1 Kevin Liu Executive Director Brendan Ahern Chief Investment

Kevin Liu Brendan Ahern 1 Executive Director Chief Investment Officer Introduction

Introduction to KraneShares

About KraneShares Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China focused ETFs provides investors with solutions to capture China’s importance as an essential element of a well-designed investment portfolio. We strive to provide innovative, first to market strategies that have been developed based on our strong partnerships and our deep knowledge of investing. We help investors stay current on global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).

2 Introduction

About the Speakers

Kevin Liu joined China International Capital Brendan Ahern joined KraneShares in June 2012 to Corporation (CICC) in 2011 and holds the title of head the firm’s efforts in becoming the leading Executive Director as a Strategist in the Research provider of China-focused exchange traded funds Department. From a top-down strategy approach by (ETFs) and Chinese investment education for US incorporating macro (growth and policy) and micro clients. Since early 2001, Brendan worked for one variables (corporate earnings and valuations etc.), his the largest global ETF providers where he was an Kevin Liu Brendan Ahern Executive main responsibility is to provide investors with Chief original member of the business development Director investment strategies, as well as cross- Investment team. His “from the ground up” experience at a market/asset/sector allocation recommendations. Officer global ETF provider allowed him to become His focuses include Chinese equities as well as intimately acquainted with all aspects of the general global markets. Mr. Liu ranked the second in business. His expertise spans product Portfolio Strategy of the 2017 II All-China and development, marketing, branding, business Mainland China Best Analysts Ranking. Prior to strategy, operations, portfolio management, CICC, Mr. Liu worked as a Quantitative Strategist with trading, and client execution. UBS Hong Kong. He obtained his master degrees from both Cornell University and Tsinghua University.

For questions during the presentation please email: info kraneshares.com @ 3 Part I: Current market and macro condition

4 How China performed YTD? Ranking the top globally

Global Equity Index Performance YTD

30%

25%

20%

15% % Return Total YTD

10%

0% Kospi Hang Seng STI MSCI EM CSI Overseas Nikkei 225 S&P 500 MSCI China A China Internet

Source: Bloomberg, as of November, 2019 5 Overall growth: largely stable despite high volatility for monthly path

% Real GDP growth Growth of industrial value added % 16 30 Real GDP growth (YoY) VAI growth (YoY) Real GDP growth (QoQ annualized) VAI growth (QoQ annualized) 25 14

20 12

8 5 6.1

6 0 6.0 GDP growth target for 2019: 6%-6.5% 4 -5 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19

Source: CEIC, CICC Research 6 Retail sales: non-housing related discretionary consumption stayed relatively resilient YTD

Retail sales growth of above-designated-size YoY (%) Total retail sales growth 15 YoY (%) enterprises, by commodity 20 Retail sales growth of staples*, 3MMA** 14 Nominal retail sales growth (excluding auto) Retail sales growth of discretionary goods, 3MMA Nominal retail sales growth Non-staple (excluding auto), 3MMA 13 15

10 11

10 5

8 0

-5 6 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19

Source: CEIC, CICC Research 7 Monetary: “behind the curve“; with more room and necessity for further policy supports

Short-term policy rate Corporate investment returns and risk-free rate % % 6 China: 7-day reverse repo rate 10 US: Fed funds rate 10Y T-bond rate South Korea: 7-day reverse repo rate ROIC of listed non-financial companies 5 9 EU: deposit rate

8 4

7 3

6 2 Investment returns fell 5

1 4

0 3

Risk-free rate picks up -1 2 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-02 Nov-04 Nov-06 Nov-08 Nov-10 Nov-12 Nov-14 Nov-16 Nov-18 May-11 May-12 May-13 May-14 May-15 May-16 May-17 May-18 May-19

Source: CEIC, CICC Research 8 Monetary: surging CPI due to abnormally high pork price might cause policy hesitation

Consumer Price Index Inventory growth of YoY (%) YoY (%) YoY (%) 10 25 20 hogs and reproductive sows CPI Inventory of hogs CPI: Non-food Inventory of reproductive sows 8 20 10 CPI: Food (RHS)

6 15 0

4 10 -10

2 5 -20

0 0 -30

-2 -5 -40

-4 -10 -50 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19

Source: CEIC, CICC Research 9 Fiscal: deficit and local gov’t bond issuance expanded, to lend supports for moderate recovery in infrastructure inv’t

Government revenue less expenditure Rmb bn Jan-Sept 500 General public budget Government fund

-500

-1,000

-1,500

-2,000 Deficit widened or surplus -2,500 narrowed

-3,000 2015 2016 2017 2018 2019

Source: CEIC, CICC Research 10 RMB: Renminbi stabilizes after August depreciation

