Stock investment strategy

I. Industry Allocation Strategy The national defense industry can be divided into different sub-industries according to the categories of products or services. The Fund will comprehensively consider the following factors to allocate stock assets in various sub-industries of national defense and military industry.

1) The investment of national military expenditure affects the prosperity of each sub-industry of national defense and military industry, and then affects the growth of each sub-industry of national defense and military industry. The Fund will continue to track and study the investment in national military expenditure, timely judge the changes in the prosperity of various sub-sectors of national defense and military industry, and over-allocate the sub-sectors that the national military expenditure focuses on.

2) Industry Structure The industry structure of each sub-industry of national defense and military industry is different, which leads to great differences in the competition structure and profitability of each sub-industry. The fund will focus on investing in sub-sectors with high industry barriers, high concentration and strong bargaining power.

3) Government policies National defense and military industry are greatly influenced by government policies. Through the analysis and research of government policies, the fund will grasp the direction of government policies and focus on investing in sub-sectors that benefit from government policies, especially high-quality private military enterprises that meet the policy direction.

Second, the strategy of individual stock selection The Fund comprehensively evaluates the investment value of listed companies in the national defense and military industry by considering the following factors, and selects listed companies with strong competitive advantages to invest.

1) R&D capability the company has strong R&D capability, and can continuously improve the original products or develop new products according to the changes in market demand, so as to maintain market share and profitability.

2) Management Ability The company has established a mature management system, which has a competitive advantage over enterprises in the same industry.

3) Operational Efficiency The company has a high operational efficiency, with good indicators such as total assets turnover rate, inventory turnover rate and accounts receivable turnover rate.

4) Growth Potential The company has a high growth rate, and the expected growth rate of operating income or profit is higher than the industry average, which is sustainable.

5) Profitability The company has strong profitability, and the expected operating profit rate or expected return on equity is higher than the industry average, which has great potential for improvement in the future.

6) Financial structure The company's asset-liability structure is relatively reasonable, and the financial risk is small, which will not have a negative impact on the company's future business development.

Three. Analysis of valuation level The Fund will select the appropriate stock valuation method according to the industry characteristics of listed companies and the company's own characteristics. The available valuation methods include price-earnings ratio method (P/E), price-to-book ratio method (P/B), price-earnings ratio-long-term growth method (PEG), enterprise value/sales revenue (EV/SALES), enterprise value/profit before interest, tax, depreciation and amortization method (EV/EBITDA), free cash flow discount method model (FCFF, FCFE) or dividend discount model. Through the analysis of the valuation level, fund managers try to find out the stocks with low or reasonable valuation.

Four. Construction and Adjustment of Stock Portfolio The Fund will determine the asset allocation ratio of each sub-industry on the basis of comprehensive analysis of each sub-industry of national defense and military industry. In all sub-sectors, the Fund will choose listed companies with strong competitive advantages and attractive valuations for investment. When the fundamentals and stock valuation level of various sub-industries and listed companies change greatly, the Fund will adjust the stock portfolio in time.

Verb (abbreviation of verb) bond investment strategy

In terms of bond investment, the Fund will conduct investment management mainly through two levels: generic allocation and bond selection. At the level of generic allocation, the Fund regularly optimizes and adjusts generic assets in the portfolio based on the comprehensive analysis of macro-economy, market interest rate, supply and demand changes and other factors, and according to the risk-return characteristics of generic assets in the exchange market and interbank market, and determines the optimal weight of generic assets. On the choice of bond varieties, the Fund conducts proactive bond investment management on the basis of analyzing the long-term interest rate trend and combining the economic trend, monetary policy, yield level, liquidity and credit risk of different bond varieties.