Cathay Fin (s) Regulatory News (CFHS)

Company code:2882

No:1

Subject: To announce the priced of the Unsecured

Overseas Convertible Bonds(the "Bonds")

Date of events:2012/08/07

Contents:

1.Date of occurrence of the event:2012/08/07

2. Company name: Cathay Financial Holding Co., Ltd. ("Cathay Financial" or the "Issuer")

3.Relationship to the Company (please enter "head office" or

"affiliate company"):head office

4.Reciprocal shareholding ratios: N.A.

5.Cause of occurrence: None

6.Countermeasures:None

7.Any other matters that need to be specified:

(1) Issue Size: US$ 254.4 million

Issue Price: 100% of par value

Denomination: US$200,000

(2) Coupon Interest: 0% per annum

(3) Redemption on the Maturity Date: Unless previously redeemed,

repurchased and cancelled or converted, the Bonds will be redeemed

in US dollar by the Issuer on the Maturity Date at an amount equal

to the principal amount of the Bonds plus a gross yield

of 0.25% per annum, calculated on a semi-annual basis

(the "Redemption Amount").

Maturity date: 2 years after issuing date

Estimated issuing date: 2012/08/14

(4) Conversion:

A. Conversion Securities: Each Bondholder will have the right to

convert the Bonds into the issued Common Shares during

the Conversion Period (as defined below) at the then prevailing Conversion Price.

B. Conversion Procedure: The converting Bondholders shall,

in accordance with the Indenture, deposit with Conversion

Agent outside the ROC a notice of conversion pursuant

to the provisions of Indenture together with the relevant

documents or certificates as may be required by the law

of the ROC and request the Issuer to convert the Bonds

through Conversion Agent.

In accordance with current laws and regulations of the ROC,

the Issuer shall deliver the Common Shares to the Bondholders

who exercise their conversion rights through the book-entry

system of Taiwan Depository & Clearing Corporation ("TDCC")

within five business days after receipt of the conversion notice.

If the converting Bondholder does not open a qualified account

with TDCC, the Issuer will deliver the Common Shares to such

converting Bondholder through book-entry system of TDCC

after such account is opened. In case any amendments are

made to the aforesaid ROC laws and regulations, the conversion

shall be made in accordance with the then prevailing laws and regulations.

The business day referred in the preceding paragraph shall

mean the trading day of TWSE.

C. Conversion Period:

Unless previously redeemed, converted, repurchased or

cancelled and except during the Closed Period (as

defined below), the Bonds may be converted at any time

starting from 41st day after the Issue Date to 10 days prior

to the Maturity Date into issued Common Shares (the

"Conversion Period"). Under current ROC laws and

regulations, the Closed Period is defined as below:

(a) The period during which under the laws of the ROC

the Issuer has to close its shareholders' register, which

period currently includes 60 days prior to the date of the

annual general shareholders' meeting, 30 days prior to a

special shareholders' meeting, or any other period prescribed by law.

(b) In the event of free distribution of shares, distribution of

cash dividend or rights issues, the period from 15 trading

days prior to the record date for determination of

shareholders entitled to receive dividends, subscription of

new shares or other benefits to the record date for the

distribution or allocation of the relevant dividends, rights and benefits.

(c) In the event of capital decrease of the Issuer, the period starts

 from the record date for capital decrease to one (1) day prior to

 the trading day of the shares reissued after the capital decrease.

(d) Other period in which the shareholder roster of the Issuer is

closed pursuant to the ROC laws and TWSE regulations.

If there is any change in the future respect to the relevant laws and

regulations on closed period, the then current laws and regulations shall apply.

D. Conversion Price: Initial conversion price is set at NT$38.10 based

on the reference share price of NT$30.00, the issuer's share price at

the pricing date.

E. Number of Common Shares to Be Delivered upon Conversion:

The number of Common Shares to be delivered upon conversion

of any Bond will be determined by dividing the principal amount

of the Bonds (Exchange rate: USD/NTD=29.938) by the applicable

Conversion Price per Common Share (in NT dollars) in effect on

the date of conversion. The Issuer will compensate in cash for the

amount of less than one Common Share. The calculation of the cash

amount shall be rounded up to the nearest US dollar.

Subject to applicable ROC laws and FSC approval, does not have

sufficient issued Common Shares to satisfy the conversion of any

Bond, the Issuer will be required to repurchase or obtain additional

issued Common Shares for satisfying the conversion of Bonds.

If the Issuer does not have sufficient issued Common Shares to

satisfy the conversion of any Bond due to application of the

adjustment of the Conversion Price under Section F of this

announcement, the Issuer may pay to the converting Bondholder an

amount in cash equal to the prevailing market price of the Common

Shares (as defined in the Indenture).

