolio turnover also may generate net short-term capital gains.

 

Valuation Risk. Independent
market quotations for certain investments held by the Fund may not be readily available, and such investments may be fair valued or valued
by a pricing service at an evaluated price. These valuations involve subjectivity and different market participants may assign different
prices to the same investment. As a result, there is a risk that the Fund may not be able to sell an investment at the price assigned
to the investment by the Fund. In addition, the securities in which the Fund invests may trade on days that the Fund does not price its
shares; as a result, the value of Fund shares may change on days when investors cannot purchase or sell their Fund holdings.

 

Tax Risk. In order to qualify for
the favorable tax treatment available to regulated investment companies, the Fund must satisfy certain income, asset diversification and
distribution requirements each year. The Fund’s investments in issuers whose control persons are not certain creates a risk that
tax authorities may retrospectively deem the Fund to have failed the asset diversification requirements. If the Fund were to fail the
favorable tax treatment requirements, it would be taxed in the same manner as an ordinary corporation, which would adversely affect its
performance.

 

Depositary Receipts Risk. The Fund
may hold the securities of foreign companies in the form of depositary receipts, including American Depositary Receipts and Global Depositary
Receipts. Investing in depositary receipts entails the risks associated with foreign investments, such as fluctuations in foreign currency
exchange rates and political and economic risks distinct from those associated with investing in the securities of U.S. issuers. In addition,
the value of the securities underlying the depositary receipts may change materially when the U.S. markets are not open for trading, which
will affect the value of the depositary receipts.

 

 

Derivatives Risk. The use of derivatives
(including swaps, futures, forwards, structured notes and options) involve risks, such as possible default by a counterparty, potential
losses if markets do not move as expected, and the potential for greater losses than if these techniques had not been used. Investments
in derivatives may expose the Fund to leverage, which may cause the Fund to be more volatile than if it had not been leveraged. By investing
in derivatives, the Fund could lose more than the amount it invests; some derivatives can have the potential for unlimited loss. Derivatives
may also be subject to valuation risk, which is the risk that valuation sources for the derivative will not be readily available in the
market which is especially possible in times of market distress, during which market participants may be reluctant to purchase complex
instruments or provide price quotes for them. In addition, derivatives can be difficult or impossible to sell at the time of and at the
price desired by the seller.

 

Investments in Investment
Companies Risk.
 The Fund will invest in other investment companies, including those that are advised, sponsored or otherwise
serviced by Krane and/or its affiliates, which include the Underlying ETFs. The Fund will indirectly be exposed to the risks of investments
by such funds and will incur its pro rata share of the underlying fund’s expenses. Additionally, investments in ETFs are subject
to ETF Risk. Krane is subject to conflicts of interest in allocating Fund assets to investment companies that are advised, sponsored or
otherwise serviced by Krane and/or its affiliates. To the extent that the Fund invests in investment companies or other pooled investment
vehicles that are not registered pursuant to the 1940 Act, including foreign investment companies, it will not enjoy the protections of
the U.S. law.

  

Securities Lending Risk. To the extent
the Fund lends its securities, it may be subject to the following risks: (1) the securities in which the collateral is invested may not
perform sufficiently to cover the applicable rebate rates paid to borrowers and related administrative costs; (2) delays may occur in
the recovery of securities from borrowers, which could interfere with the Fund’s ability to vote proxies or to settle transactions;
and (3) although borrowers of the Fund’s securities typically provide collateral in the form of cash that is reinvested in securities,
there is the risk of possible loss of rights in the collateral should the borrower fail financially.

 

Cash and Cash Equivalents Risk. The
Fund may hold cash or cash equivalents. Generally, such positions offer less potential for gain than other investments. This is particularly
true when the market for other investments in which the Fund may invest is rapidly rising. If the Fund holds cash uninvested it will be
subject to the credit risk of the depositing institution holding the cash.

 

Performance Information

 

Once the Fund has completed a full calendar year
of operations, a bar chart and table will be included in this Prospectus that will provide some indication of the risks of investing in
the Fund by showing the variability of the Fund’s return based on net assets and comparing the variability of the Fund’s return
to a broad measure of market performance. Once available, the Fund’s current performance information will be available at www.kraneshares.com.
Past performance does not necessarily indicate how the Fund will perform in the future.

 

Management

 

Investment Adviser

Krane Funds Advisors, LLC (“Krane”
or “Adviser”) serves as the investment adviser to the Fund.

 

 

Portfolio Managers

James Maund, Head of Capital Markets at the Adviser,
has served as a portfolio manager of the Fund since its inception. Jonathan Shelon, Chief Operating Officer of the Adviser, supports Mr.
Maund and has been a portfolio manager of the Fund since its inception. Anthony Sassine, Senior Investment Strategist of the Adviser,
has been a portfolio manager of the Fund since its inception.

 

Purchase and Sale of Fund Shares

Shares may be purchased and redeemed from the
Fund only in “Creation Units” of 50,000 shares, or multiples thereof. As a practical matter, only institutions and large investors,
such as market makers or other large broker-dealers, purchase or redeem Creation Units. Most investors will buy and sell shares of the
Fund on the Exchange. Individual shares can be bought and sold throughout the trading day like other publicly traded securities through
a broker-dealer on the Exchange. These transactions do not involve the Fund. The price of an individual Fund share is based on market
prices, which may be different from its NAV. As a result, the Fund’s shares may trade at a price greater than the NAV (at a premium)
or less than the NAV (at a discount). An investor may incur costs attributable to the difference between the highest price a buyer is
willing to pay to purchase shares of the Fund (bid) and the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). Most investors will incur customary brokerage commissions
and charges when buying or selling shares of the Fund through a broker-dealer.

 

Because the Fund has not commenced operations
as the Fund’s most recently completed fiscal year, the Fund did not have a sufficient trading history to report trading information
and related costs. Once the Fund commences operations, recent information regarding the Fund, including its NAV, market price, premiums
and discounts, and bid ask spreads, will be available on the Fund’s website at www.kraneshares.com.

 

Tax Information

Fund distributions are generally taxable as ordinary
income, qualified dividend income or capital gains (or a combination), unless your investment is in an IRA or other tax-advantaged retirement
account, which may be taxable upon withdrawal.

 

Payments to Broker-Dealers and Other Financial
Intermediaries

If you purchase Fund shares through a broker-dealer
or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your
sales person to recommend the Fund over another investment. Ask your sales person or visit your financial intermediary’s website
for more information.

 

 

Additional Information About the Fund

Each
of the policies described in this Prospectus, including the Fund’s investment objective is a non-fundamental policy that may be
changed by the Board of Trustees of the Trust without shareholder approval. Certain fundamental policies of the Fund are set forth in
the SAI.

 

Additional Information
About the Investment Objective

 

The Fund seeks to achieve its investment objective
by investing primarily in the Underlying ETFs shown below. Each Underlying ETF seeks to provide investment results, before fees and expenses,
corresponding to the price and yield performance of its respective underlying index and invests primarily in the publicly issued shares
of companies that are based in, operate in or are otherwise economically tied to China, including A-Shares, B-Shares, H-Shares, P-Chips
and Red Chips. The currently-projected allocation to each Underlying ETF is shown below:

 

Underlying ETFs Projected Allocation
KraneShares CSI China Internet ETF (KWEB) 30%
KraneShares MSCI All China Health Care Index ETF (KURE) 25%
KraneShares MSCI China Clean Technology ETF (KGRN) 20%
KraneShares CICC China 5G & Semiconductor ETF (KFVG) 15%
KraneShares SSE STAR Market 50 Index ETF (KSTR) 10%

 

Krane Funds Advisors, LLC (“Krane”),
the Fund’s investment adviser, will monitor market conditions and revise the allocations to the Underlying ETFs from time to time
based on its assessment of market conditions, including the maturity of investment themes and the emergence of new themes.

 

In addition to investments in the Underlying ETFs,
the Fund may invest up to 15% of its net assets in the securities of private companies, including those that may be preparing for an initial
public offering. Krane generally expects to invest in private companies that are similar to (for example, in the same sector or industry
as,) companies that are eligible for inclusion in an underlying index of an Underlying ETF. However, from time to time, the Fund may invest
in other types of private companies, if Krane believes the investment represents an attractive opportunity for the Fund to invest in an
issuer engaged in innovation in China or the surrounding region. An investment by the Fund in the securities of private companies will
generally reduce the Fund’s projected allocation to each Underlying ETF approximately pro rata.

 

The Fund may engage in securities lending.

 

Additional Information
About the Underlying ETFs

 

KraneShares CSI China
Internet ETF (KWEB)

 

The KraneShares CSI China
Internet ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance
of a specific foreign equity securities index. The Fund’s current index is the CSI Overseas China Internet Index. The CSI Overseas
China Internet Index is designed to measure the equity market performance of the investable universe of publicly traded China-based companies
whose primary business or businesses are in the Internet and Internet-related sectors (“China Internet Companies”), and are
listed outside of Mainland China, as determined by the index provider, China Securities Index Co., Ltd.. China Internet Companies include,
but are not limited to, companies that develop and market Internet software and/or provide Internet services; manufacture home entertainment
software and educational software for home use; provide retail or commercial services primarily through the Internet; and develop and
market mobile Internet software and/or provide mobile Internet services. Under normal circumstances, the KraneShares CSI China Internet
ETF invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in securities of China Internet
Companies.

 

 

KraneShares MSCI All
China Health Care Index ETF (KURE)

 

The KraneShares MSCI All
China Health Care Index ETF seeks to provide investment results that, before fees and expenses, track the price and yield performance
of a specific foreign equity securities index. The Fund’s current index is the MSCI China All Shares Health Care 10/40 Index. The
MSCI China All Shares Health Care 10/40 Index is a free float adjusted market capitalization weighted index (subject to certain modifications)
designed to track the equity market performance of Chinese companies engaged in the healthcare sector. The securities eligible for inclusion
in the MSCI China All Shares Health Care 10/40 Index include all types of publicly issued shares of Chinese issuers, such as A-Shares,
B-Shares, H-Shares, P-Chips and Red Chips. Issuers eligible for inclusion must be classified under the Global Industry Classification
Standard as engaged in the healthcare sector. The issuers included in the MSCI China All Shares Health Care 10/40 Index may include mid-cap
and large-cap companies.

 

KraneShares MSCI China
Clean Technology ETF (KGRN)

 

The KraneShares MSCI China
Clean Technology Index ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond to
the price and yield performance of a specific foreign equity securities index. The Fund’s current index is the MSCI China IMI Environment
10/40 Index. The MSCI China IMI Environment 10/40 Index is a modified, free float adjusted market capitalization weighted index (subject
to the modifications below) designed to track the equity market performance of Chinese companies that derive at least a majority of their
revenues from environmentally beneficial products and services, as determined by MSCI Inc., the provider of the index. The MSCI China
IMI Environment 10/40 Index is intended to provide exposure to Chinese issuers that focus on contributing to a more environmentally sustainable
economy by making efficient use of scarce natural resources or by mitigating environmental degradation. Securities of companies in the
MSCI China IMI Environment 10/40 Index derive at least 50% of their revenues from products and services in one or more of the following
five themes: (1)  alternative energy; (2) sustainable water; (3) green building; (4) pollution prevention; and (5) energy
efficiency. The issuers included in the MSCI China IMI Environment 10/40 Index may include small-cap, mid-cap and large-cap companies.

 

 

KraneShares CICC China
5G & Semiconductor ETF (KFVG)

 

The KraneShares CICC China
5G & Semiconductor Index ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price
and yield performance of a specific equity securities index. The KraneShares CICC China 5G & Semiconductor Index ETF current index
is the CICC China 5G and Semiconductor Leaders Index. The CICC China 5G and Semiconductor Leaders Index includes the stocks and depositary
receipts of the top 30 companies by free-float market capitalization of Chinese companies engaged in 5G and Semiconductor-Related Industries
(as defined below). The securities that are eligible for inclusion in the CICC China 5G and Semiconductor Leaders Index at each quarterly
reconstitution include all types of publicly issued shares of companies that operate primarily in China, such as A-Shares, B-Shares, H-Shares,
P-Chips and Red Chips, which are described below. Issuers eligible for inclusion must be classified by the Fuzzy Logic Industry Classification
System as being in one of the following and related industries (collectively, “5G and Semiconductor-Related Industries”):
Semiconductor Manufacturing, Semiconductor Equipment and Services, Manufacturing Equipment and Services, Internet and Data Services, Electronic
Equipment Manufacturing, Electronic Components, Consumer Electronics, Computer Hardware and Storage, Communications Equipment and Commercial
Electronics. Securities must have an average daily traded value of over $1 million.

 

KraneShares SSE STAR
Market 50 Index ETF (KSTR)

 

The KraneShares SSE STAR
Market 50 Index ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance
of a specific equity securities index. The KraneShares SSE STAR Market 50 Index ETF’s current index is the SSE Science and Technology
Innovation Board 50 Index. The SSE Science and Technology Innovation Board 50 Index includes the stocks and depositary receipts of the
top 50 companies by free-float market capitalizations that are listed on the SSE Science and Technology Innovation Board. The SSE Science
and Technology Innovation Board is a new listing exchange run by the Shanghai Stock Exchange that focuses on Chinese science and technology
companies. According to the Shanghai Stock Exchange, companies listed on the SSE Science and Technology Innovation Board are mainly from
high-tech and strategic emerging industries, and most focus on next-generation information technology, biomedicine, high-end equipment
and other industries.

 

Principal Investment Risks

 

The following section provides additional information
regarding certain of the principal risks (either directly or through its investments in the Underlying ETFs) of investing in the Fund.
An investment in the Fund is not a deposit with a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. An investment in the Fund involves a risk of a total loss. There is no guarantee that the Fund will meet
its investment objective.

 

Cash and Cash Equivalents
Risk. 
The Fund may hold cash or cash equivalents. Generally, such positions offer less potential for gain than other investments.
Holding cash or cash equivalents, even strategically, may lead to missed investment opportunities. This is particularly true when the
market for other investments in which the Fund may invest is rapidly rising. If the Fund holds cash uninvested it will be subject to the
credit risk of the depositing institution holding the cash.

 

 

China Risk – General. The
economy of China (“China” or the “PRC”) differs, sometimes unfavorably, from the U.S. economy in such respects
as structure, general development, government involvement, wealth distribution, rate of inflation, growth rate, allocation of resources
and capital reinvestment, among others. Under China’s political and economic system, the central government has historically exercised
substantial control over virtually every sector of the Chinese economy through administrative regulation and/or state ownership. For example,
the Chinese government has from time to time taken actions that influence the prices at which certain goods may be sold, encourage companies
to invest or concentrate in particular industries, induce mergers between companies in certain industries and induce private companies
to publicly offer their securities to increase or continue the rate of economic growth, control the rate of inflation or otherwise regulate
economic expansion. It may do so in the future as well. Such actions and a variety of other centrally planned or determined activities
by the Chinese government could have a significant adverse effect on economic conditions in China, the economic prospects for, and the
market prices and liquidity of, the securities of Chinese companies and the payments of dividends and interest by Chinese companies.

 

During the last 30 years,
the Chinese government has reformed its economic policies, which has resulted in less direct central and local government control over
the business and production activities of Chinese enterprises and companies. Notwithstanding the economic reforms instituted by the Chinese
government and the Chinese Communist Party, actions of the Chinese central and local government authorities continue to have a substantial
effect on economic conditions in China, which could affect the public and private sector companies in which the Fund invests. The Chinese
government may also change course and exercise greater central and local government control over Chinese firms.

 

In certain cases where China
has begun a process of privatization of certain entities and industries, investors in newly privatized entities have suffered losses due
to the inability of the newly privatized entities to adjust quickly to a competition environment or changing regulatory and legal standards,
or in some cases, due to re-nationalization of such privatized entities. There is no assurance that such losses will not recur.

 

Export growth continues
to be a major driver of China’s rapid economic growth. Reduction in spending on Chinese products and services, institution of tariffs
or other trade barriers, or a downturn in any of the economies of China’s key trading partners may have an adverse impact on the
Chinese economy. The Chinese economy is particularly dependent upon trading with key partners, such as the United States, Japan, South
Korea and countries in the European Union. Recent developments in relations between the United States and China have heightened concerns
of increased tariffs and restrictions on trade between the two countries. An increase in tariffs or trade restrictions, or even the threat
of such developments, could lead to a significant reduction in international trade, which could have a negative impact on China’s
export industry and a commensurately negative impact on the Fund.

 

In recent years, Chinese entities have incurred
significant levels of debt and Chinese financial institutions currently hold relatively large amounts of non-performing debt. Thus, there
exists a possibility that widespread defaults could occur, which could trigger a financial crisis, freeze Chinese debt and finance markets
and make Chinese securities illiquid.

 

 

In addition, trade relations between the U.S.
and China have recently been strained.  Worsening trade relations between the two countries could adversely impact the Fund, particularly
to the extent that the Chinese government restricts foreign investments in on-shore Chinese companies or the U.S. government restricts
investments by U.S. investors in China including by limiting the ability of Chinese issuers to list on the U.S. exchanges.  Worsening
trade relations may also result in market volatility and volatility in the price of Fund shares.

 

Inflation Risk. Economic growth
in China has historically been accompanied by periods of inflation. Beginning in 2004, the Chinese government commenced the implementation
of various measures to control inflation, which included the tightening of the money supply, the raising of interest rates and more stringent
control over certain industries. If inflation were to increase, the performance of the Chinese economy and the Fund’s investments
could be negatively impacted.

 

Nationalization and Expropriation
Risk.
 Expropriation, including nationalization, confiscatory taxation, political, economic or social instability or other developments
could adversely affect and significantly diminish the values of the Chinese companies in which the Fund invests. There can be no assurance
that the Chinese government will not nationalize or expropriate assets in its territory or over which it otherwise has control. An investment
in the Fund involves a risk of a total loss.

 

Moreover, the Chinese government limits
foreign investment in the securities of Chinese issuers entirely. These restrictions or limitations may have adverse effects on the liquidity
and performance of an Underlying ETF’s holdings as compared to the performance of its underlying index. This may increase the risk
of tracking error and the Fund may not be able to achieve its investment objective.

 

Currency Risk. The government
of China has historically maintained strict currency controls in order to achieve economic, trade and political objectives and regularly
intervened in the currency market. In this regard, the Chinese government has placed strict regulation on the yuan and Hong Kong dollar
and manages the yuan and Hong Kong dollar so that they have historically traded in a tight range relative to the U.S. dollar. The Chinese
government has been under pressure to manage the currency in a less restrictive fashion so that it is less correlated to the U.S. dollar.

 

Since 2005, the exchange rate of the
RMB is no longer strictly pegged to the U.S. dollar. The RMB has now moved to a managed floating exchange rate based on market supply
and demand with reference to a basket of foreign currencies. The daily trading price of the RMB against other major currencies in the
inter-bank foreign exchange market is allowed to float within a narrow band around the central parity published by the People’s
Bank of China. As the exchange rates may be based on market forces, the exchange rates for RMB against other currencies, including the
U.S. dollar, are susceptible to movements based on external factors. Of course, there can be no guarantee that this will continue, or
that the yuan or the Hong Kong dollar will move in relation to the U.S. dollar as expected. There can be no assurance that the RMB will
not be subject to devaluation. Any devaluation of the RMB is expected to adversely affect the value of the Fund’s investments.

 

 

Available Disclosure About Chinese
Issuers Risk.
 Disclosure and regulatory standards in emerging market countries, such as China, are in many respects less stringent
than U.S. standards. There is substantially less publicly available information about Chinese issuers than there is about U.S. issuers.
Therefore, disclosure of certain material information may not be made, and less information may be available to the Fund and other investors
than would be the case if the Fund’s investments were restricted to securities of U.S. issuers. Chinese issuers are subject to accounting,
auditing and financial standards and requirements that differ, in some cases significantly, from those applicable to U.S. issuers. In
particular, the assets and profits appearing on the financial statements of a Chinese issuer may not reflect its financial position or
results of operations in the way they would be reflected had such financial statements been prepared in accordance with U.S. Generally
Accepted Accounting Principles.

 

Such conditions may lead to potential
errors in index data, index computation and/or index construction and may limit the ability to oversee the index provider’s due
diligence process over index data, which may adversely impact an Underlying ETF’s performance and its ability to track the performance
of the underlying index.

 

There has been increased attention from
the SEC and the Public Company Accounting Oversight Board (“PCAOB”) with regard to international auditing standards of U.S.-listed
companies with significant operations in China as well as PCAOB-registered auditing firms in China. Currently, the SEC and PCAOB are only
able to get limited information about these auditing firms and are restricted from inspecting the audit work and practices of registered
accountants in China. These restrictions may result in the unavailability of material information about issuers in China or an issuer’s
operations in China.

 

Chinese Corporate and Securities
Law Risk.
 The Fund’s rights with respect to its investments in China, if any, generally will not be governed by U.S. law,
but rather by Chinese law. China operates under a civil law system. It is based on statutes enacted by various state bodies with authority
over economic matters such as foreign investment, company organization and governance, taxation and trade. These laws are relatively recent
with published court opinions based on them being limited. Further, court precedent is not binding. Thus, there is uncertainty regarding
the implementation of existing law. In addition, laws pertaining to bankruptcy proceedings are generally less developed and may be different
than such laws in the United States and lead to unpredictable results.

 

Legal principles relating to corporate
affairs and the validity of corporate procedures, directors’ fiduciary duties and liabilities and stockholders’ rights often
differ from those that may apply in the United States and other countries. In particular, Chinese laws providing protection to investors,
such as laws regarding the fiduciary duties of officers and directors, are undeveloped and will not provide investors, such as the Fund,
with protection in all situations where protection would be provided by comparable law in the United States. It may therefore be difficult
for the Fund to enforce its rights as an investor under Chinese corporate and securities laws, and it may be difficult or impossible for
the Fund to obtain a judgment in court. Moreover, as Chinese corporate and securities laws continue to develop, these developments may
adversely affect foreign investors, such as the Fund.

 

 

Chinese Securities Markets Risk.
China’s securities markets, including the debt markets, have a limited operating history and are not as developed as those in the
United States. These markets, historically, have had greater volatility than markets in the United States and some other countries, and
experienced inefficiency and pricing anomalies. There is relatively less regulation and monitoring of Chinese securities markets and of
the activities of investors, brokers and other participants than in the United States, including with respect to insider trading, tender
offers, stockholder proxies and disclosure of information. Stock markets in China are in the process of change and further development.
This may lead to additional volatility, difficulty in the settlement and recording of transactions and difficulty in interpreting and
applying the relevant regulations.

 

Political and Economic Risk. The
Chinese government continues to be an active participant in many economic sectors through ownership positions and regulation. The majority
of productive assets in China are still owned by the PRC government at various levels. The allocation of resources in China is subject
to a high level of government control. The Chinese government strictly regulates the payment of foreign currency denominated obligations
and sets monetary policy. Through its policies, the government may provide preferential treatment to particular industries or companies.
The policies set by the government could have a substantial effect on the Chinese economy and the Fund’s investments.

 

or more than 30 years, the PRC government
has carried out economic reforms to achieve decentralization and utilization of market forces to develop the economy of the PRC. These
reforms have resulted in significant economic growth and social progress, but growth has been uneven both geographically and among various
sectors of the economy. Economic growth has also been accompanied by periods of inflation. The PRC government has implemented various
measures from time to time to control inflation and restrain the rate of economic growth.

 

Although reforms over the last 30 years
have generally been regarded as successful, there can be no assurance that the PRC government will continue to pursue such economic policies
or, if it does, that those policies will continue to be successful or will not otherwise have a negative effect on the Fund. Any such
adjustment and modification of those economic policies may have an adverse impact on the securities market of Chinese issuers. Further,
the PRC government may from time to time adopt corrective measures to control the growth of the PRC economy which may also have an adverse
impact on the capital growth and performance of the Fund.

 

Political changes, social instability
and adverse diplomatic developments in the PRC could result in the imposition of additional government restrictions including expropriation
of assets, confiscatory taxes or nationalization of some or all of the property held by Chinese issuers. Internal social unrest or confrontations
with other neighboring countries, including military conflicts in response to such events, may also disrupt economic development in China
and result in a greater risk of currency fluctuations, currency convertibility, interest rate fluctuations and higher rates of inflation.

 

 

China Risk – Onshore
Investing Risks. 
Because the Fund may invest in the local China markets directly (also referred to herein as domestic Chinese
markets or securities or onshore Chinese markets or securities), it will be subject to the following special risks:

 

Capital Controls Risk. RMB
can be categorized into “CNY” (onshore RMB) traded in the PRC and “CNH” (offshore RMB) traded outside the PRC.
CNY and CNH are traded at different exchange rates and their exchange rates may not move in the same direction. Although there has been
a growing amount of RMB held offshore, CNH cannot be freely remitted into the PRC and is subject to certain restrictions, and vice versa.
The Fund may be adversely affected by the exchange rates between CNY and CNH.

 

CNY is currently not a freely convertible
currency as it is subject to foreign exchange control, fiscal policies and repatriation restrictions imposed by the Chinese government.
The PRC government imposes restrictions on the remittance of RMB out of and into China. In the event a remittance by the Fund is disrupted,
the Fund could be adversely affected and, among other matters, may not be able to invest those funds, which may increase the tracking
error of the Fund. In addition, any delay in repatriation of RMB out of China may result in delay in payment of redemption proceeds to
redeeming investors. The Chinese government’s policies on exchange control and repatriation restrictions are subject to change,
and such control of currency conversions and movements in the RMB exchange rates may adversely affect the operations and financial results
of PRC companies and the Fund. If such control policies change in the future, the Fund may be adversely affected.

 

Economic conditions, such as volatile
currency exchange rates and interest rates, political events and other conditions may, without prior warning, lead to intervention by
Chinese government authorities and the imposition of “capital controls.” Capital controls include the prohibition of, or restrictions
on, the ability to transfer currency, securities or other assets into, out of or into the country. Levies may be placed on profits repatriated
by foreign entities (such as the Fund). Capital controls may impact the ability of the Fund to buy, sell or otherwise transfer securities
or currency, adversely affect the trading market and price for shares of the Fund, and cause the Fund to decline in value.

 

The Chinese government also heavily
regulates the domestic exchange of foreign currencies within China. Chinese law requires that all domestic transactions must be settled
in RMB, places significant restrictions on the remittance of foreign currency and strictly regulates currency exchange from RMB. Under
State Administration of Foreign Exchange (“SAFE”) regulations, Chinese corporations may only purchase foreign currencies through
government approved banks. In general, Chinese companies must receive approval from or register with the Chinese government before investing
in certain capital account items, including direct investments and loans, and must thereafter maintain separate foreign exchange accounts
for the capital items. Foreign investors may only exchange foreign currencies at specially authorized banks after complying with documentation
requirements. These restrictions may adversely affect the Fund and its investments. The PRC government may impose additional or other
currency capital controls that could significant harm the Fund.

 

 

Custody Risk. The Fund is
required by Chinese regulation to have a local custodian in China (“PRC Custodian”) for its investments in domestic, onshore
Chinese securities, including A-Shares and mainland Chinese debt (also referred to herein as RMB Bonds). The PRC Custodian maintains the
Fund’s investments in China to ensure their compliance with the rules and regulations of the China Securities Regulatory Commission
(“CSRC”) and the People’s Bank of China. Such investments, when purchased by Krane or the Fund’s sub-adviser,
as applicable, in its capacity as the Fund’s RQFII or QFII, as applicable, will normally be received in a securities account maintained
by the PRC Custodian in the joint names of the Fund and Krane or the sub-adviser, as applicable. The account may not be used for any other
purpose than for maintaining the Fund’s assets. However, given that the securities trading account will be maintained in the joint
names of Krane or the sub-adviser, as applicable, and the Fund, the Fund’s assets may not be as well protected as they would be
if it were possible for them to be registered and held solely in the name of the Fund. In particular, there is a risk that creditors of
Krane or the sub-adviser, as applicable, may assert that the securities are owned by Krane or the sub-adviser, as applicable, and not
the Fund, and that a court would uphold such an assertion, in which case such creditors could seize assets. Because the Fund’s PRC
securities quota may be in the name of both Krane or the sub-adviser, as applicable, and the Fund, there is also a risk that regulatory
actions taken against Krane or the sub-adviser, as applicable, by PRC government authorities may affect the Fund. This is particularly
acute in the case of cash deposited with the PRC Custodian because it may not be segregated, and it may be treated as a debt owing from
the PRC Custodian to the Fund as a depositor. Thus, in the event of a PRC Custodian bankruptcy, liquidation, or similar event, the Fund
may face difficulties and/or encounter delays in recovering its cash.

 

RQFII and QFII Risk. A RQFII
or QFII license and quota may be acquired to invest directly in domestic, onshore Chinese securities. To qualify for a QFII license, an
applicant must meet strict requirements on asset management experience, assets under management, and firm capital. The Fund’s investments
may be limited to the quota obtained by Krane or a Fund’s sub-adviser, as applicable, in its capacity as a RQFII or QFII on behalf
of the Fund. A reduction in or elimination of the quota may have a material adverse effect on the ability of the Fund to achieve its investment
objective. On September 10, 2019, the PRC government announced that it would scrap QFII and
RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer be subject to quotas when investing
in PRC securities (but will remain subject to foreign shareholder limits). It is currently unclear when this change will take effect.

 

The RQFII rules continue to evolve.
The RQFII program is substantially similar to the QFII program, but provides for greater flexibility in repatriating assets, as discussed
below. Chinese regulators may revise or discontinue the RQFII program at any time. There is no guarantee that the CSRC will ultimately
grant or enlarge the quota allowed to a RQFII or QFII licensee, and the application process may take a significant amount of time. Should
the amount of securities that the Fund is eligible to invest in be or become inadequate to meet its investment needs, it may not be able
to gain sufficient exposure to an underlying index and the Underlying ETF may need to rely exclusively on investments through other channels,
such as Stock Connect Programs or Bond Connect Program (for equities) and the CIBM Program (for fixed income securities), which may be
insufficient to meet its needs.

 

 

Repatriations by RQFIIs are currently
permitted daily and are not subject to repatriation restrictions or prior regulatory approval. However, there is no assurance that PRC
rules and regulations will not change or that repatriation restrictions will not be imposed in the future. Further, such changes to the
PRC rules and regulations may be applied retroactively. If a QFII license is obtained and used, all repatriations of gains and income
would require the approval of SAFE. These limitations may also prevent the Fund from making certain distributions to shareholders. Further,
no single underlying foreign investor investing through a QFII may hold more than 10% of the total outstanding shares in one listed company
and all foreign investors investing through QFIIs may not hold, in aggregate, more than 30% of the total outstanding shares in one listed
company. Such limits may not apply where foreign investors make strategic investment in listed companies in accordance with the Measures
for the Administration of Strategic Investments in Listed Companies by Foreign Investors.

 

If the Fund invests directly in domestic
Chinese securities with a QFII license, Krane and/or the Fund’s sub-adviser, as applicable, will be required to transfer the entire
investment principal for the quota into a local sub-custodian account within such time period as specified by SAFE (up to six months).
Following this, investment capital will be subject to an initial lock-up period (currently three months if the Fund is deemed to be an
“open end fund” under Chinese regulations), during which the assets may not be repatriated to the United States, even if they
are never invested. Following that time, investment principal and earnings may generally only be repatriated with the approval of SAFE,
although up to $50 million may be repatriated each week without SAFE approval if the Fund is deemed to be an “open end fund”
under Chinese regulations.

 

China Risk – China Equity
Investing Risks.

 

A-Shares Risk. The ability
of the Fund to invest in China A-Shares is dependent, in part, on the availability of A-Shares either through the trading and clearing
facilities of a participating exchange located outside of mainland China (“Stock Connect Programs”) which currently include
the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Shanghai-London Stock Connect, and China-Japan Stock Connect,
and/or through a QFII or RQFII license and quota allocation from the Chinese regulator. Thus, the Fund’s investment in A-Shares
will be limited by the A-Shares quota obtained by the RQFII or QFII licensee and allocated to the Fund and by the amount of A-Shares available
through the Stock Connect Programs. On September 10, 2019, the PRC government announced that
it would scrap QFII and RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer be subject
to quotas when investing in PRC securities (but will remain subject to foreign shareholder limits). It is currently unclear when this
change will take effect. 
Investments in A-Shares are heavily regulated and the recoupment and repatriation of assets invested
in A-Shares is subject to restrictions by the Chinese government.

 

 

Currently, there are two stock exchanges
in mainland China, the Shanghai and Shenzhen Stock Exchanges. The Shanghai and Shenzhen Stock Exchanges are supervised by the CSRC and
are highly automated with trading and settlement executed electronically. The Shanghai and Shenzhen Stock Exchanges are substantially
smaller, less liquid and more volatile than the securities markets in the United States.

 

The Shanghai Stock Exchange commenced
trading on December 19, 1990, and the Shenzhen Stock Exchange commenced trading on July 3, 1991. The Shanghai and Shenzhen Stock Exchanges
divide listed shares into two classes: A-Shares and B shares. Companies whose shares are traded on the Shanghai and Shenzhen Stock Exchanges
that are incorporated in mainland China may issue both A-Shares and B-Shares. In China, the A-Shares and B-Shares of an issuer may only
trade on one exchange. A-Shares and B-Shares may both be listed on either the Shanghai or Shenzhen Stock Exchanges. Both classes represent
an ownership interest comparable to a share of common stock. A-Shares are traded on the Shanghai and Shenzhen Stock Exchanges in RMB.
A-Shares may be subject to more frequent and/or extended trading halts than other exchange-traded securities and may become illiquid.
The A-Shares market may behave very differently from other Chinese equity markets, and there may be little to no correlation between them.

 

Restrictions continue to exist on investments
in A-Shares and capital therefore cannot flow freely into the A-Share market, making it possible that, in the event of a market disruption,
the liquidity of the A-Share market and trading prices of A-Shares could be more severely affected than the liquidity and trading prices
of markets where securities are freely tradable and capital therefore flows more freely. The Fund cannot predict the nature or duration
of such a market disruption or the impact that it may have on the A-Share market and the short-term and long-term prospects of its investments
in the A-Share market.

 

The Chinese government has in the past
taken actions that benefitted holders of A-Shares. As A-Shares become more available to foreign investors, such as the Fund, the Chinese
government may be less likely to take action that would benefit holders of A-Shares. In addition, there is no guarantee that a QFII or
RQFII licensee will continue to maintain its existing A-Share quota or be able to obtain additional A-Share quota if the A-Share quota
is reduced or eliminated by SAFE or if a QFII or RQFII license is revoked by CSRC at some point in the future. The Fund cannot predict
what would occur if the A-Share quota were reduced or eliminated or if a QFII or RQFII license were to be revoked, although such an occurrence
could likely have a material adverse effect on the Fund. On September 10, 2019, the PRC government
announced that it would scrap QFII and RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer
be subject to quotas when investing in PRC securities (but will remain subject to foreign shareholder limits). It is currently unclear
when this change will take effect.

 

Repatriations by RQFIIs for investors
such as registered funds are permitted daily and are not subject to lockup periods. There is no assurance, however, that PRC rules and
regulations will not change or that repatriation restrictions will not be imposed in the future. Any restrictions on repatriation of the
Fund’s assets may adversely affect the Fund’s ability to meet redemption requests and/or may cause the Fund to borrow money
in order to meet its obligations. These limitations may also prevent a Fund from making certain distributions to shareholders.

 

 

If an Underlying ETF is unable to obtain
sufficient exposure to the components of its underlying index, the Underlying ETF could seek exposure to the component securities of the
underlying index in other ways, such as by investing in depositary receipts of the component securities and Hong Kong listed versions
of the component securities. Consistent with its exemptive relief, the Underlying ETFs may, to a limited extent, where applicable, also
invest in B-Shares issued by the same companies that issue A-Shares that are in its underlying index. The A-Shares market may behave very
differently from the B-Shares market, and there may be little to no correlation between the performances of the two. The Underlying ETF
may also use derivatives or invest in ETFs that can obtain comparable exposures. If necessary, the Underlying ETFs may limit or suspend
purchases of Creation Units of the Underlying ETFs until an Underlying ETF determines that the requisite exposure to an underlying index
is obtainable. During the period that creations are limited or suspended, the Underlying ETFs could trade at a significant premium or
discount to the NAV and could experience substantial redemptions. Alternatively, an Underlying ETF could change its investment objective
by, for example, seeking to track an alternative index that does not include A-Shares as component securities, or decide to liquidate
the Underlying ETFs. In circumstances beyond the control of the Fund, the Underlying ETFs may incur significant losses due to limited
investment capabilities, including based on investment objectives or strategies, due to investment restrictions on RQFIIs and QFIIs licenses,
illiquidity of the securities markets, or delay or disruption in execution or settlement of trades. Should the A-Share quota allocated
for the Underlying ETFs use be or become inadequate to meet the investment needs of the Underlying ETFs and the Underlying ETFs cannot
invest in them through the Stock Connect Programs, the Fund is expected to be adversely affected.

 

The Chinese government limits foreign
investment in the securities of Chinese issuers entirely. China may also impose higher local tax rates on transactions involving certain
companies. These restrictions or limitations may have adverse effects on the liquidity and performance of the Underlying ETFs holdings
as compared to the performance of its underlying index. This may increase the risk of tracking error and the Fund may not be able to achieve
its investment objective.

 

Per a circular (Caishui [2014] 79),
the Fund is temporarily exempt from the Chinese tax on capital gains (“CGT”) on trading in A-Shares as a QFII or RQFII on
the Shanghai Stock Exchange through the Shanghai-Hong Kong Stock Connect as of November 17, 2014, and the Shenzhen Stock Exchange through
the Shenzhen-Hong Kong Stock Connect as of December 5, 2016. There is no indication as to how long the temporary exemption will remain
in effect. Accordingly, the Fund may be subject to such taxes in the future. In addition, there is uncertainty as to the application and
implementation of China’s value added tax to the Fund’s activities. As a result, investors may be advantaged or disadvantaged
depending on the final rules of the relevant tax authorities. On November 7, 2018, the Chinese government announced a three-year exemption
from the corporate income tax withholding tax and value added tax for China-sourced bond interest derived by overseas institutional investors,
but its application, such as with respect to the type of debt issuers covered by the exemption, and whether such taxes will be implemented
again after November 6, 2021, remains unclear in certain respects.

 

 

Investors should note that such provision
may be excessive or inadequate to meet actual CGT tax liabilities (which could include interest and penalties) on the Fund’s investments.
As a result, investors may be advantaged or disadvantaged depending on the final rules of the relevant tax authorities.

 

It is also unclear how China’s
value added tax may apply to the activities of a participant in the Stock Connect Programs or QFII or RQFII licensee and how such application
may be affected by tax treaty provisions. If such a tax is collected, the expense will be passed on and borne by the Fund. The imposition
of such taxes, as well as future changes in applicable PRC tax law, may adversely affect the Fund.

 

The Fund reserves the right to establish
a reserve for any taxes as to which it is uncertain whether they will assessed, although it has not currently done so. If the Fund establishes
such a reserve but is not ultimately subject to the tax, shareholders who redeemed or sold their shares while the reserve was in place
will effectively bear the tax and may not benefit from the later release, if any, of the reserve. Conversely, if the Fund does not establish
such a reserve but ultimately is subject to the tax, shareholders who redeemed or sold their shares prior to the tax being withheld, reserved
or paid will have effectively avoided the tax, even if they benefited from the trading that precipitated the Fund’s payment of it.
The Fund is responsible for any taxes on its operations or investments, including if they are applied retroactively.

 

In addition, urban maintenance and construction
tax (currently at the rate ranging from 1% to 7%), educational surcharges (currently at the rate of 3%) and local educational surcharges
(currently at the rate of 2%) are imposed based on the business tax liabilities.

 

Disclosure of Interests and Short
Swing Profit Rule.
 The Fund may be subject to regulations promulgated by the CSRC, which currently require the Fund to make certain
public disclosures when the Fund and parties acting in concert with the Fund acquire 5% or more of the issued securities of a listed company
(which include A-Shares of the listed company). The relevant PRC regulations presumptively treat all affiliated investors and investors
under common control as parties acting in concert. As such, the Fund may be deemed as a “concert party” of other funds managed
by Krane, a sub-adviser, if applicable, or their affiliates and therefore may be
subject to the risk that the Fund’s holdings may be required to be reported in the aggregate with the holdings of such other funds
should the aggregate holdings trigger the reporting threshold under the PRC law. If the 5% shareholding threshold is triggered, the Fund
would be required to file its report within three days. During the time limit for filing the report, a trading freeze applies and the
Fund would not be permitted to make subsequent trades in the invested company’s securities. Any such trading freeze may impair the
ability of the Fund to achieve its investment objective and undermine the Fund’s performance.

 

 

Further, subject to the interpretation
of PRC courts and PRC regulators, the operation of the PRC short swing profit rule may prevent the Fund from reducing its holdings in
a PRC company within six months of the last purchase of shares of the company if the Fund’s holding in that company exceeds the
threshold prescribed by the relevant exchange on which the PRC company’s shares are listed. The Fund could be subject to these restrictions
even though an entity deemed to be an affiliate (and not the Fund) may have triggered the restrictions. Nonetheless, if the Fund violates
the rule, it may be required by the listed company to return any profits realized from such trading to the company. In addition, the Fund
could not repurchase securities of the listed company within six months of such sale. Finally, under PRC civil procedures, the Fund’s
assets may be frozen to the extent of the claims made by the company in question.

 

PRC Broker Risk. Currently, only
a limited number of brokers are available to trade A-Shares with the Fund. As a result, Krane or a sub-adviser, as applicable, will have
limited flexibility to choose among brokers on behalf of the Fund than is typically the case for investment advisers. If Krane or a sub-adviser,
as applicable, is unable to use a particular broker in the PRC, the operation of the Fund may be adversely affected. Further, the operation
of the Fund may be adversely affected in case of any acts or omissions of the PRC broker, which may result in higher tracking error or
the Fund being traded at a significant premium or discount to its NAV. If a single PRC broker is appointed, the Fund may not necessarily
pay the lowest commission available in the market. There is also a risk that the Fund may suffer losses from the default, bankruptcy or
disqualification of the PRC broker. Krane or a sub-adviser, as applicable, however, in its selection of PRC brokers will consider such
factors as the competitiveness of PRC brokers’ commission rates, size of the relevant orders, and execution standards.

 

B-Shares Risk. The B-Share
market is generally smaller, less liquid and has a smaller issuer base than the A Share market. The issuers that compose the B-Share market
include a broad range of companies, including companies with large, medium and small capitalizations. The B Shares market may behave very
differently from other portions of the Chinese equity markets, and there may be little to no correlation between their performance.

 

H-Shares Risk. The Fund may invest
in shares of companies incorporated in mainland China and listed on the Hong Kong Stock Exchange (“H-Shares”). H-Shares are
traded in Hong Kong dollars on the Hong Kong Stock Exchange, and must meet Hong Kong’s listing and disclosure requirements. H-Shares
may be traded by foreigners and can be used to gain exposure to Chinese securities. Because they are traded on the Hong Kong Stock Exchange,
H-Shares involve a number of risks not typically associated with investing in countries with more democratic governments or more established
economies or securities markets. Such risks may include the risk of nationalization or expropriation; greater social, economic and political
uncertainty; increased competition from Asia’s low-cost emerging economies; currency exchange rate fluctuations; higher rates of
inflation; controls on foreign investment and limitations on repatriation of invested capital; and greater governmental involvement in
and control over the economy. Fluctuations in the value of the Hong Kong dollar will affect the Fund’s holdings of H-Shares. The
Hong Kong stock market may behave very differently from the domestic Chinese stock market and there may be little to no correlation between
the performance of the Hong Kong stock market and the domestic Chinese stock market.

 

 

N-Shares Risk. The Fund
may invest in shares of companies with business operations in mainland China and listed on an American stock exchange, such as the NYSE
or NASDAQ (“N-Shares”). N-Shares are traded in U.S. dollars. N-Shares are issued by companies incorporated anywhere, but many
are registered in Bermuda, the Cayman Islands, the British Virgin Islands, or the United States. Because companies issuing N-Shares have
business operations in China, they are subject to certain political and economic risks in China.

 

P-Chip Risk. The
Fund may invest in shares of companies with controlling private Chinese shareholders that are incorporated outside mainland China and
listed on the Hong Kong Stock Exchange (“P-Chips”). These businesses are largely run by the private sector and have a majority
of their business operations in mainland China. P-Chip shares are traded in Hong Kong dollars on the Hong Kong Stock Exchange, and may
also be traded by foreigners. Because they are traded on the Hong Kong Stock Exchange, P-Chips are also subject to risks similar to those
associated with investments in H-Shares. They are also subject to risks affecting their jurisdiction of incorporation, including any legal
or tax changes. Private Chinese companies may be more indebted, more susceptible to adverse changes in the economy, subject to asset seizures
and nationalization, and negative political or legal developments.

 

Red Chip Risk. The Fund may invest
in shares of companies with controlling Chinese government shareholders that are incorporated outside mainland China, have a majority
of their business operations in mainland China, and listed on the Hong Kong Stock Exchange (“Red Chips”). These businesses
are controlled, either directly or indirectly, by the central, provincial or municipal governments of the PRC. Red Chip shares are traded
in Hong Kong dollars on the Hong Kong Stock Exchange, may also be traded by foreigners and are subject to risks similar to those of H-Shares.
Because Red Chip companies are controlled by various PRC governmental authorities, investing in Red Chips involves risks that political
changes, social instability, regulatory uncertainty, adverse diplomatic developments, asset expropriation or nationalization, or confiscatory
taxation could adversely affect the performance of Red Chip companies. Red Chip companies may be less efficiently run and less profitable
than other companies. They are also subject to risks affecting their jurisdiction of incorporation, including any legal or tax changes.

 

S-Chip Companies Risk. The
Fund may invest in shares of companies with business operations in mainland China and listed on the Singapore Exchange (“S-Chips”).
S-Chip shares are issued by companies incorporated anywhere, but many are registered in Singapore, the British Virgin Islands, the Cayman
Islands, or Bermuda. They are subject to risks affecting their jurisdiction of incorporation, including any legal or tax changes. S-Chip
companies may or may not be owned at least in part by a Chinese central, provincial or municipal government and be subject to the types
of risks that come with such ownership described herein. There may be little or no correlation between the performance of the Singapore
stock market and the mainland Chinese stock market.

 

 

Stock Connect Program Risk. The
Stock Connect Programs are subject to daily and aggregate quota limitations, and an investor cannot purchase and sell the same security
on the same trading day, which may restrict the Fund’s ability to invest in A-Shares through the Stock Connect Programs and to enter
into or exit trades on a timely basis. The Shanghai and Shenzhen markets may be open at a time when the participating exchanges located
outside of mainland China are not active, with the result that prices of A-Shares may fluctuate at times when the Fund is unable to add
to or exit its position. Only certain A-Shares are eligible to be accessed through the Stock Connect Programs. Such securities may lose
their eligibility at any time, in which case they may no longer be able to be purchased or sold through the Stock Connect Programs. Because
the Stock Connect Programs are still evolving, the actual effect on the market for trading A-Shares with the introduction of large numbers
of foreign investors is still relatively unknown. In addition, there is no assurance that the necessary systems required to operate the
Stock Connect Programs will function properly or will continue to be adapted to changes and developments in both markets. In the event
that the relevant systems do not function properly, trading through the Stock Connect Programs could be disrupted. The Stock Connect Programs
are subject to regulations promulgated by regulatory authorities for both exchanges and further regulations or restrictions, such as limitations
on redemptions or suspension of trading, may adversely impact the Stock Connect Programs, if the authorities believe it necessary to assure
orderly markets or for other reasons. There is no guarantee that the participating exchanges will continue to support the Stock Connect
Programs in the future. Each of the foregoing could restrict the Fund from selling its investments, adversely affect the value of its
holdings and negatively affect the Fund’s ability to meet shareholder redemptions.

 

Investments in China A-Shares may not
be covered by the securities investor protection programs of the exchanges and, without the protection of such programs, will be subject
to risk of default by the broker. Because of the way in which A-Shares are held in the Stock Connect Programs, the Fund may not be able
to exercise the rights of a shareholder and may be limited in its ability to pursue claims against the issuer of a security, and may suffer
losses in the event the depository of the Shanghai or Shenzhen Stock Exchange becomes insolvent. Given that all trades through the Stock
Connect Programs must be settled in RMB, investors must have timely access to a reliable supply of offshore RMB, which cannot be guaranteed.

 

Tax Risk. Capital gains realized
on the sale of PRC debt securities may be subject to tax in China; however, the precise method of calculating and collecting the tax for
debt securities has not been determined. There is a risk that PRC tax authorities may seek to collect tax on capital gains or income realized
on the sale of PRC debt securities on a retroactive basis without giving any prior warning. If such tax is collected, the tax liability
will be payable by the Fund.

 

 

Currently, specific PRC tax rules governing
the taxation of RQFIIs and QFIIs from the trading of PRC debt securities have yet to be announced. In this regard, the general principle
of the PRC CIT Law may apply. Under the PRC CIT Law, a non-tax resident enterprise without a permanent establishment (PE) in the PRC is
subject to CIT on a withholding basis, generally at a rate of 10%, to the extent it directly derives the PRC sourced passive income (such
as capital gains and interest income). According to Circular 47 and Circular 394, assuming that the RQFIIs are not PRC tax resident enterprises
and do not have a PE in the PRC, the RQFIIs are subject to PRC CGT at a rate of 10% (which may be reduced by applicable tax treaty) with
respect to interest derived from RMB Bonds and dividends (if any).

 

Circular 47 and Circular 394 did not
clarify the CGT treatment in respect of capital gains derived by non PRC resident enterprises (including RQFIIs and QFIIs) from the trading
of PRC debt securities. Although Circular 79, issued in November 2014, clarifies these rules in certain ways with respect to capital gains
on equity securities, no further clarification has been provided with respect to capital gains on debt securities. In the absence of specific
PRC tax regulations, capital gains realized by RQFIIs and QFIIs on the sale of PRC debt securities should be subject to CGT at a rate
of 10% (which may be reduced by applicable tax treaty) in China pursuant to the general principle of the current PRC CIT Law. However,
the precise method of calculating and collecting the tax has not been determined. Although the PRC tax bureaus have not actively enforced
the collection of CGT on capital gains derived by RQFIIs and QFIIs, in practice there is a risk that PRC tax authorities may seek to collect
CGT on capital gains realized by RQFIIs and QFIIs on the sale of PRC debt securities on a retroactive basis without giving any prior warning.
If such CGT is collected, the CGT liability should be payable by the RQFII or QFII and would be passed on to and borne by the Fund.

 

When the RQFIIs and QFIIs transfer RMB
Bonds, PRC Stamp Duty is currently imposed on the seller but not on the purchaser, at a rate of 0.1% on the transacted value. In addition,
under the current PRC BT Law, which came into effect on 1 January 2009, a taxpayer would be subject to PRC BT at a rate of 5% in respect
of capital gains derived from the trading of RMB Bonds. However, Caishui [2005] 155 grants BT exemption to QFIIs in respect of their gains
derived from the trading of RMB Bonds. The new BT Law, which came into effect on 1 January 2009, has not changed this exemption treatment
at the time of this Prospectus. However, it is not clear whether a similar exemption would be extended to RQFIIs. Dividend income or profit
distributions on equity investment derived from China are not included in the taxable scope of BT.

 

In addition, urban maintenance and construction
tax (currently at the rate ranging from 1% to 7%), educational surcharges (currently at the rate of 3%) and local educational surcharges
(currently at the rate of 2%) are imposed based on the business tax liabilities.

 

There is uncertainty as to the application
and implementation of China’s value added tax to other activities of the Fund or as a participant in the CIBM Program or QFII or
RQFII licensee and how such application may be affected by tax treaty provisions. If such a tax is collected, the expense will be borne
by the Fund. The imposition of such taxes, as well as future changes in applicable PRC tax law, may adversely affect the Fund.

 

 

The Fund reserves the right to establish
a reserve for any taxes as to which it is uncertain whether they will assessed, although it has not currently done so. If the Fund establishes
such a reserve but is not ultimately subject to the tax, shareholders who redeemed or sold their shares while the reserve was in place
will effectively bear the tax and may not benefit from the later release, if any, of the reserve. Conversely, if the Fund does not establish
such a reserve but ultimately is subject to the tax, shareholders who redeemed or sold their shares prior to the tax being withheld, reserved
or paid will have effectively avoided the tax, even if they benefited from the trading that precipitated the Fund’s payment of it.
The Fund is responsible for any taxes on its operations or investments, including if they are applied retroactively.

