Introduction to the KraneShares CICC China Leaders 100 Index ETF: A - PowerPoint PPT Presentation

Introduction to the KraneShares CICC China Leaders 100 Index ETF: A Smart Beta Approach to Investing in Mainland China’s Top 100 Companies KFYP 6/30/2020 1 info @ kraneshares.com

2 in Mainland China and has Best Investment Finance Asia (CICC Capital) China Top PE Forbes Brokerage Best Local Asiamoney Research Team #1 China Institutional Investor London and Singapore. New York, San Francisco, set footprints in Hong Kong, CICC has over 200 branches Introduction to China International Capital Corporation (CICC) and KraneShares Capital Corporation (CICC). meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International investing. These strategies allow investors to stay up to date on global market trends and provide strategies that have been developed based on the firm and its partners’ deep knowledge of well-designed investment portfolio. KraneShares ETFs represent innovative, first to market on providing investors with strategies to capture China’s importance as an essential element of a Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. The firm is focused About KraneShares CICC 2018 Awards AUM. China Investment Corporation (CIC), the second largest sovereign wealth fund with over $900 billion asset management, investment banking, private equity and wealth management. Majority owned by Leading publicly traded (Hong Kong) Chinese financial services company with expertise in research, About CICC Bank in China

Investment Strategy: 1. London. KFYP KraneShares CICC China Leaders 100 Index ETF* *Formerly the KraneShares Zacks New China ETF Smart beta is an investment style where a manager passively follows an index designed to take advantage of perceived systematic biases or inefficiencies in the market. row. 4 2. Alpha is the active return on an investment, gauges the performance of an investment against a market index or benchmark which is considered to represent the market's movement as a whole. 3. Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity 4. en.cicc.com, “CICC Wins Big in All-China Research Team Awards 2019 Organized by Institutional Investor & Caixin”, 11/11/2019, retrieved on 6/30/2020. Introduction CICC has over 200 branches across Mainland China, with offices in Hong Kong, Singapore, New York, San Francisco, and In 2019, the CICC Research Team ranked #1 in Institutional Investor’s All-China Research Category for the eighth year in a 3 Exposure to the top 100 industry leaders within China’s Mainland A-share market identified through the CICC Research in Mainland China. The strategy is based on China International Capital Corporation (CICC)’s latest research on China’s capital markets. This quantitative approach reflects CICC’s top down and bottom up research process, seeking to deliver the 100 leading companies in Mainland China. KFYP features: Smart-beta strategy which seeks to deliver cost effective alpha 2 . team’s quantitative methodology. through bottom-line growth and valuation criteria. About CICC & CICC Research: CICC is a leading, publicly traded, Chinese financial services company with expertise in research, asset management, investment banking, private equity and wealth management. KFYP tracks the CSI CICC Select 100 Index, which takes a smart-beta 1 approach to systematically invest in companies listed • • • Seeks to provide exposure to performance leaders through a Return on Equity (ROE) 3 filter which is further refined • • •

The China A-Share market is too big to ignore. Even though China is the world’s second largest economy and stock market, China A-Shares are still underrepresented in global capital markets. Top 5 Country Weights in the MSCI All Country World Index (Market Cap Weighted) 1 Top 5 Country Weights in the MSCI All Country World Index (GDP Weighted) 1 Why China? 4 1. Data from MSCI as of 6/30/2020. See page 14 for index definitions 70 30 60 25 50 20 40 15 % % 30 10 20 5 10 0 0 US Japan China UK France US China Japan Germany India

