Directions for the Conversion of Physical Central Government Bonds to Book-Entry Central Government Bonds

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Title：

Directions for the Conversion of Physical Central Government Bonds to Book-Entry Central Government Bonds

Announced Date： December 30, 1998

Amended Date： September 09, 1999

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1.

1. These Directions are prescribed by the Central Bank of the Republic of China (Taiwan) ("Central Bank") for the purpose of managing the conversion of central government bonds in certificate form ("physical bonds") into bookentry central government bonds ("book-entry bonds").

2.

2. Operations related to the conversion of physical bonds to book-entry bonds shall be governed by these Directions except where relevant provisions of the Operational Directions for Central Book-Entry bonds and Directions for the Central Government Bond Payment and Stop Payment System or other rules and regulations apply.

3.

3. As regards the headquarters of the clearing bank ("the head office") and its branch units; those branch institutions ("bank branch(es)") that have been approved by the Central Bank to conduct book-entry bond operations and are in possession of the specimen certificates and their attendant anti-counterfeiting marks shall administer bond conversion in accordance with the provisions of these Directions.

4.

4. Holders of already-issued physical bonds that have yet to reach maturity may apply for conversion to book-entry bonds per public announcement by the Ministry of Finance. Where physical bonds have been converted into book-entry bonds, reapplication may not be filed to convert them back into physical bonds.

5.

5. When applying for conversion, in addition to opening a government bond account and a demand deposit account with the bank branch, a bondholder shall also file an "Application for the Conversion of Physical Bonds to Book-Entry Bonds" (Form 1), and shall endorse each bond by affixing his or her seal to the back. The signature seal impression on the application form and on the backs of the bond certificates shall be identical to that used to open the government bond account , provided that when the bond bearer is unable to appear in person to conduct the conversion, he or she shall provide a proxy statement authorizing another person to conduct the conversion.

When application is made to convert a bond, the bond certificate shall be converted together with all interest coupons attached to it, including those that have yet to reach maturity.

6.

6. Following acceptance of a conversion application, procedures for handling shall be as follows:

(1) Bank branches, after examining the government bond coupons and their attendant anti-counterfeiting marks and confirming that the signature seals on the backs of the bond certificates and conversion application match that used for the government bond account, shall enter the name of the bond certificate, the coupon numbers, face value, serial number, number of bond certificates, the Taiwan Securities Central Depository Company's certified vault-deposit bar code ("bar code") and other information into the Central Government Bonds Settlement System. After double-checking to ensure the absence of errors, the information shall be submitted to the Central Bank for processing.

(2) Where the Central Bank verifies that the physical bond information is in compliance with the terms of conversion and that there are no stop payments, no requests for assistance in locating lost bonds, and no duplicate bond serial numbers, the physical bonds shall then be immediately converted into book-entry bonds and a message shall be sent back notifying the bank branch [of the conversion].

(3) Following receipt of confirmation fromthe Central Bank, the bank branch shall immediately enter the verified information into its accounts and print the relevant information into the bond account passbook for delivery to the applicant.

(4) After conducting the conversion to book-entry bonds, the bank branch shall immediately stamp the back of each bond coupon to indicate the conversion (including the name of the bank branch and the date of conversion) and perforate each coupon to indicate cancellation. The bank branch shall take care to ensure that the certificate number and bar code remain intact when perforating the coupons.

7.

7. Where the bank branch finds that the physical bonds have been altered or forged, that there have been associated filings for stop payment or lost bond location assistance, or that there are serial number duplications, the matter shall be handled in accordance with the provisions of Point 3 and Point 4 of the Central Bank's Directions for the Central Government Bond Payment and Stop Payment System. When the serial number(s) and bar code identification numbers do not match, the Central Bank's Treasury Department ("Treasury Department") shall be consulted.

8.

8. For the conversion of inscribed bonds, the applicant shall affix to the back of each bond certificate the signature seal matching the original signature seal, which shall then be examined for authenticity by the bank that originally conducted the registration ("the original registering bank"). Upon verification, the original registering bank shall affix its official seal to the back of each bond certificate in confirmation of authenticity, whereupon the certificates shall be presented to the bank branch for completion of book- entry registration. The name of the bond account holder conducting registration shall be the same as that of the original registered bondholder.