 

Concentration Risk. Because
the Fund’s assets are expected to be concentrated in an industry or group of industries, to the extent that an Underlying ETF concentrates
in a particular industry or group of industries, the Fund is subject to loss due to adverse occurrences that may affect that industry
or group of industries. Market conditions, interest rates, and economic, regulatory, or financial developments could significantly affect
a single industry or a group of related industries, and the securities of companies in that industry or group of industries could react
similarly to these or other developments.

 

Consumer Discretionary Sector Risk. Consumer
discretionary products and services are non-essential products and services whose demand tends to increase as consumers’ disposable
income increases. This sector can be significantly affected by the performance of the overall economy, interest rates, competition, and
consumer confidence. Success can depend heavily on disposable household income and consumer spending. Changes in demographics and consumer
tastes can also affect the demand for, and success of, consumer discretionary products. The prices of raw materials fluctuate in response
to a number of factors, including changes in government agricultural support programs, exchange rates, import and export controls, changes
in international agricultural and trading policies and seasonal and weather conditions. Companies in the consumer discretionary sector
may be subject to severe competition, which may also have an adverse impact on their profitability.

 

Currency Risk. The Fund’s NAV
is determined on the basis of the U.S. dollar and, therefore, the Fund may lose value if the local currency of a foreign market to which
the Fund is exposed depreciates against the U.S. dollar, even if the local currency value of the Fund’s holdings goes up. The Fund’s
assets will be invested in the securities of foreign issuers and the income received by the Fund may be in foreign currencies. The Fund
will compute and expects to distribute its income in U.S. dollars, and the computation of income will be made on the date that the income
is earned by the Fund at the foreign exchange rate in effect on that date. Any gain or loss attributable to fluctuations in exchange rates
between the time the Fund accrues income or gain and the time the Fund converts such income or gain from a foreign currency to the dollar
is generally treated as ordinary income or loss. Therefore, if the value of a foreign currency increases relative to the U.S. dollar between
the accrual of income and the time at which the Fund converts the foreign currency to U.S. dollars, the Fund will recognize ordinary income
upon conversion. In such circumstances, if the Fund has insufficient cash in U.S. dollars to meet distribution requirements under the
Internal Revenue Code of 1986, as amended (the “Code”), the Fund may be required to liquidate certain positions in order to
make distributions. The liquidation of investments, if required, may also have an adverse impact on the Fund’s performance. Furthermore,
the Fund may incur costs in connection with conversions between U.S. dollars and foreign currencies. Foreign exchange dealers realize
a profit based on the difference between the prices at which they are buying and selling various currencies. Thus, a dealer normally will
offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire immediately
to resell that currency to the dealer.

 

 

The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through
forward, futures or options contracts to purchase or sell foreign currencies. The use of currency transactions could result in the Fund’s
incurring losses as a result of the imposition of exchange controls, exchange rate regulation, suspension of settlements or the inability
to deliver or receive a specified currency. Delays in converting or transferring U.S. dollars to foreign currencies for the purpose of
purchasing foreign securities could leave the Fund with uninvested cash, may hinder the Fund’s performance, including because any
delay could result in the Fund missing an investment opportunity and purchasing securities at a higher price than originally intended,
or incurring cash drag. Delays in converting or transferring foreign currencies to U.S. dollars could also inhibit the Fund’s ability
to meet shareholder redemptions or make distributions.

 

Depositary Receipts Risk. The Fund
may hold the securities of foreign companies in the form of depositary receipts, including American Depositary Receipts (“ADRs”)
and Global Depositary Receipts. Investing in depositary receipts entails additional risks associated with foreign investments. The underlying
securities of the depositary receipts in the Fund’s portfolio are subject to fluctuations in foreign currency exchange rates that
may affect the value of the Fund’s portfolio. In addition, the value of the securities underlying the depositary receipts may change
materially when the U.S. markets are not open for trading, which will affect the value of the depositary receipts. Like direct investments
in foreign securities, investments in depositary receipts involve political and economic risks distinct from those associated with investing
in the securities of U.S. issuers.

 

ADRs are U.S. dollar-denominated receipts representing
shares of foreign-based corporations. ADRs are issued by U.S. banks or trust companies, and entitle the holder to all dividends and capital
gains that are paid out on the underlying foreign shares. Investment in ADRs may be less liquid than the underlying shares in their primary
trading market. “Sponsored” depositary receipts are established jointly by a depositary and the underlying issuer, whereas
“unsponsored” depositary receipts may be established by a depositary without participation by the underlying issuer. Holders
of an unsponsored depositary receipt generally bear all the costs associated with establishing the unsponsored depositary receipt. In
addition, the issuers of the securities underlying unsponsored depositary receipts are not obligated to disclose material information
in the United States and, therefore, there may be less information available regarding such issuers and there may not be a correlation
between such information and the market value of the depositary receipts.

 

 

Depositary receipts may also be unregistered and
unlisted, and may be purchased in the public markets or restricted securities that can be offered and sold only to “qualified institutional
buyers” under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). If a particular investment
in such ADRs becomes illiquid, that investment will be included within the Fund’s limitation on investment in illiquid securities.
Moreover, if adverse market conditions were to develop during the period between the Fund’s decision to sell these types of ADRs
and the point at which the Fund is permitted or able to sell such security, the Fund might obtain a price less favorable than the price
that prevailed when it decided to sell or may be unable to sell it at all.

 

Derivatives Risk. Derivatives are
financial instruments, such as swaps, futures, forwards, structured notes and options, whose values are based on the value of one or more
reference assets, such as a security, asset, currency, interest rate or index. Derivatives involve risks different from, and possibly
greater than, the risks associated with investing directly in securities and other more traditional investments. For example, derivatives
involve the risk of mispricing or improper valuation and the risk that changes in the value of a derivative may not correlate perfectly
with the reference asset(s). Derivative transactions can create investment leverage, which implicates risks greater than those associated
with investing directly in a reference asset, because a small investment in a derivative can result in a large impact on the Fund and
may cause the Fund to be more volatile.

 

Many derivative transactions are entered into
“over-the-counter” (not on an exchange or contract market); as a result, the value of such a derivative transaction will depend
on the ability and the willingness of the Fund’s counterparty to perform its obligations under the transaction. If a counterparty
were to default on its obligations, the Fund’s contractual remedies against such counterparty may be subject to bankruptcy and insolvency
laws, which could affect the Fund’s rights as a creditor (e.g., the Fund may not receive the net amount of payments that it is contractually
entitled to receive). A liquid secondary market may not always exist for the Fund’s derivative positions at any time. If a derivative
transaction is centrally cleared, it will be subject to the rules of the clearing exchange and subject to risks associated with the exchange.

 

Derivatives can be illiquid and imperfectly correlate
with the reference asset(s), resulting in unexpected returns that could materially adversely affect the Fund. Some derivatives can have
the potential for unlimited loss. Many derivatives are subject to segregation requirements, pursuant to which the Fund must segregate
the market or notional value of the derivatives and which could impede the portfolio management of the Fund. It is possible that developments
in the derivatives market, including ongoing or potential government regulation, could adversely affect the Fund’s ability to enter
into new derivatives agreements, terminate existing derivative agreements or to realize amounts to be received under such instruments.

 

 

Emerging Markets Risk. Investments
in developing or emerging markets issuers involve additional risks relating to political, economic, or regulatory conditions not associated
with investments in U.S. securities and instruments. For example, in comparison with developed markets, developing and emerging markets
may be subject to greater market volatility; greater risk of asset seizures and capital controls; lower trading volume and liquidity;
greater social, political and economic uncertainty; governmental controls on foreign investments and limitations on repatriation of invested
capital; greater risk of market shutdown; lower disclosure, corporate governance, auditing and financial reporting standards; fewer protections
of property rights; restrictions on the transfer of securities or currency; and settlement and trading practices that differ from U.S.
or developed markets. Shareholder claims and legal remedies that are common in the United States may be difficult or impossible to pursue
in many emerging market countries. In addition, due to jurisdictional limitations, matters of comity and various other factors, U.S. authorities
may be limited in their ability to bring enforcement actions against non-U.S. companies and non-U.S. persons in certain emerging market
countries. Most emerging market companies are not subject to the uniform accounting, auditing and financial reporting requirements applicable
to issuers in the United States, which may impact the availability and quality of information about emerging market issuers. Additionally,
in times of market stress, regulatory authorities of different emerging market countries may apply varying techniques and degrees of intervention.
Securities of issuers traded on foreign exchanges may be suspended, either by the issuers themselves, by an exchange, or by governmental
authorities. The likelihood of such suspensions may be higher for securities of issuers in emerging or less-developed market countries
than in countries with more developed markets. Trading suspensions may be applied from time to time to the securities of individual issuers
for reasons specific to that issuer, or may be applied broadly by exchanges or governmental authorities in response to market events.
Suspensions may last for significant periods of time, during which trading in the securities and in instruments that reference the securities,
such as derivative instruments, may be halted.Each of these factors may impact the ability of the Fund to buy, sell or otherwise transfer
securities, adversely affect the trading market and price for Fund shares, and cause the Fund to decline in value.

 

The economies of emerging markets, and China in
particular, may be heavily reliant upon international trade and may suffer disproportionately if international trading declines or is
disrupted.

 

Environmental Issuers
Risk. 
Issuers engaged in environmentally beneficial business lines may be difficult to identify and investments in them may be
volatile. They may be highly dependent upon government subsidies, contracts with government entities, and the successful development of
new and proprietary technologies. In addition, seasonal weather conditions, fluctuations in supply of and demand for clean energy products,
and international political events may cause fluctuations in the performance of these issuers and the prices of their securities. Other
countries, including the U.S., may take steps against Chinese companies engaged in environmentally beneficial services and products, such
as through the imposition of tariffs and anti-dumping duties. Even companies that are deemed to be involved in environmentally beneficial
services and products in China may not compare favorably with respect to their environmental practices and impact as issuers of other
countries.

 

Equity Securities Risk. Equity
securities are subject to volatile changes in value that may be attributable to market perception of a particular issuer or to general
stock market fluctuations that affect all issuers. Investments in equity securities are subject to volatile changes in market value and
their values may be more volatile than investments in other asset classes. In the event of liquidation, equity securities are generally
subordinate in rank to debt and other securities of the same issuer.

 

 

ETF Risk. As an ETF,
the Fund is subject to the following risks:

 

Authorized Participants Concentration
Risk. 
The Fund has a limited number of financial institutions that may act as Authorized Participants. To the extent they cannot
or are otherwise unwilling to engage in creation and redemption transactions with the Fund and no other Authorized Participant steps in,
shares of the Fund may trade like closed-end fund shares at a significant discount to NAV and may face delisting from the Exchange.

 

Cash Transactions
Risk. 
Like other ETFs, the Fund sells and redeems its shares only in large blocks called Creation Units and only to Authorized
Participants. Unlike most other ETFs, however, the Fund expects to effect its creations and redemptions at least partially or fully for
cash, rather than in-kind securities.

 

Other ETFs generally
are able to make in-kind redemptions and avoid realizing gains in connection with redemption requests. Effecting redemptions for cash
may cause the Fund to sell portfolio securities in order to obtain the cash needed to distribute redemption proceeds. Such dispositions
may occur at an inopportune time, resulting in potential losses to the Fund or difficulties in meeting shareholder redemptions, and involve
transaction costs. If the Fund recognizes gain on these sales, this generally will cause the Fund to recognize gain it might not otherwise
have recognized if it were to distribute portfolio securities in-kind or to recognize such gain sooner than would otherwise have been
required. The Fund generally intends to distribute these gains to shareholders to avoid being taxed on this gain at the Fund level and
otherwise comply with the special tax rules that apply to it. This strategy may cause shareholders to be subject to tax on gains they
would not otherwise be subject to, or at an earlier date than, if they had made an investment in another ETF.

 

In addition, cash transactions may have
to be carried out over several days if the securities market in which the Fund is trading is less liquid and may involve considerable
transaction expenses and taxes. These brokerage fees and taxes, which will be higher than if the Fund sold and redeemed its shares principally
in-kind, may be passed on to purchasers and redeemers of Creation Units in the form of creation and redemption transaction fees. However,
the Fund has capped the total fees that may be charged in connection with the redemption of Creation Units at 2% of the value of the Creation
Units redeemed. To the extent transaction and other costs associated with a redemption exceed that cap, those transaction costs will be
borne by the Fund’s remaining shareholders. These factors may result in wider spreads between the bid and the offered prices of
the Fund’s shares than for other ETFs.

 

International Closed Market Trading
Risk
. To the extent the Fund’s underlying securities may trade in markets that may be closed when the Fund and Exchange are
open, there are likely to be deviations between current pricing of an underlying security and stale pricing, resulting in the Fund trading
at a discount or premium to NAV that may be greater than those incurred by other ETFs.

 

 

Premium/Discount Risk. The NAV
of the Fund’s shares will generally fluctuate with changes in the market value of the Fund’s securities holdings. The market
prices of Fund shares will generally fluctuate in accordance with changes in the Fund’s NAV and supply and demand of shares on the
secondary market. It cannot be predicted whether Fund shares will trade below (at a discount), at or above (at a premium) their NAV. As
a result, shareholders of the Fund may pay more than NAV when purchasing shares and receive less than NAV when selling Fund shares. This
risk is heightened in times of market volatility or periods of steep market declines. In such market conditions, market or stop-loss orders
to sell Fund shares may be executed at market prices that are significantly below NAV. Price differences may be due, in part, to the fact
that supply and demand forces at work in the secondary trading market for shares may be closely related to, but not identical to, the
same forces influencing the prices of the securities of the Underlying ETFs trading individually. The market prices of Fund shares may
deviate significantly from the NAV of the shares during periods of market volatility or if the Fund’s holdings are or become more
illiquid. Disruptions to creations and redemptions may result in trading prices that differ significantly from the Fund’s NAV. In
addition, market prices of Fund shares may deviate significantly from the NAV if the number of Fund shares outstanding is smaller or if
there is less active trading in Fund shares. Investors purchasing and selling Fund shares in the secondary market may not experience investment
results consistent with those experienced by those creating and redeeming directly with the Fund.

 

Secondary Market Trading Risk.
Investors buying or selling shares in the secondary market will normally pay brokerage commissions, which are often a fixed amount and
may be a significant proportional cost for investors buying or selling relatively small amounts of shares. In addition, secondary market
investors will incur the cost of the difference between the price that an investor is willing to pay for shares (the bid price) and the
price at which an investor is willing to sell shares (the ask price). This difference in bid and ask prices is often referred to as the
“spread” or “bid-ask spread.” The bid-ask spread, which increases the cost of purchasing and selling Fund shares,
varies over time for shares based on trading volume and market liquidity, and is generally lower if the Fund’s shares have more
trading volume and market liquidity and higher if the Fund’s shares have little trading volume and market liquidity. Increased market
volatility may cause increased bid-ask spreads.

 

Although Fund shares are listed for
trading on the Exchange, there can be no assurance that an active trading market for such shares will develop or be maintained or that
the Fund’s shares will continue to be listed. Trading in Fund shares may be halted due to market conditions or for reasons that,
in the view of the Exchange, make trading in shares inadvisable. In addition, trading in shares is subject to trading halts caused by
extraordinary market volatility pursuant to Exchange “circuit breaker” rules. There can be no assurance that the requirements
of the Exchange necessary to maintain the listing of any Fund will continue to be met or will remain unchanged or that the shares will
trade with any volume, or at all.

 

ETF Risk – New Fund Risk. If the Fund
does not grow large in size once it commences trading, it will be at greater risk than larger funds of wider bid-ask spreads for its shares,
trading at a greater premium or discount to NAV, liquidation and/or a trading halt.

 

 

Foreign Securities Risk. Investment
in foreign securities may involve higher costs than investment in U.S. securities, including higher transaction and custody costs as well
as the imposition of additional taxes by foreign governments. Foreign investments may also involve risks associated with currency exchange
rates, less complete financial information about the issuers, less market liquidity, more market volatility and political and economic
instability. Future political and economic developments, the possible imposition of withholding taxes on dividend income, the possible
seizure or nationalization of foreign holdings, the possible establishment of exchange controls or freezes on the convertibility of currency,
or the adoption of other governmental restrictions might adversely affect an investment in foreign securities. Additionally, foreign issuers,
especially issuers in emerging markets, may be subject to less stringent regulation, and to different accounting, auditing, recordkeeping,
financial reporting, and investor protection requirements. Investments in foreign securities typically are less liquid than investments
in U.S. securities. The value of foreign securities may change materially when the U.S. markets are not open for trading.

 

Income from securities of non-U.S. issuers, including
gains on the sale of such securities, may be subject to foreign taxes, which would be the responsibility of the Fund. Even if the Fund
qualifies to pass these taxes through to shareholders, the ability to claim a credit for such taxes may be limited, particularly in the
case of taxes on capital gains. Foreign markets may have clearance and settlement procedures that make it difficult for the Fund to buy
and sell securities. This could result in a loss to the Fund by causing the Fund to be unable to dispose of an investment or to miss an
attractive investment opportunity, or by causing the Fund’s assets to be uninvested for some period of time, or cause the Fund to
face delays or difficulties in meeting shareholder redemptions.

 

From time to time, certain of the issuers of securities
purchased by the Fund may operate in, or have dealings with, countries that may become subject to sanctions or embargoes imposed by the
U.S. Government and the United Nations and/or countries identified by the U.S. Government as state sponsors of terrorism. A company may
suffer damage to its reputation and value if it is identified as such a company. Any Fund investment in such companies will be indirectly
subject to those risks.

 

Geographic Focus Risk. The Fund’s
investments are expected to be focused in a particular country, countries, or region to the same extent as the Underlying ETF and therefore
the Fund may be susceptible to adverse market, political, regulatory, and geographic events affecting that country or region. Such geographic
focus also may subject the Fund to a higher degree of volatility than a more geographically diversified funds.

 

Healthcare Sector Risk. The
profitability of companies in the healthcare sector may be affected by extensive government regulation, restrictions on government reimbursement
for medical expenses, rising or falling costs of medical products and services, pricing pressure, an increased emphasis on outpatient
services, a limited number of products, industry innovation, changes in technologies and other market developments. Healthcare companies
are subject to competitive forces that may make it difficult to raise prices and, in fact, may result in price discounting.

 

 

Many healthcare companies
are heavily dependent on patent protection and the actual or perceived safety and efficiency of their products. Patents have a limited
duration, and, upon expiration, other companies may market substantially similar (i.e., “generic”) products that are typically
sold at a lower price than the patented product. The introduction of a generic product to the market can cause the original developer
to lose market share and/or reduce the price of the product, resulting in lower profits for the original developer. As a result, the expiration
of patents may adversely affect the profitability of these companies.

 

In addition, because the
products and services of many companies in the healthcare sector affect the health and well-being of many individuals, these companies
are particularly susceptible to extensive litigation based on product liability and similar claims.

 

Many new products in the
healthcare sector may be subject to regulatory approvals. The process of obtaining such approvals may be long and costly, which can result
in increased development costs, delayed cost recovery and loss of competitive advantage to the extent that rival companies have developed
competing products or procedures, adversely affecting the company’s revenues and profitability. In other words, delays in the regulatory
approval process may limit the opportunity for a company to profit from a new product or to bring a new product to market, which could
adversely affect a company’s business. Healthcare companies may also be strongly affected by scientific biotechnology or technological
developments, and their products may quickly become obsolete. Also, many healthcare companies offer products and services that are subject
to extensive governmental regulation and may be adversely affected by changes to governmental policies or laws, including cost control,
national health insurance, incentives for compensation in the provision of healthcare services, tax incentives and penalties related to
healthcare insurance premiums and promotion of prepaid healthcare plans.

 

High Portfolio Turnover Risk. The
Fund may incur high turnover rates. This may increase the Fund’s brokerage commission costs. The performance of the Fund could be
negatively impacted by the increased brokerage commission costs incurred by the Fund. Rapid portfolio turnover also exposes shareholders
to a higher current realization of net short-term capital gains, distributions of which would generally be taxed to you as ordinary income
and thus cause you to pay higher taxes.

 

Industrials Sector Risk. The industrials
sector includes companies engaged in the manufacture and distribution of capital goods, such as those used in defense, construction and
engineering, companies that manufacture and distribute electrical equipment and industrial machinery and those that provide commercial
and transportation services and supplies. Companies in the industrials sector may be adversely affected by changes in government regulation,
world events and economic conditions. Government regulation may in particular affect the aerospace and defense companies, which rely to
a significant extent on government demand for their products and services. Transportation companies, another component of the industrials
sector, are subject to sharp price movements resulting from changes in the economy, fuel prices, labor agreements and insurance costs. 

 

Information Technology Sector Risk. Market
or economic factors impacting information technology companies and companies that rely heavily on technology advances could have a major
effect on the value of stocks in the information technology sector. The value of stocks of technology companies and companies that rely
heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government
regulation and competition, both domestically and internationally, including competition from competitors with lower production costs.
Information technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies,
tend to be more volatile than the overall market. Information technology companies are heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the information technology sector
may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel.

 

 

Internet Companies Risk. Investments
in Internet companies may be volatile. Internet companies are subject to intense competition, the risk of product obsolescence, changes
in consumer preferences and legal, regulatory and political changes. They are also especially at risk of hacking and other cybersecurity
events. In addition, it can be difficult to determine what qualifies as an Internet company.

 

Investments in Investment Companies Risk. The
Fund will purchase shares of investment companies, such as ETFs, unit investment trusts, closed-end investment companies and foreign investment
companies, including those that are advised, sponsored or otherwise serviced by Krane and/or its affiliates, which include the Underlying
ETFs. When the Fund invests in an investment company, in addition to directly bearing the expenses associated with its own operations,
it will bear a pro rata portion of the underlying fund’s expenses. An investor in the Fund may receive taxable gains as a result
of an underlying fund’s portfolio transactions in addition to the taxable gains attributable to the Fund’s transactions in
shares of the underlying fund. For example, shares of an ETF are traded at market prices, which may vary from the NAV of its underlying
investments. Also, the lack of liquidity in an ETF can contribute to the increased volatility of its value in comparison to the value
of the underlying portfolio securities. To the extent that the Fund invests in investment companies or other pooled investment vehicles
that are not registered pursuant to the 1940 Act, including foreign investment companies, it will not enjoy the protections of the 1940
Act. In addition, to the extent the Fund invests in other investment companies, including ETFs, sponsored, advised or otherwise serviced
by Krane, its sub-adviser, as applicable, or their affiliates, they may be subject to conflicts of interest in allocating Fund assets,
particularly if they are paid an advisory fee both by the Fund and the fund in which the Fund invests.

 

Large Capitalization
Company Risk. 
Investments in large capitalization companies may go in and out of favor based on market and economic conditions
and may underperform other market segments. Some large capitalization companies may be unable to respond quickly to new competitive challenges
and attain the high growth rate of successful smaller companies, especially during extended periods of economic expansion. As such, returns
on investments in stocks of large capitalization companies could trail the returns on investments in stocks of small and mid capitalization
companies.

 

Liquidity Risk. The Fund’s investments
are subject to liquidity risk, which exists when an investment is or becomes difficult to purchase or sell at a reasonable time and price.
If a transaction is particularly large or if the relevant market is or becomes illiquid, it may reduce the potential returns of the Fund
because it may be unable to sell the illiquid securities at an advantageous time or price, which may cause the Fund to suffer significant
losses and difficulties in meeting redemptions. This is especially true given the limited number of market participants in certain markets
in which the Fund may invest. Certain countries in which the Fund may invest may be subject to extended settlement delays and/or foreign
holidays, during which the Fund will unlikely be able to convert such holdings to cash and may make it additionally difficult for the
Fund to meet redemptions in a timely fashion.

 

 

Market developments may cause the Fund’s
investments to become less liquid and subject to erratic price movements, and may also cause the Fund to encounter difficulties in timely
honoring redemptions, especially if market events cause an increased incidence of shareholder redemptions. If a number of securities held
by the Fund stop trading or become illiquid, it may have a cascading effect and cause the Fund to halt trading. Volatility in market prices
will increase the risk of the Fund being subject to a trading halt.

 

To the extent that an investment is deemed to
be an illiquid investment or a less liquid investment, a Fund can expect to be exposed to greater liquidity risk.

 

Management Risk. The Fund is actively-managed
and may not meet its investment objective based on the Adviser’s success or failure to implement investment strategies for the Fund.
The Adviser’s evaluations and assumptions regarding investments, and other factors may not successfully achieve the Fund’s
investment objective given actual market conditions.

 

The Underlying ETFs are
not actively-managed and may not fully replicate their underlying indexes and may hold less than the total number of securities in their
underlying indexes. Therefore, an Underlying ETF is subject to the risk that the Adviser’s investment strategy, which is subject
to a number of constraints, may not produce the intended results.

 

Market Risk. The
values of the Fund’s holdings could decline generally or could underperform other investments. Market fluctuations could be caused
by such factors as economic and political developments, changes in interest rates and perceived trends in securities prices. Recent developments
in relations between the United States and its trading partners have heightened concerns of increased tariffs and restrictions on trade
between the U.S. and other countries. An increase in tariffs or trade restrictions, or even the threat of such developments, could lead
to a significant reduction in international trade, which could have a negative impact on the world’s export industry and a commensurately
negative impact on financial markets. Different types of securities tend to go through cycles of outperformance and under-performance
in comparison to the general securities markets. In addition, securities may decline in value due to factors affecting a specific issuer,
market or securities markets generally. Therefore, the Fund is susceptible to the risk that certain holdings may be difficult or impossible
to sell at a favorable time or price.

 

Turbulence in the financial
markets and reduced liquidity in equity, credit and fixed-income markets may negatively affect issuers worldwide, which could have an
adverse effect on the Fund. The Federal Reserve and other domestic and foreign government agencies may attempt to stabilize the global
economy. These actions may expose markets to heightened volatility and may reduce liquidity for certain Fund investments, causing the
value of the Fund’s investments and share price to decline. To the extent that the Fund experiences high redemptions because of
these actions, the Fund may experience increased portfolio turnover, which will increase the costs that the Fund incurs and will lower
the Fund’s performance.

 

 

Geopolitical risks, including
terrorism, tensions or open conflict between nations, or political or economic dysfunction within some nations that are major players
on the world stage or major producers of oil, may lead to overall instability in world economies and markets generally and have led, and
may in the future lead, to increased market volatility and may have adverse long-term effects. Similarly, environmental and public health
risks, such as natural disasters or pandemics/epidemics, or widespread fear that such events may occur, may impact markets adversely and
cause market volatility in both the short- and long-term.

 

Materials Sector Risk. Companies in
the materials sector may be adversely affected by commodity price volatility, exchange rates, import controls, increased competition,
depletion of resources, over-production, technical progress, labor relations, litigation and government regulations, among other factors.
Also, companies in the materials sector are at risk of liability for environmental damage and product liability claims. Production of
materials may exceed demand as a result of market imbalances or economic downturns, leading to poor investment returns.

 

Passive Investment Risk. The Underlying
ETFs are not actively managed and do not seek to “beat” its underlying index, and do not take temporary positions when markets
decline. Therefore, an Underlying ETF may not sell a security due to current or projected underperformance of a security, industry or
sector. If a specific security is removed from an underlying index, the Underlying ETF may be forced to sell such security at an inopportune
time or for a price other than the security’s current market value. It is expected that the value of Underlying ETF shares will
decline, more or less, in correspondence with any decline in value of an underlying index. An underlying index may not contain the appropriate
mix of securities for any particular economic cycle, and the timing of movements from one type of security to another in seeking to track
its underlying index could have a negative effect on the Underlying ETF. However, the Underlying ETF’s investment objective and
principal investment strategies impose limits on its ability to invest in securities not included in its underlying index. There is no
guarantee that any underlying index will create the desired exposure.

 

Unlike an actively managed fund, the
Underlying ETFs
do not use techniques or defensive strategies designed to lessen the effects of market volatility or to reduce
the impact of periods of market decline. This means that, based on market and economic conditions, the Underlying ETF’s performance
could be lower than other types of registered investment companies that may actively shift their portfolio assets to take advantage of
market opportunities or to lessen the impact of a market decline. To the extent an Underlying ETF employs a representative sampling approach,
it will hold a smaller number of securities than are in its underlying index. As a result, an adverse development to an issuer of securities
that the Underlying ETF holds could result in a greater decline in NAV than would be the case if the Underlying ETF held more of the securities
in its underlying index.

 

 

Pre-IPO Investments Risk. Investments in
private companies that have not yet issued securities publicly in an initial public offering (“IPO”) (“pre-IPO shares”),
involve greater risks than investments in securities of companies that have traded publicly on an exchange for extended periods of time.
Investments in these companies are generally less liquid than investments in securities issued by public companies and may be difficult
for the Fund to value. Compared to public companies, private companies may have a more limited management group and limited operating
histories with narrower, less established product lines and smaller market shares, which may cause them to be more vulnerable to competitors’
actions, market conditions and consumer sentiment with respect to their products or services, as well as general economic downturns. In
addition, private companies may have limited financial resources and may be unable to meet their obligations. The Fund may only have limited
access to a private company’s actual financial results and there is no assurance that the information obtained by the Fund is reliable.
These companies may not ever issue shares in an IPO and a liquid market for their shares may never develop, which could adversely affect
the Fund’s liquidity. If the company does issue shares in an IPO, IPOs are risky and volatile and may cause the value of the Fund’s
investment to decrease significantly. Moreover, because securities issued by private companies are generally not freely or publicly tradable,
the Fund may not have the opportunity to purchase, or the ability to sell, these securities in the amounts, or at the prices, the Fund
desires.

 

Securities Lending Risk. The Fund
may lend its portfolio securities to brokers, dealers and financial institutions to seek income. There is a risk that a borrower may default
on its obligations to return loaned securities. There is a risk that the assets of the Fund’s securities lending agent may be insufficient
to satisfy any contractual indemnification requirements to that Fund. Borrowers of the Fund’s securities typically provide collateral
in the form of cash that is reinvested. The Fund will be responsible for the risks associated with the investment of cash collateral,
including any collateral invested in a money market fund. The Fund may lose money on its investment of cash collateral or may fail to
earn sufficient income on its investment to meet obligations to the borrower. In addition, delays may occur in the recovery of securities
from borrowers, which could interfere with the Fund’s ability to vote proxies or to settle transactions and there is the risk of
possible loss of rights in the collateral should the borrower fail financially. Krane and its sub-adviser, if applicable, are subject
to potential conflicts of interest because the compensation paid to them increases in connection with any net income received by the Fund
from a securities lending program.

 

Small- and Mid-Capitalization Company Risk. Investing
in the securities of small- and mid-capitalization companies involves greater risk and the possibility of greater price volatility than
investing in larger capitalization companies and more established companies. Since small- and medium-sized companies may have limited
operating histories, product lines and financial resources, the securities of these companies may lack sufficient market liquidity and
can be sensitive to expected changes in interest rates, borrowing costs and earnings. These companies’ securities may be more volatile
and less liquid than those of more established companies, and they may be more sensitive to market conditions.

 

Tax Risk. In order to qualify for
the favorable tax treatment generally available to regulated investment companies, a Fund must satisfy certain income, distribution and
asset diversification requirements. With respect to the latter, a Fund generally may not acquire a security if, as a result of the acquisition,
more than 50% of the value of the Fund’s assets would be invested in (a) issuers in which the Fund has, in each case, invested more
than 5% of the Fund’s assets and (b) issuers more than 10% of whose outstanding voting securities are owned by the Fund. If the
Fund were to fail to qualify as a regulated investment company, it would be taxed in the same manner as an ordinary corporation, and distributions
to its shareholders would not be deductible by the Fund in computing its taxable income, which would adversely affect its performance.
Because there is limited transparency into state ownership of Chinese issuers, there is a risk of such issuers being deemed to be a single
issuer, which could result in the Fund falling out of compliance with the asset diversification requirements.

 

 

In order to qualify for the favorable tax treatment
generally available to regulated investment companies and avoid Fund-level taxes, a Fund must also satisfy certain distribution requirements.
Capital controls and currency controls may affect a Fund’s ability to meet the applicable distribution requirements. If a Fund fails
to satisfy the distribution requirement necessary to qualify for treatment as a regulated investment company for any taxable year, the
Fund would be treated as a corporation subject to U.S. federal income tax, thereby subjecting any income earned by the Fund to tax at
the corporate level. If a Fund fails to satisfy a separate distribution requirement, it will be subject to a Fund-level excise tax. These
Fund-level taxes will apply in addition to taxes payable at the shareholder level on distributions.

 

To the extent a Fund does not distribute to shareholders
all of its investment company taxable income and net capital gain in a given year, it will be required to pay U.S. federal income tax
on the retained income and gains, thereby reducing the Fund’s return. A Fund may elect to treat its net capital gain as having been
distributed to shareholders. In that case, shareholders of record on the last day of the Fund’s taxable year will be required to
include their attributable share of the retained gain in income for the year as a long-term capital gain despite not actually receiving
the dividend, and will be entitled to a tax credit or refund for the tax deemed paid on their behalf by the Fund as well as an increase
in the basis of their shares to reflect the difference between their attributable share of the gain and the related credit or refund.

 

Investments in swaps and other derivatives may
be subject to special U.S. federal income tax rules that could adversely affect the character, timing and amount of income earned by a
Fund (e.g., by causing amounts that would be capital gain to be taxed as ordinary income or to be taken into income earlier than would
otherwise be necessary). Also, a Fund may be required to periodically adjust its positions in its swaps and derivatives to comply with
certain regulatory requirements which may further cause these investments to be less efficient than a direct investment in the securities
themselves. For example, swaps in which the Fund may invest may need to be reset on a regular basis in order to maintain compliance with
the 1940 Act, which may increase the likelihood that the Fund will generate short-term capital gains. In addition, because the application
of these special rules may be uncertain, it is possible that the manner in which they are applied by a Fund may be determined to be incorrect.
In that event, the Fund may be found to have failed to maintain its qualification as a RIC or to be subject to additional U.S. tax liability.
Moreover, a Fund may make investments, both directly and through swaps or other derivative positions, in companies classified as passive
foreign investment companies for U.S. federal income tax purposes (“PFICs”). Investments in PFICs are subject to special tax
rules which may result in adverse tax consequences to the Fund and its shareholders.

 

 

Tracking Error Risk. Tracking error
refers to the risk that an Underlying ETF’s performance may not match or correlate to that of the underlying index of an Underlying
ETF, either on a daily or aggregate basis. Tracking error may cause the Underlying ETF’s performance to be less than expected. There
are a number of factors that may contribute to an Underlying ETF’s tracking error, such as fund expenses, imperfect correlation
between the Underlying ETF’s investments and those of its underlying index, the use of representative sampling strategy, if applicable,
asset valuation differences, tax considerations, the unavailability of securities in the underlying index from time to time, holding cash
and cash equivalents, and other liquidity constraints. In addition, securities included in an underlying index may be suspended from trading.
To the extent an Underlying ETF calculates its NAV based on fair value prices and the value of the underlying index is based on securities’
closing prices on local foreign markets, the Underlying ETF’s ability to track the underlying index may be adversely affected. Mathematical
compounding may prevent the Underlying ETF from correlating with the monthly, quarterly, annual or other period performance of its underlying
index. In addition, an Underlying ETF may not invest in certain securities and other instruments included in its underlying index, or
invest in them in the exact proportions they represent of the underlying index, including due to legal restrictions or limitations imposed
by a foreign government or a lack of liquidity in certain securities. Moreover, the Underlying ETF may be delayed in purchasing or selling
securities and other instruments included in the underlying index. Any issues the Underlying ETF encounters with regard to currency convertibility
(including the cost of borrowing funds, if any) and repatriation may also increase the Underlying ETF’s tracking error.

 

Valuation Risk. Financial information
about the Fund’s portfolio holdings may not always be reliable, which may make it difficult to obtain a current price for the investments
held by the Fund. Independent market quotations for such investments may not be readily available, such as on days during which a security
does not trade or a foreign holiday, and securities may be fair valued or valued by a pricing service at an evaluated price. These valuations
are subjective and different funds may assign different fair values to the same investment. Such valuations also may be different from
what would be produced if the security had been valued using market quotations. As a result, there is a risk that the Fund may not be
able to sell an investment at the price assigned to the investment by the Fund. Additionally, Fund securities that are valued using techniques
other than market quotations, including “fair valued” securities, may be subject to greater fluctuations in their value from
one day to the next. Because securities in which the Fund invests may trade on days when the Fund does not price its shares, the value
of the securities in the Fund’s portfolio may change on days when shareholders will not be able to purchase or sell the Fund’s
shares.

 

Management

Investment Adviser

Krane Funds Advisors, LLC (“Krane”
or “Adviser”), a UN PRI signatory, is a registered investment adviser located at 280 Park Avenue, 32nd Floor, New York, NY
10017 and serves as investment adviser of the Fund. Krane has served as the investment adviser of the Fund since its inception.

 

 

Under the Investment Advisory Agreement between
the Trust and Krane, Krane is responsible for reviewing, supervising and administering the Fund’s investment program and the general
management and administration of the Trust. In this regard, among other things, Krane arranges for transfer agency, custody, fund administration
and accounting, and other non-distribution related services necessary for the Fund to operate. Krane may engage a subadviser to assist
it in managing the Fund’s investments, but will be responsible for overseeing any subadvisers. Krane manages the Fund’s business
affairs, provides office facilities and equipment and certain clerical, bookkeeping and administrative services, and permits its officers
and employees to serve as officers or Trustees of the Trust. Under the Investment Advisory Agreement, Krane bears all of its own costs
associated with providing advisory services to the Fund. In addition, Krane has contractually agreed to pay all operating expenses of
the Fund, except (i) interest and taxes (including, but not limited to, income, excise, transaction, transfer and withholding taxes);
(ii) expenses of the Fund incurred with respect to the acquisition and disposition of portfolio securities and the execution of portfolio
transactions, including brokerage commissions and short sale dividend or interest expense; (iii) expenses incurred in connection with
any distribution plan adopted by the Trust in compliance with Rule 12b-1 under the 1940 Act, including distribution fees; (iv) Acquired
Fund Fees and Expenses; (v) litigation expenses; (vi) the compensation payable to the Adviser under the investment advisory agreement;
(vii) compensation and expenses of the Independent Trustees (including any Trustees’ counsel fees); and (viii) any expenses determined
to be extraordinary expenses by the Board. Nevertheless, there exists a risk that a Trust service provider will seek recourse against
the Trust if is not timely paid by Krane for the fees and expenses for which it is responsible, which could materially adversely affect
the Fund.

 

Under the Investment Advisory Agreement, the Fund
pays Krane the fee shown in the table below (in addition to the securities lending compensation Krane receives under the Agreement discussed
below), which is calculated daily and paid monthly, at an annual rate based on a percentage of the average daily net assets of the Fund.

 

KraneShares China Innovation ETF [0.25]%

 

The Investment Advisory Agreement has been approved
by the Board of Trustees and shareholders of the Fund (in this regard, Krane as the sole initial shareholder of the Fund will approve
various matters and agreements, including the Investment Advisory Agreement for the Fund prior to its public offering).

 

In addition to the above-described services, to
the extent the Fund engages in securities lending, Krane will: (i) determine which securities are available for loan and notify the securities
lending agent for the Fund (the “Agent”), (ii) monitor the Agent’s activities to ensure that securities loans are effected
in accordance with Krane’s instructions and in accordance with applicable procedures and guidelines adopted by the Board, (iii)
make recommendations to the Board regarding the Fund’s participation in securities lending; (iv) prepare appropriate periodic reports
for, and seek appropriate periodic approvals from, the Board with respect to securities lending activities; (v) respond to Agent inquiries
concerning Agent’s activities; and (vi) such other related duties as Krane deems necessary or appropriate.

 

Because the Fund had not commenced operations
prior to the date of this prospectus, Krane did not receive any advisory fees or fees from securities lending activities from the Fund
during the prior fiscal year. A discussion regarding the basis for the Board’s approval of the Fund’s investment advisory
agreement with Krane will be available in the Fund’s first Annual or Semi-Annual Report to Shareholders.

 

 

China International Capital Corporation (USA)
Holdings Inc., a wholly-owned, indirect subsidiary of China International Capital Corporation Limited owns a majority stake in Krane.
As of December 31, 2020, Central Huijin Investment Limited, a mainland Chinese-domiciled entity, and HKSCC Nominees Limited, held approximately
40.17% and 30.74%, respectively, of the shares of China International Capital Corporation Limited. Central Huijin Investment Limited is
a wholly-owned subsidiary of China Investment Corporation, which is a mainland Chinese sovereign wealth fund. KFA One Holdings, LLC, located
at 280 Park Avenue, 32nd Floor, New York, New York 10017, holds the remaining equity interests in Krane and Jonathan Krane, through his
equity interests in KFA One Holdings, LLC, beneficially owns more than 10% of the equity interests in Krane.

 

Portfolio Managers

 

James Maund, Head of Capital Markets at the Adviser,
has served as the lead portfolio manager of the Fund since the Fund’s inception. He joined the Adviser in 2020 and has over 15 years
of experience in the investment management industry. Previously, he was a Vice President in the Institutional ETF Group and a member of
the ETF Capital Markets Group at State Street Global Advisors (2010-2019). Mr. Maund graduated with a bachelor’s degree in economics
from Wesleyan University.

 

Jonathan Shelon, Chief Operating Officer of the
Adviser, has been a portfolio manager of the Fund since the Fund’s inception. Mr. Shelon joined Krane in 2015 as a Managing Partner.
Mr. Shelon has spent the majority of his career managing investment portfolios and diverse teams at leading asset management organizations.
Prior to joining Krane, he was the Chief Investment Officer of a 40-person global Specialized Strategies Team at J.P. Morgan with $40
billion AUM.

 

Anthony Sassine, Senior Investment Strategist
of the Adviser, has been a portfolio manager of the Fund since the Fund’s inception. Mr. Sassine joined Krane in 2019. Prior to
joining Krane, Mr. Sassine spent eight years at Van Eck and Pinebridge as a product strategist focusing on emerging markets equity and
debt. At Van Eck, Mr. Sassine oversaw the growth of the firm’s emerging markets active business.

 

Additional information about the Portfolio Managers’
compensation, other accounts managed by the Portfolio Managers and the Portfolio Managers’ ownership of Fund shares is available
in the SAI.

 

Other Service Providers

 

SEI Investments Global Funds Services (“Administrator”)
serves as administrator for the Fund. The Administrator provides necessary administrative and accounting services for the maintenance
and operations of the Trust and the Fund, and makes available the office space, equipment, personnel and facilities required to provide
such services.

 

SEI Investments Distribution Co. (“Distributor”),
an affiliate of the Administrator, serves as the Fund’s distributor. Shares in less than Creation Units are not distributed by the
Distributor, and the Distributor does not maintain a secondary market in the shares of the Fund.

 

 

Brown Brothers Harriman & Co. (“BBH”)
serves as custodian and transfer agent for the Fund. BBH maintains in separate accounts cash, securities and other assets of the Fund,
keeps all necessary accounts and records, and provides other services. BBH also serves as the custodian for the Subsidiary.

 

Shareholder Information

 

Calculating NAV

 

The Fund calculates its NAV by:

 

Taking the current market value of its total
assets
Subtracting any liabilities and withholdings
(if any)
Dividing that amount by the total number of shares
owned by the shareholders

 

The Fund normally calculates NAV as of the regularly
scheduled close of normal trading on each day that the NYSE is scheduled to be open for business (a ‘‘Business Day’’)
(normally, 4:00 p.m., Eastern time). Any assets or liabilities denominated in currencies other than the U.S. dollar are converted into
U.S. dollars at the current market rates on the date of valuation as quoted by one or more sources.

 

In calculating the values of the Fund’s
portfolio securities, securities listed on a securities exchange, market or automated quotation system for which quotations are readily
available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last reported sale
price on the primary exchange or market (foreign or domestic) on which they are traded (or at the time as of which the Fund’s NAV
is calculated if a security’s exchange is normally open at that time). If there is no such reported sale, such securities are valued
at the most recently reported bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. If available,
debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the
last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated
bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed
to identify the market value for such securities. Debt obligations with remaining maturities of sixty days or less may be valued at their
amortized cost, which approximates market value. The prices for foreign securities are reported in local currency and converted to U.S.
dollars using currency exchange rates. The value of a swap contract is equal to the obligation (or rights) under the swap contract, which
will generally be equal to the net amounts to be paid or received under the contract based upon the relative values of the positions held
by each party to the contract as determined by the applicable independent, third party pricing agent. Exchange-traded options are valued
at the last reported sales price on the exchange on which they are listed. If there is no such reported sale on the valuation date, long
positions are valued at the most recent bid price, and short positions are valued at the most recent ask price. OTC options are valued
based upon prices determined by the applicable independent, third party pricing agent. Futures are valued at the settlement price established
by the board of trade on which they are traded. Foreign currency forward contracts are valued at the current day’s interpolated
foreign exchange rate, as calculated using the current day’s spot rate and the 30-, 60-, 90- and 180-day forward rates provided
by an Independent Pricing Agent. The exchange rates used for valuation are captured as of the close of the London Stock Exchange each
day normally at 4:00 p.m. Greenwich Mean Time. Prices for most securities held by the Fund are provided daily by independent pricing agents.
If a security price cannot be obtained from an independent, third-party pricing agent, the Fund seeks to obtain bid and ask prices from
two broker-dealers who make a market in the portfolio instrument and determines the average of the two.

 

 

Investments in open-end investment
companies that do not trade on an exchange are valued at the end of day NAV per share. Investments in open-end investment companies that
trade on an exchange are valued at the last reported sale price or official closing price as of the close of the customary trading session
on the exchange where the security is principally traded. If there is no such reported sale, such securities are valued at the most recently
reported bid price. With respect to the Fund’s assets that are invested in the Subsidiary, the value of such investment will be
calculated based upon the Subsidiary’s NAV, which will be determined using the same pricing policies and procedures applicable to
the Fund.

 

Securities for which market prices
are not ‘‘readily available,’’ or are not deemed to reflect current market values, or are instruments where no
evaluated price is available from the Trust’s third-party pricing agents pursuant to established methodologies, are fair valued
in accordance with the Trust’s valuation policies and procedures approved by the Board of Trustees. Some of the more common reasons
that may necessitate that a security be valued using ‘‘fair value’’ pricing may include, but are not limited to:
the security’s trading has been halted or suspended; the security’s primary trading market is temporarily closed; or the security
has not been traded for an extended period of time. The Fund may fair value certain of the foreign securities held by the Fund each day
the Fund calculates its NAV.

 

In addition, the Fund may fair value its securities
if an event that may materially affect the value of the Fund’s securities that trade outside of the United States (a ‘‘Significant
Event’’) has occurred between the time of the security’s last close and the time that the Fund calculates its NAV. A
Significant Event may relate to a single issuer or to an entire market sector, country or region. Events that may be Significant Events
may include: government actions, natural disasters, armed conflict, acts of terrorism and significant market fluctuations. If Krane becomes
aware of a Significant Event that has occurred with respect to a portfolio instrument or group of portfolio instruments after the closing
of the exchange or market on which the portfolio instrument or portfolio instruments principally trade, but before the time at which the
Fund calculates its NAV, it will notify the Administrator and may request that an ad hoc meeting of the Fair Valuation Committee be called.

 

With respect to trade-halted securities, the Trust
typically will fair value a trade-halted security by adjusting the security’s last market close price by the security’s sector
performance, as measured by a predetermined index, unless Krane recommends and the Trust’s Fair Valuation Committee determines to
make additional adjustments. Certain foreign securities exchanges have mechanisms in place that confine one day’s price movement
in an individual security to a pre-determined price range based on that day’s opening price (‘‘Collared Securities’’).
Fair value determinations for Collared Securities will generally be capped by Krane based on any applicable pre-determined “limit
down” or “limit up” prices established by the relevant foreign securities exchange. As an example, China A-Shares can
only be plus or minus ten percent in one day of trading in the relevant mainland China equity market. As a result, the fair value price
determination on a given day will generally be capped at plus or minus ten percent.

 

 

Fair value pricing involves subjective judgments
and it is possible that a fair value determination for a security is materially different than the value that could actually be realized
upon the sale of the security or that another fund that uses market quotations or its own fair value procedures to price the same securities.
In addition, fair value pricing could result in a difference between the prices used to calculate the Fund’s NAV and the prices
used by the Index.

 

Trading in securities on many foreign exchanges
is normally completed before the close of business on each Business Day. In addition, securities trading in a particular country or countries
may not take place on each Business Day, including those that are advised, sponsored or otherwise
serviced by Krane and/or its affiliates,
or may take place on days that are not Business Days. Changes in valuations on certain
securities may occur at times or on days on which the Fund’s NAV is not calculated and on which Fund shares do not trade and sales
and redemptions of shares do not occur. As a result, the value of the Fund’s portfolio securities and the net asset value of its
shares may change on days when you will not be able to purchase or sell your shares.

 

Buying and Selling Fund Shares

Shares of the Fund may be purchased or redeemed
directly from the Fund only in Creation Units or multiples thereof. Only a broker-dealer (“Authorized Participant”) that enters
into an Authorized Participant Agreement with the Fund’s distributor, SEI Investments Distribution Co. (the “Distributor”),
may engage in creation and redemption transactions directly with the Fund. Purchases and redemptions directly with the Fund must follow
the Fund’s procedures, and are subject to transaction fees, which are described in the SAI. The transaction fee will not exceed
2.00% of the value of the Creation Units purchased or redeemed, which is used to compensate the Fund for any difference for the expenses
incurred by it in connection with the purchase or redemption order. Orders for such transactions may be rejected or delayed if they are
not submitted in good order and subject to the other conditions set forth in this prospectus and the SAI.

 

Purchases and redemptions of Creation Units will
take place in-kind and/or for cash at the discretion of the Fund. The determination of whether purchases and redemptions of Creation Units
will be for cash or in-kind depends primarily on the regulatory requirements and settlement mechanisms relevant to the Fund’s portfolio
holdings and the Fund is not limited to engaging in in-kind transactions to any particular market circumstances. As further described
in the SAI, Creation Units typically are issued on a two Business Days (“T+2”) basis after a purchase order has been received
in good order and the transfer of good title to the Fund of any in-kind securities and/or cash required to purchase a Creation Unit have
been completed (subject to certain exceptions). Similarly, and also as further described in the SAI, deliveries of redemption proceeds
by the Fund generally will be made on a T+2 basis after a redemption order has been received in good order and the requisite number of
Fund shares have been delivered (subject to certain exceptions). The Fund reserves the right to settle Creation Unit transactions on a
basis other than T+2 in order to, among other matters, accommodate non-U.S. market holiday schedules, closures and settlement cycles,
to account for different treatment among non-U.S. and U.S. markets of dividend record dates and ex-dividend dates (i.e., the last day
the holder of a security can sell the security and still receive dividends payable on the security) and in certain other circumstances.
The Fund has received exemptive relief to delay such settlement for up to 14 days from the date an order has been submitted in good order
and the requisite cash and/or assets delivered to the relevant Fund to accommodate foreign holidays, as further described in the SAI,
and otherwise may delay redemptions up to 7 days or longer as permitted by applicable law, regulations and interpretations such as where
unusual market conditions affect the NYSE or an emergency exists which makes it impracticable for the Fund to dispose of or value securities
it owns or the Fund has received an SEC order.

 

 

The Fund intends to comply with the U.S. federal
securities laws in accepting securities for deposit and satisfying redemptions with redemption securities by, among other means, assuring
that any securities accepted for deposit and any securities used to satisfy redemption requests will be sold in transactions that would
be exempt from registration under the Securities Act. Further, an Authorized Participant that is not a “qualified institutional
buyer,” as such term is defined under Rule 144A of the Securities Act, will not be able to receive restricted securities eligible
for resale under Rule 144A.

 

Once created, shares are listed on the Exchange
and trade in the secondary market. When you buy or sell the Fund’s shares in the secondary market, you will pay or receive the market
price. Shares can be bought and sold throughout the trading day like other publicly traded securities. Most investors will buy and sell
shares through a broker and, thus, will incur customary brokerage commissions and charges when buying or selling shares.

 

The secondary markets are closed on weekends and
also are generally closed on the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Columbus Day, Veterans’ Day, Thanksgiving Day, and Christmas Day.

 

For more information on how to buy and sell shares
of the Fund, call 1.855.857.2638 or visit www.kraneshares.com.

 

Premium/Discount Information

Information showing the number of days the market
price of the Fund’s shares was greater than the Fund’s NAV per share (i.e., at a premium) and the number of days it
was less than the Fund’s NAV per share (i.e., at a discount) for various time periods will be available by visiting the Fund’s
website at www.kraneshares.com. The premium and discount information contained on the website will represent past performance and cannot
be used to predict future results.

 

Portfolio Holdings Information

A description of the Fund’s policies and
procedures with respect to the disclosure of Fund portfolio securities is available in the Fund’s Statement of Additional Information
(“SAI”). The holdings of the Fund can be found on the Fund’s website at www.kraneshares.com.

