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1.These Directions are promulgated in order to effectively utilize Labor Retirement Fund (hereinafter the “Fund”)in accordance with Article 3 and Article 6 of Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund (hereinafter the “Regulations”).

2.The principles for investment utilization of the Fund shall be as follows:
(1)Subject to the consideration on safety, liquidity and profitability, the Fund shall conduct professional investment by selecting the most advantageous investment portfolio and transaction timing.
(2)Without sacrificing the income of the Fund, the corporate social responsibilities and ethics of the investment targets shall be taken into consideration.

3.The following are the regulations on depositing domestic currency in a financial institution:
(1)The following financial institutions incorporated under the laws of the Republic of China to conduct business:
(i)Central Bank;
(ii)Government-owned or private banks that have participated in the Central Deposit Insurance Corporation;
(iii)Chunghwa Post Co., Ltd.
(iv)Government-owned or private investment and trust corporations;
(v)The branch institutions of foreign banks in Taiwan.
(2)Except for the Central Bank and Chunghwa Post Co., Ltd., the credit rating shall satisfy any one of the following levels:
(i)Long-term debt credit rating at or above “BBB-” by Standard & Poor's Corp..
(ii)Long-term debt credit rating at or above “Baa3” by Moody's Investors Service.
(iii)Long-term debt credit rating at or above “BBB-” by Fitch Ratings Ltd..
(iv)Long-term debt credit rating at or above “twBBB” by Taiwan Ratings Corporation.
(v)Long-term debt credit rating at or above “BBB(twn)” by Fitch Ratings Limited, Taiwan Branch.
(3)The total amount of deposit in a financial institution shall be handled in accordance with the following provisions:
(i)Central Bank , government-owned bank and Chunghwa Post Co., Ltd.: the amount of deposit shall be exempted from the restrictions on deposit amount.
(ii)A financial institution in which the government or the government-owned enterprise holds at least 30% of the shareholders’ equity thereof or of the financial holding company said financial institution subordinates to: the total amount of deposit shall not exceed 40% of the net asset value of said financial institution.
(iii)Financial institutions other than the above two subsections: the total amount of deposit shall not exceed 30% of the net asset value of said financial institution.
(iv)The Bank of Taiwan shall compile table of deposit quota for next year by the end of December every year based on net asset value of financial institutions announced by the competent authority. When the total amount deposited in a financial institution does not comply with relevant provisions, the Bank of Taiwan shall continuously make adjustments upon the maturity dates of each deposit.
(v)If a financial institution that accepted deposit of the Fund is officially ordered to suspend its business and to fix the problem within a given time limited by the competent authority,or the competent authority has assigned officials to place such financial institution into receivership or monitor its business operations due to severe deterioration in the financial institution’s business or financial status , the amount of deposit in such financial institution shall not be increased.
(4)Any financial institution which intends to accept deposit of the Fund shall make an application to the Bank of Taiwan.The Bank of Taiwan will issue a letter notifying said financial institution to handle matters related to deposit of the Fund, and will report the same to Labor Pension Fund Supervisory Committee (hereinafter “LPSC”)thereafter for recordation.

4.The following are the regulations on depositing foreign currencies in foreign or domestic financial institutions:
(1)Banks located within the territory of the ROC or overseas branches of domestic banks.
(2)The banks shall rank among the top three hundred of all the banks in the world in terms of assets or capital, or have credit ratings at a certain level by an internationally prestigious rating agency or a rating agency approved by the competent authorities.
(3)The amount of foreign currency deposit in one single bank shall not exceed one percent (1%)of the net value of the Fund; provided, however, that the demand deposit deposited in the custodian banks entrusted by the Fund, as well as the portion of overseas mandated management and the reserve funds for overseas mandated management shall not be counted into such amount.
(4)The ranking of the credit rating agency approved by the competent authorities reaching a certain level referred to in the above second paragraph shall satisfy one of the following levels:
(i)Long-term debt credit rating at or above “BBB-” by Standard & Poor's Corp..
(ii)Long-term debt credit rating at or above “Baa3” by Moody's Investors Service.
(iii)Long-term debt credit rating at or above “BBB-” by Fitch Ratings Ltd..
(iv)Long-term debt credit rating at or above “twBBB” by Taiwan Ratings Corporation.
(v)Long-term debt credit rating at or above “BBB(twn)” by Fitch Ratings Limited, Taiwan Branch.

