HSBC Jinxin 2016 Life Cycle Announcement on Warrant Investment

In order to protect the legitimate rights and interests of fund share holders, standardize the warrant investment operation of funds under HSBC Jinxin Fund Management Co., Ltd. (hereinafter referred to as "the Company"), and ensure the safety of fund assets, in accordance with the Securities Investment Fund Law of the People's Republic of China and the Measures for the Management of Securities Investment Fund Operation In accordance with the provisions of the Notice on Issues Related to Investment Warrants of Securities Investment Funds in the Non tradable Share Reform (ZJJJZ [2005] No. 138) issued by the CSRC and the relevant provisions in the fund contract of the HSBC Jinxin 2016 Life Cycle Open ended Securities Investment Fund managed by the Company ）Proportional restrictions, investment strategies and information disclosure in the process of investment warrants

This investment plan has been formulated with respect to exposure and risk control measures, and is hereby announced as follows:

1、 Proportion limit of warrant investment

The Fund's use of fund assets for warrant investment will comply with the following restrictions:

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 the Fund and other funds of the Company shall not exceed 10% of the warrant.

4. After the exercise of the warrants held by the Fund, the amount of the underlying securities held by the Fund shall not exceed 10% of the net asset value of the Fund.

5. After the exercise of the same warrant held by the Fund and all other funds of the Company, the amount of underlying securities held by all funds shall not exceed 10% of the issued amount of such securities.

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2、 Strategy of warrant investment

The Fund actively invests in warrants on the premise of controlling investment risks and ensuring the safety of fund assets. The Fund's warrant investment strategy mainly includes the following aspects:

1. The Fund will comprehensively measure the reasonable intrinsic value, underlying stock price, exercise price, exercise time, exercise method, stock price history and expected volatility, risk-free return and other factors of the underlying stock of the warrants, and use a variety of options pricing models recognized in the market to price the warrants.

2. The Fund will decide to buy, hold or sell warrants based on the difference between the reasonable intrinsic value of the warrants and their market price, namely, the "valuation difference", and the sensitivity of the reasonable intrinsic value of the warrants to pricing parameters, in combination with the consideration of the reasonable intrinsic value of the underlying stocks.

3. The Fund will use the characteristics of warrant derivatives to improve the risk return characteristics of the portfolio through portfolio investment of warrants and securities.

3、 Information disclosure method

The Fund will, in strict accordance with the Administrative Measures for Information Disclosure of Securities Investment Funds and relevant laws and regulations as well as the relevant provisions of the CSRC, regularly report the information related to warrant investment in the Fund and

4、 Risk control measures

The Fund consists of the Risk Management Committee, the Supervision and Audit Department and other specialized agencies for fund investment risk management to identify, prevent and control risks in all aspects of fund investment. The Supervision and Audit Department monitors the whole process of investment decisions and actual investments, and provides risk reports to the Risk Management Committee regularly and irregularly; The Risk Management Committee deliberates on risk matters and risk assessment reports and communicates with the Investment Decision making Committee to monitor whether the investment decision-making process and the exercise of decision-making authority at all levels are legal, compliant, scientific and reasonable, and uses the trading system to impose mandatory restrictions on the proportion of investment warrants. In the process of warrant investment, the Fund mainly grasps the control risk from the following three aspects: (1) grasp the change trend of the intrinsic value of warrants through the fundamental analysis of underlying assets; (2) Control the risk return level of the fund through reasonable allocation of stocks, warrants, bonds and cash; (3) Real time monitoring of warrant investment risk through risk monitoring indicators.

5、 Risk disclosure

Due to the high leverage and volatility of warrants, warrant investment behavior may affect the overall risk return of fund investment. These investment risks mainly include:

1. Leveraged trading risk: warrant trading has financial leverage effect. Although investors have the opportunity to obtain greater returns at limited costs, they may also suffer huge losses in a short time;

2. Price fluctuation risk: the market price of the warrant is affected by various factors such as the price fluctuation of the underlying stock. Moreover, the fluctuation of the underlying stock price to a certain extent will lead to a large fluctuation of the warrant market price;

3. Liquidity risk: market participants in warrant trading and their price differences affect the liquidity of warrants. The market liquidity of warrants is weakened by the small number of trading participants and the bid ask price difference. Moreover, as the maturity date approaches, the market liquidity of warrants may decline.

4. Performance risk: the performance ability of the warrant issuer is crucial. If the issuer fails to perform, investors may suffer full losses;

5. Risk of expiration of warrants: when the warrants expire and there is no other performance value, the warrants will have no value.

The Company requests fund holders to pay attention to the risk of fluctuation of fund net value that may arise from the fund's warrant investment. At the same time, the Company will further improve the warrant investment management system, improve risk control measures and effectively protect the legitimate rights and interests of fund holders according to market conditions.

It is hereby announced.

HSBC Jinxin Fund Management Co., Ltd

June 29, 2006