CNY exchange rate Overseas flows to HK is tightly correlated with RMB Dec 31, 2014=100 CNY/USD Overseas flows to HK Equities 100 CFETS basket CNY index 6.1 (US$m) USD/CNY (Inverted, RHS) Spot CNY exchange rate (RHS) 1,500 15-day mavg 6.0 99 6.2

6.3 98 1,000 6.2 6.4 97 CNY 6.5 depreciates 500 6.4 96 6.6 95 6.7 0 6.6 94 6.8 (500) 6.8 93 6.9

92 7.0 (1,000) 7.0

91 7.1

90 7.2 (1,500) 7.2 Jul-16 Jan-14 Jan-19 Jun-14 Jun-19 Oct-17 Apr-15 Sep-15 Feb-16 Dec-16 Aug-18 Nov-14 Nov-19 Mar-18 May-17 Feb-18 Feb-19 Aug-17 Aug-18 Aug-19 Nov-17 Nov-18 Nov-19 May-18 May-19

Source: CEIC, EPFR, CICC Research 11 Growth forecast: China’s real GDP is expected to grow 6.1% YoY in 2019 and 5.9% YoY in 2020

% Real GDP YoY Nominal GDP YoY (RHS) % 9 11.7 12 11.411.3 11.2

10.1 10.3 9.6 10 8 9.1 8.3 7.8 7.8 8 8.1 7.6 7.8 8 7.2 7.1 7.3 7 6.7 7.0 6.2 6 6.0 6.1

6 4

7.0 7.0 6.9 6.8 6.7 6.7 6.7 6.8 6.9 6.9 6.8 6.8 6.8 6.7 6.5 6.4 6.4 6.2 6 6 5.9 5.9 5.8 5.8 5 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015: 6.9% 2016: 6.7% 2017: 6.8% 2018: 6.6% 2019E: 6.1% 2020E: 5.9%

Source: Bloomberg, Wind Info, CICC Research 12 Earnings forecast: 2020 earnings is expected to grow ~6% for both A and H-shares

A-share Offshore China

Financials Non-Financials Overall Financials Non-Financials Overall Year

Earnings Revenue Earnings Earnings Earnings Revenue Earnings Earnings Net margin % Net margin % growth % growth % growth % growth % growth % growth % growth % growth %

2018A 1.7 13.7 4.4 -4.8 -1.6 3.0 18.0 6.2 20.0 11.0

2019E 11.2 8.4 5.1 5.2 8.4 7.5 5.6 6.1 4.5 6.0

2020E 6.5 6.5 5.1 5.5 5.9 4.8 5.2 6.1 5.5 5.2

2021E 7.8 6.0 5.2 8.9 8.4 7.1 5.1 6.4 10.8 8.9

Estimates based on the following forecasts by our macro team: p According to the 2020 outlook of our macro team, real GDP growth in 2020 and 2021 is estimated to decelerate to 5.9% and 5.8%. Meanwhile, nominal GDP growth will likely moderate to 7.3% and 6.9%. p CPI may reach 3.8% in 2020 but will fall back down to around 1.2% in 2021. p With respect to monetary policy, LPR may receive a 40bp but in 2H20 and another 30bp cut in 1H21. Regarding fiscal policy, it is estimated that aggregate central and local government budget deficit will expand by 1ppt. p In addition, US-China trade tension is expected to ease further, restoring exports growth momentum. The yuan may fluctuate within a narrow range against the dollar.

Source: Bloomberg, Wind Info, CICC Research 13 (x) Comparison: global markets 2019E P/E ratio 30 28

25 23 19 20 18 17 17 17 17 18 15 15 15 14 14 14 15 15 15 15 13 10 10 7

5 US EM

Competitive India Korea Japan Europe Taiwan Pakistan Thailand Australia Malaysia A-shares AC Word fin.) advantage: Indonesia Philippines Hong Kong Asia Pacific MSCI China AP ex Japan New Zealand

low A-shares (non- valuations (x) Comparison: global markets 2019E P/B ratio 4 globally 3.4 3.1 2.8 3 2.6 2.3 1.9 2.0 2.0 2.1 2 1.6 1.8 1.5 1.5 1.5 1.6 1.6 1.2 1.2 1.3 1.0 1.0 1

0 US EM India Korea Japan Taiwan Europe Pakistan Thailand Australia Malaysia A-shares AC Word fin.) Indonesia Philippines Hong Kong Asia Pacific MSCI China AP ex Japan New Zealand A-shares (non- Source: Factset, Bloomberg, CICC Research 14 Part II: Challenges and policy responses

15 External: trade frictions might still pose external demand shocks in the near term

% U.S. imports from China $34bn list $16bn list $200bn list $300bn list 60

20 3.5

-20 (15.0)