5.The following are the operation procedures on loans to all levels of governments or government-owned enterprises for the purpose of economic development or investment expenditure the reimbursements of which may come either in the form of profits or through annual budgetary repayments:
(1)The borrowing entity shall apply with the LPSC by filling in and submitting the application letter together with the following documents:
(i)The overview of the economic development and investment planning.
(ii)The required loan amount and repayment plan.
(iii)If the borrowing entity is one of all levels of local governments, the consent letter from the civil representative body at the same level or a financial institution’s guarantee letter is required; if the borrowing entity is a township office, the repayment guarantee letter from its upper level of government is required to be submitted, unless such repayment plan has annual budgetary and is approved by the civil representative body.
(iv)Explanations on the financial status of the borrowing entity.
(2)After the LPSC accepts the loan applications, those applications will be reviewed by relevant business divisions. Upon approval by the LPSC, the LPSC will notify the borrowing entity for the same to sign contracts with the Bank of Taiwan and draw down the amount of the loan in installments based on the construction progress or investment progress.
(3)The borrowing entity shall fully execute the construction or investment plans and repayment plans, and the LPSC may dispatch its personnel to inspect the execution status as it deems necessary.
(4)If the borrowing entity fails to repay the loan in full when it becomes due and payable, the Bank of Taiwan will take recourse action, and the competent authorities of the Fund will notify in writing the competent authorities supervising the borrowing entity to assist in the recourse.
(5)The interest rate and repayment term of the loan shall be reviewed and approved by the LPSC case by base based on the nature of the borrowing entity and its utilization plan.
(6)If the borrowing entity is a government-owned enterprise, the facility terms shall include such clause stating that “If it is ascertained that the borrower will be privatized, the borrower shall notify in advance and agree that the applicable loan agreement shall be terminated on the date one day before the privatization of the borrower, whereby the portion of loan that has been drawn shall be deemed as accelerated, all the unpaid principal and interest of the loan shall be repaid on the date one day before the privatization and the portion of loan that has not been drawn shall cease to be drawn.”

6.The following are the regulations on investment in foreign and domestic equity securities listed on the stock exchange, over the counter market or on a private placement basis .
(1)The foreign and domestic equity securities the Fund may invest in shall include securities with direct or indirect shareholders’ equity such as listed stock, stock traded in the over-the-counter market, stock of secondary public offering, stock of initial public offering and depositary receipts.
(2)Investment in foreign and domestic equity securities shall take into consideration fundamental factors such as the industry prospect, management performance, business and financial status and dividend policy, and shall follow the principles of acquiring stock dividend, cash dividend or capital gains.
(3)The total cost for purchasing one single domestic equity securities shall not exceed two percent (2%)of the net value of the Fund at the time of investment.
(4)The total cost for purchasing one single foreign equity securities shall not exceed one percent (1%)of the net value of the Fund at the time of investment.
(5)The total amount invested in any equity securities shall not exceed ten percent (10%)of the total issued amount of said equity securities.
(6)In the case of investment in depositary receipts, the investment amount should be calculated by adding the amount of shares represented by such depository receipts to the amount of invested shares of the company issuing such depositary receipts. The amount of depository receipts is calculated based on the amount of underlying stocks represented by said depository receipts. The maximum investment ratio of the combined calculated investment shall be handled pursuant to the above three subsections.

