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1.These Guidelines are promulgated for implementing the business of mandated management of the Labor Retirement Fund (hereinafter referred to as the Fund).
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2.The Bureau of Labor Funds of the Ministry of Labor (hereinafter referred to as the Bureau of Labor Funds) may, within the proportion and amount as set forth in the Annual Plan for Investment and Utilization of the Fund, delegate the management to mandated parties in accordance with Article 6, Paragraph 1, Subparagraphs 1 and 3 to 7 of the Regulations for Revenues, Expenditures,Safeguard and Utilization of the Labor Retirement Fund.
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3.The manager mandated by the Fund for management shall be an overseas or domestic asset management institution or its branch institution complying with relevant regulations governing asset management businesses.
The manager mandated for management of domestic investment shall comply with relevant regulations promulgated by the competent authority in charge of the relevant enterprises and satisfy the following qualifications:
(1) The manager must be established for three (3) years or more.
(2) The manager must be incorporated or recognized under the laws of the Republic of China to conduct business in the Republic of China.
(3) The manager’s clients’ assets under management must be no less than NT$10 billion up to the end of the month immediately preceding the public tender date.
(4) The cumulative rate of return of a single fund or trust account under its management for the past three years must be no less than that of the benchmark commonly used in the market or the rate of return set forth by the Bureau of Labor Funds.
The manager mandated for management of overseas investment shall satisfy the following qualifications:
(1) The manager must be established for three (3) years or more.
(2) The manager must be incorporated and registered to conduct business under the laws of the Republic of China or any of the foreign countries.
(3) The manager’s institutional clients’ assets under management must be no less than US$5 billion or its equivalent calculated in other currencies up to the end of the quarter immediately preceding the public tender date.
(4) The historical performance of the mandate type the manager applies for shall not be less than three years.
(5) The manager must have branch institution(s), business operation venue(s) or service team(s) in the territory of the Republic of China.
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4.The Bureau of Labor Funds shall publicly solicit companies that meet the qualifications prescribed under Article 3 hereof to handle the mandated management of the Fund.
The above companies shall, within the period prescribed by the Bureau of Labor Funds, submit the following documents to the Bureau of Labor Funds to apply for conducting the mandated management:
(1) Supporting documents demonstrating the compliance with the requirements under Article 3 hereof;
(2) Management service proposals; and
(3) Other documents required by the Bureau of Labor Funds.
The content of the management and custody service proposals stipulated in subparagraph 2 in the above shall conform to the requirement of the Bureau of Labor Funds.
The Bureau of Labor Funds may mandate a professional investment consulting firm to assist in the selection, performance measurement, monitoring, post-selection management and other relevant matters of the managers , and may engage an attorney to handle legal issues related to the mandated management.
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5.The Bureau of Labor Funds shall select nine (9) to eleven (11) members to form the Selection Panel and designate one member of the Selection Panel to serve as the convener. Its members shall include representatives of government organizations, labor and employer groups and experts and scholars. The number of experts and scholars shall account for no less than one third of the entire Selection Panel.
The Selection Panel is responsible for the assessment of applicant managers, and their duties are as follows:
(1) Stipulate matters that ought to be specified in the investment management service proposals;
(2) Review the investment management service proposals; and
(3) Appraise the ranking of the applicant companies being reviewed.
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6.Relevant fees and costs required for conducting the mandated management in the aforementioned two Articles shall be included in and listed as the transaction costs of the mandated management.
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7.The Bureau of Labor Funds will select managers, negotiate on the mandate agreement, the management fee and allocate the amount to each mandated manager based on the rankings appraised in accordance with Article 5 of the Guidelines.
The allocation of amount to mandated managers and the standards of the scale for calculating the payment of the management fee shall be determined by the Bureau of Labor Funds. The management fee shall be calculated on the basis of the net asset value of the assets under mandated management.
The amount distributed for mandated management of each manager shall not exceed forty percent (40%) of the total mandate amount for the Fund at the time of such mandate. The aforementioned total mandate amount shall include the existing mandate amount and the newly increased mandate amount.
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8.The term of each management mandate of the Fund shall not exceed five (5) years.
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9.The mandate agreement entered into by and between the Bureau of Labor Funds and the manager shall be in Chinese. However, if the agreement is required to be in any foreign language, a Chinese translation thereof shall be attached. The interpretation of the provisions of the agreement shall be governed by the laws agreed upon by both parties. The agreement shall contain the following:
(1) The manager shall comply with the principle of recusal in the event of conflicts of interest .