For inscribed bonds that have already been converted as described in the preceding paragraph, the bank branch shall also confirm by telephone that the original registering bank has confirmed the authenticity of the signature seals before carrying out the conversion.

Following the book-entry registration of physical bonds, the Central bank's Treasury Department shall deliver monthly reports to bank head offices directing them to instruct the original registering banks to cancel physical bonds that have been registered. The Treasury Department shall also notify the Ministry of Finance.

9.

9. The bank branch shall handle physical bonds that have already been converted in the following manner:

(1) At the end of each business day, an "Itemized Statement of the Conversion of Physical Bonds to Book-Entry Bonds" (form 2) shall be printed out, checked for accuracy against the physical bond certificates that have already been converted, and filed for recordation.

(2) At the end of each ten-day period, physical bond certificates that have already been converted shall be sorted according to bond name, type, serial number and face value, and gathered in bound volumes to be submitted together with the "Statement of the Conversion of Physical Bonds to Book-Entry Bonds for Deposit" (form 3) to the bank head office for archiving.

10.

10. The head office shall handle physical bonds that have already been converted in the following manner:

(1) At the end of each business day, after ensuring consistency with information in the Central Bank's central archives, a "Aggregate Statement of the Conversion ofPhysical Bonds toBook-Entry Bonds" (form 4) shall be printed out and filed for recordation.

(2) Physical bonds submitted by each bank branch every 10 days shall be examined for consistency and stored separately from those bonds that have already been redeemed, and at the end of each month, following examination for consistency with the Central Bank's archived information, a "Monthly Statement of the Conversion of Physical Bonds to Book-Entry Bonds" (form 5) shall be filed for recordation.

(3) Each year at the end of June and the end of December, the "Semi-Annual Statement of Conversion of Physical Bonds to Book-Entry Bonds" (form 6) shall be compiled and, following the auditing unit's examination for accuracy, shall be submitted within 45 days to the Central Bank, with a copy also submitted to the Ministry of Finance, for recordation.

The compilation and organization, custody, cancellation, approval for destruction, and allocation of the relevant processing fees with regard to the handling of converted bonds as described in the preceding paragraph shall be conducted in accordance with the provisions of the Regulations Governing the Management of Central Government Bonds.

11.

11. The Treasury Department shall conduct the handling of all archived information submitted to theCentral Bank by each bank branch as follows:

(1) At the end of each business day, a "Aggregate Daily Statement of the Conversion of Physical Bonds to Book-Entry Bonds" (form 7) shall be compiled, printed and used as the basis for account entries.

(2) Each month, a "Aggregate Monthly Statement of the Conversion of Physical Bonds to Book-Entry Bonds" (form 8) shall be compiled, and every six months two copies each compiled of the "Aggregate Semi-Annual Report of the Conversion of Physical Bonds to Book-Entry Bonds" (form 9) and " Comprehensive Details of the Conversion of Physical Bonds to Book-Entry Bonds " (form 10), with one copy each submitted to the Ministry of Finance and the other filed for recordation [by the Treasury Department].

12.

12. When the computer system fails at a bank branch or communications are disrupted, the problem shall be promptly resolved. If it is determined that the problem cannot be resolved within a short period of time, the reasons for the problem shall be explained to the applicant, who shall be assisted in locating another bank branch where they can complete the application process.

13.

13. When the head office's computer server system fails or communications are disrupted, the head office shall immediately notify the Central Bank's Information Systems Office and Treasury Department to request assistance in handling the problem.

14.

14. When the Central Bank's computer server system fails or communications are disrupted, resulting in complete inability to conduct online operations, the CentralBank's Information SystemsOffice shallimmediately notify the Treasury Department and each bank head office to temporarily suspend acceptance [of conversion applications] until systems have been restored.

15.

15. When the Central Bank's computer server system is restored to normal operations , bank branches shall resume handling of applications that had been in process but were disrupted due to the system failure, and shall first check all information in the system to Directions for the Conversion of Physical central government bonds to Book-Entry Central Government Bonds ensure that it conforms with the original certificates, make any necessary corrections and additions, and then complete processing of the applications.