7.The following are the regulations on investment in foreign and domestic debt securities .
(1)Utilization Principles
(i)The foreign and domestic debt securities the Fund may invest in shall include government bonds, financial debentures or corporate bonds, short-term bills, repurchase agreements and reverse repurchase agreements, beneficiary securities of financial asset securitization or asset-backed securities, foreign currency denominated international bonds and guaranteed fixed income products issued by banks, securities firms or insurance companies or other securities with debt nature.
(ii)Investment in debt securities shall be conducted by selecting debt securities with good debt credit rating in order to acquire interest or capital gains.
(2)Purchase of domestic short-term bills shall be made with a view to the status of revenues and expenditures of the Fund, with an adequate amount of capital being reserved for any short-term use, and shall be in compliance with the following regulations:
(i)The types of short-term bills the Fund may invest in shall include the following:
(a)Treasury bills.
(b)Negotiable certificates of deposit issued by the Central Bank.
(c)Savings bonds issued by the Central Bank.
(d)Bankers’ acceptances.
(e)Commercial paper guaranteed by financial institutions or non-guarantee commercial paper.
(f)Negotiable certificates of deposit issued by the financial institutions in which the Fund has deposit.
(ii)The credit rating of the financial institution guaranteeing or accepting the purchased of domestic short-term bills, being purchased shall satisfy any one of the following levels (for the branch institution of a foreign bank in Taiwan, the credit rating of its head office shall satisfy any one of the following levels):
(a)Short-term debt credit rating at or above “A-3” by Standard & Poor's Corp..
(b)Short-term debt credit rating at or above “P-3” by Moody's Investors Service.
(c)Short-term debt credit rating at or above “F3” by Fitch Ratings Ltd..
(d)Short-term debt credit rating at or above “twA-3” by Taiwan Ratings Corporation.
(e)Short-term debt credit rating at or above “F3(twn)” by Fitch Ratings Limited, Taiwan Branch.
(iii)Subsection 2(ii)above applies to the issuer of non-guarantee commercial paper.
(iv)The credit rating shall be reviewed at least once every year.
(v)If the guarantee or acceptance financial institution of the short-term bills fails to satisfy the credit rating levels in Subsection 2(ii)above but the issuer thereof satisfies such credit rating levels, the Fund may still purchase such short-term bills.
(vi)If non-guarantee bills invested in by the Fund and the credit rating of the guarantee or acceptance financial institutions fail to satisfy said levels in Subsection 2(ii)above but the issuer thereof satisfies such credit rating levels, the total amount of investment in such bills shall not exceed five percent (5%)of the net value of the Fund at the time of purchase.
(vii)The outstanding amount of the purchased short-term notes guaranteed, accepted or issued by a single bank or bill finance company shall not exceed five percent (5%)of the net value of the Fund at the time of purchase.
(3)With respect to investment in domestic debt securities (not including short-term bills), except for government bonds and those issued or guaranteed by government-owned institutions, the credit rating of the debt securities or the issuer or the lead guarantor of such securities shall meet one of the following standards:
(i)Long-term debt credit rating at or above “BBB-” by Standard & Poor's Corp..
(ii)Long-term debt credit rating at or above “Baa3” by Moody's Investors Service.
(iii)Long-term debt credit rating at or above “BBB-” by Fitch Ratings Ltd..
(iv)Long-term debt credit rating at or above “twBBB-” by Taiwan Ratings Corporation.
(v)Long-term debt credit rating at or above “BBB-(twn)” by Fitch Ratings Limited, Taiwan Branch.of the paragraph
(4)For investment in domestic convertible corporate bonds and warrant bonds with the aim of converting into the equity securities, the foregoing subsection shall not apply.
(5)The following are the regulations on investment in debt securities in Subsections 3 and 4 above:
(i)With respect to investment, an evaluation report shall be presented in advance and such investment shall be made within the authorized amount and in accordance with the risk control procedures. With respect to investment in beneficiary securities and asset-backed securities on a private placement basis, prior approval from the LPSC is required.
(ii)Except for government bonds, bank debentures issued by government-owned banks, corporate bonds issued by government-owned enterprises or guaranteed by government-owned banks, the total cost for investment in any debt securities shall not exceed two percent (2%)of the net value of the Fund at the time of purchase.
(iii)Except for government bonds, bank debentures issued by government-owned bank, corporate bonds issued by government-owned enterprises or guaranteed by government-owned banks, the total amount of investment in any corporate debt security shall not exceed ten percent (10%)of the total amount of debt security issued by said company.
(6)Purchase of foreign short-term bills shall be in compliance with the following:
(i)The types of short-term bills the Fund may invest in shall include the following:
(a)Treasury bills.
(b)Negotiable certificates of deposit.
(c)Bank acceptance bills
(d)Commercial paper.
(ii)With respect to the purchased of foreign short-term bills, the credit rating of the bills or the financial institution guaranteeing or accepting the purchased of the bills or the issuer shall meet one of the following levels:
(a)Short-term debt credit rating at or above “A-3” by Standard & Poor's Corp..
(b)Short-term debt credit rating at or above “P-3” by Moody's Investors Service.
(c)Short-term debt credit rating at or above “F3” by Fitch Ratings Ltd.
(d)Short-term debt credit rating at or above “twA-3” by Taiwan Ratings Corporation.
(e)Short-term debt credit rating at or above “F3(twn)” by Fitch Ratings Limited, Taiwan Branch.
(7)With respect to investment in foreign debt securities（not including short-term bills）, the credit rating of the debt securities or the issuer or guarantor thereof shall meet one of the following standards:
(i)Long-term debt credit rating at or above “A-” by Standard & Poor's Corp..
(ii)Long-term debt credit rating at or above “A3” by Moody's Investors Service.
(iii)Long-term debt credit rating at or above “A-” by Fitch Ratings Ltd..
(iv)Long-term debt credit rating at or above “twA-“ by Taiwan Ratings Corporation.
(v)Long-term debt credit rating at or above “A-(twn)” by Fitch Ratings Limited, Taiwan Branch.
(8)The following are the regulations on investment in debt securities in Subsections 6 and 7 above:
(i)The total cost for the purchase of single foreign debt securities shall not exceed one percent (1%)of the net value of the Fund at the time of investment.
(ii)The total amount of investment in any foreign debt securities shall not exceed ten percent (10%)of the total issued amount of said debt securities.
(9)For investment in domestic convertible corporate bonds and warrant bonds with the aim of converting into the equity securities, the equity securities represented by those bonds shall be combined with the equity securities invested by the Fund for calculation of the total amount or the total number.
(10)The Bank of Taiwan shall report the actual amount for foreign investment to the LPSC for approval before handling the investment, and shall handle the investment within the amount approved by the LPSC and in accordance with relevant rules and regulations as well as investment restrictions.

