1.To engage infinancial derivativestransaction for the Labor Pension Fund, the Labor Retirement Fund and the Labor Insurance Fund(hereinafter referred to as the Funds), this Directions for Derivatives Transaction (hereinafter referred to as the Directions)is hereby stipulated in accordance with the regulations:Paragraph 2, Article 6 of theRegulations of the Labor Pension Act on the Labor Pension Fund Management/Utilization and Profit/Loss Allocation, Paragraph 2, Article 9 of the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and Paragraph 2, Article 9 of the Management and Application Rules for the Labor Insurance Fund.

2.Derivatives transactionshall conform to the spirit of long-term operational stabilityand the principles ofliquidity, profitability,securityandrisk management.

3.Financial derivatives under the Directions include any kind of financial contract which derives its value from the performance of interest rate,foreign exchange, stock, index, or other portfolio of underlying assets.

4.Financial derivatives transaction may be made by self-managed investment or delegated scheme in domestic and foreign markets.

5.The derivativestransaction markets and the Derivatives transaction items shall be traded only through financial institutionsapproved by the local financial, securities, futures competent authorities.
If the Funds transacts in an OTC market, the credit rating of the tradingcounterparty shall comply with one of the following levels:
(1)Its long-term debt credit rating shall be at least “BBB-” by Standard & Poor’s Corp.
(2)Its long-term debt credit rating shall be at least “Baa3” by Moody’s Investors Service;
(3)Its long-term debt credit rating shall be at least “BBB-” by Fitch Ratings Ltd.
(4)Its long-term debt credit rating shall be at least “twBBB-” by Taiwan Ratings Corporation
(5)Its long-term debt credit rating shall be at least “BBB-(twn)” byFitch Australia Pty Ltd, Taiwan Branch.

6.As to the derivatives transaction for the purpose of non-hedging, the maximum transaction amount shall not increase the financial leverage of the Funds.

7.As to the derivatives transaction for the purpose of hedging,the aggregate contractual value of the hedging position may not exceed the aggregate market value of the underlying spot assets that have already been held.

8.When the delegated institutionsinvestin derivatives, the derivativestransaction procedures or related risk management measures shall comply with the applicable laws, rules and regulations of the local competent authorities, and the execution rules shall be stated in the service proposal, and providereports in regular interval, indicating transaction purpose, transaction details, investment performance and risk assessment.
The above transaction procedures consist of thefour steps of transaction analysis, transaction decision making, transaction execution and transaction evaluation.

9.When the Fund enters into an agreement with a delegated institution regarding handling derivatives transactions, the content of such agreement shall include the following matters:
(1)The purpose of the delegated institution engaging in derivativestransaction;
(2)The restrictions in the types of derivativeswhich thedelegated institution may transact;
(3)Thelimit in the amount of derivatives which the delegated institution may transact;
(4)The personnel in charge of the derivatives transaction, the hierarchical responsibilities ofsuch personnel and the agency mechanism be subject to its internal audit and internal control.
(5)Adelegated institution investsin non-hedging derivatives shall set forth a stop loss mechanism.

10.When the Fundsinvest in derivativesby self-managed investment, in addition to abiding by the Directions for Risk Management of Bureau of Labor Funds, it shall also comply with the following risk management principles:
(1)Credit risk management: the transaction position amount based on the credit rating of the transactioncounterparties.
(2)Market risk management:
Hedge ratio for various trades shall be drawn up based on different investment items.
Evaluation of profit and loss of the financial derivatives transaction based on the market value on the date of evaluation.
(3)Liquidity riskmanagement: the maximum daily net settlement amount shall not exceed a certain percentage of the Funds.
(4)Legal risk management:
The legality of the trade agreement, in principle, will be based on the publicly recognized standard agreement. If necessary, it may be supplemented based on opinions rendered by a legal counsel.
Annual status of compliance of laws and regulations related to handle financial derivative products transaction by the Funds.
(5)Operation riskmanagement:
Risk management personnel shall not occupy any post of the financial derivative products trading department.
Trading staff shall not concurrently serve as the settlement staff and vice versa, and non-trading staff shall notengage inany trade.

11.The following are the operating procedures to investderivativesby self-managed investment:
(1)Pre-trade:an official written documents regarding the trading counterparties, the total contractual amount, the utilization limit, the risk management target and the utilization strategy shall be provided. Said written documents shall clearly stipulate the utilization tool, utilization items and how to evaluate the fair valueor cash flow of the investment position.
(2)During a trade:
When a trader makes a trade, the trade limit shall not exceed the authorized trade limit.
A trader shall make a trade only with approved trading counterparties.
After completion of a trade, relevant trade certificates and statements shall be delivered to the clearing and settlement staff as well as the accounting staff.
The clearing and settlement staff shall confirm, verify each item of the trade information, and then handle settlement and clearing operations as well as any follow up matters related to the maturity.
(3)Post-trade: a monthly consolidated report on the trading volume, the contractual market valueand the amount of loss or profit shall be prepared and the same shall be submittedin regular intervals for review and approval.

12.The Funds may designate a domestic delegated institution to serve as a broker to engage in derivatives transaction, and to uniformlynegotiate processing fees and rates and relevant conditions. A foreign delegated institution shall provide criteriafortheselection of derivatives trading counterparties.

13.Other criteria that are not listed in the Directions may be stipulated in specific investment management agreement orother relevant regulations.