The NESTOR China Fund invests most of its assets in equities of issuers and companies that are headquartered or conduct most of their business in China and/or Hong Kong. These investments can be made indirectly using participation notes (“P-notes”), global depository receipts (“GDRs”) or American depository receipts (“ADRs”). The issuers of the P-notes, ADRs and GDRs are typically not headquartered in China or Hong Kong.

The sub-fund can also invest in warrants on securities and indices, convertible bonds and bonds with warrants, and certificates (that qualify as securities under Article 41 of the 2010 Act and have no leverage effect) on investments whose underlyings are equities or recognised, sufficiently diversified financial indices (within the meaning of Article 9 of the Grand-Ducal Ordinance of 8 February 2008 regarding certain definitions of the 2002 Act). For such investments to be made, the underlying equities must be in companies that are headquartered or conduct most of their  business in China and/or Hong Kong.

The sub-fund can also invest 20% of its assets in securities from states other than China and Hong Kong.

For investments in all the above-mentioned securities to be made, they must be listed on a stock exchange or traded on another form of recognised regulated market that is open to the public and operates in a proper manner.

Investments in the Chinese A-share market may only be made indirectly through other instruments such as P-notes. The total amount invested in A-shares may not exceed 35% of the sub-fund’s assets. Potential unit holders should be aware of the heightened risks of such investments, in particular their liquidity risk.

In the case of direct investments in securities issued by companies that are headquartered or conduct most of their business in China and/or Hong Kong, it must be noted that investments in such securities – insofar as these are not listed on a stock exchange or traded on another form of recognised regulated market that is open to the public and operates in a proper manner – and investments in assets referred to in Points 3 d) and 4 a) of Article 4 of the Management Regulations together may not exceed 10% of the sub-fund’s net assets.

The investment limits for securities listed on a stock exchange or traded on a regulated market also apply where the securities in companies that are headquartered or conduct most of their business in China and/or Hong Kong or are domiciled there, are securitised in the form of global depository receipts (GDRs) or American depository receipts (ADRs) issued by first-rate financial institutions. ADRs are issued and promoted by US banks. They confer the right to receive securities issued by the issuer that are deposited with a US bank or a correspondent bank in the US. GDRs are depository certificates that are issued by a US bank, a European bank or another financial institution and have the same characteristics as ADRs. ADRs and GDRs need not necessarily be expressed in the same currency as their underlying securities. 

In the interests of enhanced growth, the management company may, as part of its efficient asset management conclude financial futures contracts on behalf of the sub-fund, even if these do not serve to secure assets belonging to the sub-fund.