Directions for the Operation of Book-Entry Central Government Securities — CBC — TW

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Title：

Directions for the Operation of Book-Entry Central Government Securities

Inactive Regulations

Announced Date： August 06, 1997

Amended Date： December 15, 2004

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Chapter 1: General Principles

These Directions are specially prescribed by the Central Bank of China (hereinafter referred to as “the Bank”) for the management of book-entry central government securities (hereinafter referred to as “the Securities”).

Except where otherwise provided by law, management of the Securities shall be undertaken in accordance with these Directions.

Particulars of the issuance and buyback of the Securities, such as the issue name, type, serial number, form, method, date, amount, coupon rate, date for repayment of principal and interest (method of repayment), the time and place of auctions, the underlying exchange government held shares, the period, the price and the procedures for exchange, redemption at holders’ (issuer’s) option of the Central Government Exchangeable Bonds (hereinafter referred to as “Exchangeable Bonds”) shall be handled in the manner as publicly announced by the Ministry of Finance.

The Securities are in registered form, and the particulars of purchase, transfer, trust, lodgement, depository of reserves, pledge, and serving as public guarantee shall be registered in accordance with these Directions. Without registration, protestation against a third party is prohibited.

Terms in these Directions are defined as follows:

(1)“Book-entry central government securities(CGS)” refers to government bonds issued in registered form (hereinafter referred to as “book-entry bonds”) in accordance with Article 6 of the Act Governing Central Government Construction Bonds and Borrowing, and treasury bills issued in registered form (hereinafter referred to as “book-entry Treasury bills”) in accordance with Article 5 of the Act Governing Treasury Bills and Short-term Borrowing.

(2) “Exchangeable bonds ” refers to book-entry bonds which may be exchanged for stocks held by the central government(“Government Held Stocks”), the government agrees to repay with Government Held Stocks or to pay the principal to the bonds holders.

(3)” Strippable bonds” refers to interest-bearing government bonds that are announced as strippable issues by the Ministry of Finance.

( 4 ) “ Separate Trading of Registered Interest and Principal of Securities (STRIPS)〞refers to〝coupon STRIPS〞and〝principal STRIPS〞, that are zero coupon bonds, derived from stripping principal and interest components of strippable bonds and are traded separately, with no interest payment but repaid at par value at maturity.

(5) “Clearing banks” refers to banks and Chunghwa Post Co., Ltd. appointed by the Bank to handle book entry of the Securities, transfers of settlement funds, and payment of principal and interest when due.

( 6) “Registration institutions” refers to the Department of the Treasury and Department of Banking of the Central Bank (hereinafter referred to as “Treasury Department” and “Banking Department”), and clearing banks that perform registration of the Securities.

(7)“Self-owned account” refers to the securities account owned by the Bank or a clearing bank for its own position.

(8)“Customer account” refers to the securities account owned by a corresponding customer at the Bank or a clearing bank.

(9)“Transfer registration” refers to registration of inward or outward transfer of securities ownership, as in purchase, trading, succession, gift, or trust.

(10)"Lodgement registration" refers to inward or outward transfer registration of securities occupation when the underlying securities serve as the lodgement object deposited with the Court.

(11)"Return registration " refers to inward or outward transfer registration of securities occupation when the underlying securities serve as the lodgement object deposited with the Court are returned to the original depositor or delivered to a third party.

(12)“Restricted transfer registration” refers to restricted inward or outward transfer registration without securities ownership transferred, as in pledge or serving as public guarantee (where duly deposited in the Bank, the Treasury, or a bank to serve as a guarantee), or depository of reserves (where duly deposited in the Bank to serve as trust fund reserves or compensation reserves).

(13)“Intrabank transaction registration” refers to various registrations performed between two trading parties whose securities accounts are within the same registration institution.

(14)“Interbank transaction registration” refers to various registrations performed between two trading parties whose securities accounts are at different registration institutions.

(15)" Par value " refers to the registered value of the Securities, with the minimum registration unit of NT$100,000 and is in multiples of NT$100,000. (16)“Transferable balance” refers to the balance of a clearing bank securities account at the Treasury Department after subtracting the balance of interbank restricted outward transfer registrations. (17)“Disposable balance” refers to the balance in a clearing bank self-owned securities account or a customer’s securities account after subtracting the balance of restricted outward transfer registrations, RP/RS transaction certificates issued by the clearing bank and other intra bank deductible balances.

Registrations carried out by a Registration Institution shall be as follows:

(1)Aggregate registration by the Treasury Department of all Registration Institution bond accounts, and registration of restricted transfers on their customer accounts.

(2)Registration by the Banking Department of its open-market operations, deposits for reserve (bonds), registration of transfers on its Self-owned Accounts for short-term financing operations, and registration of restricted transfers.

(3)Clearing Bank registrations of assignments between Self-owned Accounts and Customer Accounts and registration of restricted transfers.

The representative office of a Registration Institution shall process with registrations for its Self-owned Accounts and Customer Accounts; branches of the Registration Institution may perform registration operations [for the Bank] given prior reporting to the Bank for approval and recordation.

A registration institution shall report contact list containing information about representative office, responsible supervisors, clerks, and branch list to the Treasury Department for filing by letter. Any changes in the above items shall likewise be reported.

In order to perform various registrations, a natural person or a juristic person shall open a securities account and a demand deposit account at a clearing bank. A clearing bank shall open a securities account and a cash account (hereinafter referred to as “ cash account”) with the Treasury Department.

