Semi-Annual Report

KraneShares Global Carbon Strategy ETF

KraneShares European Carbon Allowance Strategy ETF

KraneShares California Carbon Allowance Strategy ETF

KraneShares Global Carbon Offset Strategy ETF

KraneShares Electrification Metals Strategy ETF

KraneShares RockefellerSM Ocean Engagement ETF 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

   

 

 

 

 

Table of Contents

 

Schedule of Investments/Consolidated Schedules of Investments    
KraneShares Global Carbon Strategy ETF   1
KraneShares European Carbon Allowance Strategy ETF   2
KraneShares California Carbon Allowance Strategy ETF   3
KraneShares Global Carbon Offset Strategy ETF   4
KraneShares Electrification Metals Strategy ETF   5
KraneShares Rockefeller Ocean Engagement ETF   6
Glossary   10
Statement of Assets and Liabilities/Consolidated Statements of Assets and Liabilities   11
Statements of Operations/Consolidated Statements of Operations   13
Statements of Changes in Net Assets/Consolidated Statements of Changes in Net Assets   15
Financial Highlights/Consolidated Financial Highlights   21
Notes to Financial Statements/Notes to Consolidated Financial Statements   23
Approval of Advisory Agreement and Sub-Advisory Agreement   41
Disclosure of Fund Expenses   49
Supplemental Information   51

 

 

 

 

 

The Funds file their complete schedules of Fund holdings with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year as an exhibit to their reports on Form N-PORT. The Funds’ Form N-PORT reports are available on the Commission’s website at https://www.sec.gov.

 

A description of the policies and procedures that KraneShares Trust uses to determine how to vote proxies relating to Fund securities, as well as information relating to how the Funds voted proxies relating to Fund securities during the most recent 12-month year ended June 30, are available (i) without charge, upon request, by calling 855-857-2638; and (ii) on the Commission’s website at https://www.sec.gov.

 

Fund shares may only be purchased or redeemed from a Fund in Creation Unit aggregations. Investors who cannot transact in Creation Units of a Fund’s shares must buy or sell Fund shares in the secondary market at their market price, which may be at a premium or discount to a Fund’s net asset value, with the assistance of a broker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying Fund shares and receive less than net asset value when selling Fund shares.

 

 

 

 

Consolidated Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares Global Carbon Strategy ETF

 

 

    Shares     Value  
SHORT-TERM INVESTMENT — 57.1%                
State Street Institutional U.S. Government Money Market Fund, Cl Premier, 5.298%(A)     278,046,727     $ 278,046,727‌  
TOTAL SHORT-TERM INVESTMENT
(Cost $278,046,727)
            278,046,727‌  
                 
TOTAL INVESTMENTS — 57.1%
(Cost $278,046,727)
            278,046,727‌  
OTHER ASSETS LESS LIABILITIES – 42.9%             208,506,668‌  
NET ASSETS - 100%           $ 486,553,395‌  

 

A list of the open futures contracts held by the Fund at September 30, 2023, is as follows:

 

Type of Contract   Number of
Contracts
    Expiration
Date
  Notional
Amount
    Value     Unrealized
Appreciation/
(Depreciation)
 
Long Contracts                                    
CA Carbon Allowance^     690     Dec-2024   $ 21,183,888     $ 27,296,400‌     $ 6,112,512  
CA Carbon Allowance^     3,694     Dec-2023     104,786,068‌       135,606,740‌       30,820,672  
Euro FX^     2     Dec-2023     269,528‌       265,313‌       (4,215 )
ICE ECX Emission^     2,990     Dec-2023     268,907,133‌       258,539,666‌       (16,523,856 )
ICE ECX Emission^     259     Dec-2024     24,495,349‌       23,530,497‌       (1,567,482 )
RGGI VINTAGE^     1,703     Dec-2023     23,704,242‌       24,914,890‌       1,210,648  
UK Emission Allowance^     363     Dec-2023     29,583,555‌       17,367,997‌       (12,926,329 )
                $ 472,929,763     $ 487,521,503‌     $ 7,121,950  

 

^ Security is held by the KFA Global Carbon Subsidiary, Ltd. as of September 30, 2023.
(A) The rate shown is the 7-day effective yield as of September 30, 2023.

 

As of September 30, 2023, all of the Fund’s investments and other financial instruments were considered Level 1 of the fair value hierarchy, in accordance with the authoritative guidance under U.S. GAAP.

 

See “Glossary” for abbreviations.

 

The accompanying notes are an integral part of the financial statements.

 

1

 

 

Consolidated Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares European Carbon Allowance Strategy ETF

 

 

    Shares     Value  
SHORT-TERM INVESTMENT — 29.7%                
State Street Institutional U.S. Government Money Market Fund, Cl Premier, 5.298%(A)     6,306,465     $ 6,306,465‌  
TOTAL SHORT-TERM INVESTMENT
(Cost $6,306,465)
             
6,306,465‌
 
                 
TOTAL INVESTMENTS — 29.7%
(Cost $6,306,465)
             
6,306,465‌
 
OTHER ASSETS LESS LIABILITIES – 70.3%             14,916,207‌  
NET ASSETS - 100%           $ 21,222,672‌  

 

A list of the open futures contracts held by the Fund at September 30, 2023, is as follows:

 

Type of Contract   Number of
Contracts
    Expiration
Date
  Notional
Amount
    Value     Unrealized
Appreciation/
(Depreciation)
 
Long Contracts                                    
Euro FX^     1     Dec-2023   $ 134,764     $ 132,656‌     $ (2,108 )
ICE ECX Emission^     248     Dec-2023     22,863,231‌       21,444,093‌       (1,846,367 )
                $ 22,997,995     $ 21,576,749‌     $ (1,848,475 )

 

^ Security is held by the KraneShares European Carbon Subsidiary, Ltd. as of September 30, 2023.
(A) The rate shown is the 7-day effective yield as of September 30, 2023.

 

As of September 30, 2023, all of the Fund’s investments and other financial instruments were considered Level 1 of the fair value hierarchy, in accordance with the authoritative guidance under U.S. GAAP.

 

See “Glossary” for abbreviations.

 

The accompanying notes are an integral part of the financial statements.

 

2

 

 

Consolidated Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares California Carbon Allowance Strategy ETF

 

 

    Shares     Value  
SHORT-TERM INVESTMENT — 86.5%                
State Street Institutional U.S. Government Money Market Fund, Cl Premier, 5.298%(A)     227,728,879     $ 227,728,879‌  
TOTAL SHORT-TERM INVESTMENT
(Cost $227,728,879)
             
227,728,879‌
 
                 
TOTAL INVESTMENTS — 86.5%.
(Cost $227,728,879)
             
227,728,879‌
 
OTHER ASSETS LESS LIABILITIES – 13.5%             35,599,261‌  
NET ASSETS - 100%           $ 263,328,140‌  

 

A list of the open futures contracts held by the Fund at September 30, 2023, is as follows:

 

Type of Contract   Number of
Contracts
    Expiration
Date
  Notional
Amount
    Value     Unrealized
Appreciation/
(Depreciation)
 
Long Contracts                                    
CA Carbon Allowance^     7,158     Dec-2023   $ 203,963,951     $ 262,770,180‌     $ 58,806,229  

 

^ Security is held by the KraneShares California Carbon Subsidiary, Ltd. as of September 30, 2023.
(A) The rate shown is the 7-day effective yield as of September 30, 2023.

