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In order to standardize the warrant investment operation of the funds managed by the Company and protect the legitimate rights and interests of fund holders, in accordance with the Securities Investment Fund Law, the Measures for the Administration of Securities Investment Fund Operation, the Notice on Issues Related to Securities Investment Fund Investment Warrants in the Share trading Reform and other relevant laws and regulations, as well as the relevant provisions of the CSRC, The Company has formulated the following plans for the fund investment warrants under management:
1、 Fund that can invest in warrants
According to the provisions of each fund contract, the Hongfei Securities Investment Fund, Hongyang Securities Investment Fund, Baoying Hongli Income Securities Investment Fund and Baoying Oceanwide Coastal Area Growth Stock Securities Investment Fund managed by the Company are all qualified for investment warrants.
2、 Investment proportion limit
The funds managed by the Company will use the fund assets to invest in warrants subject to the following restrictions:
1. The total amount of warrants purchased by a fund on any trading day shall not exceed 0.5% of the net asset value of the fund on the previous trading day.
2. The market value of all warrants held by a fund shall not exceed 3% of the net asset value of the fund.
3. The same warrant held by all funds managed by the Company shall not exceed 10% of the warrant.
China CSRC If otherwise specified, it is not subject to the proportion limit specified in Items 1, 2 and 3 above.
because negotiable securities Market fluctuations, fund size changes Non tradable shares If the fund investment does not conform to the above 2 and 3 items and the investment proportion agreed in the fund contract or fund warrant investment plan due to factors other than the fund manager such as payment of consideration during the reform, the funds managed by the Company will be adjusted within ten trading days.
3、 Investment strategy
The basic principle of fund warrant investment managed by the Company is that, under the premise of risk control, based on the value judgment of the underlying securities corresponding to the warrant, it extends to the value judgment of the warrant, and invests in the warrant in order to obtain the income commensurate with the risk. Specific investment strategies include:
1. Under a certain risk-free interest rate level, considering the substitutability of the underlying securities and warrant investment, select the underlying securities or warrants for investment.
2. In the case of holding the underlying securities, the warrants can be used to lock the risk and lock the minimum market value as required; If the underlying securities are not held, the warrant can be used to lock the purchase cost of the underlying securities.
3. Use the leverage, risk transfer and limited loss characteristics of warrants to adjust the risk and return of the fund portfolio to build a portfolio risk structure that is more consistent with the fund contract.
4. When the warrant market is relatively mature in the future, appropriate hedging warrant portfolio or warrant and underlying securities portfolio will be constructed to reduce the risk level of the portfolio.
On the premise of ensuring the interests of fund holders, the Fund Manager has the right to make adjustments to the above investment strategies according to the changes in the environment and actual needs, and make timely announcements as required.
4、 Investment decision and process management
The investment research team works together and restricts each other in warrant investment. The specific process is as follows:
1. The Investment Decision making Committee, according to the fund contract and the risk return characteristics of different funds, stipulates the scope, amount and proportion of each fund's investment in warrants. In principle, it will not invest in warrants whose underlying is securities other than the company's research library;
2. Industry researchers conduct fundamental analysis and research on the underlying securities, and form value judgments and investment strategies for the underlying securities in combination with profit forecasts and valuations;
3. Based on the investment theory of modern finance, the Financial Engineering Research Center establishes a warrant pricing model, and calculates the intrinsic value of warrants by combining the estimation of market risk-free interest rate, volatility and other parameters;
4. The Financial Engineering Research Center makes appropriate adjustments to the calculation method of warrants based on the researcher's judgment on the value of the underlying securities, and on this basis, forms operational recommendations for warrant investment;
5. On the basis of the recommendations of the industry researchers and the financial engineering research center on the operation of warrant investment, the fund manager, in accordance with the requirements of the fund contract and in combination with his own judgment, carries out warrant investment and builds a portfolio under the authorization of the investment decision-making committee;
6. The centralized trading room conducts transactions according to the instructions of the fund manager;
7. The risk performance evaluation team shall evaluate the performance and risk of each fund warrant investment, and issue evaluation reports regularly and irregularly.
5、 Information disclosure
The information disclosure of fund warrant investment managed by the Company will be carried out in strict accordance with relevant laws and regulations, fund contracts and other relevant provisions. The funds managed by the Company will disclose the relevant information of warrant investment in detail in the regular reports of the funds, including but not limited to:
1. The total market value of warrants held by each fund;
2. The proportion of the total market value of the warrants held by each fund in the net asset value of the fund;
3. Other information required by the CSRC to be disclosed for fund investment warrants.
6、 Risk control
（1） Control of compliance risk
The Company's Risk Control Committee, the Chief Inspector and the Supervision and Audit Department are the subjects of compliance risk control, and the Supervision and Audit Department is responsible for the daily compliance review of warrant investment.
（2） Control of investment risk
For the risk in the process of warrant investment, the Company will control the decision-making, trading and other important links:
1. Based on the value judgment of the warrant investment, the investment decision-making committee implements hierarchical authorization management on the warrant investment of each fund manager according to the relevant fund contract;
2. The risk performance evaluation team is responsible for the risk evaluation and control of the warrant investment in advance, during and after the event, and issuing the risk control report regularly and irregularly;
3. The fund manager shall, within the scope of authorization, make steady investment based on the investment value of warrants and under the premise of strict risk control;
4. The centralized trading room shall review the warrant investment instructions of the fund manager, and report in a timely manner any violations or abnormalities found.
7、 Risk disclosure
Due to the high leverage and volatility of warrants, warrant investment may affect the overall risk return characteristics of fund investment. These investment risks mainly include:
1. Systematic risk: refers to the fluctuation of the securities market caused by changes in monetary policy, fiscal policy and industrial policy, and the risk of the warrant price.
2. Risk of price change of underlying securities: refers to the risk of price change of underlying securities of warrants to warrant prices.
3. Volatility risk of underlying securities: refers to the risk brought to the warrant price by the change of volatility of underlying securities of warrants.
4. Interest rate risk: refers to the risk brought by the change of risk-free interest rate to the warrant price.
5. Liquidity risk: the risk of loss in the realization of warrant assets due to insufficient liquidity of the warrant.
6. Credit risk: refers to the risk caused by the warrant issuer's failure to perform due to various reasons.
7. Legal risk: refers to the risk of warrant investment caused by changes in relevant laws and regulations.
It is hereby announced that
Baoying Fund Management Co., Ltd
August 23, 2005
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
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