An Account Application Form (Form 1) and a Seal Impression Card (Form 2) shall be filled out when applying to open a securities account or a cash account. For the purpose of performing trust registration of the Securities, a trustee shall open an extra securities trust account and an extra deposit trust account with the clearing bank.

A Registration Institution shall issue a book-entry central government securities passbook to customers for all registrations in connection with the Securities, and may, at the customer’s request, provide an Account Verification Statement (Form 3).

Customers may select from either booklet or loose-leaf passbooks for their use (Form 4), but shall obtain approval from the Registration Institution prior to switching to use of the other type. Use of the passbooks shall be according to the “Directions for (Loose-leaf) Passbook Use” (Appendices 1 and 2).

The “Central Government Securities Settlement System” (hereinafter referred to as “ CGSS”) is a computer network linking the Bank and clearing banks, with the Bank as interbank online center (hereinafter referred to as “ CGSS Center”), to effect real-time interbank transfers of securities or relevant funds. The Taiwan Securities Central Depository Co., Ltd. (hereinafter referred to as “TSCD”), with a linkage to the Bank, shall effect the real-time book-entry transfers of the underlying stocks according to the information transmitted by CGSS. The TSCD, with links to its correspondent clearing banks(hereinafter referred to as〝TSCD correspondent clearing bank 〞), shall effect real-time book- entry transfers of STRIPS.

Any participants in the Securities System shall observe such matters and procedures for data security as set forth in the relevant provisions in the “Central Bank Computer Communications Services System.”

10.

The cut-off time for acceptance of interbank transfers by the Central Bank’s Connection Center shall be 5:00 p.m. (see Table 1 for details of Bond System Operation Schedule). No late transfers will be accepted, provided that this restriction shall not apply when irregularities occur in Bond System operations or the need to coordinate policies requires that normal operating hours be extended.

A Clearing Bank applying for extension of the Connection Center’s operating hours shall notify the Treasury Department by telephone prior to the cut-off time set forth in the preceding paragraph, and shall fax an Application for Extension of Operating Hours (Form 5) to the Treasury Department within thirty minutes of the normal cut-off time.

11.

A Clearing Bank shall use the Banking Department’s Interbank Funds Allocation and Clearing System for transfer and clearing of funds in relation to interbank trading through the Bond System.

Chapter 2: Appointment and Management of Clearing Banks

12.

A bank may apply with the Central Bank to be appointed as a Clearing Bank in accordance with these Directions by meeting the following requirements:

(1)Net worth of NT$15 billion or above.

(2)A ratio of self-owned capital to risk-based assets of 8% or above.

(3)An average net profit ratio for the past three years of 6% or above.

13.

A bank shall apply for appointment as a Clearing Bank by filling out a “Book- Entry Central Government Securities Clearing Bank Application” (Form 6) for submission to the Treasury Department along with a financial statement and other documents required under regulations.

Applications may be approved by the Bank based on need as determined by bond market development.

14.

After receiving an appointment as a Clearing Bank, a bank shall contact the Central Bank Information Systems Office (hereinafter referred to as “ Information Systems Office”) to set up online connections, and shall complete testing of online connections within one year from the date of appointment. Where testing is not completed within this deadline, the Bank may revoke a bank’s status as Clearing Bank.

Following successful completion of tests as per the preceding paragraph, which shall be undertaken jointly with the Information Systems Office and the Treasury Department, the Treasury Department will issue a letter informing the Clearing Bank of the date upon which it may commence operations.

15.

A Clearing Bank shall establish rigorous internal controls and exercise the diligence of a good custodian with regard to performing registrations, clearing funds, releasing trading information, and issuing and revoking repurchase (resell) trade certificates. Except for information duly provided under relevant laws, a Clearing Bank may not divulge customer information.

16.

Given any of the following circumstances, the Bank may issue a letter notifying a Clearing Bank to effect improvement:

(1)Failure to perform book-entry bond operations in accordance with these Directions.

(2)Failure to effect transfers of funds in accordance with Bond System data handling protocols.

(3)Occurrence of any other matter hindering smooth operation of the Bond System.

17.

Given any of the following, and where warranted by circumstances, the Central Bank may terminate a Clearing Bank’s appointment, suspend its appointment for a specific period of time, or limit new authorizations allowing branches of the bank to carry out Clearing Bank matters:

(1)Failure to effect improvement following notification in accordance with the preceding Direction.

(2)Violation of relevant regulations or material negligence resulting in severe hindrance to Bond System operations.

(3)Suspension of any department’s operations by the central competent authority, resulting in inability to perform bond operations.

(4)Appointment of a receiver or conservator by the central competent authority.

(5)An order from the central competent authority to cease operations.

18.

A Clearing Bank shall give advance notice to the Treasury Department of its intention to withdraw from the Bond System three months prior to the intended withdrawal date.

19.

Where a Clearing Bank’s appointment is suspended by the Bank, the Clearing Bank shall pay relevant transfer fees and perform final settlement procedures for bond accounts and Deposit Accounts.

Where a Clearing Bank withdraws from the Bond System or its appointment is terminated by the Bank, in addition to effecting final settlements as set forth in the preceding paragraph, it shall perform account cancellation for its bond accounts and Deposit Accounts.

Chapter 3: Issuance and Subscription

20.

Participation in bidding for book-entry bonds is restricted to central government bond dealers (hereinafter referred to as “Bond Dealers”); natural persons and juristic persons shall engage a Bond Dealer to submit bids under whose name on their behalf.