(33.6) -40

(50.7)

-60 Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Jan-19 Jun-19 Source: USTR, Wind, CICC Research 16 Sectors more affected by tariffs initially are mostly labor intensive

Source: USTR, Wind, CICC Research 17 A-shares’ earnings growth could thereby be 4.2ppt lower due to the tariffs in base case

Impact on Impact on non earnings Impact on net financial growth of non Scenario analysis on US-China Impact on Impact on GDP margin of non listcos financial trade friction export growth growth financials revenue listcos over listcos growth next 12 months A-share non financials Bull -2.2% -0.2% -0.5% -0.1% -2.3% Base -4.0% -0.4% -0.9% -0.1% -4.2% Bear -6.2% -0.6% -1.4% -0.2% -6.6% Offshore Chinese non financials Bull -2.2% -0.2% -0.5% -0.1% -2.8% Base -4.0% -0.4% -0.9% -0.3% -5.1% Bear -6.2% -0.6% -1.5% -0.4% -8.1% Assumption 1: US$50bn/US$200bn/Remainders imports to tariff has elasticity of 2/1.5/1 respectively Assumption 2: A-share/offshore Chinese non-financials revenue to nominal GDP growth has elasticity of 2.31/2.44 Assumption 3: A-share/offshore Chinese non-financials net margin to export growth has elasticity of 0.03/0.07 Source: Factset, Wind, CICC Research 18 Further escalation could also hurt the US by passing through higher cost and domestic inflation

Breakdown of US tariffs on Chinese goods by products Toys 18 82 Footwear 7 45 47 Textiles 10 77 13 Electronics 41 17 41 Stone & glass 50 30 20 Machinery 51 13 36 Vegetable products 56 41 3 Plastics & rubber 57 23 20 Wood products 64 20 14 2 Metals 68 17 13 1 Fuel 73 27 Miscellaneous 62 12 6 19 Chemicals 49 6 13 32 Prepared food 87 12 1 Animal products 75 11 2 12 Transportation 92 2 2 4 Hide & skins 100 Minerals 34 66 0 10 20 30 40 50 60 70 80 90 100 As of Sep 23, 2018 List A (Sep 1, 2019) List B (Dec 15, 2019) Not covered Breakdown of US tariffs on Chinese goods Final Consumption 29 40 30 2 Capital Goods 38 11 49 2 Others 22 1 37 40 Intermediate 82 11 4 4

Overall 46 21 29 4

0 10 20 30 40 50 60 70 80 90 100 As of Sep 23, 2018 List A (Sep 1, 2019) List B (Dec 15, 2019) Not covered 19 Source: USTR, PIIE, Wind, CICC Research Policy responses: 1) boost domestic demands (e.g. VAT & fee cut, auto, infrastructure inv’t); 2) to open service accounts

Total tax and contribution rate (% of profit) US$bn Brazil 65.1 US total trade deficit to China China 64.9 100 France 60.4 US service surplus to China Belgium 57.7 Italy 53.1 50 Mexico 53.0 India 52.1 Austria 51.5 0 Sweden 49.1 Germany 49.0 Australia 47.4 -50 Spain 47.0 Japan 46.7 Russian… 46.3 Czech… 46.1 -100 United States 43.8 Philippines 42.9 Turkey 40.9 -150 Netherlands 40.8 Portugal 39.8 Malaysia 39.2 -200 Vietnam 37.8 Finland 37.3 Norway 37.0 -250 Chile 34.0 Korea, Rep. 33.1 Indonesia 30.1 -300 United… 30.0 Thailand 29.5 South Africa 29.1 -350 Switzerland 28.8 Israel 26.2 Denmark 23.8 -400 Hong Kong… 22.9 Canada 20.5

0 10 20 30 40 50 60 70 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Source: Wind, CICC Research 20 Internal: the mystery of China’s “high leverage”: high savings + the inefficient financial system

China: debt/GDP Deposits/GDP % 260

240

220

200

180

160

140

120 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 21 By sector: more critical for corporate and LGFV; household & govt sectors are in net cash

(%) Global non-financial sector debt to GDP, 1Q19 (%) Global government sector debt to GDP, 1Q19 250

400 378 358 203 350 316 200 183 304 292

300 275 263 259 254 249 235 250 228 150 134 190 200 179 98 100 99 97 157 150 100 87 85 134 79 125

150 119 116 67 63 62 59 53 51 78 77 100 70 39 50 37 35 34 32 30 50 14 0 0 HK UK US US UK HK Italy Italy India India Brazil Spain China Brazil Korea Spain Japan China Korea Japan Turkey Russia France Mexico Turkey Russia France Greece Mexico Greece Canada Canada Thailand Australia Malaysia Thailand Australia Malaysia Germany Germany Argentina Indonesia Argentina Indonesia SouthAfrica SouthAfrica