F. Adjustment of the Conversion Price:

After the issuance of the Bonds, the Conversion Price shall be

adjusted in accordance with the following anti-dilution formula:

(a) After the issuance of the Bonds, upon the occurrence of

any event which will cause the outstanding Common Shares

 (including the Common Shares issued by way of private placement)

of the Issuer to increase (including but not limited to: rights issue,

recapitalization of retained earnings or capital surplus, issuing employee

bonus shares, stock splits, issuing shares in exchange for shares

of other company, issuing shares as consideration for a merger,

and rights issue for sponsoring issue of overseas depositary receipts),

and the subscription or the issue price of new shares is lower than

the market price per Common Share (as defined in the Indenture),

the Conversion Price shall be adjusted downward, not upward,

in accordance with following formula. The calculation of the Conversion

Price shall be made to the nearest cent of a dollar.

In the event of the rights issue, if the original offering price is

changed after the record date for determining the shareholders who

are entitle to subscribe for the new shares, the Adjusted Conversion

Price shall be recalculated based on the new offering price. If the

 recalculated Adjusted Conversion Price is lower then the Adjusted

Conversion Price calculated based on the original offering price, the

Issuer shall make public announcement with respect to the change

of the Adjusted Conversion Price.

Adjusted Conversion Price＝Then Conversion Price ×

[ENS＋(NNS×PNI)/P]/[ENS＋NNS]

ENS＝ Number of outstanding Common Shares before issue

(the number of total issued and outstanding Common Shares

(including the Common Shares issued by way of private

placement), minus the number of treasury shares which have

been repurchased by the Issuer but have not been cancelled

or transferred)

NNS＝ Number of new Common Shares

PNI＝ Offering price of new Common Shares (In the event of

free distribution of Common Shares or stock splits, PNI shall

be zero. In the event of employee bonus shares, PNI shall be

the closing price of the common shares of the Issuer on the

TSE on the date immediately prior to the date of the

shareholders' meeting approving such employee bonus

shares, taking into account the impact of ex-dividend. In the

event of issue of new shares pursuant to a merger or share

exchange, PNI shall be net value per share calculated based

on the latest audited or reviewed financial statements prior to

the record date of merger or share exchange, as the case

may be, times share exchange ratio.)

P ＝ Market price per share on relevant record date

(as defined in the Indenture)

Note 1: in the event of merger,the adjustment shall become effective

on the record date of the merger; in the event of share exchange,

the adjustment shall become effective on the record date of the

share exchange; in the event of private placement of new common

shares, the adjustment will become effective on the delivery date of

the new shares; in the event of the rights issue or rights issue for

sponsoring issue of overseas depositary receipts by way of

book-building, because there will be no record date for determining

the shareholders who are entitle to subscribe for the new shares, the

adjustment will become effective on the issue date of the new shares

or overseas depositary receipts, as the case may be.

(b) After the issuance of the bonds, if the Issuer shall issue

or privately placed securities convertible into Common Shares or

granting the holders of such securities warrants to subscribe or

purchase Common Shares and where the conversion or subscription

price is less than the Market Value per Common Share (as defined

in the Indenture), the Conversion Price shall be adjusted downward,

not upward, in accordance with following formula. The calculation

of the Conversion Price shall be made to the nearest cent of a dollar

and the adjustment shall become effective on the record date for

 issuance of securities or warrants or the delivery of the privately

 placed securities

Adjusted Conversion Price =

Then Conversion Price × [ENS+(NNSC ×CPNI)/

Then Conversion Price]/[ENS+NNSC]

ENS=Number of outstanding shares before issuance (Note 1)

NNSC=Number of new shares to be converted, subscribed or

purchased from the convertible securities or warrants mentioned

above

CPNI= Conversion price or subscription price of the

convertible securities or warrants mentioned above

Note 1: ENS means the number of total issued and

outstanding common shares (including the common shares

 issued by way of private placement), minus the number of

treasury shares which have been repurchased by the Issuer

but have not been cancelled or transferred.

Note 2: In the event that treasury shares are served as the

underlying shares for the publicly issued or privately placed

convertible securities or warrants mentioned above, number

of new shares to be converted or subscribed from such

securities or warrants should be deducted from the ENS.

(c) The Conversion Price shall not be adjusted in the event

of capital reduction for cancellation of treasury shares of the

Issuer.

After the issuance of the Bonds, upon the occurrence of

capital reduction (except for capital reduction for cancellation

of treasury shares) which will cause the outstanding shares

of the Issuer to decrease, the Conversion Price shall be

adjusted in accordance with following formula, and such

adjustment shall become effective on the record date of capital reduction:

Adjusted Conversion Price=Then Conversion Price x

Number of outstanding shares before capital reduction/

Number of outstanding shares after capital reduction

(d) After the issuance of the Bonds, if the Issuer shall

distribute any cash dividends or other form of cash to its

shareholders, subject to the criteria in the Indenture, the

Conversion Price shall be adjusted in accordance with the

following formula (adjustment manner should be subject to

detailed terms in the Indenture). The calculation of the

Conversion Price shall be adjusted downward, not upward,

and made to the nearest cent of a dollar.

