The Central Governmental Construction Bond (briefing called

Government Bond or Central Bond) is the convertible debt securities with maturity for one year or above issued by the government for the purpose of financial problems solution and capital funding. Issuing amount is arranged by the Treasury Division of Financial Ministry and is published by Treasury Bureau of Central Bank by open bid. The government bonds are categorized by two kinds by the payment methodology of the issuers. The first category is defined as the funding source of principle and interest amount of construction funds on the non self-paying part shall be budgeted and paid by the Financial Ministry; the second category is defined as that the funding source of the construction fund on the self-paying part shall be budgeted and paid by the special fund established by affiliated unit of all in-charge institutes. The government bonds should be listed by the number based on its Fiscal Year, category and order.

For example: A 86 1 01 - A represents " Central Bond", 86 represents Fiscal Year; 1 represents " Category" (1: First Category of non self-paying Government Bond, 2: Second Category of self-paying Government Bond, 3: First Category of non self-paying important transportation construction, 4: Second Category of self-paying important transportation construction) 01 represents "order."

Advantages of Investing in Government Bond:

secured by government credit, number of default risk concern, free to trade, high liquidity, and most likely being the mortgage and guarantee on business. Investors may delegate the bond dealers approved by central bank to bid and ask for those bonds with over NT$10 million; as for those small amount bonds, investors may directly subscribe the amount from NT$100,000 to NT$1 million at the assigned post offices.

Tax Expense of Government Bond:

Security trading tax, tax incurred income from securities trading, sales tax: tax-free.

Tax of Interest Income: The delegated institutes will deduct 10% of interest income while paying the bond interest and will send the tax-return form to investing individual or business entities. Each individual enjoy tax exemption for an amount of NT$270,000 and for the amount over the aforesaid amount shall be reported along with income tax and vice versa. If the bond subscriber is a business entity, the tax exempted amount shall be based on its actual holding period and the formula is as follows:
Accrued Interest = Face value * Coupon Rate * Days of Holding / Interest Paid Period.

Issuance Types:

The physical bond: defined as that the bond is issued by certificate and categorized into kinds: nominal and non-nominal. This type of bond offers the interest certificate and the assigned bond institutes will cut down the interest certificate and pay the interest.

Registered Bond: defined as that the bond is issued by register and the clearing banks will enter related information and issue the account book for government bond. ( The clearing banks are referred to those financial institutes delegated and approved by Central Banks on the business of bonds registered, payment settlement and transferring and interest-paying at expiration, among them, there are Postal Giro Bureau, Taiwan Bank, Chiao-Tung Industrial Bank, and United World Bank) Because no physical certificate of bond, it is called non-physical bond as well. The Financial Ministry has started to issue the registered Bond since September 23, 1997. Because no physical certificate for such kind of bond, investors do not have their concerns on loss, robbed, ruined or even the risks on certificate fabrication and duplication.