(2) In managing the matters mandated by the Bureau of Labor Funds, the manager shall use the financial institution designated by the Bureau of Labor Funds as the fund custodian to conduct matters relating to the custody, trading, settlement and accounts management of the mandate assets and investment revenues.
(3) If the securities purchased by the manager with the mandate assets are in registered form, such securities shall be registered under the name of Labor Retirement Fund or the Bureau of Labor Funds; provided, however, that the investment in foreign securities shall be conducted in accordance with the overseas custodian agreement .
(4) The independent accounting treatment adopted by the manager in managing the mandated fund; the preparation and presentation for review of accounting statements; the retention period for relevant evidences, account books and statements; and on-site due diligence by the Bureau of Labor Funds.
(5) The manager shall deliver details of the mandat’s net asset value and investment changes to the Bureau of Labor Funds, on a regular basis, as per the Bureau of Labor Funds’ request.
(6) The manager’s responsibilities and warranty of good service.
(7) The restriction on the total amount of investment in the stock, bonds and other securities of any single company listed on the stock exchange or over the counter market.
(8) The restriction on the ratio of investment in the stock of any single company listed on the stock exchange or over the counter market to the total number of issued shares of such company.
(9) Calculation method of net asset value and rate of return for the mandated fund.
(10) Events of agreement rescission and termination.
(11) An arbitration clause or a clause on the court of jurisdiction for dispute settlement.
(12) Other matters required to be provided based on the nature of such mandate agreement.
An attorney who has practiced for five (5) years or more shall be engaged to issue a legal opinion on the agreement signed in accordance with the preceding Paragraph; for overseas mandate management, such engaged attorney shall have experience of relevant international legal practice. However, if the agreement is extended, or if the mandated management is conducted again and the agreement is revised to a relatively light extent, then it is not required to engage an attorney to issue a legal opinion.
The attorney issuing a legal opinion in accordance with the preceding Paragraph shall not have been disciplined under the Attorney Law, the Attorney Discipline Rules or other regulations within two (2) years before issuing such legal opinion. The legal opinion shall state the following:
(1) Suggested amendments, the reasons of such suggestions and the legal grounds thereof;
(2) Name of attorney issuing this legal opinion and his/her legal opinion.
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10. The Bureau of Labor Funds may designate brokerage firm(s) for the domestic manager to trade in securities, determine the rate paid on commission and relevant terms.
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11. The Bureau of Labor Funds shall conduct quarterly review of the management performance.
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12. If the management performance and risk control of the investment manager are better than the evaluation criteria set by the Bureau of Labor Funds or the performance of the Bureau of Labor Funds’ mandated assets of the same type and the manager has not violated any relevant laws and regulations and agreements, the Bureau of Labor Funds may, during the term of agreement or upon its expiration, increase the contribution amount up to triple of the original mandate amount or extend the agreement with the manager.
The evaluation method and period for the management performance in the preceding Paragraph shall be set forth in the mandate agreement; the evaluation criteria shall be determined by the Bureau of Labor Funds.
If, from the evaluation date to the date of agreement extension, the manager obtaining the qualification of agreement extension without re-selection is requested to remedy or take any action by the Bureau of Labor Funds, then the Bureau of Labor Funds may, at its sole discretion, reduce the mandate amount or cancel the agreement extension qualifications the manager has obtained.
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13. In the event of any of the following on the side of the manager so as to potentially decrease the principal or return of the fund, the Bureau of Labor Funds may notify the manager or the custodian in writing to promptly remedy or provide necessary measures or retrieve part or whole of the mandate assets:
(1)The manager breaches its duty of care as a good administrator and its fiduciary duty.
(2)The manager violates relevant laws or regulations and is admonished or punished by the competent authority of the Republic of China or any of the foreign countries.
(3)The manager breaches the agreement.
(4)The manager’s performance as measured by the annual regular evaluation fails to achieve the statutory guaranteed return of the fund or return of benchmark commonly used in the market or the rate of return set forth by the Bureau of Labor Funds.
The method for the retrieval of mandate assets in the preceding Paragraph is to be determined by the Bureau of Labor Funds, and the Bureau of Labor Funds may mandate another institution to manage on a transfer basis or deal with the subsequent matters through transition management.
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14. The Bureau of Labor Funds may request for Bank of Taiwan’s assistance to handle operations related to the mandated management.