(%) Global household sector debt to GDP, 1Q19 (%) Global corporate sector debt to GDP, 1Q19 140 250 119 222 120 100 200 100 92 87 155 75 73 150 142 80 69 68 60 119 58 58 103 60 54 54 52 97 94 100 41 78 75 75 34 69 71 68 40 28 54 58 48 46 46 18 17 16 50 42 41 20 14 12 26 6 23 16 0 0 UK US HK Italy HK UK US India Italy Brazil Spain China India Korea Japan Brazil Spain Russia Turkey China France Korea Mexico Japan Greece Canada Turkey Russia France Mexico Greece Thailand Australia Malaysia Canada Germany Argentina Thailand Indonesia Australia Malaysia Germany Argentina Indonesia SouthAfrica

SouthAfrica 22 Structural changes: China has witnessed visible growth model transition over the past decade

At the first glance, China’s overall growth continued to slow down since 2008… …but a deeper look shows that the tertiary sector (services and consumption) already exceeded 50% (%) China real GDP growth Primary Industry Secondary Industry 16 60 Tertiary Industry

52.2 14 50

40 40.7 10

30 8

20 6

4 10

7.2 2 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 23 Part III: Structural changes and secular trends

24 Stock market: ~60% are consumption and technology related companies in the MSCI China index

“New economy” is gaining share in China’s listed space in MSCI China index now consists of ~60% of terms of market value consumption/technology related companies

China listcos (A+offshore) Market Value "New MSCI China Index sector Breakdown economy" Materials, breakdown by sectors 100% sectors Utilities, 2.5 2.0

IT Energy, 4.7 90% Industrials, Health Care 5.1 80% Real Estate, Cons. Stap. 5.7 70% Cons. Disc. Communicati on Services, 60% Telecom 26.7

50% Industrials

Real Estate 40% Financials, Consumer 22.2 Discretionary Utilities , 22.4 30% Materials 20% Energy

10% Consumer Financials Staples, 2.6 Information 0% Health Care, Technology, 3.0 3.1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

25 The divergence: “new economy” has been outperforming “old economy” by very large margins

”New economy” sectors …stock price of MNCs with large …and in offshore China equities outperformed “old economy” China exposure also as well… sectors in A-share in recent years… outperformed

A-Share market : old and new economy Offshore China market : old and new MNCs: old and new economy index economy index index 1200 700 "New economy" vs. Old economy" sector MNCs New Economy - Old Economy (RHS) New Economy - Old Economy (RHS) 1,600 1,000 "Old economy" sector MNCs A-share Old Economy index MSCI China Old Economy index 400 "New economy" sector MNCs 200 A-share New Economy index MSCI China New Economy index 600 1,400 1000 During 2003-2008, MNCs 800 350 in "old economy " sectors 500 with large exposure to 150 China benefited from 1,200 China's fast growth and 800 300 outperformed "new 600 400 economy" sectors... 1,000 100 250 600 300 800 400 200 50

200 600 400 150 200 ...but the trend reversed 0 since 2011 with "New 100 economy" MNCs 400 100 outperforming "old 200 economy" MNCs, 0 -50 0 synchronizing the 200 50 outperformance in offshore China equities' "new 2003/1/1=100 economy" sectors 0 -200 0 -100 0 -100 Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 Jan/17 Jan/18 Jan/19 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19

Note: Old economy sectors: investment related, including raw materials, industrials, and utilities; New economy sectors: consumption related, including consumer discretionary, consumer staples, health care and information technology. 26 Source: Wind, Factset, CICC Research Urbanization and hukou system reform: the main driver of aggregate demands in China

China’s urban residence population vs. urban De Jure (Hukou) population

(mn) Urban De Jure Population (LHS) Urban Hukou Population (LHS) 900 Urbanization Rate of De Jure Population Urbanization Rate of Hukou Population 70% 百

800 59.6% 60%

700 50% 600 41.2%

500 40%

400 30%

300 20% 200

10% 100

0 0% 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 27 Two “super networks”: the high-speed railway

The eight vertical and eight horizontal system

28 Two “super networks”: the mobile internet & 5G; China has become a so-called cash-free society

(mn) China mobile network users and penetration rate Mn Average monthly active users (past 6 months) Size of mobile netizens (LHS) 1,000 925 Mobile internet penetration rate (RHS,%) 900 900 70 ……and has reached 800 800 58.5% by 58.5 54.1 60 the end of 2018 700 700 48.6 44.7 50 600 600 40.7 526 521 36.7 500 500 China's mobile 40 429 31.0 internet penetration 400 400 26.4 30 rate was only 1.3% in 22.6 300 300 2006…… 17.5 212 20 200 132 200 8.9 100 3.8 10 100 100 1.3 27 0 0 0 Wechat Taobao Alipay Youku JD Meituan Didi Dianping

