Directions for the Central Government Bond Principal and Interest Payment and Stop Payment System

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Title：

Directions for the Central Government Bond Principal and Interest Payment and Stop Payment System

Amended Date： March 31, 1997

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Chapter 1: General Principles

[Authorized Regulations]

1.

1. The Central Bank of the Republic of China (Taiwan) ("the Central Bank") has prescribed these Directions System") for the payment of central government bond principal and interest, and for reporting lost certificates and stopping payment thereof. Related operations shall be handled pursuant to these Directions except where otherwise provided in the Regulations Governing Administration of Central Government Bonds or other pertinent laws.

2.

2. Agencies administering the System shall handle cautiously all information pertaining to the payment of central government bond principal and interest and the reporting of lost certificates (with payment stopped). To ensure the accuracy of information in the System, a reviewer shall check to make sure no error has been made before information is transmitted.

Chapter 2: Payment of Principal and Interest

3.

3. Before a bank's head office or any of its branch locations, acting on behalf of the Central Bank, redeems bonds or interest coupons, it shall first compare the certificates against specimen certificates and anticounterfeiting marks to verify authenticity, and shall enter the serial numbers into the System to ensure that the certificates in question have not been reported lost (with payment stopped) or reported lost (with a request for assistance in finding). Once it has been confirmed that there are no problems with respect to the above matters, the bonds and interest coupons shall be redeemed and canceled. Where forgeries are discovered, or a certificate has already been reported lost (with payment stopped or with a request for assistance in finding), the police authorities shall be notified immediately. Where there are doubts concerning authenticity of certificates or other matters, the bank shall take possession of the certificates on the spot, file related evidence, and report the matter through proper channels to the Ministry of Finance.

4.

4. If, in the course of redeeming bonds or interest coupons, a bank branch or head office discovers certificates with duplicate serial numbers, it shall effect redemption only after re-examining the certificates and verifying that there has been no error in input. In doing so, however, it must first contact the bank branch or head office that last redeemed certificates bearing the same serial number for assistance in thematter; the bank branch office or head office receiving the request for assistance shall provide prompt assistance or, failing to do so, shall be held responsible for any problems arising from the delay.

5.

5. After redeeming the certificates with duplicate serial numbers mentioned in the preceding Article, a bank branch or head office shall list them in an "other receivables" account and make a later correction after the matter has been clarified.

6.

6. When certificates to be redeemed are confirmed to have duplicate serial numbers, bank branches shall report such information through proper channels to the Central Bank, which shall consolidate such reports and relay the information to the Ministry of Finance for review. After the Ministry of Finance delivers a ruling, the Central Bank's Treasury Department shall forward the ruling to the bank head office, which shall revise the cancellation record and the appropriate item(s) in its treasury funds account. Information in the System shall not be revised until the Ministry of Finance issues a ruling.

7.

7. If a bank branch or head office loses a certificate that has already been redeemed, it shall enter information on the certificate in question into the System for the record. The head office shall then submit the relevant documents to the Central Bank's Treasury Department, which shall forward them to the Ministry of Finance's Department of National Treasury for review and action.

If a redeemed certificate that was lost as referred to in the preceding paragraph is found again, then in accordancewith the preceding paragraph, information entered into the System for that certificate shall be canceled and the cancellation shall be reported through proper channels.

8.

8. After the close of business each day, a bank branch shall not forward or file information on the day's redemptions and cancellations until it has taken all certificates redeemed that day and checked them against an itemized record (generated by the System) of the day's transactions to ensure that there are no errors; and it shall also, within the time limit set forth, send the certificates to its head office, which shall keep them on file. If it is discovered that erroneous information was transmitted during the course of business, the error shall be corrected promptly.

9.

9. The bank head office shall check the redeemed certificates sent to it by the bank branch against printouts generated by the System, and shall keep all such records properly filed. Any errors shall be corrected in the monthly report for the following month. If the correction affects the calculation of processing fees, the reason for the correction shall be reported to the Central Bank's Treasury Department.

Chapter 3: Reporting Lost Certificates and Stopping Payment

10.

10. When a bank branch processes an "Application to Report Loss of Bearer-Form Certificate and Stop Payment" (attachment 1), it shall conduct an examination to ensure that there are no errors in the application, or in the "Attestation of Report to the Police" and any other documents submitted by the applicant as proof of loss of the certificate. Once these documents have been confirmed error-free, the information in the documents related to reporting a lost rtificate (with payment stopped) shall be entered into the System. After the information entered into the System has been saved, the bank branch shall submit a "Stop Payment Notifice for Lost Bearer-Form Government Bond Certificates" (attachment 2) and other related documents to the Central Bank's Treasury Department, which shall report the information to all relevant agencies.

11.

11. A notice of stoppage of payment shall become invalid if the person who applies for a "Notification of Bearer-Form Certificate Loss Report and Stoppage of Payment" cancels the stoppage of payment or fails, within five days after notification of stoppage of redemption, to provide proof that he or she has already published public notice thereof. The bank handling the stoppage of payment shall then submit a "Notice of Invalidation of Stop Payment for Lost Bearer-Form Government Bond Certificates" (attachment 3) and other related documents to notify the Central Bank's Treasury Department or to report to the Central Bank's Treasury Department through its head office, after which the Treasury Department will notify all relevant agencies.

