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In order to standardize the operation of the Company's securities investment fund warrant investment and effectively protect the legitimate rights and interests of fund share holders, in accordance with the requirements of the Securities Investment Fund Law and the Notice of the China Securities Regulatory Commission (Zheng Jian Ji Jin Zi [2005] No. 138) on Issues Related to Securities Investment Fund Warrants in the Share trading Reform, As well as the relevant provisions in the fund contracts of Xiangcai Hefeng series securities investment funds (including Xiangcai Hefeng growth funds, Xiangcai Hefeng cyclical funds, Xiangcai Hefeng stable funds), Xiangcai Hefeng Banking Selected Securities Investment Fund, and Xiangcai Heyin Risk Budget Securities Investment Fund currently managed by the Company, the above fund assets can actively invest in warrants. The Company formulates the following scheme for the warrant investment of the above securities investment funds:
1、 Investment proportion limit
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;
4. Due to fluctuations in the securities market, changes in fund size Non tradable shares If the fund investment does not conform to the provisions of Items 1, 2 and 3 above due to factors other than the fund manager such as payment of consideration during the reform, the fund manager shall complete the adjustment within ten trading days;
5. Comply with other investment proportion restrictions stipulated by the CSRC;
6. If otherwise specified by the CSRC, the fund investment is not subject to the proportion limit specified in Items 1, 2 and 3 above.
2、 Investment strategy
On the premise of ensuring consistency with the investment objectives of the Fund, the Fund Manager, through fundamental research on the underlying securities of the warrants, estimates the value of the warrants in combination with the warrant pricing model, and in line with the principle of prudence and controllable risk, invests in the warrants in order to obtain the income commensurate with the risks undertaken.
3、 Information disclosure method
In the semi annual report and annual report of the Fund Open-ended Funds To be publicly disclosed in the prospectus.
4、 Risk control measures
（1） Permission settings
The company strictly implements the company's investment authorization system based on the concept of steady investment and hierarchical decision-making:
1. All warrants held by a fund whose market value exceeds 1% of the fund's net asset value shall be reported to the investment director for approval;
2. If the market value of all warrants held by a fund exceeds 2% of the net asset value of the fund, it shall be reported to the investment decision-making committee of the company for approval.
（2） Process control
1. The Research Department is responsible for the research of warrant investment. According to modern financial investment theory, calculate the theoretical value of warrants, analyze the fundamentals of underlying securities of warrants, evaluate the investment value of warrants, and put forward investment suggestions.
2. The fund manager, with full reference to the opinions of the researchers and in combination with the judgment on the underlying securities' fundamentals and future trend, fully assesses the risk and return characteristics of the warrants, and prudently invests under the premise of strict risk control according to the authority granted.
3. The Risk Management and Fund Evaluation Department provides regular or irregular risk and performance evaluation reports for warrant investment.
（3） Prohibited acts
When using fund assets to invest in warrants, it is not allowed to obtain illegitimate interests through insider information, manipulate the price of warrants or underlying securities, use warrant investment for benefit transmission, or conduct any act that damages the interests of fund share holders.
5、 Disclosure of warrant investment risk
Although the fund manager invests in warrants based on the principle of prudence and controllable risk, warrants are a financial derivative with high leverage, high risk and high return, which is risky. For the Xiangcai Hefeng Series Securities Investment Fund, Xiangcai Hefeng Banking Selected Securities Investment Fund, Xiangcai Heyin Risk Budget Securities Investment Fund Investment Warrants managed by the Manager, please pay attention to the investment risks of fund share holders.
The risk of warrant investment is mainly reflected in the following aspects:
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 security price, volatility, interest rate level and the remaining duration of the warrant; 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. Credit risk
When warrant holders exercise their rights, there is a risk that the issuer will fail to perform.
The Company will further establish and improve the warrant investment management system, improve risk control measures and effectively protect the legitimate rights and interests of fund share holders according to market conditions.
Xiangcai Heyin Fund Management Co., Ltd
August 26, 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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