Participation in bidding for book-entry treasury bills is restricted to banks, trust investment companies, insurance enterprises, bills finance companies and the Chunghwa Post Co., Ltd.; natural persons and juristic persons are required to engage a bills finance company to submit bids under whose name on their behalf.

21.

Successful bidders shall attend to the following matters prior to the issuance of the Securities:

(1)Filling out an “Application Form For Registration Of Subscriptions” ( Form 7), to be submitted to its Clearing Bank to effect registration, showing the combined total Face Values and prices of bonds payable for purchases on its own accounts and on customer accounts, one for each type of security and prior to the following deadlines:

i.Book-entry bonds: prior to 3:30 p.m. on the next business day following the auction.

ii.Book-entry treasury bills: prior to 3:30 p.m. on the date of the auction .

(2)Payment for bonds purchased on their own accounts and on customer accounts prior to the prescribed deadline on the date of issuance.

22.

A Clearing Bank shall carry out the following matters prior to bond issuance:

(1)Submission to the Central Bank of information related to the “Book-Entry Central Government Securities Subscription Statement” (Form 8) in accordance with the type of securities and prior to the following deadlines :

i.Book-entry bonds: prior to 12:00 p.m. on the second business day following the date of auction.

ii.Book-entry treasury bills: prior to 5:00 p.m. on the date of the auction.

(2)Sending information on payment of funds for subscriptions on their own account, for customers, and for respective individual bidders, to the Bank to effect payment before 3:00 p.m. on the date of issuance. And Then the Bank will write down the amount in the Clearing Bank’s Deposit Account and write up the amount in the Clearing Bank’s bond account. Where successful bidders fail to effect timely performance of funds settlement, the Clearing Bank shall notify the Bank to make corrections.

(3)Making transfers into the customers’ security accounts on the date of issuance, following the Bank confirmation of payment information, in accordance with the customers listed in the application forms for registration of subscriptions.

Chapter 4: Intrabank Trade Registrations

23.

Transfer registrations between accounts at the same Clearing Bank shall be carried out in accordance with the following provisions:

(1)When a Clearing Bank is requested to deduct funds from a transferee’s deposit account in payment of a transaction price, the transferor and transferee respectively shall fill out an “Outward Transfer Registration (and Request for Collection) Form” (Form 9) and an “Inward Transfer Registration (and Request for Payment) Form” (Form 10) for processing by the Clearing Bank. Following confirmation of a match between the transferee’s and the transferor’s trading information, the Clearing Bank shall effect the respective account transfers of bonds and settlement funds as per the applications, and record the same in passbooks for the transferor and transferee. Confirmation of trade match may be omitted where a customer has made prior arrangement with the Clearing Bank.

(2)In cases where a Clearing Bank is not requested to deduct funds from a transferee’s deposit account for a transfer in payment of a transaction price, or where no funds are transferred in connection with the transaction, the Clearing Bank may directly proceed with the transfer of bonds in accordance with the “Outward Transfer Registration (and Request for Funds Collection) Form” filled out by the transferor, except in cases of donations or successions which require attachment of relevant documents. The transferee may have supplemental passbook entries recorded at the Clearing Bank.

24.

Intrabank Lodgment Registration shall be carried out in accordance with the following provisions:

(1)The depositor shall submit documents for lodgment request (lodgment statements, court decrees, etc.) and fill out a "Application for Treasury Custody " (Form 11) for processing by the Clearing Bank. After having certified the relevant documents, the Clearing Bank shall process with Lodge-out Registration for the lodger and Lodge-in Registration for the Court. The Clearing Bank shall print the passbook and give it to the lodger together with a "Lodgment Certificate of Treasury Custody " (Form 11-1), and shall print relevant slips of the " Deposit Certificate of Treasury Custody " (hereinafter referred to as a " Deposit Certificate") (Forms 12, 12-1, 12-2, and 12-3).

(2)If several persons (including several persons with a co-ownership relationship) apply joint lodgement, they shall submit Lodgement Registration request as prescribed in the preceding Paragraph. The lodger may use the name of one person among them and ID Card number (or profit- seeking enterprise uniform number) when serving as a representative. The Clearing Bank shall record the representative name and ID Card number (or profit-seeking enterprise uniform number)of the joint lodgement, and the total number of lodgers, in the account name columns of the relevant slips of the Deposit Certificate. The Clearing Bank shall print the Deposit Certificate number on the joint lodgers lists which shall be affixed to the relevant slips of the Deposit Certificate for filing.

25.

The Intrabank Return Registration and the conversion or sale of the lodged securities shall be carried out in accordance with the following manners:

(1) Full return or reception:

i.The receiver shall submit the Deposit Certificate with the authorized signature of the Court to the Clearing Bank for return or reception. After having certified the authorized signature, the Clearing Bank shall process with the Return-Out Registration for the Court and the Return-In Registration for the receiver based on the Deposit Certificate, and print the passbook and give it to the receiver. The Court may have its passbook entry updated at the Clearing Bank.

ii.If several persons (including several persons with a co-ownership relationship) jointly return or receive the lodged securities, they shall apply in accordance with the manners provided by Subparagraph 2 , Direction 24.

(2) Partial return or reception:

i.After having certified the authorized signature of the Court, the Clearing Bank shall divide the Deposit Certificate into two new Deposit Certificates pursuant to the indication of the Court Letter stating portions of the lodged securities to be reserved and to be received, and print the relevant slips for each new certificate. Apart from the slip for Clearing Bank, other slips shall be handed over to the governing Court.

ii.Reception procedures shall be processed in accordance with the full return or reception procedures.

