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According to the requirements of the Notice on Issues Related to Investment Warrants of Securities Investment Funds in the Share trading Reform (ZJJJZ [2005] No. 138) of the China Securities Regulatory Commission and the provisions in the Fund Contract of Dongfang Long Hybrid Open ended Securities Investment Fund that allow investment in other financial instruments approved by the China Securities Regulatory Commission, The warrant investment plan of Dongfang Dragon Hybrid Open ended Securities Investment Fund (hereinafter referred to as "the Fund") managed by Oriental Fund Management Co., Ltd. (hereinafter referred to as "the Fund") in the share trading reform is announced as follows:
1、 Investment proportion limit
1. The total amount of warrants purchased by the 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 the 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;
4. If the fund portfolio does not comply with the provisions of Items 2 and 3 due to factors other than the fund manager, such as fluctuations in the securities market, changes in the size of the fund, and payment of consideration in the share trading reform, the fund manager shall complete the adjustment within ten trading days;
5. Such as China CSRC If it is otherwise provided, the fund shall not be subject to the proportion limit specified in Items 1, 2 and 3 of the preceding paragraph.
2、 Investment strategy
On the premise of ensuring consistency with the investment objectives of the Fund, the Fund Manager, in the principle of prudence and controllable risk, invests in warrants in order to obtain returns commensurate with the risks undertaken.
1. Asset allocation strategy
According to the allocation plan of asset categories such as stocks and bonds, the Fund can invest in warrants in order to improve investment efficiency or avoid risks. The proportion of warrant investment ranges from 0% to 3%.
2. Investment Management Procedures
The warrant investment management procedures include research, decision-making, portfolio construction and adjustment, trading, risk and performance evaluation. Strict investment management procedures are the premise to avoid major risks.
(1) Research
The Research Department is responsible for the research of warrant investment. According to the investment theory of modern finance, the pricing model of warrants is established, and the intrinsic value of warrants is evaluated based on the estimation of market risk-free interest rate, implied volatility and other parameters, and investment suggestions are put forward accordingly.
(2) Asset allocation decision
Within the scope of warrant investment proportion determined by the company's investment decision-making committee, the fund manager shall determine the proportion of warrant alternative investment or hedging according to the actual situation of the fund portfolio and in combination with the warrant investment report submitted by the Research Department.
(3) Warrant portfolio construction
The fund manager shall decide the investment plan of specific warrant varieties according to the market transaction of warrants and his own research and judgment, and approve it according to the internal investment management process of the company.
(4) Transaction execution
The Trading Department is responsible for the specific transaction execution, while performing the responsibility of front-line monitoring, including but not limited to the proportion of warrant investment.
(5) Risk and performance evaluation
The Financial Engineering Department provides risk assessment reports for warrant investment in advance, and provides risk and performance assessment reports for warrant investment regularly and irregularly afterwards. The risk assessment report includes both the single warrant variety itself and the portfolio.
(6) Monitoring and adjustment of warrant investment
The fund manager shall monitor and adjust the warrant investment according to the risk and performance evaluation results of the warrant investment and in combination with the conditions of the securities market and other factors, so as to make it more consistent with the investment objectives of the fund.
On the premise of ensuring the interests of fund share holders and abiding by the Fund Contract of the Fund, the Fund Manager has the right to make adjustments to the above investment procedures according to environmental changes and actual needs, and make an announcement in the Fund Prospectus (update).
3、 Information disclosure method
The information disclosure of the Fund's investment warrants will be carried out in strict accordance with the Law of the People's Republic of China on Securities Investment Funds, the Notice on Relevant Issues of Securities Investment Fund Investment Warrants in the Share trading Reform, the Fund Contract, this Plan and other relevant provisions. The information disclosure of the Fund's investment warrants will be announced on at least one media designated by the CSRC.
The Fund's investment warrants shall disclose the following matters in the Fund's regular reports (including the Fund's annual reports, semi annual reports and quarterly reports) and prospectus (updates):
1. The total market value of warrants purchased by the Fund;
2. The proportion of the total market value of warrants purchased by the Fund in the net asset value of the Fund;
3. Other information that should be disclosed in accordance with the provisions of the CSRC for fund investment warrants.
The annual report and semi annual report of the Fund shall also disclose the details of all warrants sorted by the proportion of market value in the net value of the Fund assets at the end of the reporting period, including the warrant code, warrant name, number, market value at the end of the period, and the proportion of market value in the net value of the Fund assets.
4、 Risk control measures
1. For warrant investment, the company's investment decision-making committee has formulated a management system for fund warrant investment and constantly adjusted it according to the actual situation;
2. Strictly implement the company's investment authorization system;
3. The Research Department provides relevant reports on warrant investment;
4. The fund manager shall decide the investment plan of specific warrant varieties according to the market transaction of warrants and his own research judgment, and report to the competent investment leader for approval;
5. The Trading Department is responsible for the specific transaction execution, while performing the responsibility of front-line monitoring, including but not limited to the proportion of warrant investment;
6. The Financial Engineering Department is responsible for risk and performance evaluation;
7. The Supervision and Audit Department is responsible for supervising and auditing the legality and compliance of warrant investment and the implementation of internal control.
5、 Disclosure of warrant investment risk
The Fund Manager carries out warrant investment in the principle of prudence and controllable risk, but still has the following risks:
1. Price risk
Due to the high leverage of warrants, the price of warrants may fluctuate violently. The warrant price is highly related to the underlying securities price and volatility, interest rate level, warrant residual duration and other factors; At the same time, the price of warrants may be affected by the degree of trading activity of warrants. The warrant price has risks caused by the changes of the above factors:
(1) The decline of the price and volatility of the underlying securities may lead to the decline of the warrant price;
(2) The decline of interest rate may lead to the decline of warrant price;
(3) Shortening the remaining duration of warrants may lead to a decline in the price of warrants.
2. Liquidity risk
Influenced by the scale of warrants and the active degree of warrant trading, warrants may not be able to buy or sell in a large number at the same price level, and there is a certain liquidity risk.
3. Timeliness risk
The warrant has a certain duration. After the expiration of the duration, the warrant will not have any value, and there is a timeliness risk.
4. Leverage risk
Due to the leverage effect of warrants, the fluctuation of warrant price will be far greater than the risk brought by the fluctuation of its underlying stock.
5. Credit risk
When warrant holders exercise their rights, there is a risk that the issuer will fail to perform.
It is hereby announced.
Oriental 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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