Adjusted Conversion Price ＝

Then Conversion Price× [1 － (C/P)]

C ＝ Amount of cash dividend per share

P ＝ Market price per share (as defined in the Indenture)

(e)After the issuance of the Bonds, upon the occurrence of

certain dilutive or other analogous events as specified in the

Indenture, the Conversion Price shall also be adjusted in the

manner as prescribed in the Indenture.

G. Dividends:

Bondholders do not have the right to receive stock or cash

dividends prior to conversion. After exercising the conversion

 right, the converting Bondholders who hold Common Shares

after the conversion may enjoy the same rights to receive

dividend distribution as those available to the holders of

Common Shares.

(a) Cash dividends

1. In each year, during the period from January 1 to the

fifteenth trading day prior to the record date for determination

of shareholders entitled to receive dividends (exclusive),

if a Bondholder applies to convert the Bonds into Common

Shares, the converting Bondholder shall be entitled to any

annual cash dividend distributions for the previous year.

2. In each year, the Bonds may not be converted during the

period from the fifteenth trading day prior to the record date

for determination of shareholders entitled to receive dividends

(inclusive) to the ex-dividend day (inclusive).

3. In each year, during the period from the day after the

ex-dividend day to December 31, if a Bondholder applies to

convert the Bonds into Common Shares, the converting

Bondholder shall only be entitled to any annual cash

dividend distributions for the next year.

(B) Stock dividends

1. In each year, during the period from January 1 to the

fifteenth trading day prior to the record date for determination

of shareholders entitled to receive dividends (exclusive),

if a Bondholder applies to convert the Bonds into Common

Shares, the converting Bondholder shall be entitled to any

annual stock dividend distributions for the previous year.

2. In each year, the Bonds may not be converted during the

period from the fifteenth trading day prior to the record date

for determination of shareholders entitled to receive dividends

(inclusive) to the ex-dividend day (inclusive).

3. In each year, during the period from the day after the

ex-dividend day to December 31, if a Bondholder applies to

convert the Bonds into Common Shares, the converting

Bondholder shall only be entitled to any annual stock

dividend distributions for the next year.

H. Redemption at the Option of the Bondholders

(a) In the event that the common shares of Cathay Financial

("Common Shares") cease to be listed, or suspended from

trading for a period greater than 30 consecutive trading days,

on the Taiwan Stock Exchange ("TWSE"), each Bondholder

shall have the right to require the Issuer to redeem the Bonds,

in whole or in part, at an amount equal to the principal amount

of the Bonds plus a gross yield of 0.25% per annum, calculated

on a semi-annual basis (the "Early Redemption Amount").

(b) In the event that a Change of Control as defined in the

Indenture of the Bonds occurs to the Issuer, the Bondholders

shall have the right to require the Issuer to redeem the Bonds,

in whole or in part, at the applicable Early Redemption Amount.

(c) The Bondholder shall exercise the redemption right and

the Issuer shall handle such redemption in accordance with

the procedure provided in the Indenture. The payment of the

Early Redemption Amount will be made by the Issuer in cash

on the payment date designated by the Issuer pursuant to the Indenture.

I. Redemption at the Option of the Issuer

(a) The Issuer has the option to call (in whole but not in part)

at the Early Redemption Amount anytime after 1 years from

the Issue Date and prior to the Maturity Date, if the closing price

of the Common Shares on the TWSE, translated into US dollars at the

then prevailing exchange rate, for a period of 20 consecutive trading

days is at least 120% of the Early Redemption Amount divided by

the Conversion Ratio, defined to be the principal amount of Bonds divided

by the Conversion Price at that time (translated into US dollars at the

Fixed Exchange Rate as determined on the pricing date).

(b) The Issuer may redeem the outstanding Bonds, in whole

but not in part, at the Early Redemption Amount in the event

that more than 90% in principal amount of the Bonds have

been redeemed, repurchased and cancelled, or converted.

(c) The Issuer may redeem the outstanding Bonds, in whole

but not in part, at the Early Redemption Amount in the event

of changes in the ROC taxation, which results in increase of

tax obligation or the necessity to pay additional interest

expense or increase of additional costs to the Issuer.

Bondholders may elect not to have their bonds redeemed

but with no entitlement to any additional amounts or reimbursement of additional tax.

(5) Trading Market: SGX-ST

(6) Capital Usage Plan and Benefits:

The proceeds will be used for repayment of indebtedness

and injection of operating capital. Thus, the company will

save interest expense.

(7) Impact to Shareholders: The proceeds will be used for

repayment of indebtedness and injection of operating

capital. Thus, the company will save interest expense

and should have positive impact for shareholder in the long run.