China Data from MSCI as of 6/30/2020. Taiwan 11.1 India 8.3 Others 34.3 2018 Inclusion 1 2019 Inclusion 2 Future Proposed Inclusion 3 1. MSCI.com/China, retrieved 6/30/2020 2. “MSCI Will Increase The Weight Of China A Shares In MSCI Indexes” MSCI, Feb. 2019, retrieved 6/30/2020 3. 5 Korea Korea Others 7% India 11% Taiwan 10% 20% Inclusion Overview Shares China A 29% China Emerging Markets Index China A-Share Inclusion in MSCI 15.0 0.8 30.5 Currently, $1.8 trillion track the MSCI Emerging Markets Index. Up to $360b are expected to be reallocated to China A-Shares after full inclusion. China A Shares 4.0 Korea 12.2 Taiwan 10.5 India 8.3 Others 34.5 See page 14 for index definitions On February 28, 2019, MSCI made a larger than expected China A-Share inclusion announcement. MSCI increased the inclusion factor of China A-Shares in their Global Standard Indexes from 5% to 20% in 2019. completed the first 5% inclusion of Shares provide a sustained catalyst for the China A 30.5 China market. outperformance of the Mainland Emerging Markets Index. projected to reach 20% of the the end of 2019. of China A-Shares from 5% to 20% by Emerging Markets Index. China A-Shares within the MSCI 23% • On September 3, 2018 MSCI • MSCI increased the inclusion factor • The full proposed inclusion weight is • We believe multiple inclusions could

6 40% 3. Wang, Hangfei. “Changing Landscape of China A-share Investor Structure.” CICC Research. Jul. 2, 2019. 4. McGrath, Charles. “Institutions Own 80% OF Equity Market.” Pensions & Investments. Apr. 25, 2017. Retrieved 6/30/2020. 0% 10% 20% 30% 50% 2. 60% 70% 80% 2014 2018 A-Share Market Ownership by Free-Float Market Cap 3 Institutions Individuals Geng, Shuajin. “CICC Select Indexes – an Introduction.” CICC Research. May 5, 2019. Sheng, Andrew. “How China is Moving Out of Debt and Up The Value Chain.” World Economic Forum. Aug. 9, 2017. The Chinese economy is transforming into a high-quality growth model. As such, prudent China investment Accordingly, the financial sector in China is experiencing significant strategies will allocate according to signs of long-term value and growth rather than sentiment. As the world’s second largest economy develops, the structure of its capital markets will increasingly resemble those in the developed world. market allocation of resources and lowering costs of doing business in China. 1 Chinese consumers are upgrading to higher-end products while its industries are consolidating and moving up the value chain. 2 1. Inclusion Overview growth. Financial institutions are increasingly exerting influence over In the United States, institutions own approximately 80% of the stock market. 4 The result is that markets become less influenced by short-term sentiment and are increasingly driven by long-term fundamentals analysis. • The Chinese government’s 13 th Five Year Plan (2016-2020) stressed • • equity markets 3 as they long have done in developed capital markets. •

KraneShares has partnered with CICC and CSI to provide investors with smart-beta investment solutions. Portfolio Leaders 100 Index ETF KraneShares CICC China KFYP Research Equity Strategy Research 7 Macro Calculation Index Management Portfolio Education Investor Smart-Beta

8 Why use the smart-beta approach with China A-shares? through the ETF structure transparency provided Liquidity and share funds average fees of active A- Lower fees compared to share market. returns in China’s A- potentially gain excess cost effective way to provides investors with a a smart-beta approach traditional passive funds, Compared to active and Active Smart-Beta Passive Smart-Beta • Alpha Potential • • Benchmark Risk

9 12% 30% 20% 10% 0% 12% 10% 15% 50% 17% 14% 13% 11% 13% 10% 87% 40% 60% 88% 2012 Institutional Investors Individual Investors Trading Volume of the Shanghai Stock Exchange by Investor Type 2016 2015 2014 2013 2011 70% 2010 2009 2008 2007 100% 90% 80% 89% 85% The Chinese market is dominated by retail investors which can make smart-beta investing more challenging. 10% 70% 60% 50% 40% 30% 20% 0% 90% 75% 47% 15% 25% 53% 85% Source: Shanghai Securities Exchange Yearbook, CICC Research as of January 2018. Retrieved 6/30/2020. 80% 100% 83% China A-shares see a higher proportion of retail investors in market turnover than other major markets 86% 87% 89% 87% 90% Retail investors are typically more sentiment driven than institutions, which may cause stock prices and fundamentals to diverge significantly Market Overview China Individual investors account for more than 80% of total trading volume in the China A-share market Institutional Investors Retail Investors Market Turnover of Major Asian Stock Exchanges by Investor Type Hong Kong Korea • • •