 

 

Active Investors and Market Timing

The Trust’s Board of Trustees has determined
not to adopt policies and procedures designed to prevent or monitor for frequent purchases and redemptions of the Fund’s shares
because the Fund sells and redeems its shares at NAV only in Creation Units pursuant to the terms of an Authorized Participant Agreement
between the Authorized Participant and the Distributor, and such direct trading between the Fund and Authorized Participants is critical
to ensuring that the Fund’s shares trade at or close to NAV. Further, the vast majority of trading in Fund shares occurs on the
secondary market, which does not involve the Fund directly and therefore does not cause the Fund to experience many of the harmful effects
of market timing, such as dilution and disruption of portfolio management. In addition, the Fund imposes a transaction fee on Creation
Unit transactions, which is designed to offset transfer and other transaction costs incurred by the Fund in connection with the issuance
and redemption of Creation Units and may employ fair valuation pricing to minimize potential dilution from market timing The Fund reserves
the right to reject any purchase order at any time and reserves the right to impose restrictions on disruptive, excessive, or short-term
trading.

 

Investments by Registered Investment Companies

Section 12(d)(1) of the 1940 Act restricts investments
by investment companies in the securities of other investment companies, including shares of the Fund. Registered investment companies
are permitted to invest in the Fund beyond the limits set forth in Section 12(d)(1) subject to certain terms and conditions set forth
in an SEC exemptive order issued to the Trust, including that such investment companies enter into an agreement with the Fund. However,
since the Fund does not currently intend to limit its investments in other investment companies as required by Section 12(d)(1)(A), other
registered investment companies generally will not be able to invest in the Fund beyond the limits set forth in Section 12(d)(1).

 

Continuous Offering

The method by which Creation Units of Fund shares
are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of shares are issued and
sold by the Fund on an ongoing basis, a “distribution,” as such term is used in the Securities Act, may occur at any point.
Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their
being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus
delivery requirement and liability provisions of the Securities Act.

 

For example, a broker-dealer firm or its client
may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Distributor, breaks them down into constituent
shares and sells the shares directly to customers or if it chooses to couple the creation of a supply of new shares with an active selling
effort involving solicitation of secondary market demand for shares. A determination of whether one is an underwriter for purposes of
the Securities Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client
in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that could
lead to a characterization as an underwriter.

 

 

Broker-dealer firms should also note that dealers
who are not “underwriters” but are effecting transactions in shares, whether or not participating in the distribution of shares,
are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(3) of the Securities Act
is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. As a result, broker-dealer firms should
note that dealers who are not “underwriters” but are participating in a distribution (as contrasted with engaging in ordinary
secondary market transactions) and thus dealing with the shares that are part of an overallotment within the meaning of Section 4(3)(C)
of the Securities Act, will be unable to take advantage of the prospectus delivery exemption provided by Section 4(3) of the Securities
Act. For delivery of prospectuses to exchange members, the prospectus delivery mechanism of Rule 153 under the Securities Act is only
available with respect to transactions on a national exchange.

 

Dealers effecting transactions in the Fund’s
shares, whether or not participating in this distribution, are generally required to deliver a Prospectus. This is in addition to any
obligation of dealers to deliver a Prospectus when acting as underwriters.

 

Payments to Broker-Dealers and Other Financial
Intermediaries

If you purchase shares of the Fund through a broker-dealer
or other financial intermediary (such as a bank), Krane, any Fund sub-adviser, if applicable, or an affiliate may pay the intermediary
for marketing activities or other services related to the sale or promotion of the Fund. These payments may create a conflict of interest
by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary’s website for more information.

 

Distribution Plan

The Fund has adopted a Distribution Plan (the
“Plan”) that allows the Fund to pay distribution fees to the Distributor and other firms that provide distribution services
(“Service Providers”). Under the Plan, if a Service Provider provides distribution services, the Fund would pay distribution
fees to the Distributor at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 under the 1940
Act. The Distributor would, in turn, pay the Service Provider out of its fees. The Board of Trustees currently has determined not to implement
any 12b-1 fees pursuant to the Plan. 12b-1 fees may only be imposed after approval by the Board of Trustees. Because any distribution
fees would be paid out of the Fund’s assets on an on-going basis, if payments are made in the future, the distribution fees would
increase the cost of your investment and may cost you more than paying other types of sales charges.

 

Householding Policy

To reduce expenses, we mail only one copy of the
prospectus or summary prospectus, each annual and semi-annual report, and any proxy statements to each address shared by two or more accounts
with the same last name or that the Trust reasonably believes are members of the same family. If you wish to receive individual copies
of these documents, please call the Trust at 1.855.857.2638 between the hours of 8:30 a.m. and 6:00 p.m. Eastern Time on days the Fund
is open for business or contact your financial institution. We will begin sending you individual copies thirty days after receiving your
request. Investors who hold their shares through an intermediary are subject to the intermediary’s policies. Contact your financial
intermediary for any questions you may have.

 

 

Dividends and Distributions

The Fund pays out dividends to shareholders at
least annually. The Fund distributes its net capital gains, if any, to shareholders annually. The Fund may make distributions on a more
frequent basis. The Fund reserves the right to declare special distributions, including if, in its reasonable discretion, such action
is necessary or advisable to preserve the status of the Fund as a regulated investment company under Subchapter M of the Code, to avoid
imposition of income or excise taxes on undistributed income.

 

Additional Tax Information

 

The following is a summary of some important tax
issues that affect the Fund and its shareholders. The summary is based on current tax laws, which may be changed by legislative, judicial
or administrative action. You should not consider this summary to be a detailed explanation of the tax treatment of the Fund, or the tax
consequences of an investment in the Fund. More information about taxes is located in the SAI. You are urged to consult your tax adviser
regarding specific questions as to federal, state and local income taxes.

 

Tax Status of the Fund

The Fund is treated as a separate entity for federal
tax purposes, and intends to qualify for the special tax treatment afforded to regulated investment companies. As long as the Fund qualifies
for treatment as a regulated investment company, it pays no federal income tax on the earnings it distributes to shareholders.

 

Tax Status of Distributions

The Fund will, at least annually, distribute substantially
all of its net investment taxable income and net capital gains.

 

The income dividends you receive from the Fund
(which include the Fund’s short-term capital gains) will be taxed as either ordinary income or qualified dividend income. For non-corporate
shareholders, dividends that are reported as qualified dividend income are generally taxable at reduced maximum tax rates to the extent
that the Fund receives qualified dividend income and subject to certain limitations and holding period requirements.

 

Distributions of the Fund’s short-term capital
gains are generally taxable as ordinary income. Any distributions of net capital gain (the excess of the Fund’s net long-term capital
gains over its net short-term capital losses) are taxable as long-term capital gains regardless of how long you have owned your shares.
Long-term capital gains are taxable at reduced maximum tax rates.

 

If the Fund makes distributions to a shareholder
in excess of the Fund’s current and accumulated earnings and profits in any taxable year, the excess distribution will be treated
as a return of capital to the extent of the shareholder’s tax basis in its shares, and thereafter as capital gain. A return of capital
is not taxable, but reduces a shareholder’s tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent
taxable disposition by the shareholder of its shares.

 

The Fund may invest in complex securities. These
investments may be subject to numerous special and complex rules. These rules could affect whether gains and losses recognized by the
Fund are treated as ordinary income or capital gain, accelerate the recognition of income to the Fund and/or defer the Fund’s ability
to recognize losses. In turn, these rules may affect the amount, timing or character of distributions you receive from the Fund.

 

 

Dividends and distributions are generally taxable
to you whether you receive them in cash or in additional shares. Corporate shareholders may be entitled to a dividends-received deduction
for the portion of dividends they receive that is attributable to dividends received by the Fund from U.S. corporations, subject to certain
limitations.

 

Distributions paid in January but declared by
the Fund in October, November or December of the previous year may be taxable to you in the previous year. Your broker will inform you
of the amount of your ordinary income dividends, qualified dividend income, and capital gains distributions shortly after the close of
each calendar year.

 

If you lend your Fund shares pursuant to securities
lending arrangements, you may lose the ability to treat the Fund’s dividends (paid while the shares are held by the borrower) as
qualified dividend income. Consult your financial intermediary or tax adviser.

 

Some foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a portion of these withholding taxes is recoverable, the non-recovered
portion will reduce the income received from the securities in the Fund. If more than 50% of the total assets of the Fund at the close
of a year consist of non-U.S. stocks or securities, then the Fund may elect, for U.S. federal income tax purposes, to treat certain non-U.S.
income taxes (including withholding taxes) paid by the Fund as paid by its shareholders. The Fund will provide you with the information
necessary to reflect foreign taxes paid on your income tax return if it makes this election.

 

If you hold your shares in a tax-qualified retirement
account, you generally will not be subject to federal taxation on income received with respect to the shares (including Fund dividends
and distributions, and any gain on the sale of shares), until you begin receiving payments from your retirement account. You should consult
your tax adviser regarding the tax rules that apply to your retirement account.

 

Tax Status of Share Transactions

Any capital gain or loss upon a sale of the Fund’s
shares is generally treated as a long-term gain or loss if the shares have been held for more than one year and as a short-term gain or
loss if held for one year or less. Any capital loss on the sale of the Fund’s shares held for six months or less is treated as a
long-term capital loss to the extent that any capital gain distributions were paid with respect to such shares.

 

Medicare Contribution Tax

U.S. individuals with income exceeding $200,000
($250,000 if married and filing jointly) are subject to a 3.8% Medicare contribution tax on all or a portion of their “net investment
income,” including interest, dividends, and certain capital gains (including capital gains realized on the sale or exchange of shares
of the Fund). This 3.8% tax also applies to all or a portion of the undistributed net investment income of certain shareholders that are
estates and trusts.

 

 

Back-Up Withholding

The Fund will be required in certain cases to
withhold at applicable withholding rates (currently 24%) and remit to the U.S. Treasury the amount withheld on amounts payable to any
shareholder who (1) has provided the Fund either an incorrect tax identification number or no number at all, (2) is subject
to back-up withholding by the Internal Revenue Service (“IRS”) for failure to properly report payments of interest or dividends,
(3) has failed to certify to the Fund that such shareholder is not subject to back-up withholding, or (4) has not certified
that such shareholder is a U.S. person (including a U.S. resident alien).

 

Non-U.S. Investors

If you are not a citizen or permanent resident
of the United States or if you are a non-U.S. entity, the Fund’s ordinary income dividends (which include distributions of net short-term
capital gains, unless the Fund designates such distributions as short-term capital gain dividends) will generally be subject to a 30%
U.S. withholding tax, unless a lower treaty rate applies, provided that withholding tax will generally not apply to any gain or income
realized by a non-U.S. shareholder in respect of any distributions of long-term capital gains or upon the sale or other disposition of
shares of the Fund (or dividends designated as interest-related dividends or short-term capital gain dividends). You also may potentially
be subject to U.S. federal estate taxes.

 

A 30% withholding tax will generally be imposed
on (1) dividends paid by the Fund to (i) foreign financial institutions including non-U.S. investment funds unless they agree to collect
and disclose to the IRS, or the tax authorities in their home jurisdictions, information regarding their direct and indirect U.S. account
holders and (ii) certain other foreign entities, unless they certify certain information regarding their direct and indirect U.S. owners.
A non-U.S. shareholder may be exempt from the withholding described in this paragraph under an intergovernmental agreement between the
United States and a foreign government, provided that the shareholder and the applicable foreign government comply with the terms of such
agreement. Recently issued proposed regulations (which are effective while pending) eliminate the application of the Foreign Account Tax
Compliance Act (“FATCA”) withholding tax to capital gain dividends and redemption proceeds that was scheduled to take effect
in 2019.

 

State Tax Considerations

In addition to federal taxes, distributions by
the Fund and ownership of the Fund’s shares may be subject to state and local taxes. You should consult your tax adviser regarding
how state and local tax laws affect your investment in the Fund’s shares.

 

Taxes on Creations and Redemptions of Creation Units

A person who purchases a Creation Unit by exchanging
securities in-kind generally will recognize a gain or loss equal to the difference between (i) the sum of the market value of the
Creation Units at the time of the exchange and any net amount of cash received by the Authorized Participant in the exchange and (ii) the
sum of the purchaser’s aggregate basis in the securities surrendered and any net amount of cash paid for the Creation Units. A person
who redeems Creation Units and receives securities in-kind from the Fund will generally recognize a gain or loss equal to the difference
between the redeemer’s basis in the Creation Units, and the aggregate market value of the securities received and any net cash received.
The IRS, however, may assert that a loss realized upon an in-kind exchange of securities for Creation Units or an exchange of Creation
Units for securities cannot be deducted currently under the rules governing “wash sales,” or on the basis that there has been
no significant change in economic position. Persons effecting in-kind creations or redemptions should consult their own tax adviser with
respect to these matters.

 

 

The Fund has the right to reject an order for
Creation Units if the purchaser (or a group of purchasers) would, upon obtaining the shares so ordered, own 80% or more of the outstanding
shares of the Fund and if, pursuant to section 351 of the Code, the Fund would have a basis in the deposit securities different from the
market value of such securities on the date of deposit. The Fund also has the right to require information necessary to determine beneficial
share ownership for purposes of the 80% determinations.

 

Additional Disclaimers

Krane and Trust Disclaimer

Neither Krane nor the Trust guarantees the
accuracy or the completeness of any Index or any data included therein and neither shall have any liability for any errors, omissions
or interruptions therein. Krane and the Fund further make no representation or warranty, express or implied, to the owners of shares of
the Fund or any members of the public as to results to be obtained by the Fund from the use of any Index, as to any data included therein,
or as to the advisability of investing in securities generally or in the Fund particularly. Krane expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the Index or Fund. Without limiting any of the foregoing, in
no event shall Krane have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits),
even if notified of the possibility of such damages.

 

NYSE Arca, Inc. Disclaimer

 

Shares of the Fund are
not sponsored, endorsed or promoted by NYSE Arca, Inc. (“NYSE Arca”). NYSE Arca makes no representation or warranty, express
or implied, to the owners of the shares of the Fund or any member of the public regarding the ability of the Fund to track the total return
performance of the Indexes, if applicable, or the ability of the Indexes to track stock market performance. NYSE Arca is not responsible
for, nor has it participated in, the determination of the compilation or the calculation of the Indexes, nor in the determination of the
timing of, prices of, or quantities of shares of the Fund to be issued, nor in the determination or calculation of the equation by which
the shares are redeemable. NYSE Arca has no obligation or liability to owners of the shares of the Fund in connection with the administration,
marketing or trading of the shares of the Fund.

 

NYSE Arca does not guarantee
the accuracy and/or the completeness of the Indexes or any data included therein. NYSE Arca makes no warranty, express or implied, as
to results to be obtained by the Trust on behalf of the Fund as licensee, licensee’s customers and counterparties, owners of the
shares of the Fund, or any other person or entity from the use of the subject index or any data included therein in connection with the
rights licensed as described herein or for any other use. NYSE Arca makes no express or implied warranties and hereby expressly disclaims
all warranties of merchantability or fitness for a particular purpose with respect to the Indexes or any data included therein. Without
limiting any of the foregoing, in no event shall NYSE Arca have any liability for any direct, indirect, special, punitive, consequential
or any other damages (including lost profits) even if notified of the possibility of such damages.

 

 

Financial Highlights

 

No financial highlights are available for the
Fund because the Fund had not commenced operations prior to the end of the prior fiscal year.

 

 

Additional Information

 

Additional and more detailed information about
the Fund is included in the SAI dated [   ], 2021. The SAI has been filed with the SEC and is incorporated by reference into this Prospectus
and, therefore, legally forms a part of this Prospectus. The SEC maintains the EDGAR database on its website (“http://www.sec.gov”)
that contains the SAI, material incorporated by reference, and other information regarding registrants that file electronically with the
SEC and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address:
[email protected]

 

You may obtain a copy of the SAI or the Annual
or Semi-Annual Reports or make inquiries, without charge by calling 1.855.857.2638, visiting www.kraneshares.com, or writing the Trust
at 280 Park Avenue, 32nd Floor, New York, NY 10017. Additional information about the Fund’s investments will be available in the
Annual and Semi-Annual Reports. Also, in the Fund’s Annual Report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund’s performance during its last fiscal year.

 

No one has been authorized to give any information
or to make any representations not contained in this Prospectus or in the Fund’s SAI in connection with the offering of Fund shares.
Do not rely on any such information or representations as having been authorized by the Fund, Krane or the sub-adviser, as applicable.
This Prospectus does not constitute an offering by the Fund in any jurisdiction where such an offering is not lawful.

 

The Trust enters into contractual arrangements
with various parties, including among others, the Fund’s investment adviser, sub-adviser(s) (if applicable), distributor, custodian, and
transfer agent who provide services to the Fund. Shareholders are not parties to any such contractual arrangements or intended beneficiaries
of those contractual arrangements, and those contractual arrangements are not intended to create in any shareholder any right to enforce
them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the
Trust.

 

This prospectus provides information concerning
the Fund that you should consider in determining whether to purchase Fund shares. Neither this prospectus nor the SAI is intended, or
should be read, to be or give rise to an agreement or contract between the Trust, the Trustees, or the Fund and any investor, or to give
rise to any rights in any shareholder or other person other than any rights under federal or state law that may not be waived.

 

The Trust’s Investment Company Act file number
is 811-22698.

 

 

KraneShares Trust

 

STATEMENT OF ADDITIONAL INFORMATION

[   ], 2021

 

Kraneshares China Innovation
ETF – (     )

 

Shares of the Fund will be traded on the NYSE Arca, Inc.

 

This Statement of Additional Information (“SAI”)
relates to the above listed fund (the “Fund”), a series of the KraneShares Trust (the “Trust”). This SAI is not
a prospectus and should be read in conjunction with the current prospectus for the Fund, dated [  ], 2021, as it may be revised from time
to time (the “Prospectus”). Capitalized terms used herein that are not defined have the same meaning as in the Prospectus,
unless otherwise noted. The audited financial statements with respect to the Fund for the most recent fiscal year will be incorporated
in this SAI by reference to the Fund’s first Annual Report to Shareholders. A copy of the Prospectus, this SAI, and/or the most
recent annual and semi-annual reports to shareholders may be obtained, without charge, by calling 1.855.857.2638, visiting www.kraneshares.com,
or writing to the Trust at 280 Park Avenue, 32nd Floor, New York, NY 10017.

 

 

 

 

GENERAL DESCRIPTION OF THE TRUST AND THE FUND

 

The Trust was organized as a Delaware statutory
trust on February 3, 2012 and is permitted to offer multiple, separate series (i.e., funds). As of the date of this SAI, the Trust
offers 29 separate funds, including the Fund and other funds not offered in this SAI. The Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and the Fund is a non-diversified series
of the Trust. The offering of the Trust’s shares is registered under the Securities Act of 1933, as amended (the “Securities
Act”). All payments received by the Trust for shares of any fund belong to that fund. Each fund will have its own assets and liabilities.
Shares of the Fund will only be issued against full payment, as further described in the Prospectus and this Statement of Additional Information.

 

Krane Funds Advisors, LLC (“Krane”
or the “Adviser”) serves as the investment adviser to the Fund and is responsible for continuously reviewing, supervising
and administering the Fund’s investment program. SEI Investments Distribution Co. serves as the distributor (the “Distributor”)
of the shares of the Fund.

 

Shares of the Fund
will be listed on NYSE Arca, Inc. (“NYSE”). The Exchange is a national securities exchange and shares of the Fund will trade
throughout the day on the Exchange and other secondary markets at market prices that may be below, at or above their net asset value (“NAV”)
per share. As in the case of other publicly traded securities, brokers’ commissions on transactions in the Fund’s shares will
be based on negotiated commission rates and subject to bid/ask spreads
.

 

INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS

 

General

The Fund’s principal investment strategies
and risks are discussed in its Prospectus. The investment techniques discussed below and in the prospectus may, consistent with the Fund’s
investment objectives and investment limitations, be used by the Fund. The Fund is free to reduce or eliminate its activity with respect
to any of the investment techniques discussed below without changing its fundamental investment policies and without prior notice to shareholders.
There is no assurance that the Fund’s strategies or any other strategies and methods of investment available to the Fund will result
in the achievement of the Fund’s objective.

 

In reliance on an SEC exemptive order, the Fund
will invest in affiliated investment companies (“underlying funds”) in excess of the limits in Section 12 of the 1940 Act
and the rules and regulations thereunder. When the Fund invests in underlying funds, it is indirectly exposed to the investment practices
of the underlying funds and, therefore, is subject to all the risks associated with the practices of the underlying funds. This SAI is
not an offer to sell shares of any underlying fund. Shares of an underlying fund are sold only through the currently effective prospectus
for that underlying fund. Unless otherwise noted herein, the investment practices and associated risks detailed below also include those
to which the Fund indirectly may be exposed through its investment in an underlying fund. Unless otherwise noted herein, any references
to investments made by the Fund include those that may be made both directly by the Fund and indirectly by the Fund through its investments
in underlying funds.

 

Cash and Cash Equivalents

The Fund may hold cash
or cash equivalents. Generally, such positions offer less potential for gain than other investments. Holding cash or cash equivalents,
even strategically, may lead to missed investment opportunities. This is particularly true when the market for other investments in which
the Fund may invest is rapidly rising. If the Fund holds cash uninvested it will be subject to the credit risk of the depositing institution
holding the cash.

 

 

Debt Securities

The Fund may invest in debt securities. A debt
security is a security consisting of a certificate or other evidence of a debt (secured or unsecured) on which the issuer promises to
pay the holder thereof a fixed, variable, or floating rate of interest for a specified length of time, and to repay the debt on the specified
maturity date. Some debt securities, such as zero coupon bonds, do not make regular interest payments but are issued at a discount to
their principal or maturity value. Debt securities include a variety of fixed income obligations, including, but not limited to, corporate
bonds, government securities, municipal securities, convertible securities, mortgage-backed securities, and asset-backed securities. Debt
securities include investment-grade securities, non-investment-grade securities, and unrated securities. Debt securities are subject to
a variety of risks, such as interest rate risk, income risk, call/prepayment risk, inflation risk, credit risk, and (in the case of foreign
securities) country risk and currency risk.

 

The market value of the debt securities in which
the Fund invests will change in response to interest rate changes and other factors. During periods of falling interest rates, the values
of outstanding debt securities generally rise. Conversely, during periods of rising interest rates, the values of such securities generally
decline. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are
also subject to greater market fluctuations as a result of changes in interest rates. Changes in the value of these securities will not
necessarily affect cash income derived from these securities but will affect the Fund’s NAV. Additional information regarding debt securities
is described below.

 

Credit Ratings. Credit risk is the risk
that a borrower or issuer of a debt will be unable or unwilling to repay its obligations under the debt. Certain debt securities may be
rated by a credit rating agency. Changes by such agencies in the rating of any debt security and in the ability of an issuer to make payments
of interest and principal, or the perception thereof, may affect the value of these investments.

 

U.S. Credit Ratings. The rating
criteria and methodology used by U.S. rating agencies may not be fully transparent and such ratings may not accurately reflect the risk
of investing in such instruments.

 

Chinese Credit Ratings. The rating
criteria and methodology used by Chinese rating agencies may be different from those adopted by most of the established international
credit rating agencies. Therefore, such rating systems may not provide an equivalent standard for comparison with securities rated by
international credit rating agencies. The rating criteria and methodology used by Chinese credit ratings agencies also may not be fully
transparent and such ratings may not accurately reflect the risk of investing in such instruments.

 

Duration. Duration is a measure of the
expected change in value of a debt security for a given change in interest rates. For example, if interest rates changed by one percent,
the value of a security having an effective duration of two years generally would vary by two percent. Duration takes the length of the
time intervals between the present time and time that the interest and principal payments are scheduled, or in the case of a callable
bond, expected to be received, and weighs them by the present values of the cash to be received at each future point in time.

 

Pay-In-Kind and Step-Up Coupon Securities.
A pay-in-kind security pays no interest in cash to its holder during its life. Similarly, a step-up coupon security is a debt security
that may not pay interest for a specified period of time and then, after the initial period, may pay interest at a series of different
rates. Accordingly, pay-in kind and step-up coupon securities will be subject to greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities that make current, periodic distribution of interest in cash.

 

 

Perpetual Bonds. Perpetual bonds offer
a fixed return with no maturity date. Because they never mature, perpetual bonds can be more volatile than other types of bonds that have
a maturity date and may be more sensitive to changes in interest rates. If market interest rates rise significantly, the interest rate
paid by a perpetual bond may be much lower than the prevailing interest rate. Perpetual bonds are also subject to credit risk with respect
to the issuer. In addition, because perpetual bonds may be callable after a set period of time, there is the risk that the issuer may
recall the bond.

 

Variable and Floating Rate Securities.
Variable and floating rate instruments involve certain obligations that may carry variable or floating rates of interest, and may involve
a conditional or unconditional demand feature. Such instruments bear interest at rates which are not fixed, but which vary with changes
in specified market rates or indices. The interest rates on these securities may be reset daily, weekly, quarterly, or some other reset
period, and may have a set floor or ceiling on interest rate changes. There is a risk that the current interest rate on such obligations
may not accurately reflect existing market interest rates.

 

Corporate Debt Securities. The Fund may
invest in corporate debt securities. The selection of such securities will generally not be dependent on independent credit analysis or
fundamental analysis performed by Krane or the Fund sub-adviser, if applicable. The Fund may invest in all grades of corporate debt securities
including below investment grade as discussed below. See Appendix B for a description of corporate bond ratings. The Fund may also invest
in unrated securities.

 

Corporate debt securities are typically fixed-income
securities issued by businesses to finance their operations, but may also include bank loans to companies. Notes, bonds, debentures and
commercial paper are the most common types of corporate debt securities. The primary differences between the different types of corporate
debt securities are their maturities and secured or un-secured status. Commercial paper has the shortest term and is usually unsecured.
The broad category of corporate debt securities includes debt issued by domestic or foreign companies of all kinds, including those with
small-, mid- and large-capitalizations. Corporate debt may be rated investment-grade, below investment-grade or unrated and may carry
variable or floating rates of interest.

 

Because of the wide range of types, and maturities,
of corporate debt securities, as well as the range of creditworthiness of its issuers, corporate debt securities have widely varying potentials
for return and risk profiles. For example, commercial paper issued by a large established domestic corporation that is rated investment-grade
may have a modest return on principal, but is intended to carry relatively limited risk. On the other hand, a long-term corporate note
issued by a small foreign corporation from an emerging market country that has not been rated may have the potential for relatively large
returns on principal, but carries a relatively high degree of risk.

 

Corporate debt securities carry both credit risk
and interest rate risk. Credit risk is the risk that the Fund could lose money if the issuer of a corporate debt security does not pay
interest or principal when it is due. The credit risk of a particular issuer’s debt security may vary based on its priority for repayment.
For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that
the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in
the event of bankruptcy, holders of higher-ranking senior securities may receive amounts otherwise payable to the holders of more junior
securities. Interest rate risk is the risk that the value of certain corporate debt securities will tend to fall when interest rates rise.
In general, corporate debt securities with longer terms tend to fall more in value when interest rates rise than corporate debt securities
with shorter terms.

 

 

High Yield Securities. High yield securities
are commonly referred to as “junk bonds.” Investing in these securities involves special risks in addition to the risks associated
with investments in higher-rated fixed income securities. While offering a greater potential opportunity for capital appreciation and
higher yields, high yield securities typically entail greater credit risk and potential price volatility and may be less liquid than higher-rated
securities. The Fund may have difficulty selling certain junk bonds because they may have a thin trading market. The lack of a liquid
secondary market may have an adverse effect on the market price and the Fund’s ability to dispose of particular issues, including
to honor redemptions, and may also make it more difficult for the Fund to obtain accurate market quotations in valuing these assets. High
yield securities are regarded as inherently speculative with respect to the issuer’s continuing ability to meet principal and interest
payments. They may also be more susceptible to real or perceived adverse economic and competitive industry conditions and changes than
higher-rated securities. Issuers of securities in default may fail to resume principal or interest payments, in which case the Fund may
lose its entire investment.

 

Companies that issue high yield bonds are often
highly leveraged and may not have more traditional methods of financing available to them. During an economic downturn or recession, highly
leveraged issuers of high-yield securities may experience financial stress, and may not have sufficient revenues to meet their interest
payment obligations. Economic downturns tend to disrupt the market for high yield bonds, lowering their values and increasing their price
volatility. The risk of issuer default is higher with respect to high yield bonds because such issues may be subordinated to other creditors
of the issuer and because they may be issued by less financially stable entities.

 

The credit rating of a high yield bond does not
necessarily address its market value risk, and ratings may from time to time change to reflect developments regarding the issuer’s
financial condition. The lower the rating of a high yield bond, the more speculative its characteristics.

 

Unrated debt securities may face the same or more
severe risks than high yield securities.

 

U.S. Dollar-Denominated Foreign Debt Securities.
Foreign debt securities denominated in U.S. dollars may behave very differently from debt securities issued in local currencies, and there
may be little to no correlation between the performance of the two. For example, changes to currency exchange rates may impact issuers
of foreign debt securities denominated in U.S. dollars differently than issuers of debt securities issued in local currencies. Currency
exchange rates can be very volatile and can change quickly and unpredictably, which may adversely affect the Fund. In addition, if the
U.S. dollar increases in value against the local currency of a U.S. dollar-denominated debt issue, the issuer may be subject to a greater
risk of default on their obligations (i.e., are unable to make scheduled interest or principal payments to investors).

 

Commercial Paper.
The Fund may invest in commercial paper of U.S. or foreign issuers. U.S. commercial paper generally consists of unsecured short-term
promissory notes with a fixed maturity of no more than 270 days issued by corporations, generally to finance short-term business needs.
Chinese commercial paper that may be purchased by the Fund generally will have no more than one year of remaining maturity. The Fund may
purchase commercial paper of any rating or that is unrated. Commercial paper issues in which the Fund may invest include securities issued
by corporations without registration under the Securities Act in reliance on the exemption from such registration afforded by Section
3(a)(3) thereof, and commercial paper issued in reliance on the so-called “private placement” exemption from registration,
which is afforded by Section 4(2) of the Securities Act (“Section 4(2) paper”). Section 4(2) paper is restricted as to disposition
under the federal securities laws in that any resale must similarly be made in an exempt transaction. Section 4(2) paper is normally resold
to other institutional investors through or with the assistance of investment dealers who make a market in Section 4(2) paper, which may
provide some liquidity.

 

Mortgage-Backed
Securities.
The Fund may invest in mortgage-backed securities, including collateralized mortgage obligations and mortgage pass-through
securities. These securities represent interests in pools of mortgage loans. The payments of principal and interest on the underlying
loans pass through to investors. Although the underlying mortgage loans are for specified periods of time, such as fifteen to thirty years,
the borrowers can, and often do, repay them sooner. Thus, the security holders may receive prepayments of principal, in addition to the
regular interest and principal.

 

 

There are
three types of interest rate-related risks associated with mortgage-backed securities. The first is interest rate risk. The values of
mortgage-backed securities will generally fluctuate inversely with interest rates. The second is prepayment risk. This is the risk that
borrowers will repay their mortgages earlier than anticipated. A borrower is more likely to prepay a mortgage that bears a relatively
high rate of interest. Thus, in times of declining interest rates, some higher yielding mortgages might be repaid resulting in larger
cash payments to the Fund, and the Fund will be forced to accept lower interest rates when that cash is used to purchase additional securities.
The third is extension risk. When interest rates rise, prepayments often drop, which should extend the average maturity of the mortgage-backed
security. This makes mortgage-backed securities more sensitive to interest rate changes.

 

Mortgage-backed
securities may also be subject to credit risk. Payment of principal and interest on many mortgage pass-through securities (but not the
market value of the securities themselves) may be guaranteed by U.S. Government agencies whose obligations are backed by the full faith
and credit of the U.S. Government (in the case of securities guaranteed by the Government National Mortgage Association) or may be guaranteed
by agencies or instrumentalities of the U.S. Government whose obligations are not backed by the full faith and credit of the U.S. Government
(such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie
Mac”)). Mortgage pass-through securities may also be issued by non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers). Some of these mortgage pass-through
securities may be supported by various forms of insurance or guarantees but may otherwise be subject to a greater risk of loss.

 

Other
Asset-Backed Securities.
The Fund may invest in other forms of asset-backed securities in addition to asset-based commercial paper
and mortgage-backed securities. These securities, issued by trusts and special purpose corporations, are backed by a pool of assets, such
as credit card receivables, automobile loans, airplane leases, equipment leases, or other forms of receivables. These securities present
certain risks in addition to those normally associated with debt securities. For instance, these securities may not have the benefit of
any security interest in any collateral that could ensure payment of the receivable. For example, credit card receivables are generally
unsecured. The obligors may also be entitled to the protection of a number of state and federal credit laws. Moreover, even if there are
perfected security interests in the underlying collateral, there is the possibility that recoveries on repossessed collateral may not
be sufficient to support payments on these securities.

 

To lessen
the effect of failures by obligors on underlying assets to make payments, asset-backed securities may contain elements of credit support
which fall into two categories: (i) liquidity protection and (ii) protection against losses resulting from ultimate default by an obligor
on the underlying assets. Liquidity protection refers to the provision of advances, to ensure that the receipt of payments on the underlying
pool occurs in a timely fashion. Protection against losses resulting from ultimate default ensures payment through insurance policies
or letters of credit obtained by the issuer or sponsor from third parties. The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit risk associated with the underlying assets. Delinquency or loss in excess
of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. Credit supports,
if any, do not protect against fluctuation in the market values of asset-backed securities. Moreover, a credit support depends upon the
financial ability of its issuer to honor the support.

 

Sovereign and Quasi-Sovereign Debt Obligations.
The Fund may invest in sovereign and quasi-sovereign debt obligations. Sovereign debt obligations are issued or guaranteed by a foreign
government or one of its agencies, authorities, instrumentalities, political subdivisions or by a supra-national organization. Investments
in sovereign and quasi-sovereign debt obligations involve special risks not present in corporate debt obligations. The issuer of the sovereign
or quasi-sovereign debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal
or interest when due, and the Fund may have limited recourse in the event of a default. Quasi-sovereign debt typically is not guaranteed
by a sovereign entity. During periods of economic uncertainty, the market prices of sovereign and quasi-sovereign debt, and the Fund’s
net asset value, may be more volatile than prices of U.S. debt obligations. In the past, certain non-U.S. markets have encountered difficulties
in servicing their debt obligations, withheld payments of principal and interest and declared moratoria on the payment of principal and
interest on their sovereign debts.

 

 

A sovereign or quasi-sovereign debtor’s willingness
or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the
extent of its foreign currency reserves, the availability of sufficient foreign exchange, the relative size of the debt service burden,
politics, the sovereign debtor’s policy toward principal international lenders and local political constraints. Sovereign and quasi-sovereign
debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies and other entities to reduce principal
and interest arrearages on their debt. The failure of a sovereign or quasi-sovereign debtor to implement economic reforms, achieve specified
levels of economic performance or repay principal or interest when due may result in the cancellation of third-party commitments to lend
funds to the sovereign or quasi- sovereign debtor, which may further impair such debtor’s ability or willingness to service its debts.

 

Debt Securities Issued by the World Bank for
Reconstruction and Development (“World Bank”).
The Fund may invest in debt securities issued by the World Bank. Debt securities
issued by the World Bank may include high quality global bonds backed by member governments, including the United States, Japan, Germany,
France and the United Kingdom, as well as in bonds in “non-core” currencies, including emerging markets and European accession
countries, structured notes, and discount notes represented by certificates, in bearer form only, or in un-certified form (Book Entry
Discount Notes) with maturities of 360 days or less at a discount, and in the case of Discount Notes, in certified form only and on an
interest bearing basis in the U.S. and Eurodollar markets.

 

U.S. Government Securities. The Fund may
invest in U.S. government securities. Securities issued or guaranteed by the U.S. government or its agencies or instrumentalities include
U.S. Treasury securities, which are backed by the full faith and credit of the U.S. Treasury and which differ only in their interest rates,
maturities, and times of issuance. U.S. Treasury bills have initial maturities of one-year or less; U.S. Treasury notes have initial maturities
of one to ten years; and U.S. Treasury bonds generally have initial maturities of greater than ten years. Certain U.S. government securities
are issued or guaranteed by agencies or instrumentalities of the U.S. government including, but not limited to, obligations of U.S. government
agencies or instrumentalities such as Fannie Mae, Freddie Mac, the government National Mortgage Association (“Ginnie Mae”),
the Small Business Administration, the Federal Farm Credit Administration, the Federal Home Loan Banks, Banks for Cooperatives (including
the Central Bank for Cooperatives), the Federal Land Banks, the Federal Intermediate Credit Banks, the Tennessee Valley Authority, the
Export-Import Bank of the United States, the Commodity Credit Corporation, the Federal Financing Bank, the National Credit Union Administration
and the Federal Agricultural Mortgage Corporation.

 

Some obligations issued or guaranteed by U.S.
government agencies and instrumentalities, including, for example, Ginnie Mae pass-through certificates, are supported by the full faith
and credit of the U.S. Treasury. Other obligations issued by federal agencies, such as those securities issued by Fannie Mae, are not
guaranteed by the U.S. government. No assurance can be given that the U.S. government will provide financial support to such issuers since
the U.S. government is not so obligated by law. U.S. Treasury notes and bonds typically pay coupon interest semi-annually and repay the
principal at maturity.

 

Since 2008, Fannie Mae and Freddie Mac have been
in conservatorship and have received significant capital support through U.S. Treasury preferred stock purchases, as well as U.S. Treasury
and Federal Reserve purchases of their mortgage-backed securities. The Federal Housing Finance Agency (“FHFA”) and the U.S.
Treasury (through its agreement to purchase Fannie Mae and Freddie Mac preferred stock) have imposed strict limits on the size of their
mortgage portfolios. The mortgage-backed security purchase programs ended in 2010. An FHFA stress test suggested that in a “severely
adverse scenario” significant additional Treasury support might be required. No assurance can be given that Fannie Mae and Freddie
Mac will remain successful in meeting their obligations with respect to the debt and mortgage-backed securities that they issue.

 

 

In addition, the problems faced by Fannie Mae
and Freddie Mac, resulting in their being placed into federal conservatorship and receiving significant U.S. government support, have
sparked serious debate among federal policy makers regarding the continued role of the U.S. government in providing liquidity for mortgage
loans. In December 2011, Congress enacted the Temporary Payroll Tax Cut Continuation Act of 2011 which, among other provisions, requires
that Fannie Mae and Freddie Mac increase their single-family guaranty fees by at least 10 basis points and remit this increase to Treasury
with respect to all loans acquired by Fannie Mae or Freddie Mac on or after April 1, 2012 and before January 1, 2022. Nevertheless, discussions
among policymakers have continued as to whether Fannie Mae and Freddie Mac should be nationalized, privatized, restructured, or eliminated
altogether. Fannie Mae has reported that there is “significant uncertainty regarding the future of our company, including how long
the company will continue to exist in its current form, the extent of our role in the market, how long we will be in conservatorship,
what form we will have and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship
is terminated, and whether we will continue to exist following conservatorship.” Freddie Mac faces similar uncertainty about its
future role. Fannie Mae and Freddie Mac also are the subject of several continuing legal actions and investigations related to certain
accounting, disclosure, or corporate governance matters, which (along with any resulting financial restatements) may continue to have
an adverse effect on the guaranteeing entities. Congress is currently considering several pieces of legislation that would reform U.S.
government sponsored enterprises, proposing to address their structure, mission, portfolio limits, and guarantee fees, among other issues.

 

U.S. Treasury Obligations. U.S. Treasury
obligations consist of bills, notes and bonds issued by the U.S. Treasury and separately traded interest and principal component parts
of such obligations that are transferable through the federal book-entry system known as Separately Traded Registered Interest and Principal
Securities (“STRIPS”) and Treasury Receipts (“TRs”).

 

Receipts. Interests in separately traded
interest and principal component parts of U.S. government obligations that are issued by banks or brokerage firms and are created by depositing
U.S. government obligations into a special account at a custodian bank. The custodian holds the interest and principal payments for the
benefit of the registered owners of the certificates or receipts. The custodian arranges for the issuance of the certificates or receipts
evidencing ownership and maintains the register. TRs and STRIPS are interests in accounts sponsored by the U.S. Treasury. Receipts are
sold as zero coupon securities.

 

U.S. Government Zero Coupon Securities.
STRIPS and receipts are sold as zero coupon securities, that is, fixed income securities that have been stripped of their unmatured interest
coupons. Zero coupon securities are typically sold at a (usually substantial) discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. The amount of this discount is accreted over the life of the security, and the
accretion constitutes the income earned on the security for both accounting and tax purposes. Because of these features, the market prices
of zero coupon securities are generally more volatile than the market prices of securities that have similar maturity but that pay interest
periodically. Zero coupon securities are likely to respond to a greater degree to interest rate changes than are non-zero coupon securities
with similar maturity and credit qualities.

 

U.S. Government Agencies. Some obligations
issued or guaranteed by agencies of the U.S. government are supported by the full faith and credit of the U.S. Treasury, others are supported
by the right of the issuer to borrow from the U.S. Treasury, while still others are supported only by the credit of the instrumentality.
Guarantees of principal by agencies or instrumentalities of the U.S. government may be a guarantee of payment at the maturity of the obligation
so that in the event of a default prior to maturity there might not be a market and thus no means of realizing on the obligation prior
to maturity. Guarantees as to the timely payment of principal and interest do not extend to the value or yield of these securities nor
to the value of the Fund’s shares.

 

 

Foreign Securities

The Fund may invest in non-U.S. securities and
instruments, or in instruments that provide exposure to such securities and instruments. These instruments may include debt or equity
securities. Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For
example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic
instability. There may be less information publicly available about non-U.S. issuers. Non-U.S. issuers may be subject to different accounting,
auditing, financial reporting and investor protection standards than U.S. issuers. Investments in non-U.S. securities may be subject to
withholding or other taxes and may be subject to additional trading, settlement, custodial, and operational risks (including restrictions
on the transfers of securities). With respect to certain countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there is also the possibility that it will be difficult to obtain or enforce
legal judgments in certain countries.

 

Non-U.S. markets may not be as developed or efficient
as, and may be more volatile than, those in the U.S. While the volume of shares traded on non-U.S. markets generally have been growing,
such markets usually have substantially less volume than U.S. markets. Therefore, the Fund’s investments in non-U.S. securities
may be less liquid and subject to more rapid and erratic price movements than comparable securities trading in the U.S. For example, non-U.S.
equity securities may trade at price/earnings multiples higher than comparable U.S. securities and such levels may not be sustainable.
There may be less government supervision and regulation of foreign stock exchanges, brokers, banks and listed companies abroad than in
the U.S. Moreover, settlement practices for transactions in foreign markets may differ from those in U.S. markets. Such differences may
include delays beyond periods customary in the U.S. and practices, such as delivery of securities prior to receipt of payment, that increase
the likelihood of a failed settlement, which can result in losses to the Fund. Foreign exchanges may be open on days when the Fund does
not price its shares, thus, the value of the securities in the Fund’s portfolio may change on days when shareholders will not be
able to purchase or sell the Fund’s shares. Conversely, Fund shares may trade on days when foreign exchanges are closed. Each of
these factors can make investments in the Fund more volatile and potentially less liquid than other types of investments. In addition,
the Fund may change its creation or redemption procedures without notice in connection with restrictions on the transfer of securities.
For more information on creation and redemption procedures, see “Creation and Redemption of Creation Units” herein.

 

Foreign brokerage commissions, custodial expenses
and other fees are also generally higher than for securities traded in the U.S. This may cause the Fund to incur higher portfolio transaction
costs than domestic funds. Fluctuations in exchange rates may also affect the earning power and asset value of the foreign entity issuing
a security, even one denominated in U.S. dollars. Dividend and interest payments may be repatriated based on the exchange rate at the
time of disbursement, but restrictions on capital flows may be imposed.

 

Economic conditions, such as volatile currency
exchange rates and interest rates, political events and other conditions may, without prior warning, lead to government intervention and
the imposition of “capital controls.” Countries use these controls to restrict volatile movements of capital entering (inflows)
and exiting (outflows) their country to respond to certain economic conditions. Capital controls include the prohibition of, or restrictions
on, the ability to transfer currency, securities or other assets. Levies may be placed on profits repatriated by foreign entities (such
as the Fund). Capital controls may impact the ability of the Fund to create and redeem Creation Units, adversely affect the trading market
for shares of the Fund, and cause shares of the Fund to trade at prices materially different from NAV. There can be no assurance that
a country in which the Fund invests will not impose a form of capital control to the possible detriment of the Fund and its shareholders.
The Fund may also be subject to delays in converting or transferring U.S. dollars to foreign currencies for the purpose of purchasing
foreign securities. This may hinder the Fund’s performance, since any delay could result in the Fund missing an investment opportunity
and purchasing securities at a higher price than originally intended, or incurring cash drag.

 

 

Investing in foreign companies may involve risks
not typically associated with investing in companies domiciled in the United States. The value of securities denominated in foreign currencies,
and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets
can be very volatile. Many foreign countries lack uniform accounting and disclosure standards comparable to those that apply to U.S. companies,
and it may be more difficult to obtain reliable information regarding a foreign issuer’s financial condition and operations. In
addition, the costs of foreign investing, including withholding taxes, brokerage commissions, and custodial fees, generally are higher
than for U.S. investments. Investing in companies located abroad also carries political and economic risks distinct from those associated
with investing in the United States. Foreign investment may be affected by actions of foreign governments adverse to the interests of
U.S. investors, including the possibility of seizure, expropriation or nationalization of assets, including foreign deposits, confiscatory
taxation, restrictions on U.S. investment, or on the ability to repatriate assets or to convert currency into U.S. dollars. There may
be a greater possibility of default by foreign governments or foreign-government sponsored enterprises. Investments in foreign countries
also involve a risk of local political, economic, or social instability, military action or unrest, or adverse diplomatic developments.

 

Geographic Focus. Funds that are less diversified
across countries or geographic regions are generally riskier than more geographically diversified funds. To the extent the Fund focuses
on a specific region, it will be more exposed to that region’s economic cycles, currency exchange rates, stock market valuations
and political risks, among others, compared with a more geographically diversified fund. The economies and financial markets of certain
regions, such as Asia, can be interdependent and may be adversely affected by the same events. Set forth below for certain markets in
which the Fund may invest are brief descriptions of some of the conditions and risks in each such market.

 

Investments in Emerging Markets Securities.
The Fund may invest in markets that are considered to be “emerging.” Investing in securities listed and traded in emerging
markets may be subject to additional risks associated with emerging market economies. Such risks may include: (i) greater market volatility,
(ii) greater risk of asset seizures and capital controls, (iii) lower trading volume and liquidity, (iv) greater social, political and
economic uncertainty, (v) governmental controls on foreign investments and limitations on repatriation of invested capital, (vi) lower
disclosure, corporate governance, auditing and financial reporting standards, (vii) fewer protections of property rights, (viii) restrictions
on the transfer of securities or currency, and (ix) settlement and trading practices that differ from U.S. markets. Emerging markets are
generally less liquid and less efficient than developed securities markets.

 

Investments in Frontier Market Securities.
Frontier market countries generally have smaller economies and less developed capital markets or legal, regulatory and political systems
than traditional emerging market countries. As a result, the risks of investing in emerging market countries are magnified in frontier
market countries.

 

Investments in Asia. Investments in securities
of issuers in Asian countries involve risks not typically associated with investments in securities of issuers in other regions. Such
heightened risks include, among others, expropriation and/or nationalization of assets, confiscatory taxation, political instability,
including authoritarian and/or military involvement in governmental decision-making, armed conflict and social instability as a result
of religious, ethnic and/or socio-economic unrest. Certain Asian economies have experienced rapid rates of economic growth and industrialization
in recent years, and there is no assurance that these rates of economic growth and industrialization will be maintained.

 

 

Certain Asian countries have democracies with
relatively short histories, which may increase the risk of political instability. These countries have faced political and military unrest,
and further unrest could present a risk to their local economies and securities markets. Indonesia and the Philippines have each experienced
violence and terrorism, which has negatively impacted their economies. North Korea and South Korea each have substantial military capabilities,
and historical tensions between the two countries present the risk of war; in the recent past, these tensions have escalated. Any outbreak
of hostilities between the two countries could have a severe adverse effect on the South Korean economy and securities market. Increased
political and social unrest in these geographic areas could adversely affect the performance of investments in this region.

 

Certain governments in this region administer
prices on several basic goods, including fuel and electricity, within their respective countries. Certain governments may exercise substantial
influence over many aspects of the private sector in their respective countries and may own or control many companies. Future government
actions could have a significant effect on the economic conditions in this region, which in turn could have a negative impact on private
sector companies. There is also the possibility of diplomatic developments adversely affecting investments in the region.

 

Corruption and the perceived lack of a rule of
law in dealings with international companies in certain Asian countries may discourage foreign investment and could negatively impact
the long-term growth of certain economies in this region. In addition, certain countries in the region are experiencing high unemployment
and corruption, and have fragile banking sectors. Their securities markets are not as developed as those of other countries and, therefore,
are subject to additional risks such as trading halts.

 

Some economies in this region are dependent on
a range of commodities, including oil, natural gas and coal. Accordingly, they are strongly affected by international commodity prices
and particularly vulnerable to any weakening in global demand for these products. The market for securities in this region may also be
directly influenced by the flow of international capital, and by the economic and market conditions of neighboring countries. Adverse
economic conditions or developments in neighboring countries may increase investors’ perception of the risk of investing in the region
as a whole, which may adversely impact the market value of the securities issued by companies in the region.

 

Investments in Brazil. Brazil has experienced
economic instability resulting from, among other things, periods of very high inflation, persistent structural public sector deficits
and significant devaluations of its currency, leading also to a high degree of price volatility in both the Brazilian equity and foreign
currency markets. Brazilian companies may also be adversely affected by high interest and unemployment rates, fluctuations in commodity
prices, significant public health concerns, and associated declines in tourism.

 

Investments in China. The Chinese economy
is generally considered an emerging market and can be significantly affected by economic and political conditions and policy in China
and surrounding Asian countries. The economy of China, which has been in a state of transition from a planned economy to a more market
oriented economy, differs from the economies of most developed countries in many respects, including the level of government involvement,
its state of development, its growth rate, control of foreign exchange, and allocation of resources.

 

Although the majority of productive assets in
China are still owned by the Chinese government at various levels, the Chinese government has implemented economic reform measures emphasizing
utilization of market forces in the development of the economy of China and a high level of management autonomy. The economy of China
has experienced significant growth in the past 20 years, but growth has been uneven both geographically and among various sectors of the
economy. Economic growth has often been accompanied by periods of high inflation in China. The Chinese government has implemented various
measures from time to time to control inflation and restrain the rate of economic growth.

 

 

The Chinese government has carried out economic
reforms to achieve decentralization and utilization of market forces to develop the economy of China. These reforms have resulted in significant
economic growth and social progress. There can, however, be no assurance that the Chinese government will continue to pursue such economic
policies or, if it does, that those policies will continue to be successful. Any such adjustment and modification of those economic policies
may have an adverse impact on the securities market in China, the portfolio securities of the Fund or the Fund itself. Further, the Chinese
government may from time to time adopt corrective measures to control the growth of the Chinese economy, which may also have an adverse
impact on the capital growth and performance of the Fund. Political changes, social instability and adverse diplomatic developments in
China could result in the imposition of additional government restrictions including expropriation of assets, confiscatory taxes or nationalization
of some or all of the property held by the underlying issuers of the Fund’s portfolio securities. As the Chinese economy develops,
its growth may slow significantly and sometimes unexpectedly. The laws, regulations, including the investment regulations allowing foreigners
to invest in Chinese securities, government policies and political and economic climate in China may change with little or no advance
notice. Any such change could adversely affect market conditions and the performance of the Chinese economy and, thus, the value of securities
in the Fund’s portfolio.

 

The Chinese government continues to be
an active participant in many economic sectors through ownership positions and regulation. The allocation of resources in China is subject
to a high level of government control. The Chinese government strictly regulates the payment of foreign currency denominated obligations
and sets monetary policy. Through its policies, the government may provide preferential treatment to particular industries or companies.
The policies set by the government could have a substantial effect on the Chinese economy and the Fund’s investments. The Chinese
government strictly regulates the payment of foreign currency denominated obligations and sets monetary policy, and may introduce new
laws and regulations that have an adverse effect on the Fund.

 

In addition, the Chinese economy is export-driven
and highly reliant on trade. Recent developments in relations between the United States and China have heightened concerns of increased
tariffs and restrictions on trade between the two countries. An increase in tariffs or trade restrictions, or even the threat of such
developments, could lead to a significant reduction in international trade, which could have a negative impact on China’s export industry
and a commensurately negative impact on the Fund. A downturn in the economies of China’s primary trading partners could also slow
or eliminate the growth of the Chinese economy and adversely impact the Fund’s investments.