 

As of September 30, 2023, all of the Fund’s investments and other financial instruments were considered Level 1 of the fair value hierarchy, in accordance with the authoritative guidance under U.S. GAAP.

 

See “Glossary” for abbreviations.

 

The accompanying notes are an integral part of the financial statements.

 

3

 

 

Consolidated Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares Global Carbon Offset Strategy ETF

 

 

    Shares     Value  
SHORT-TERM INVESTMENT — 41.0%                
State Street Institutional U.S. Government Money Market Fund, Cl Premier, 5.298%(A)     508,325     $ 508,325‌  
TOTAL SHORT-TERM INVESTMENT
(Cost $508,325)
             
508,325‌
 
                 
TOTAL INVESTMENTS — 41.0%
(Cost $508,325)
             
508,325‌
 
OTHER ASSETS LESS LIABILITIES – 59.0%             732,663‌  
NET ASSETS - 100%           $ 1,240,988‌  

 

A list of the open futures contracts held by the Fund at September 30, 2023, is as follows:

 

Type of Contract   Number of
Contracts
    Expiration
Date
  Notional
Amount
    Value     Unrealized
Appreciation/
(Depreciation)
 
Long Contracts                                    
CBL Global Emission Offset^     250     Dec-2023   $ 313,767     $ 190,000‌     $ (123,767 )
CBL Nature-Based Global Emission Offset^     200     Dec-2023     397,214       362,000       (35,214 )
                $ 710,981     $ 552,000     $ (158,981 )

 

^ Security is held by the KraneShares Global Carbon Offset Strategy Subsidiary, Ltd. as of September 30, 2023.
(A) The rate shown is the 7-day effective yield as of September 30, 2023.

 

As of September 30, 2023, all of the Fund’s investments and other financial instruments were considered Level 1 of the fair value hierarchy, in accordance with the authoritative guidance under U.S. GAAP.

 

See “Glossary” for abbreviations.

 

The accompanying notes are an integral part of the financial statements.

 

4

 

 

Consolidated Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares Electrification Metals Strategy ETF

 

 

    Shares     Value  
SHORT-TERM INVESTMENT — 73.8%                
State Street Institutional U.S. Government Money Market Fund, Cl Premier, 5.298%(A)     3,296,863     $ 3,296,863‌  
TOTAL SHORT-TERM INVESTMENT
(Cost $3,296,863)
            3,296,863‌  
                 
TOTAL INVESTMENTS — 73.8%.
(Cost $3,296,863)
            3,296,863‌  
OTHER ASSETS LESS LIABILITIES – 26.2%             1,168,558‌  
NET ASSETS - 100%           $ 4,465,421‌  

 

A list of the open futures contracts held by the Fund at September 30, 2023, is as follows:

 

Type of Contract   Number of
Contracts
    Expiration
Date
  Notional
Amount
    Value     Unrealized
Appreciation/
(Depreciation)
 
Long Contracts                                    
Aluminum^     8     Nov-2023   $ 434,387     $ 468,700‌     $ 34,313
Cobalt Fastmarket^     11     Nov-2023     393,040       404,989       11,949
Copper^     12     Dec-2023     1,127,941       1,121,250       (6,691 )
Lithium Lioh Come^     4     Nov-2023     172,452       108,000       (64,452 )
LME Nickel^     9     Nov-2023     1,093,958       1,003,374       (90,584 )
LME Primary Aluminum^     9     Nov-2023     489,567       527,962       38,395  
LME Zinc^     12     Nov-2023     719,643       794,775       75,132  
                $ 4,430,988     $ 4,429,050     $ (1,938 )

 

^ Security is held by the KraneShares Electrification Metals Strategy Subsidiary, Ltd. as of September 30, 2023.
(A) The rate shown is the 7-day effective yield as of September 30, 2023.

 

As of September 30, 2023, all of the Fund’s investments and other financial instruments were considered Level 1 of the fair value hierarchy, in accordance with the authoritative guidance under U.S. GAAP.

 

See “Glossary” for abbreviations.

 

The accompanying notes are an integral part of the financial statements.

 

5

 

 

Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares Rockefeller Ocean Engagement ETF

 

 

    Shares     Value  
COMMON STOCK — 95.8%                
CANADA — 5.4%                
Financials — 3.3%                
Loblaw     938     $ 80,063  
                 
Health Care — 2.1%                
Premium Brands Holdings, Cl A     706       49,660  
TOTAL CANADA             129,723  
                 
CHINA — 4.1%                
Consumer Discretionary — 3.0%                
Yum China Holdings     1,328       73,996  
                 
Industrials — 1.1%                
COSCO SHIPPING Ports     40,000       26,150  
TOTAL CHINA             100,146  
                 
DENMARK — 2.4%                
Industrials — 2.4%                
AP Moller - Maersk, Cl B     10       18,081  
Vestas Wind Systems*     1,804       38,820  
TOTAL DENMARK             56,901  
                 
FAROE ISLANDS — 2.1%                
Consumer Staples — 2.1%                
Bakkafrost P     989       50,887  
TOTAL FAROE ISLANDS             50,887  
                 
FINLAND — 3.6%                
Energy — 2.0%                
Neste     1,456       49,530  

 

The accompanying notes are an integral part of the financial statements.

 

6

 

 

Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares Rockefeller Ocean Engagement ETF (continued)

 

    Shares     Value  
COMMON STOCK (continued)                
Industrials — 1.6%                
Konecranes     1,134     $ 37,771  
TOTAL FINLAND             87,301  
                 
FRANCE — 6.5%                
Consumer Staples — 1.3%                
Danone     586       32,424  
                 
Industrials — 5.2%                
Bureau Veritas     2,178       54,213  
Cie de Saint-Gobain     1,188       71,543  
              125,756  
TOTAL FRANCE             158,180  
                 
GERMANY — 1.2%                
Materials — 1.2%                
Evonik Industries     1,612       29,569  
TOTAL GERMANY             29,569  
                 
JAPAN — 6.1%                
Consumer Staples — 3.9%                
Nissui     8,000       39,226  
Shiseido     1,600       56,291  
              95,517  
Industrials — 2.2%                
Nippon Yusen     400       10,417  
Penta-Ocean Construction     7,200       42,903  
              53,320  
TOTAL JAPAN             148,837  
                 
LUXEMBOURG — 2.2%                
Health Care — 2.2%                
Eurofins Scientific     930       52,678  
TOTAL LUXEMBOURG             52,678  
                 
MEXICO — 2.3%                
Consumer Staples — 2.3%                
Arca Continental     6,000       54,816  
TOTAL MEXICO             54,816  
                 
NETHERLANDS — 1.4%                
Industrials — 1.4%                
Arcadis     770       34,729  
TOTAL NETHERLANDS             34,729  

 

The accompanying notes are an integral part of the financial statements.