(3) Conversion of lodged securities : To convert lodged securities by law, the lodger shall attach the documents for lodgement request (lodgment statements, court decrees, or certificates of confirmation, etc.), and shall apply Lodgement Registration with the newly-provided securities as security lodgement in accordance with Direction 24, and shall apply Return Registration with the originally- lodged securities in accordance with this Direction.

(4) Sale of lodged securities:

i.After having certified the authorized signature of the Court, the Clearing Bank shall sell unmatured securities recorded on the Deposit Certificate in accordance with the Court’s compulsory enforcement order.

ii.The clearing bank shall transfer the securities into the security account assigned by the transferee, and shall total the sum of money remained after sale together with the principal, interest, and yield of the matured securities, shall fill out(copies of)Receipt of Treasury Deposit and transfer the said sum to the custody account of court enforcement case monies for allocation.

26.

Intrabank Restricted Transfer Registration shall be carried out in accordance with the following: The pledgor (guarantee provider) shall fill out an “Application for Registration Establishing Right of Pledge” (Form 13) (or "Application for Registration of Public Guarantee " (Form 14) ) and request the Clearing Bank for registration. The Clearing Bank shall perform Restricted Transfer-out Registration on behalf of the pledgor (guarantee provider) and Restricted Transfer-in Registration on behalf of the pledgee (guarantee recipient) in accordance with the applications, and print out the passbook and provide it to the pledgor (guarantee provider) together with an " Certificate for Registration of Establishing Right of Pledge " (Form 13-1) (or "Certificate of Registration of Public Guarantee " (Form 14-1) ); the pledgee may have a supplemental passbook entry recorded at the Clearing Bank.

27.

Intrabank Revocation of Restricted Transfer Registrations, the exercise of pledge rights and revocation of public guarantee under court order for compulsory execution by transfer of registration shall be carried out in accordance with the following:

(1)Revocation of Restricted Transfer Registrations:

i.The pledgor (guarantee provider) shall fill out an “Application for Revocation of Right of Pledge or Registration of Public Guarantee” ( Form 13), to which the seal of the pledgee (guarantee recipient) shall be affixed as proof of consent for processing by the Clearing Bank.

ii.According to the documents prescribed in the preceding Item, the Clearing Bank shall revoke the Restricted Transfer Registration between the pledgor (guarantee provider) and pledgee’s (guarantee recipient’s ), and print out the passbook and provide it to the pledger (guarantee provider) together with a "Certificate of Revocation Registration of Pledge or Public Guarantee " (Form 15-1); the pledgee may have a supplemental passbook entry recorded at the Clearing Bank.

(2)Exercise of pledge right:

i.The transferee shall fill out a “Notice of Exercise of Pledge Right ” (Form 16) in regard to the result of the pledgee’s execution of right of pledge, with the pledge-holder’s seal affixed as proof of consent, for submission to the Clearing Bank for processing. The following documents shall be attached according to the respective circumstances:

(i) Petition for court auction: Documents related to court auction shall be attached.

(ii) Self-sale by pledgee: Evidentiary documents shall be attached as listed in the proviso to Article 28 of the Law Governing the Application of the Book of Obligations of the Civil Code (certification from the court, a notary, the police unit, commercial group, or a local autonomous institution, showing sale at market price).

(iii) Agreement with pledgor that the pledgee obtained the subject of the pledge: The contract between the pledgor and pledgee shall be attached.

(iv) Other forms of disposal: The contract between the pledgor and pledgee shall be attached. Where a third party is involved, the relevant contract shall be attached.

ii.If not being requested of deducting funds from the transferee’s deposit account to settle the transaction, the Clearing Bank shall, in accordance with the documents prescribed in the preceding Item, carry out a simultaneous revocation of the pledgor and pledgee’s Restricted Transfer Registration and at transfer of bonds between the pledgor and transferee’s accounts, and shall print a passbook and provide it to the transferee together with a " Certificate of Exercise of Pledge Right " (Form 16-1); the pledgor and pledgee may have a supplemental passbook entry recorded at the Clearing Bank.

iii.In cases where a Clearing Bank is requested to deduct funds from a transferee’s deposit account for a transfer in payment of a transaction price, the Clearing Bank shall also, in addition to carrying out a bond transfer as set forth in the preceding Item , carry out a transfer of funds between the transferee’s and pledgor’s accounts.

(3)Revocation of Public Guarantee Registration and simultaneous transfer of the lodged securities in accordance with the court order for compulsory execution shall be carried out in accordance with the following:

i.The transferee shall fill out a “Notice of Revocation for Public Guarantee by Transfer of Registration” (Form 17), with the guarantee recipient’s seal affixed as proof of consent, for submission to the Clearing Bank for processing.

ii.The Clearing Bank shall, based on the information in the preceding Item, carry out a simultaneous revocation of the guarantee provider’s and the recipient’s Restricted Transfer Registrations and a transfer of securities between the guarantee provider and transferee’s accounts, and shall print a passbook and provide it to the transferee together with a "Certificate of Revocation for Public Guarantee by Transfer of Registration " (Form 17-1)record of the same for the transferee. The guarantee provider and the recipient may have a supplemental passbook entry recorded at the Clearing Bank.

28.

Entities qualified as a central government bond trader or a securities dealer may apply to strip strippable bonds (hereinafter referred to as “ bond stripping”) or to reconstitute stripped bonds (hereinafter referred to as “bond reconstitution”).Intrabank bond stripping or bond reconstitution shall be performed as follows:

(1) Bond stripping: The applicant shall fill out an “ Application for Stripping Form” (Form 18) and submit it to the clearing bank. The clearing bank shall strip, in accordance with the application form, the interest-bearing government bonds into coupon STRIPS and principal STRIPS and transmit the message to TSCD, which shall transfer coupon STRIPS and principal STRIPS into the applicant’s centralized depository securities account. The clearing bank shall print the passbook and issue a “ Certificate of Stripping” (Form 18-1) to the applicant.