8.The following are the regulations on investment in publicly or privately placing beneficiary certificates issued by domestic securities investment trust funds, futures trust funds, mutual trust funds or collective trust products:
(1)Prior to making the investment, an evaluation report shall be presented based on the performance stability, market liquidity, investment risk, frequently used market indicators or fund rakings published by each fund intelligence, and such investment shall be made within the authorized amount and in accordance with the risk control procedures.
(2)The total cost for the purchase of a single fund shall not exceed two percent (2%)of the net value of the Fund at the time of investment. The total cost for the purchase of a single exchange traded fund (ETF)shall not exceed five percent (5%)of the net value of the Fund at the time of investment.
(3)The total amount of investment in any fund shall not exceed ten percent (10%)of the total amount of said fund. The total amount of investment in the beneficiary certificates of any ETF shall not exceed twenty percent (20%)of the total amount of said fund.

9.The following are regulations on investment in foreign exchange traded funds and offshore funds:
(1)Prior to making the investment, an evaluation report shall be presented based on the performance stability, market liquidity, investment risk, frequently used market indicators or fund rakings published by each fund intelligence, and such investment shall be made within the authorized amount and in accordance with the risk control procedures.
(2)The total cost for the purchase of a single exchange traded fund or offshore fund shall not exceed one percent (1%)of the net value of the Fund at the time of investment.
(3)The amount of investment in any exchange traded fund or offshore fund shall not exceed ten percents (10%)of the outstanding beneficiary certificates of said fund.

10.The following are the regulations on investment in gold transactions made via gold savings passbook accounts:
(1)Where the transaction counterparty is a financial institution, the credit rating of such financial institution shall satisfy any one of the following levels:
(i)Long-term debt credit rating at or above “BBB” by Standard & Poor's Corp..
(ii)Long-term debt credit rating at or above “Baa2” by Moody's Investors Service.
(iii)Long-term debt credit rating at or above “BBB” by Fitch Ratings Ltd..
(iv)Long-term debt credit rating at or above “twA-” by Taiwan Ratings Corporation.
(v)Long-term debt credit rating at or above “A-(twn)” by Fitch Ratings Limited, Taiwan Branch.
(2)The total amount of deposit in the gold savings passbook accounts shall not exceed one percent (1%)of the net value of the Fund at the time of purchase.
(3)The total amount of deposit in the gold savings passbook accounts of each financial institution shall not exceed five percent (5%)of the net value of such financial institution; provided, however, that government-owned banks shall be waived from such restrictions on total amount of deposit in the gold savings passbook accounts.
The aforementioned net value shall be based on the information published by Financial Supervisory Commission, Executive Yuan.

