Semi-Annual Report

KFA Large Cap Quality Dividend Index ETF

KFA Small Cap Quality Dividend Index ETF

KFA Dynamic Fixed Income ETF

KFA Value Line® Dynamic Core Equity Index ETF

KFA Mount Lucas Index Strategy ETF

September 30, 2021

   

 

 

Table of Contents

Schedules of Investments/Consolidated Schedule of Investments

   

KFA Large Cap Quality Dividend Index ETF

 

1

KFA Small Cap Quality Dividend Index ETF

 

5

KFA Dynamic Fixed Income ETF

 

7

KFA Value Line® Dynamic Core Equity Index ETF

 

13

KFA Mount Lucas Index Strategy ETF

 

16

Statements of Assets and Liabilities/Consolidated Statement of Assets and Liabilities

 

18

Statements of Operations/Consolidated Statement of Operations

 

20

Statements of Changes in Net Assets/Consolidated Statements of Changes in Net Assets

 

22

Financial Highlights/Consolidated Financial Highlights

 

28

Notes to Financial Statements/Consolidated Notes to Financial Statements

 

30

Approval of Advisory and Sub-Advisory Agreements

 

52

Liquidity Risk Management Program

 

56

Disclosure of Fund Expenses

 

57

Supplemental Information

 

59

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 its reports on Form N-PORT. The Funds’ Form N-PORT reports are available on the Commission’s website at http://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 http://www.sec.gov.

Fund shares may only be purchased or redeemed from a Fund in large 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.

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Large Cap Quality Dividend Index ETF

 

Shares

 

Value

COMMON STOCK — 99.6%

     

 

 

UNITED STATES — 99.6%

     

 

 

Communication Services — 1.6%

     

 

 

Comcast, Cl A

 

6,602

 

$

369,250

Interpublic Group of Companies

 

10,881

 

 

399,006

       

 

768,256

Consumer Discretionary — 8.1%

     

 

 

Genuine Parts

 

3,366

 

 

408,060

Home Depot

 

1,238

 

 

406,386

Lowe’s

 

1,959

 

 

397,403

NIKE, Cl B

 

2,495

 

 

362,349

Pool

 

821

 

 

356,651

Service International

 

6,296

 

 

379,397

Starbucks

 

3,491

 

 

385,092

Target

 

1,651

 

 

377,699

Tractor Supply

 

2,087

 

 

422,847

Williams-Sonoma

 

2,283

 

 

404,844

       

 

3,900,728

Consumer Staples — 9.5%

     

 

 

Altria Group

 

7,951

 

 

361,930

Archer-Daniels-Midland

 

6,833

 

 

410,048

Coca-Cola

 

7,236

 

 

379,673

Costco Wholesale

 

891

 

 

400,371

Hershey

 

2,273

 

 

384,705

J M Smucker

 

3,300

 

 

396,099

Kroger

 

8,534

 

 

345,030

PepsiCo

 

2,606

 

 

391,968

Philip Morris International

 

3,867

 

 

366,553

Procter & Gamble

 

2,807

 

 

392,419

Sysco

 

5,249

 

 

412,046

Walgreens Boots Alliance

 

7,881

 

 

370,801

       

 

4,611,643

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

1

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Large Cap Quality Dividend Index ETF (continued)

 

Shares

 

Value

COMMON STOCK (continued)

     

 

 

Energy — 1.8%

     

 

 

Marathon Petroleum

 

7,043

 

$

435,328

ONEOK

 

7,664

 

 

444,435

       

 

879,763

Financials — 20.3%

     

 

 

Allstate

 

3,050

 

 

388,296

American Express

 

2,501

 

 

418,993

American Financial Group

 

2,951

 

 

371,324

Ameriprise Financial

 

1,498

 

 

395,652

Aon, Cl A

 

1,405

 

 

401,507

Arthur J Gallagher

 

2,780

 

 

413,247

Assurant

 

2,407

 

 

379,704

Assured Guaranty

 

8,530

 

 

399,289

BlackRock, Cl A

 

437

 

 

366,494

Brown & Brown

 

7,001

 

 

388,206

Cboe Global Markets

 

3,207

 

 

397,219

Chubb

 

2,230

 

 

386,860

Cincinnati Financial

 

