The Fund seeks to achieve its objective by investing, under normal circumstance, at least 80% of the Fund’s net assets (plus borrowings for investment purposes, if any) in China A-Shares and other instruments that have economic characteristics similar to such securities. China A-Shares are Chinese renminbi (“RMB”)-denominated equity securities issued by companies incorporated in mainland China. Direct investments in China A-Shares are currently possible only through the trading and clearing facilities of a participating exchange located outside of mainland China (“Stock Connect Programs”) or Renminbi Qualified Foreign Institutional Investor (“RQFII”) or Qualified Foreign Institutional Investor (“QFII”) license. Currently, the Fund intends to invest in China A-Shares through Stock Connect Programs. UBS Asset Management (Americas) Inc., the Fund’s sub-adviser (“UBS” or “Sub-Adviser”), believes that there are discrepancies between the market price and its estimate of a company’s value due to market behavior and market structure, which provide an opportunity to outperform the market. To take advantage of these opportunities, UBS seeks to identify upcoming industry leaders in key growth sectors early in a company’s lifecycle and when the company’s share price trades below UBS’s estimate of the company’s value. UBS selects investments based on the attractiveness of their valuations, top down macro factors, and a conviction that its investment thesis is likely to be realized. UBS’s investment process for the Fund is driven by bottom-up proprietary research. UBS starts with all China A-Shares trading through Stock Connect Programs. UBS conducts extensive valuation analysis incorporating company/industry fundamentals, future operations, and cash generation. UBS will assess companies based on the industry structure and company’s competitiveness, company trends, profitability and sustainability of such trends and profitability, and the company’s governance, disclosure, environmental and social practices. UBS also looks at industry peers and historical and forward looking financials in evaluating companies. UBS attempts to exclude companies exhibiting what they view as unsustainable business models, poor corporate governance practices, and negative industry dynamics. While UBS seeks to construct a concentrated, high-conviction portfolio of its “best ideas,” UBS attempts to remain diversified across many sectors and, generally, no single position will be more than 10% of the Fund’s net assets at the time of investment. However, from time to time, based on market or economic conditions, a single position may exceed 10% of the Fund’s net assets at the time of investment. UBS uses a benchmark agnostic approach in selecting its investments (i.e., UBS does not take into account any benchmarks in selecting its investments for the Fund). In addition to China A-Shares, which are described above, the Fund may invest up to 20% of its net assets in the following China-related securities: ● China B Shares, which are shares of companies listed on the Shanghai or Shenzhen Stock Exchange but quoted and traded in foreign currencies (such as Hong Kong Dollars or U.S. Dollars), which were primarily created for trading by foreign investors. ● China H Shares, which are shares of companies incorporated in mainland China and listed on the Hong Kong Stock Exchange (“H-Shares”), where they are traded in Hong Kong dollars and may be traded by foreign investors. ● China N Shares, which are shares of companies with business operations in mainland China and listed on an American stock exchange, such as NYSE or NASDAQ (“N-Shares”). ● P-Chips, which are shares of private sector companies with a majority of their business operations in mainland China and controlling private Chinese shareholders, which are incorporated outside of mainland China and traded on the Hong Kong Stock Exchange in Hong Kong dollars. ● Red Chips, which are shares of companies with a majority of their business operations in mainland China and controlled by the central, provincial or municipal governments of the PRC, whose shares are traded on the Hong Kong Stock Exchange in Hong Kong dollars. ● S-Chips, which are shares of companies with business operations in mainland China and listed on the Singapore Exchange. S-Chip shares are issued by companies incorporated anywhere, but many are registered in Singapore, the British Virgin Islands, the Cayman Islands, or Bermuda. ● Depositary receipts and depositary shares, including American Depositary Receipts or Global Depositary Receipts, of companies that are economically tied to China. For purposes of the Fund’s 80% policy, at times, the Fund may include China-related securities toward the 80% minimum if the Sub-Adviser determines such China-related securities have economic characteristics similar to China A-Shares. The Fund may invest in companies across all market capitalization ranges and companies at the time of their initial public offering (“IPO”). The derivatives in which the Fund may invest include options (including options on securities, indices, futures, forwards, and swap agreements), futures, forward currency agreements, swap agreements (including interest rate, total return and currency), and equity participation notes and equity linked notes. All of the derivatives listed above may be used for risk management purposes; for investment (non-hedging) purposes; to earn income; to enhance returns; to replace more traditional direct investments (except for forward currency agreements); to obtain exposure to certain markets; or to establish net short positions for individual currencies (except for equity participation notes). Futures on currencies and forward currency agreements may also be used to hedge against a specific currency or potential changes in currency exchange rates. The Fund may invest in cash or cash equivalent instruments, including shares of affiliated investment companies or money market funds. The Fund may engage in securities lending.