12.

12. When application is made to report the loss of a registered certificate and stop payment, the owner of the certificate shall: publicly announce invalidation of the certificate in a newspaper published in the area where the bank branch is located; submit to the bank branch an "Application to Report the Loss of a Registered Certificate and Stop Payment" (attachment 4) under the same seal that he or she used to purchase the original certificate; and complete the procedures for reporting the loss and stopping payment. After the bank branch has conducted an examination and confirmed that there is no error in the documentation related to the lost certificate, it shall enter into the System the information from the documents related to the report of loss of certificate and stoppage of payment. After the information entered into the Systemhas been saved, the bank branch shall submit related documents to its head office, which shall forward them to the Central Bank's Treasury Department, which shall in turn forward them to the Ministry of Finance for recordation.

13.

13. After public announcement of the invalidation of a certificate, the applicant may submit an "Application for Reissue of Certificate" (attachment 5), together with the original copy of a court ruling invalidating the certificate, to the party that originally handled the lost certificate report and stoppage of payment. This party shall then forward these documents through proper channels to the Ministry of Finance, which shall reissue a duplicate copy of the certificate.

Chapter 4: Management of Certificate Document Files

14.

14. The bank head office shall store information related to redeemed certificates in the System, and once every sixmonths shall prepare a list of redeemed and canceled bonds and interest coupons. The head office shall submit this list to the Central Bank's Treasury Department, which shall forward it to the Ministry of Finance for auditing and settlement. Only after this has been done may the information be transferred to other media for storage, which shall be regularly inspected and properly maintained.

If changes to the information mentioned in the preceding paragraph affect the period for calculation of processing fees, the reason for the changes shall be reported in writing to the Central Bank's Treasury Department, and shall be used as the basis for revision of information in the System.

15.

15. After the close of business each day, bank branches shall update the System to reflect information for that day's reports of lost certificates and stoppages of payment, and shall prepare printed records to keep on file.

Chapter 5: System Malfunctions

16.

16. When a bank head office is unable to operate the System normally due to malfunctions in equipment, circuitry, or software, it shall report the matter to the Central Bank's Information Systems Office and Treasury Department.

If it is deemed that the malfunction referred to in the preceding paragraph cannot be repaired in a short time,manual methods shall be used to handle redemption of bonds and interest coupons, and to report the loss of registered certificates and stop redemption thereof. With bearer-form certificates, however, the bank head office may explain the malfunction to certificate holders and help them locate another local bank branch towhich they can take their certificates for redemption. After the malfunction has been repaired, materials processed manually shall be keyed into the System. Depending on the circumstances of the malfunction and of bank operations, the bank head office may apply to the Central Bank's Treasury Department for extension of the System's operating hours.

17.

17. When the System cannot operate normally due to malfunctions in the Central Bank's server, equipment, or circuitry, the Central Bank's Information Systems Office shall immediately notify the Central Bank's Treasury Department, the Ministry of Finance's Department of National Treasury, and all bank head offices engaged in operation of the System. If it is deemed that the System cannot be restored to normal operations within a short period of time, the Department of National Treasury and all bank head offices shall fax to the Central Bank's Treasury Department copies of the day's lost certificate reports (with payment stopped), lost certificate reports (with request for assistance in finding), applications for reissue of duplicate certificates, certificates that have been lost after redemption, and other materials. The Central Bank's Treasury Department shall then assemble the aforementioned materials and notify the Department of National Treasury and the various bank head offices; the latter shall relay this notification to their bank branches. For certificates reported lost (with payment stopped), the bank branches must, after receiving the faxed materials, dispatch a return fax acknowledging receipt, whereupon the stoppage of redemption shall take effect.

When transactions involving the redemption of bonds and interest coupons are processed by hand, banks are still required, before making redemption, to verify that the certificates have not been reported lost (with payment stopped , or with request for help in finding), that no application for reissue of a duplicate certificate has been filed, and that the certificates have not been previously redeemed and subsequently reported lost. When lost certificate reports (with payment stopped) are processed by hand, banks are still required to complete all notification procedures in connection with the lost certificate reports (with payment stopped) within two working days.

18.

18. After the System is restored to normal operation, bank branches shall carefully review all transactions processed manually while the computer system was out of service, and shall then input the manually processed materials into the System. Depending on how long the System was out of service and the status of operations, the Central Bank's Treasury Department may consider extending the normal operating hours of the System.

19.

19. In the event the government announces a work holiday for Taipei City residents due to a natural disaster or other major incident while government agencies in other areas remain in operation, bank branches in areas where government agencies remain in operation shall continue to process redemptions pursuant to the provisions of Article 3 above. However, they shall use information available prior to the government shutdown when verifying that the certificates have not been reported lost (with payment stopped, or with request for help in finding), that no application for reissue of a duplicate certificate has redeemed and subsequently reported lost. After the Systemis restored to normal operation, they shall promptly complete all backlogged items requiring processing.

Chapter 6: Supplementary Provisions

20.

20. In principle, the operating hours of the System are the same as the hours during which banks are open to the public, but the schedule for processing of internal bank matters shall be set in accordance with the Daily Work Flow Chart (attached Table 6).