3,349

 

 

382,523

Evercore, Cl A

 

2,959

 

 

395,530

Franklin Resources

 

12,617

 

 

374,977

Hanover Insurance Group

 

2,896

 

 

375,380

JPMorgan Chase

 

2,529

 

 

413,972

Marsh & McLennan

 

2,568

 

 

388,872

Moody’s

 

1,075

 

 

381,743

Morningstar

 

1,472

 

 

381,292

Nasdaq

 

2,069

 

 

399,358

Old Republic International

 

17,007

 

 

393,372

Raymond James Financial

 

4,401

 

 

406,124

T Rowe Price Group

 

1,843

 

 

362,518

US Bancorp

 

7,209

 

 

428,503

       

 

9,790,955

Health Care — 7.9%

     

 

 

AmerisourceBergen, Cl A

 

3,244

 

 

387,496

Anthem

 

1,046

 

 

389,949

Hill-Rom Holdings

 

2,675

 

 

401,250

Medtronic

 

3,037

 

 

380,688

Pfizer

 

8,767

 

 

377,069

Quest Diagnostics

 

2,606

 

 

378,678

STERIS

 

1,873

 

 

382,616

Stryker

 

1,475

 

 

388,987

UnitedHealth Group

 

951

 

 

371,594

West Pharmaceutical Services

 

890

 

 

377,840

       

 

3,836,167

Industrials — 20.4%

     

 

 

A O Smith

 

5,634

 

 

344,068

Carlisle

 

1,923

 

 

382,273

Donaldson

 

6,287

 

 

360,937

Dover

 

2,341

 

 

364,026

Eaton

 

2,452

 

 

366,108

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

2

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Large Cap Quality Dividend Index ETF (continued)

 

Shares

 

Value

COMMON STOCK (continued)

     

 

 

Industrials (continued)

     

 

 

Emerson Electric

 

3,942

 

$

371,336

Expeditors International of Washington

 

3,347

 

 

398,728

General Dynamics

 

2,006

 

 

393,236

Graco

 

5,193

 

 

363,354

Honeywell International

 

1,764

 

 

374,462

Hubbell, Cl B

 

2,033

 

 

367,302

JB Hunt Transport Services

 

2,241

 

 

374,740

L3Harris Technologies

 

1,720

 

 

378,813

Lincoln Electric Holdings

 

2,961

 

 

381,347

ManpowerGroup

 

3,434

 

 

371,834

Nordson

 

1,686

 

 

401,521

Regal Rexnord

 

2,776

 

 

417,344

Republic Services, Cl A

 

3,244

 

 

389,475

Robert Half International

 

3,965

 

 

397,808

Rockwell Automation

 

1,257

 

 

369,608

Roper Technologies

 

844

 

 

376,534

Snap-on

 

1,830

 

 

382,379

Toro

 

3,761

 

 

366,359

United Parcel Service, Cl B

 

2,064

 

 

375,854

Waste Management

 

2,627

 

 

392,369

Xylem

 

2,977

 

 

368,195

       

 

9,830,010

Information Technology — 7.4%

     

 

 

Amphenol, Cl A

 

5,331

 

 

390,389

Automatic Data Processing

 

1,969

 

 

393,643

Broadridge Financial Solutions

 

2,396

 

 

399,269

Cisco Systems

 

6,882

 

 

374,587

Intuit

 

737

 

 

397,619

Microsoft

 

1,368

 

 

385,667

Paychex

 

3,600

 

 

404,820

Texas Instruments

 

2,145

 

 

412,291

Xilinx*

 

2,678

 

 

404,351

       

 

3,562,636

Materials — 7.1%

 

 

 

Albemarle

 

1,709

 

 

374,220

Avery Dennison

 

1,835

 

 

380,230

Celanese, Cl A

 

2,659

 

 

400,552

International Paper

 

6,891

 

 

385,345

Nucor

 

3,694

 

 

363,822

PPG Industries

 

2,611

 

 

373,399

Reliance Steel & Aluminum

 

2,767

 

 

394,076

Sherwin-Williams

 

1,330

 

 

372,041

Steel Dynamics

 

6,190

 

 

361,991

       

 

3,405,676

Real Estate — 7.8%

     