 

7

 

 

Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares Rockefeller Ocean Engagement ETF (continued)

 

    Shares     Value  
COMMON STOCK (continued)                
PORTUGAL — 1.8%                
Consumer Staples — 1.8%                
Jeronimo Martins SGPS     1,960     $ 44,118  
TOTAL PORTUGAL             44,118  
                 
SPAIN — 2.5%                
Health Care — 0.5%                
Pharma Mar     306       10,406  
                 
Utilities — 2.0%                
EDP Renovaveis     2,974       48,853  
TOTAL SPAIN             59,259  
                 
SWITZERLAND — 1.7%                
Materials — 1.7%                
DSM-Firmenich     496       42,079  
TOTAL SWITZERLAND             42,079  
                 
THAILAND — 4.2%                
Consumer Staples — 2.0%                
Thai Union Group, Cl F     125,000       49,777  
                 
Materials — 2.2%                
Indorama Ventures     74,000       52,839  
TOTAL THAILAND             102,616  
                 
UNITED KINGDOM — 10.2%                
Consumer Staples — 4.2%                
Nomad Foods*     3,368       51,261  
Reckitt Benckiser Group     700       49,503  
              100,764  
Energy — 3.1%                
Subsea 7     5,478       75,883  
                 
Utilities — 2.9%                
SSE PLC     3,640       71,529  
TOTAL UNITED KINGDOM             248,176  
                 
UNITED STATES — 38.1%                
Consumer Discretionary — 1.4%                
Sweetgreen, Cl A*     2,894       34,005  
                 
Consumer Staples — 3.4%                
Albertsons, Cl A     3,652       83,083  

 

The accompanying notes are an integral part of the financial statements.

 

8

 

 

Schedule of Investments (Unaudited) September 30, 2023

 

KraneShares Rockefeller Ocean Engagement ETF (concluded)

 

    Shares     Value  
COMMON STOCK (continued)                
Industrials — 15.7%                
Advanced Drainage Systems     726     $ 82,640  
Array Technologies*     1,040       23,077  
Chart Industries*     172       29,089  
Great Lakes Dredge & Dock*     4,300       34,271  
MasTec*     562       40,447  
Tetra Tech     322       48,954  
Waste Management     804       122,562  
              381,040  
Information Technology — 5.6%                
Teledyne Technologies*     154       62,921  
Trimble*     1,346       72,496  
              135,417  
Materials — 10.1%                
Berry Global Group     1,816       112,428  
Crown Holdings     818       72,377  
Sealed Air     1,844       60,594  
              245,399  
Utilities — 1.9%                
American Water Works     380       47,055  
TOTAL UNITED STATES             925,999  
                 
TOTAL COMMON STOCK                
(Cost $2,398,453)             2,326,014  
                 
TOTAL INVESTMENTS — 95.8%                
(Cost $2,398,453)             2,326,014  
OTHER ASSETS LESS LIABILITIES – 4.2%             102,854  
NET ASSETS - 100%           $ 2,428,868  

 

Industries are utilized for compliance purposes, whereas sectors are utilized for reporting.
* Non-income producing security.

 

As of September 30, 2023, all of the Fund’s investments were considered Level 1 of the fair value hierarchy, in accordance with the authoritative guidance under U.S. GAAP.

 

See “Glossary” for abbreviations.

 

The accompanying notes are an integral part of the financial statements.

 

9

 

 

Schedule of Investments/Consolidated Schedules of Investments (Unaudited)

September 30, 2023

 

Glossary (abbreviations used in preceding Schedule of Investments):

 

Fund Abbreviations

Cl — Class

PLC — Public Limited Company

 

10

 

 

Consolidated Statements of Assets and Liabilities (Unaudited)

September 30, 2023

 

     
KraneShares
Global Carbon
Strategy ETF(1)
    KraneShares
European Carbon
Allowance
Strategy ETF(2)
    KraneShares
California Carbon
Allowance
Strategy ETF(3)
 
Assets:                        
Investments at Value   $ 278,046,727     $ 6,306,465     $ 227,728,879  
Cash and Cash Equivalents     108,109,892       10,975,291       43,383,648  
Foreign Currency at Value     68,992,934       3,579,071        
Cash Collateral on Futures Contracts     33,583,403       647,920       31,356,666  
Variation Margin Receivable on Future Contracts     1,686,530       281       1,002,120  
Dividend and Interest Receivable     40,357       915       27,248  
Prepaid Expenses     4,126       136       1,423  
Total Assets     490,463,969       21,510,079       303,499,984  
                         
Liabilities:                        
Variation Margin Payable on Future Contracts     3,580,216       273,073        
Payable for Management Fees     325,783       14,064       171,019  
Payable for Trustees’ Fee     4,575       270       825  
Payable for Investment Securities Purchased                 40,000,000  
Total Liabilities     3,910,574       287,407       40,171,844  
Net Assets   $ 486,553,395     $ 21,222,672     $ 263,328,140  
                         
Net Assets Consist of:                        
Paid-in Capital   $ 493,313,932     $ 25,126,589     $ 244,961,147  
Total Distributable Earnings/(Loss)     (6,760,537 )     (3,903,917 )     18,366,993  
Net Assets   $ 486,553,395     $ 21,222,672     $ 263,328,140  
Outstanding Shares of Beneficial Interest (unlimited authorization - no par value)     13,450,000       725,006       9,250,002  
Net Asset Value, Offering and Redemption Price Per Share   $ 36.17     $ 29.27     $ 28.47  
Cost of Investments   $ 278,046,727     $ 6,306,465     $ 227,728,879  
Cost of Foreign Currency     68,135,554       3,542,387        

 

(1) KraneShares Global Carbon Strategy ETF includes the account of the Fund’s Subsidiary, KFA Global Carbon Subsidiary, Ltd.
(2) KraneShares European Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares European Carbon Subsidiary, Ltd.
(3) KraneShares California Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares California Carbon Subsidiary, Ltd.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

11

 

 

Statement of Assets and Liabilities/Consolidated Statements of Assets and Liabilities (Unaudited)

September 30, 2023

 

    KraneShares
Global Carbon Offset

Strategy ETF(1)
    KraneShares
Electrification Metals
Strategy ETF(2)
    KraneShares
Rockefeller Ocean
Engagement ETF
 
Assets:                        
Investments at Value   $ 508,325     $ 3,296,863     $ 2,326,014  
Cash Collateral on Futures Contracts     503,769       944,153        
Cash and Cash Equivalents     255,122       193,280       137,801  
Variation Margin Receivable on Future Contracts     2,500       47,747        
Dividend and Interest Receivable     74       479       1,885  
Reclaim Receivable                 305  
Prepaid Expenses     14       136        
Total Assets     1,269,804       4,482,658       2,466,005  
                         
Liabilities:                        
Variation Margin Payable on Future Contracts     28,000       14,284        
Payable for Management Fees     782       2,846       1,037  
Payable for Trustees’ Fee     34       107       2  
Payable for Investment Securities Purchased                 5,315  
Foreign Currency Payable at Value                 30,783  
Total Liabilities     28,816       17,237       37,137  
Net Assets   $ 1,240,988     $ 4,465,421     $ 2,428,868  
                         