Mn Mobile shopping users (Mar 2019) China internet penetration rate Urban area Rural area Tier 1 96 74.6 75 71 69.1 New tier 1 158 65.8 62.8 65 60.3 Tier 2 192

55 Tier 3 219 45 38.4 35.4 Tier 4 165 33.1 35 31.6 28.1 28.8 Tier 5 & below 106 25 2006 2007 2008 2009 2010 2011 0 50 100 150 200 250

Source: Wind, CICC Research 29 Secular Trend 1: Consumption upgrades • Home-grown brands that benefit from urbanization in tier-3, 4 and 5 cities

Clothing ANTA SPORTS CHOW TAI FIYTA LAO FEN XIANG NANJI E-COMMERCE LUTAI TEXTILE SEMIR SHENZHOU INTL FOOK

Food KWEICHOU JIANGSU YANGHE SNOW BREWERIES MENGNIU YILI ANGEL YEAST HAITIAN SHUANGHUI WH GROUP XIABUXIABU ZHOUHEIYA MOUTAI DAIRY

Residence GREE ELECTRIC MIDEA GROUP HISENSE KELON SUOFEIYA HOME OPPEIN HAIER ELECTRONICS HENGAN INTL ROBAM SUPOR HOLI C&S PAPER HOME

Transportation GEELY ZHONGSH HUAZHU HOTELS SAIC MOTOR BYD AIRCHINA BTG HOTELS S.F. EXPRESS GREAT WALL MOTOR MINTH GROUP AUTOMOBILE ENG

Health Care DONG E-E- LBX PHARMACY TONGHUA SHANGHAI PIENTZEHUANG TONGRENTANG HENGRUI KELUN CSPC JIAO DONGBAO PHARMACEUTICALS

Recreation TAL NEW ORIENTAL UTOUR KINGSOFT TENCENT TCL NETEASE EDUCATION

30 Advantages of Chinese industries: large population and domestic consumer market

China vs. US annual retail sales (US$ trn) US annual retail sales China annual retail sales 7

6.0 6 5.8 5.8 5.5 5.3 5.4 5.2 5.0 5.0 5 4.8 4.8 4.6 4.4 4.3 4.4 4.3 4.4 4.1 4.1 4.0 4 3.8 3.6 3.5 3.3 3.4 3.4 3.1 2.9 2.9 3 2.7 2.6 2.3 2.5 2.3 2.2 2.0 1.9 2 1.7 1.2 1.0 1 0.8 0.6 0.7 0.5 0.5 0.6 0.3 0.4 0.4 0.4 0.2 0.2 0.2 0.3 0

31 Secular trend 2: Manufacturing upgrade – the rise of “Made in China”

Consumer products mfg.

LUXSHARE PRECISION SUNNY OPTICAL GOERTEK HIKIVISION DAHUA TECH YUTO PACKAGING LEXY SHENZHOU INTL AAC TECH

Automobile

SAIC HUAYU AUTOMOBILE GREAT WALL GEELY AUTOMOBILE MINTH GROUP YUTONG BUS SAILUN JINYU FUYAO GLASS BYD MOTOR MOTOR

Machinery

SANY HEAVY ANHUI HELI HAN’S LASER MEIYA CRRC CORP WEICHAI POWER XCMG GOLDWIND INDUSTRY OPTOELECTRONIC

32 The competitiveness of China’s manufacturing industry: service robots

Ninebot is a leader in the market of electric self-balancing personal transporters. Founded in 2014, the firm acquired Segway in April 2015 and gained some patents on self-balancing personal transporters.

33 China has the world’s the largest manufacturing sector: industrial production reached $4.4trillion in 2018

34 Source: WSJ, CICC Research How have Chinese assets performed? The smart beta, CICC select portfolios In long-term horizons, CICC Select 300 and CICC Select 100 booked returns of 21.04% and 18.15% from 2005 to 24th April, 2019, which are significant higher than CSI300 TR’s 12.42%

CICC Select 300 CICC Select 100 CSI 300 TR 16

35 China is still the world’s best place to search for growth

China accounts for 43% of the world’s consumer, technology and China accounts for 39% of the world’s consumer, technology and pharmaceutical companies for companies with a market cap pharmaceutical companies for companies with market cap between US between US $5–80BN and 2018 & 2019e revenue growth above 15%. $5–80BN and 2018 & 2019e revenue growth above 20%. (26% A-shares and 17% offshore Chinese stocks) (23% A-shares and 16% offshore Chinese stocks)