 

 

Alexandria Real Estate Equities

 

1,964

 

 

375,261

AvalonBay Communities

 

1,761

 

 

390,308

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

3

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Large Cap Quality Dividend Index ETF (concluded)

 

Shares

 

Value

COMMON STOCK (continued)

     

 

 

Real Estate (continued)

     

 

 

Camden Property Trust

 

2,660

 

$

392,270

CubeSmart

 

7,508

 

 

363,763

Equity LifeStyle Properties

 

4,666

 

 

364,415

Essex Property Trust

 

1,216

 

 

388,804

Extra Space Storage

 

2,134

 

 

358,491

Iron Mountain

 

8,181

 

 

355,464

Mid-America Apartment Communities

 

2,082

 

 

388,813

UDR

 

7,351

 

 

389,456

       

 

3,767,045

Utilities — 7.7%

 

 

 

Alliant Energy

 

6,564

 

 

367,453

American Electric Power

 

4,516

 

 

366,609

Duke Energy

 

3,835

 

 

374,258

Essential Utilities

 

8,078

 

 

372,234

Evergy

 

5,857

 

 

364,305

IDACORP

 

3,751

 

 

387,778

NextEra Energy

 

4,751

 

 

373,049

Public Service Enterprise Group

 

6,310

 

 

384,279

Southern

 

6,134

 

 

380,124

UGI

 

8,623

 

 

367,512

       

 

3,737,601

TOTAL UNITED STATES

     

 

48,090,480

TOTAL COMMON STOCK
(Cost $44,796,857)

     

 

48,090,480

       

 

 

TOTAL INVESTMENTS — 99.6%
(Cost $44,796,857)

     

 

48,090,480

OTHER ASSETS LESS LIABILITIES — 0.4%

     

 

172,848

NET ASSETS — 100%

     

$

48,263,328

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

Cl — Class

As of September 30, 2021, 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.

For the period ended September 30, 2021, there have been no transfers in or out of Level 3.

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

4

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Small Cap Quality Dividend ETF

 

Shares

 

Value

COMMON STOCK — 99.7%

     

 

 

UNITED STATES — 99.7%

     

 

 

Communication Services — 4.1%

     

 

 

John Wiley & Sons, Cl A

 

12,619

 

$

658,838

Telephone and Data Systems

 

34,691

 

 

676,474

       

 

1,335,312

Consumer Staples — 10.8%

     

 

 

Andersons

 

24,164

 

 

744,976

J & J Snack Foods

 

4,396

 

 

671,797

SpartanNash

 

33,811

 

 

740,461

Tootsie Roll Industries

 

22,157

 

 

674,237

Universal

 

14,293

 

 

690,781

       

 

3,522,252

Financials — 31.6%

     

 

 

Arbor Realty Trust

 

39,012

 

 

722,892

Associated Banc-Corp

 

35,711

 

 

764,930

Atlantic Union Bankshares

 

19,330

 

 

712,311

Bryn Mawr Bank

 

17,643

 

 

810,696

Cohen & Steers

 

8,296

 

 

694,956

Federal Agricultural Mortgage, Cl C

 

7,190

 

 

780,259

First Merchants

 

17,511

 

 

732,660

Fulton Financial

 

45,793

 

 

699,717

Lakeland Bancorp

 

42,672

 

 

752,307

Sandy Spring Bancorp

 

16,589

 

 

760,108

Simmons First National, Cl A

 

25,212

 

 

745,267

Southside Bancshares

 

18,918

 

 

724,370

Washington Trust Bancorp

 

13,294

 

 

704,316

WesBanco

 

21,624

 

 

736,946

       

 

10,341,735

Health Care — 4.0%

     

 

 

Ensign Group

 

8,719

 

 

652,966

LeMaitre Vascular

 

12,421

 

 

659,431

       

 

1,312,397

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

5

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Small Cap Quality Dividend ETF (concluded)

 

Shares

 

Value

COMMON STOCK (continued)

     

 

 

Industrials — 14.6%

     

 

 

Apogee Enterprises

 

16,538

 

$

624,475

Applied Industrial Technologies

 

8,293

 

 

747,448

Franklin Electric

 

8,410

 

 

671,539

Insperity

 

6,364

 