(2) Bond reconstitution:The Applicant applying for reconstitution of principal STRIPS and coupon STRIPS into interest-bearing government bonds shall comply with the relevant regulations of TSCD, through which messages are transmitted to the TSCD correspondent clearing bank and reconstituted bonds are transferred to the securities account of the applicant. The applicant may have a supplemental passbook entry recorded at the clearing bank.

29.

When issuing or revoking an RP/RS transaction certificate, a clearing bank shall proceed in accordance with the following provisions:

(1)The applicant shall fill out an “Application for Issuance of an Repurchase Agreement/Reverse Repurchase Agreement (RP/RS) Transaction Certificate” (Form 19) and submit it to the clearing bank. The clearing bank shall print the passbook and issue a certificate to the applicant.

(2)When an RP/RS transaction certificate comes due or for early annulment of contract, the applicant shall apply for revocation at the clearing bank, using the original certificate issued by the clearing bank, with the applicant’s registered seal affixed. The clearing bank shall print the passbook for the applicant.

Chapter 5: Interbank Trading Registration

30.

When exchangeable bonds are redeemed at holders’option, the applicant shall fill out an “Application for Exchange of Central Government Exchangeable Bonds for Government Held Stocks/Redemption at Holders’ Option of Central Government Exchangeable Bonds” (Form 20) for processing by the clearing bank. The clearing bank shall print the passbook to the applicant.

32.

When registration institutions perform interbank transaction registration(or funds transfer), the party that initiates the transmission of transaction message is the transferor bank, the party that receives the message is the transferee bank. Once an interbank transaction instruction is received by the CGSS Center, the CGSS Center will settle the transfers of securities or funds between the transferor bank and the transferee bank, in accordance with the instruction of the transferor bank, and will transmit the message to the transferee bank. The processing result will be transmitted to the Bank, then to the transferor bank.Registration institutions shall be responsible for any errors in the execution of transfer orders that result in injury to the rights and interests of its customers.

The CGSS Center will decline a trade if there is no match in trading information or if the disposable balance of the securities account or the balance of the cash account of the transferor bank is insufficient to cover the trade.

The clearing bank processing the exchange of exchangeable bonds for government held stocks through the CGSS Center shall debit the securities account of the transferor bank as instructed by the transferor bank and transmit the message to TSCD.

Once a bond stripping transaction performed by a clearing bank is received by the CGSS Center, the CGSS Center shall effect transfers, in accordance with the instruction of the transferor bank, debiting the interest-bearing government bonds from the transferor bank account for the amount to be stripped and crediting STRIPS to the account of the TSCD correspondent clearing bank by the same amount,and transmit the message to the TSCD correspondent clearing bank.Once a bond reconstitution transaction performed by the TSCD correspondent clearing bank is received by the CGSS Center, the CGSS Center will effect transfers, in accordance with the instruction of the TSCD correspondent clearing bank, debiting STRIPS from the TSCD correspondent clearing bank account for the amount to be reconstituted and crediting the interest-bearing government bonds to the transferee bank account by the same amount. The method for transmitting the message of the paragraphs 1 and 2 shall apply, mutatis mutandis in paragraphs 3 to 5.

33.

The transferor bank and the transferee bank for interbank transaction transfer, exchanges of government held stocks and bond stripping or reconstitution as listed in the previous direction are defined as follows:

(1)Transfer registration: The registration institution with which the transferor corresponds is the transferor bank (assignor bank); the registration institution with which the transferee corresponds is the transferee bank (assignee bank).

(2)Lodgment registration: The registration institution with which the depositor corresponds is the transferor bank (depositing bank); the registration institution with which the Court corresponds is the transferee bank (custodian bank).

(3)Return registration: The registration institution with which the Court corresponds is the transferor bank (custodian bank) ; the registration institution with which the receiver corresponds is the transferee bank (depositing bank).

(4)Restricted transfer registrations: The registration institution with which the pledgor, guarantee provider, or reserves depositor corresponds is the transferor bank (pledgor bank, guarantee provider bank or depositor bank); the registration institution with which the pledgee or recipient corresponds is the transferee bank (pledgee bank or recipient bank).

(5)Revocation of restricted transfer registrations, exercise of pledge, and revocation of public guarantee (depository of reserves ) with ownership transfer: The registration institution with which the pledgee or the recipient corresponds is the transferor bank (the pledgee bank or recipient bank); the registration institution with which the pledgor or guarantee provider or reserves depositor corresponds is the transferee bank (pledgor bank or guarantee provider bank or reserves depository bank).

(6)Funds transfers: The clearing bank with which an outward transfer is applied for by an applicant is the transferor bank; the clearing bank receiving such an inward transfer is the transferee bank.

(7)Exchange for government held stocks: The clearing bank at which the applicant applies for exchange is the transferor bank. The TSCD is the transferee bank. (8) Bond stripping: The clearing bank at which the applicant applies for bond stripping is the transferor bank, and the TSCD correspondent clearing bank is the transferee bank. (9) Bond reconstitution: The TSCD correspondent clearing bank is the transferor bank, and the clearing bank at which reconstituted bonds is transferred in is the transferee bank.

Chapter 6: Interest and principal repayment

34.