 

The performance of the Chinese economy may differ
favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation,
capital reinvestment, resource self-sufficiency and balance of payments position. Adverse changes to the economic conditions of its primary
trading partners, such as the United States, Japan and South Korea, would adversely impact the Chinese economy and the Fund’s investments.
Moreover, the slowdown in other significant economies of the world, such as the United States, the European Union (“EU”) and
certain Asian countries, may adversely affect economic growth in China. An economic downturn in China would likely adversely the Fund’s
investments.

 

The regulatory and legal framework for capital
markets in China may not be as well developed as those of developed countries. Chinese laws and regulations affecting securities markets
are relatively new and evolving, and enforcement of these regulations involve significant uncertainties. No assurance can be given that
changes in such laws and regulations, their interpretation or their enforcement will not have a material adverse effect on their business
operations or on the Fund.

 

Although China has begun the process of privatizing
certain sectors of its economy, privatized entities may lose money and/or be re-nationalized. Accordingly, an investment in the Fund involves
a risk of total loss. In the Chinese securities markets, a small number of issuers may represent a large portion of the entire market.
The Chinese securities markets are characterized by relatively frequent trading halts and low trading volume, resulting in substantially
less liquidity and greater price volatility. These risks may be more pronounced for the A Share market than for Chinese equity securities
markets generally because the A Share market is subject to greater government restrictions and control, including the risk of nationalization
or expropriation of private assets which could result in a total loss of an investment in the Fund.

 

 

Repatriations of gains and income on PRC securities
may require the approval of China’s State Administration of Foreign Exchange (“SAFE”) and principal invested pursuant
to the PRC securities quota may be subject to repatriation restrictions, depending on the license used and the period from remittance
of funds into China.

 

Currently, there are two stock exchanges in mainland
China, the Shanghai and Shenzhen Stock Exchanges. The Shanghai and Shenzhen Stock Exchanges are supervised by the China Securities Regulatory
Commission (“CSRC”) and are highly automated with trading and settlement executed electronically. The Shanghai and Shenzhen
Stock Exchanges are substantially smaller, less liquid and more volatile than the major securities markets in the United States.

 

The Shanghai Stock Exchange commenced trading
on December 19, 1990, the Shenzhen Stock Exchange commenced trading on July 3, 1991 and the Hong Kong Stock Exchange commenced trading
on April 2, 1986. The Shanghai and Shenzhen Stock Exchanges divide listed shares into two classes: A-Shares and B-Shares. Companies whose
shares are traded on the Shanghai and Shenzhen Stock Exchanges that are incorporated in mainland China may issue both A-Shares and B-Shares.
In China, the A-Shares and B-Shares of an issuer trade on one exchange. A-Shares and B-Shares may both be listed on either the Shanghai
or Shenzhen Stock Exchange. Both classes represent an ownership interest comparable to a share of common stock. A-Shares are traded on
the Shanghai and Shenzhen Stock Exchanges in Chinese currency. B-Shares are traded on the Shenzhen and Shanghai Stock Exchanges in Hong
Kong dollars and U.S. dollars, respectively.

 

Foreign investors had historically been unable
to participate in the PRC securities market. However, in late 2002, Investment Regulations promulgated by the CSRC came into effect, which
were replaced by the updated Investment Regulations (i.e., “Measures for the Administration of the Securities Investments of Qualified
Foreign Institutional Investors in the PRC”), which came into effect on September 1, 2006, that provided a legal framework for certain
Qualified Foreign Institutional Investors (“QFIIs”) to invest in PRC securities and certain other securities historically
not eligible for investment by non-Chinese investors, through quotas granted by SAFE to those QFIIs which have been approved by the CSRC.
The RMB QFII (“RQFII”) program was instituted in December 2011 and is substantially similar to the QFII program, but provides
for greater flexibility in repatriating assets. On September 10, 2019, the PRC government announced that it would eliminate the QFII and
RQFII quotas, meaning that entities registered with the appropriate Chinese regulator will no longer be subject to quotas when investing
in PRC securities (but will remain subject to foreign shareholder limits). It is currently unclear when this change will take effect.

 

In November 2014, the PRC government launched
the Shanghai-Hong Kong Stock Connect program, which allows investors with brokerage accounts in Hong Kong to invest in certain A-Shares
without a RQFII or QFII license. A similar stock connect program, the Shenzhen-Hong Kong Stock Connect program, launched in November 2016,
and the Shanghai-London Stock Connect Program and the China-Japan Stock Connect both launched in June 2019 (together, the “Stock
Connect Programs”).

 

In February 2016, the People’s Bank of China
established a program that permits foreign investors to invest directly in securities traded on the Chinese Interbank Bond Market (“CIBM”),
even without a RQFII or QFII license (“CIBM Program”). If the Fund participates in the CIBM Program, a PRC onshore settlement
agent will be appointed for the Fund, which is required by the CIBM Program.

 

 

Bond Connect, a mutual market access scheme, commenced
trading on July 3, 2017 and represents an exception to Chinese laws that generally restrict foreign investment in RMB Bonds. In August
2018, Bond Connect enhanced its settlement system to fully implement real-time delivery-versus-payment settlement of trades, which has
resulted in increased adoption of Bond Connect by investors. However, if the Fund participates in Bond Connect, there is a risk that Chinese
regulators may alter all or part of the structure and terms of, as well as the Fund’s access to, Bond Connect in the future or eliminate
it altogether, which may limit or prevent the Fund from investing directly in or selling its RMB Bonds.

 

There is no guarantee that any quota received
by Krane or a subadviser of the Fund to invest in PRC securities will not be modified or revoked in the future. Additionally, given that
the PRC securities markets are considered volatile and unstable, the creation and redemption of Creation Units may also be disrupted.
A participating dealer may not redeem or create Creation Units of the Fund for securities if it believes PRC securities are not available.

 

PRC Custodian and Dealer/Settlement
Agent.

 

The Fund is responsible for selecting
the PRC Dealer/Settlement Agent to execute certain transactions for the Fund in the PRC markets. Krane or a sub-adviser can currently
only use a limited number of PRC Dealers/Settlement Agents and may use more than one PRC Dealer/Settlement Agent for accessing some securities.
Should, for any reason, the Fund’s ability to use a given PRC Dealer/Settlement Agent be affected, this could disrupt the operations
of the Fund and affect the ability of the Fund to track the underlying index or cause a premium or a discount to the trading price of
the Fund’s shares. The Fund may also incur losses due to the acts or omissions of either the relevant PRC Dealer/Settlement Agent
or the PRC Custodian in the execution or settlement of any transaction or in the transfer of any funds or securities. Subject to the applicable
laws and regulations in the PRC, Krane or a sub-adviser will make arrangements to ensure that the PRC Dealers/Settlement Agents and PRC
Custodian have appropriate procedures to properly seek to safe-keep the Fund’s assets.

 

According to the applicable Chinese
regulations and market practice, the securities and cash accounts for the Fund held in the PRC pursuant to a RQFII or QFII license are
to be maintained in the joint names of Krane or a sub-adviser as the QFII or RQFII holder and the Fund. Krane or a sub-adviser may not
use the account for any other purpose than for maintaining the Fund’s assets. However, given that the securities trading account
will or would be maintained in the joint names of Krane or a sub-adviser and the Fund, the Fund’s assets may not be as well protected
as they would be if it were possible for them to be registered and held solely in the name of the Fund. In particular, there is a risk
that creditors of Krane or a sub-adviser may assert that the securities are owned by Krane or the sub-adviser and not the Fund, and that
a court would uphold such an assertion, in which case creditors of Krane or the sub-adviser could seize assets of the Fund. Because Krane
or a sub-adviser’s PRC securities quota would be in the name of Krane or the sub-adviser and the Fund, there is also a risk that
regulatory actions taken against Krane or the sub-adviser by PRC government authorities may affect the Fund.

 

Investors should note that cash deposited
in the cash account of the Fund with the PRC Custodian will not be segregated but will be a debt owing from the PRC Custodian to the Fund
as a depositor. Such cash will be co-mingled with cash belonging to other clients of the PRC Custodian. In the event of bankruptcy or
liquidation of the PRC Custodian, the Fund will not have any proprietary rights to the cash deposited in such cash account, and the Fund
will become an unsecured creditor, ranking pari passu with all other unsecured creditors, of the PRC Custodian. The Fund may face difficulty
and/or encounter delays in recovering such debt, or may not be able to recover it in full or at all, in which case the Fund will suffer
losses.

 

In the event of any default of either
the relevant PRC Dealer/Settlement Agent or the PRC Custodian (directly or through its delegate) in the execution or settlement of any
transaction or in the transfer of any funds or securities in the PRC, the Fund may encounter delays in recovering its assets which may
in turn adversely impact the NAV of that Fund.

 

 

Specific Risks of Investing in the
A-Shares Market

 

The Fund may invest in A-Shares through
a RQFII or QFII license from CSRC and an A-Shares quota from SAFE, the Stock Connect Programs, and other investment companies, including
other exchange-traded funds (“ETFs”) which may be advised or otherwise serviced by Krane. The Stock Connect Programs are exceptions
to Chinese law, which generally restricts foreign investment in A Shares. These programs are novel. Chinese regulators may alter or eliminate
these programs at any time.

 

Because restrictions continue to exist
and capital therefore cannot flow freely into and out of the A-Share market, it is possible that in the event of a market disruption,
the liquidity of the A-Share market and trading prices of A-Shares could be more severely affected than the liquidity and trading prices
of markets where securities are freely tradable and capital therefore flows more freely. The Fund cannot predict the nature or duration
of such a market disruption or the impact that it may have on the A-Share market and the short-term and long-term prospects of its investments
in the A-Share market. In the event that the Fund invests in A-Shares directly, the Fund may incur significant losses, or may not be able
fully to implement or pursue its investment objectives or strategies, due to investment restrictions on RQFIIs and QFIIs, illiquidity
of the Chinese securities markets, or delay or disruption in execution or settlement of trades. A-Shares may become subject to frequent
and widespread trading halts.

 

The Chinese government has in the past
taken actions that benefitted holders of A-Shares. As A-Shares become more available to foreign investors, such as the Fund, the Chinese
government may be less likely to take action that would benefit holders of A-Shares. In addition, there is no guarantee that an A-Shares
quota will be sufficient for the Fund’s intended scope of investment.

 

The regulations which apply to investments
by RQFIIs and QFIIs, including the repatriation of capital, are relatively new and are unique to PRC investment schemes. The application
and interpretation of such regulations are therefore relatively untested. In addition, there is little precedent or certainty evidencing
how such discretion may be exercised now or in the future; and even if there were precedent, it may provide little guidance as PRC authorities
would likely continue to have broad discretion.

 

If the Fund obtains a QFII or RQFII
license to invest in A-Shares, Krane and/or a sub-adviser will be required to transfer the entire investment principal for its A-Share
quota into a local sub-custodian account within such time period as specified by SAFE. These limitations may also prevent the Fund from
making certain distributions to shareholders.

 

Repatriations by RQFIIs are currently
permitted daily and are not subject to repatriation restrictions or prior regulatory approval. However, there is no assurance that PRC
rules and regulations will not change or that repatriation restrictions will not be imposed in the future. Further, such changes to the
PRC rules and regulations may be applied retroactively. Any restrictions on repatriation of the Fund’s portfolio investments could
have an adverse effect on the Fund’s ability to meet redemption requests.

 

If the Fund invests in A-Shares directly
through a QFII or RQFII license, it would be required to select a PRC sub-custodian for its investments in A-Shares, which is a mainland
commercial bank qualified as a custodian for QFIIs (“PRC custodian”). Given that the securities in an A-Shares trading account
would be maintained in the joint names of Krane or a sub-adviser and the Fund, the Fund’s assets may not be as well protected as
they would be if it were possible for them to be registered and held solely in the name of the Fund. In particular, there is a risk that
creditors of such Krane or a sub-adviser may assert that the securities are owned by Krane or the sub-adviser and not the Fund, and that
a court would uphold such an assertion, in which case creditors of Krane or the sub-adviser could seize assets of the Fund. There would
also be a risk that regulatory actions taken against Krane or the sub-adviser might affect the Fund.

 

 

The Chinese government limits foreign
investment in the securities of certain Chinese issuers and prohibits certain investments entirely. For example, currently, no single
underlying foreign investor may hold more than 10% of the total outstanding shares in one listed company and all foreign investors may
not hold, in aggregate, more than 30% of the total outstanding shares in one listed company. Such limits may not apply where foreign investors
make strategic investment in listed companies in accordance with the Measures for the Administration of Strategic Investments in Listed
Companies by Foreign Investors. Any restrictions or limitations could have adverse effects on the liquidity and performance of the Fund’s
holdings, which would increase the risk of tracking error and, at the worst, result in the Fund not being able to achieve its investment
objective.

 

Regulations adopted by the CSRC and
SAFE specify that all A-Shares purchased or sold through a QFII or RQFII license must be executed through a specified set of brokers per
exchange. Should the Fund’s ability to use the relevant PRC broker be affected for any reason, it could disrupt the operations of
the Fund, causing a premium or discount in the trading price of the Fund’s shares relative to NAV. The Fund may also incur losses
due to the acts or omissions of the PRC broker in the execution of any transaction or the transfer of funds or securities. In addition,
limiting transactions to a particular PRC broker may result in higher brokerage commissions paid by the Fund.

 

If the Fund purchases A-Shares through
a QFII or RQFII license, the Fund, per Chinese regulations, would be required to maintain its securities and cash accounts in the PRC
in the joint names of the Fund and the QFII or RQFII holder. Although the accounts cannot be used for any purpose other than maintaining
the Fund’s assets, such assets may not be as well protected as they would be if they were registered and held solely in the name
of the Fund. In particular, there is a risk that creditors of the QFII or RQFII holder may seek to assert ownership in the event of such
entity’s bankruptcy or the like. Adverse actions taken against the QFII or RQFII holder may also adversely impact the accounts.

 

If the Fund purchases A-Shares through
a QFII or RQFII license, cash deposited in the cash account of the Fund with the PRC custodian would not normally be, in fact, segregated
for the benefit of the Fund, but will likely be deemed a general debt of the PRC custodian owing to the Fund as depositor. Such cash accordingly
would be commingled with the cash of other clients of the PRC custodian. In the event of such custodian’s bankruptcy or the like,
it is unlikely that the Fund would have proprietary rights to the cash it deposited. Instead, the Fund would likely become an unsecured
creditor, ranking pari passu with all other unsecured creditors of the custodian. The Fund may face delays in recovering the cash and
may be unable to recover it at all.

 

In addition to investing directly in
A-Shares, the Fund may seek exposure to China A-Shares by investing in depositary receipts, H shares or B-Shares on the component securities.
The A Shares market may behave very differently from the B-Shares, H-Shares, and N-Shares and there may be little to no correlation between
their performance. The Fund may also use derivatives or invest in ETFs that provide comparable exposures. If necessary, the Fund may suspend
the sale of shares in Creation Units until it is determined that the requisite exposure to the component securities of the underlying
index is obtainable. During the period that creations are suspended, Fund shares may trade at a significant premium or discount to net
asset value (the “NAV”). Alternatively, the Fund may change its investment objective and track another index of Chinese-related
stocks. In extreme circumstances beyond the control of the Fund, the Fund may incur significant losses due to limited investment capabilities,
including based on the illiquidity of the Chinese securities markets, or delay or disruption in execution or settlement of trades. A-Shares
may be subject to more frequent and/or extended trading halts than other exchange-traded securities.

 

 

The ability of the Fund to buy and
sell A-Shares through the Stock Connect Programs on a particular day may be affected by public holidays of the participating exchanges,
which differ.

 

Tax
Risk.
 Per a circular (Caishui [2014] 79), the Fund is temporarily exempt from the Chinese
tax on capital gains (“CGT”) on trading in A-Shares as a QFII or RQFII on the Shanghai Stock Exchange through the Shanghai-Hong
Kong Stock Connect as of November 17, 2014, and the Shenzhen Stock Exchange through the Shenzhen-Hong Kong Stock Connect as of December
5, 2016. There is no indication as to how long the temporary exemption will remain in effect. Accordingly, the Fund may be subject to
such taxes in the future.

 

When the QFIIs and RQFIIs transfer
A-Shares and B-Shares, PRC Stamp Duty is currently imposed on the seller but not on the purchaser, at a rate of 0.1% on the transacted
value. In addition, under the current PRC Business Tax (“BT”) Law, which came into effect on January1, 2009, taxpayer would
be subject to PRC BT at a rate of 5% in respect of capital gains derived from the trading of A-Shares. However, Caishui [2005] 155 grants
BT exemption to QFIIs in respect of their gains derived from the trading of PRC securities (including A-Shares). The new BT Law, which
came into effect on January 1, 2009, has not changed this exemption treatment at the time of this Prospectus. However, it is not clear
whether a similar exemption would be extended to RQFIIs. Dividend income or profit distributions on equity investment derived from China
are not included in the taxable scope of BT.

 

Urban maintenance and construction
tax (currently at the rate ranging from 1% to 7%), educational surcharges (currently at the rate of 3%) and local educational surcharges
(currently at the rate of 2%) are imposed based on the business tax liabilities.

 

The Fund reserves the right to establish
a reserve for taxes which present uncertainty as to whether they will be assessed, although it currently does not do so. If the Fund establishes
such a reserve but is not ultimately subject to these taxes, shareholders who redeemed or sold their shares while the reserve was in place
will effectively bear the tax and may not benefit from the later release, if any, of the reserve. Conversely, if the Fund does not establish
such a reserve but ultimately is subject to the tax, shareholders who redeemed or sold their shares prior to the tax being withheld, reserved
or paid will have effectively avoided the tax. Investors should note that such provision, if any, may be excessive or inadequate to meet
actual tax liabilities (which could include interest and penalties) on the Fund’s investments. As a result, investors may be advantaged
or disadvantaged depending on the final rules of the relevant tax authorities.

 

Investments in swaps and other derivatives
may be subject to special U.S. federal income tax rules that could adversely affect the character, timing and amount of income earned
by the Fund (e.g., by causing amounts that would be capital gain to be taxed as ordinary income or to be taken into income earlier than
would otherwise be necessary). Also, the Fund may be required to periodically adjust its positions in its swaps and derivatives to comply
with certain regulatory requirements which may further cause these investments to be less efficient than a direct investment in the securities
themselves. For example, swaps in which the Fund may invest may need to be reset on a regular basis in order to maintain compliance with
the Investment Company Act of 1940, as amended (the “1940 Act”), which may increase the likelihood that the Fund will generate
short-term capital gains. In addition, because the application of these special rules may be uncertain, it is possible that the manner
in which they are applied by the Fund may be determined to be incorrect. In that event, the Fund may be found to have failed to maintain
its qualification as a RIC or to be subject to additional U.S. tax liability. Moreover, the Fund may make investments, both directly and
through swaps or other derivative positions, in companies classified as passive foreign investment companies (“PFICs”) for
U.S. federal income tax purposes. Investments in PFICs are subject to special tax rules which may result in adverse tax consequences to
the Fund and its shareholders.

 

 

Currency, Capital Controls and Currency
Conversion Risk.
Economic conditions and political events may lead to foreign government intervention and the imposition of additional
or renewed capital controls in China, which may impact the ability of the Fund to buy, sell or otherwise transfer securities or currency,
and limit the Fund’s ability to pay redemptions, and cause the Fund to decline in value. Although the RMB is not presently freely
convertible, there is no assurance that repatriation restrictions will not be (re-)imposed in the future. Because the Fund’s NAV
is determined on the basis of U.S. dollars, the Fund may lose value if the RMB depreciates against the U.S. dollar, even if the local
currency value of the Fund’s holdings goes up. The Fund may also be subject to delays in converting or transferring U.S. dollars
to RMB for the purpose of purchasing A Shares. This may hinder its performance, including because any delay could result in the Fund missing
an investment opportunity and purchasing securities at a higher price than originally intended, or incurring cash drag.

 

China B-Shares. The Fund may invest in
shares of companies incorporated in mainland China that are traded in the mainland B-Share markets. B-Shares were originally intended
to be available only to foreign investors or foreign institutions. However, since February 2001, B-Shares have been available to domestic
individual investors who trade through legal foreign currency accounts. Unlike prices in the A-Share market, the prices of B-Shares are
quoted in foreign currencies. The B-Share market commenced operations in April 1991 and was originally opened exclusively for foreign
investors. In 2001, the B-Share market opened to Chinese domestic individual investors as well. However, Chinese domestic individual investors
must trade with legal foreign currency accounts. The China B-Share market is composed of the Shanghai Stock Exchange (which settles in
U.S. dollars) and the Shenzhen Stock Exchange (which settles in Hong Kong dollars). The China B-Share market is generally smaller, less
liquid and has a smaller issuer base than the China A-Share market. The A-Shares market may behave very differently from the B-Shares
market, and there may be little to no correlation between the performance of the two.

 

China H-Shares. The Fund may invest in
shares of companies incorporated in mainland China and listed on the Hong Kong Stock Exchange. H-Shares are traded in Hong Kong dollars
on the Hong Kong Stock Exchange, and must meet Hong Kong’s listing and disclosure requirements. H-Shares may be traded by foreigners
and offer a vehicle to foreigners to gain exposure to Chinese securities. Because they are traded on the Hong Kong Stock Exchange, H-Shares
involve a number of risks not typically associated with investing in countries with more democratic governments or more established economies
or securities markets. Such risks may include the risk of nationalization or expropriation; greater social, economic and political uncertainty;
increased competition from Asia’s other low-cost emerging economies; currency exchange rate fluctuations; higher rates of inflation;
controls on foreign investment and limitations on repatriation of invested capital; and greater governmental involvement in and control
over the economy. Fluctuations in the value of the Hong Kong dollar will affect the Fund’s holdings of H-Shares. The Hong Kong stock
market may behave very differently from the domestic Chinese stock market and there may be little to no correlation between the performance
of the Hong Kong stock market and the domestic Chinese stock market.

 

China N-Shares. The Fund may invest in
shares of companies with business operations in mainland China and listed on an American stock exchange, such as NYSE or Nasdaq. N-Shares
are traded in U.S. dollars. N-Shares are issued by companies incorporated anywhere, but many are registered in Bermuda, the Cayman Islands,
the British Virgin Islands, or the United States. Because companies issuing N-Shares often have business operations in China, they are
subject to certain political and economic risks in China.

 

P-Chip Companies. The Fund may invest
in shares of companies with controlling private Chinese shareholders that are incorporated outside mainland China and listed on the Hong
Kong Stock Exchange. These businesses are often run by the private sector and have a majority of their business operations in mainland
China. P-Chip shares are traded in Hong Kong dollars on the Hong Kong Stock Exchange, and may also be traded by foreigners. Because they
are traded on the Hong Kong Stock Exchange, P-Chips are also subject to risks similar to those associated with investments in H-Shares.
They are also subject to risks affecting their jurisdiction of incorporation, including any legal or tax changes. Private Chinese companies
may be more indebted, more susceptible to adverse changes in the economy, subject to asset seizures and nationalization, and negative
political or legal developments.

 

 

Red Chip Companies. The Fund may invest
in shares of companies with controlling Chinese shareholders that are incorporated outside mainland China, have a majority of their business
operations in mainland China, and listed on the Hong Kong Stock Exchange. These businesses are controlled, either directly or indirectly,
by the central, provincial or municipal governments of the PRC. Red Chip shares are traded in Hong Kong dollars on the Hong Kong Stock
Exchange and may also be traded by foreigners. Because Red Chip companies are controlled by various PRC governmental authorities, investing
in Red Chips involves risks that political changes, social instability, regulatory uncertainty, adverse diplomatic developments, asset
expropriation or nationalization, or confiscatory taxation could adversely affect the performance of Red Chip companies. Red Chip companies
may be less efficiently run and less profitable than other companies.

 

S-Chip Companies. The Fund may invest in
shares of companies with business operations in mainland China and listed on the Singapore Exchange (“S-Chips”). S-Chip shares
are issued by companies incorporated anywhere, but many are registered in Singapore, the British Virgin Islands, the Cayman Islands, or
Bermuda. They are subject to risks affecting their jurisdiction of incorporation, including any legal or tax changes. S-Chip companies
may or may not be owned at least in part by a Chinese central, provincial or municipal government and be subject to the types of risks
that come with such ownership described herein. There may be little or no correlation between the performance of the Singapore stock market
and the mainland Chinese stock market.

 

Disclosure of Interests and Short Swing Profit
Rule
. The Fund may be subject to shareholder disclosure of interest regulations promulgated by the CSRC. These regulations
currently require the Fund to make certain public disclosures when the Fund and parties acting in concert with the Fund acquire 5% or
more of the issued securities of a listed company. If the reporting requirement is triggered, the Fund will be required to report information
which includes, but is not limited to: (a) information about the Fund and the type and extent of its holdings in the company; (b) a statement
of the Fund’s purposes for the investment and whether the Fund intends to increase its holdings over the following 12-month period;
(c) a statement of the Fund’s historical investments in the company over the previous six months; (d) the time of, and other information
relating to, the transaction that triggered the Fund’s holding in the listed company reaching the 5% reporting threshold; and (e)
other information that may be required by the CSRC or the stock exchange. Additional information may be required if the Fund and its concerted
parties constitute the largest shareholder or actual controlling shareholder of the listed company. The report must be made to the CSRC,
the stock exchange, the invested company, and the CSRC local representative office where the listed company is located. The Fund would
also be required to make a public announcement through a media outlet designated by the CSRC. The public announcement must contain the
same content as the official report.

 

The relevant PRC regulations presumptively treat
all affiliated investors and investors under common control as parties acting in concert. As such, under a conservative interpretation
of these regulations, the Fund may be deemed as a “concert party” of other funds managed by Krane, a sub-adviser and/or their
affiliates and therefore may be subject to the risk that the Fund’s holdings may be required to be reported in the aggregate with
the holdings of such other funds should the aggregate holdings trigger the reporting threshold under the PRC law.

 

If the 5% shareholding threshold is triggered
by the Fund and parties acting in concert with the Fund, the Fund would be required to file its report within three days of the date the
threshold is reached. During the time limit for filing the report, a trading freeze applies and the Fund would not be permitted to make
subsequent trades in the invested company’s securities. Any such trading freeze may impair the ability of the Fund to achieve its
investment objective and undermine the Fund’s performance, if the Fund would otherwise make trades during that period but is prevented
from doing so by the regulation.

 

 

Once the Fund and parties acting in concert reach
the 5% trading threshold as to any listed company, any subsequent incremental increase or decrease of 5% or more will trigger a further
reporting requirement and an additional three-day trading freeze, and also an additional freeze on trading within two days of the Fund’s
report and announcement of the incremental change. These trading freezes may undermine the Fund’s performance as described above.
Also, Shanghai Stock Exchange requirements currently require the Fund and parties acting in concert, once they have reach the 5% threshold,
to disclose whenever their shareholding drops below this threshold (even as a result of trading which is less than the 5% incremental
change that would trigger a reporting requirement under the relevant CSRC regulation). CSRC regulations also contain additional disclosure
(and tender offer) requirements that apply when an investor and parties acting in concert reach thresholds of 20% and greater than 30%
shareholding in a company.

 

Subject to the interpretation of PRC courts and
PRC regulators, the operation of the PRC short swing profit rule may prevent the Fund from reducing its holdings in a PRC company within
six months of the last purchase of shares of the company if the Fund’s holding in that company exceeds the threshold prescribed
by the relevant exchange on which the PRC company’s shares are listed. If the Fund’s holdings are aggregated with other investors
deemed as acting as concert parties of the Fund, the Fund will be subject to these restrictions even though it may not have caused or
benefited by the activity. If the Fund violates the rule, it may be required by the listed company to return any profits realized from
such trading to the listed company. In addition, the rule limits the ability of the Fund to repurchase securities of the listed company
within six months of such sale. Moreover, under PRC civil procedures, the Fund’s assets may be frozen to the extent of the claims
made by the company in question. These risks may greatly impair the performance of the Fund.

 

Investments in Eastern Europe. Many countries
in Eastern Europe are in their infancy and are developing rapidly, but such countries may lack the social, political and economic stability
of more developed countries. Emerging market countries in Europe will be significantly affected by the fiscal and monetary controls of
the European Monetary Union. Changes in regulations on trade, decreasing imports or exports, changes in the exchange rate of the euro
and recessions among European countries may have a significant adverse effect on the economies of other European countries including those
of Eastern Europe. The markets in Eastern Europe remain relatively undeveloped and can be particularly sensitive to political and economic
developments, including those relating to Russia. Additionally, the small size and inexperience of the securities markets in Eastern European
countries and the limited volume of trading in securities in those markets may make the Fund’s investments in such countries illiquid
or more volatile than investments in more developed countries.

 

Investments in Germany. Investment in German
issuers subjects the Fund to legal, regulatory, political, currency, security, and economic risks specific to Germany. Recently, new concerns
have emerged in relation to the economic health of the European Union. These concerns have led to downward pressure on the earnings of
certain European issuers, including German financial services companies. Secessionist movements, such as the Catalan movement in Spain,
may have an adverse effect on the German economy. The German economy is dependent to a significant extent on the economies of certain
key trading partners, including the Netherlands, China, United States, United Kingdom, France, Italy and other European countries. Reduction
in spending on German products and services, or changes in any of its key trading partners’ economies may have an adverse impact
on the German economy. Recent developments in relations between the United States and its trading partners have heightened concerns of
increased tariffs and restrictions on trade between the countries. An increase in tariffs or trade restrictions, or even the threat of
such developments, could lead to a significant reduction in international trade, which could have a negative impact on Germany’s export
industry and a commensurately negative impact on the Fund. In addition, heavy regulation of labor, energy and product markets in Germany
may have an adverse impact on German issuers. Such regulations may negatively impact economic growth or cause prolonged periods of recession.

 

 

Investments in Hong Kong. The Fund may
invest in securities listed and traded on the Hong Kong Stock Exchange. In addition to the risks of investing in non-U.S. securities,
investing in securities listed and traded in Hong Kong involves special considerations not typically associated with investing in countries
with more democratic governments or more established economies or securities markets. Such risks may include: (i) the risk of nationalization
or expropriation of assets or confiscatory taxation; (ii) greater social, economic and political uncertainty (including the risk of war);
(iii) dependency on exports and the corresponding importance of international trade; (iv) increasing competition from Asia’s other
low-cost emerging economies; (v) currency exchange rate fluctuations and the lack of available currency hedging instruments; (vi) higher
rates of inflation; (vii) controls on foreign investment and limitations on repatriation of invested capital and on the Fund’s ability
to exchange local currencies for U.S. dollars; (viii) greater governmental involvement in and control over the economy; (ix) the risk
that the Chinese government may decide not to continue to support the economic reform programs implemented since 1978 and could return
to the prior, completely centrally planned, economy; (x) the fact that Chinese companies, particularly those located in China, may be
smaller, less seasoned and newly organized; (xi) the differences in, or lack of, auditing and financial reporting standards which may
result in unavailability of material information about issuers, particularly in China; (xii) the fact that statistical information regarding
the economy of China may be inaccurate or not comparable to statistical information regarding the U.S. or other economies; (xiii) the
less extensive, and still developing, regulation of the securities markets, business entities and commercial transactions; (xiv) the fact
that the settlement period of securities transactions in foreign markets may be longer; (xv) the fact that the willingness and ability
of the Chinese government to support the Chinese and Hong Kong economies and markets is uncertain; (xvi) the risk that it may be more
difficult, or impossible, to obtain and/or enforce a judgment than in other countries; (xvii) the rapidity and erratic nature of growth,
particularly in China, resulting in inefficiencies and dislocations; (xviii) the risk that, because of the degree of interconnectivity
between the economies and financial markets of China and Hong Kong, any sizable reduction in the demand for goods from China, or an economic
downturn in China, could negatively affect the economy and financial market of Hong Kong as well; and (xix) the risk that certain companies
in the underlying indexes of the Underlying Funds may have dealings with countries subject to sanctions or embargoes imposed by the U.S.
Government or identified as state sponsors of terrorism.

 

Investments in Hong Kong are also subject to certain
political risks. Following the establishment of the People’s Republic of China by the Communist Party in 1949, the Chinese government
renounced various debt obligations incurred by China’s predecessor governments, which obligations remain in default, and expropriated
assets without compensation. There can be no assurance that the Chinese government will not take similar action in the future. An investment
in the Fund involves risk of a total loss. China has committed by treaty to preserve Hong Kong’s autonomy and its economic, political
and social freedoms for 50 years from the July 1, 1997 transfer of sovereignty from Great Britain to China. However, if China would exert
its authority so as to alter the economic, political or legal structures or the existing social policy of Hong Kong, or is followed by
political or economic disruptions, investor and business confidence in Hong Kong could be negatively affected, which in turn could negatively
affect markets and business performance. These and other factors could have a negative impact on the Fund’s performance.

 

Japan Risk. The Japanese economy is heavily
dependent upon international trade and may be subject to considerable degrees of economic, political and social instability, which could
negatively affect the Fund. The Japanese yen has fluctuated widely during recent periods and may be affected by currency volatility elsewhere
in Asia, especially Southeast Asia. In addition, the yen has had a history of unpredictable and volatile movements against the U.S. dollar.
The performance of the global economy could have a major impact upon equity returns in Japan. Since the mid-2000s, Japan’s economic
growth has remained relatively low. A recent economic recession was likely compounded by an unstable financial sector, low domestic consumption,
and certain corporate structural weaknesses, which remain some of the major issues facing the Japanese economy. Japan has also experienced
natural disasters, such as earthquakes and tidal waves, of varying degrees of severity, which could negatively affect the Fund.

 

 

Investments in India. Foreign investment
in the securities of issuers in India is usually restricted or controlled to some degree. Under normal circumstances, income, gains and
initial capital with respect to such investments are freely repatriable, subject to payment of applicable Indian taxes. There can be no
assurance that these investment control regimes will not change in a way that makes it more difficult or impossible for the Fund to implement
its investment objective or repatriate its income, gains and initial capital from India.

 

The Indian government exercises significant influence
over many aspects of the economy. Government actions, bureaucratic obstacles and inconsistent economic reform could have a significant
effect on the economy and the Fund’s investments in India. There can be no assurance that the Indian government in the future, whether
for purposes of managing its balance of payments or for other reasons, will not impose restrictions on foreign capital remittances abroad
or otherwise modify the exchange control regime applicable to foreign institutional investors in such a way that may adversely affect
the ability of the Fund to repatriate its income and capital.

 

Founders and their families control many Indian
companies. Corporate governance standards of family-controlled companies may be weaker and less transparent, which increases the potential
for loss and unequal treatment of investors. The securities market in India is substantially smaller, less liquid and significantly more
volatile than the securities market in the U.S. Exchanges have also experienced problems such as temporary exchange closures, broker defaults,
settlement delays and broker strikes that, if they occur again in the future, could affect the market prices and liquidity of the Indian
securities in which the Fund invests. In addition, the governing bodies of the various Indian stock exchanges have from time to time imposed
restrictions on trading in certain securities, limits on price movements and margin requirements. The relatively small market capitalizations
of, and trading values on, the principal stock exchanges may cause the Fund’s investments in securities listed on these exchanges
to be comparatively less liquid and subject to greater price volatility than comparable U.S. investments.

 

Religious, cultural and border disputes persist
in India. The Indian government has confronted separatist movements in several Indian states. The longstanding dispute with Pakistan over
the bordering Indian state of Jammu and Kashmir remains unresolved. If the Indian government is unable to control the violence and disruption
associated with these tensions (including both domestic and external sources of terrorism), the results could destabilize the economy
and, consequently, adversely affect the Fund’s investments. Both India and Pakistan have tested nuclear weapons, and the threat
of deploying such weapons could hinder development of the Indian economy, and escalating tensions could impact the broader region, including
China.

 

Investments in Indonesia. Indonesia is
subject to a considerable degree of economic, political and social instability. Indonesia has experienced currency devaluations, substantial
rates of inflation, widespread corruption and economic recessions. Indonesia is considered an emerging market, and its securities laws
are unsettled. Judicial enforcement of contracts with foreign entities is inconsistent and, as a result of pervasive corruption, subject
to the risk that cases will not be judged impartially. Indonesia has a history of political and military unrest and has recently experienced
acts of terrorism that have targeted foreigners. Such acts of terrorism have had a negative impact on tourism, an important sector of
the Indonesian economy. Additionally, Indonesia has faced violent separatist movements on the islands of Sumatra and Timor, as well as
outbreaks of violence amongst religious and ethnic groups. Although the Indonesian government has recently revised policies intended to
coerce cultural assimilation of ethnic minorities, a history of discrimination, official persecution, and populist violence continues
to heighten the risk of economic disruption in Indonesia due to ethnic tensions. In addition, the Indonesian economy is heavily dependent
on trading relationships with certain key trading partners, including China, Japan, Singapore and the United States.

 

Investment in Japan. The Japanese yen has shown volatility over
the past two decades and such volatility could affect returns in the future. The yen may also be affected by currency volatility elsewhere
in Asia. Depreciation of the yen, and any other currencies in which the Fund’s securities are denominated, will decrease the value
of the Fund’s holdings.

 

 

Japan’s growth prospects appear to be dependent on its export
capabilities. Japan’s neighbors, in particular China, have become increasingly important export markets. Despite a strengthening
in the economic relationship between Japan and China, the countries’ political relationship has at times been strained in recent
years. Should political tension increase, it could adversely affect the economy and destabilize the region as a whole. Japan also remains
heavily dependent on oil imports, and higher commodity prices could therefore have a negative impact on the economy. The natural disasters
that have impacted Japan and the ongoing recovery efforts have had a negative effect on Japan’s economy. Japan has an aging population
and, as a result, Japan’s workforce is shrinking. Japan’s economy may suffer if this trend continues.

 

Investments in Latin America. Latin America,
including Brazil and Mexico, has long suffered from political, economic, and social instability. For investors, this has meant additional
risk caused by periods of regional conflict, political corruption, totalitarianism, protectionist measures, nationalization, hyperinflation,
debt crises and defaults, sudden and large currency devaluation, and intervention by the military in civilian and economic spheres. For
example, the government of Brazil imposes a tax on foreign investment in Brazilian stocks and bonds, which may affect the value of the
Fund’s investments in Brazilian issuers. While some Latin American governments have experienced privatization of state-owned companies
and relaxation of trade restrictions, future free-market economic reforms are uncertain, and political unrest could result in significant
disruption in securities markets in the region. The economies of certain Latin American countries have experienced high interest rates,
economic volatility, inflation and high unemployment rates. Adverse economic events in one country may have a significant adverse effect
on other Latin American countries.

 

Commodities (such as oil, gas and minerals) represent
a significant percentage of the region’s exports and many economies in this region are particularly sensitive to fluctuations in
commodity prices. Some markets are in areas that have historically been prone to natural disasters or are economically sensitive to environmental
events, and a natural disaster could have a significant adverse impact on the economies in the geographic region.

 

Many Latin American countries have high levels
of debt, which may stifle economic growth, contribute to prolonged periods of recession and adversely impact the Fund’s investments.
Most countries have been forced to restructure their loans or risk default on their debt obligations. Interest on debt is subject to market
conditions and may reach levels that would impair economic activity and create a difficult and costly environment for borrowers. Governments
may be forced to reschedule or freeze their debt repayment, which could negatively affect local markets.

 

Investments in Middle East. Many Middle
Eastern countries are prone to political turbulence, which may have an adverse impact on the Fund. Many economies in the Middle East are
highly reliant on income from the sale of oil or trade with countries involved in the sale of oil, and their economies are therefore vulnerable
to changes in the market for oil and foreign currency values. As global demand for oil fluctuates, many Middle Eastern economies may be
significantly impacted.

 

In addition, many Middle Eastern governments have
exercised and continue to exercise substantial influence over many aspects of the private sector. In certain cases, a Middle Eastern country’s
government may own or control many companies, including some of the largest companies in the country. Accordingly, governmental actions
in the future could have a significant effect on economic conditions in Middle Eastern countries. This could affect private sector companies
and the Fund, as well as the value of securities in the Fund’s portfolio.

 

Certain Middle Eastern markets are in the earliest
stages of development. As a result, there may be a high concentration of market capitalization and trading volume in a small number of
issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries. Brokers
in Middle Eastern countries typically are fewer in number and less well capitalized than brokers in the United States.

 

 

The legal systems in certain Middle Eastern countries
also may have an adverse impact on the Fund. For example, the potential liability of a shareholder in a U.S. corporation with respect
to acts of the corporation generally is limited to the amount of the shareholder’s investment. However, the notion of limited liability
is less clear in certain Middle Eastern countries. The Fund therefore may be liable in certain Middle Eastern countries for the acts of
a corporation in which it invests for an amount greater than its actual investment in that corporation. Similarly, the rights of investors
in Middle Eastern issuers may be more limited than those of shareholders of a U.S. corporation. It may be difficult or impossible to obtain
or enforce a legal judgment in a Middle Eastern country. Some Middle Eastern countries prohibit or impose substantial restrictions on
investments in their capital markets, particularly their equity markets, by foreign entities such as the Fund. For example, certain countries
may require governmental approval prior to investment by foreign persons or limit the amount of investment by foreign persons in a particular
issuer. Certain Middle Eastern countries may also limit the investment by foreign persons to only a specific class of securities of an
issuer that may have less advantageous terms (including price) than securities of the issuer available for purchase by nationals.

 

The manner in which foreign investors may invest
in companies in certain Middle Eastern countries, as well as limitations on those investments, may have an adverse impact on the operations
of the Fund. For example, in certain of these countries, the Fund may be required to invest initially through a local broker or other
entity and then have the shares that were purchased re-registered in the name of the Fund. Re-registration in some instances may not be
possible on a timely basis. This may result in a delay during which the Fund may be denied certain of its rights as an investor, including
rights as to dividends or to be made aware of certain corporate actions. There also may be instances where the Fund places a purchase
order but is subsequently informed, at the time of re-registration, that the permissible allocation of the investment to foreign investors
has been filled.

 

Substantial limitations may exist in certain Middle
Eastern countries with respect to the Fund’s ability to repatriate investment income or capital gains. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investment.

 

Certain Middle Eastern countries may be heavily
dependent upon international trade and, consequently, have been and may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with
which they trade. These countries also have been and may continue to be adversely impacted by economic conditions in the countries with
which they trade. In addition, certain issuers located in Middle Eastern countries in which the Fund invests may operate in, or have dealings
with, countries subject to sanctions and/or embargoes imposed by the U.S. government and the United Nations, and/or countries identified
by the U.S. government as state sponsors of terrorism. As a result, an issuer may sustain damage to its reputation if it is identified
as an issuer which operates in, or has dealings with, such countries. The Fund, as an investor in such issuers, will be indirectly subject
to those risks.

 

Certain Middle Eastern countries have strained
relations with other Middle Eastern countries due to territorial disputes, historical animosities or defense concerns, which may adversely
affect the economies of these Middle Eastern countries. Certain Middle Eastern countries experience significant unemployment, as well
as widespread underemployment. Recently, many Middle Eastern countries have experienced political, economic and social unrest as protestors
have called for widespread reform. These protests may adversely affect the economies of these Middle Eastern countries.

 

 

Investments in Russia. Russia has experienced
political and economic turbulence and has endured decades of communist rule under which its citizens were collectivized into state agricultural
and industrial enterprises. Since the collapse of the Soviet Union, Russia’s government has been faced with the task of stabilizing
and modernizing its economy. Investors in Russia have experienced significant losses due to expropriation, nationalization, confiscation
of assets and property or the imposition of restrictions on foreign investments and repatriation of capital invested. There is no assurance
that similar losses will not recur. The current government regime has become increasingly authoritarian, especially in its dealings with
successful Russian companies. In this environment, there is always a risk that the government will abandon elements of a market economy
and replace them with radically different political and economic policies that would be detrimental to the interests of foreign investors.

 

The Russian economy is heavily dependent upon
the export of a range of commodities including industrial metals, forestry products, oil, and gas. Accordingly, it is strongly affected
by international commodity prices and is particularly vulnerable to any weakening in global demand for these products. Foreign investors
also face a high degree of currency risk when investing in Russian securities and a lack of available currency hedging instruments. In
addition, Eastern European markets remain relatively underdeveloped and can be particularly sensitive to political and economic developments;
adverse events in Eastern European countries may greatly impact the Russian economy.

 

Because of the recent formation of the Russian
securities market as well as the underdeveloped state of the banking and telecommunications systems, settlement, clearing and registration
of securities transactions are subject to significant risks. There is no central registration system for shareholders and these services
are carried out by the companies themselves or by registrars located throughout Russia. These registrars are not necessarily subject to
effective state supervision nor are they licensed with any governmental entity and it is possible for the Fund to lose share registration
through fraud or negligence. In addition, while applicable Russian regulations impose liability on registrars for losses resulting from
their errors, it may be difficult for the Fund to enforce any rights it may have against the registrar or issuer of the securities in
the event of loss of share registration. Furthermore, significant delays or problems may occur in registering the transfer of securities,
which could cause the Fund to incur losses due to a counterparty’s failure to pay for securities the Fund has delivered or the Fund’s
inability to complete its contractual obligations because of theft or other reasons.

 

Poor accounting standards, inept management, pervasive
corruption, insider trading and crime, and inadequate regulatory protection all pose significant risks, particularly to foreign investors.
In addition, there is a risk that the Russian tax system will not be reformed to prevent inconsistent, retroactive and/or punitive taxation,
or, in the alternative, a risk that a reformed tax system may result in inconsistent and unpredictable enforcement of the new tax laws.
The Russian securities market is relatively new and a substantial proportion of securities transactions in Russia are privately negotiated
outside the stock exchanges. The inexperience of the Russian securities market and the limited volume of trading in securities in the
market may make obtaining accurate prices on portfolio securities from independent sources more difficult than in more developed markets.
Additionally, little information is available to investors. As a result, it may be difficult to assess the value of an investment in Russian
companies. Because of the recent formation of the Russian securities market and the underdeveloped state of the banking and telecommunications
systems, securities transactions are subject to significant risks.

 

The United States and the European Union have
imposed sanctions on certain Russian individuals and issuers. The United States and other nations or international organizations may impose
additional, broader economic sanctions or take other actions that may adversely affect Russian-related issuers in the future. These sanctions,
any future sanctions or other actions, or even the threat of further sanctions or other actions, may negatively affect the value and liquidity
of the Fund’s investments. For example, the Fund may be prohibited from investing in securities issued by companies subject to such
sanctions. In addition, the sanctions may require the Fund to freeze its existing investments in Russian companies, prohibiting the Fund
from buying, selling or otherwise transacting in these investments. Russia may undertake countermeasures or retaliatory actions which
may further impair the value and liquidity of the Fund’s portfolio and potentially disrupt its operations.

 

 

For these or other reasons, the Fund could seek
to suspend redemptions of Creation Units, including in the event that an emergency exists in which it is not reasonably practicable for
the Fund to dispose of its securities or to determine its net asset value. The Fund could also, among other things, limit or suspend creations
of Creation Units. During the period that creations or redemptions are affected, the Fund’s shares could trade at a significant
premium or discount to their net asset value. In the case of a period during which creations are suspended, the Fund could experience
substantial redemptions, which may cause the Fund to experience increased transaction costs and make greater taxable distributions to
shareholders of the Fund. The Fund could liquidate all or a portion of its assets, which may be at unfavorable prices. The Fund may also
change its investment objective by, for example, seeking to track an alternative index.

 

Investments in South Africa. South Africa’s
two-tiered economy, with one rivaling developed countries and the other exhibiting many characteristics of developing countries, is characterized
by uneven distribution of wealth and income and high rates of unemployment. This may cause civil and social unrest, which could adversely
impact the South African economy. Ethnic and civil conflict could result in the abandonment of many of South Africa’s free market
reforms. In addition, South Africa has experienced high rates of human immunodeficiency virus (HIV) and HIV remains a prominent health
concern. Although economic reforms have been enacted to promote growth and foreign investments, there can be no assurance that these programs
will achieve the desired results. South Africa’s inadequate currency reserves have left its currency vulnerable, at times, to devaluation.
South Africa has privatized or has begun the process of privatization of certain entities and industries. In some instances, investors
in certain newly privatized entities have suffered losses due to the inability of the newly privatized entities to adjust quickly to a
competitive environment or to changing regulatory and legal standards. There is no assurance that such losses will not recur. Despite
significant reform and privatization, the South African government continues to control a large share of South African economic activity.
Heavy regulation of labor and product markets is pervasive and may stifle South African economic growth or cause prolonged periods of
recession. The agriculture and mining sectors of South Africa’s economy account for a large portion of its exports, and thus the
South African economy is susceptible to fluctuations in these commodity markets. Moreover, the South African economy is heavily dependent
upon the economies of Europe, Asia (particularly Japan) and the United States. Reduction in spending by these economies on South African
products and services or negative changes in any of these economies may cause an adverse impact on the South African economy. South Africa
has historically experienced acts of terrorism and strained international relations related to border disputes, historical animosities,
racial tensions and other defense concerns. These situations may cause uncertainty in the South African market and may adversely affect
the South African economy.

 

Investments in South Korea. The South Korean
economy is heavily dependent on trading exports and on the economies of other Asian countries, especially China or Southeast Asia, and
the United States as key trading partners. Distributions in trade activity, reductions in spending by these economies on South Korean
products and services or negative changes in any of these economies may have an adverse impact on the South Korean economy. Furthermore,
South Korea’s economy may be impacted by currency fluctuations and increasing competition from Asia’s other low-cost emerging
economies. Finally, South Korea’s economic growth potential has recently been on a decline due to, among other factors, a rapidly
aging population and structural problems.

 

Substantial tensions with North Korea may cause
further uncertainty in the political and economic climate of South Korea. North and South Korea each have substantial military capabilities,
and historical tensions between the two present the ongoing risk of war. Recent events involving the North Korean military have escalated
tensions between North and South Korea. Any outbreak of hostilities between the two countries, or even the threat of an outbreak of hostilities,
may have a severe adverse effect on the South Korean economy and any investments in South Korea.

 

 

Investments in Taiwan. The political reunification
of China and Taiwan, over which China continues to claim sovereignty, remains tense and is unlikely to be settled in the near future.
China has staged frequent military drills off the coast of Taiwan and relations between China and Taiwan have been hostile at times. This
continuing hostility between China and Taiwan may have an adverse impact on the values of the Fund’s investments in China or Taiwan,
or make such investments impracticable or impossible. Any escalation of hostility between China and Taiwan would likely have a significant
adverse impact on the value of the Fund’s investments in both countries and the region. In addition, certain Asian economies have
experienced over-extension of credit, currency devaluations and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Economic events in any one country may have a significant economic effect on the entire Asian region and any adverse
events in the Asian markets may have a significant adverse effect on Taiwanese companies.

 

Taiwan’s growth has been export-driven to
a significant degree. As a result, Taiwan is affected by changes in the economies of its main trading partners. If growth in the export
sector declines, future growth will be increasingly reliant on domestic demand. Taiwan has limited natural resources, resulting in dependence
on foreign sources for certain raw materials and vulnerability to global fluctuations of price and supply. This dependence is especially
pronounced in the energy sector. Any fluctuations or shortages in the commodity markets could have a negative impact on Taiwan’s
economy. A significant increase in energy prices could have an adverse impact on Taiwan’s economy.

 

Investments in United Kingdom. In a referendum
held on June 23, 2016, citizens of the United Kingdom voted to leave the European Union (“EU”), creating economic and political
uncertainty in its wake. There is considerable uncertainty as to the position of the United Kingdom and the arrangements that will apply
to its relationships with the EU and other countries following its anticipated withdrawal. This uncertainty may affect other countries
in the EU, or elsewhere, including issuers located in emerging market countries, if they are considered to be impacted by these events.

 

The United Kingdom has one of the largest economies
in Europe, and member countries of the EU are substantial trading partners of the United Kingdom. The City of London’s economy is
dominated by financial services, some of which may have to move outside of the United Kingdom post-referendum (e.g., currency trading,
international settlement). Under Brexit, banks may be forced to move staff and comply with two separate sets of rules or lose business
to banks in Europe. Furthermore, the referendum creates the potential for decreased trade, the possibility of capital outflows, devaluation
of the pound sterling, the cost of higher corporate bond spreads due to uncertainty, and the risk that all the above could damage business
and consumer spending as well as foreign direct investment. As a result of the referendum, the British economy and its currency may be
negatively impacted by changes to its economic and political relations with the EU.

 

The impact of the referendum in the near- and
long-term is still unknown and could have additional adverse effects on economies, financial markets and asset valuations around the world.