China A 2% 2% 2% 2% China A 2% 2% 2% Offshore China 2% 2% 2% Offshore China 2% 2% United States 2% United States 2% 2% Germany China: 39% Canada 2% 3% Canada 28% Germany 31% Japan 3% China: 43% South Korea 5% Hong Kong Hong Kong 5% Japan Australia 5% Bermuda Australia 5% Denmark 7% 0% Denmark France 5% India India 0% Luxembourg 7% Macau 6% Macau New Zealand New Zealand 33% 30% Philippines South Korea United Kingdom United Kingdom

Source: FactSet, CICC Research Based on constituents of the MSCI ACWI Index and MSCI All China Index. 36 MSCI A-Share Inclusion Update

37 2019 performance differential for Chinese companies listed in Mainland China, Hong Kong and the US

No. of Listed 3M Average Daily Free Float Market Market Free-float Cap Proxy Index YTD Performance Companies Volume Cap%

China A-share 3,578 47,327 2,676,829 56% MSCI China A 27.37% Shanghai 1,451 20,519 1,529,215 32% Shanghai SE 180 16.65% Shenzhen 2,127 26,808 1,147,614 24% Shenzhen Component 27.55% Offshore China 1,521 9,280 2,083,187 44% MSCI China 12.15% Hong Kong 1,086 5,563 1,277,350 27% FTSE China 50 8.39% H-share 269 2,448 556,266 12% Red Chip 163 872 241,875 5% P-Chip 654 2,243 479,209 10% US 195 3,597 718,056 15% CSI Overseas China Internet 18.76% NYSE 62 1,668 502,100 11% NASDAQ 133 1,929 215,956 5% AMEX 7 1 518 0% B-share 99 32 82,543 2% Singapore 90 52 4,223 0% Canada 18 30 875 0% London 11 1 23 0% Others 22 5 117 0% All China 5,099 56,606 4,760,016 100% MSCI China All Shares 17.78%

Data from CICC Research as of 12/31/2018, 38 YTD Performance from Bloomberg as of 11/18/2019 Chinese companies listed in different locations offer different exposures Hong Kong is Financials heavy, US offers more new economy and China A shares is unique for Consumer Staples and Health Care

60 China Index Sector Exposures

40 %

0 Financials Consumer Communication Industri als Consumer Staples Information Health Care Real Estate Materials Energy Utilities Discretionary Services Technology

China Overseas Internet FTSE China 50 MSCI China A MSCI China All Shares

39 Data from Bloomberg as of 9/30/2019. China is the largest country in the MSCI Emerging Markets (EM) Index by weight and by number of securities. Pro-forma Weights of MSCI EM post November 26th SAIR.

% of MSCI EM Index % of MSCI EM Index by Market Capitalization Weight by Number of Securities

China, Other, 27% 33.6% Other, 25.9 China, 50.4%

Brazil, Brazil, 3.8% 7.2% South India, 5.9% India, 9.1% Korea, 11.6% Taiwan, Taiwan, 6.2% 11.5% South Korea 7.8%

Data from MSCI as of 11/7/2019. See end of the presentation for index definitions 40 There have been continuous foreign inflows via stock and bond connect into Chinese domestic assets.

RMB bn Foreign Holdings of domestic Chinese assets: Equity Foreign Holdings: Bond 2,200

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 41 Source: Bloomberg, Wind, CICC Research The Index Matters MSCI is a trusted index provider for the largest global investment managers

1 As of June 30, 2018, as reported on September 30, 2018 by eVestment, Morningstar and Bloomberg, retrieved 6/30/2019. 2 Based on latest P&I AUM data and MSCI clients as of March 2018, retrieved 6/30/2019. 3 As of September 2018 , retrieved 6/30/2019; defined as each share class of an exchange traded fund, as identified by a separate Bloomberg ticker. Only primary listings, and not cross-listings, are counted. 4 As of Dec 2016, according to Intersec LLC , retrieved 6/30/2019. 42 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 MSCI All Country World Top 5 Country Weights in the MSCI All Country 1 Index (Market cap weighted)1 World Index (GDP Weighted) 30% 60%

50% 25%

40% 20%

30% 15%

20% 10%

10% 5%

0% 0% United States Japan United Kingdom China France United States China Japan Germany France

43 1. Data from MSCI as of 8/31/2019. See end of the presentation for index definitions MSCI’s current Global Standard definition of China only represents a small portion of China’s total market The MSCI China Index was historically limited to Chinese companies listed on the Hong Kong Stock Exchange. Recently, MSCI expanded this definition to include US-listed Chinese companies. This definition represents only a small percentage of Chinese stocks.