 

704,749

Lindsay

 

4,324

 

 

656,340

Matthews International, Cl A

 

19,211

 

 

666,430

Standex International

 

7,187

 

 

710,866

       

 

4,781,847

Information Technology — 2.1%

     

 

 

Badger Meter

 

6,809

 

 

688,662

Materials — 12.8%

     

 

 

Avient

 

14,826

 

 

687,185

Balchem

 

5,060

 

 

734,054

HB Fuller

 

10,878

 

 

702,284

Kaiser Aluminum

 

5,915

 

 

644,498

Materion

 

9,787

 

 

671,780

Sensient Technologies

 

8,338

 

 

759,425

       

 

4,199,226

Real Estate — 4.1%

     

 

 

Kennedy-Wilson Holdings

 

32,606

 

 

682,118

STAG Industrial

 

16,706

 

 

655,710

       

 

1,337,828

Utilities — 15.6%

     

 

 

ALLETE

 

10,578

 

 

629,602

American States Water

 

7,225

 

 

617,882

Black Hills

 

10,025

 

 

629,169

California Water Service Group

 

11,092

 

 

653,652

Chesapeake Utilities

 

5,429

 

 

651,751

Middlesex Water

 

6,347

 

 

652,345

NorthWestern

 

11,106

 

 

636,374

Portland General Electric

 

13,892

 

 

652,785

       

 

5,123,560

TOTAL UNITED STATES

     

 

32,642,819

TOTAL COMMON STOCK
(Cost $31,666,342)

     

 

32,642,819

       

 

 

TOTAL INVESTMENTS — 99.7%
(Cost $31,666,342)

     

 

32,642,819

OTHER ASSETS LESS LIABILITIES — 0.3%

     

 

95,439

NET ASSETS — 100%

     

$

32,738,258

Industries are utilized for compliance purposes, whereas sectors are utilized for reporting.
Real Estate Investment Trust

Cl — Class

As of September 30, 2021, 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.

For the period ended September 30, 2021, there have been no transfers in or out of Level 3.

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

6

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Dynamic Fixed Income ETF

 

Face Amount

 

Value

CORPORATE OBLIGATIONS — 101.4%

 

 

   

 

 

Communication Services — 19.3%

 

 

   

 

 

CCO Holdings

 

 

   

 

 

4.750%, 03/01/2030(A)

 

$

225,000

 

$

235,084

4.500%, 08/15/2030(A)

 

 

225,000

 

 

232,137

4.500%, 05/01/2032

 

 

225,000

 

 

231,469

CSC Holdings

 

 

   

 

 

5.750%, 01/15/2030(A)

 

 

200,000

 

 

202,964

5.375%, 02/01/2028(A)

 

 

200,000

 

 

209,000

DISH DBS

 

 

   

 

 

7.750%, 07/01/2026

 

 

225,000

 

 

253,969

5.875%, 11/15/2024

 

 

225,000

 

 

241,938

Gray Television

 

 

   

 

 

4.750%, 10/15/2030(A)

 

 

150,000

 

 

147,408

Netflix

 

 

   

 

 

6.375%, 05/15/2029

 

 

325,000

 

 

412,344

5.875%, 11/15/2028

 

 

325,000

 

 

397,852

Sirius XM Radio

 

 

   

 

 

3.875%, 09/01/2031(A)

 

 

275,000

 

 

268,641

3.125%, 09/01/2026(A)

 

 

275,000

 

 

278,781

Sprint

 

 

   

 

 

7.625%, 03/01/2026

 

 

175,000

 

 

211,750

Sprint Capital

 

 

   

 

 

8.750%, 03/15/2032

 

 

175,000

 

 

261,425

6.875%, 11/15/2028

 

 

175,000

 

 

224,000

TEGNA

 

 

   

 

 

5.000%, 09/15/2029

 

 

100,000

 

 

103,005

   

 

   

 

3,911,767

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

7

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Dynamic Fixed Income ETF (continued)

 

Face Amount

 

Value

CORPORATE OBLIGATIONS (continued)

 

 

   

 

 

Consumer Discretionary — 17.4%

 

 

   

 

 

1011778 BC ULC / New Red Finance

 

 

   

 

 

4.000%, 10/15/2030(A)