11.The following are the regulations on investment in beneficiary securities of real estate investment trust or real estate asset trust :
(1)The total number of investment in the beneficiary units of any real estate investment trust issued by the trustee shall not exceed ten percent (10%)of the total number of the outstanding beneficiary units of such real estate investment trust.
(2)The total amount of investment in the beneficiary securities of any real estate asset trust issued by the trustee shall not exceed ten percent (10%)of the total amount of the outstanding beneficiary securities of such real estate asset trust issued by such trustee in any given tranche (if issued in different tranches).
(3)The total amount of investment in the beneficiary securities of any real estate investment trust and real estate asset trust issued by the trustee shall not exceed two percent (2%)of the net value of the Fund at the time of the purchase.
(4)The total amount of investment in the beneficiary securities of any real estate asset trust issued by the trustee on the basis of the real estate entrusted by any originator shall not exceed two percent (2%)of the net value of the Fund at the time of investment.
(5)The credit rating of the beneficiary securities of real estate investment trust or real estate asset trust being invested in shall satisfy any one of the following levels:
(i)Credit rating at or above “BBB-” by Standard & Poor's Corp..
(ii)Credit rating at or above “Baa3” by Moody's Investors Service.
(iii)Credit rating at or above “BBB-” by Fitch Ratings Ltd..
(iv)Credit rating at or above “twBBB-” by Taiwan Ratings Corporation.
(v)Credit rating at or above “BBB-(twn)” by Fitch Ratings Limited, Taiwan Branch.
(6)Investment in private placed beneficiary securities of real estate investment trust or real estate asset trust shall be made after reporting to and obtaining approval from the LPSC, and shall ensure the most beneficial utilization of capital under the relevant standards set by the Bank of Taiwan.

12.Engaging in financial derivatives transactions shall be implemented in accordance with Directions for Transaction in Derivatives for Labor Retirement Fund.

13.The following are the trading principles and operating methods on the engaging in securities lending :
(1)Trading principles on the domestic securities lending:
(i)Such lending business shall be limited to securities traded at fixed price, negotiated price or through competitive auction.
(ii)The lending period starting from the lending date with maximum of six months; extension of lending period shall be granted once and shall not exceed six months. The lending period for domestic securities lending may not go beyond two business days prior to the interest payment date.
(iii)The lending amount of any securities shall not exceed fifty percent (50%)of the total amount of such securities held on the trading date before the lending date.
(2)Trading principles on the foreign securities lending:
(i)The Fund’s foreign custodian bank may engage in lending business as an agency.
(ii)The credit rating of the borrower shall satisfy any one of the following levels（if such credit rating is not avilable, credit rating of its parent company shall satify any one of the following levels）:
(a)Credit rating at or above “A-” by Standard & Poor's Corp..
(b)Credit rating at or above “A3” by Moody's Investors Service.
(c)Credit rating at or above “A-” by Fitch Ratings Ltd..
(d)Credit rating at or above “twA-” by Taiwan Ratings Corporation.
(e)Credit rating at or above “A-(twn)” by Fitch Ratings Limited, Taiwan Branch.
(iii)The maintenance ratio of the guarantee shall be no less than one hundred percent(100%).
(iv)The types and credit ratings of the reinvestment targets secured by non-cash collateral or cash collateral shall satisfy the relevant provisions of foreign investment under these Directions.
(3)Operating Methods:
The Bank of Taiwan will handle lending securities pursuant to the quota and trading restrictions stipulated by relevant regulations.

14.When the Fund's annual accounts are being prepared, the Bank of Taiwan shall allocate ten percent (10%)of the net profit of stock as investment loss reserve and allocate one percent (1%)of the balance of the principal and interest of the loan as reserve for bad debt in order to stabilize profit. However, the balance after allocation shall be no less than the guaranteed profit for the same year, and shall use the same to offset the insufficiency when the accumulated surplus is insufficient to supplement the minimum profit.

15.The Bank of Taiwan shall analyze and then report the revenue and expenditure, utilization, cost of capital and utilization surplus of the Fund to the LPSC on a monthly basis.

16.In the event the Fund mandates any other financial institution to utilize the fund and make discretionary investment, the investment mandate agreement shall include the relevant provisions of these Directions.