Net Assets Consist of:                        
Paid-in Capital   $ 10,389,348     $ 5,643,618     $ 2,500,051  
Total Distributable Loss     (9,148,360 )     (1,178,197 )     (71,183 )
Net Assets   $ 1,240,988     $ 4,465,421     $ 2,428,868  
Outstanding Shares of Beneficial Interest (unlimited authorization - no par value)     550,002       200,002       100,002  
Net Asset Value, Offering and Redemption Price Per Share   $ 2.26     $ 22.33     $ 24.29  
Cost of Investments   $ 508,325     $ 3,296,863     $ 2,398,453  
Cost (Proceeds) of Foreign Currency                 (30,858 )

 

(1) KraneShares Global Carbon Offset Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Global Carbon Offset Strategy Subsidiary, Ltd.
(2) KraneShares Electrification Metals Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Technology Metals Strategy Subsidiary, Ltd.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

12

 

 

Consolidated Statements of Operations (Unaudited)

For the Period Ended September 30, 2023

 

    KraneShares
Global Carbon
Strategy ETF(1)
    KraneShares
European Carbon
Allowance
Strategy ETF(2)
    KraneShares
California Carbon
Allowance
Strategy ETF(3)
 
Investment Income:                        
Interest Income   $ 8,883,825     $ 309,698     $ 4,630,381  
Total Investment Income     8,883,825       309,698       4,630,381  
                         
Expenses:                        
Management Fees     2,238,372       105,047       952,562  
Trustees’ Fees     18,574       859       7,357  
Insurance Expense     5,054       209       1,639  
Total Expenses     2,262,000       106,115       961,558  
Net Investment Income     6,621,825       203,583       3,668,823  
                         
Net Realized Gain (Loss) on:                        
Futures Contracts     (6,722,263 )     (1,238,293 )     825,048  
Foreign Currency Translations     2,098,000       330,952        
Net Realized Gain (Loss)     (4,624,263 )     (907,341 )     825,048  
                         
Net Change in Unrealized Appreciation (Depreciation) on:                        
Futures Contracts     (25,925,548 )     (2,697,498 )     39,167,602  
Foreign Currency Translations     (4,965,646 )     (642,622 )      
Net Change in Unrealized Appreciation (Depreciation)     (30,891,194 )     (3,340,120 )     39,167,602  
Net Realized and Unrealized Gain (Loss)     (35,515,457 )     (4,247,461 )     39,992,650  
Net Increase (Decrease) in Net Assets Resulting from Operations   $ (28,893,632 )   $ (4,043,878 )   $ 43,661,473  

 

See Note 4 in Notes to Financial Statements.
(1) KraneShares Global Carbon Strategy ETF includes the account of the Fund’s Subsidiary, KFA Global Carbon Subsidiary, Ltd.
(2) KraneShares European Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares European Carbon Subsidiary, Ltd.
(3) KraneShares California Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares California Carbon Subsidiary, Ltd.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

13

 

 

Statements of Operations/Consolidated Statements of Operations (Unaudited)

For the Period Ended September 30, 2023

 

    KraneShares Global
Carbon Offset
Strategy ETF(1)
    KraneShares
Electrification Metals
Strategy ETF(2)
    KraneShares
Rockefeller Ocean
Engagement ETF(3)
 
Investment Income:                        
Dividend Income   $     $     $ 2,577  
Interest Income     12,227       143,406        
Less: Foreign Taxes Withheld                 (389 )
Total Investment Income     12,227       143,406       2,188  
                         
Expenses:                        
Management Fees     5,221       28,093       1,037  
Trustees’ Fees     53       237       2  
Insurance Expense     20       167        
Total Expenses     5,294       28,497       1,039  
Net Investment Income     6,933       114,909       1,149  
                         
Net Realized Gain (Loss) on:                        
Futures Contracts     (1,850,865 )     (2,961,373 )      
Foreign Currency Translations                 31  
Net Realized Gain (Loss)     (1,850,865 )     (2,961,373 )     31  
                         
Net Change in Unrealized Appreciation (Depreciation) on:                        
Investments     —        —        (72,439 )
Futures Contracts     382,722       1,068,067        
Foreign Currency Translations                 76  
Net Change in Unrealized Appreciation (Depreciation)     382,722       1,068,067       (72,363 )
Net Realized and Unrealized Loss     (1,468,143 )     (1,893,306 )     (72,332 )
Net Decrease in Net Assets Resulting from Operations   $ (1,461,210 )   $ (1,778,397 )   $ (71,183 )

 

See Note 4 in Notes to Financial Statements.
(1) KraneShares Global Carbon Offset Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Global Carbon Offset Strategy Subsidiary, Ltd.
(2) KraneShares Electrification Metals Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Technology Metals Strategy Subsidiary, Ltd.
(3) Commenced operations on September 12, 2023.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

14

 

 

Consolidated Statements of Changes in Net Assets (continued)

 

    KraneShares Global Carbon
Strategy ETF(1)
 
    Period Ended
September 30,
2023
    Year Ended
March 31,
 
    (unaudited)     2023  
Operations:                
Net Investment Income (Loss)   $ 6,621,825     $ (1,214,400 )
Net Realized Gain (Loss)     (4,624,263 )     23,854,461  
Net Change in Unrealized Appreciation (Depreciation)     (30,891,194 )     (21,218,272 )
Net Increase (Decrease) in Net Assets Resulting from Operations     (28,893,632 )     1,421,789  
Distributions     (23,965,856 )     (132,430,808 )
                 
Capital Share Transactions:(2)                
Issued     3,792,460       44,916,398  
Redeemed     (99,657,494 )     (641,881,247 )
Decrease in Net Assets from Capital Share Transactions     (95,865,034 )     (596,964,849 )
Total Decrease in Net Assets     (148,724,522 )     (727,973,868 )
                 
Net Assets:                
Beginning of Year/Period     635,277,917       1,363,251,785  
End of Year/Period   $ 486,553,395     $ 635,277,917  
                 
Share Transactions:                
Issued     100,000       1,150,000  
Redeemed     (2,650,000 )     (14,450,000 )
Net Decrease in Shares Outstanding from Share Transactions     (2,550,000 )     (13,300,000 )

 

(1) KraneShares Global Carbon Strategy ETF includes the account of the Fund’s Subsidiary, KFA Global Carbon Subsidiary, Ltd.
(2) Includes transaction costs related to creations and redemptions.

 

The accompanying notes are an integral part of the financial statements.