The transferor bank, when sending instructions such as interbank transaction transfer, exchange for government held stocks and bond stripping or bond reconstitution, shall proceed in accordance with the following transactions：

(1)Transfer registration or funds transfer: The messages shall include the transaction code, the transferor bank, the securities account number of the transferor, the account name of the transferor, personal ID number ( profit- seeking enterprise uniform number) of the transferor, the transferee bank, the securities account number of the transferee, the account name of the transferee, the personal ID number ( profit-seeking enterprise uniform number) of the transferee, the securities code, and the amount of securities or the cash account number and the amount of funds. Transfer registration affected by a trust shall also include relevant information related to the establishment or termination of the trust.

(2)Restricted transfer registration: In addition to the information prescribed in the preceding subparagraph, information on the type of registration and interest beneficiary shall also be included. (3)Exchange of government held stocks: The message shall include the trading code number, the transferor bank, the securities account number of the transferor, the account name of the transferor, personal ID number ( profit-seeking enterprise uniform number) of the transferor, centralized depository account number of the transferor, the securities code, the amount of the securities, the exchange price, the securities code of the underlying stocks, the number of stocks exchanged and the amount payable for odd stocks. (4) Bond stripping or reconstitution of bonds: The messages shall include transaction code, transferor bank, securities account number of the transferor, profit seeking enterprise uniform number of the transferor, centralized depository account number of the transferor, the security code, the amount of the securities, and attached coupon series；Bond stripping shall also include relevant information such as the interest income accrued before stripping and the amount of tax withheld.

36.

Interest payments and principal redemption for the Securities shall be processed in accordance with the following provisions:

(1) Maturity of the Securities ( STRIPS excluded) i. The Treasury Department willcalculate the amount of principal and interest due based on the records atthe registration institutions as of the close of business day prior to the payment date. These payments will be transfered to the registration institutions prior to 10：00 a.m. on the payment date. ii. Based on the final balances in self-owned accounts and customers’ accounts on the same record date as in the preceding subparagraph, registration institutions shall calculate the amount of principal and interest due, and following thetransfer of principal and interest by the Treasury Department, transfer net amount, after withholding taxes, to the various cash accounts for self-owned accounts and customers’ accounts prior to 12:00 p.m. on the principal and interest payment date.

(2) Maturity of STRIPS i. The Treasury Department will calculate the amount of principal payable based on the book records at the TSCD correspondent clearing bank as of the close of the business the day before maturity date of the coupon STRIPS and the principal STRIPS, and will transfer principal to the TSCD correspondent clearing bank prior to 10：00 a.m. on the maturity date. ii. TSCD correspondent clearing bank will transfer, in accordance with the STRIPS holders list provided by TSCD, the net amount after withholding tax to the cash accounts of the STRIPS holder's prior to 12:00 p.m. on maturity date; if the holder is an interbank customer, the amount shall be remitted to the cash account of the interbank customer. (3) Exchangeable Bonds Redeemed at Holders’(Issuer's) Option i. The Treasury Department will calculate the amount of principal and interest payable based on the accumulated amount applied to be redeemed at holders’ option (the records of the balances) at the clearing banks at the end of the announced record date. These payments will be transferred to the registration institutions prior to 10：00 a.m. on the fifth business day after the record date. ii Based on the accumulated amount applied to be redeemed at holders’ option (final balances in self-owned accounts and customers’accounts) on the same record date as in the preceding subparagraph, registration institutions shall calculate the amount of principal and interest payable, and following the transfer of principal and interest by the Treasury Department, will transfer the net amount after withholding taxes to the various cash accounts for self- owned accounts and customers’accounts prior to 12:00 noon on the fifth business day after the record date of redemption at holders’(Issuer's) option. When securities mature or if exchangeable bonds are redeemed at holders’( Issuer's) option, after the Treasury Department has transferred the principal and interest in accordance with subparagraph 1, item 1, subparagraph 2, item 1, or suparagraph 3, item 1of the preceding paragraph registered information shall be closed in whole or in part. The exchange of exchangeable bonds for government held stocks shall be handled in the same way.

37.

When security registrations are carried out in connection with the establishment of pledge, public guarantee or depository of reserves, interest at maturity or interest received due to redemption of exchangeable bonds at issuer’s option will be transferred to the pledgor bank(guarantee provide bank) by the Treasury Department, and the pledgor bank (guarantee provider bank）will make a transfer to the cash account of the pledgor (guarantee provider or reserves depositor) or the pledgee (recipient) based on the agreement between the applicant and the pledgee (recipient) at the time of application for registration. If the recipient of the interest is an interbank customer, the pledgor bank shall remit the interest to the cash account of the interbank customer.

Chapter 7: Buyback

38.

When security registrations are carried out in connection with establishment of pledge, public guarantee and depository of reserves, then principal at maturity or principal to be received due to redemption of exchangeable bonds at issuer’s option, prior to the performance of the aforementioned revocations, will be handled in accordance with the following provisions: (1)Pledge registration : The Treasury Department will transfer the principal amount to the pledgor bank, which shall make payment only after first notifying the interested party and retaining a record of the original registrations, and after the presentation by the interested party of documents demonstrating the consent of the other party or other valid documents as required by law. (2)Public guarantee and depository of reserves registration: The Treasury Department will transfer the principal amount to the recipient bank, which will transfer the amount to the recipient’s cash account to serve as public guarantee or depository of reserves.

39.