 

Currency Transactions

 

The Fund may enter into spot currency transactions,
foreign currency forward and foreign currency futures contracts. Foreign currency forward and foreign currency futures contracts are derivatives
and are subject to derivatives risk.

 

Forward Foreign Currency Contracts. A forward
foreign currency exchange contract (“forward contract”) involves an obligation to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are principally traded in the interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no margin deposit requirement.

 

 

A non-deliverable forward contract is a forward
contract where there is no physical settlement of two currencies at maturity. Non-deliverable forward contracts are contracts between
parties in which one party agrees to make a payment to the other party (the “Counterparty”) based on the change in market
value or level of a specified currency. In return, the Counterparty agrees to make payment to the first party based on the return of a
different specified currency. Non-deliverable forward contracts will usually be done on a net basis, with the Fund receiving or paying
only the net amount of the two payments. The net amount of the excess, if any, of the Fund’s obligations over its entitlements with
respect to each non-deliverable forward contract is accrued on a daily basis and an amount of cash or highly liquid securities having
an aggregate value at least equal to the accrued excess is maintained in an account at the Trust’s custodian bank. The risk of loss
with respect to non-deliverable forward contracts generally is limited to the net amount of payments that the Fund is contractually obligated
to make or receive.

 

Foreign Currency Futures Contracts. A foreign
currency futures contract is a contract involving an obligation to deliver or acquire the specified amount of a specific currency, at
a specified price and at a specified future time. Futures contracts may be settled on a net cash payment basis rather than by the sale
and delivery of the underlying currency.

 

Currency exchange transactions involve a significant
degree of risk and the markets in which currency exchange transactions are effected are highly volatile, specialized and technical. Significant
changes, including changes in liquidity and prices, can occur in such markets within very short periods of time, often within minutes.
Currency exchange trading risks include, but are not limited to, exchange rate risk, maturity gap, interest rate risk, and potential interference
by foreign governments through regulation of local exchange markets, foreign investment or particular transactions in foreign currency.
If the Fund utilizes foreign currency transactions at an inappropriate time, such transactions may lower the Fund’s return. The
Fund could experience losses if the value of any currency forwards and futures positions is poorly correlated with its other investments
or if it could not close out its positions because of an illiquid market. Such contracts are subject to the risk that the counterparty
will default on its obligations. In addition, the Fund will incur transaction costs, including trading commissions, in connection with
certain foreign currency transactions.

 

Foreign Exchange Spot Transactions. The
Fund may settle trades of holdings denominated in foreign currencies on a spot (i.e., cash) basis at the prevailing rate in the
foreign currency exchange market. A foreign exchange spot transaction, also known as FX spot, is an agreement between two parties to buy
one currency against selling another currency at an agreed price for settlement on the spot date. The exchange rate at which the transaction
is done is called the spot exchange rate. Unlike forward foreign currency exchange contracts and foreign currency futures contracts, which
involve trading a particular amount of a currency pair at a predetermined price at some point in the future, the underlying currencies
in a spot FX are exchanged following the settlement date.

 

Equity Securities

 

The Fund may invest in equity securities. Equity
securities represent ownership interests in a company or partnership and include common stocks, preferred stocks, warrants to acquire
common stock, securities convertible into common stock, and investments in master limited partnerships. Investments in equity securities
in general are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities
in which the Fund invests will cause the NAV of the Fund to fluctuate. Global stock markets, including the U.S. stock market, tend to
be cyclical, with periods when stock prices generally rise and periods when stock prices generally decline. The Fund may purchase equity
securities traded on exchanges or the over-the-counter (“OTC”) market. The Fund may invest in the types of equity securities
described in more detail below.

 

Common Stock. Common stock represents an
equity or ownership interest in an issuer. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds
and preferred stock take precedence over the claims of those who own common stock.

 

 

Preferred Stock. Preferred stock represents
an equity or ownership interest in an issuer that pays dividends at a specified rate and that has precedence over common stock in the
payment of dividends. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds take precedence over
the claims of those who own preferred and common stock.

 

Convertible Securities. Convertible securities
are bonds, debentures, notes, preferred stocks or other securities that may be converted or exchanged (by the holder or by the issuer)
into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio. A convertible security
may also be called for redemption or conversion by the issuer after a particular date and under certain circumstances (including a specified
price) established upon issue. If a convertible security held by the Fund is called for redemption or conversion, the Fund could be required
to tender it for redemption, convert it into the underlying common stock, or sell it to a third party.

 

Convertible securities generally have less potential
for gain or loss than common stocks. Convertible securities generally provide yields higher than the underlying common stocks, but generally
lower than comparable non-convertible securities. Because of this higher yield, convertible securities generally sell at a price above
their “conversion value,” which is the current market value of the stock to be received upon conversion. The difference between
this conversion value and the price of convertible securities will vary over time depending on changes in the value of the underlying
common stocks and interest rates. When the underlying common stocks decline in value, convertible securities tend not to decline to the
same extent because of the interest or dividend payments and the repayment of principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When the underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time, however, the difference between the market value of convertible securities
and their conversion value will narrow, which means that the value of convertible securities will generally not increase to the same extent
as the value of the underlying common stocks. Because convertible securities may also be interest-rate sensitive, their value may increase
as interest rates fall and decrease as interest rates rise. Convertible securities are also subject to credit risk, and are often lower-quality
securities.

 

Small and Medium Capitalization Issuers.
Investing in equity securities of small and medium capitalization companies often involves greater risk than is customarily associated
with investments in larger capitalization companies. This increased risk may be due to the greater business risks of smaller size, limited
markets and financial resources, narrow product lines and frequent lack of depth of management. The securities of smaller companies are
often traded in the OTC market and even if listed on a national securities exchange may not be traded in volumes typical for that exchange.
Consequently, the securities of smaller companies are less likely to be liquid, may have limited market stability, and may be subject
to more abrupt or erratic market movements than securities of larger, more established growth companies or the market averages in general.

 

Warrants. Warrants are instruments that
entitle the holder to buy an equity security at a specific price for a specific period of time. Changes in the value of a warrant do not
necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than the price
of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants do not
entitle a holder to dividends or voting rights with respect to the underlying security and do not represent any rights in the assets of
the issuing company. A warrant ceases to have value if it is not exercised prior to its expiration date. These factors can make warrants
more speculative than other types of investments.

 

Rights. A right is a privilege granted
to existing shareholders of a corporation to subscribe to shares of a new issue of common stock before it is issued. Rights normally have
a short life of usually two to four weeks, are freely transferable and entitle the holder to buy the new common stock at a lower price
than the public offering price. An investment in rights may entail greater risks than certain other types of investments. Generally, rights
do not carry the right to receive dividends or exercise voting rights with respect to the underlying securities, and they do not represent
any rights in the assets of the issuer. In addition, their value does not necessarily change with the value of the underlying securities,
and they cease to have value if they are not exercised on or before their expiration date. Investing in rights increases the potential
profit or loss to be realized from the investment as compared with investing the same amount in the underlying securities.

 

 

Depositary Receipts. The Fund may invest
in issuers located outside the United States directly, or in financial instruments that are indirectly linked to the performance of foreign
issuers. Examples of such financial instruments include ADRs, Global Depositary Receipts (“GDRs”), European Depositary Receipts
(“EDRs”), International Depository Receipts (“IDRs”), “ordinary shares,” and “New York shares”
issued and traded in the United States. ADRs are U.S. dollar-denominated receipts typically issued by U.S. banks and trust companies that
evidence ownership of underlying securities issued by a foreign issuer. The underlying securities may not necessarily be denominated in
the same currency as the securities into which they may be converted. The underlying securities are held in trust by a custodian bank
or similar financial institution in the issuer’s home country. The depositary bank may not have physical custody of the underlying
securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. Generally,
ADRs in registered form are designed for use in domestic securities markets and are traded on exchanges or over-the-counter in the United
States. GDRs, EDRs, and IDRs are similar to ADRs in that they are certificates evidencing ownership of shares of a foreign issuer, however,
GDRs, EDRs, and IDRs may be issued in bearer form and denominated in other currencies, and are generally designed for use in specific
or multiple securities markets outside the United States. EDRs, for example, are designed for use in European securities markets while
GDRs are designed for use throughout the world. Ordinary shares are shares of foreign issuers that are traded abroad and on a U.S. exchange.
New York shares are shares that a foreign issuer has allocated for trading in the United States. ADRs, ordinary shares, and New York shares
all may be purchased with and sold for U.S. dollars.

 

Depositary receipts may be sponsored or unsponsored.
Although the two types of depositary receipt facilities (unsponsored or sponsored) are similar, there are differences regarding a holder’s
rights and obligations and the practices of market participants. A depository may establish an unsponsored facility without participation
by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of non-objection from the underlying
issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The
depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars
or other currency, the disposition of non-cash distributions, and the performance of other services. The depository of an unsponsored
facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through
voting rights to depositary receipt holders with respect to the underlying securities.

 

Sponsored depositary receipt facilities are created
in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository
and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying
issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the
costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipts holders
may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of
shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the
underlying issuer’s request.

 

Depositary receipts may be unregistered and unlisted.
The Fund’s investments may also include ADRs that are not purchased in the public markets and are restricted securities that can
be offered and sold only to “qualified institutional buyers” under Rule 144A of the Securities Act of 1933, as amended. Depositary
receipts may become illiquid. If adverse market conditions were to develop during the period between the Fund’s decision to sell
these types of ADRs and the point at which the Fund is permitted or able to sell such security, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell.

 

 

Real Estate Investment Trusts. The
Fund may invest in the securities of real estate investment trusts (“REITs”). Risks associated with investments in securities
of REITs include decline in the value of real estate, risks related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, variations in
rental income, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates. In addition, equity
REITs may be affected by changes in the values of the underlying property owned by the trusts, while mortgage REITs may be affected by
the quality of credit extended. REITs are dependent upon management skills, may not be diversified and are subject to the risks of financing
projects. REITs are also subject to heavy cash-flow dependency, defaults by borrowers, self-liquidation and the possibility of failing
to qualify for tax-free pass-through of income and net gains under the Code and to maintain exemption from the 1940 Act. If an issuer
of debt securities collateralized by real estate defaults, it is conceivable that the REITs could end up holding the underlying real estate.
Because REITs have ongoing fees and expenses, which may include management, operating and administration expenses, REIT shareholders,
including the Fund, will indirectly bear a proportionate share of those expenses in addition to the expenses of the Fund. However, such
expenses are not considered to be Acquired Fund Fees and Expenses and, therefore, are not reflected as such in the Fund’s fee table.

 

Privately-Issued Securities

 

The Fund may invest in privately-issued securities,
including those that are normally purchased pursuant to Rule 144A or Regulation S under the Securities Act. Privately-issued securities
typically may be resold only to “qualified institutional buyers,” in a privately negotiated transaction, to a limited number
of purchasers or in limited quantities after they have been held for a specified period of time and other conditions are met for an exemption
from registration. Because there may be relatively few potential purchasers for such securities, especially under adverse market or economic
conditions or in the event of adverse changes in the financial condition of the issuer, the Fund may find it more difficult to sell such
securities when it may be advisable to do so or it may be able to sell such securities only at prices lower than if such securities were
more widely held and traded. At times, it also may be more difficult to determine the fair value of such securities for purposes of computing
the Fund’s NAV due to the absence of an active trading market. There can be no assurance that a privately-issued security that is
deemed to be liquid when purchased will continue to be liquid for as long as it is held by the Fund, and its value may decline as a result.

 

Derivatives

The Fund may use derivative instruments as part
of its investment strategies. Generally, derivatives are financial contracts the value of which depends upon, or is derived from, the
value of an underlying asset, reference rate or index, and may relate to bonds, interest rates, currencies, commodities, and related indexes.
Examples of derivative instruments include forward currency contracts, currency and interest rate swaps, currency options, futures contracts,
including index futures, options on futures contracts, structured notes, and swap contracts. The Fund’s use of derivative instruments
will be collateralized by investments in short term, high-quality U.S. money market securities.

 

 

With respect to certain kinds of derivative transactions
entered into by the Fund that involve obligations to make future payments to third parties, including, but not limited to, futures contracts,
forward contracts, swap contracts, the purchase of securities on a when-issued or delayed delivery basis, or reverse repurchase agreements,
under applicable federal securities laws, rules, and interpretations thereof, the Fund must “set aside” (referred to sometimes
as “asset segregation”) liquid assets, or engage in other measures to “cover” open positions with respect to such
transactions. For example, with respect to forward foreign currency exchange contracts and futures contracts that are not contractually
required to “cash-settle,” the Fund must cover its open positions by setting aside liquid assets equal to the contracts’
full, notional value, except that deliverable forward contracts for currencies that are liquid will be treated as the equivalent of “cash-settled”
contracts. As such, the Fund may set aside liquid assets in an amount equal to the Fund’s daily marked-to-market (net) obligation
(i.e., the Fund’s daily net liability if any) rather than the full notional amount under such deliverable forward foreign
currency exchange contracts. With respect to forward foreign currency exchange contracts and futures contracts that are contractually
required to “cash-settle,” the Fund may set aside liquid assets in an amount equal to the Fund’s daily marked-to-market
(net) obligation rather than the notional value. Because the Fund may enter into (or “open”) certain derivatives contracts
with an initial investment that is less than the notional value of the contract, such contracts provide inherent economic leverage equal
to the difference between the initial investment requirement (also known as initial margin requirement) and the notional value of the
contract. The Fund reserves the right to modify its asset segregation policies in the future consistent with applicable law. The Fund’s
use of derivatives may be limited by the requirements of the Internal Revenue Code of 1986, as amended (the “Code”) for qualification
as a regulated investment company for U.S. federal tax purposes.

 

To the extent the Fund transacts in commodity
interests (e.g., futures contracts, swap agreements, non-deliverable forward contracts), it will do so only in accordance with Rule 4.5
of the Commodity Futures Trading Commission (“CFTC”). Krane, on behalf of the Fund, has filed or will file a notice of eligibility
for exclusion from the definition of the term “commodity pool operator” in accordance with Rule 4.5 so that it is not subject
to registration or regulation as a commodity pool operator under the Commodity Exchange Act (“CEA”).

 

Swap Contracts. The Fund may enter into
swap contracts, including interest rate swaps and currency swaps. A typical interest rate swap involves the exchange of a floating interest
rate payment for a fixed interest payment. A typical foreign currency swap involves the exchange of cash flows based on the notional differences
among two or more currencies. Swap contracts may be used to hedge or achieve exposure to, for example, currencies, interest rates, and
money market securities without actually purchasing such currencies or securities. The Fund may also use swap contracts to invest in a
market without owning or taking physical custody of the underlying securities in circumstances in which direct investment is restricted
for legal reasons or is otherwise impracticable. Swap contracts will tend to shift the Fund’s investment exposure from one type
of investment to another or from one payment stream to another. Depending on their structure, swap contracts may increase or decrease
the Fund’s exposure to long- or short-term interest rates (in the United States or abroad), foreign currencies, corporate borrowing
rates, or other factors, and may increase or decrease the overall volatility of the Fund’s investments and its share price.

 

Futures, Options and Options on Futures Contracts.
The Fund may enter into U.S. or foreign futures contracts, options and options on futures contracts. When the Fund purchases a futures
contract, it agrees to purchase a specified underlying instrument at a specified future date. When the Fund sells a futures contract,
it agrees to sell the underlying instrument at a specified future date. The price at which the purchase and sale will take place is fixed
when the Fund enters into the contract. Futures can be held until their delivery dates, or can be closed out before then if a liquid secondary
market is available.

 

The risk of loss in trading futures contracts
or uncovered call options in some strategies (e.g., selling uncovered stock index futures contracts) is potentially unlimited.
The risk of a futures position may still be large as traditionally measured due to the low margin deposits required. In many cases, a
relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor relative to
the size of a required margin deposit.

 

Utilization of futures and options on futures
by the Fund involves the risk of imperfect or even negative correlation to the underlying index if the index underlying the futures contract
differs from the underlying index. There is also the risk of loss by the Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in the futures contract or option. The purchase of put or call options will be based upon predictions
by the Fund as to anticipated trends, which predictions could prove to be incorrect.

 

 

The potential for loss related to the purchase
of an option on a futures contract is limited to the premium paid for the option plus transaction costs. Because the value of the option
is fixed at the point of sale, there are no daily cash payments by the purchaser to reflect changes in the value of the underlying contract;
however, the value of the option changes daily and that change would be reflected in the NAV of the Fund. The potential for loss related
to writing options is unlimited.

 

Cover. Transactions using derivative instruments, other than
purchased options, expose the Fund to an obligation to another party. The Fund will not enter into any such transactions unless it owns
either (1) an offsetting (“covered”) position in securities or other options or futures contracts or (2) cash and liquid assets
with a value, marked-to-market daily, sufficient to cover its potential obligations to the extent not covered as provided in (1) above.
The Fund will comply with SEC guidelines regarding cover for these instruments and will, if the guidelines so require, set aside cash
or liquid assets in an account with its custodian, in the prescribed amount as determined daily.

 

Assets used as cover or held in an account cannot be sold while the
position in the corresponding derivative instrument is open, unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund’s assets to cover or accounts could impede portfolio management or the Fund’s ability
to meet redemption requests or other current obligations.

 

Structured Notes and Securities. The Fund
may invest in structured instruments, including, without limitation, participation notes, certificates and warrants and other types of
notes on which the amount of principal repayment and interest payments are based on the movement of one or more specified factors, such
as the movement of a particular stock or stock index. Structured instruments may be derived from or based on a single security or securities,
an index, a commodity, debt issuance or a foreign currency (a “reference”), and their interest rate or principal may be determined
by an unrelated indicator. Structured securities may be positively or negatively indexed, so that appreciation of the reference may produce
an increase or a decrease in the value of the structured security at maturity, or in the interest rate of the structured security. Structured
securities may entail a greater degree of risk than other types of securities because the Fund bears the risk of the reference in addition
to the risk that the counterparty to the structured security will be unable or unwilling to fulfill its obligations under the structured
security to the Fund when due. The Fund bears the risk of loss of the amount expected to be received in connection with a structured security
in the event of the default or bankruptcy of the counterparty to the structured security. Structured securities may also be more volatile,
less liquid, and more difficult to accurately price than less complex securities or more traditional debt securities.

 

Exchange-Traded
Notes

 

The Fund
may invest in exchange-traded notes (“ETNs”). ETNs are senior, unsecured, unsubordinated debt securities whose returns are
linked to the performance of a particular market benchmark or strategy, minus applicable fees. ETNs are traded on an exchange (e.g., the
New York Stock Exchange (“NYSE”)) during normal trading hours; however, investors can also hold the ETN until maturity. At
maturity, the issuer pays to the investor a cash amount equal to the principal amount, subject to the day’s market benchmark or
strategy factor. ETNs do not make periodic coupon payments or provide principal protection. ETNs are subject to credit risk, including
the credit risk of the issuer, and the value of the ETN may drop due to a downgrade in the issuer’s credit rating, despite the underlying
market benchmark or strategy remaining unchanged. The value of an ETN may also be influenced by time to maturity, level of supply and
demand for the ETN, volatility and lack of liquidity in underlying assets, changes in the applicable interest rates, changes in the issuer’s
credit rating, and economic, legal, political, or geographic events that affect the referenced underlying asset. When the Fund invests
in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. A decision by the Fund to sell ETN holdings may
be limited by the availability of a secondary market. In addition, although an ETN may be listed on an exchange, the issuer may not be
required to maintain the listing, and there can be no assurance that a secondary market will exist for an ETN.

 

 

ETNs are
also subject to tax risk. No assurance can be given that the IRS will accept, or a court will uphold, how the Fund characterizes and treats
ETNs for tax purposes.

 

An ETN that
is tied to a specific market benchmark or strategy may not be able to replicate and maintain exactly the composition and relative weighting
of securities, commodities or other components in the applicable market benchmark or strategy. Some ETNs that use leverage can, at times,
be relatively illiquid, and thus they may be difficult to purchase or sell at a fair price. Leveraged ETNs are subject to the same risk
as other instruments that use leverage in any form.

 

The market
value of ETNs may differ from their market benchmark or strategy. This difference in price may be due to the fact that the supply and
demand in the market for ETNs at any point in time is not always identical to the supply and demand in the market for the securities,
commodities or other components underlying the market benchmark or strategy that the ETN seeks to track. As a result, there may be times
when an ETN trades at a premium or discount to its market benchmark or strategy.

 

Investments in Other Investment Companies

The Fund may invest
in the securities of other investment companies to the extent that such an investment would be consistent with the requirements of Section
12(d)(1) of the 1940 Act, or any rule, regulation or order of the SEC or interpretation thereof. Generally, the Fund may invest in the
securities of another investment company (the “acquired company”) provided that the Fund, immediately after such purchase
or acquisition, does not own: (i) more than 3% of the total outstanding voting stock of the acquired company; (ii) securities issued by
the acquired company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (iii) securities issued
by the acquired company and all other investment companies having an aggregate value in excess of 10% of the value of the total assets
of the Fund. Section 12(d)(1)(B) prohibits another investment company from selling its shares to the Fund if, after the sale (i) the Fund
owns more than 3% of the other investment company’s voting stock or (ii) the Fund and other investment companies, and companies
controlled by them, own more than 10% of the voting stock of such other investment company. In addition, t
he Fund will not purchase
a security issued by a closed-end fund if after such purchase the Fund and any other investment companies with the same investment adviser
would own more than 10% of the voting shares of the closed-end investment company.

 

The Fund, however, may invest in the securities
of an acquired company provided that immediately after such purchase or acquisition not more than 3% of the total outstanding stock of
such issuer is owned by the Fund and all affiliated persons of the Fund. In addition, subject to certain conditions, the Fund may invest
in acquired funds in the “same group of investment companies” (“affiliated funds”), government securities and
short-term paper, as well as: (1) unaffiliated investment companies (subject to certain limits), (2) other types of securities (such as
stocks, bonds and other securities) not issued by an investment company that are consistent with the fund of fund’s investment policies,
(3) affiliated and unaffiliated money market funds, and (4) derivatives. Further, the Fund may rely on other investment companies’
exemptive relief, if any, to invest in such companies’ shares in excess of the Section 12(d)(1)(A) limits.

 

The SEC has proposed revisions to the rules permitting
funds to invest in other investment companies, which could dramatically change how funds of funds operate and limit their investments.
The SEC has also proposed rescinding most prior exemptive orders permitting Funds of Funds arrangements and certain Fund of Fund rules
and SEC staff guidance. The proposed revisions and the related rescissions could alter the operation of Funds of Funds by limiting their
investments in unaffiliated funds and direct investments, and potentially imposing restrictions on their ability to redeem the investment
company shares they hold.

 

 

If the Fund invests in, and thus, is a shareholder
of, another investment company, the Fund’s shareholders will indirectly bear the Fund’s proportionate share of the fees and
expenses paid by such other investment company, including advisory fees, in addition to both the management fees payable directly by the
Fund to the Fund’s own investment adviser and the other expenses that the Fund bears directly in connection with the Fund’s
own operations.

 

Consistent with the restrictions discussed above,
the Fund may invest in several different types of investment companies from time to time, including mutual funds, ETFs, closed-end funds,
foreign investment companies and business development companies (“BDCs”). For example, the Fund may elect to invest in another
investment company when such an investment presents a more efficient investment option than buying securities individually. The Fund also
may invest in investment companies that are included as components of an index, such as BDCs, to seek to track the performance of that
index. A BDC is a less common type of closed-end investment company that more closely resembles an operating company than a typical investment
company. BDCs generally focus on investing in, and providing managerial assistance to, small, developing, financially troubled, private
companies or other companies that may have value that can be realized over time and with management assistance. Similar to an operating
company, a BDC’s total annual operating expense ratio typically reflects all of the operating expenses incurred by the BDC, and
is generally greater than the total annual operating expense ratio of a mutual fund that does not bear the same types of operating expenses.

 

The main risk of investing in other investment
companies is that the Fund will be exposed to the risks of the investments held by the other investment companies. The market prices of
ETFs will fluctuate in accordance with both changes in the market value of their underlying portfolio securities and due to supply and
demand for the instruments on the exchanges on which they are traded (which may result in their trading at a discount or premium to their
NAVs). Index-based investment companies may not replicate exactly the performance of their specific index because of transaction costs,
and because of the temporary unavailability of certain component securities of the index, or strategy used to track the index.

 

Krane and a sub-adviser, if applicable, are subject
to a conflict of interest in allocating the Fund’s assets to investment companies from which they or their affiliates receive compensation
or other benefits.

 

Borrowing

The Fund
may borrow money to the extent permitted by the 1940 Act. Borrowing for investment purposes is a form of leverage. Leveraging investments,
by purchasing securities with borrowed money, is a speculative technique that increases investment risk. Because substantially all of
the Fund’s assets will fluctuate in value, whereas the interest obligations on borrowings may be fixed, the NAV of the Fund will
increase more when the Fund’s portfolio assets increase in value and decrease more when the Fund’s portfolio assets decrease
in value than would otherwise be the case. Moreover, interest costs on borrowings may fluctuate with changing market rates of interest
and may partially offset or exceed the returns on the borrowed funds. The Fund also may be required to maintain minimum average balances
in connection with a borrowing or to pay a commitment or other fee to maintain a line of credit, which would further increase the cost
of borrowing. Under adverse conditions, the Fund might have to sell portfolio securities to meet interest or principal payments at a time
when investment considerations would not favor such sales.

 

 

Although
it has not entered into a credit facility (other than any overdrafts permitted by the Fund’s custodian), the Fund may borrow money
to facilitate management of the Fund’s portfolio by enabling the Fund to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous, and for temporary or emergency purposes, such as trade settlements and as necessary
to distribute to shareholders any income required to maintain the Fund’s status as a RIC. In this regard, the Fund may enter into
a credit facility to borrow money for temporary or emergency purposes, including the funding of shareholder redemption requests, trade
settlements, and as necessary to distribute to shareholders any income required to maintain the Fund’s status as a RIC. Such borrowing
is not for investment purposes and will be repaid by the Fund promptly. As required by the 1940 Act, the Fund must maintain continuous
asset coverage (total assets, including assets acquired with borrowed funds, less liabilities exclusive of borrowings) of 300% of all
amounts borrowed. If, at any time, the value of the Fund’s assets should fail to meet this 300% coverage test, the Fund, within
three days (not including Sundays and holidays), will reduce the amount of the Fund’s borrowings to the extent necessary to meet
this 300% coverage requirement. Maintenance of this percentage limitation may result in the sale of portfolio securities at a time when
investment considerations otherwise indicate that it would be disadvantageous to do so.

 

In addition
to the foregoing, the Fund is authorized to borrow money for extraordinary or emergency purposes. Borrowings for extraordinary or emergency
purposes are not subject to the foregoing 300% asset coverage requirement. While the Fund does not anticipate doing so, the Fund is authorized
to pledge (i.e., transfer a security interest in) portfolio securities in an amount up to one-third of the value of the Fund’s
total assets in connection with any borrowing.

 

Bank Deposits and Obligations

The Fund
may invest in deposits and other obligations of U.S. and non-U.S. banks and financial institutions. Deposits and obligations of banks
and financial institutions include certificates of deposit, time deposits, and bankers’ acceptances. Certificates of deposit and
time deposits represent an institution’s obligation to repay funds deposited with it that earn a specified interest rate. Certificates
of deposit are negotiable certificates, while time deposits are non-negotiable deposits. A banker’s acceptance is a time draft drawn
on and accepted by a bank that becomes a primary and unconditional liability of the bank upon acceptance. Investments in obligations of
non-U.S. banks and financial institutions may involve risks that are different from investments in obligations of U.S. banks. These risks
include future unfavorable political and economic developments, seizure or nationalization of foreign deposits, currency controls, interest
limitations or other governmental restrictions that might affect the payment of principal or interest on the securities held in the Fund.
All investments in deposits and other obligations are subject to credit risk, which is the risk that the Fund may lose its investments
in these instruments if, for example, the issuing financial institution collapses and is unable to meet its obligations. This risk is
more acute for investments in deposits and other obligations that are not insured by a government or private entity. For a discussion
of the risks of the Fund holding cash in mainland China, please see the “PRC Custodian and Dealer/Settlement Agent” section
above.

 

Illiquid Securities

The Fund may invest up to an aggregate amount
of 15% of its net assets in illiquid investments. An illiquid investment is any investment that the Fund reasonably expects cannot be
sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing
the market value of the investment. Illiquid securities may be difficult to value, and the Fund may have difficulty or be unable to dispose
of such securities promptly or at reasonable prices.

 

The SEC has adopted Rule 22e-4 under the 1940
Act, which requires the Fund to adopt a liquidity risk management program to assess and manage its liquidity risk. Under its program,
the Fund will be required to classify its investments into specific liquidity categories and monitor compliance with limits on investments
in illiquid securities. The Fund does not expect Rule 22e-4 to have a significant effect on investment operations. While the liquidity
risk management program attempts to assess and manage liquidity risk, there is no guarantee it will be effective in its operations and
may not reduce the liquidity risk inherent in the Fund’s investments.

 

If illiquid investments exceed 15% of the Fund’s
net assets (including, for example, because of changes in the market value of its investments or because of redemptions), Rule 22e-4 and
the liquidity risk management program will require that certain remedial actions be taken. The Fund may not acquire illiquid investments
if, immediately after the acquisition, more than 15% of the Fund’s net assets would be illiquid investments.

 

 

Private Companies and Pre-IPO Investments.
Investments in private companies, including companies that have not yet issued securities publicly in an IPO (“Pre-IPO shares”)
involve greater risks than investments in securities of companies that have traded publicly on an exchange for extended periods of time.
Investments in these companies are generally less liquid than investments in securities issued by public companies and may be difficult
for the Fund to value. Compared to public companies, private companies may have a more limited management group and limited operating
histories with narrower, less established product lines and smaller market shares, which may cause them to be more vulnerable to competitors’
actions, market conditions and consumer sentiment with respect to their products or services, as well as general economic downturns. In
addition, private companies may have limited financial resources and may be unable to meet their obligations. This could lead to bankruptcy
or liquidation of such private company or the dilution or subordination of the Fund’s investment in such private company. Additionally,
there is significantly less information available about private companies’ business models, quality of management, earnings growth
potential and other criteria used to evaluate their investment prospects and the little public information available about such companies
may not be reliable. Because financial reporting obligations for private companies are not as rigorous as public companies, it may be
difficult to fully assess the rights and values of certain securities issued by private companies. The Fund may only have limited access
to a private company’s actual financial results and there is no assurance that the information obtained by the Fund is reliable.
Although there is a potential for pre-IPO shares to increase in value if the company does issue shares in an IPO, IPOs are risky and volatile
and may cause the value of the Fund’s investment to decrease significantly. Moreover, because securities issued by private companies
shares are generally not freely or publicly tradable, the Fund may not have the opportunity to purchase or the ability to sell these shares
in the amounts or at the prices the Fund desires. The private companies the Fund may invest in may not ever issue shares in an IPO and
a liquid market for their pre-IPO shares may never develop, which may negatively affect the price at which the Fund can sell these shares
and make it more difficult to sell these shares, which could also adversely affect the Fund’s liquidity. Furthermore, these investments
may be subject to additional contractual restrictions on resale that would prevent the Fund from selling the company’s securities
for a period of time following any IPO. The Fund’s investment in a private company’s securities will involve investing in
restricted securities. If the Fund invests in private companies or issuers, there is a possibility that Krane may obtain access to material
non-public information about an issuer of private placement securities, which may limit Krane’s ability to sell such
securities, could negatively impact Krane’s ability to manage the Fund since Krane may be required to sell other securities to meet
redemptions, or could adversely impact the Fund’s performance.

 

Portfolio Turnover

In general, Krane or a sub-adviser manages the
Fund without regard to restrictions on portfolio turnover. The Fund’s investment strategies may produce high portfolio turnover
rates. To the extent the Fund invests in derivative or other instruments with short maturities, the instruments generally will have short-term
maturities and, thus, be excluded from the calculation of portfolio turnover. The value of portfolio securities received or delivered
as a result of in-kind creations or redemptions of the Fund’s shares also is excluded from the calculation of the Fund’s portfolio
turnover rate. As a result, the Fund’s reported portfolio turnover may be low despite relatively high portfolio activity which would,
in turn, produce correspondingly greater expenses for the Fund, including brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestments in other securities. Generally, the higher the rate of portfolio turnover of a fund,
the higher these transaction costs borne by a fund and its long-term shareholders. Such sales may result in the realization of taxable
capital gains (including short-term capital gains, which, when distributed, are generally taxed to shareholders at ordinary income tax
rates) for certain taxable shareholders.

 

 

“Portfolio Turnover Rate” is defined
under the rules of the SEC as the lesser of the value of the securities purchased or of the securities sold, excluding all securities
whose maturities at the time of acquisition were one-year or less, divided by the average monthly value of such securities owned during
the year. Based on this definition, instruments with a remaining maturity of less than one-year are excluded from the calculation of the
portfolio turnover rate. Instruments excluded from the calculation of portfolio turnover may include commercial paper, futures contracts
and option contracts because they generally have a remaining maturity of less than one-year.

 

Repurchase Agreements

The Fund may enter into repurchase agreements.
A repurchase agreement is a transaction in which the Fund purchases securities or other obligations from a bank or securities dealer (or
its affiliate) and simultaneously commits to resell them to a counterparty at an agreed-upon date or upon demand and at a price reflecting
a market rate of interest unrelated to the coupon rate or maturity of the purchased obligations. The Fund maintains custody of the underlying
obligations prior to their repurchase, either through its regular custodian or through a special “triparty” custodian or sub-custodian
that maintains separate accounts for both the Fund and its counterparty. Thus, the obligation of the counterparty to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such obligations.

 

Repurchase agreements carry certain risks not
associated with direct investments in securities, including a possible decline in the market value of the underlying obligations. If their
value becomes less than the repurchase price, plus any agreed-upon additional amount, the counterparty must provide additional collateral
so that at all times the collateral is at least equal to the repurchase price plus any agreed-upon additional amount. The difference between
the total amount to be received upon repurchase of the obligations and the price that was paid by the Fund upon acquisition is accrued
as interest and included in its net investment income. Repurchase agreements involving obligations other than U.S. government securities
(such as commercial paper and corporate bonds) may be subject to special risks and may not have the benefit of certain protections in
the event of the counterparty’s insolvency. If the seller or guarantor becomes insolvent, the Fund may suffer delays, costs and
possible losses in connection with the disposition of collateral.

 

Reverse Repurchase Agreements

The Fund may enter into reverse repurchase agreements,
which involve the sale of securities held by the Fund subject to its agreement to repurchase the securities at an agreed-upon date or
upon demand and at a price reflecting a market rate of interest. Reverse repurchase agreements are subject to the Fund’s limitation
on borrowings and may be entered into only with banks or securities dealers or their affiliates. While a reverse repurchase agreement
is outstanding, the Fund will maintain the segregation, either on its records or with the Trust’s custodian, of cash or other liquid
securities, marked to market daily, in an amount at least equal to its obligations under the reverse repurchase agreement.

 

Reverse repurchase agreements involve the risk
that the buyer of the securities sold by the Fund might be unable to deliver them when the Fund seeks to repurchase. If the buyer of securities
under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the buyer or trustee or receiver may receive an extension
of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds
of the reverse repurchase agreement may effectively be restricted pending such decision.

 

Lending of Portfolio Securities

The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions. In connection with such loans, the Fund remains the beneficial owner of the loaned
securities and continues to be entitled to payments in amounts approximately equal to the interest, dividends or other distributions payable
on the loaned securities. The Fund also has the right to terminate a loan at any time. The Fund does not have the right to vote on securities
while they are on loan. Loans of portfolio securities will not exceed 33 1/3% of the value of the Fund’s total assets (including
the value of all assets received as collateral for the loan). The Fund will receive collateral in an amount equal to at least 100% of
the current market value of the loaned securities. If the collateral consists of cash, the Fund will reinvest the cash and pay the borrower
a pre-negotiated fee or “rebate” from any return earned on the investment. Should the borrower of the securities fail financially,
the Fund may experience delays or trouble in recovering the loaned securities or exercising its rights in the collateral. In a loan transaction,
the Fund will also bear the risk of any decline in value of securities acquired with cash collateral. Krane and a sub-adviser, if applicable,
are subject to potential conflicts of interest because the compensation paid to them increases in connection with any net income received
by the Fund from a securities lending program.

 

 

Cyber-Security
Risk

The Fund, and its service
providers, may be prone to operational and information security risks resulting from cyber-attacks. Cyber-attacks include, among other
behaviors, stealing or corrupting data maintained online or digitally, denial of service attacks on websites, the unauthorized release
of confidential information or various other forms of cyber security breaches. Cyber-attacks affecting the Fund or its advisors, custodian,
transfer agent, intermediaries and other third-party service providers may adversely impact the Fund. For instance, cyber-attacks may
interfere with the processing of shareholder transactions, impact the Fund’s ability to calculate its NAV, cause the release of
private shareholder information or confidential business information, impede trading, subject the Fund to regulatory fines or financial
losses and/or cause reputational damage. The Fund may also incur additional costs for cyber security risk management purposes. While the
Fund’s service providers have established business continuity plans, there are inherent limitations in such plans and systems including
the possibility that certain risks have not been identified. Furthermore, the Fund cannot control the cyber security plans and systems
put in place by its service providers or any other third parties whose operations may affect the Fund or its shareholders. Similar types
of cyber security risks are also present for issues or securities in which the Fund may invest, which could result in material adverse
consequences for such issuers and may cause the Fund’s investment in such companies to lose value.

 

INVESTMENT LIMITATIONS

 

Unless otherwise noted, whenever a fundamental
or non-fundamental investment policy or limitation states that a maximum percentage of the Fund’s assets that may be invested in
any security or other asset, or sets forth a policy regarding quality standards, such standard or percentage limitation will be determined
immediately after and as a result of the Fund’s acquisition of such security or other asset. Accordingly, other than with respect
to the Fund’s limitations on borrowings, any subsequent change in values, net assets, or other circumstances will not be considered
when determining whether the investment complies with the Fund’s investment policies and limitations.

 

Fundamental Policies

The investment limitations below are fundamental
policies of the Fund, and cannot be changed without the consent of the holders of a majority of the Fund’s outstanding shares. The
term “majority of the outstanding shares” means the vote of (i) 67% or more of the Fund’s shares present at a meeting,
if more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (ii) more than 50% of the Fund’s
outstanding shares, whichever is less.

 

The Fund may not:

 

1. Issue senior securities, except as permitted under the 1940 Act, the rules, regulations and interpretations
thereunder, and any applicable exemptive relief.

 

2. Borrow money, except as permitted under the 1940 Act, the rules, regulations and interpretations thereunder,
and any applicable exemptive relief.

 

3. Act as an underwriter of another issuer’s securities, except to the extent that the Fund may be
considered an underwriter within the meaning of the Securities Act in the disposition of portfolio securities.

 

 

4. Purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government,
or any non-U.S. government, or their respective agencies or instrumentalities) if, as a result, more than 25% of the Fund’s total
assets would be invested in the securities of companies whose principal business activities are in the same industry (excluding investment
companies) or group of industries.

 

5. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments
(but this shall not prevent the Fund from investing in securities or other instruments backed by real estate, real estate investment trusts
or securities of companies engaged in the real estate business).

 

6. Purchase or sell physical commodities unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Fund from purchasing or selling options, futures contracts, forward contracts, swaps and other
financial instruments or from investing in issuers engaged in the commodities business or securities or other instruments backed by physical
commodities).

 

7. Lend any security or make any other loan except as permitted under the 1940 Act, the rules, regulations
and interpretations thereunder, and any applicable exemptive relief. This limitation does not apply to purchases of debt securities or
to repurchase agreements, or to acquisitions of loans, loan participations or other forms of debt instruments permissible under the Fund’s
investment policies.

 

CONTINUOUS OFFERING

 

The method by which Creation Units of shares are
created and traded may raise certain issues under applicable securities laws. Because new Creation Units of shares are issued and sold
by the Fund on an ongoing basis, at any point a “distribution,” as such term is used in the Securities Act, may occur. Broker-dealers
and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants
in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery requirement and
liability provisions of the Securities Act.

 

For example, a broker-dealer firm or its client
may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Fund’s Distributor, breaks them
down into constituent shares, and sells such shares directly to customers, or if it chooses to couple the creation of a supply of new
shares with an active selling effort involving solicitation of secondary market demand for shares. A determination of whether one is an
underwriter for purposes of the Securities Act must take into account all the facts and circumstances pertaining to the activities of
the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description
of all the activities that could lead to a categorization as an underwriter.

 

Broker-dealer firms should also note that dealers
who are not “underwriters” but are effecting transactions in shares, whether or not participating in the distribution of shares,
generally are required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(3) of the Securities
Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act.

 

MANAGEMENT OF THE TRUST

 

Board Responsibilities

The Board of Trustees is responsible for overseeing
the management and affairs of the Fund and the Trust. The Board considers and approves contracts, as described herein, under which certain
companies provide essential management and administrative services to the Trust. Like most ETFs, the day-to-day business of the Trust,
including the day-to-day management of risk, is performed by third-party service providers, such as Krane, a sub-adviser where applicable,
the Distributor and the Administrator (as defined below). The Board oversees the Trust’s service providers and overall risk management.
Risk management seeks to identify and eliminate or mitigate the potential effects of risks, i.e., events or circumstances that
could have material adverse effects on the business, operations, shareholder services, investment performance or reputation of the Trust
or the Fund. Under the overall supervision of the Board and the Audit Committee (discussed in more detail below), the service providers
to the Fund employ a variety of processes, procedures and controls to identify risks relevant to the operations of the Trust and the Fund
to lessen the probability of their occurrence and/or to mitigate the effects of such events or circumstances if they do occur. Each service
provider is responsible for one or more discrete aspects of the Trust’s business (e.g., Krane is responsible for the oversight
of a sub-adviser) and, consequently, for managing the risks associated with that activity.

 

 

Consistent with its responsibility for oversight
of the Trust and the Fund, the Board oversees the management of risks relating to the administration and operations of the Trust and the
Fund. Krane, as part of its responsibilities for the day-to-day operations of the Fund, is responsible for day-to-day risk management
for the Fund. The Board performs its risk management oversight directly and, as to certain matters, through its committees. The following
provides an overview of the principal, but not all, aspects of the Board’s oversight of risk management for the Trust and the Fund.

 

In general, the Fund’s risks include, among
others, investment risk, liquidity risk, valuation risk and operational risk. The Fund’s service providers, including Krane and
sub-adviser, as applicable, are responsible for adopting policies, procedures and controls designed to address various risks within their
purview. Further, Krane is responsible for overseeing and monitoring the investments and operations of any sub-adviser. The Board also
oversees risk management for the Trust and the Fund through review of regular reports, presentations and other information from officers
of the Trust and other persons. In addition to reports from Krane, the Board also receives reports regarding other service providers to
the Trust on a periodic or regular basis.

 

The Board is responsible for overseeing the nature,
extent and quality of the Fund services provided to the Fund by Krane and any sub-adviser and receives information from them on a periodic
basis. In connection with its consideration of whether to approve and/or renew the advisory agreements with Krane and any sub-adviser,
the Board will request information allowing the Board to review such services. The Board also receives reports related to Krane’s
and any sub-adviser’s adherence to the Fund’s investment restrictions and compliance with the stated policies of the Fund.
In addition, the Board regularly receives information about the Fund’s performance and investments.

 

The Trust’s Chief Compliance Officer meets
regularly with the Board to review and discuss compliance and other issues. At least annually, the Trust’s Chief Compliance Officer
provides the Board with a report reviewing the adequacy and effectiveness of the Trust’s policies and procedures and those of its
service providers, including the Adviser and any sub-adviser. The report generally seeks to address: the operation of the policies and
procedures of the Trust and each service provider since the date of the last report; material changes to the policies and procedures since
the date of the last report; any recommendations for material changes to the policies and procedures; and material compliance matters
since the date of the last report.

 

The Board normally also receives reports from
the Trust’s service providers regarding Fund operations, portfolio valuation and other matters. Annually, an independent registered
public accounting firm reviews with the Audit Committee its audit of the Trust’s financial statements, focusing on certain areas
of risk to the Trust and the Trust’s internal controls.

 

The Board recognizes that not all risks that may
affect the Fund can be identified, that it may not be practical or cost-effective to eliminate or mitigate certain risks, that it may
be necessary to bear certain risks (such as investment-related risks) to achieve the Fund’s goals, and that the processes, procedures
and controls employed to address certain risks may be limited in their effectiveness. Moreover, despite the periodic reports the Board
receives and the Board’s discussions with the service providers to the Fund, it may not be made aware of all relevant information
about certain risks. Most of the Trust’s investment management and business affairs are carried out by or through Krane and other
service providers, each of which has an independent interest in risk management but whose policies and methods by which one or more risk
management functions are carried out may differ from the Trust’s and each other’s in the setting of priorities, the resources
available or the effectiveness of relevant controls. As a result of the foregoing and other factors, the Board’s risk management
oversight is subject to substantial limitations.

 

 

Members of the Board and Officers of the
Trust

Set forth below are the names, years of birth,
position with the Trust, term of office, the principal occupations for a minimum of the last five years, number of portfolios overseen
by, and other directorships of each of the persons currently serving as members of the Board and as Executive Officers of the Trust. Also
included below is the term of office for each of the Executive Officers of the Trust. The members of the Board serve as Trustees for the
life of the Trust or until retirement, removal, or their office is terminated pursuant to the Trust’s Amended and Restated Declaration
of Trust.

 

The Chairman of the Board, Jonathan Krane, is
an interested person of the Trust as that term is defined in the 1940 Act. No single Independent Trustee serves as a lead Independent
Trustee. The Trust has determined its leadership structure is appropriate given the specific characteristics the Trust and its operations.
The Trust made this determination in consideration of, among other things, the fact that the Trustees who are not interested persons of
the Trust (i.e., “Independent Trustees”) constitute at least fifty percent (50%) of the Board, the fact that the Audit
Committee is composed of the Independent Trustees, and the number of funds (and classes of shares) overseen by the Board.

 

Name, Address

and Year of Birth of
Trustee/Officer

Position(s)
Held with

the Trust,
Term of Office
and Length of
Time
Served

Principal Occupation(s)

During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen

by Trustee/

Officer

Other
Directorships
Held by
Trustee/Officer

Interested Trustee1

Jonathan Krane*

(1968)

280 Park Ave, 32nd Floor, New York, New York 10017

Trustee and Chairman of the Board, No set term; served since 2012 Chief Executive Officer of Krane Funds Advisors, LLC from 2011 to present. Chief Executive Officer of Krane Portfolio Advisors, LLC from 2018 to present. 29 None
Independent Trustees1

Patrick P. Campo

(1970)

280 Park Ave, 32nd Floor, New York, New York 10017

Trustee, No set term; served since 2017

From 2019 to present, Director of Research, and from 2013 to
2019, Director of Long Short Equity, Titan Advisors.

29 None

John Ferguson

(1966)

280 Park Ave, 32nd Floor, New York, New York 10017

 

Trustee, No set term; served since 2012

Chief Operating Officer of Shrewsbury River Capital from 2017 to 2020.
Chief Operating Officer of Kang Global Investors LP (hedge fund adviser) from 2014 to 2016. President of Alden Global Capital, LLC (hedge
fund adviser) from 2012 to 2014 (formerly, Chief Operating Officer from 2011 to 2012). Senior Managing Director and Chief Operating
Officer of K2 Advisors, L.L.C. from 2005 to 2011.

 

29 None

 

 

Name, Address

and Year of Birth of
Trustee/Officer

Position(s)
Held with

the Trust,
Term of Office
and Length of
Time
Served

Principal Occupation(s)

During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen

by Trustee/

Officer

Other
Directorships
Held by
Trustee/Officer

Matthew Stroyman

(1968)

280 Park Ave, 32nd Floor, New York, New York 10017

 

Trustee, No set term; served since 2012 Founder and President of BlackRidge Ventures from 2018 to present (principal investment activities and strategic advisory services in a variety of industries to clients and partners that include institutional investment firms, family offices and high net-worth individuals).Co-Founder, President and Chief Operating Officer of Arcturus (real estate asset and investment management services firm) from 2007 to 2017. 29 None
Officers

Jonathan Krane

(1968)

280 Park Ave, 32nd Floor, New York, New York 10017

Principal Executive Officer and Principal Financial Officer, No set term; served since 2012

Chief Executive Officer of Krane Funds Advisors, LLC from 2011 to
present. Chief Executive Officer of Krane Portfolio Advisors, LLC from 2018 to present.

 

29 None

Jennifer Tarleton (formerly Krane)

(1966)

280 Park Ave, 32nd Floor, New York, New York 10017

Vice President and Secretary, No set term; served since 2012 Vice President of Krane Funds Advisors, LLC from 2011 to present.  29 None

Michael Quain

(1957)

280 Park Ave, 32nd Floor, New York, New York 10017

 

Chief Compliance Officer and Anti-Money Laundering Officer, No Set Term; served since 2015 Principal/President of Quain Compliance Consulting, LLC from 2014 to present. First Vice President of Aberdeen Asset Management Inc. from May 2013 to September 2013. 29 None

 

 

Name, Address

and Year of Birth of
Trustee/Officer

Position(s)
Held with

the Trust,
Term of Office
and Length of
Time
Served

Principal Occupation(s)

During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen

by Trustee/

Officer

Other
Directorships
Held by
Trustee/Officer

Eric Olsen2

(1970)

SEI Investments Company

One Freedom Valley Drive

Oaks, PA 19456

Assistant Treasurer, No set term; served since 2021 Director of Accounting, SEI Investments Global Fund Services (March 2021 to present); Deputy Head of Fund Operations, Traditional Assets, Aberdeen Standard Investments (August 2013 to February 2021). 29 None

David Adelman

(1964)

280 Park Avenue

32nd Floor New York,

New York, 10017

Assistant Secretary, No set term; served since 2021 Managing Director and the General Counsel, Krane Fund Advisors, LLC from 2021. Partner, Reed Smith LLP from 2015 to 2021. 29 None

Jonathan Shelon

(1974)

280 Park Ave, 32nd Floor, New York, New York 10017

Assistant Secretary, No set term; served since 2019 Chief Operating Officer, Krane Funds Advisors, LLC from 2015 to present.  Chief Operating Officer, CICC Wealth Management (USA) LLC from 2018 to present.  Chief Investment Officer of Specialized Strategies, J.P. Morgan from 2011 to 2015.   29 None

 

* Mr. Krane is an “interested” person of the Trust, as that term is defined in the 1940 Act,
by virtue of his ownership and controlling interest in the Adviser.
1 Each Trustee serves until his or her successor is duly elected or appointed and qualified.
2 These officers of the Trust also serve as officers of one or more funds for which SEI Investments Company
or an affiliate acts as a manager, administrator or distributor.

 

Board Standing Committees

The Board has established the following standing
committees:

 

Audit Committee. Messrs. Campo, Ferguson
and Stroyman are members of the Trust’s Audit Committee (the “Audit Committee”) and Mr. Ferguson is the Chairman of
the Audit Committee. The principal responsibilities of the Audit Committee are the appointment, compensation and oversight of the Trust’s
independent auditors, including the review of any significant disputes regarding financial reporting between Trust management and such
independent auditors. Under the terms of the Audit Committee charter adopted by the Board, the Audit Committee is authorized to, among
other things, (i) oversee the accounting and financial reporting processes of the Trust and its internal control over financial reporting;
(ii) oversee the quality and integrity of the Fund’s financial statements and the independent audits thereof; (iii) oversee, or,
as appropriate, assist Board oversight of, the Trust’s compliance with legal and regulatory requirements that relate to the Trust’s
accounting and financial reporting, internal control over financial reporting and independent audits; (iv) approve, prior to appointment,
the engagement of the Trust’s independent auditors and, in connection therewith, review and evaluate the qualifications, independence
and performance of the Trust’s independent auditors; and (v) act as a liaison between the Trust’s independent auditors and
the full Board. The Board of the Trust has adopted a written charter for the Audit Committee. During the fiscal year ended March 31, 2021,
the Audit Committee held [five] meetings.

 

 

The Audit Committee also serves as the Qualified
Legal Compliance Committee (“QLCC”) for the Trust.  The function of the QLCC is to receive, review and recommend resolution
with respect to any report made or referred to the QLCC by an attorney of evidence of a material violation of applicable U.S. federal
or state securities law, material breach of a fiduciary duty under U.S. federal or state law or a similar material violation by the Trust
or by any officer, trustee, employee, or agent of the Trust. The QLCC meets as needed.