U.S. Listed MSCI’s Current Global Standard Definition of China Chinese MSCI China Index Companies Hong Kong and US = 94.7% 10.49% China A-Shares = 5.3% 500 Stocks Hong Kong Listed MSCI’s Definition of Entire Mainland A-Share Market Chinese MSCI China A Onshore IMI Index Companies Shanghai and Shenzhen only 30.25% Mainland China 2,411 Stocks A-Shares 59.18%

Source: MSCI Data as of 7/31/2019, Retrieved on 8/31/2019. Excluding Singapore listed (0.1%) 44 See end of the presentation for index definitions. Source: MSCI as of 7/31/2019. On February 28, 2019, MSCI made a larger than expected China A-Share inclusion announcement. MSCI will increase the inclusion factor of China A-Shares in their Global Standard Indexes from 5% to 20% in 2019.

Currently, $1.8 trillion track the MSCI EM Index. Up to $300b are expected to be reallocated to China A-Shares after full inclusion.

China A-Share Inclusion in MSCI EM

2018 Inclusion1 2019 Inclusion2 Future Proposed Inclusion3

China China China Others Others Others 30.5 30.5 26.3 34.3 34.5 29.6

China A Shares India India Korea 0.8 India Korea 7.2 8.3 Taiwan 15.0 8.3 Taiwan Taiwan 12.2 China A Korea 11.1 10.5 9.0 China A Shares 10.5 Shares 4.1 17.4 1. MSCI.com/China retrieved 9/30/2019 2. “MSCI Will Increase The Weight Of China A Shares In MSCI Indexes” MSCI, Feb. 2019, retrieved 9/30/2019 45 3. MSCI, “China and the future of equity allocations”, June 2019., retrieved 9/30/2019 Index Matters: We believe that the MSCI China A Index has distinct advantages over the CSI 300 Index

• MSCI is a trusted index provider for the largest global investment managers with over $14.8 trillion in equity assets estimated to be benchmarked to MSCI Indexes4 • The CSI 300 Index, originally built for domestic Chinese investors, consists of the 300 largest China A-Share stocks ranked by market capitalization. In comparison, the MSCI China A Index currently tracks 427 securities deemed most suitable for international investors by MSCI. • The constituent count overlap of these indexes is 53%1. • We believe gaining exposure to China A-Shares through an MSCI index provides international investors with several distinct advantages.

MSCI China A Index and CSI 300 Index Comparison2 MSCI Quick Facts Over $14.8 trillion in assets are estimated to MSCI China A Index CSI 300 Index MSCI Advantage • be benchmarked to MSCI indexes.3

Consistent with MSCI EM and MSCI Largest 300 China A-share • 99 of top 100 global investment managers Index Construction Based on MSCI’s Global Investable ACWI which enables building and companies ranked by full market MSCI clients.4 Market Index (GIMI) methodology monitoring portfolios in a cohesive Methodology capitalization manner • 1040+ ETFs are based on MSCI indexes, more than any other index provider.5 Only A-shares that can be traded Any A-share listed in Shanghai Eligible Universe No QFII or RQFII quota restraints through Stock Connect and Shenzhen Stock Exchanges • 94% of US pension fund assets invested in global equities are benchmarked to MSCI Subject to Foreign Ownership Limits of Does not consider Foreign Tailored for foreign investors indexes.6 Foreign Ownership 30% Ownership Limits

1.Data from Bloomberg as of 9/30/2019, calculated by KraneShares. Large Cap Size Segment targets 70%, Uses a fixed number of 2.Data from MSCI as of 9/30/2019. See page 20 for index definitions. Standard Size Segment targets 85%, Designed to dynamically reflect the Size Segmentation constituents 3.As of June 30, 2018, as reported on September 30, 2018 by eVestment, and IMI Size Segment targets 99% of the growing China capital markets Morningstar and Bloomberg, retrieved 9/30/2018. methodology coverage universe 4.Based on latest P&I AUM data and MSCI clients as of March 2018, retrieved 9/30/2018 5.As of September 2018 , retrieved 9/30/2018; defined as each share class of Semi-Annual and Quarterly Index an exchange traded fund, as identified by a separate ticker. Only primary Semi-Annual Reviews More timely reflection of the market Index Review Reviews listings, and not cross-listings, are counted. 6.As of Dec 2016, according to Intersec LLC , retrieved 9/30/2018.