During lodgement period, the matured principal and interest of the securities which have been processed with lodgement registration or principal and interest received due to redemption of exchangeable bonds at issuer’s option shall be handled in accordance with the following provisions: (1) The Treasury Department shall transfer the matured principal and interest or principal and interest to be received due to the redemption of exchangeable bonds at issuer’s option to the clearing bank( custodian bank). The sum shall be reserved as lodgement object in the custody of the clearing bank. (2) The clearing bank (custodian bank) shall pay the accrued interest of the matured principal and interest of securities or principal and interest received due to redemption of exchangeable bonds at issuer’s option, which are reserved as lodgement object. When processing the return registration at the request of the receiver, the clearing bank shall calculate the principal, interest, accrued interest, and tax payable of the securities originally in its custody, and shall pay the net amount after withholding tax to the receiver.

40.

Bidding on buyback of book-entry Treasury bills is limited to bills companies; natural persons or other juristic persons wishing to submit bids shall engage a bills company to do so under its name on their behalf.

41.

Prior to selling back book-entry Treasury bills, successful bidders shall fill out an “Application for Selling Back Registrations” (Form 22) showing the total amount of the Treasury bills entrusted for resale through them and resold on their own accounts and funds receivable, and prior to 3:30 p.m. on the date of auction transmit the information to their respective clearing banks for registration.

Chapter 8: Account Affairs and Reporting of Data

42.

Prior to selling back book-entry Treasury bills, the clearing bank shall carry out the following: (1)Transmission of information on the “Statement of Book-Entry Treasury Bills for Selling Back ” (Form 23) to the Bank prior to 5:00 p.m. on the auction date. (2)Transmission of message on return and selling back of Treasury bills on own accounts and on behalf of others, according to each respective successful bidder, to the Bank prior to 3:00 p.m. on the date of buyback for processing the return of bills. The Bank will debit the clearing bank’s securities account accordingly and credit its own cash account. Where a successful bidder is unable to perform its settlement obligations, it shall notify the Bank to make corrections accordingly. (3)On the date of buyback and following the Bank confirmation of the bills return information, the clearing bank shall credit customer accounts after withholding taxes of successful bidders as listed on the “Application for selling back Registration.”

43.

Registered information shall be closed for buyback of book-entry Treasury bills after the transfer of principal and interest by the Treasury Department.

44.

Registration institutions shall establish formal memorandum ledgers for securities transactions; the Treasury Department shall establish a “government book-entry securities management” assets memorandum ledger to control the number of securities issued by the Treasury, as well as a “government book- entry securities consigned management” liabilities memorandum ledger to control the amount of securities in self-owned and customer accounts at the various registration institutions. Registration institutions shall establish a “government book-entry securities management” assets memorandum ledger for the purpose of cross-checking with the Bank's assets memorandum ledger, and shall also establish a “government book-entry securities consigned management” liabilities memorandum ledger in order to control the balances of securities in self-owned and customers’ accounts. Accounting ledgers listed in the preceding paragraph shall be managed according to the provisions of the “Central Public Debts Accounting System.”

45.

A registration institution may, at any time, make inquiries regarding its own transactions for the current day through the CGSS, at the close of business it shall check daily transaction information against the original certificates. Based on the settlement notification issued through the CGSS Center, the registration institution should check the comprehensive data on bond registrations and funds movements in order to maintain the accuracy of its records. Files with itemized trading information shall be kept on file and printed out monthly in Memorandum Books (Form 24). Each day at the close of operations, a clearing bank shall print a “Trading of CGS” (Form 25), a “Trust of CGS”(Form 25-1), a “Balance of CGS” (Form 26), a “Daily Statement for the Exchange of Exchangeable Bonds” (Form 27), a “Daily Statement for Redemption at Holders’(issuer’s) Option of Exchangeable Bonds” (Form 28), and a “Holding Analysis of Exchangeable Bonds” (Form 29) and a“Daily Statement for Bond Stripping/Reconstitution” (Form 30) to be sent to the Bank for its files; the Bank will compile and print an “Aggregate Statement of Trading of CGS” (Form 31), an “Aggregate Statement ” for Trust of CGS”(Form 31-1), an “Aggregate Statement for Balance of CGS”(Form 32), an “Aggregate Statement for Exchange of Exchangeable Bonds” (Form 33), an“ Aggregate Statement for the Redemption at Holder’s( Issuer’s )Option of Exchangeable Bonds” (Form 34), a “Aggregate Holding Analysis of Exchangeable Bonds ”(Form 35), and an “AggregateDailyStatementforBondStripping/Reconstitution” (Form 36).

Chapter 9: Management of System Failure and Correction of Account Errors

46.

Clearing banks shall print “CGS Payment of Principal and Interest” (Form 37), “Monthly Statement for Exchangeable Bonds” (Form 38) and “Monthly Statement for Bond Stripping/Reconstitution” (Form 39) for filing on a monthly basis. “Monthly Statement for CGS Disbursement and Collection of Principal and Interest Funds” (Form 40), “Holding Analysis of CGS” (Form 41), “Financial Institutions Holdings of CGS” (Form 41-1), and “Monthly Statement Disbursement and Collection of Exchangeable Bonds Odd Stocks Repayment Fund” (Form 42) should be printed and transmitted to the Bank for filing prior to the second business day of the following month. The Bank will compile a “Aggregate Monthly Statement for CGS Disbursement and Collection of Principal and Interest Funds” (Form 43), a“ Strippable Bonds Disbursement and Collection of Principal and Interest Funds” (Form 43-1), “Aggregate Monthly Statement for the Exchange of Exchangeable Bonds” (Form 44), a “Aggregate Monthly Statement Disbursement and Collection of Exchangeable Bonds Odd Stocks Repayment Funds” (Form 45) and “Aggregate Monthly Statement for Bond Stripping/Reconstitution” (Form 46) for Ministry of Finance records.A “Aggregate Holding Analysis of CGS” (Form 47)will be printed.

