一、 These Directions are promulgated in order to utilize the National Pension Insurance Fund (hereinafter referred to as “the Fund”) managed by the Bureau of Labor Funds of the Ministry of Labor (hereinafter referred to as “BLF”) which is entrusted by the Ministry of Health and Welfare.

二、The principles of investment are as the following:
(一) Subject to the consideration on security, liquidity and profitability, the Fund shall conduct professional investment by selecting the most advantageous investment portfolio and transaction timing.
(二) Without sacrificing the income of the Fund, the corporate social responsibilities and the enterprise ethics of the investment targets shall be taken into consideration.

三、 The annual asset allocation plans of the Fund shall be submitted to the National Pension Supervisory Commission of the Ministry of Health and Welfare (hereinafter referred to as“the Supervisory Commission") for examination, then to the Ministry of Health and Welfare for approval.

四、The following are the regulations on depositing domestic currency in a financial institution:
(一)The following financial institutions incorporated under the laws of the Republic of China to conduct business:
1.Central Bank.
2.Government-owned or private banks that have participated in the Central Deposit Insurance Corporation.
3.Chunghwa Post Co., Ltd.
4.Government-owned or private investment and trust corporations.
5.The branch institutions of foreign banks in Taiwan.
(二)The credit rating of a financial institution shall satisfy any one of the following levels:
1.Long-term debt credit rating at or above “BBB-” by Standard & Poor's Corp.
2.Long-term debt credit rating at or above “Baa3” by Moody's Investors Service.
3.Long-term debt credit rating at or above “BBB-” by Fitch Ratings Ltd.
4.Long-term debt credit rating at or above “twBBB” by Taiwan Ratings Corporation.
5.Long-term debt credit rating at or above “BBB (twn)” by Fitch Australia PTY Ltd, Taiwan Branch.
(三)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.

五、 The credit rating of domestic or foreign financial institution where foreign currency is deposited shall satisfy the long-term debt credit rating at or above “BBB-” or the same level by the internationally renowned institution or the institution approved by the securities authority to conduct the credit rating business.

六、The following regulations are the operation procedures on loans to all levels of governments (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:
(一)The borrowing entity shall submit the application letter with the following documents :
1.The overview of the economic development and investment planning.
2.The required loan amount and repayment plan.
3.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.
4.The financial statement of borrowing entity.
(二)The amount of the approved loan will be drawn down in installments according to the construction progress or investment progress after the signed contract.
(三)The borrowing entity shall fully execute the construction or investment plans, the repayment plans and accept inspection of the execution status.
(四)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.
(五)The interest rate and repayment term of the loan shall be approved based on the nature of the borrowing entity and its utilization plan.

七、Investment in foreign and domestic equity securities should follow the regulations listed below:
(一)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, secondary equity offering and initial public offering, and depositary receipts.
(二)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.
(三)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.

八、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 fund’s balance of income and payment.

九、The following are regulations for domestic and foreign short-term bill investment:
(一)The following are the types of short-term bills which can be invested:
1.Domestic
(1)Treasury bills.
(2)Saving Bonds of Central Bank.
(3)Bankers’ acceptances.
(4)Commercial paper guaranteed by financial institutions or non-guarantee commercial paper.
(5)Negotiable certificates of deposit issued by financial institutions.
2.Foreign:
(1)Treasury bills.
(2)Negotiable certificates of deposit.
(3)Bankers’ acceptances.
(4)Commercial paper.
(二)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):
1.Short-term debt credit rating at or above “A-3” by Standard & Poor's Corp.
2.Short-term debt credit rating at or above “P-3” by Moody's Investors Service.
3.Short-term debt credit rating at or above “F3” by Fitch Ratings Ltd.
4.Short-term debt credit rating at or above “twA-3” by Taiwan Ratings Corporation.
5.Short-term debt credit rating at or above “F3 (twn)” by Fitch Australia PTY Ltd, Taiwan Branch.
(三)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 Fund 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 shall not exceed five percent (5%) of the total value utilized from the Fund at the time of investment. Issuers of government-owned enterprises are not subject to this restriction.
(四)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.

十、The following are regulations for investment in domestic or foreign debt securities (not including short-term bills):
(一)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:
1.Long-term debt credit rating at or above “BBB-” by Standard & Poor's Corp.
2.Long-term debt credit rating at or above “Baa3” by Moody's Investors Service.
3.Long-term debt credit rating at or above “BBB-” by Fitch Ratings Ltd.
4.Long-term debt credit rating at or above “twBBB-” by Taiwan Ratings Corporation.
5.Long-term debt credit rating at or above “BBB-(twn)” by Fitch Australia PTY Ltd, Taiwan Branch.
(二)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.
(三)Prior to foreign debt security investment, the investment department shall establish the position limits, holding period, authorized amount and other relevant standards.
(四)If the domestic convertible corporate bonds and corporate bonds 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.
(五)The investment in the convertible corporate 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.

十一、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.

十二、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.

十三、The following are the regulations for investment in real estate investment trust beneficiary securities or real estate asset trust beneficiary securities:
(一)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.
(二)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.

十四、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:
(一) The foreign custodian bank of the Fund may engage in securities lending business as an agency.
(二) 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).
(三) The maintenance ratio of the guarantee shall be no less than one hundred percent (100%).
(四) 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.

十五、These Directions shall be submitted to the Supervisory Commission for examination, then to the Ministry of Health and Welfare for approval.