 

Nominating Committee. Messrs. Campo, Ferguson
and Stroyman are members of the Trust’s Nominating Committee and Mr. Stroyman is the Chairman of the Nominating Committee. The principal
responsibilities of the Nominating Committee are to (i) identify, select and nominate the appropriate number of candidates for election
or appointment as members of the Board and (ii) recommend any appropriate changes to the Board for consideration. The Nominating Committee
is solely responsible for the selection and nomination of the Trust’s Independent Trustees and does not consider nominations for
the office of Trustee made by Trust shareholders. During the fiscal year ended March 31, 2021, the Nominating Committee held [two] meetings.

 

Individual Trustee Qualifications

The Board has concluded that each of the Trustees
should serve on the Board because of his ability to review and understand information about the Trust and the Fund provided by management,
to identify and request other information he may deem relevant to the performance of the Trustees’ duties, to question management
and other service providers regarding material factors bearing on the management and administration of the Fund, and to exercise his business
judgment in a manner that serves the best interests of the Fund’s shareholders. The Board has concluded that each of the Trustees
should serve as a Trustee based on his own experience, qualifications, attributes and skills as described below.

 

The Board has concluded that Mr. Krane should
serve as Trustee because of his knowledge of, and the executive positions he holds, or has held in, the financial services industry. Specifically,
Mr. Krane currently serves as Chief Executive Officer of the Adviser and Chief Executive Officer of Krane Portfolio Advisors, LLC. Mr.
Krane contributes expertise and institutional knowledge relating to the structure of the “Krane” organization and the way
that the “Krane” business operates. Mr. Krane also served as Chief Executive Officer of the China division of a multinational
company, where he gained valuable experience in managing a business and critical knowledge of business and investment opportunities in
China. In addition, he has served on the boards of different corporations and, in doing so, has first-hand knowledge of the fiduciary
duties and responsibilities bestowed upon trustees and directors. Mr. Krane’s experience as serving as Chief Executive Officer for
multiple businesses in the financial services industry, his familiarity with the “Krane” complex, and his experience in serving
on the boards of various companies qualify him to serve as a Trustee of the Trust.

 

The Board has concluded that Patrick Campo should
serve as Trustee because of the experience he has gained working in the investment management industry over many years. In particular,
Mr. Campo currently serves as the director of certain investment strategies managed by an investment adviser and contributes to the portfolio
construction process for all products offered by that investment adviser. In addition, Mr. Campo previously served as partner and head
of research for another investment adviser. The knowledge Mr. Campo has gained over these years working in the investment management industry
and his day-to-day work in managing investment advisory firms qualify him to serve as Trustee of the Trust.

 

The Board has concluded that Mr. Ferguson should
serve as Trustee because of the experience he has gained working in the financial services and legal industries over the years. In particular,
Mr. Ferguson has extensive experience in managing global investment adviser firms, including the management, creation and success of hedge
funds. Prior to that, Mr. Ferguson served as a corporate securities and tax attorney assisting and counseling clients with the organization
and creation of both domestic and offshore funds. In addition, Mr. Ferguson has served as an officer for two registered investment companies
and, in doing so, has gained experience and knowledge regarding the mutual fund industry. Mr. Ferguson’s experience in the financial
services, fund and legal industries and his day-to-day work in managing investment advisory firms, qualify him to serve as a Trustee of
the Trust.

 

 

The Board has concluded that Mr. Stroyman should
serve as Trustee because of the experience he has gained working in the financial services and real estate industries. Working as an investment
banker early in his career, Mr. Stroyman developed a strong base of knowledge regarding corporate finance, structuring, public and private
securities, and company valuations. Through his work in the real estate industry and relationships with large investment management firms,
Mr. Stroyman has gained an understanding of sophisticated financial products. He has advised institutional clients including pension funds,
endowments and other qualified investors in asset management, risk assessment, and repositioning and disposition of underperforming assets.
The knowledge Mr. Stroyman has gained over the years working in the financial services and real estate industries and his value and understanding
of fiduciary duties and responsibilities qualify him to serve as Trustee of the Trust.

 

As of March 31, 2021,
[none of the Independent Trustees or members of their immediate family, beneficially owned or owned of record securities representing
interests in Krane, any sub-adviser or distributor of the Trust, or any person controlling, controlled by or under common control with
such persons]. For this purpose, “immediate family member” includes an Independent Trustee’s spouse, children residing
in the same household and dependents of the Independent Trustee.

 

Fund Shares Owned by Board Members

The Fund is new and, therefore, as of the date
of this SAI, none of the Trustees beneficially owned shares of the Fund.

 

As of December 31, 2020, the Trustees beneficially
owned the following amounts of shares of other series of the Trust:

 

Trustee Funds Aggregate 
Dollar 
Range of 
Beneficial 
Ownership 
of Funds
Patrick Campo None None
John Ferguson KraneShares Electric Vehicles and Future Mobility Index ETF $10,001-$50,000
KraneShares MSCI All China Health Care Index ETF $10,001-$50,000

KraneShares CSI China Internet ETF

$50,001-$100,000
Jonathan Krane KraneShares Bosera MSCI China A Share ETF [   ]
KraneShares CSI China Internet ETF [   ]
KraneShares MSCI Emerging Markets Ex China Index ETF [   ]
KraneShares MSCI All China Index ETF [   ]
KraneShares Emerging Markets Healthcare Index ETF [   ]
KraneShares Electric Vehicles and Future Mobility Index ETF [   ]
KraneShares Asia Pacific High Yield Bond Fund [   ]
KraneShares Emerging Markets Consumer Technology Index ETF [   ]
KraneShares CICC China Leaders 100 Index ETF [   ]
Matthew Stroyman KraneShares Asia Pacific High Yield Bond Fund $1-$10,000
KraneShares CSI China Internet ETF $1-$10,000

 

“Beneficial ownership” is determined
in accordance with Rule 16a-1(a)(2) under the 1934 Act.

 

 

Board Compensation

Trustees who are “interested
persons” of Krane are not compensated by the Trust for their service as a Trustee. For the fiscal year ended March 31, 2021:
(a) Mr. Campo received aggregate compensation from the Trust in the amount of [$50,000] (b) Mr. Ferguson received aggregate
compensation from the Trust in the amount of [$65,000] and (c) Mr. Stroyman received aggregate compensation from the Trust in the
amount of [$65,000]. None of the Trustees accrued or received any retirement or pension benefits.

 

For the fiscal year ending March 31, 2022, it
is expected that the Trustees will receive compensation from the Trust in the amount of [$50,000] per year and the Chairmen of the Audit
Committee and Nominating Committee will each receive an additional [$15,000]. The Fund bears a proportionate share of Trustee compensation
and expenses based on its relative net assets.

 

INVESTMENT ADVISER

 

Krane Funds Advisors, LLC (“Krane’
or “Adviser’) serves as investment adviser to the Fund pursuant to an Investment Advisory Agreement between the Trust and
Krane (the “Advisory Agreement”). Krane is a Delaware limited liability company registered as an investment adviser under
the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Krane’s offices are located at 280 Park Avenue,
32nd Floor, New York, New York 10017.

 

Under the Advisory Agreement, Krane is responsible
for reviewing, supervising and administering the Fund’s investment program and the general management and administration of the
Trust. Krane may engage a subadviser to assist it in managing the Fund’s investments, but will be responsible for overseeing any
subadvisers. Krane arranges for transfer agency, custody, fund administration and accounting, and other non-distribution related services
necessary for the Fund to operate. Krane manages the Fund’s business affairs, provides office facilities and equipment and certain
clerical, bookkeeping and administrative services, and permits its officers and employees to serve as officers or Trustees of the Trust.
Under the Advisory Agreement, Krane bears all of its own costs associated with providing advisory services to the Fund. As part of the
Advisory Agreement, Krane has contractually agreed to pay all expenses of the Fund, except (i) interest and taxes (including, but not
limited to, income, excise, transaction, transfer and withholding taxes); (ii) expenses of the Fund incurred with respect to the acquisition
and disposition of portfolio securities and the execution of portfolio transactions, including brokerage commissions and short sale dividend
or interest expense; (iii) expenses incurred in connection with any distribution plan adopted by the Trust in compliance with Rule 12b-1
under the 1940 Act, including distribution fees; (iv) Acquired Fund Fees and Expenses; (v) litigation expenses; (vi) the compensation
payable to the Adviser under the investment advisory agreement; (vii) compensation and expenses of the Independent Trustees (including
any Trustees’ counsel fees); and (viii) any expenses determined to be extraordinary expenses by the Board. Nevertheless, there exists
a risk that a Trust service provider will seek recourse against the Trust if is not timely paid by Krane for the fees and expenses for
which it is responsible, which could materially adversely affect the Fund.

 

Under the Advisory Agreement, the Fund pays Krane
the fee shown in the table below, which is calculated daily and paid monthly, at an annual rate based on a percentage of the average daily
net assets of the Fund. In addition, under the Advisory Agreement, as compensation for the services provided by Krane in connection with
any securities lending-related activities, the Fund pays Krane 10% of the monthly investment income received from the investment of cash
collateral and loan fees received from borrowers in respect of securities loans (net of any amounts paid to the custodian and/or securities
lending agent or rebated to borrowers).

 

KraneShares China Innovation ETF 0.25%

 

 

In addition to the above-described services, to
the extent the Fund engages in securities lending, Krane will: (i) determine which securities are available for loan and notify the securities
lending agent for the Fund (the “Agent”), (ii) monitor the Agent’s activities to ensure that securities loans are effected
in accordance with Krane’s instructions and in accordance with applicable procedures and guidelines adopted by the Board, (iii)
make recommendations to the Board regarding the Fund’s participation in securities lending; (iv) prepare appropriate periodic reports
for, and seek appropriate periodic approvals from, the Board with respect to securities lending activities, (v) respond to Agent inquiries
concerning Agent’s activities, and (vi) such other related duties as Krane deems necessary or appropriate. In addition, Krane may
provide additional securities lending-related services as requested by the Trustees from time to time.

 

Under the Investment Advisory Agreement, while
the fees and expenses related to the Fund’s securities lending-related activities reduce the revenues and income of the Fund from
such activities, they are not fees and expenses for which Krane is responsible.

 

Because the Fund had not commenced operations
as of the date of this SAI, Krane did not receive any advisory fees or fees from securities lending activities from the Fund during the
prior three fiscal years.

 

The Investment Advisory Agreement with respect
to the Fund will continue in effect for two years from its initial effective date, and thereafter is subject to annual approval by (i) the
Board of Trustees of the Trust or (ii) the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund, provided that in either event such continuance also is approved by a vote of a majority of the Trustees of the Trust who are
not interested persons (as defined in the 1940 Act) of the Fund. If the shareholders of the Fund fail to approve the Investment Advisory
Agreement, Krane may continue to serve in the manner and to the extent permitted by the 1940 Act and rules and regulations thereunder.

 

The Investment Advisory Agreement with respect
to the Fund is terminable without any penalty, by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund, or by Krane, in each case on not less than sixty (60) days’ prior
written notice to the other party; provided that a shorter notice period shall be permitted for the Fund in the event its shares are no
longer listed on a national securities exchange or in such other circumstances where the Fund waives such notice period. The Advisory
Agreement will terminate automatically and immediately in the event of its “assignment” (as defined in the 1940 Act).

 

China International Capital Corporation (USA)
Holdings Inc., a wholly-owned, indirect subsidiary of China International Capital Corporation Limited owns a majority stake in Krane.
As of April 30, 2021, Central Huijin Investment Limited, a mainland Chinese-domiciled entity, and HKSCC Nominees Limited, held approximately
40.17% and 30.74%, respectively, of the shares of China International Capital Corporation Limited. Central Huijin Investment Limited is
a wholly-owned subsidiary of China Investment Corporation, which is a mainland Chinese sovereign wealth fund. KFA One Holdings, LLC, located
at 280 Park Avenue, 32nd Floor, New York, New York 10017, holds the remaining equity interests in Krane and Jonathan Krane, through his
equity interests in KFA One Holdings, LLC, beneficially owns more than 10% of the equity interests in Krane.

 

Krane has received “manager of managers”
exemptive relief from the SEC that permits Krane, subject to the approval of the Board of Trustees, to appoint a “wholly-owned”
or unaffiliated sub-adviser, as defined in the exemptive relief, or to change the terms of a sub-advisory agreement with a “wholly-owned”
or unaffiliated sub-adviser without first obtaining shareholder approval. The exemptive order further permits Krane to add or to change
a “wholly-owned” or unaffiliated sub-adviser or to change the fees paid to such parties from time to time without the expense
and delays associated with obtaining shareholder approval of the change and to disclose sub-advisers’ fees only in the aggregate
in its registration statement. Any increase in the aggregate advisory fee paid by any Fund remains subject to shareholder approval. Krane
continues to have ultimate responsibility (subject to oversight by the Board of Trustees) to oversee the sub-advisers and recommend their
hiring, termination, and replacement. The Fund will notify shareholders of any change of the Fund sub-adviser.

 

 

PORTFOLIO MANAGERS

 

Portfolio Manager
Fund Ownership.
The Fund is required to show the dollar range of each portfolio manager’s “beneficial ownership”
of shares of the Fund as of the end of the most recently completed fiscal year. The Fund had not
yet commenced operations as of the date of this SAI. Therefore, Messrs. Maund, Shelon, and Sassine did not beneficially own any shares
of the Fund as of that date.

 

Other Accounts. The portfolio managers
are responsible for the day-to-day management of certain other accounts, as follows:

 

 

Krane’s Portfolio Managers

Name

Registered

Investment
Companies*

Other Pooled

Investment Vehicles*

Other Accounts*
Number
of
Accounts

Total
Assets

($
millions)

Number
of
Accounts
Total
Assets  ($
millions)
Number
of
Accounts

Total Assets

($ millions)

 
James Maund [   ] [   ] [   ] [   ] [   ] [   ]
Jonathan Shelon [   ] [   ] [   ] [   ] [   ] [   ]
Anthony Sassine [   ] [   ] [   ] [   ] [   ] [   ]

 

* The information provided is as of [March
31], 2021.

 

Portfolio Manager Compensation

 

The portfolio managers receive a fixed base salary
and incentive awards based on the profitability of Krane and the satisfaction of the account objectives. The potential conflicts of interest
arising with respect to each portfolio manager’s compensation are relatively limited because the Fund seeks to track the performance
of the underlying index, which makes it unlikely, but not impossible, that the portfolio manager would take undue risks in investing the
Fund’s assets to increase performance. Nevertheless, to the extent a portfolio manager would derive additional compensation from
managing other accounts, the portfolio manager may be motivated to favor the other accounts.

 

Description of Material Conflicts of Interest

 

A portfolio manager’s
management of “other accounts” may give rise to potential conflicts of interest in connection with his management of the Fund’s
investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment
objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the similar investment objectives, whereby
the portfolio manager could favor one account over another. Another potential conflict could include the portfolio manager’s knowledge
of the size, timing and possible market impact of the Fund’s trades, whereby the portfolio manager could use this information to
the advantage of other accounts, including personal trading, and to the disadvantage of the Fund. However, Krane has established policies
and procedures to ensure that the purchase and sale of securities among all accounts it manages are fairly and equitably allocated. Krane
monitors and limits personal trading in accordance with its Code of Ethics, as described below.

 

 

CODES OF ETHICS

 

The Trust and Krane have each adopted a Code of
Ethics pursuant to Rule 17j-1 under the 1940 Act. The Codes of Ethics apply to the personal investing activities of trustees, directors,
officers and certain employees (“access persons”). Rule 17j-1 and the Codes of Ethics are designed to prevent unlawful practices
in connection with the purchase or sale of securities by access persons. Under the Codes of Ethics, access persons are permitted to engage
in personal securities transactions (including investments in securities that may be purchased and held by the Fund), but are required
to report their personal securities transactions for monitoring purposes. Each Code of Ethics is on file with the SEC and is available
to the public.

 

PROXY VOTING POLICY

 

The Trust has adopted the proxy voting policies
of Krane, a summary of which is set forth in the appendix to this SAI. The Trust is required to disclose annually the Fund’s complete
proxy voting record on Form N-PX covering the period from July 1 of one year through June 30 of the next and to file Form N-PX with the
SEC no later than August 31 of each year. The Form N-PX is available, or will be available, at no charge upon request by calling 1.855.857.2638.
The Fund’s Form N-PX is also available or will be available, on the SEC’s website at www.sec.gov.

 

ADMINISTRATOR

 

SEI Investments Global Funds Services (the “Administrator”)
serves as administrator for the Fund. SEI Investments Management Corporation (“SIMC”), a wholly-owned subsidiary of SEI Investments
Company (“SEI Investments”), is the owner of all beneficial interest in the Administrator. The principal address of the Administrator
is One Freedom Valley Drive, Oaks, Pennsylvania 19456. Under an Amended and Restated Administration Agreement with the Trust dated July
9, 2014, as amended (the “Administration Agreement”), the Administrator provides necessary administrative and accounting services
for the maintenance and operations of the Trust and the Fund. In addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services.

 

For its services under the Administration Agreement,
the Administrator is entitled to a fee, based on assets under management, subject to a minimum fee. The Administrator may be reimbursed
by the Fund for its out-of-pocket expenses. The Advisory Agreement provides that Krane will pay certain operating expenses of the Trust,
including the fees due to the Administrator under the Administration Agreement.

 

CUSTODIAN AND TRANSFER AGENT

 

Brown Brothers Harriman & Co. (“BBH”)
serves as custodian and transfer agent for the Trust.  The principal address of BBH is 50 Post Office Square, Boston, Massachusetts
02110.  Under the Custodian and Transfer Agent Agreement with the Trust dated December 12, 2012, BBH, in its capacity as custodian,
maintains in separate accounts cash, securities and other assets of the Fund, keeps all necessary accounts and records, and provides other
services. BBH is required, upon the order of the Trust, to deliver securities held by it, in its capacity as custodian, and to make payments
for securities purchased by the Trust for the Fund. 

 

 

Under the Custodian and Transfer Agent Agreement,
foreign securities held by the Fund are generally held by sub-custodians in BBH’s sub-custodian network.

 

BBH further acts as a transfer agent for the Trust’s
authorized and issued shares of beneficial interest, and as dividend disbursing agent of the Trust, under the Custodian and Transfer Agent
Agreement.  The Advisory Agreement provides that Krane will pay certain operating expenses of the Trust, including the fees due to
BBH under the Custodian and Transfer Agent Agreement.

 

SECURITIES LENDING ARRANGEMENTS

 

BBH serves as the securities lending agent for
the Trust.  The principal address of BBH is 50 Post Office Square, Boston, Massachusetts 02110.  As the securities lending agent,
BBH, among other matters, negotiates the specific loan terms for the Fund to loan their securities and receive compensation therefor,
arranges for deliveries of securities and collateral under the securities lending program, and effects the investment of cash collateral
received in connection with loaned securities, all as specified in the Securities Lending Agency Agreement and within the parameters established
under the Trust’s securities lending program. BBH is authorized to lend Fund securities only to such borrowers as have been approved
by the Trust or Krane.

 

Because the Fund has not commenced operations
as of the date of this SAI, it has not begun lending securities.

 

DISTRIBUTOR AND DISTRIBUTION ARRANGEMENTS

 

SEI Investments Distribution Co., a wholly-owned
subsidiary of SEI Investments, and an affiliate of the Administrator, serves as Distributor for the Trust. The principal address of the
Distributor is One Freedom Valley Drive, Oaks, Pennsylvania 19456. The Distributor has entered into an Amended and Restated Distribution
Agreement with the Trust dated July 9, 2014, (the “Distribution Agreement”) pursuant to which it distributes shares of the
Fund. The Distribution Agreement will continue for two years from its effective date and is renewable annually. Shares are continuously
offered for sale by the Fund through the Distributor only in Creation Units, as described in the Prospectus and below in the “Creation
and Redemption of Creation Units” section. Shares in less than Creation Units are not distributed by the Distributor. The Distributor
is a broker-dealer registered under the 1934 Act and a member of the Financial Industry Regulatory Authority (“FINRA”). The
Distributor is not affiliated with Krane, or any national securities exchange.

 

The Distribution Agreement provides that it may
be terminated at any time, without the payment of any penalty: (i) by a vote of a majority of the independent Trustees; (ii) by a vote
of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund; or (iii) on at least thirty (30) days’
prior written notice to the other party. The Distribution Agreement will terminate automatically in the event of its assignment (as defined
in the 1940 Act).

 

The Distributor also may enter into agreements
with securities dealers (“Soliciting Dealers”) who will solicit purchases of Creation Units of shares. Such Soliciting Dealers
also may be Authorized Participants (as defined below) or DTC Participants (as defined below).

 

Distribution Plan. The Fund has adopted
a Distribution Plan applicable to the Fund’s shares. Under the Distribution Plan, the Distributor, or designated service providers,
may receive up to 0.25% of the Fund’s assets attributable to shares as compensation for distribution services pursuant to Rule 12b-1
of the 1940 Act. Distribution services may include: (i) services in connection with distribution assistance, or (ii) payments to financial
institutions and other financial intermediaries, such as broker-dealers, fund “supermarkets” and the Distributor’s affiliates
and subsidiaries, as compensation for services or reimbursement of expenses incurred in connection with distribution assistance. The Distributor
may, at its discretion, retain a portion of such payments to compensate itself for distribution services and distribution related expenses
such as the costs of preparation, printing, mailing or otherwise disseminating sales literature, advertising, and prospectuses (other
than those furnished to current shareholders of the Fund), promotional and incentive programs, and such other marketing expenses that
the Distributor may incur. The plan is a compensation plan, which means that the Distributor is compensated regardless of its expenses,
as opposed to a reimbursement plan which reimburses only for expenses incurred.

 

 

No distribution fees are currently charged to
the Fund and there are currently no plans to impose these fees. The Plan was adopted in order to permit the implementation of the Fund’s
method of distribution. In the event that 12b-1 fees are charged in the future, because the Fund pays these fees out of assets on an ongoing
basis, over time these fees may cost you more than other types of sales charges and will increase the cost of your investment in the Fund.

 

The Plan will remain in effect for a period of
one year and is renewable from year to year with respect to the Fund, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Trustees and (2) by a vote of the majority of those Independent Trustees who have no direct or indirect
financial interest in the Plan (“Rule 12b-1 Trustees”). The Plan may not be amended to increase materially the amount of fees
that may be paid by the Fund under the Plan unless such amendment is approved by a 1940 Act majority vote of the outstanding shares and
by the Fund’s Trustees in the manner described above. The Plan is terminable with respect to the Fund at any time by a vote of a
majority of the Rule 12b-1 Trustees or by a 1940 Act majority vote of the outstanding shares.

 

Intermediary Compensation. Krane and/or
their affiliates, out of their own resources and not out of the Fund’s assets (i.e., without additional cost to the Fund
or its shareholders), may pay certain broker dealers, banks and other financial intermediaries (“Intermediaries”), to the
extent permitted by applicable law, for certain activities related to the Fund, including marketing and education support and the sale
of the Fund’s shares. These arrangements are sometimes referred to as “revenue sharing” arrangements. Revenue sharing
arrangements are not financed by the Fund and, thus, do not result in increased Fund expenses. They are not reflected in the fees and
expenses listed in the fees and expenses sections of the Fund’s Prospectus and they do not change the price paid by investors for
the purchase of the Fund’s shares or the amount received by a shareholder as proceeds from the redemption of shares of the Fund.

 

Such compensation may be paid to Intermediaries
that provide services to the Fund, including marketing and education support (such as through conferences, webinars and printed communications).
Such compensation may also be paid to Intermediaries for inclusion of the Fund on a sales list, including a preferred or select sales
list, in other sales programs. Krane periodically assesses the advisability of continuing to make these payments.

 

Payments to an Intermediary may be significant
to the Intermediary, and amounts that Intermediaries pay to your adviser, broker or other investment professional, if any, may also be
significant to such adviser, broker or investment professional. Because an Intermediary may make decisions about what investment options
it will make available or recommend, and what services to provide in connection with various products, based on payments it receives or
is eligible to receive, such payments create conflicts of interest between the Intermediary and its clients. For example, these financial
incentives may cause the Intermediary to recommend the Fund over other investments. The same conflict of interest exists with respect
to your financial adviser, broker or investment professionals if he or she receives similar payments from his or her Intermediary firm.

 

Intermediary information is current only as of
the date of this SAI. Please contact your adviser, broker or other investment professional for more information regarding any payments
his or her Intermediary firm may receive.

 

Any payments made by Krane and/or their affiliates
to an Intermediary may create an incentive for the Intermediary to encourage customers to buy shares of the Fund.

 

 

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

 

The Fund has not yet commenced operations as of the date of this SAI, and, therefore, there were no public shareholders of the Fund as
of that date. Krane will own the initial shares issued by the Fund and can thus approve any matter requiring shareholder approval.

 

EXCHANGE LISTING AND TRADING

 

A discussion of exchange listing and trading matters
associated with an investment in the Fund is contained in the Prospectus. The discussion below supplements, and should be read in conjunction
with, such sections of the Prospectus.

 

The shares of the Fund are listed and traded on the Exchange identified
on the cover of this SAI at prices that may differ from the Fund’s NAV. There can be no assurance that the Exchange requirements
necessary to maintain the listing of the shares of the Fund will continue to be met. The Exchange may, but is not required to, remove
the shares of the Fund from listing if, among other matters: (i) the Exchange becomes aware that the Fund is no longer eligible to operate
in reliance on Rule 6c-11 of the Investment Company Act; (ii) if the Fund no longer complies with the requirements set forth by the Exchange;
(iii) following the initial 12-month period after commencement of trading of the Fund, there are fewer than fifty (50) Beneficial Owners
(as that term is defined below) of the shares of the Fund; or (iv) such other event shall occur or condition exist that, in the opinion
of the Exchange, makes further dealings on the Exchange inadvisable. The Exchange will remove the shares of the Fund from listing and
trading upon termination of the Fund.

 

Trading prices of Shares on the Exchange may differ from the Fund’s
daily NAV. Market forces of supply and demand, economic conditions and other factors may affect the trading prices of Shares.

 

As in the case of other stocks traded on the Exchange,
broker’s commissions on purchases or sales of shares in market transactions will be based on negotiated commission rates at customary
levels.

 

The Trust reserves the right to adjust the price
levels of shares in the future to help maintain convenient trading ranges for investors. Any adjustments would be accomplished through
stock splits or reverse stock splits, which would have no effect on the net assets of the Fund.

 

BOOK ENTRY ONLY SYSTEM

 

The information below supplements and should be
read in conjunction with the section in the Prospectus entitled “Shareholder Information.”

 

The Depository Trust Company (“DTC”)
acts as securities depository for the Fund’s shares. Shares of the Fund are represented by securities registered in the name of
the DTC or its nominee, Cede & Co., and deposited with, or on behalf of, the DTC.

 

The DTC, a limited-purpose trust company, was
created to hold securities of its participants (“DTC Participants”) and to facilitate the clearance and settlement of securities
transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants,
thereby eliminating the need for physical movement of securities’ certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own
the DTC. More specifically, the DTC is owned by a number of its DTC Participants and by the Exchange, and FINRA. Access to the DTC system
is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship
with a DTC Participant, either directly or indirectly (the “Indirect Participants”).

 

 

Beneficial ownership of shares is limited to DTC
Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial
interests in shares (owners of such beneficial interests are referred to herein as “Beneficial Owners”) is shown on, and the
transfer of ownership is effected only through, records maintained by the DTC (with respect to DTC Participants) and on the records of
DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners will receive
from or through the DTC Participant a written confirmation relating to their purchase of shares. The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability of
certain investors to acquire beneficial interests in shares.

 

Conveyance of all notices, statements and other
communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the Trust and the DTC, the DTC
is required to make available to the Trust upon request and for a fee to be charged to the Trust a listing of the shares of the Fund held
by each DTC Participant. The Trust shall inquire of each such DTC Participant as to the number of Beneficial Owners holding shares, directly
or indirectly, through such DTC Participant. The Trust shall provide each such DTC Participant with copies of such notice, statement or
other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order that such notice,
statement or communication may be transmitted by such DTC Participant, directly or indirectly, to such Beneficial Owners. In addition,
the Trust shall pay to each such DTC Participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal,
all subject to applicable statutory and regulatory requirements.

 

Share distributions shall be made to the DTC or
its nominee, Cede & Co., as the registered holder of all shares. The DTC or its nominee, upon receipt of any such distributions, shall
credit immediately DTC Participants’ accounts with payments in amounts proportionate to their respective beneficial interests in
shares of the Fund as shown on the records of the DTC or its nominee. Payments by DTC Participants to Indirect Participants and Beneficial
Owners of shares held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered in a “street name,” and will be the responsibility
of such DTC Participants.

 

The Trust has no responsibility or liability for
any aspect of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in
such shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests, or for any other
aspect of the relationship between the DTC and DTC Participants or the relationship between such DTC Participants and the Indirect Participants
and Beneficial Owners owning through such DTC Participants.

 

The DTC may decide to discontinue providing its
service with respect to shares at any time by giving reasonable notice to the Trust and discharging its responsibilities with respect
thereto under applicable law. Under such circumstances, the Trust shall take action to find a replacement for the DTC to perform its functions
at a comparable cost.

 

 

BROKERAGE TRANSACTIONS

 

Krane or, as applicable, the Fund sub-adviser
assumes general supervision over placing orders on behalf of the Fund for the purchase and sale of portfolio securities.

 

Although Krane or, as applicable, the Fund sub-adviser
strives to obtain the best net price under prevailing circumstances surrounding each trade, the determinative factor is whether a transaction
represents the best overall execution for the Fund and not whether the lowest possible transaction cost is obtained. Krane and any sub-adviser
consider the full range and quality of a broker-dealer’s servicing in selecting the broker to meet best execution obligations, and
may not pay the lowest transaction cost available. Krane or the sub-adviser review trading to ensure best execution, operational performance,
and reasonable commission rates. Order flow may go through traditional broker-dealers, but may also be executed on an Electronic Communication
Network, Alternative Trading System or other execution system.

 

As discussed in the Prospectus and this SAI, Chinese
regulations and market practice limit the PRC Dealers and/or Brokers that may be available to trade with the Fund. Where multiple broker-dealers
are available to execute portfolio transactions, in selecting the brokers or dealers for any transaction in portfolio securities, Krane
or a sub-adviser’s policy is to make such selection based on factors deemed relevant, which may include the breadth of the market
in the security; the price of the security; the reasonableness of the commission or mark-up or mark-down, if any; execution capability;
settlement capability; back office efficiency; and the financial condition of the broker or dealer, both for the specific transaction
and on a continuing basis. The overall reasonableness of brokerage commissions paid or spreads is evaluated by Krane or a sub-adviser
generally based upon its knowledge of available information as to the general level of commissions paid or spreads by other institutional
investors for comparable services. Brokers or dealers may also be selected because of their ability to handle special or difficult executions,
such as may be involved in large block trades, less liquid securities, broad distributions, or other circumstances. Krane or a sub-adviser
may also consider the provision or value of research, products or services a broker or dealer may provide, if any, as a factor in the
selection of a broker or dealer or the determination of the reasonableness of commissions paid in connection with portfolio transactions.
. The Trust has adopted policies and procedures that prohibit the consideration of sales of the
Fund’s shares as a factor in the selection of a broker or a dealer to execute its portfolio transactions. 

 

When one or more broker-dealers is believed capable
of providing the best combination of price and execution, a broker-dealer need not be selected based solely on the lowest commission rate
available for a particular transaction. In such cases, Krane or a sub-adviser may pay a higher commission than otherwise obtainable from
other brokers in return for brokerage research services provided to Krane or a sub-adviser consistent with Section 28(e) of the Securities
Exchange Act of 1934 (the “Exchange Act”). Section 28(e) provides that Krane or a sub-adviser may cause the Fund to pay a
broker-dealer a commission for effecting a transaction in excess of the amount of commission another broker or dealer would have charged
as long as Krane or the sub-adviser makes a good faith determination that the amount of commission is reasonable in relation to the value
of the brokerage and research services provided by the broker-dealer. To the extent Krane or a sub-adviser obtains brokerage and research
services that it otherwise would acquire at its own expense, Krane or a sub-adviser may have incentive to place a greater volume of transactions
or pay higher commissions than would otherwise be the case.

 

The types of products and services that Krane
or the sub-adviser may obtain from broker-dealers through such arrangements may include research reports and other information on the
economy, industries, sectors, groups of securities, individual companies, statistical information, political developments, technical market
action, pricing and appraisal services, credit analysis, risk measurement analysis, performance and other analysis. Krane or a sub-adviser
may use products and services provided by brokers in servicing all of its client accounts and not all such products and services may necessarily
be used in connection with the account that paid commissions to the broker-dealer providing such products and services. Any advisory or
other fees paid to Krane or a sub-adviser are not reduced as a result of the receipt of brokerage and research services.

 

 

In some cases, Krane or a sub-adviser may receive
a product or service from a broker that has both a “research” and a “non-research” use. When this occurs, Krane
or the sub-adviser will make a good faith allocation between the research and non-research uses of the product or service. The percentage
of the service that is used for research purposes may be paid for with brokerage commissions, while Krane or the sub-adviser will use
its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, Krane
or the sub-adviser faces a potential conflict of interest, but Krane or the sub-adviser believes that its allocation procedures are reasonably
designed to appropriately allocate the anticipated use of such products and services to research and non-research uses.

 

The Trust has adopted policies and procedures
that prohibit the consideration of sales of the Fund’s shares as a factor in the selection of a broker or a dealer to execute its
portfolio transactions.

 

Brokerage transactions may be conducted through
“affiliated brokers or dealers,” as defined in rules under the 1940 Act. An affiliated broker-dealer will receive compensation
from the Fund in connection with the Fund’s portfolio investment transactions conducted through them. This arrangement may present
actual or perceived conflicts of interest, but the 1940 Act permits commissions to be paid by a fund to an “affiliated broker or
dealer” if such commissions do not exceed the usual and customary broker’s commission. Accordingly, the Fund has adopted compliance
policies and procedures to permits such trades so long as, among other matters, the commissions paid to an affiliated broker-dealer are,
in the judgment of the Krane or the subadviser (if applicable), reasonable and fair as compared to the commissions charged by other brokers
in connection with comparable transactions involving similar securities.

 

An affiliated broker-dealer may engage in proprietary
trading and advise accounts and funds that have investment objectives similar to those of the Fund and/or that engage in and compete for
transactions in the same types of securities, currencies and other instruments as the Fund. Such activities could affect the prices and
availability of the securities, currencies, and instruments in which the Fund invests, which could have an adverse impact on the Fund’s
performance. Such transactions for an affiliated broker-dealers other client accounts will be executed independently of the Fund’s
transactions and thus at prices or rates that may be more or less favorable than those obtained by the Fund. As a result, the affiliated
broker-dealer may compete with the Fund for appropriate investment opportunities.

 

Brokerage Commissions

 

Because the Fund had not commenced operations
as of the date of this SAI, the Fund did not pay any brokerage commissions during the three prior fiscal years.

 

Directed Brokerage

 

Because the Fund had not commenced operations
as of the date of this SAI, the Fund did not pay any brokerage commissions pursuant to an agreement or understanding whereby the broker
provides research or other brokerage services to Krane during the prior fiscal year.

 

Affiliated Brokers

 

Because the Fund had not commenced operations
as of the date of this SAI, the Fund did not pay any brokerage commissions to any affiliated brokers during the three prior fiscal years.

 

Regular Broker-Dealers

 

The Fund is required to identify any securities
of its “regular brokers and dealers” (as such term is defined in the 1940 Act) which the Fund may hold at the close of its
most recent fiscal year. “Regular brokers or dealers” of the Fund are the ten brokers or dealers that, during the most recent
fiscal year: (i) received the greatest dollar amounts of brokerage commissions from the Fund’s portfolio transactions; (ii) engaged
as principal in the largest dollar amounts of portfolio transactions of the Fund; or (iii) sold the largest dollar amounts of the Fund’s
shares.

 

Because the Fund had not commenced operations
as of the date of this SAI, the Fund did not own any securities of their “regular broker-dealers” as of that time.

 

 

Portfolio Turnover

 

Portfolio turnover may vary from year to year,
as well as within a year. High turnover rates are likely to result in comparatively greater brokerage expenses or dealer mark-ups and
other transaction costs. The overall reasonableness of brokerage commissions is evaluated by Krane or the sub-adviser based upon their
knowledge of available information as to the general level of commissions and spreads paid or incurred by the other institutional investors
for comparable services.

 

Because the Fund had not commenced operations
as of the date of this SAI, the Fund does not have portfolio turnover information for the prior fiscal year to report.

 

CREATION AND REDEMPTION OF CREATION
UNITS

 

Except as otherwise noted below, the following
applies to any Fund covered by this SAI:

 

General

 

The Trust issues and redeems shares of the Fund
only in Creation Units on a continuous basis through the Distributor, without a sales load but subject to the transaction fees described
below, at the NAV next determined after receipt, on any Business Day (as defined below), of an order in proper form. A “Business
Day”, as used herein, is any day on which the New York Stock Exchange (“NYSE”) is open for business. As of the date
of this SAI, the NYSE observes the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

 

Currently, the number of shares that constitutes
a Creation Unit is 50,000 shares. The Board reserves the right to declare a split or a consolidation in the number of shares outstanding
of the Fund, and to make changes in the number of shares constituting a Creation Unit, including in the event that the per share price
in the secondary market rises (or declines) to an amount that falls outside the range deemed desirable by the Board.

 

Creation Units may be purchased and redeemed only
by or through a DTC Participant that has entered into an Authorized Participant Agreement with the Distributor (an “Authorized Participant”).
Such Authorized Participant will agree, pursuant to the terms of such Authorized Participant Agreement and on behalf of itself or any
investor on whose behalf it will act, to certain conditions, including those set forth below, the Authorized Participant Agreement and
the handbook governing the Authorized Participants. Investors who are not Authorized Participants must make appropriate arrangements with
an Authorized Participant to purchase or redeem Creation Units. Investors should be aware that their particular broker may not be a DTC
Participant or may not have executed an Authorized Participant Agreement with the Distributor and that Creation Unit orders may have to
be placed by the investor’s broker through an Authorized Participant. As a result, orders placed through an Authorized Participant
may result in additional charges to such investor. A list of current Authorized Participants may be obtained from the Distributor.

 

Investors who are not Authorized Participants
may purchase and sell shares of the Fund on the secondary market.

 

Because the portfolio securities of the Fund may
trade on days that the Exchange is closed or are otherwise not Business Days for the Fund, shareholders may not be able to purchase or
redeem their shares of the Fund, or purchase or sell shares of the Fund on the Exchange, on days when the NAV of the Fund could be significantly
affected by events in the relevant non-U.S. markets.

 

 

Purchases of Creation Units

 

The consideration for the purchase of Creation
Units of the Fund consists of an in-kind deposit of a designated portfolio of securities (or cash for all or any portion of such securities
(“Deposit Cash”) (collectively, the “Deposit Securities”) and the Cash Component, which is an amount equal to
the difference between the aggregate NAV of a Creation Unit and the Deposit Securities. Together, the Deposit Securities and the Cash
Component constitute the “Fund Deposit.”

 

The Custodian or the Administrator makes available
through the National Securities Clearing Corporation (“NSCC”) on each Business Day, prior to the opening of regular trading
on the Exchange, the list of names and the required number of shares of each Deposit Security and Deposit Cash, as applicable, and the
estimated amount of the Cash Component to be included in the current Fund Deposit. Such Fund Deposit is applicable, subject to any adjustments
as described below, in order to effect purchases of Creation Units of the Fund until such time as the next-announced Fund Deposit is made
available. The means by which the Deposit Securities and Cash Component are to be delivered by the Authorized Participant to the Fund
are set forth in the Authorized Participant Agreement and the handbook governing the Authorized Participants, except to the extent the
Distributor and the Authorized Participant otherwise agree. Fund shares will be settled through the DTC system.

 

The identity and number of shares of the Deposit
Securities change pursuant to, among other matters, changes in the composition of the Fund’s portfolio and as rebalancing adjustments
and corporate action events are reflected from time to time.

 

The Trust reserves the right to permit or require
the substitution of an amount of cash to replace any Deposit Security: (i) if, on a given Business Day, the Fund announces before the
open of trading that all purchases on that day will be made entirely in cash; (ii) if, upon receiving a purchase order from an Authorized
Participant, the Fund determines to require the purchase to be made entirely in cash; (iii) if, on a given Business Day, the Fund requires
all Authorized Participants purchasing shares on that day to deposit cash in lieu of some or all of the Deposit Securities solely because:
(a) such instruments are not eligible for transfer through either the NSCC or DTC systems; or (b) such instruments are not eligible for
trading due to local trading restrictions, local restrictions on securities transfers or other similar circumstances; or (iv) if the Fund
permits an Authorized Participant to deposit cash in lieu of some or all of the Deposit Securities solely because: (a) such instruments
are not available in sufficient quantity; or (b) such instruments are not eligible for trading by an Authorized Participant or the investor
on whose behalf the Authorized Participant is acting (together, “custom orders”).

 

The Trust also reserves the right to include or
remove Deposit Securities from the Fund Deposit for one or more of the following reasons: (i) in the case of bonds, for minor differences
when it is impossible to break up bonds beyond certain minimum sizes needed for transfer and settlement; (ii) for minor differences when
rounding is necessary to eliminate fractional shares or lots that are not tradeable round lots; (iii) TBA Transactions, short positions
and other positions that cannot be transferred in-kind, including instruments that can be transferred in-kind only with the consent of
the original counterparty; (iv) to the extent the Fund determines, on a given Business Day, to use, if applicable, a representative sampling
of the Fund’s portfolio; or (v) for temporary periods, to effect changes in the Fund’s portfolio as a result of the rebalancing
of its underlying index, if any.

 

Cash purchases of Creation Units will be effected
in essentially the same manner as in-kind purchases. The Authorized Participant will pay the cash equivalent of the Deposit Securities
as Deposit Cash plus or minus the same Cash Component.

 

 

Krane or the sub-adviser, as applicable, on behalf
of the Fund, will convert subscriptions that are made in whole or in part in cash into the relevant foreign currency prior to investment
at the applicable exchange rate and subject to the applicable spread. Those purchasing Creation Units of the Fund bear the risk associated
with changes in the currency exchange rate between the time they place their order and the time that the Fund converts any cash received
into foreign investments.

 

Placement of Purchase Orders

 

To initiate an order for a Creation Unit, an Authorized
Participant must submit to the Distributor an irrevocable order in proper form to purchase shares of the Fund generally between 4:15 p.m.
and 5:00 p.m. Eastern Time. Authorized Participants may also submit to the Distributor an irrevocable order in proper form to purchase
shares of the Fund generally anytime on a Business Day, except from 4:00 p.m. to 4:15 Eastern Time, but orders submitted on a Business
Day before 4:00 p.m. Eastern Time will normally be charged the maximum transaction fees and Authorized Participants are encouraged to
submit orders generally between 4:15 p.m. and 5:00 p.m. Eastern Time. For a purchase order to be processed based on the NAV calculated
on a particular Business Day, the purchase order must be received in proper form and accepted by the Trust prior to the time as of which
the NAV is calculated (“Cutoff Time”). Investors who are not Authorized Participants and seek to place a purchase order for
a Creation Unit through an Authorized Participant should allow sufficient time to permit proper submission of the purchase order to the
Distributor by the Cutoff Time on such Business Day. Custom Orders must be received in proper form
and accepted by the Trust at least two hours prior to Cutoff Time.

 

The Authorized Participant Agreement and the handbook
governing the Authorized Participants set forth the different methods whereby Authorized Participants can submit purchase orders. A purchase
order is considered to be in “proper form” if a request in a form satisfactory to the Fund is (1) received by the Distributor
from an Authorized Participant on behalf of itself or another person within the time period set above, and (2) all the procedures and
other requirements applicable to the method used by the Authorized Participant to submit the purchase order, such as, in the case of purchase
orders submitted through the Distributor’s website, the completion of all required fields, and otherwise set forth in the Authorized
Participant Agreement and handbook governing the Authorized Participants are properly followed.

 

Creation Unit orders must be transmitted by an
Authorized Participant by telephone or other transmission method acceptable to the Distributor. Economic or market disruptions or changes,
or telephone or other communication failure, may impede transmissions between the Distributor and an Authorized Participant. Orders to
create shares of the Fund that are submitted on the Business Day immediately preceding a holiday or a day (other than a weekend) when
the securities markets in a foreign market in which the Fund may invest are closed may not be accepted or may be charged the maximum transaction
fee. The Distributor, in its discretion, may permit the submission of orders and requests by or through an Authorized Participant via
communication through the facilities of the Distributor’s proprietary website maintained for this purpose. A Purchase order, if
accepted by the Trust, will be processed based on the NAV as of the next Cutoff Time.

 

Acceptance of Orders for, and Issuance of,
Creation Units

 

All questions as to whether an order has been
submitted in proper form and the number of shares of each security in the Deposit Securities and the validity, form, eligibility and acceptance
for deposit of any securities to be delivered shall be determined by the Fund and the Fund’s determination shall be final and binding.

 

The Fund reserves the absolute right to reject
or revoke acceptance of a creation order, including if (i) the order is not in proper form; (ii) the investor(s), upon obtaining the shares
ordered, would own 80% or more of the currently outstanding shares of the Fund; (iii) the Deposit Securities delivered do not conform
to the identity and number of shares specified; (iv) acceptance of the Deposit Securities would have certain adverse tax consequences
to the Fund; (v) acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance of the Fund Deposit would,
in the discretion of the Fund or Krane, have an adverse effect on the Fund or the rights of Beneficial Owners; or (vii) circumstances
outside the control of the Fund, the Distributor and Krane make it impracticable to process purchase orders. The Distributor shall notify
a prospective purchaser of a Creation Unit and/or the Authorized Participant acting on behalf of such purchaser of the rejection or revocation
of acceptance of such order. The Fund, the Custodian, the sub-custodian and the Distributor are under no duty, however, to give notification
of any defects or irregularities in the delivery of Fund Deposits nor shall any of them incur any liability for failure to give such notification.

 

 

Except as provided in the following paragraph,
a Creation Unit will not be issued until the transfer of good title to the Fund of the Deposit Securities and the payment of the Cash
Component, Deposit Cash and creation transaction fees have been completed. In this regard, the Custodian will require, prior to the issuance
of a Creation Unit, that the sub-custodian confirm to the Custodian that the Deposit Securities have been delivered to the account of
the Fund at the sub-custodian(s). If the Fund does not receive the foregoing by the time specified herein the Creation Unit may not be
delivered or the purchase order may ultimately be rejected.

 

The Fund may issue Creation Units to an Authorized
Participant, notwithstanding the fact that all Deposit Securities have not been received, in reliance on the undertaking of the Authorized
Participant to deliver the missing Deposit Securities as soon as possible, which undertaking shall be secured by such Authorized Participant’s
delivery and maintenance of collateral having a value of up to 115% of the value of the missing Deposit Securities. The only collateral
that is acceptable is cash in U.S. dollars. Such cash collateral must be delivered no later than 2:00 p.m., Eastern Time on the contractual
settlement date of the Creation Unit(s). The Fund may buy the missing Deposit Securities at any time, and the Authorized Participant will
be liable for any shortfall between the cost to the Fund of purchasing such securities and the cash collateral. In addition, the cash
collateral may be invested at the risk of the Authorized Participant, and any income on invested cash collateral will be paid to that
Authorized Participant. Information concerning the Fund’s current procedures for collateralization of missing Deposit Securities
is available from the Distributor.

 

In certain cases, an Authorized Participant may
create and redeem Creation Units on the same trade date. In these instances, the Fund reserves the right to settle these transactions
on a net basis or require a representation from the Authorized Participant that the creation and redemption transactions are for separate
Beneficial Owners.

 

Once the Fund has accepted a purchase order, upon
the next determination of the NAV of the shares, the Fund may confirm the issuance of a Creation Unit, against receipt of payment, at
such NAV. The Distributor will then transmit a confirmation of acceptance to the Authorized Participant that placed the order. Creation
Units typically are settled on a “T+2 basis” (i.e., two Business Days after trade date), subject to certain exceptions. However,
the Fund reserves the right to settle Creation Unit transactions on a basis other than T+2, including in order to accommodate non-U.S.
market holiday schedules, closures and settlement cycles, and to account for different treatment among non-U.S. and U.S. markets of dividend
record dates and ex-dividend dates.

 

Creation Transaction Fees

 

A standard creation transaction fee is imposed
to offset transfer and other costs associated with the issuance of Creation Units. The standard creation transaction fee is charged to
the Authorized Participant on the day such Authorized Participant creates a Creation Unit, and is the same, regardless of the number of
Creation Units purchased by the Authorized Participant on the applicable Business Day.

 

The Authorized Participant may also be required
to pay a variable transaction fee (up to the maximum amount shown in the table below) to cover certain brokerage, tax, foreign exchange,
execution, market impact and other costs and expenses. Authorized Participants will also bear the costs of transferring the Deposit Securities,
including any stamp duty or other similar fees and expenses. Investors who use the services of a broker or other financial intermediary
may be charged a fee for such services.

 

 

The standard creation transaction fee and maximum
variable transaction fee for a Creation Unit are set forth below:

 

FUND

STANDARD
TRANSACTION
FEE
MAXIMUM
VARIABLE
TRANSACTION
FEE*
KraneShares China Innovation ETF $[100] [2.00%]

* As a percentage of the Creation Unit(s) purchased.

 

The Adviser may adjust the transactions fees from
time to time based on actual experience.

 

Redemptions of Creation Units

 

The consideration paid by the Fund for the redemption
of Creation Units consists of an in-kind basket of a designated portfolio of securities (or cash for all or any portion of such securities
(“Redemption Cash”)) (collectively, the “Fund Securities”) and the Cash Component, which is an amount equal to
the difference between the aggregate NAV of a Creation Unit and the Fund Securities. Together, the Fund Securities and the Cash Component
constitute the “Fund Redemption.”

 

The Custodian or the Administrator makes available
through NSCC on each Business Day, prior to the opening of regular trading on the Exchange, the list of names and the number of shares
of each Fund Security and Redemption Cash, as applicable, and the estimated amount of the Cash Component to be included in the current
Fund Redemption. Such Fund Redemption is applicable, subject to any adjustments as described below, for redemptions of Creation Units
of the Fund until such time as the next-announced Fund Redemption is made available. The delivery of Fund shares will be settled through
the DTC system. The means by which the Fund Securities and Cash Component are to be delivered to the Authorized Participant by the Fund
are set forth in the Authorized Participant Agreement and the handbook governing the Authorized Participants, except to the extent the
Distributor and the Authorized Participant otherwise agree.

 

The identity and number of shares of the Fund
Securities change pursuant to, among other matters, changes in the composition of the Fund’s portfolio and as rebalancing adjustments
and corporate action events are reflected from time to time.

 

The Trust reserves the right to permit or require
the substitution of an amount of cash to replace any Redemption Security: (i) if, on a given Business Day, the Fund announces before the
open of trading that all redemptions on that day will be made entirely in cash; (ii) if, upon receiving a redemption order from an Authorized
Participant, the Fund determines to require the redemption to be made entirely in cash; (iii) if, on a given Business Day, the Fund requires
all Authorized Participants redeeming shares on that day to receive cash in lieu of some or all of the Fund Securities solely because:
(a) such instruments are not eligible for transfer through either the NSCC or DTC systems; or (b) such instruments are not eligible for
trading due to local trading restrictions, local restrictions on securities transfers or other similar circumstances; or (iv) if the Fund
permits an Authorized Participant to receive cash in lieu of some or all of the Fund Securities solely because: (a) such instruments are
not eligible for trading by an Authorized Participant or the redeemer on whose behalf the Authorized Participant is acting; or (b) a shareholder
would be subject to unfavorable income tax treatment if the shareholder receives redemption proceeds in kind (together, “custom
orders”).

 

 

The Trust also reserves the right to include or
remove Fund Securities from the Fund Redemption for one or more of the following reasons: (i) in the case of bonds, for minor differences
when it is impossible to break up bonds beyond certain minimum sizes needed for transfer and settlement; (ii) for minor differences when
rounding is necessary to eliminate fractional shares or lots that are not tradeable round lots; (iii) TBA Transactions, short positions
and other positions that cannot be transferred in-kind, including instruments that can be transferred in-kind only with the consent of
the original counterparty; (iv) to the extent the Fund determines, on a given Business Day, to use, if applicable, a representative sampling
of the Fund’s portfolio; or (v) for temporary periods, to effect changes in the Fund’s portfolio as a result of the rebalancing
of its underlying index, if any.

 

Cash redemptions of Creation Units will be effected
in essentially the same manner as in-kind redemptions. The Authorized Participant will receive the cash equivalent of the Fund Securities
as Redemption Cash plus or minus the same Cash Component.