47.

In the event of any malfunction or interruption of the system participants’ mainframe system, the Clearing Bank shall immediately notify the Treasury Department and Information Management Office. Where service has not been restored by 5:00 p.m. on the same day, transactions shall be carried out in manual backup procedures. When the cause of the failure occurred at the transferor bank, the transferor bank shall, prior to restoration of service, deliver all already-processed transactions to the Treasury Department for processing in the form of an [electronic] medium prior to 6:30 p.m., and the Bank shall provide all already-processed transactions received from the transferee bank to the transferor bank for processing by means of [a suitable] medium. When the cause of the breakdown occurred at the transferee bank, the Bank shall provide all already-processed transactions to the transferee bank by means of [a suitable] medium; the transferee bank shall report the results of processing to the Treasury Department by fax and telephone, and the Treasury Department shall forward the information to the relevant departments.

The [electronic] media referred to in the preceding paragraph, shall be delivered in a sealed envelope attached with a detail list and affixed with the authorized signature of the security account.

48.

In the event of any malfunction or interruption of the Bank's mainframe system resulting in its complete inability to carry out online operations, the Information Management Office shall immediately notify Treasury Department, Banking Department and all system participants. When service cannot be restored, system functions shall be shifted to the Bank's offsite backup center. If the offsite backup center is inoperative, operations shall be carried out in manual backup procedures. The transferor banks shall deliver all accepted transactions to the Treasury Department on the [electronic] media in whole batches；the Treasury Department shall contact the Transferee banks to get the Bank serial numbers of the last received transactions and produce the information on the [electronic] media for processing by the transferee banks. Transferee banks shall report the results of processing to the Treasury Department by fax and telephone, and the Treasury Department shall notify the relevant departments. The [electronic] media referred to in the preceding paragraph, shall be delivered in a sealed envelope attached with a detail of list and affixed with the authorized signature of the securities account.

49.

In the event of any malfunction or interruption of the system participants’ mainframe system, the clearing bank shall immediately notify the Treasury Department and Information Management Office. Where service has not been restored by 5:00 p.m. on the same day, transactions shall be carried out in manual backup procedures. When the cause of the failure occurred at the transferor bank, the transferor bank shall, prior to restoration of service, deliver all already-processed transactions to the Treasury Department for processing in the form of an [electronic] medium prior to 6:30 p.m., and the Bank shall provide all already-processed transactions received from the transferee bank to the transferor bank for processing by means of [a suitable] medium. When the cause of the breakdown occurred at the transferee bank, the Bank shall provide all already-processed transactions to the transferee bank by means of [a suitable] medium; the transferee bank shall report the results of processing to the Treasury Department by fax and telephone.The Treasury Department shall forward the information to the relevant departments. The [electronic] media referred to in the preceding paragraph, shall be delivered in a sealed envelope attached with a detailed list and affixed with the authorized signature of the securities account.

50.

Where the Bank, due to a system breakdown, causes interbank security transactions or funds transfers to be inconsistent with the original documentation of the clearing bank, the Bank shall make correction in accordance with the relevant accounting regulations.

51.

When a system participant discovers an error while reviewing its same-day transaction statement or through checking the comprehensive trading information for the given day, it shall immediately notify the relevant department of the Bank and take part in the investigation.

52.

When a transferor bank transmits an instruction of interbank transfer or exchange for government held stocks not conforming with the original documentation, it shall transmit a message for return [of transfer] upon obtaining approval from the transferee bank, based on which the transferee bank shall make a reverse correction transfer. The transferee shall offer its full cooperation in making the aforementioned correction when notified. If the balance of securities, stocks or funds of a transferee bank’s customer account is insufficient to cover a reverse correction transfer, the transferor bank shall negotiate with the customer to resolve the problem by itself.The preceding two paragraphs do not apply to STRIPS.

Chapter 10: Fees

53.

For transactions not conforming with the original documentation as under Directions 50 to 52, item 1 which are not processed by the transferor bank on the same day but corrected at a later date, and where delay is disadvantageous to the transferee bank, it may request the transferor bank to pay interest from the date of the transaction until the date of correction for any securities or funds pending transfer during that period or for a shortfall in the transfer.The transferor bank shall not be liable for any other damages. With the exception of previous agreements between the parties to a transfer, payment of interest as per the preceding paragraph shall be calculated at the overnight interbank reference call loan rate for the number of days of delay in payment.

54.

Where a registration institution discovers an error connected with any type of securities registration which makes the transaction invalid, it shall immediately investigate the source of the error and re-enter the transaction data. Transactions that have not been effected before the completion of the registration process shall be cancelled, and a reverse entry made on the account.

Chapter 11: Supplementary Provisions

55.

The Bank may charge transfer fees for carrying out interbank securities or funds transfers (Interbank Transfer Charge Schedules are in Appendix 2).The fees shall be collected from customers by clearing banks and deducted from the book-entry securities deposit accounts of those clearing banks by the Bank.Rates shall be determined by the Bank through consultation with clearing banks.

56.

A clearing bank handling securities or funds transfers or issuance of RP/RS transaction certificates may charge transfer, issuance, or account maintenance fees. Assessment of charges and rates for intrabank trades shall be determined by clearing banks.