 

15

 

 

Consolidated Statements of Changes in Net Assets (continued)

 

    KraneShares European Carbon
Allowance Strategy ETF(1)
 
    Period Ended
September 30,
2023
    Year Ended
March 31,
 
    (unaudited)     2023  
Operations:                
Net Investment Income (Loss)   $ 203,583     $ (117,020 )
Net Realized Loss     (907,341 )     (1,216,186 )
Net Change in Unrealized Appreciation (Depreciation)     (3,340,120 )     4,549,220  
Net Increase (Decrease) in Net Assets Resulting from Operations     (4,043,878 )     3,216,014  
                 
Capital Share Transactions:(2)                
Issued     2,751       20,531,219  
Redeemed     (6,208,331 )     (21,085,266 )
Decrease in Net Assets from Capital Share Transactions     (6,205,580 )     (554,047 )
Total Increase (Decrease) in Net Assets     (10,249,458 )     2,661,967  
                 
Net Assets:                
Beginning of Year/Period     31,472,130       28,810,163  
End of Year/Period   $ 21,222,672     $ 31,472,130  
                 
Share Transactions:                
Issued     —        600,000  
Redeemed     (200,000 )     (675,000 )
Net Decrease in Shares Outstanding from Share Transactions     (200,000 )     (75,000 )

 

(1) KraneShares European Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares European Carbon Subsidiary, Ltd.
(2) Includes transaction costs related to creations and redemptions.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

16

 

 

Consolidated Statements of Changes in Net Assets (continued)

 

    KraneShares California Carbon
Allowance Strategy ETF(1)
 
    Period Ended
September 30,
2023
    Year Ended
March 31,
 
    (unaudited)     2023  
Operations:                
Net Investment Income   $ 3,668,823     $ 2,453,910  
Net Realized Gain (Loss)     825,048       (42,498,467 )
Net Change in Unrealized Appreciation (Depreciation)     39,167,602       22,137,284  
Net Increase (Decrease) in Net Assets Resulting from Operations     43,661,473       (17,907,273 )
Distributions     (1,870,820 )     (589,669 )
                 
Capital Share Transactions:(2)                
Issued     1,427,176       161,770,906  
Redeemed     (9,199,377 )     (53,113,424 )
Increase (Decrease) in Net Assets from Capital Share Transactions     (7,772,201 )     108,657,482  
Total Increase in Net Assets     34,018,452       90,160,540  
                 
Net Assets:                
Beginning of Year/Period     229,309,688       139,149,148  
End of Year/Period   $ 263,328,140     $ 229,309,688  
                 
Share Transactions:                
Issued     50,000       6,425,000  
Redeemed     (375,000 )     (2,250,000 )
Net Increase (Decrease) in Shares Outstanding from Share Transactions     (325,000 )     4,175,000  

 

(1) KraneShares California Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares California Carbon Subsidiary, Ltd.
(2) Includes transaction costs related to creations and redemptions.

 

The accompanying notes are an integral part of the financial statements.

 

17

 

 

Consolidated Statements of Changes in Net Assets (continued)

 

    KraneShares Global Carbon Offset
Strategy ETF(1)
 
    Period Ended
September 30,
2023
    Period Ended
March 31,
 
    (unaudited)     2023(2)  
Operations:                
Net Investment Income (Loss)   $ 6,933     $ (5,348 )
Net Realized Loss     (1,850,865 )     (7,122,300 )
Net Change in Unrealized Appreciation (Depreciation)     382,722       (541,703 )
Net Decrease in Net Assets Resulting from Operations     (1,461,210 )     (7,669,351 )
Distributions     (7,791 )     (10,008 )
                 
Capital Share Transactions:(3)                
Issued     389,298       10,000,050  
Increase in Net Assets from Capital Share Transactions     389,298       10,000,050  
Total Increase (Decrease) in Net Assets     (1,079,703 )     2,320,691  
                 
Net Assets:                
Beginning of Year/Period     2,320,691       —   
End of Year/Period   $ 1,240,988     $ 2,320,691  
                 
Share Transactions:                
Issued     150,000       400,002  
Net Increase in Shares Outstanding from Share Transactions     150,000       400,002  

 

(1) KraneShares Global Carbon Offset Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Global Carbon Offset Strategy Subsidiary, Ltd.
(2) Commenced operations on April 20, 2022.
(3) Includes transaction costs related to creations and redemptions.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

18

 

 

Consolidated Statements of Changes in Net Assets (concluded)

 

    KraneShares Electrification Metals
Strategy ETF(1)
 
    Period Ended
September 30,
2023
    Period Ended
March 31,
 
    (unaudited)     2023(2)  
Operations:                
Net Investment Income   $ 114,909     $ 146,106  
Net Realized Gain (Loss)     (2,961,373 )     1,551,770  
Net Change in Unrealized Appreciation (Depreciation)     1,068,067       (1,070,005 )
Net Increase (Decrease) in Net Assets Resulting from Operations     (1,778,397 )     627,871  
Distributions     —        (27,671 )
                 
Capital Share Transactions:(3)                
Issued     —        22,618,491  
Redeemed     (16,974,873 )     —   
Increase (Decrease) in Net Assets from Capital Share Transactions     (16,974,873 )     22,618,491  
Total Increase (Decrease) in Net Assets     (18,753,270 )     23,218,691  
                 
Net Assets:                
Beginning of Year/Period     23,218,691       —   
End of Year/Period   $ 4,465,421     $ 23,218,691  
                 
Share Transactions:                
Issued     —        900,002  
Redeemed     (700,000 )     —   
Net Increase (Decrease) in Shares Outstanding from Share Transactions     (700,000 )     900,002  

 

(1) KraneShares Electrification Metals Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Technology Metals Strategy Subsidiary, Ltd.
(2) Commenced operations on October 13, 2022.
(3) Includes transaction costs related to creations and redemptions.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

19

 

 

Statement of Changes in Net Assets

 

    KraneShares
Rockefeller Ocean
Engagement ETF
 
    Period Ended
September 30,
2023(1)
 
Operations:        
Net Investment Income   $ 1,149  
Net Realized Gain     31  
Net Change in Unrealized Appreciation (Depreciation)     (72,363 )
Net Decrease in Net Assets Resulting from Operations     (71,183 )
         
Capital Share Transactions:(2)        
Issued     2,500,051  
Increase in Net Assets from Capital Share Transactions     2,500,051  
Total Increase in Net Assets     2,428,868  
         
Net Assets:        
Beginning of Year/Period      
End of Year/Period   $ 2,428,868  
         
Share Transactions:        
Issued     100,002  
Net Increase in Shares Outstanding from Share Transactions     100,002  

 

(1) Commenced operations on September 12, 2023.
(2) Includes transaction costs related to creations and redemptions.

 

Amounts designated as “—” are $0 or have been rounded to $0.

 

The accompanying notes are an integral part of the financial statements.

