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These Directions are promulgated in order to effectively utilize the Labor Pension Fund under Labor Pension Act, the Labor Retirement Fund, the Labor Insurance Fund, the Employment Insurance Fund, the Arrear Wage Payment Fund and the Labor Occupational Accident Insurance Fund (hereinafter referred to as the Funds or each Fund).

The principles of investment are as the following:
(1) Subject to the consideration on security, liquidity and profitability, the Funds shall conduct professional investment by selecting the most advantageous investment portfolio and transaction timing.
(2) Without sacrificing the income of the Funds and to practice sustainable investment, the sustainable development of investment targets shall be taken into consideration.

The annual asset allocation plans of each Fund shall be submitted to the Labor Funds Supervisory Committee, the Ministry of Labor.

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) The credit rating of a 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 “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 Australia PTY Ltd, Taiwan Branch
(3) The deposit amount limit of the in-house capital utilization shall be established in accordance with the credit rating However, the deposit amount in the Central Bank of the Republic of China, government-owned banks and Chunghwa Post Co., Ltd shall not be restricted to the deposit amount limit.

The credit rating of domestic or foreign financial institution where foreign currency is deposited shall follow the foreign currency deposit guidelines for the Labor Pension Fund under Labor Pension Act .

The following regulations are the operation procedures on loans to all levels of governments or government-owned enterprises (hereinafter the “borrowing entity”) for the purpose of economic development or investment expenditure with reimbursements which may come either in the form of profits or annual budgetary repayments:
(1) The borrowing entity shall submit the application letter 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 the guarantee letter from a financial institution is required; if the borrowing entity is a township (city, district) office, the repayment guarantee letter from its upper level of government is required, unless such repayment plan is under annual budget and is approved by the civil representative body.
(IV) The financial statement of borrowing entity
(2) The amount of the approved loan will be drawn down in installments according to the construction progress or investment progress after the signed contract.
(3) The borrowing entity shall fully execute the construction or investment plans, the repayment plans and accept inspection of the execution status.
(4) If the borrowing entity fails to repay the loan in full when the loan is due, the recourse action will be taken for recovery; moreover, the Funds will notify the competent authority of the borrowing entity in writing letter to assist in the recourse and recovery.
(5) The interest rate and repayment term of the loan shall be approved based on the nature of the borrowing entity and its utilization plan.
(6) If the borrowing entity is a government-owned enterprise, the loan terms shall include such clause stating that “If it is ascertained that the borrowing entity shall be privatized, the borrowing entity shall notify the Funds in advance and agree that the applicable loan agreement shall be terminated on one day before the date of the privatization, whereby the portion of loan that has been drawn shall be deemed as due, all the unpaid principal and interest of the loan shall be repaid on the same day and the portion of loan that has not been drawn shall cease to be drawn.”

Besides subject to other acts and regulations, investment in foreign and domestic equity securities should follow the regulations listed below:
(1) The foreign and domestic equity securities include securities with direct or indirect shareholders’ equity such as listed stock, stock traded in the over-the-counter market, stock of private placement, secondary equity offering and initial public offering, and depositary receipts.
(2) Investment in foreign and domestic equity securities shall consider 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 operational regulations which are relevant to the investment authority and the amount of investment exposure shall be established before the investment in equity securities
(4) The total cost of investment in a single domestic equity for the Labor Retirement Fund shall not exceed five percent (5%) of the net asset value of the fund at the time of investment The total cost invested in a single domestic equity for the Arrear Wage Payment Fund shall not exceed five percent (5%) of the total asset value of the fund at the time of investment.
(5) The total investment in any domestic equity for the Labor Retirement Fund and Arrear Wage Payment Fund shall not exceed ten percent (10%) of the total outstanding shares of such company at the time of investment

The investment in domestic and foreign listed, OTC or private debt securities, include short-term bills with repurchase agreement as well as reverse sell agreement, government bonds, financial bonds, corporate bonds, asset securitization beneficiary securities, asset-backed securities and other securities with fixed income guaranteed by banks, securities firms and insurance companies or other types of debt securities.
With respect to the investment of debt securities, should be made to choose good credit and acquire interest gains or capital gains as principle; For the purpose of capital allocation, short-term capital investment shall be made with adequate investment amount which depends on each fund’s balance of income and payment.