 

Krane or the sub-adviser, as applicable, on behalf
of the Fund, will sell investments denominated in foreign currencies and convert such proceeds into U.S. Dollars at the applicable exchange
rate and subject to the applicable spread for redemptions that are made in whole or in part for cash. Those redeeming Creation Units of
the Fund bear the risk associated with changes in the currency exchange rate between the time they place their order and the time that
the Fund converts any investments into U.S. Dollars.

 

Placement of Redemption Orders

 

To initiate a redemption order for a Creation
Unit, an Authorized Participant must submit to the Distributor an irrevocable order in proper form to redeem shares of the Fund generally
between 4:15 p.m. and 5:00 p.m. Eastern Time. Authorized Participants may also submit to the Distributor an irrevocable order in proper
form to redeem shares of the Fund generally anytime on a Business Day, except from 4:00 p.m. to 4:15 Eastern Time, but orders submitted
on a Business Day before 4:00 p.m. Eastern Time will normally be charged the maximum transaction fees and Authorized Participants are
encouraged to submit orders generally between 4:15 p.m. and 5:00 p.m. Eastern Time. For a redemption order to be processed based on the
NAV calculated on a particular Business Day, the order must be received in proper form and accepted by the Trust prior to the time as
of which the NAV is calculated (“Cutoff Time”). Investors who are not Authorized Participants and seek to place a redemption
order for a Creation Unit through an Authorized Participant should allow sufficient time to permit proper submission of the redemption
order to the Distributor by the Cutoff Time on such Business Day.

 

The Authorized Participant Agreement and the handbook
governing the Authorized Participants set forth the different methods whereby Authorized Participants can submit redemption orders. A
redemption request is considered to be in “proper form” if a request in a form satisfactory to the Fund is (1) received by
the Distributor from an Authorized Participant on behalf of itself or another person within the time period set above, and (2) all the
procedures and other requirements applicable to the method used by the Authorized Participant to submit the redemption order, such as,
in the case of redemption orders submitted through the Distributor’s website, the completion of all required fields, and otherwise
set forth in the Authorized Participant Agreement and handbook governing the Authorized Participants are properly followed.

 

Creation Unit orders must be transmitted by an
Authorized Participant by telephone or other transmission method acceptable to the Distributor. Economic or market disruptions or changes,
or telephone or other communication failure, may impede transmissions between the Distributor and an Authorized Participant. Orders to
redeem shares of the Fund that are submitted on the Business Day immediately preceding a holiday or a day (other than a weekend) when
the securities markets in a foreign market in which the Fund may invest are closed may be charged the maximum transaction fee. The Distributor,
in its discretion, may permit the submission of orders and requests by or through an Authorized Participant via communication through
the facilities of the Distributor’s proprietary website maintained for this purpose. A redemption request, if accepted by the Trust,
will be processed based on the NAV as of the next Cutoff Time.

 

 

Acceptance of Orders for, and Redemption
of, Creation Units

 

All questions as to whether an order has been
submitted in proper form and the requisite number of Fund shares and transaction fees have been delivered shall be determined by the Fund
and the Fund’s determination shall be final and binding.

 

The Fund reserves the absolute right to reject
a redemption order if the order is not in proper form. In addition, the right of redemption may be suspended or the date of payment postponed
with respect to the Fund (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings), (ii)
for any period during which trading on the NYSE is suspended or restricted, (iii) for any period during which an emergency exists as a
result of which disposal of the shares of the Fund’s portfolio securities or determination of its NAV is not reasonably practicable;
or (iv) in such other circumstance as is permitted by the SEC. The Fund or Distributor will notify the Authorized Participant of such
rejection, but the Fund, Custodian, sub-custodian and Distributor shall not be liable for any failure to give such notification.

 

The payment by the Fund of the Fund Securities,
Redemption Cash, and Cash Component will not be issued until the transfer of the Creation Unit(s) and the applicable redemption transaction
fees has been completed. If the Transfer Agent does not receive the investor’s shares through DTC’s facilities and the applicable
redemption transaction fees by the required time, the redemption request may be rejected. Further, a redeeming Beneficial Owner or Authorized
Participant acting on behalf of such Beneficial Owner must maintain appropriate security arrangements with a qualified broker-dealer,
bank or other custody providers in each jurisdiction where Fund Securities are customarily traded and will be delivered. If neither the
redeeming Beneficial Owner nor the Authorized Participant acting on behalf of such redeeming Beneficial Owner has appropriate arrangements
to take delivery of Fund Securities in the applicable non-U.S. jurisdiction and it is not possible to make other such arrangements, or
if it is not possible to effect deliveries of Fund Securities in such jurisdiction, the Trust may redeem shares in Redemption Cash, and
the redeeming Beneficial Owner will be required to receive its redemption proceeds as Redemption Cash.

 

Redemptions of shares for Fund Securities will
be subject to compliance with applicable U.S. federal and state securities laws and the Fund (whether or not it otherwise permits cash
redemptions) reserves the right to redeem Creation Units for cash to the extent that the Fund cannot lawfully deliver specific Fund Securities
upon redemptions or cannot do so without first registering the Fund Security under such laws.

 

Once the Fund has accepted a redemption order,
upon the next determination of the NAV of the shares, the Fund may confirm the redemption of a Creation Unit, against receipt of payment,
at such NAV. The Distributor will then transmit a confirmation of acceptance to the Authorized Participant that placed the order. Deliveries
of redemption proceeds by the Fund typically are settled on a “T+2”basis” (i.e., two Business Days after trade date),
but may be made up to seven days later, particularly in stressed market conditions, except as further set forth herein. The Fund reserves
the right to settle redemption transactions on another basis to accommodate non-U.S. market holiday schedules (see below for further information),
closures and settlement cycles, to account for different treatment among non-U.S. and U.S. markets of dividend record dates and dividend
ex-dates (i.e., the last date the holder of a security can sell the security and still receive dividends payable on the security sold),
and in certain other circumstances. The Regular Holidays section hereto identifies the expected instances, if any, where more than seven
days would be needed to deliver redemption proceeds consisting of Fund Securities. Pursuant to an order of the SEC, the Trust will make
delivery of redemption proceeds within the number of days stated in the Regular Holidays section to be the maximum number of days necessary
to deliver redemption proceeds due to foreign holidays.

 

In certain cases, an Authorized Participant may
create and redeem Creation Units on the same trade date. In these instances, the Fund reserves the right to settle these transactions
on a net basis or require a representation from the Authorized Participant that the creation and redemption transactions are for separate
Beneficial Owners.

 

 

Redemption Transaction Fees

 

A standard redemption transaction fee is imposed
to offset transfer and other costs associated with the redemption of Creation Units. The standard redemption transaction fee is charged
to the Authorized Participant on the day such Authorized Participant redeems a Creation Unit, and is the same regardless of the number
of Creation Units redeemed by an Authorized Participant on the applicable Business Day.

 

The Authorized Participant may also be required
to pay a variable transaction fee (up to the maximum amount shown in the table below) to cover certain brokerage, tax, foreign exchange,
execution, market impact and other costs and expenses. Authorized Participants will also bear the costs of transferring the Fund Securities,
including any stamp duty or other similar fees and expenses. Investors who use the services of a broker or other financial intermediary
may be charged a fee for such services.

 

The standard redemption transaction fee and maximum
variable transaction fee for a Creation Unit are set forth below:

 

FUND

STANDARD

TRANSACTION

FEE

MAXIMUM
VARIABLE
TRANSACTION
FEE*
KraneShares China Innovation ETF $[100] [2.00%]

* As a percentage of the Creation Unit(s) redeemed.

 

The Adviser may adjust the transactions fees from
time to time based on actual experience.

 

Taxation on Creation and Redemptions of
Creation Units

An Authorized Participant generally will recognize
either gain or loss upon the exchange of Deposit Securities for Creation Units. This gain or loss will generally equal the difference
between (i) the sum of the market value of the Creation Units at the time of the exchange and any net amount of cash received by the Authorized
Participant in the exchange and (ii) the sum of the Authorized Participant’s aggregate basis in the Deposit Securities exchanged
therefor and any net amount of cash paid for the Creation Units. However, the U.S. Internal Revenue Service may apply the wash sales rules
to determine that any loss realized upon the exchange of Deposit Securities for Creation Units is not currently deductible. Authorized
Participants should consult their own tax advisers.

 

Current U.S. federal tax laws dictate that capital
gain or loss realized from the redemption of Creation Units will generally create long-term capital gain or loss if the Authorized Participant
holds the Creation Units for more than one year, or short-term capital gain or loss if the Creation Units were held for one year or less,
if the Creation Units are held as capital assets.

 

Regular Holidays

For every occurrence of one or more intervening holidays in the applicable
non-U.S. market that are not holidays observed in the U.S. equity market, the redemption settlement cycle will be extended by the number
of such intervening holidays. In addition to holidays, other unforeseeable closings in a non-U.S. market due to emergencies may also prevent
the Trust from delivering securities within normal settlement period. The securities delivery cycles currently practicable for transferring
portfolio securities to redeeming investors, coupled with non-U.S. market holiday schedules, will require a delivery process longer than
seven calendar days, in certain circumstances, but in no event longer than fourteen calendar days.  

 

The right of redemption may also be suspended
or the date of payment postponed (1) for any period during which the relevant Exchange is closed (other than customary weekend and holiday
closings); (2) for any period during which trading on the relevant Exchange is suspended or restricted; (3) for any period during which
an emergency exists as a result of which disposal of the Shares of the Fund or determination of its NAV is not reasonably practicable;
or (4) in such other circumstance as is permitted by the SEC.

 

 

TAXES

 

The following discussion of certain U.S. federal
income tax consequences of investing in the Fund is based on the Code, U.S. Treasury regulations, and other applicable authority, all
as in effect as of the date of the filing of this SAI. These authorities are subject to change by legislative or administrative action,
possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal income tax considerations
generally applicable to investments in the Fund. There may be other tax considerations applicable to particular shareholders. Shareholders
should consult their own tax advisers regarding their particular situation and the possible application of foreign, state, and local tax
laws.

 

Qualification as a RIC

The Fund has elected or intends to elect to be
treated, and intends to qualify each year, as a regulated investment company (a “RIC”) under Subchapter M of the Internal
Revenue Code. In order to qualify for the special tax treatment accorded RICs and their shareholders, the Fund must, among other things:

 

(a) derive at least 90% of its gross income each
year from (i) dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock or securities
or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect
to its business of investing in such stock, securities or currencies, and (ii) net income derived from interests in “qualified publicly
traded partnerships” (as defined below);

 

(b) diversify its holdings so that, at the end
of each quarter of its taxable year, (i) at least 50% of the market value of the Fund’s total assets consists of cash and cash items,
U.S. government securities, securities of other RICs and other securities, with investments in such other securities limited with respect
to any one issuer to an amount not greater than 5% of the value of the Fund’s total assets and not greater than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of the Fund’s total assets is invested in (1) the securities
(other than those of the U.S. government or other RICs) of any one issuer or two or more issuers that are controlled by the Fund and that
are engaged in the same, similar or related trades or businesses or (2) the securities of one or more qualified publicly traded partnerships;
and

 

(c) distribute with respect to each taxable year
at least the sum of 90% of its investment company taxable income (as that term is defined in the Code without regard to the deduction
for dividends paid – generally taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term
capital losses) and 90% of its net tax-exempt interest income.

 

In general, for purposes of the 90% of gross income
requirement described in (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income
is attributable to items of income of the partnership that would be qualifying income if realized directly by the Fund. However, 100%
of the net income derived from an interest in a “qualified publicly traded partnership” (generally, a partnership (i) interests
in which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof,
(ii) that derives at least 90% of its income from the passive income sources specified in Code section 7704(d), and (iii) that derives
less than 90% of its income from the qualifying income described in (a)(i) of the prior paragraph) will be treated as qualifying income.
In addition, although in general the passive loss rules of the Code do not apply to RICs, such rules do apply to a RIC with respect to
items attributable to an interest in a qualified publicly traded partnership.

 

 

The U.S. Treasury Department has authority to
issue regulations that would exclude foreign currency gains from the 90% test described in (a) above if such gains are not directly related
to a fund’s business of investing in stock or securities. Accordingly, regulations may be issued in the future that could treat
some or all of the Fund’s non-U.S. currency gains as non-qualifying income, thereby potentially jeopardizing the Fund’s status
as a RIC for all years to which the regulations are applicable.

 

Taxation of the Fund

If the Fund qualifies as a RIC, the Fund will
not be subject to federal income tax on income and gains that are distributed in a timely manner to its shareholders in the form of dividends.

 

If the Fund fails to satisfy the qualifying income
test in any taxable year or the diversification requirements for any quarter, the Fund may be eligible for relief provisions if the failures
are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable
requirements. If these relief provisions are not available to the Fund for any year in which it fails to qualify as a RIC, all of its
taxable income will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and its distributions
(including capital gains distributions) generally will be taxable as ordinary income dividends to its shareholders, subject to the dividends
received deduction for corporate shareholders and lower tax rates on qualified dividend income for individual shareholders. In addition,
the Fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before
requalifying as a RIC that is accorded special tax treatment.

 

The Fund intends to distribute at least annually
to its shareholders substantially all of its taxable income and its net capital gains. Taxable income that is retained by the Fund will
be subject to tax at regular corporate rates. If the Fund retains any net capital gain, that gain will be subject to tax at corporate
rates, but the Fund may designate the retained amount as undistributed capital gains in a notice to its shareholders who (i) will be required
to include in income for federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) will
be entitled to credit their proportionate shares of the tax paid by the Fund on such undistributed amount against their federal income
tax liabilities, if any, and to claim refunds on a properly filed U.S. tax return to the extent the credit exceeds such liabilities. For
federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will be increased by an amount equal to the difference
between the amount of undistributed capital gains included in the shareholder’s gross income and the tax deemed paid by the shareholder
under clause (ii) of the preceding sentence. 

 

Deferral of Late Year Losses

The Fund may elect to treat part or all of any
“qualified late year loss” as if it had been incurred in the succeeding taxable year in determining the Fund’s taxable
income, net capital gain, net short-term capital gain, and earnings and profits. The effect of this election is to treat any such “qualified
late year loss” as if it had been incurred in the succeeding taxable year in characterizing the Fund’s distributions for any
calendar year. A “qualified late year loss” generally includes net capital loss, net long-term capital loss, or net short-term
capital loss incurred after October 31 of the current taxable year (commonly referred to as “post-October losses”) and certain
other late-year losses. 

 

Capital Loss Carryovers

If the Fund has a “net capital loss” (that is, capital
losses in excess of capital gains), the excess (if any) of the Fund’s net short-term capital losses over its net long-term capital
gains is treated as a short-term capital loss arising on the first day of the Fund’s next taxable year, and the excess (if any)
of the Fund’s net long-term capital losses over its net short-term capital gains is treated as a long-term capital loss arising
on the first day of the Fund’s next taxable year. Such capital loss carryover can be used to offset capital gains of the Fund in
succeeding taxable years. The carryover of capital losses may be limited under the general loss limitation rules if the Fund experiences
an ownership change as defined in the Code.

 

 

Excise Tax

If the Fund fails to distribute in a calendar
year an amount at least equal to the sum of 98% of its ordinary income for such year and 98.2% of its capital gain net income for the
one-year period ending October 31 of such year, plus any retained amount from the prior year, the Fund will be subject to a nondeductible
4% excise tax on the undistributed amount. For these purposes, the Fund will be treated as having distributed any amount on which it has
been subject to corporate income tax for the taxable year ending within the calendar year. A dividend paid to shareholders in January
of a year generally is deemed to have been paid by the Fund on December 31 of the preceding year if the dividend was declared and payable
to shareholders of record on a date in October, November, or December of that preceding year. The Fund intends to declare and pay dividends
and distributions in the amounts and at the times necessary to avoid the application of the 4% excise tax, although there can be no assurance
that it will be able to do so.

 

Fund Distributions

Distributions are taxable whether shareholders
receive them in cash or reinvest them in additional shares. Moreover, distributions are generally subject to federal income tax as described
herein to the extent they do not exceed the Fund’s realized income and gains, even though such dividends and distributions may economically
represent a return of a particular shareholder’s investment. Such distributions are likely to occur in respect of shares purchased
at a time when the Fund’s NAV reflects gains that are either unrealized, or realized but not distributed. Such realized gains may
be required to be distributed even when the Fund’s NAV also reflects unrealized losses.

 

Distributions by the Fund of investment income
are generally taxable as ordinary income. Taxes on distributions of capital gains are determined by how long the Fund owned the investments
that generated those gains, rather than how long a shareholder has owned his or her Fund shares. Distributions of net capital gains from
the sale of investments that the Fund owned for more than one year and that are properly designated by the Fund as capital gain dividends
(“Capital Gain Dividends”) will be taxable as long-term capital gains. Distributions from capital gains are generally made
after applying any available capital loss carryovers. Preferential long-term capital gain rates apply to individuals at a maximum rate
of 20% for individuals with taxable income exceeding certain thresholds. Such preferential rates also apply to qualified dividend income
if certain holding period requirements are met. Distributions of gains from the sale of investments that the Fund owned for one year or
less will be taxable as ordinary income. Qualified dividend income is, in general, dividend income from taxable domestic corporations
and certain foreign corporations (i.e., foreign corporations incorporated in a possession of the United States or in certain countries
with a comprehensive tax treaty with the United States, which includes China (but not Hong Kong which is treated as a separate jurisdiction),
or the stock of which is readily tradable on an established securities market in the United States). In order for some portion of the
dividends received by the Fund’s shareholders to be qualified dividend income, the Fund must meet holding period and other requirements
with respect to the dividend paying stocks in its portfolio, and the shareholder must meet holding period and other requirements with
respect to the Fund’s shares.

 

Some portion of the dividends paid by the Fund
may be eligible for qualified dividend income treatment.

 

Given the Fund’s investment objective, it
is not expected that Fund distributions will be eligible for the corporate dividends received deduction on Fund distributions attributable
to dividends received.

 

For U.S. individuals with income exceeding $200,000
($250,000 if married and filing jointly), a 3.8% Medicare contribution tax will apply on all or a portion of their “net investment
income,” including interest, dividends, and capital gains, which generally includes taxable distributions received from the Fund.
This 3.8% tax also applies to all or a portion of the undistributed net investment income of certain shareholders that are estates and
trusts.

 

 

If the Fund makes distributions to a shareholder
in excess of the Fund’s current and accumulated earnings and profits in any taxable year, the excess distribution will be treated
as a return of capital to the extent of the shareholder’s tax basis in its shares, and thereafter as capital gain. A return of capital
is not taxable, but reduces a shareholder’s tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent
taxable disposition by the shareholder of its shares. 

 

Investors considering buying shares just prior
to a dividend or capital gain distribution should be aware that, although the price of shares purchased at that time may reflect the amount
of the forthcoming distribution, such dividend or distribution may nevertheless be taxable to them. If the Fund is the holder of record
of any security on the record date for any dividends payable with respect to such security, such dividends will be included in the Fund’s
gross income not as of the date received but as of the later of (a) the date such security became ex-dividend with respect to such dividends
(i.e., the date on which a buyer of the security would not be entitled to receive the declared, but unpaid, dividends); or (b)
the date the Fund acquired such security. Accordingly, in order to satisfy its income distribution requirements, the Fund may be required
to pay dividends based on anticipated earnings, and shareholders may receive dividends in an earlier year than would otherwise be the
case.

 

Sale or Exchange of Shares

A sale or exchange of shares in the Fund may give
rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital
gain or loss if the shares have been held for more than 12 months. Otherwise, the gain or loss on the taxable disposition of shares will
be treated as short-term capital gain or loss. However, any loss realized upon a taxable disposition of shares held for six months or
less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received (or deemed
received) by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of shares will
be disallowed if shares of the same Fund are purchased within 30 days before or after the disposition. In such a case, the basis of the
newly purchased shares will be adjusted to reflect the disallowed loss.

 

As noted above, for U.S. individuals with income
exceeding $200,000 ($250,000 if married and filing jointly), a 3.8% Medicare contribution tax will apply on “net investment income,”
including interest, dividends, and capital gains, which generally includes taxable distributions received from the Fund and taxable gains
on the disposition of shares of the Fund.

 

Backup Withholding

The Fund (or a financial intermediary, such as
a broker, through which a shareholder holds Fund shares) generally is required to withhold and to remit to the U.S. Treasury a percentage
of the taxable distributions and sale or redemption proceeds paid to any shareholder who fails to properly furnish a correct taxpayer
identification number, who has under-reported dividend or interest income, or who fails to certify that he, she or it is not subject to
such withholding. The backup withholding tax rate is currently 24%.

 

Federal Tax Treatment of Certain Fund Investments

Transactions of the Fund in options, futures contracts,
hedging transactions, forward contracts, swap contracts, straddles and foreign currencies may be subject to various special and complex
tax rules, including mark-to-market, constructive sale, straddle, wash sale and short sale rules. These rules could affect whether gains
and losses recognized by the Fund are treated as ordinary income or capital gain, accelerate the recognition of income to the Fund and/or
defer the Fund’s ability to recognize losses. These rules may in turn affect the amount, timing or character of the income distributed
to shareholders by the Fund.

 

The Fund is required, for federal income tax purposes,
to mark to market and recognize as income for each taxable year its net unrealized gains and losses as of the end of such year on certain
regulated futures contracts, foreign currency contracts and options that qualify as Section 1256 contracts in addition to the gains and
losses actually realized with respect to such contracts during the year. Except as described below under “Certain Foreign Currency
Tax Issues,” gain or loss from Section 1256 contracts that are required to be marked to market annually will generally be 60% long-term
and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders.

 

 

Some debt obligations that are acquired by the
Fund may be treated as having original issue discount (“OID”). Generally, the Fund will be required to include OID in taxable
income over the term of the debt security, even though payment of the OID is not received until a later time, usually when the debt security
matures. If the Fund holds such debt instruments, it may be required to pay out as distributions each year an amount that is greater than
the total amount of cash interest the Fund actually received. Such distributions may be made from the cash assets of the Fund or by liquidation
of portfolio securities, if necessary. The Fund may realize gains or losses from such liquidations. In the event the Fund realizes net
gains from such transactions, its shareholders may receive larger distributions than they would have in the absence of such transactions.

 

Any market discount recognized on a bond is taxable
as ordinary income. A market discount bond is a bond acquired in the secondary market at a price below redemption value or adjusted issue
price if issued with original issue discount. Absent an election by the Fund to include the market discount in income as it accrues, gains
on the Fund’s disposition of such an obligation will be treated as ordinary income rather than capital gain to the extent of the
accrued market discount.

 

Certain Foreign Currency Tax Issues

The Fund’s gain or loss on foreign currency
denominated debt securities and on certain other financial instruments, such as forward currency contracts and currency swaps, that is
attributable to fluctuations in exchange rates occurring between the date of acquisition and the date of settlement or disposition of
such securities or instruments generally will be treated under Section 988 of the Code as ordinary income or loss. The Fund may elect
out of the application of Section 988 of the Code with respect to the tax treatment of each of its foreign currency forward contracts
to the extent that (i) such contract is a capital asset in the hands of the Fund and is not part of a straddle transaction and (ii) the
Fund makes an election by the close of the day the contract is entered into to treat the gain or loss attributable to such contract as
capital gain or loss.

 

The Fund’s forward contracts may qualify
as Section 1256 contracts if the underlying currencies are currencies for which there are futures contracts that are traded on and subject
to the rules of a qualified board or exchange. However, a forward currency contract that is a Section 1256 contract would, absent an election
out of Section 988 of the Code as described in the preceding paragraph, be subject to Section 988. Accordingly, although such a forward
currency contract would be marked to market annually like other Section 1256 contracts, the resulting gain or loss would be ordinary.
If the Fund were to elect out of Section 988 with respect to forward currency contracts that qualify as Section 1256 contracts, the tax
treatment generally applicable to Section 1256 contracts would apply to those forward currency contracts: that is, the contracts would
be marked to market annually and gains and losses with respect to the contracts would be treated as long-term capital gains or losses
to the extent of 60% thereof and short-term capital gains or losses to the extent of 40% thereof. If the Fund were to elect out of Section
988 with respect to any of its forward currency contracts that do not qualify as Section 1256 contracts, such contracts will not be marked
to market annually and the Fund will recognize short-term or long-term capital gain or loss depending on the Fund’s holding period
therein. The Fund may elect out of Section 988 with respect to some, all or none of its forward currency contracts.

 

Finally, regulated futures contracts and non-equity
options that qualify as Section 1256 contracts and are entered into by the Fund with respect to foreign currencies or foreign currency
denominated debt instruments will be subject to the tax treatment generally applicable to Section 1256 contracts unless the Fund elects
to have Section 988 apply to determine the character of gains and losses from all such regulated futures contracts and non-equity options
held or later acquired by the Fund.

 

 

Foreign Investments

Income received by the Fund from sources within
foreign countries (including, for example, interest on securities of non-U.S. issuers) may be subject to withholding and other taxes imposed
by such countries. Tax treaties between such countries and the U.S. may reduce or eliminate such taxes. If as of the end of the Fund’s
taxable year more than 50% of the Fund’s assets consist of foreign securities, the Fund is expected to make an election to permit
shareholders to claim a credit or deduction on their income tax returns for their pro rata portions of qualified taxes paid by the Fund
during that taxable year to foreign countries in respect of foreign securities that the Fund has held for at least the minimum period
specified in the Code. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes.
A shareholder’s ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the Fund may be subject to
certain limitations imposed by the Code, which may result in the shareholder not getting a full credit or deduction for the amount of
such taxes. Because a foreign tax credit is only available for foreign taxes paid by the Fund, no such credit may be available for a reduction
in the Fund’s net asset value to reflect a reserve (if any) for Chinese withholding taxes. Shareholders who do not itemize on their federal
income tax returns may claim a credit, but not a deduction, for such foreign taxes.

 

Passive Foreign Investment Companies

If the Fund purchases shares in a PFIC, it may
be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares
even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature of interest
may be imposed on the Fund in respect of deferred taxes arising from such distributions or gains. If the Fund were to invest in a PFIC
and elect to treat the PFIC as a “qualified electing fund” under the Code, in lieu of the foregoing requirements, the Fund
would be required to include in income each year a portion of the ordinary earnings and net capital gains of the qualified electing fund,
even if not distributed to the Fund, and such amounts would be subject to the 90% and excise tax distribution requirements described above.
In order to make this election, the Fund would be required to obtain certain annual information from the PFICs in which it invests, which
may be difficult or impossible to obtain. Alternatively, the Fund may make a mark-to-market election that would result in the Fund being
treated as if it had sold and repurchased its PFIC stock at the end of each year. In such case, the Fund would report any such gains as
ordinary income and would deduct any such losses as ordinary losses to the extent of previously recognized gains. The election must be
made separately for each PFIC owned by the Fund and, once made, would be effective for all subsequent taxable years, unless revoked with
the consent of the IRS. By making the election, the Fund could potentially ameliorate the adverse tax consequences with respect to its
ownership of shares in a PFIC, but in any particular year may be required to recognize income in excess of the distributions it receives
from the PFIC and its proceeds from dispositions of PFIC stock. The Fund may have to distribute this “phantom” income and
gain to satisfy the 90% distribution requirement and to avoid imposition of the 4% excise tax. The Fund will make the appropriate tax
elections, if possible, and take any additional steps that are necessary to mitigate the effects of these rules.

 

Tax-Exempt Shareholders

Under current law, income of a RIC that would
be treated as unrelated business taxable income (“UBTI”) if earned directly by a tax-exempt entity generally will not be attributed
as UBTI to a tax-exempt entity that is a shareholder in the RIC. Notwithstanding this “blocking” effect, a tax-exempt shareholder
could realize UBTI by virtue of its investment in the Fund if shares in the Fund constitute debt-financed property in the hands of the
tax-exempt shareholder within the meaning of Code Section 514(b).

 

Non-U.S. Shareholders

In general, dividends other than Capital Gain
Dividends paid by the Fund to a shareholder that is not a “U.S. person” within the meaning of the Code (a “foreign person”)
are subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate) even if they are funded by income
or gains (such as foreign-source dividend and interest income) that, if paid to a foreign person directly, would not be subject to withholding.
If the Fund were to recognize short-term capital gains or U.S.-source portfolio interest, properly reported short-term capital gain dividends
and interest-related dividends paid by the Fund would not be subject to such withholding tax.

 

 

A beneficial holder of shares who is a non-U.S.
person is not, in general, subject to U.S. federal income tax on gains (and is not allowed a U.S. income tax deduction for losses) realized
on a sale of shares of the Fund or on Capital Gain Dividends or short-term capital gain dividends unless (i) such gain or dividend is
effectively connected with the conduct of a trade or business carried on by such holder within the United States or (ii) in the case of
an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year
of the sale or the receipt of the Capital Gain Dividend or short-term capital gains dividends and certain other conditions are met. 

 

In order for a non-U.S. investor to qualify for
an exemption from backup withholding, the foreign investor must comply with special certification and filing requirements. Foreign investors
in the Fund should consult their tax advisers in this regard. Backup withholding is not an additional tax. Any amounts withheld may be
credited against the shareholder’s U.S. federal income tax liability, provided the appropriate information is furnished to the Internal
Revenue Service.

 

A beneficial holder of shares who is a non-U.S.
person may be subject to the U.S. federal estate tax in addition to the federal income tax consequences referred to above. If a shareholder
is eligible for the benefits of a tax treaty, any income or gain effectively connected with a U.S. trade or business will generally be
subject to U.S. federal income tax on a net basis only if it is also attributable to a permanent establishment maintained by the shareholder
in the United States.

 

Under the Foreign Account Tax Compliance Act (“FATCA”),
a 30% withholding tax will be imposed on dividends paid by the Fund to (i) foreign financial institutions including non-U.S. investment
funds unless they agree to collect and disclose to the Internal Revenue Service information regarding their direct and indirect U.S. account
holders and (ii) certain other foreign entities, unless they certify certain information regarding their direct and indirect U.S. owners.
A non-U.S. shareholder resident or doing business in a country that has entered into an intergovernmental agreement with the U.S. to implement
a similar reporting regime will be exempt from this withholding tax if the shareholder and the applicable foreign government comply with
the terms of such agreement. A Shareholder subject to such withholding tax will not receive additional amounts from the Fund to compensate
for such withholding. Recently issued proposed regulations (which are effective while pending) eliminate the application of the FATCA
withholding tax to capital gain dividends and redemption proceeds that was scheduled to take effect in 2019.

 

Creation and Redemption of Creation Units

An Authorized Participant who exchanges securities
for Creation Units generally will recognize a gain or a loss. The gain or loss will be equal to the difference between the market value
of the Creation Units at the time and the sum of the exchanger’s aggregate basis in the securities surrendered plus the amount of
cash paid for such Creation Units. A person who redeems Creation Units will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate market value of any securities received plus the
amount of any cash received for such Creation Units. The Internal Revenue Service, however, may assert that a loss realized upon an exchange
of securities for Creation Units cannot be deducted currently under the rules governing “wash sales,” or on the basis that
there has been no significant change in economic position. Any capital gain or loss realized upon the creation of Creation Units will
generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than
one year.

 

Any capital gain or loss realized upon the redemption
of Creation Units will generally be treated as long-term capital gain or loss if the shares comprising the Creation Units have been held
for more than one year. Otherwise, such capital gains or losses will be treated as short-term capital gains or losses.

 

Persons purchasing or redeeming Creation Units
should consult their own tax advisers with respect to the tax treatment of any creation or redemption transaction.

 

 

Section 351

The Trust on behalf of the Fund has the right
to reject an order for Creation Units if the purchaser (or group of purchasers) would, upon obtaining the shares so ordered, own 80% or
more of the outstanding shares of the Fund and if, pursuant to Section 351 of the Code, the Fund would have a basis in the deposit securities
different from the market value of such securities on the date of deposit. The Trust also has the right to require information necessary
to determine beneficial share ownership for purposes of the 80% determination.

 

Tax Shelter Reporting Regulations

Under U.S. Treasury regulations, if an individual
shareholder recognizes a loss of $2 million or more in any single tax year or, for a corporate shareholder, $10 million or more in any
single tax year, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders
of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC
are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs.
The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment
of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of
their individual circumstances.

 

 Chinese Tax Considerations

Although Chinese law provides for a 10% withholding
tax (“WHT”) on capital gains realized by non-residents, significant uncertainties remain regarding the implementation of this
law. Such uncertainties may result in capital gains taxes imposed upon the Fund relative to securities of companies headquartered, managed
or listed in China. While the application and enforcement of this law with respect to the Fund remain subject to clarification, to the
extent that such taxes are imposed on any capital gains of the Fund, the Fund’s NAV or returns may be adversely impacted.

 

In addition, there is uncertainty as to the application
of China’s value added tax to the Fund’s activities. The imposition of such taxes, as well as future changes in applicable
PRC tax law, may adversely affect the Fund. In light of this uncertainty, the Fund reserves the right to establish a reserve for such
tax, although none currently do so. If the Fund establishes such a reserve but is not ultimately subject to these taxes, shareholders
who redeemed or sold their shares while the reserve was in place will effectively bear the tax and may not benefit from the later release,
if any, of the reserve. Conversely, if the Fund does not establish such a reserve but ultimately is subject to the tax, shareholders who
redeemed or sold their shares prior to the tax being withheld, reserved or paid will have effectively avoided the tax. Investors should
note that such provision, if any, may be excessive or inadequate to meet actual Chinese tax liabilities (which could include interest
and penalties) on the Fund’s investments. As a result, investors may be advantaged or disadvantaged depending on the final rules
of the relevant PRC tax authorities.

 

Per a circular (Caishui [2014] 79), the Fund is
temporarily exempt from the Chinese tax on capital gains (“CGT”) on trading in A-Shares as a QFII or RQFII on the Shanghai
Stock Exchange through the Shanghai-Hong Kong Stock Connect as of November 17, 2014, and the Shenzhen Stock Exchange through the Shenzhen-Hong
Kong Stock Connect as of December 5, 2016. There is no indication as to how long the temporary exemption will remain in effect. Accordingly,
the Fund may be subject to such taxes in the future. If Krane expects such CGT on trading in domestic Chinese equity securities to be
re-imposed, the Fund reserves the right to establish a reserve for such tax. If the Fund establishes such a reserve but is not ultimately
subject to the tax, shareholders who redeemed or sold their shares while the reserve was in place will effectively bear the tax and may
not benefit from the later release, if any, of the reserve. Conversely, if the Fund does not establish such a reserve but ultimately is
subject to the tax, shareholders who redeemed or sold their shares prior to the tax being withheld, reserved or paid will have effectively
avoided the tax, even if they benefited from the trading that precipitated the Fund’s payment of it. On November 7, 2018, the Chinese
government issued a three-year exemption from the corporate income tax withholding tax and value added tax for China-sourced bond interest
derived by overseas institutional investors, but its application, such as with respect to the type of debt issuers covered by the exemption,
and whether such taxes will be implemented again after November 6, 2021, remains unclear in certain respects.

 

 

The Fund reserves the right to establish a reserve
for taxes which present uncertainty as to whether they will be assessed, although it currently does not do so. If the Fund establishes
such a reserve but is not ultimately subject to these taxes, shareholders who redeemed or sold their shares while the reserve was in place
will effectively bear the tax and may not benefit from the later release, if any, of the reserve. Conversely, if the Fund does not establish
such a reserve but ultimately is subject to the tax, shareholders who redeemed or sold their shares prior to the tax being withheld, reserved
or paid will have effectively avoided the tax. Investors should note that such provision, if any, may be excessive or inadequate to meet
actual tax liabilities (which could include interest and penalties) on the Fund’s investments. Any taxes imposed in connection with
the Fund’s activities will be borne by the Fund. To the extent Krane or a sub-adviser, through the use of a QFII or RQFII license,
pays any taxes in connection with the Fund’s transactions in PRC securities, the Fund will repay them for such tax expenses. As
a result, investors may be advantaged or disadvantaged depending on the final rules of the relevant tax authorities.

 

As discussed above under “— Foreign
Investments,” even if the Fund qualifies and elects to pass through foreign taxes to its shareholders, your ability to claim a credit
for such taxes may be limited.

 

General Considerations

The U.S. federal income tax discussion and the
discussion of Chinese tax considerations set forth above are for general information only. Prospective investors should consult their
tax advisers regarding the specific federal income tax consequences of purchasing, holding and disposing of shares of the Fund, as well
as the effect of state, local and foreign tax law and any proposed tax law changes.

 

DETERMINATION OF NAV

 

This information supplements and should be read
in conjunction with the section in the Prospectus entitled “Calculating NAV.”

 

The NAV per share of the Fund is computed by dividing
the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities and withholdings) by the total number
of shares of the Fund outstanding, rounded to the nearest cent. Expenses and fees, including without limitation, the management, administration
and distribution fees, are accrued daily and taken into account for purposes of determining NAV. The NAV per share for the Fund normally
is calculated by the Administrator and determined as of the regularly scheduled close of the regular trading session on the NYSE (ordinarily
4:00 p.m., Eastern Time) on each day that the Exchange is open. 

 

In calculating the values of the Fund’s
portfolio securities, securities listed on a securities exchange, market or automated quotation system for which quotations are readily
available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last reported sale
price on the primary exchange or market (foreign or domestic) on which they are traded (or at the time as of which the Fund’s NAV
is calculated if a security’s exchange is normally open at that time). If there is no such reported sale, such securities are valued
at the most recently reported bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. If available,
debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the
last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated
bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed
to identify the market value for such securities. Debt obligations with remaining maturities of sixty days or less may be valued at their
amortized cost, which approximates market value. The prices for foreign securities are reported in local currency and converted to U.S.
dollars using currency exchange rates. The value of a swap contract is equal to the obligation (or rights) under the swap contract, which
will generally be equal to the net amounts to be paid or received under the contract based upon the relative values of the positions held
by each party to the contract as determined by the applicable independent, third party pricing agent. Exchange-traded options are valued
at the last reported sales price on the exchange on which they are listed. If there is no such reported sale on the valuation date, long
positions are valued at the most recent bid price, and short positions are valued at the most recent ask price. OTC options are valued
based upon prices determined by the applicable independent, third party pricing agent. Futures are valued at the settlement price established
by the board of trade on which they are traded. Foreign currency forward contracts are valued at the current day’s interpolated
foreign exchange rate, as calculated using the current day’s spot rate and the 30-, 60-, 90- and 180-day forward rates provided
by an independent pricing agent. The exchange rates used for valuation are captured as of the close of the London Stock Exchange each
day normally at 4:00 p.m. Greenwich Mean Time. Prices for most securities held by the Fund are provided daily by independent pricing agents.
If a security price cannot be obtained from an independent, third-party pricing agent, the Fund seeks to obtain bid and ask prices from
two broker-dealers who make a market in the portfolio instrument and determines the average of the two.

 

 

Investments in open-end investment companies that
do not trade on an exchange are valued at the end of day NAV per share. Investments in open-end investment companies that trade on an
exchange are valued at the last reported sale price or official closing price as of the close of the customary trading session on the
exchange where the security is principally traded. If there is no such reported sale, such securities are valued at the most recently
reported bid price.

 

Investments for which market prices are not “readily
available,” such as during a foreign market holiday, or are not deemed to reflect current market values, or are investments where
no evaluated price is available from the Trust’s third-party pricing agents pursuant to established methodologies, are fair valued
in accordance with the Trust’s valuation policies and procedures approved by the Board of Trustees. Some of the more common reasons
that may necessitate that an investment be valued using “fair value” pricing may include, but are not limited to: the investment’s
trading has been halted or suspended; the investment’s primary trading market is temporarily closed; or the investment has not been
traded for an extended period of time. The Fund may fair value certain of the foreign investments held by the Fund each day the Fund calculates
its NAV.

 

In addition, the Fund may fair value its securities
if an event that may materially affect the value of the Fund’s securities that trade outside of the United States (a “Significant
Event”) has occurred between the time of the security’s last close and the time that the Fund calculates its NAV. A Significant
Event may relate to a single issuer or to an entire market sector, country or region. Events that may be Significant Events may include:
government actions, natural disasters, armed conflict, acts of terrorism and significant market fluctuations.

 

If Krane becomes aware of a Significant Event
that has occurred with respect to a portfolio instrument or group of portfolio instruments after the closing of the exchange or market
on which the portfolio instrument or portfolio instruments principally trade, but before the time at which the Fund calculates its NAV,
it will notify the Administrator and may request that an ad hoc meeting of the Fair Valuation Committee be called.  

 

With respect to trade-halted securities, the Trust
typically will fair value a trade-halted security by adjusting the security’s last market close price by the security’s sector
performance, as measured by a predetermined index, unless Krane recommends and the Trust’s Fair Valuation Committee determines to
make additional adjustments. Certain foreign securities exchanges have mechanisms in place that confine one day’s price movement
in an individual security to a pre-determined price range based on that day’s opening price (“Collared Securities”).
Fair value determinations for Collared Securities will generally be capped based on any applicable pre-determined “limit down”
or “limit up” prices established by the relevant foreign securities exchange. As an example, China A-Shares can only be plus
or minus ten percent in one day of trading in the relevant mainland China equity market. As a result, the fair value price determination
on a given day will generally be capped plus or minus ten percent.

 

 

Fair value pricing involves subjective judgments
and it is possible that a fair value determination for a security is materially different than the value that could actually be realized
upon the sale of the security or that another fund that uses market quotations or its own fair value procedures to price the same securities.
In addition, fair value pricing could result in a difference between the prices used to calculate the Fund’s NAV and the prices
used by an underlying index, if any.

 

Trading in securities on many foreign exchanges
is normally completed before the close of business on each Business Day. In addition, securities trading in a particular country or countries
may not take place on each Business Day or may take place on days that are not Business Days. Changes in valuations on certain securities
may occur at times or on days on which the Fund’s NAV is not calculated and on which Fund shares do not trade and sales and redemptions
of shares do not occur. As a result, the value of the Fund’s portfolio securities and the net asset value of its shares may change
on days when you will not be able to purchase or sell your shares.

 

Fund shares are purchased or sold on a national
securities exchange at market prices, which may be higher or lower than NAV. No secondary sales will be made to brokers or dealers at
a concession by the Distributor or by the Fund. Purchases and sales of shares in the secondary market, which will not involve the Fund,
will be subject to customary brokerage commissions and charges. Transactions in Fund shares will be priced at NAV only if you purchase
or redeem shares directly from the Fund in Creation Units.

 

DIVIDENDS AND DISTRIBUTIONS

 

The Fund intends to pay out dividends, if any, at least annually. The
Fund also distributes its net realized capital gains, if any, to investors annually. The Fund may make distributions on a more frequent
basis. The Fund may occasionally be required to make supplemental distributions at some other time during the year. Distributions in cash
may be reinvested automatically in additional whole shares only if the broker through whom you purchased shares makes such option available.
Your broker is responsible for distributing the income and capital gain distributions to you. The Trust reserves the right to declare
special distributions if, in its reasonable discretion, such action is necessary or advisable.

 

OTHER INFORMATION

 

Portfolio Holdings

The Board has approved portfolio holdings disclosure
policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of the Fund’s portfolio
holdings and the use of material non-public information about the Fund’s holdings. These policies and procedures, as described below,
are designed to ensure that disclosure of portfolio holdings is in the best interests of Fund shareholders, and address conflicts of interest
between the interests of Fund shareholders and those of Krane, a sub-adviser, the Distributor, or any affiliated person of the Fund, Krane,
a sub-adviser or the Distributor. The policies and procedures apply to all officers, employees, and agents of the Fund, including Krane
and a sub-adviser.

 

The Fund discloses on its website at the start
of each Business Day the identities and quantities of the securities and other assets held by the Fund that will form the basis of the
Fund’s calculation of its NAV on that Business Day. The portfolio holdings so disclosed will be based on information as of the close
of business on the prior Business Day. This information is generally used in connection with the creation and redemption process and is
disseminated on a daily basis through the facilities of the Exchange, the National Securities Clearing Corporation (“NSCC”)
and/or other fee-based subscription services to NSCC members and/or subscribers to those other fee-based subscription services, including
Authorized Participants, and to entities that publish and/or analyze such information in connection with the process of purchasing or
redeeming Creation Units or trading shares of the Fund in the secondary market.

 

 

Daily access to non-public information concerning
the Fund’s portfolio holdings also is permitted (i) to certain personnel of those service providers that are involved in portfolio
management and providing administrative, operational, risk management, or other support to portfolio management, including affiliated
broker-dealers and/or Authorized Participants, and (ii) to other personnel of Krane and other service providers, such as a sub-adviser,
the administrator, the custodian and the fund accountant, who deal directly with, or assist in, functions related to investment management,
administration, custody and fund accounting, as may be necessary to conduct business in the ordinary course in a manner consistent with
agreements with the Fund and/or the terms of the Fund’s current registration statement.  

 

From time to time, non-public information concerning
Fund portfolio holdings also may be provided to other entities that provide services to the Fund, including, among others, rating or ranking
organizations, in the ordinary course of business, no earlier than one business day following the date of the information. Portfolio holdings
information made available in connection with the creation and redemption process may be provided to other entities that provide services
to the Fund in the ordinary course of business after it has been disseminated to the NSCC.

 

The Fund’s chief compliance officer, or
a compliance manager designated by the chief compliance officer, also may grant exceptions to permit additional disclosure of Fund portfolio
holdings information at differing times and with different lag times (the period from the date of the information to the date the information
is made available), if any, in instances where the Fund has legitimate business purposes for doing so, it is in the best interests of
shareholders, and the recipients are subject to a duty of confidentiality, including a duty not to trade on the nonpublic information
and are required to execute an agreement to that effect. The Board will be informed of any such disclosures at its next regularly scheduled
meeting or as soon as is reasonably practicable thereafter. In no event will the Fund, Krane, a sub-adviser, or any other party receive
any direct or indirect compensation in connection with the disclosure of information about the Fund’s portfolio holdings.

 

The Board exercises continuing oversight of the
disclosure of the Fund’s portfolio holdings by (1) overseeing the implementation and enforcement of the Trust’s the portfolio
holdings policies and procedures by the Fund’s chief compliance officer and the Fund, (2) considering reports and recommendations
by the chief compliance officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7
under the Advisers Act) that may arise in connection with any portfolio holdings policies and procedures, and (3) considering whether
to approve or ratify any amendment to any of the portfolio holdings policies and procedures. The Board and the Fund reserve the right
to amend the policies and procedures in their sole discretion at any time and from time to time without prior notice to shareholders.
For purposes of the policies and procedures, the term “portfolio holdings” means investment positions held by the Fund that
are not publicly disclosed.

 

In addition to the permitted disclosures described
above, the Fund must publicly disclose its complete holdings quarterly in SEC filings. These reports will be available, free of charge,
on the EDGAR database on the SEC’s web site at www.sec.gov.

 

No person is authorized to disclose the Fund’s portfolio holdings
or other investment positions except in accordance with the Trust’s policies and procedures.

 

Voting Rights

Each share of the Fund is entitled to one vote
with respect to matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated
thereunder. Shareholders receive one vote for every full Fund share owned. Shareholders of the Fund will vote separately on matters relating
solely to that Fund. All shares of the Fund are freely transferable.

 

 

As a Delaware statutory trust, the Trust is not
required to hold annual shareholder meetings unless otherwise required by the 1940 Act. However, for the purpose of considering removal
of a Trustee as provided in Section 16(c) of the 1940 Act, a special meeting may be called by shareholders owning at least 10% of the
outstanding shares of the Trust. Shareholder inquiries can be made by contacting the Trust at the number and website address provided
under “Shareholder Inquiries” below.

 

Shareholder Inquiries

Shareholders may visit the Trust’s web site
at www.kraneshares.com or call 1.855.857.2638 or call to obtain information about account statements, procedures, and other related information.

 

COUNSEL

 

K&L Gates LLP, 1601 K Street NW, Washington,
DC 20006, serves as counsel to the Trust.

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

[____], 1601 Market Street, Philadelphia, Pennsylvania
19103, the Trust’s independent registered public accounting firm, provides audit and tax services with respect to filings with the
SEC.

 

FINANCIAL STATEMENTS

 

Once available, the Fund’s financial statements
will be incorporated by reference into this SAI.

 

 

APPENDIX A – PROXY VOTING POLICY

 

Form N-1A requires an investment company
to describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities. In connection
with this requirement, the Trust’s Board has delegated voting of the Fund’s proxies to Krane Funds Advisors, LLC (“Adviser”
or “KFA”), subject to the Board’s oversight. The Board has directed that proxies be voted consistent with the Fund and
its shareholders’ best interests and in compliance with all applicable proxy voting rules and regulations. The Adviser has adopted
the following as its proxy voting policies and procedures:

 

Proxy
Voting Policies and Procedures

 

 

Background

 

An investment adviser has a duty of care and loyalty to its
Clients and Investors with respect to monitoring corporate events and exercising proxy authority in the best interests of such Clients
and Investors. KFA will adhere to Rule 206(4)-6 of the Advisers Act and all other applicable laws and regulations in regard to the voting
of proxies.

 

Policies
and Procedures

 

Proxy Voting

 

KFA votes proxies for the securities
in the KraneShares Trust, on behalf of each series of the Trust (the “Funds”) for which it has been granted investment authority
using the following guidelines to comply with Rule 206(4)-6 under the Advisers Act. Specifically, Rule 206(4)-6 requires that the Adviser:

 

Adopt and implement written policies and procedures reasonably designed
to ensure that it votes client securities in the best interest of clients
;
Disclose to clients how they may obtain information from KFA about how
KFA voted proxies for their securities
; and
Describe KFA’s proxy voting policies and procedures to clients and
furnish them with a copy of such policies and procedures on request
.

 

Objective

 

Where KFA is given responsibility for
voting proxies, KFA must take reasonable steps under the circumstances to ensure that proxies are received and voted in the best interest
of the Funds, which generally means voting proxies with a view to enhancing the value of the shares of stock held in a Fund’s portfolio.

 

KFA has retained Broadridge Investor Communication Solutions,
Inc. (“Broadridge”) to track the Fund’s proxy votes and the subsequent action the Fund took upon receipt of the vote,
and where applicable, the issuer’s management and shareholder recommendations.

 

General Guidelines

KFA generally votes in accordance with Glass Lewis &
Co.’s pre-determined proxy voting guidelines (“Guidelines”), unless KFA believes it is in the best interest of a Fund
to vote differently.

 

 

For KraneShares MSCI China ESG Leaders Index ETF, KFA votes
proxies in accordance with pre-determined guidelines provided by Broadridge (“ESG Guidelines”) (collectively with Glass Lewis
Guidelines, the “Guidelines”) that are based on the Form N-PX data filed by the 50 largest MSCI ESG funds rated AAA or AA
by MSCI. The ESG Guidelines are created by Broadridge by categorizing the voting records of these funds based on proposal type and providing
a recommendation using the following rules:

 

If more than 60% voted for the proposal type, the ESG Guidelines
call for a “For” vote;
If between 40-60% voted for the proposal type, the ESG Guidelines
call for a “With Management” vote;
If less than 40% voted for the proposal type, the ESG Guidelines
call for an “Against” vote;
With respect to proposals on which Form N-PX does not provide
sufficient information to allow for proper categorization, the ESG Guidelines will call for a “With Management” vote; and
With respect to proposals with detailed data points, such
as election of directors, ratification of auditors or proxy access, the ESG Guidelines will reflect what Broadridge data indicates are
the most common voting policies.

 

Conflicts of Interests

 

KFA has adopted procedures that are
designed to identify conflicts or potential conflicts that could arise between its own interests and those of the Funds. For example,
conflicts of interest may arise when:

 

Proxy votes regarding non-routine matters are solicited by an issuer that
has an institutional separate account relationship with KFA
;1
a proponent of a proxy proposal has a business relationship with KFA; or
KFA has business relationships with participants in proxy contests, corporate directors
or director candidates.

 

KFA’s senior management, in coordination with its CCO,
are primarily responsible for monitoring and resolving possible material conflicts of interest with respect to proxy voting. Any person
with knowledge of a personal conflict of interest relating to a particular matter shall disclose that conflict to the CCO and may be required
to recuse him or herself from the proxy voting process. If it is determined that a conflict of interest or potential conflict of interest
is material, the CCO will work with appropriate personnel to agree upon a method to resolve such conflict before voting proxies affected
by the conflict. It is KFA’s expectation that voting in accordance with the Guidelines should, in most cases, adequately address
any possible conflicts of interest. All overrides to vote contrary to the Guidelines must be documented and approved by KFA’s CCO.