 

20

 

 

Financial Highlights/Consolidated Financial Highlights

 

Selected Per Share Data & Ratios

For the Periods Ended September 30, 2023 (Unaudited)

For the Years/Periods Ended March 31

For a Share Outstanding Throughout Each Period

 

    Net Asset
Value,
Beginning of
Period
  Net Investment
Income (Loss)
  Net Realized and
Unrealized Gain
(Loss)
on Investments
  Total
from
Operations
  Distribution
from Net
Investment
Income
  Return of
Capital
    ($)   ($)*   ($)   ($)   ($)   ($)
KraneShares Global Carbon Strategy ETF              
2023***(1)   39.70   0.44   (2.33)   (1.89)   (1.64)  
2023(1)   46.53   (0.06)   1.59   1.53   (8.36)  
2022(1)   28.39   (0.38)   18.77   18.39   (0.25)  
2021(1)(2)   20.00   (0.12)   8.51   8.39    
KraneShares European Carbon Allowance Strategy ETF              
2023***(3)   34.02   0.25   (5.00)   (4.75)    
2023(3)   28.81   (0.15)   5.36   5.21    
2022(3)(4)(5)   25.00   (0.13)   3.94   3.81    
KraneShares California Carbon Allowance Strategy ETF              
2023***(6)   23.95   0.39   4.33   4.72   (0.20)  
2023(6)   25.77   0.26   (2.02)   (1.76)   (0.06)  
2022(4)(6)   25.00   (0.11)   0.88   0.77    
KraneShares Global Carbon Offset Strategy ETF              
2023***(7)   5.80   0.02   (3.54)   (3.52)   (0.02)  
2023(7)(8)   25.00   (0.01)   (19.16)   (19.17)   (0.03)  
KraneShares Electrification Metals Strategy ETF              
2023***(9)   25.80   0.38   (3.85)   (3.47)    
2023(9)(10)   25.00   0.18   0.65   0.83   (0.03)  
KraneShares Rockefeller Ocean Engagement ETF              
2023***(11)   25.00   0.01   (0.72)   (0.71)    

 

* Per share data calculated using average shares method.
** Total return is based on the change in net asset value of a share during the year or period and assumes reinvestment of dividends and distributions at net asset value. Total return is for the period indicated and periods of less than one year have not been annualized. The return shown does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Excludes effects of standard creation and redemption transaction fees associated with creation units.
*** For the period ended September 30, 2023.
Annualized.
†† Portfolio turnover rate is for the period indicated and periods of less than one year have not been annualized. Excludes effect of in-kind transfers.
(1) KraneShares Global Carbon Strategy ETF includes the account of the Fund’s Subsidiary, KFA Global Carbon Subsidiary, Ltd.
(2) The Fund commenced operations on July 29, 2020.
(3) KraneShares European Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares European Carbon Subsidiary, Ltd.
(4) The Fund commenced operations on October 4, 2021.
(5) All per share amounts and net asset values have been adjusted as a result of a 3 to 1 forward stock split on December 10, 2021.
(6) KraneShares California Carbon Allowance Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares California Carbon Subsidiary, Ltd.

 

The accompanying notes are an integral part of the financial statements.

 

21

 

 

 

 

 

 

 

 

Total from
Distributions
($)
  Net Asset
Value, End
of Period
($)
  Total Return
(%)**
  Net Assets
End of Period
($)(000)
  Ratio of
Expenses to
Average Net
Assets
(%)
  Ratio of Expenses
to Average Net
Assets (Excluding
Waivers, as
applicable)
(%)
  Ratio of Net
Investment
Income (Loss)
to Average Net
Assets
(%)
  Portfolio
Turnover
(%)
                               
(1.64)   36.17   (4.89)   486,553   0.79    0.79    2.31    †† 
(8.36)   39.70   4.43   635,278   0.79   0.79   (0.13)    
(0.25)   46.53   64.71   1,363,252   0.87   0.87   (0.86)    
  28.39   41.95   93,701   0.78    0.78    (0.72)    †† 
                               
  29.27   (13.96)   21,223   0.79    0.79    1.52    †† 
  34.02   18.08   31,472   0.79   0.79   (0.49)    
  28.81   15.24   28,810   0.87    0.87    (0.87)    †† 
                               
(0.20)   28.47   19.83   263,328   0.79    0.79    3.01    †† 
(0.06)   23.95   (6.83)   229,310   0.79   0.79   1.11    
  25.77   3.08   139,149   0.91    0.91    (0.91)    †† 
                               
(0.02)   2.26   (60.78)   1,241   0.79    0.79    1.04    †† 
(0.03)   5.80   (76.74)   2,321   0.79    0.79    (0.10)    †† 
                               
  22.33   (13.45)   4,465   0.79    0.79    3.20    †† 
(0.03)   25.80   3.33   23,219   0.79    0.79    1.44    †† 
                               
  24.29   (2.84)   2,429   0.85    0.85    0.94    †† 

 

(7) KraneShares Global Carbon Offset Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Global Carbon Offset Strategy Subsidiary, Ltd.
(8) The Fund commenced operations on April 20, 2022.
(9) KraneShares Electrification Metals Strategy ETF includes the account of the Fund’s Subsidiary, KraneShares Technology Metals Strategy Subsidiary, Ltd.
(10) The Fund commenced operations on October 13, 2022.
(11) The Fund commenced operations on September 12, 2023.

 

The accompanying notes are an integral part of the financial statements.

 

22

 

 

Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited)

 

1. ORGANIZATION

 

KraneShares Trust (the “Trust”) is a Delaware Statutory Trust formed on February 3, 2012. The Trust is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of September 30, 2023, the Trust had thirty-three operational series. The financial statements herein and the related notes pertain to the following 6 series: KraneShares Global Carbon Strategy ETF, KraneShares European Carbon Allowance Strategy ETF, KraneShares California Carbon Allowance Strategy ETF, KraneShares Global Carbon Offset Strategy ETF, KraneShares Electrification Metals Strategy ETF and Kraneshares Rockefeller Ocean Engagement ETF (each, a “Fund” and collectively, the “Funds”). All Funds are non-diversified Funds, as defined under Section 5(b)(1) of the Investment Company Act. Krane Funds Advisors, LLC (“Krane” or the ‘‘Adviser’’), a Delaware limited liability company, serves as the investment adviser for the Funds and is subject to the supervision of the Board of Trustees (the ‘‘Board’’). The Adviser is responsible for managing the investment activities of the Funds, the Funds’ business affairs and other administrative matters. The Adviser may use sub-advisers (each, a “Sub-Adviser” or collectively, the “Sub-Advisers”) to perform the day-to-day management of the Funds.

 

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 September 30, 2023, Central Huijin Investment Limited, a mainland Chinese-domiciled entity, and HKSCC Nominees Limited, held approximately 40.1% and 39.4%, 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.

 

The KFA Global Carbon Subsidiary, Ltd. is a wholly-owned subsidiary of the KraneShares Global Carbon Strategy ETF (“Subsidiary”). The Subsidiary is organized under the laws of the Cayman Islands as an exempt limited company. Information regarding the KraneShares Global Carbon Strategy ETF and its subsidiary has been consolidated in the Consolidated Schedule of Investments, Consolidated Statements of Assets and Liabilities, Consolidated Statements of Operations, Consolidated Statements of Changes in Net Assets and Consolidated Financial Highlights.

 

The KraneShares European Carbon Subsidiary, Ltd. is a wholly-owned subsidiary of the KraneShares European Carbon Allowance Strategy ETF (“Subsidiary”). The Subsidiary is organized under the laws of the Cayman Islands as an exempt limited company. Information regarding the KraneShares European Carbon Allowance Strategy ETF and its subsidiary has been consolidated in the Consolidated Schedule of Investments, Consolidated Statements of Assets and Liabilities, Consolidated Statements of Operations, Consolidated Statements of Changes in Net Assets and Consolidated Financial Highlights.