The following are regulations for domestic and foreign short-term bill investment:
(1) The following are the types of short-term bills which can be invested:
(I) Domestic
(a) Treasury bills
(b) Saving Bonds of Central Bank
(c) Bankers’ acceptances
(d) Commercial paper guaranteed by financial institutions or non-guarantee commercial paper
(e) Negotiable certificates of deposit issued by financial institutions
(II) Foreign:
(a) Treasury bills
(b) Negotiable certificates of deposit
(c) Bankers’ acceptances
(d) Commercial paper
(2) The credit ratings of the financial institutions which guarantee or accept the domestic and foreign short-term bills or the credit rating of the issuer, 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):
(I) Short-term debt credit rating at or above “A-3” by Standard & Poor's Corp.
(II) Short-term debt credit rating at or above “P-3” by Moody's Investors Service
(III) Short-term debt credit rating at or above “F3” by Fitch Ratings Ltd.
(IV) Short-term debt credit rating at or above “twA-3” by Taiwan Ratings Corporation
(V) Short-term debt credit rating at or above “F3 (twn)” by Fitch Australia PTY Ltd, Taiwan Branch.
(3) If the credit rating of domestic non-guarantee commercial paper or the credit rating of financial institutions guaranteeing or accepting short term bills which are invested by the Funds fail to satisfy said levels in Subsection (2) above but the issuer thereof satisfies such credit rating levels, the total amount of investment in such bills for the Labor Retirement Fund shall not exceed five percent (5%) of the net asset value of each Fund at the time of investment The total amount of investment in said bills for the other Funds shall not exceed five percent (5%) of the total asset value of each Fund at the time of investment Issuers of government-owned enterprises are not subject to this restriction.
(4) The balance of invested domestic commercial bills guaranteed by the same financial institution shall not exceed ten percent (10%) of the total amount of the commercial papers guaranteed by such financial institution at the time of investment; the balance of the non-guarantee commercial papers of the same issuer shall not exceed ten percent (10%) of the outstanding amount of that issuing company at the time of investment.

The investment in domestic or foreign debt securities (not including short-term bills) shall comply with one of the following standards:
(1) The credit rating level of the debt securities or guarantee financial institution or the issuer shall comply with one of the following standards However, domestic debt securities issued by government-owned enterprises or guaranteed by government-owned banks are not subject to the credit rating restriction:
(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 Australia PTY Ltd, Taiwan Branch.
(2) With respect to investment in domestic private placement of financial bonds, corporate bonds, beneficiary securities and asset-backed securities, an evaluation report shall be presented in advance and such investment shall be made in accordance with the authorized investment amount and the risk control procedures.
(3) The exposure to domestic debt securities or financial asset securitization products shall comply with the following regulations:
(I) The total cost of investment in any single debt securities for the Labor Retirement Fund shall not exceed five percent (5%) of the net asset value of the said Fund The total cost of investment in any single debt securities for the Arrear Wage Payment shall not exceed five percent (5%) of total asset value of said Fund at the time of investment.
(II) The total amount of investment of the Labor Retirement Fund in any single debt securities shall not exceed ten percent (10 %) of the total issued amount of said securities at the time of the investment The total amount of investment of the Arrear Wage Payment Fund in any single debt securities shall not exceed ten percent (10%) of the net asset value of said company at the time of investment .
(III) The total cost of investment in any financial securitization products issued by the trustee or special purpose company for the Labor Retirement Fund shall not exceed five percent (5%) of the net asset value of the said fund at the time of investment; for the other Funds shall not exceed five percent (5%) of the total asset value of each Funds at the time of investment .
(IV) The total amount of investment in the financial securitization products issued by the trustee or special purpose company shall not exceed ten percent (10 %) of the total outstanding shares of such company at the time of investment.
(4) Prior to foreign debt security investment, the investment department shall establish the position limits, holding period, authorized amount and other relevant standards.
(5) If the domestic preferred stocks, convertible bonds and corporate bounds with attached warrant, its guarantee financial institutions, or its issuers do not have the long-term credit rating in the paragraph 1 of this Article, said bonds may apply to the other credit rating evaluation which is regularly used by domestic financial institution and shall satisfy at least one of the levels in Item 4 or 5 of paragraph 1 of this Article.
(6) The investment in theconvertible bonds and corporate bonds with warrant for the purpose of converting into the equity securities shall not apply to the specific credit rating conditions on paragraph 1 Nevertheless, the total value or total amount of such debts with converting into equity securities option should be calculated with the invested equities.