 

$

375,000

 

$

371,250

Bath & Body Works

 

 

   

 

 

7.500%, 06/15/2029

 

 

175,000

 

 

198,741

6.875%, 11/01/2035

 

 

175,000

 

 

219,625

Boyd Gaming

 

 

   

 

 

4.750%, 12/01/2027

 

 

175,000

 

 

180,845

Carnival

 

 

   

 

 

7.625%, 03/01/2026(A)

 

 

325,000

 

 

346,937

5.750%, 03/01/2027(A)

 

 

375,000

 

 

387,188

Ford Motor

 

 

   

 

 

9.000%, 04/22/2025

 

 

175,000

 

 

210,310

7.450%, 07/16/2031

 

 

175,000

 

 

227,500

4.750%, 01/15/2043

 

 

225,000

 

 

235,829

Goodyear Tire & Rubber

 

 

   

 

 

4.875%, 03/15/2027

 

 

175,000

 

 

188,781

Hilton Domestic Operating

 

 

   

 

 

4.875%, 01/15/2030

 

 

200,000

 

 

214,552

Mattel

 

 

   

 

 

3.750%, 04/01/2029(A)

 

 

100,000

 

 

104,250

Newell Brands

 

 

   

 

 

4.700%, 04/01/2026

 

 

175,000

 

 

192,942

Royal Caribbean Cruises

 

 

   

 

 

5.500%, 08/31/2026(A)

 

 

200,000

 

 

205,588

Scientific Games International

 

 

   

 

 

7.000%, 05/15/2028(A)

 

 

100,000

 

 

107,875

Yum! Brands

 

 

   

 

 

4.625%, 01/31/2032

 

 

100,000

 

 

106,750

   

 

   

 

3,498,963

Consumer Staples — 1.2%

 

 

   

 

 

Fresh Market

 

 

   

 

 

9.750%, 05/01/2023(A)

 

 

40,000

 

 

41,200

JBS USA LUX SA / JBS USA Food / JBS USA Finance

 

 

   

 

 

3.750%, 12/01/2031(A)

 

 

200,000

 

 

208,106

   

 

   

 

249,306

Energy — 15.4%

 

 

   

 

 

Antero Resources

 

 

   

 

 

5.375%, 03/01/2030(A)

 

 

150,000

 

 

157,972

Cheniere Energy Partners

 

 

   

 

 

4.000%, 03/01/2031(A)

 

 

100,000

 

 

104,720

EQM Midstream Partners

 

 

   

 

 

6.500%, 07/15/2048

 

 

100,000

 

 

114,500

6.000%, 07/01/2025(A)

 

 

225,000

 

 

246,645

4.750%, 01/15/2031(A)

 

 

225,000

 

 

234,005

EQT

 

 

   

 

 

7.500%, 02/01/2030

 

 

225,000

 

 

289,620

3.900%, 10/01/2027

 

 

275,000

 

 

297,613

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

8

 

Schedule of Investments (Unaudited) September 30, 2021

KFA Dynamic Fixed Income ETF (continued)

 

Face Amount

 

Value

CORPORATE OBLIGATIONS (continued)

 

 

   

 

 

Energy (continued)

 

 

   

 

 

Kerr-McGee

 

 

   

 

 

7.125%, 10/15/2027

 

$

25,000

 

$

27,811

MEG Energy

 

 

   

 

 

5.875%, 02/01/2029(A)

 

 

100,000

 

 

102,250

Occidental Petroleum

 

 

   

 

 

6.625%, 09/01/2030

 

 

200,000

 

 

246,750

6.600%, 03/15/2046

 

 

200,000

 

 

251,000

6.450%, 09/15/2036

 

 

200,000

 

 

251,625

5.550%, 03/15/2026

 

 

250,000

 

 

277,500

Targa Resources Partners

 

 

   

 

 

4.875%, 02/01/2031

 

 

275,000

 

 

296,656

TerraForm Power Operating

 

 

   

 

 

5.000%, 01/31/2028(A)

 

 

100,000

 

 

107,500

Western Midstream Operating

 

 

   

 

 

5.300%, 02/01/2030

 

 

100,000

 

 

110,500

   

 

   

 

3,116,667

Financials — 4.6%