46 Conclusion: Perception Is Not China’s Reality

• KraneShares Offers a Balanced Perspective on China’s Economy and Capital Markets

• On June 1, 2018, MSCI commenced the multi-year process of including China Others 26.3 China A-Shares into their Global Standard Indexes. 29.6

• This rebalance has triggered what may be one of the largest asset transfers in recent history, causing hundreds of billions of dollars to be reallocated to China A-Share securities KBA holds today. India • We believe full inclusion could take up to five years, potentially 7.2 providing a sustained catalyst for the performance of China’s Mainland China A Taiwan Shares market. 9.0 Korea 17.4 10.5

Source: MSCI, “China and the future of equity allocations”, June 2019. 47 Investment Strategies to Capture China’s Growing Importance In Global Portfolios

China Thematic China Core EM Thematic MSCI Emerging Markets ex China Internet MSCI China A China Emerging Markets Consumer China Health Care Technology MSCI All China Emerging Markets Healthcare China Environment China Fixed Income Global Thematic China ESG One Belt One Road China RMB Commercial Paper China A Electric Vehicles & Large Cap Smart Beta China High Yield USD Future Mobility Bond

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50 Index Definitions: MSCI China Index: captures large and mid cap representation across China H shares, B shares, Red chips and P chips. MSCI All China Investable Market Index (IMI): captures large, mid and small cap representation across all China securities that are listed in China and Hong Kong, the US and in Singapore. The index includes: A-Shares, H shares, B shares, Red chips and P chips as well as China securities that are listed on the NYSE Euronext (New York), NASDAQ, New York AMEX and Singapore exchanges. MSCI ACWI Index: captures large and mid cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries. The MSCI ACWI GDP Weighted Index: is based on the flagship MSCI ACWI Index, its parent index, and includes large and mid cap stocks across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. The index uses a different weighting scheme than its cap weighted parent index, however. The weight of each country in the index is derived from its economic size (using GDP data) rather than the size of its equity market. Over time, GDP data tends to have more stability than equity market prices. The MSCI EAFE Index: is an equity index which captures large and mid cap representation across Developed Markets countries around the world, excluding the US and Canada. S&P 500 Index: is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ The MSCI Emerging Markets Index: captures large and mid cap representation across 23 Emerging Markets (EM) countries. The MSCI USA Index: The MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. The MSCI Frontier Markets (FM) Index: captures large and mid cap representation across 29 Frontier Markets countries. The MSCI China A Index: captures large and mid cap representation across China securities listed on the Shanghai and Shenzhen exchanges. The MSCI China A International Index: is a free-float adjusted market capitalization weighted index that is designed to track the equity market performance of large-cap and mid-cap Chinese securities listed on the Shanghai and Shenzhen Stock Exchanges. The Index is based on the concept of the integrated MSCI China equity universe with mainland Chinese securities included. The MSCI United Arab Emirates (UAE) Index: designed to measure the performance of the large and mid cap segments of the UAE market. CSI 300 Index: consists of the 300 largest and most liquid A-share stocks. The Index aims to reflect the overall performance of China A-share market..

45 51 Important Notes Carefully consider the Funds’ investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds' full and summary prospectus, which may be obtained by visiting www.kraneshares.com. Read the prospectus carefully before investing. ETF shares are not redeemable with the issuing fund other than in large Creation Unit aggregations. Instead, investors must buy or sell ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value (NAV) when buying and receive less than net asset value when selling. The NAV of the Fund’s shares is calculated each day the national securities exchanges are open for trading as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 P.M. Eastern time (the “NAV Calculation Time”). Shares are bought and sold at market price not NAV. Closing price returns are based on the midpoint of the bid/ask spread at 4:00 P.M. Eastern Time (when NAV is normally determined). Investing involves risk, including possible loss of principal. There can be no assurance that a Fund will achieve its stated objectives. The Funds are subject to political, social or economic instability within China which may cause decline in value. Fluctuations in currency of foreign countries may have an adverse effect to domestic currency values. Emerging markets involve heightened risk related to the same factors as well as increase volatility and lower trading volume. The ability of the KraneShares Bosera MSCI China A ETF to achieve its investment objective is dependent on the continuous availability of A-Shares and the ability to obtain, if necessary, additional A-Shares quota. If the Fund is unable to obtain sufficient exposure due to the limited availability of A-Share quota, the Fund could seek exposure to the component securities of the Underlying Index by investing in other types of securities. The Fund may invest in derivatives, which are often more volatile than other investments and mat magnify the Fund’s gains or losses. Although the information provided in this document has been obtained from sources which Krane Funds Advisors, LLC believes to be reliable, it does not guarantee accuracy of such information and such information may be incomplete or condensed. The KraneShares ETFs are distributed by SEI Investments Distribution Company (SIDCO), which is not affiliated with Krane Funds Advisors, LLC, the Investment Adviser for the Fund.

46 52 Questions for Brendan & Kevin? Email [email protected] Subscribe to our email roundup on China’s markets: www.ChinaLastNight.com