Prior to making the investment in domestic public offering or private placement of securities investment trust fund, futures trust fund, common trust fund or collective investment trust fund, the evaluation report shall be presented based on the performance stability, market liquidity, investment risk, frequently used market indicators or ratings published by the fund rating agencies, and such investment shall be made in accordance with authorized amount and the risk control procedures except as otherwise provided by law or regulation.
Besides the aforementioned regulations, the Labor Retirement Fund and the Arrear Wage Payment Fund shall comply with the following regulations:
(1) The total purchase cost of a single fund for the Labor Retirement Fund shall not exceed five percent (5%) of the net asset value of the Labor Retirement Fund at the time of investment The total purchase cost of a single fund for the Arrear Wage Payment Fund shall not exceed five percent (5%) of the total value of said Fund at the time of investment.
(2) The total amount of investment in any fund shall not exceed ten percent (10%) of the number of the beneficial unit of said issued fund The total amount of investment in the beneficiary certificates of any exchange traded fund (ETF) shall not exceed twenty percent (20%) of the number of the beneficial unit of each issued ETF.

Prior to making investment in offshore funds, an evaluation report shall be presented based on the performance stability, market liquidity, investment risk, frequently used market indicators or ratings published by the fund rating agencies, and such investment shall be made in accordance with authorized amount and the risk control procedures.

The following are the regulations on investment in gold transactions 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 Australia PTY Ltd, Taiwan Branch
(2) The total amount of deposit in the gold savings passbook accounts for the Labor Retirement Fund shall not exceed one percent (1%) of the net asset value of each Fund at the time of purchase For the other Funds, the total amount of deposit in the gold savings passbook accounts shall not exceed one percent(1%) of the total asset value of each fund
(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 asset value of such financial institution; However, the government-owned banks shall be waived from such restrictions on the total amount of deposit in the gold savings passbook accounts.
The aforementioned net asset value shall be based on the information published by Financial Supervisory Commission, Executive Yuan.

The following are the regulations for investment in real estate investment trust beneficiary securities or real estate asset trust beneficiary securities:
(1) The total amount of investment in any real estate investment trust (REIT) beneficiary securities or real estate asset trust (REAT) beneficiary securities issued by a trustee for the Labor Retirement Fund shall not exceed five percent (5%) of the net asset value of each Fund at the time of the investment For the other Funds, the total amount of investment in said securities shall not exceed five percent (5%) of the total asset value of each fund at the time of the investment
(2) The total amount of investment in any real estate investment trust (REIT) beneficiary securities or real estate asset trust (REAT) beneficiary securities issued by a trustee shall not exceed ten percent (10%) of the total amount of said real estate investment trust beneficiary securities or said real estate asset trust beneficiary securities issued by such trustee.
(3) The long-term credit rating of the guarantee financial institution, the issuer or the long-term credit rating of real estate investment trust debt securities or real estate asset trust debt securities shall apply to the paragraph 1 of article 10.

The operation procedures for the investment in domestic land, real estate and its development and construction are as follows, except as otherwise provided in the law and regulation:
(1) Professional institutions are entrusted for appraisal, assessment and planning.
(2) Investment plan shall be drafted and stated with the purpose, investment location, investment amount, operation method, withdrawal of the investment capital and benefit analysis of the investment.
(3) If the investment benefit and the pro forma cash flow are indeed feasible under investment assessment, the investment plan shall be implemented with the approval of the Ministry of Labor.

The securities lending of domestic equity and domestic debt is limited to the securities lending operation via pricing, bidding or bargaining.
The trading principles on the foreign securities lending as follows:
(1) The foreign custodian bank of the Funds may engage in securities lending business as an agency.
(2) The long-term credit rating of the borrower shall comply with the regulations in paragraph 1 of article 10 (if such credit rating is not available, credit rating of its parent company shall be used here).
(3) The maintenance ratio of the guarantee shall be no less than one hundred percent (100%).
(4) The types and credit ratings of the reinvestment targets secured by non-cash guarantee or cash guarantee shall comply with the relevant provisions under this Utilization Directions.

While preparing annual financial statement of the Labor Retirement Fund, the Bank of Taiwan shall appropriate ten percent (10%) of the net gain on equity securities as investment loss reserve and one percent (1%) of the principal and interest balance of investment loans as allowance for bad debts to stabilize income However, the annual income after appropriation of investment loss reserve and allowance for bad debts shall not be less than the annual guaranteed income; moreover, in the event that accumulated surplus is insufficient for compensating guaranteed income, the above appropriation shall be used to offset for the insufficiency.

In the event that each Fund is mandated to any other financial institution to make discretionary investment, the investment mandate agreement shall include the relevant provisions of the Directions.