 

The KraneShares California Carbon Subsidiary, Ltd. is a wholly-owned subsidiary of the KraneShares California Carbon Allowance Strategy ETF (“Subsidiary”). The Subsidiary is organized under the laws of the Cayman Islands as an exempt limited company. Information regarding the KraneShares California Carbon Allowance Strategy ETF and its subsidiary has been consolidated in the Consolidated Schedule of Investments, Consolidated Statements of Assets and Liabilities, Consolidated Statements of Operations, Consolidated Statements of Changes in Net Assets and Consolidated Financial Highlights.

 

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Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited) (continued)

 

The KraneShares Global Carbon Offset Strategy Subsidiary, Ltd. is a wholly-owned subsidiary of the KraneShares Global Carbon Offset Strategy ETF (“Subsidiary”). The Subsidiary is organized under the laws of the Cayman Islands as an exempt limited company. Information regarding the KraneShares Global Carbon Offset Strategy ETF and its subsidiary has been consolidated in the Consolidated Schedule of Investments, Consolidated Statements of Assets and Liabilities, Consolidated Statements of Operations, Consolidated Statements of Changes in Net Assets and Consolidated Financial Highlights.

 

The KraneShares Technology Metals Strategy Subsidiary, Ltd. is a wholly-owned subsidiary of the KraneShares Electrification Metals Strategy ETF (“Subsidiary”). The Subsidiary is organized under the laws of the Cayman Islands as an exempt limited company. Information regarding the KraneShares Electrification Metals Strategy ETF and its subsidiary has been consolidated in the Consolidated Schedule of Investments, Consolidated Statements of Assets and Liabilities, Consolidated Statements of Operations, Consolidated Statements of Changes in Net Assets and Consolidated Financial Highlights.

 

Shares of the Funds are listed and traded on the NYSE Arca, Inc. (the “Exchange”). Market prices for Fund shares (“Shares”) may be different from their net asset value (“NAV”). The Funds issue and redeem Shares on a continuous basis at NAV only in large blocks of Shares, typically 25,000 or 50,000 Shares or multiples thereof, called “Creation Units”. This does not mean, however, that individual investors will be able to redeem and purchase Shares directly with the series of the Trust. Only Authorized Participants can redeem and purchase Creation Units of Shares directly. Each Fund will issue and redeem Shares for a basket of securities and/or a balancing cash amount. Individual shares trade in the secondary market at market prices that change throughout the day.

 

The investment objective of each of the following Funds is to seek to provide a total return or investment results that (before fees and expenses) tracks the performance of its respective index listed below (each, an “Underlying Index”):

 

KraneShares Funds   Index
KraneShares Global Carbon Strategy ETF   IHS Markit Global Carbon Index
KraneShares European Carbon Allowance Strategy ETF   IHS Markit Carbon EUA Index
KraneShares California Carbon Allowance Strategy ETF   IHS Markit Carbon CCA Index
KraneShares Global Carbon Offset Strategy ETF   S&P GSCI Global Voluntary Carbon Liquidity Weighted Index
KraneShares Electrification Metals Strategy ETF   Bloomberg Electrification Metals Index

 

The investment objective of the KraneShares Rockefeller Ocean Engagement ETF is to seek long-term growth of capital. The KraneShares Rockefeller Ocean Engagement ETF is actively managed and does not track an index.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of the significant accounting policies followed by the Funds. The Funds are investment companies that apply the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board (“FASB”).

 

USE OF ESTIMATES — The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent

 

24

 

 

Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited) (continued)

 

assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates, and could have a material impact to the Funds.

 

SECURITY VALUATION — The NAV per share of each Fund is computed by dividing the value of the net assets of a Fund (i.e., the value of its total assets less total liabilities and withholdings) by the total number of shares of a 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 each Fund normally is calculated by the Administrator (as defined below) and determined as of the regularly scheduled close of normal trading on each day that the NYSE is scheduled to be open for business (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.

 

Securities listed on a securities exchange (i.e., exchange-traded equity securities), 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 by independent pricing agents 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 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.

 

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 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. 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. Over-the-counter (“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

 

25

 

 

Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited) (continued)

 

spot rate and the 30-, 60-, 90- and 180-day forward rates provided by an independent pricing agent. As of and during the period ended September 30, 2023, the Funds did not hold options, swaps or foreign currency forward contracts.

 

Securities issued by a wholly-owned subsidiary of a Fund will be valued at the subsidiary’s net asset value, which will be determined using the same pricing policies and procedures applicable to the Fund.

 

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 in the same manner as other exchange-traded equity securities (described above).

 

FLEX (short for flexible) options are normally valued using a model-based price provided by a third-party pricing vendor. On days when a trade in a FLEX options occurs, the trade price will be used to value such FLEX options in lieu of the model price.

 

On certain days, the settlement price for futures may not be available at the time the Fund calculates its NAV. On such days, the best available price (which is typically the last trade price) may be used to value futures.

 

Investments for which market prices are not ‘‘readily available,’’ or are not deemed to reflect current market values, or are debt securities where no evaluated price is available from third-party pricing agents pursuant to established methodologies, are fair valued in accordance with the Adviser’s valuation policies and procedures approved by the Board. 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.

 

In addition, a Fund may fair value its securities if an event that may materially affect the value of a 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 a 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 a 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 Adviser 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’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.

 

26

 

 

Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited) (continued)

 

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 a Fund’s NAV and the prices used by the Underlying Index. This may adversely affect a Fund’s ability to track its Underlying Index.

 

Trading in securities on many foreign exchanges is normally completed before the close of business on each Business Day (a “Business Day”, as used herein, is any day on which the Exchange is open for business). 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 a 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 a Fund’s portfolio securities and the net asset value of its shares may change on days when share purchases or sales cannot occur. Fund shares are purchased or sold on a national securities exchange at market prices, which may be higher or lower than NAV. Transactions in Fund shares will be priced at NAV only if shares are purchased or redeemed directly from a Fund in Creation Units. No secondary sales will be made to brokers or dealers at a concession by the Distributor or by a Fund. Purchases and sales of shares in the secondary market, which will not involve a Fund, will be subject to customary brokerage commissions and charges.

 

In accordance with the authoritative guidance on fair value measurements and disclosure under U.S. GAAP, the Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1 – Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date.

 

Level 2 – Other significant observable inputs (including quoted prices in non-active markets, quoted prices for similar investments, fair value of investments for which the Funds have the ability to fully redeem tranches at net asset value as of the measurement date or within the near term, and short-term investments valued at amortized cost).

 

Level 3 – Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments, broker quotes, fair value of investments for which the Funds do not have the ability to fully redeem tranches at net asset value as of the measurement date or within the near term).

 

Investments are classified within the level of the lowest significant input considered in determining fair value. Investments classified within Level 3 whose fair value measurement considers several inputs may include Level 1 or Level 2 inputs as components of the overall fair value measurement. For details of the investment classification, refer to each Fund’s Schedule of Investments.

 

27

 

 

Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited) (continued)

 

FEDERAL INCOME TAXES — It is each Fund’s intention to qualify or continue to qualify as a regulated investment company for federal income tax purposes by complying with the appropriate provisions of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and to distribute annually all or substantially all of its taxable income and gains to shareholders. Accordingly, no provisions for federal income taxes have been made in the financial statements.

 

The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is “more-likely-than-not” (i.e., greater than 50 percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Funds did not record any tax provisions in the current period. However, management’s conclusions regarding tax positions may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., the last three tax year ends, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof.

 

As of September 30, 2023, management of the Funds has reviewed all open tax years since inception and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.

 

SECURITY TRANSACTIONS AND INVESTMENT INCOME — Security transactions are accounted for on the trade date for financial reporting purposes. Costs used in determining realized gains and losses on the sale of investment securities are based on specific identification. Dividend income is recorded, net of any applicable withholding tax, on the ex-dividend date, or for certain foreign securities, when the information becomes available to the Funds. Interest income is recognized on the accrual basis from the settlement date and includes the amortization of premiums and the accretion of discount calculated using the effective interest method.

 

FOREIGN CURRENCY — The books and records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars on the date of valuation. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the relevant rates of exchange prevailing on the respective dates of such transactions. The Funds do not isolate that portion of realized or unrealized gains and losses resulting from changes in the foreign exchange rate from fluctuations arising from changes in the market prices of the securities. The Funds report certain foreign-currency-related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes.

 

FUTURES — The KraneShares Global Carbon Strategy ETF, KraneShares European Carbon Allowance Strategy ETF, KraneShares California Carbon Allowance Strategy ETF, KraneShares Global Carbon Offset Strategy ETF and KraneShares Electrification Metals Strategy ETF will each utilize its respective Subsidiary for purposes of investing in commodity futures that are the same as or similar to those included in the Index. Initial margin deposits of cash or securities are made upon entering into futures contracts. The contracts are marked-to-market daily and the resulting changes in value are accounted for as unrealized gains and losses. Variation margin payments are paid or received, depending upon whether unrealized gains or losses are incurred. When contracts are closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the amount invested in the contract.

 

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Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited) (continued)

 

As of September 30, 2023, the KraneShares Global Carbon Strategy ETF, KraneShares European Carbon Allowance Strategy ETF, KraneShares California Carbon Allowance Strategy ETF, KraneShares Global Carbon Offset Strategy ETF and KraneShares Electrification Metals Strategy ETF had open futures contracts. Refer to each Fund’s Consolidated Schedule of Investments for details regarding open futures contracts as of September 30, 2023.

 

For the period ended September 30, 2023, the average monthly notional amount of futures contracts were as follows:

 

KraneShares Global Carbon Strategy ETF      
Average Monthly Notional Value Long   $ 721,194,643  
KraneShares European Carbon Allowance Strategy ETF        
Average Monthly Notional Value Long   $ 36,749,365  
KraneShares California Carbon Allowance Strategy ETF        
Average Monthly Notional Value Long   $ 247,726,450  
KraneShares Global Carbon Offset Strategy ETF        
Average Monthly Notional Value Long   $ 988,447  
KraneShares Electrification Metals Strategy ETF        
Average Monthly Notional Value Long   $ 4,622,906  

 

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS — KraneShares Rockefeller Ocean Engagement ETF pays out to its shareholders net investment income and net realized capital gains, if any, once a year (usually in December). KraneShares Global Carbon Strategy ETF, KraneShares European Carbon Allowance Strategy ETF, KraneShares California Carbon Allowance Strategy ETF, KraneShares Global Carbon Offset Strategy ETF and KraneShares Electrification Metals Strategy ETF may pay out net investment income, if any, at least semi-annually in June and December, but may pay such income as frequently as quarterly. KraneShares Global Carbon Strategy ETF, KraneShares European Carbon Allowance Strategy ETF, KraneShares California Carbon Allowance Strategy ETF, KraneShares Global Carbon Offset Strategy ETF and KraneShares Electrification Metals Strategy ETF pays out to its shareholders net realized capital gains, if any, once a year (usually in December). Each Fund may make distributions on a more frequent basis. Each 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, or to avoid imposition of income or excise taxes on undistributed income.

 

CASH OVERDRAFT CHARGES — Per the terms of an agreement with Brown Brothers Harriman & Co. (“BBH”), the Funds’ Custodian, if a Fund has a cash overdraft on a given day, it will be assessed an overdraft charge of the BBH Overdraft Base Rate plus 2.00%. Cash overdraft charges are included in “Interest Expense” on the Statements of Operations.

 

SECURITIES LENDING — The Funds may lend securities from their portfolios to brokers, dealers and other financial institutions. In connection with such loans, a Fund remains the beneficial owner of the loaned securities and continues to receive payments in amounts approximately equal to the interest, dividends or other distributions payable on the loaned securities. A Fund also has the right to terminate a loan at any time. A 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 a Fund’s total assets (including the value of all assets received as collateral for the loan). A Fund will receive collateral

 

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Notes to Financial Statements/Notes to Consolidated Financial Statements (Unaudited) (continued)

 

in an amount equal to at least 100% of the current market value of the loaned securities. If the collateral consists of cash, a 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, a Fund may experience delays in recovering the loaned securities or exercising its rights in the collateral. In a loan transaction, a Fund will also bear the risk of any decline in value of securities acquired with cash collateral. Krane and a sub-adviser are subject to potential conflicts of interest because the compensation paid to them increases in connection with any net income received by a Fund from a securities lending program. Each Fund pays Krane 10% of any net monthly income received from the investment of cash collateral and loan fees received from borrowers in respect of each securities loan (net of any amounts paid to the custodian and/or securities lending agent or rebated to borrowers) (see Note 4).

 

CREATION UNITS — The Funds issue and redeem Shares at NAV and only in large blocks of Shares (each block of Shares for a Fund is a Creation Unit of 25,000 Shares or 50,000 Shares, or multiples thereof). In its discretion, the Trust reserves the right to increase or decrease the number of each Fund’s shares that constitute a Creation Unit.

 

Except when aggregated in Creation Units, Shares are not redeemable securities of a Fund. Shares of a Fund may only be purchased or redeemed by certain Authorized Participants. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company (‘‘DTC’’) participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors will not qualify as Authorized Participants or have the resources to buy and sell whole Creation Units. Therefore, they will be unable to purchase or redeem the Shares directly from a Fund. Rather, most retail investors will purchase Shares in the secondary market with the assistance of a broker and will be subject to customary brokerage commissions or fees when buying or selling Shares. If a Creation Unit is purchased or redeemed for cash, a higher transaction fee may be charged.

 

The following table discloses Creation Unit breakdown for the period ended September 30, 2023:

 

KraneShares Funds   Creation
Unit
Shares
    Standard
Transaction Fee -
Subscriptions
    Value at
September 30,
2023
    Standard
Transaction Fee -
Redemptions
    Maximum
Variable
Transaction Fee*
 
KraneShares Global Carbon Strategy ETF     50,000     $ 50     $ 1,808,500     $ 50       2.00 %
KraneShares European Carbon Allowance Strategy ETF     25,000       50       731,750       50       2.00 %
KraneShares California Carbon Allowance Strategy ETF     25,000       50       711,750       50