Regulations Governing Securities Investment Trust Funds Article 14

Lending of domestic securities by a SITE-managed fund shall be handled in accordance with the applicable rules of the Taiwan Securities Exchange Corporation (TWSE) and the GreTai Securities Market (GTSM), and shall conform with the following conditions:1. A fund may not loan any single domestic security in an amount exceeding 50 percent of the total of that security held by the fund, provided that this shall not apply where the securities investment trust agreement of a privately offered fund provides otherwise.2. The lending period for securities loans shall extend for at most six months from the date of the lending transaction.3. When a loan of securities takes the form of a negotiated securities lending transaction, the types of collateral provided by the borrower shall be limited to cash, government bonds, and exchange listed or OTC listed securities that are eligible subjects of margin trades or short sales, provided that when the borrower's collateral is in the form of said bonds or securities, the SITE may provide such a securities loan only after reporting its risk monitoring and control measures for collateral management to the FSC for approval.The provisions of subparagraph 3 of the preceding paragraph regarding collateral shall be applied with reference to TWSE and GTSM regulations applicable to fixed-price trading and auction trading.A SITE that loans domestic securities held by one of its managed funds shall draft measures for the monitoring and management of risk in domestic securities lending as a part of its internal control system and submit those measures to the board of directors for passage.