 

Special Issues with Voting Foreign Proxies

 

Although KFA has arrangements with the
proxy vendor to vote foreign proxies, voting proxies with respect to shares of foreign stocks may involve significantly greater effort
and corresponding cost due to the variety of regulatory schemes and corporate practices in foreign countries with respect to proxy voting.
Logistical problems in voting foreign proxies include the following:

 

Each country has its own rules and practices regarding shareholder notification,
voting restrictions, registration conditions and share blocking
.
To vote shares in some countries, the shares may be “blocked”
by the custodian or depository (or bearer shares deposited with a specified financial institution) fora specified number of days (usually
five or fewer but sometimes longer) before or after the shareholder meeting. When blocked, shares typically may not be traded until the
day after the blocking period. KFA may refrain from voting shares of foreign stocks subject to blocking restrictions where, in KFA’s
judgment, the benefit from voting the shares is outweighed by the interest of maintaining client liquidity in the shares. This decision
generally is made on a case-by-case basis based on relevant factors, including the length of the blocking period, the significance of
the holding, and whether the stock is considered a long-term holding
.

 

1
       For this purpose, KFA generally will consider as “non-routine” any matter listed
in New York Stock Exchange Rule 452.11, relating to when a member adviser may not vote a proxy without instructions from its customer
(for example, contested matters are deemed non-routine).

 

 

Often it is difficult to ascertain the date of a shareholder meeting because
certain countries, such as France, do not require companies to publish announcements in any official stock exchange publication
.
Timeframes between shareholder notification, distribution of proxy materials,
book-closure and the actual meeting date may be too short to allow timely action
.
Language barriers will generally mean that an English translation of proxy
information must be obtained or commissioned before the relevant shareholder meeting
.
Some companies and/or jurisdictions require that, in order to be eligible
to vote, the shares of the beneficial holders be registered in the company’s share registry
.
Lack of a “proxy voting service” by custodians in certain countries.

 

Proxy Voting Reporting

 

Information regarding how KFA, on behalf
of the Funds, voted proxies is available on the SEC’s website at http://sec.gov.

 

KFA must provide the Funds’ Board
with a report that describes any significant issues that arose during the year as they relate to voting proxies including any votes that
were made inconsistent with KFA’s stated proxy voting policies and procedures. Additionally, on an at least annual basis, any changes
to KFA’s proxy voting policies and procedure as they relate to the Funds, must be reported to the Board, which shall review and
in its discretion, approve the use of such amended proxy voting policies and procedures.

 

Securities Lending

Voting rights on the loaned securities
may pass to the borrower, provided that KFA must be able to vote proxies on the securities loaned, either by terminating the loan or by
entering into an alternative arrangement with the borrower. KFA may instruct its securities lending agent to terminate loans and recall
securities so that the securities may be voted by KFA if so determined by KFA consistent with its fiduciary duty to the Fund. Such notice
shall be provided no less than the normal settlement period for the securities in question prior to the record date for the proxy vote
or other corporate entitlement.

 

Class Actions

KFA does not commit to participate in all class actions that
may arise with regard to Fund portfolio securities. Upon receipt of class action information, the COO or CCO will evaluate the costs versus
the benefits of participation in the suit for each pertinent Fund. Unless the COO or CCO determines that it would be in the best interest
of the Fund, KFA will not participate in the class action on behalf of the Fund. The COO or CCO will either return to the sender any documents
inadvertently received by Adviser regarding class actions or forward the documents to the pertinent Fund(s). If a determination is made
that the benefits of participating in a class action outweigh the cost of participation, the Adviser will distribute any compensation
received pro rata to the investors in the Fund(s) based on the current percentage holdings in the Fund or as otherwise appropriately arranged
and disclosed to investors.

 

Class Action Notices should be forwarded to the CCO upon
receipt.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment
Manager Policy

 

An
Overview of Glass Lewis’ Investment Manager

Thematic
Voting Policy

 

January
2021

 

www.glasslewis.com

 

 

 

 

 

 

 

 

 

 

Investment Manager Thematic Voting Policy 2

 

 

ABOUT
GLASS LEWIS

 

Glass
Lewis is the world’s choice for governance solutions. We enable institutional investors and publicly listed companies to
make sustainable decisions based in research and data. We cover 30,000+ meetings each year, across approximately 100 global markets.
Our team has been providing in-depth analysis of companies since 2003, relying solely on publicly available information to inform
its policies, research, and voting recommendations.

 

Our
customers include the majority of the world’s largest pension plans, mutual funds, and asset managers, collectively
managing over $40 trillion in assets. We have teams located across the United States, Europe, and Asia-Pacific giving us
global reach with a local perspective on the important governance issues.

 

investors
around the world depend on Glass Lewis’ Viewpoint product to manage their proxy voting, policy implementation, recordkeeping,
and reporting. Our industry leading Proxy Paper product provides comprehensive environmental, social, and governance research
and voting recommendations weeks ahead of voting deadlines. Public companies can also use our innovative Report Feedback Statement
to deliver their unfiltered opinion on our proxy research directly to the voting decision makers at every investor client
in time for voting decisions to be made or changed.

 

The
research team engages extensively with issuers, investors, regulators, and other industry stakeholders to gain relevant context
into the realities surrounding companies, sectors, and the market in general. This enables us to provide the most comprehensive
and pragmatic insights to our customers.

 

 

 

 

 

 

 

Join
the Conversation

 

Glass
Lewis is committed to ongoing engagement with all market participants.

 

 

[email protected]           |           www.glasslewis.com

 

 

 

Investment Manager Thematic Voting Policy 3

 

 

SUMMARY
OF CHANGES

 

On
an ongoing basis, Glass Lewis extensively reviews and consults with stakeholders and clients on its policy guidelines. Annually,
Glass Lewis updates its policy guidelines in line with market trends, developments, and the results of our ongoing consultations.

 

In
advance of the 2020 proxy season, Glass Lewis has not made material revisions to the Investment Manager policy guidelines. However,
a number of updates have been made to the Glass Lewis standard guidelines, which underpin and inform the Investment Manager policy
guidelines. Further details can be found at https://www.glasslewis.com/voting-policies-current/.

 

Investment Manager Thematic Voting Policy 4

 

 

 

INTRODUCTION

 

The
Glass Lewis Investment Manager Guidelines are designed to maximize returns for investment managers by voting in a manner consistent
with such managers’ active investment decision-making. The guidelines are designed to increase investor’s potential
financial gain through the use of the shareholder vote while also allowing management and the board discretion to direct the operations,
including governance and compensation, of the firm.

 

The
guidelines will ensure that all issues brought to shareholders are analyzed in light of the fiduciary responsibilities unique
to investment advisors and investment companies on behalf of individual investor clients including mutual fund shareholders. The
guidelines will encourage the maximization of return for such clients through identifying and avoiding financial, audit and corporate
governance risks.

 

Investment Manager Thematic Voting Policy 5

 

 

 

MANAGEMENT
PROPOSALS

 

Election
of Directors

 

In
analyzing directors and boards, Glass Lewis’ Investment Manager Guidelines generally support the election of incumbent directors
except when a majority of the company’s directors are not independent or where directors fail to attend at least 75% of
board and committee meetings. In a contested election, we will apply the standard Glass Lewis recommendation.

 

Auditor

 

The
Glass Lewis Investment Manager Guidelines will generally support auditor ratification except when the non-audit fees exceed the
audit fees paid to the auditor.

 

Compensation

 

Glass
Lewis recognizes the importance in designing appropriate executive compensation plans that truly reward pay for performance. We
evaluate equity compensation plans based upon their specific features and will vote against plans than would result in total overhang
greater than 20% or that allow the repricing of options without shareholder approval.

 

The
Glass Lewis Investment Manager Guidelines will follow the general Glass Lewis recommendation when voting on management advisory
votes on compensation (“say-on-pay”) and on executive compensation arrangements in connection with merger transactions
(i.e., golden parachutes). Further, the Investment Manager Guidelines will follow the Glass Lewis recommendation when voting on
the preferred frequency of advisory compensation votes.

 

Authorized
Shares

 

Having
sufficient available authorized shares allows management to avail itself of rapidly developing opportunities as well as to effectively
operate the business. However, we believe that for significant transactions management should seek shareholders approval to justify
the use of additional shares. Therefor shareholders should not approve the creation of a large pool of unallocated shares without
some rational of the purpose of such shares. Accordingly, where we find that the company has not provided an appropriate plan
for use of the proposed shares, or where the number of shares far exceeds those needed to accomplish a detailed plan, we typically
vote against the authorization of additional shares. We also vote against the creation of or increase in (i) blank check preferred
shares and (ii) dual or multiple class capitalizations.

 

Shareholder
Rights

 

Glass
Lewis Investment Manager Guidelines will generally support proposals increasing or enhancing shareholder rights such as declassifying
the board, allowing shareholders to call a special meeting, eliminating supermajority voting and adopting majority voting for
the election of directors. Similarly, the Investment Manager Guidelines will generally vote against proposals to eliminate or
reduce shareholder rights.

 

Investment Manager Thematic Voting Policy 6

 

 

 

Mergers,
Acquisitions and Contested Meetings

 

Glass
Lewis undertakes a thorough examination of the implications of a proposed merger or acquisition to determine the transaction’s
likelihood of maximizing shareholder return. In making our voting recommendation, we examine the process conducted, the specific
parties and individuals involved in negotiating an agreement, as well as the economic and governance terms of the proposal. In
contested merger situations, or board proxy fights, Glass Lewis considers the plan presented by the dissident party and how, if
elected, it plans to enhance or protect shareholder value. We also consider the arguments presented by the board, including any
plans for improving the performance of the company.

 

The
Glass Lewis Investment Manager Guidelines will vote in accordance with the standard Glass Lewis policy recommendations on contested
meetings, mergers, acquisitions, and other financing transactions.

 

Investment Manager Thematic Voting Policy 7

 

 

 

SHAREHOLDER
PROPOSALS

 

The
Investment Manager Policy will review and vote on shareholder proposals on a case-by-case basis. The policy supports shareholder
proposals if the requested action would increase shareholder value, mitigate risk or enhance shareholder rights but generally
recommend voting against those that would not ultimately impact performance.

 

Governance

 

The
Glass Lewis Investment Manager Guidelines will support reasonable initiatives that seek to enhance shareholder rights, such as
the introduction of majority voting to elect directors, elimination in/reduction of supermajority provisions, the declassification
of the board and requiring the submission of shareholder rights’ plans to a shareholder vote. The guidelines generally support
reasonable, well-targeted proposals to allow increased shareholder participation at shareholder meetings through the ability to
call special meetings and ability for shareholders to nominate director candidates to a company’s board of directors. However,
the Investment Manager Guidelines will vote against proposals to require separating the roles of CEO and chair.

 

Compensation

 

The
Glass Lewis Investment Manager Guidelines will generally oppose any shareholder proposals seeking to limit compensation in amount
or design. However, the guidelines will vote for reasonable and properly targeted shareholder initiatives such as to require shareholder
approval to reprice options, to link pay with performance, to eliminate or require shareholder approval of golden coffins, to
allow a shareholder vote on excessive golden parachutes (i.e., greater than 2.99 times annual compensation) and to clawback unearned
bonuses.

 

Environment

 

Glass
Lewis’ Investment Manager Guidelines vote against proposals seeking to cease a certain practice or take certain actions
related to a company’s activities or operations. Further, the Glass Lewis’ Investment Manager Guidelines generally
vote against proposals regarding enhanced environmental disclosure and reporting, including those seeking sustainability reporting
and disclosure about company’s greenhouse gas emissions, as well as those advocating compliance with international environmental
conventions and adherence to environmental principles.

 

Social

 

Glass
Lewis’ Investment Manager Guidelines generally oppose proposals requesting companies adhere to labor or worker treatment
codes of conduct, such as those espoused by the International Labor Organization, relating to labor standards, human rights conventions
and corporate responsibility at large conventions and principles. The guidelines will also vote against proposals seeking disclosure
concerning the rights of workers, impact on local stakeholders, workers’ rights and human rights in general. Furthermore,
the Investment Manager Guidelines oppose increased reporting and review of a company’s political and charitable spending
as well as its lobbying practices.

 

Investment Manager Thematic Voting Policy 8

 

 

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Investment Manager Thematic Voting Policy 9

 

 

DISCLAIMER

 

©
2021 Glass, Lewis & Co., and/or its affiliates. All Rights Reserved.

 

This
document supplements Glass Lewis’ country-specific proxy voting policies and guidelines and should be read in conjunction
with those guidelines, which are available on Glass Lewis’ website – http://www.glasslewis.com. This document is not
intended to be exhaustive and does not address all potential voting issues, whether alone or together with Glass Lewis’
country-specific proxy voting policies and guidelines. These guidelines have not been set or approved by the U.S. Securities and
Exchange Commission or any other regulatory body. Additionally, none of the information contained herein is or should be relied
upon as investment advice. The content of this document has been developed based on Glass Lewis’ experience with proxy voting
and corporate governance issues, engagement with clients and issuers and review of relevant studies and surveys, and has not been
tailored to any specific person or entity.

 

Glass
Lewis’ proxy voting guidelines are grounded in corporate governance best practices, which often exceed minimum legal requirements.
Accordingly, unless specifically noted otherwise, a failure to meet these guidelines should not be understood to mean that the
company or individual involved has failed to meet applicable legal requirements.

 

No
representations or warranties express or implied, are made as to the accuracy or completeness of any information included herein.
In addition, Glass Lewis shall not be liable for any losses or damages arising from or in connection with the information contained
herein or the use, reliance on, or inability to use any such information. Glass Lewis expects its subscribers to possess sufficient
experience and knowledge to make their own decisions entirely independent of any information contained in this document.

 

All
information contained in this report is protected by law, including but not limited to, copyright law, and none of such information
may be copied or otherwise reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold, or
stored for subsequent use for any such purpose, in whole or in part, in any form or manner or by any means whatsoever, by any
person without Glass Lewis’ prior written consent.

 

Investment Manager Thematic Voting Policy 10

 

APPENDIX B – DESCRIPTION OF SECURITIES
RATINGS

 

Corporate and Municipal Long-Term Bond Ratings

 

China Lianhe Credit Ratings

 

AAA: Strong ability to repay debt. Not
adversely affected by the economic environment. The risk of default is very low.

 

AA: Strong ability to repay debt. Less
adversely affected by the economic environment. The risk of default is very low.

 

A: Strong ability to repay debt. More susceptible
adversely affected by the economic environment. The risk of default is very low.

 

BBB: Adequate ability to repay debt. Business
is affected by unfavorable economic environment. Greater default risk in general.

 

BB: Weak ability to repay debt. Business
is affected by unfavorable economic environment. Greater default risk in general.

 

B: Businesses ability to repay debt is
largely dependent on favorable economic environment. There is a high risk of default.

 

CCC: Businesses ability to repay debt is
extremely dependent on favorable economic environment. There is a high risk of default.

 

CC: Businesses ability to repay debt is
extremely dependent on favorable economic environment. Business is at risk of bankruptcy or reorganization. Default is likely.

 

C: Business cannot repay the debt.

 

In addition to AAA and CCC grade level (inclusive)
level, every one credit rating available, “+”, “-” symbol to fine tune, which means that a slightly higher or slightly
below this level.

 

China Chengxin (Asia Pacific) Credit Ratings Company,
Limited (“CCXAP”) long-term credit ratings:

 

AAAg: Capacity to meet the commitment on
short-term and long-term debts is extremely strong. Business is operated in a virtuous circle. The foreseeable uncertainty on business
operations is minimal.

 

AAg+, AAg, AAg: Capacity to meet short-term
and long-term financial commitment is very strong. Business is operated in a virtuous circle. Foreseeable uncertainty in business operations
is relatively low.

 

Ag+, Ag, Ag-: Capacity to meet short-term
and long-term commitment is strong. Business is operated in a virtuous circle. Business operation and development may be affected by internal
uncertain factors, which may create fluctuations on profitability and solvency of the issuer.

 

BBBg+, BBBg, BBBg-: Capacity to meet financial
commitment is considered adequate and capacity to meet short-term and long-term commitment is satisfactory. Business is operated in a
virtuous circle. Business is affected by internal and external uncertainties. Profitability and solvency may experience significant fluctuation.
Principal and interest may not be sufficiently protected by the terms of agreement.

 

 

BBg+, BBg, BBg-: Capacity to meet short-term
and long-term financial commitment is relatively weak. Financial commitment towards short-term and long-term debts is below average. Status
of business operation and development is not good. Solvency is unstable and subject to sustainable risk.

 

Bg+, Bg, Bg-: Financial commitment towards
short-term and long-term debts is bad. Business is affected by internal and external uncertain factors. There are difficulties in business
operation. Solvency is uncertain and subject to high credit risk.

 

CCCg: Financial commitment towards short-term
and long-term debts is very bad. Business is affected by internal and external uncertain factors. There are difficulties in business operation.
Poor solvency with very high credit risk.

 

CCg: Financial commitment towards short-term
and long-term debts is extremely bad. Business operation is poor. There are very limited positive internal and external factors to support
business operation and development. Extremely high credit risk is found.

 

Cg: Financial commitment towards short-term
and long-term debts is insolvent. Business falls in vicious circle. Very limited positive internal and external factors are found to support
the business operation and development in positive cycle. Extremely high credit risk is seen and is near default.

 

Dg: Unable to meet the financial commitments.
Default is confirmed.

 

Dagong Global Credit Rating Co. (“Dagong”)
Corporate and Financial Institution Issuer, Borrowing Companies, and Long-term Debt Facility Credit Ratings:

 

AAA- Highest Credit Quality: “AAA”
ratings denote the lowest expectation of default risk. It indicates that the issuer has exceptionally strong capacity for payment of financial
commitments. Although the debt protection factors may change, this capacity is highly unlikely to be adversely affected by any foreseeable
event. “AAA” is the highest issuer credit rating assigned by Dagong.

 

AA- Very High Credit Quality: “AA”
ratings denote expectations of very low default risk. It indicates that the issuer has very strong capacity for payment of financial commitments.
Although due to its relatively higher long-term risk, this capacity is not significantly vulnerable to any foreseeable event.

 

A– High Credit Quality: “A’
ratings denote expectations of relatively low default risk. The capacity for payment of financial commitments is considered sufficient.
However, this capacity may be more vulnerable than those of the higher ratings to adverse business or economic conditions due to any foreseeable
event.

 

BBB– Medium Credit Quality: “BBB”
ratings indicate that expectations of default risk are currently low and it has medium default risk. In normal conditions, the capacity
for payment of financial commitments is considered adequate, whereas under adverse business or economic conditions risks of default are
more likely to exist under this scale.

 

BB– Low Medium Credit Quality: “BB”
ratings indicate that the issuer faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions,
which could lead to the obligor’s inadequate capacity to meet its financial commitments.

 

B– Relatively Low Credit Quality: “B”
ratings indicate that expectations of default risk are relatively high but a limited margin of safety remains. Adverse business, financial,
or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments. This is a lower
scale than that of the “BB” rating and an obligor rated “B” is more vulnerable to adverse developments than the
obligors rated “BB”.

 

 

CCC- Low Credit Quality: “CCC”
ratings indicate very high default risk. The issuer is currently vulnerable, and is dependent upon favorable business, financial, and
economic conditions to meet its financial commitments. Some practical risks exist and this will impair the obligor’s ability to
meet its financial commitments.

 

CC– Very Low Credit Quality: “CC”
ratings indicate that the issuer is currently highly vulnerable and entities with this rating have a seriously high risk of default.

 

C– Lowest Credit Quality: “C”
ratings indicate the highest default risk and the issuer is currently unable to meet its financial commitments or may even be in the process
of compulsory debt reconstruction, or a takeover by regulatory organizations or in bankruptcy liquidation.

 

China Bond Rating Co.

 

AAAR : Strong ability to repay debt. Basically
unaffected by adverse economic conditions, and the risk of default is extremely low.

AAR: Strong ability to repay debt. Not
affected by the economic environment. The risk of default is very low.

 

AR: Strong ability to repay debt. More
susceptible adversely affected by the economic environment. The risk of default is very low.

 

BBBR: Adequate ability to repay debt. Business
is affected by unfavorable economic environment. Greater default risk in general.

 

BBR: Weak ability to repay debt. Business
is affected by unfavorable economic environment. Greater default risk in general.

 

BR: Businesses ability to repay debt is
largely dependent on favorable economic environment. There is a high risk of default.

 

CCCR: Businesses ability to repay debt
is extremely dependent on favorable economic environment. There is a high risk of default.

 

CCR: Businesses ability to repay debt is
extremely dependent on favorable economic environment. Business is at risk of bankruptcy or reorganization. Default is likely.

 

CR: Business cannot repay the debt.

 

DR Default is confirmed.

 

In addition to AAA and CCC grade level (inclusive)
level, every one credit rating available, “+”, “-” symbol to fine tune, which means that a slightly higher or slightly
below this level.

 

CSCI Pengyuan Credit Rating Co.

 

AAA: The ability to repay debt is extremely
strong. Not adversely affected by the economic environment. The risk of default is very low.

 

AA: The ability to repay debt is strong.
Less adversely affected by the economic environment. The risk of default is very low.

 

A: Strong ability to repay debt. More susceptible
adversely affected by the economic environment. The risk of default is very low.

 

 

BBB: Adequate ability to repay debt. Business
is affected by unfavorable economic environment. Greater default risk in general.

 

BB: Weak ability to repay debt. Business
is affected by unfavorable economic environment. Greater default risk in general.

 

B: Businesses ability to repay debt is
largely dependent on favorable economic environment. There is a extremely high risk of default.

 

CCC: Businesses ability to repay debt is
extremely dependent on favorable economic environment. There is a high risk of default.

 

CC: In the case of bankruptcy or restructuring,
there is less protection and there is basically no guarantee of repayment of debts..

 

C: Business cannot repay the debt.

 

In addition to AAA and CCC grade level (inclusive)
level, every one credit rating available, “+”, “-” symbol to fine tune, which means that a slightly higher or slightly
below this level.

 

Standard & Poor’s (“S&P”)
Long-Term Issue Credit Ratings:

 

The following descriptions of S&P’s
long-term corporate and municipal bond ratings have been published by Standard & Poor’s Financial Services LLC.

 

AAA – An obligation rated ‘AAA’
has the highest rating assigned by S&P Global Ratings. The obligor’s capacity to meet its financial commitment on the obligation
is extremely strong.

 

AA – An obligation rated ‘AA’
differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the
obligation is very strong.

 

A – An obligation rated
‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is
still strong.

 

BBB – An obligation rated ‘BBB’
exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the
obligor’s capacity to meet its financial commitment on the obligation.

 

BB, B, CCC, CC, and C – Obligations
rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant
speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such
obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

 

BB – An obligation rated ‘BB’
is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the
obligation.

 

B – An obligation rated ‘B’
is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness
to meet its financial commitment on the obligation.

 

 

CCC – An obligation rated ‘CCC’
is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not
likely to have the capacity to meet its financial commitment on the obligation.

 

CC – An obligation rated ‘CC’
is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred but S&P Global Ratings expects
default to be a virtual certainty, regardless of the anticipated time to default.

 

C – An obligation rated ‘C’
is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery
compared with obligations that are rated higher.

 

D – An obligation rated ‘D’ is in default
or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation
are not made on the date due, unless S&P Global Ratings believes that such payments will be made within five business days in the
absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The ‘D’ rating also will be used
upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for
example due to automatic stay provisions. A rating on an obligation is lowered to ‘D’ if it is subject to a distressed exchange offer.

 

Plus (+) or Minus (-) – The ratings from
‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within
the major rating categories.

 

NR – This indicates that a rating has not
been assigned or is no longer assigned.

 

Moody’s Investors Service, Inc. (“Moody’s”)
Global Long-Term Ratings:

 

The following descriptions of Moody’s
long-term corporate bond ratings have been published by Moody’s Investors Service, Inc. and Moody’s Analytics Inc.

 

Aaa – Obligations rated Aaa are judged
to be of the highest quality, with minimal credit risk.

 

Aa – Obligations rated Aa are judged to
be of high quality and are subject to very low credit risk.

 

A – Obligations rated A are considered
upper-medium grade and are subject to low credit risk.

 

Baa – Obligations rated Baa are subject
to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

 

Ba – Obligations rated Ba are judged to
have speculative elements and are subject to substantial credit risk.

 

B – Obligations rated B are considered
speculative and are subject to high credit risk.

 

Caa – Obligations rated Caa are judged
to be of poor standing and are subject to very high credit risk.

 

Ca – Obligations rated Ca are highly speculative
and are likely in, or very near, default, with some prospect of recovery of principal and interest.

 

C – Obligations rated C are the lowest
rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

 

Modifiers: Moody’s appends numerical modifiers
1, 2, and 3 to each generic rating classification from Aa through Caa.

 

 

The modifier 1 indicates that the obligation ranks
in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking
in the lower end of that generic rating category.

 

Fitch Ratings Ltd. (“Fitch”) Corporate
Bond Ratings:

 

The following descriptions of Fitch’s
long-term corporate bond ratings have been published by Fitch, Inc. and Fitch Ratings Ltd.

 

AAA – Highest credit quality. ‘AAA
ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of
financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

 

AA – Very high credit quality.
AA’ ratings denote expectations of very low default risk. They indicate very strong capacity for payment of
financial commitments. This capacity is not significantly vulnerable to foreseeable events.

 

A – High credit quality.
A’ ratings denote expectations of low default risk. The capacity for payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case
for higher ratings.

 

BBB – Good credit quality. ‘BBB
ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered
adequate, but adverse business or economic conditions are more likely to impair this capacity.

 

BB – Speculative.
BB’ ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in
business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of
financial commitments.

 

B – Highly speculative. ‘B
ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being
met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

 

CCC – Substantial credit risk. ‘CCC
ratings indicate that default is a real possibility.

 

CC – Very high levels of credit risk. ‘CC
ratings indicate that default of some kind appears probable.

 

C – Exceptionally high levels of credit
risk. ‘C’ indicates that a default or default-like process has begun, or the issuer is in standstill, or for a closed
funding vehicle, payment capacity is irrevocably impaired. Conditions that are indicative of a ‘C’ category rating for an
issuer include:

a. the issuer has entered into a grace
or cure period following non-payment of a material financial obligation;

b. the issuer has entered into a temporary
negotiated waiver or standstill agreement following a payment default on a material financial obligation;

c. the formal announcement by the issuer
or their agent of a distressed debt exchange;

d. a closed financing vehicle where
payment capacity is irrevocably impaired such that it is not expected to pay interest and/or principal in full during the life of the
transaction, but where no payment default is imminent.

 

D – Default. ‘D’ ratings
indicate an issuer that in Fitch’s opinion has entered into bankruptcy filings, administration, receivership, liquidation or other
formal winding-up procedure or that has otherwise ceased business.

 

 

Default ratings are not assigned prospectively
to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will
generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven
by bankruptcy or other similar circumstance, or by a distressed debt exchange.

 

Plus (+) or Minus (-) – The modifiers “+”
or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to
the ‘AAA’ obligation rating category, or to ratings below the ‘CCC’ category.

 

The terms “investment grade” and “speculative
grade” have established themselves over time as shorthand to describe the categories ‘AAA’ to ‘BBB’ (investment
grade) and ‘BB’ to ‘D’ (speculative grade). The terms “investment grade” and “speculative grade”
are market conventions, and do not imply any recommendation or endorsement of a specific security for investment purposes. “Investment
grade” categories indicate relatively low to moderate credit risk, while ratings in the “speculative” categories either
signal a higher level of credit risk or that a default has already occurred.

 

Fitch’s Municipal Bond Long-Term Ratings:

 

The following descriptions of Fitch’s
long-term municipal bond ratings have been published by Fitch, Inc. and Fitch Ratings Ltd.

 

AAA – Highest credit quality. ‘AAA
ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of
financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

 

AA – Very high credit quality. ‘AA
ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.

 

A – High credit quality. ‘A
ratings denote expectations of low default risk. The capacity for payment of financial

commitments is considered strong. This capacity
may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

 

BBB – Good credit quality. ‘BBB
ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate
but adverse business or economic conditions are more likely to impair this capacity.

 

BB – Speculative. ‘BB
ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions
over time.

 

B – Highly speculative. ‘B
ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being
met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

 

CCC – Substantial credit risk. ‘CCC
ratings indicate that default is a real possibility.

 

CC – Very high levels of credit risk. ‘CC
ratings indicate default of some kind appears probable.

 

C – Exceptionally high levels of credit
risk. ‘C’ ratings indicate default appears imminent or inevitable.

 

D – Default. ‘D’ ratings
indicate a default. Default generally is defined as one of the following:

 

failure to make payment of principal and/or interest under
the contractual terms of the rated obligation;

 

 

the bankruptcy filings, administration, receivership, liquidation
or other winding-up or cessation of the business of an issuer/obligor; or

 

the distressed exchange of an obligation, where creditors
were offered securities with diminished structural or economic terms compared with the existing obligation to avoid a probable payment
default.

 

Structured Finance Defaults – “Imminent”
default, categorized under ‘C’, typically refers to the occasion where a payment default has been intimated by the issuer,
and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period
during which it may cure the payment default. Another alternative would be where an issuer has formally announced a coercive debt exchange,
but the date of the exchange still lies several days or weeks in the immediate future.

 

Additionally, in structured finance transactions,
where analysis indicates that an instrument is irrevocably impaired such that it is not expected to pay interest and/or principal in full
in accordance with the terms of the obligation’s documentation during the life of the transaction, but where no payment default
in accordance with the terms of the documentation is imminent, the obligation will typically be rated in the ‘C’ category.

 

Structured Finance Writedowns – Where an
instrument has experienced an involuntary and, in the agency’s opinion, irreversible “writedown” of principal (i.e.
other than through amortization, and resulting in a loss to the investor), a credit rating of ‘D’ will be assigned to the
instrument. Where the agency believes the “writedown” may prove to be temporary (and the loss may be “written up”
again in future if and when performance improves), then a credit rating of ‘C’ will typically be assigned. Should the “writedown”
then later be reversed, the credit rating will be raised to an appropriate level for that instrument. Should the “writedown”
later be deemed as irreversible, the credit rating will be lowered to ‘D’.

 

Notes: In the case of structured and project finance,
while the ratings do not address the loss severity given default of the rated liability, loss severity assumptions on the underlying assets
are nonetheless typically included as part of the analysis. Loss severity assumptions are used to derive pool cash flows available to
service the rated liability. In the case of public finance, the ratings also do not address the loss given default of the rated liability,
focusing instead on the vulnerability to default of the rated liability.

 

Plus (+) or Minus (-) – The modifiers “+”
or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to
the ‘AAA’ obligation rating category, or to ratings below the ‘CCC’ category.

 

Municipal Short-Term Bond Ratings

 

CCXAP short-term credit ratings:

 

Ag-1: Capacity to meet short-term financial
commitment is extremely strong with high level of safety.

 

Ag-2: Capacity to meet short-term financial
commitment is strong with high level of safety.

 

Ag-3: Capacity to meet short-term financial
commitment is average but the safety may be easily affected by adverse business, financial and economic conditions.

 

Bg: Capacity to meet short-term financial
commitment is weak with high probability of default.

 

Cg: Capacity to meet short-term financial
commitment is very weak and the probability of default is very high.

 

Dg: Unable to meet the financial commitments.
Default is confirmed.

 

 

S&P’s Municipal Short-Term Note Ratings:

 

The following descriptions of S&P’s
short-term municipal ratings have been published by Standard & Poor’s Financial Services LLC.

 

SP-1 – Strong capacity to pay principal
and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

 

SP-2 – Satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

 

SP-3 – Speculative capacity to pay principal
and interest.

 

D – ‘D’ is assigned upon failure to pay
the note when due, completion of a distressed exchange offer, or the filing of a bankruptcy petition or the taking of similar action and
where default on an obligation is a virtual certainty, for example due to automatic stay provisions.

 

Moody’s Global Short-Term Ratings:

 

The following descriptions of Moody’s
short-term municipal ratings have been published by Moody’s Investors Service, Inc. and Moody’s Analytics Inc.

 

P-1 – Issuers (or supporting institutions)
rated Prime-1 have a superior ability to honor short-term debt obligations.

 

P-2 – Issuers (or supporting institutions)
rated Prime-2 have a strong ability to honor short-term debt obligations.

 

P-3 – Issuers (or supporting institutions)
rated Prime-3 have an acceptable ability to honor short-term obligations.

 

NP – Issuers (or supporting institutions)
rated Not Prime do not fall within any of the Prime rating categories.

 

Fitch’s Short-Term Ratings:

 

The following descriptions of Fitch’s
short-term ratings have been published by Fitch, Inc. and Fitch Ratings Ltd.

 

F1 – Highest short-term credit
quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+”
to denote any exceptionally strong credit feature.

 

F2 – Good short-term credit quality. Good
intrinsic capacity for timely payment of financial commitments.

 

F3 – Fair short-term credit quality. The
intrinsic capacity for timely payment of financial commitments is adequate.

 

B – Speculative short-term credit
quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in
financial and economic conditions.

 

C – High short-term default risk. Default
is a real possibility.

 

RD – Restricted default. Indicates an entity
that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable
to entity ratings only.

 

 

D – Default. Indicates a broad-based default
event for an entity, or the default of a specific short-term obligation. The modifiers “+” or “-” may be appended
to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ Long-term rating
category, to categories below ‘CCC’, or to Short-term ratings other than ‘F1’.

 

Commercial Paper Ratings

 

S&P’s Short-Term Issuer Credit Ratings:

The following descriptions of S&P’s
commercial paper ratings have been published by Standard & Poor’s Financial Service LLC.

 

A-1 – An obligor rated ‘A-1’
has strong capacity to meet its financial commitments. It is rated in the highest category by S&P Global Ratings. Within this category,
certain obligors are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment
on these obligations is extremely strong.

 

A-2 – An obligor rated ‘A-2’ has satisfactory
capacity to meet its financial commitments. However, it is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than obligors in the highest rating category.

 

A-3 – An obligor rated ‘A-3’ has adequate
capacity to meet its financial obligations. However, adverse economic conditions or changing circumstances are more likely to weaken the
obligor’s capacity to meet its financial commitments.

 

B – An obligor rated ‘B’ is regarded as
vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments;
however, it faces major ongoing uncertainties that could lead to the obligor’s inadequate capacity to meet its financial commitments.

 

C – A short-term obligation rated ‘C’ is
currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet
its financial commitments on the obligation.

 

D – A short-term obligation rated ‘D’ is
in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an
obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace
period. However, any stated grace period longer than five business days will be treated as five business days. The ‘D’ rating also will
be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty,
for example due to automatic stay provisions. A rating on an obligation is lowered to ‘D’ if it is subject to a distressed exchange offer.

 

Dual Ratings – S&P may assign
“dual” ratings to debt issues that have a put option or demand feature as part of their structure. The first component of
the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only
the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either
short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating
symbol (for example, ‘AAA/A-1+’ or ‘A-1+/A-1’). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating
symbols are used for the first component of the rating (for example, ‘SP-1+/A-1+’).

 

Moody’s U.S. Municipal Short-Term Ratings:

 

The following descriptions of Moody’s
commercial paper ratings have been published by Moody’s Investors Service, Inc. and Moody’s Analytics Inc.

 

MIG 1 – This designation denotes superior
credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based
access to the market for refinancing.

 

 

MIG 2 – This designation denotes strong
credit quality. Margins of protection are ample, although not as large as in the preceding group.

 

MIG 3 – This designation denotes acceptable
credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

 

SG – This designation denotes speculative-grade
credit quality. Debt instruments in this category may lack sufficient margins of protection.

 

Fitch’s Commercial Paper Ratings:

The following descriptions of Fitch’s
commercial paper ratings have been published by Fitch, Inc. and Fitch Ratings Ltd.

 

F1 – Highest short-term credit
quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+”
to denote any exceptionally strong credit feature.

 

F2 – Good short-term credit quality. Good
intrinsic capacity for timely payment of financial commitments.

 

F3 – Fair short-term credit quality. The
intrinsic capacity for timely payment of financial commitments is adequate.

 

B – Speculative short-term credit
quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in
financial and economic conditions.

 

C – High short-term default risk. Default
is a real possibility.

 

RD – Restricted default. Indicates an entity
that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable
to entity ratings only.

 

D – Default. Indicates a broad-based default
event for an entity, or the default of a specific short-term obligation.

 

The modifiers “+” or “-”
may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’
Long-term rating category, to categories below ‘CCC’, or to Short-term ratings other than ‘F1’.

 

 

PART C: OTHER INFORMATION

 

Item 28.

Exhibits
   
(a)(1) Certificate
of Trust, as filed with the state of Delaware on February 3, 2012, for KraneShares Trust (the “Registrant” or the “Trust”)
is incorporated herein by reference to Exhibit (a)(1) to the Registrant’s initial Registration Statement on Form N-1A as filed
with the U.S. Securities and Exchange Commission (the “SEC”) via EDGAR Accession No. 0001193125-12-173444 on April 20,
2012.
   
(a)(2) Registrant’s
Amended and Restated Declaration of Trust, dated June 7, 2017, is incorporated herein by reference to Exhibit (a)(2) of Post-Effective
Amendment No. 145 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with
the SEC via EDGAR Accession No. 0001144204-17-033078 on June 19, 2017.
   
(b) Registrant’s
Amended By-Laws, dated June 7, 2017, are incorporated herein by reference to Exhibit (b) of Post-Effective Amendment No. 145 to the
Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession
No. 0001144204-17-033078 on June 19, 2017.
   
(c) Not applicable.
   
(d)(1) Investment
Advisory Agreement between the Registrant and Krane Funds Advisors, LLC, is incorporated herein by reference to Exhibit (d)(3) of
Post-Effective Amendment No. 149 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698),
as filed with the SEC via EDGAR Accession No. 0001144204-17-038833 on July 28, 2017.
   
(d)(2) Schedule A to the Investment Advisory Agreement between the Registrant
and Krane Funds Advisors, LLC, to be filed by subsequent amendment.
   
(d)(3) Schedule
B to the Investment Advisory Agreement between the Registrant and Krane Funds Advisors, LLC, is incorporated herein by reference
to Exhibit (d)(3) of Post-Effective Amendment No. 180 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870
and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-19-004417 on March 22, 2019.

 

 

 

(d)(5) Investment
Advisory Agreement between Krane Funds Advisors, LLC, on behalf of the KraneShares E Fund China Commercial Paper ETF, and E Fund
Management (Hong Kong) Co., Limited, is incorporated herein by reference to Exhibit (d)(7) of Post-Effective Amendment No. 149 to
the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR
Accession No. 0001144204-17-038833 on July 28, 2017.
   
(d)(6) Investment
Subadvisory Agreement between Krane Funds Advisors, LLC, on behalf of the KraneShares CCBS China Corporate High Yield Bond USD Index
ETF, and CCB Securities Ltd., is incorporated herein by reference to Exhibit (d)(6) of Post-Effective Amendment No. 156 to the Registrant’s
Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-18-000019
on January 2, 2018.
   
(d)(7) Sub-Advisory
Agreement between Krane Funds Advisors, LLC, on behalf of the Quadratic Interest Rate Volatility and Inflation Hedge ETF, and Quadratic
Capital Management LLC, is incorporated herein by reference to Exhibit (d)(10) of Post-Effective Amendment No. 173 to the Registrant’s
Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-19-002177
on February 11, 2019.

 

(d)(8) Sub-Advisory
Agreement between Krane Funds Advisors, LLC, on behalf of the KFA Dynamic Fixed Income ETF, and SkyRock Investment Management, LLC,
is incorporated herein by reference to Exhibit (d)(8) of Post-Effective Amendment No. 247 to the Registrant’s Registration
Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001213900-20-019102 on
July 29, 2020.
   
(d)(9) Form
of Sub-Advisory Agreement between Krane Funds Advisors, LLC, on behalf of the KFA Global Carbon ETF and Climate Finance Partners
LLC, is incorporated herein by reference to Exhibit (d)(9) of Post-Effective Amendment No. 236 to the Registrant’s Registration
Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-20-005257 on
April 30, 2020.
   
(d)(10) Form
of Investment Advisory Agreement between KFA Global Carbon Subsidiary, Ltd., and Krane Fund Advisors LLC, is incorporated herein
by reference to Exhibit (d)(10) of Post-Effective Amendment No. 236 to the Registrant’s Registration Statement on Form N-1A
(File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-20-005257 on April 30, 2020.

 

 

 

(d)(12) Form
of Sub-Advisory Agreement between Krane Funds Advisors, LLC on behalf of the KFA Value Line® Dynamic Core Equity Index ETF and
Lee Capital Management, LP, is incorporated herein by reference to Exhibit (d)(12) of Post Effective No. 255 to the
Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR
Accession No. 0001829126-20-000149 on November 19, 2020.
   
(d)(13) Sub-Advisory
Agreement between Krane Funds Advisors, LLC, on behalf of the KFA Mount Lucas Index Strategy ETF and Mount Lucas Index Advisers LLC,
is incorporated herein by reference to Exhibit (d)(13) of Post-Effective Amendment No. 258 to the Registrant’s Registration
Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-20-000214 on
November 30, 2020.
   
(d)(14) Form
of Investment Advisory Agreement between KFA MLM Index, and Krane Fund Advisors LLC, is incorporated herein by reference to Exhibit
(d)(14) of Post-Effective Amendment No. 258 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and
811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-20-000214 on November 30, 2020.
   
(d)(15) Form
of Sub-Advisory Agreement between KFA MLM Index, and Krane Fund Advisors LLC, is incorporated herein by reference to Exhibit (d)(15)
of Post-Effective Amendment No. 258 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and
811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-20-000214 on November 30, 2020.
   
(d)(16) Form
of Investment Advisory Agreement between Krane Funds Advisors, LLC on behalf of Krane-UBS China A Share Fund, is incorporated herein
by reference to Exhibit (d)(16) of Post-Effective Amendment No. 269 to the Registrant’s Registration Statement on Form N-1A
(File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-21-000882 on February 24,
2021.
   
(d)(17) Form
of Sub-Advisory Agreement between Krane Funds Advisors, LLC, on behalf of the Krane-UBS China A Share Fund and UBS Asset Management
(Americas) Inc., is incorporated herein by reference to Exhibit (d)(17) of Post-Effective Amendment No. 269 to the
Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR
Accession No. 0001829126-21-000882 on February 24, 2021.
   
(e)(1) Amended
and Restated Distribution Agreement between the Registrant and SEI Investments Distribution Co., is incorporated herein by reference
to Exhibit (e)(1) of Post-Effective Amendment No. 63 to the Registrant’s Registration Statement on Form N-1A (File Nos.
333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001144204-14-046850 on August 4, 2014.

 

(e)(2) Schedule A to the Amended and Restated Distribution Agreement between the Registrant and SEI Investments
Distribution Co., to be filed by subsequent amendment.

 

 

(e)(3) Amendment
No. 1 to Amended and Restated Distribution Agreement between the Registrant and SEI Investments Distribution Co., is incorporated
herein by reference to Exhibit (e)(3)  of Post-Effective Amendment No. 243 to the Registrant’s Registration Statement
on Form N-1A  (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-20-007826
on June 30, 2020.
   
(e)(4) Form
of Authorized Participant Agreement is incorporated herein by reference to Exhibit (e)(2) of Pre-Effective Amendment No. 2 to the
Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession
No. 0001144204-13-003143 on January 18, 2013.
   
(e)(5) Distribution
Agreement between the Registrant and SEI Investments Distribution Co. on behalf of Krane-UBS China A Share Fund, dated November 15,
2018, is incorporated herein by reference to Exhibit (e)(5) of Post-Effective Amendment No. 269 to the Registrant’s
Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No.
0001829126-21-000882 on February 24, 2021.
   
(e)(6) Schedule
A to the Distribution Agreement between the Registrant and SEI Investments Distribution Co. on behalf of Krane-UBS China A Share
Fund, is incorporated herein by reference to Exhibit (e)(6) of Post-Effective Amendment No. 269 to the Registrant’s
Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No.
0001829126-21-000882 on February 24, 2021.
   
(f) Not applicable.
   
(g)(1) Custodian
and Transfer Agent Agreement between the Registrant and Brown Brothers Harriman & Co. is incorporated herein by reference to
Exhibit (g) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870
and 811-22698), as filed with the SEC via EDGAR Accession No. 0001144204-13-003143 on January 18, 2013.
   
(g)(2) Form
of Agency Agreement between the Registrant and DST Asset Manager Solutions, Inc., is incorporated herein by reference to Exhibit
(g)(2) of Post-Effective Amendment No. 269 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and
811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-21-000882 on February 24, 2021.
   
(h)(1) Amended
and Restated Administration Agreement between the Registrant and SEI Global Fund Services is incorporated herein by reference to
Exhibit (h)(1) of Post-Effective Amendment No. 63 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870
and 811-22698), as filed with the SEC via EDGAR Accession No. 0001144204-14-046850 on August 4, 2014.

 

(h)(2) Schedule I to the Amended and Restated Administration Agreement between the Registrant and SEI Global
Fund Services, to be filed by subsequent amendment.

 

 

 

(h)(5) Schedule I to the Form of Sublicense Agreement between the Registrant
and Krane Funds Advisors, LLC, is incorporated herein by reference to Exhibit (h)(5) of Post-Effective Amendment No. 281 to the Registrant’s
Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-21-004773
on June 3, 2021.
   
(h)(6) Securities
Lending Agency Agreement between the Registrant and Brown Brothers Harriman & Co., dated February 1, 2018, is incorporated herein
by reference to Exhibit (h)(8) of Post-Effective Amendment No. 162 to the Registrant’s Registration Statement on Form N-1A
(File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-18-007036 on July 30, 2018.
   
(h)(7) Fee
Waiver Agreement between the Registrant and Krane Funds Advisors, LLC, relating to the KraneShares Bosera MSCI China A Share ETF,
KraneShares E Fund China Commercial Paper ETF, KraneShares Asia Robotics and Artificial Intelligence Index ETF, KraneShares Bloomberg
Barclays China Aggregate Bond Inclusion Index ETF, Quadratic Interest Rate Volatility and Inflation Hedge ETF, KraneShares MSCI
All China Index ETF, KraneShares MSCI Emerging Markets ex China Index ETF, and KraneShares MSCI All China Health Care Index ETF, is
incorporated herein by reference to Exhibit (h)(9) of Post-Effective Amendment No. 247 to the Registrant’s Registration Statement
on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001213900-20-019102 on July 29,
2020.
   
(h)(8) Fee
Waiver Agreement between the Registrant and Krane Funds Advisors, LLC, relating to the KraneShares MSCI All China Index ETF, is incorporated
herein by reference to Exhibit (h)(10) of Post-Effective Amendment No. 247 to the Registrant’s Registration Statement on Form
N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001213900-20-019102 on July 29, 2020.
   
(h)(9) Fee
Waiver Agreement between the Registrant and Krane Funds Advisors, LLC, relating to the KraneShares Emerging Markets Consumer Technology
Index ETF, is incorporated herein by reference to Exhibit (h)(11) of Post-Effective Amendment No. 247 to the Registrant’s Registration
Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001213900-20-019102 on
July 29, 2020.

 

 

(h)(10) Expense
Limitation Agreement between the Registrant and Krane Funds Advisors, LLC, relating to the Krane-UBS China A Share Fund, is
incorporated herein by reference to Exhibit (h)(10) of Post-Effective Amendment No. 269 to the Registrant’s Registration
Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-21-000882 on
February 24, 2021.
   
(i) Opinion and consent of counsel, to be filed by subsequent amendment.
   
(j) Not applicable.
   
(k) Not applicable.
   
(l) Subscription
Agreement between the Registrant and Krane Funds Advisors, LLC is incorporated herein by reference to Exhibit (l) of Pre-Effective
Amendment No. 2 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with
the SEC via EDGAR Accession No. 0001144204-13-003143 on January 18, 2013.
   
(m) Distribution Plan, to be filed by subsequent amendment.

 

(n) Rule
18f-3 Multiple Class Plan, is incorporated herein by reference to Exhibit (n) of Post-Effective Amendment No. 269 to the
Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR
Accession No. 0001829126-21-000882 on February 24, 2021.
   
(o) Not applicable.
   
(p)(1) Code
of Ethics of the Registrant is incorporated herein by reference to Exhibit (p)(1) of Post-Effective Amendment No. 198 to the Registrant’s
Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-19-010464
on July 29, 2019.
   
(p)(2) Code
of Ethics of Krane Funds Advisors, LLC is incorporated herein by reference to Exhibit (p)(2) of Post-Effective Amendment No. 198
to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR
Accession No. 0001615774-19-010464 on July 29, 2019.
   
(p)(3) Code
of Ethics of Bosera Asset Management (International) Co., Ltd., sub-adviser to the KraneShares Bosera MSCI China A Share ETF, is
incorporated herein by reference to Exhibit (p)(5) of Post-Effective Amendment No. 43 to the Registrant’s Registration Statement
on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001144204-14-022475 on April 14,
2014.

 

 

 

(p)(5) Code
of Ethics of CCB Securities Ltd., sub-adviser to the KraneShares CCBS China Corporate High Yield Bond USD Index ETF, is incorporated
herein by reference to Exhibit (p)(5) of Post-Effective Amendment No. 156 to the Registrant’s Registration Statement on Form
N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-18-000019 on January 2, 2018.
   
(p)(6) Code
of Ethics of Quadratic Capital Management LLC, sub-adviser to the Quadratic Interest Rate Volatility and Inflation Hedge ETF, is
incorporated herein by reference to Exhibit (p)(8) of Post-Effective Amendment No. 182 to the Registrant’s Registration Statement
on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-19-005273 on April 2,
2019.
   
(p)(7) Code
of Ethics of SkyRock Investment Management, LLC, sub-adviser to the KFA Dynamic Fixed Income ETF, is incorporated herein by reference
to Exhibit (p)(7) of Post-Effective Amendment No. 216 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870
and 811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-19-014687 on November 25, 2019.
   
(p)(8) Code
of Ethics of Climate Finance Partners LLC, sub-adviser to the KFA Global Carbon ETF, is incorporated herein by reference to Exhibit
(p)(8) of Post-Effective Amendment No. 236 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and
811-22698), as filed with the SEC via EDGAR Accession No. 0001615774-20-005257 on April 30, 2020.

 

(p)(9) Code
of Ethics of Lee Capital Management, LP, sub-adviser to the KFA Value Line® Dynamic Core Equity Index ETF, is incorporated
herein by reference to Exhibit (p)(9) to Post-Effective Amendment No. 255 to the Registrant’s Registration Statement on Form
N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-20-000149 on November 19,
2020.
   
(p)(10) Code
of Ethics of Mount Lucas Index Advisers LLC, sub-adviser to KFA Mount Lucas Index Strategy ETF, is incorporated herein by reference
to Exhibit (p)(10) to Post-Effective Amendment No. 258 to the Registrant’s Registration Statement on Form N-1A (File Nos.
333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-20-000214 on November 30, 2020.
   
(p)(11) Code
of Ethics of UBS Asset Management (Americas) Inc., sub-adviser to the Krane-UBS China A Share Fund, is incorporated herein by
reference to Exhibit (p)(11) of Post-Effective Amendment No. 269 to the Registrant’s Registration Statement on Form N-1A (File
Nos. 333-180870 and 811-22698), as filed with the SEC via EDGAR Accession No. 0001829126-21-000882 on February 24,
2021.
   
(q)(1) Powers
of Attorney dated September 29, 2015 for Matthew Stroyman and John Ferguson is incorporated herein by reference to Exhibit (q) of
Post-Effective Amendment No. 108 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698),
as filed with the SEC via EDGAR Accession No. 0001144204-16-080317 on February 10, 2016.
   
(q)(2) Power
of Attorney dated August 31, 2017 for Patrick Campo, is incorporated herein by reference to Exhibit (q)(2) of Post-Effective Amendment
No. 153 to the Registrant’s Registration Statement on Form N-1A (File Nos. 333-180870 and 811-22698), as filed with the SEC
via EDGAR Accession No. 0001615774-17-005305 on September 22, 2017.

 

 

Item 29. Persons Controlled by or under Common Control with the Fund

 

Not applicable.

 

 

A Trustee, when acting in such capacity, shall
not be personally liable to any Person, other than the Trust, to the extent provided in Article VII of the Registrant’s Amended
and Restated Declaration of Trust, for any act, omission, or obligation of the Trust, of such Trustee, or of any other Trustee. A Trustee
shall be liable to the Trust solely for his or her own willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the office of Trustee, and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees shall not be responsible or liable in any event for any neglect or wrong-doing of any officer, agent, employee, Investment Adviser,
or Principal Underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee. The Trust shall
indemnify each Person who is, or has been, a Trustee, officer, employee or agent of the Trust, any Person who is serving or has served
at the Trust’s request as a Trustee, officer, trustee, employee or agent of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise to the fullest extent permitted by law against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him
in settlement thereof.

 

Subject to applicable federal law, expenses of
preparation and presentation of a defense to any claim, action, suit or proceeding subject to a claim for indemnification under Section
2 of the Registrant’s Amended and Restated Declaration of Trust shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking