Arrangements for Adjustment of Cathay Pacific Futures and Options

Market Operations

10 Oct 2006

Hong Kong Exchanges and Clearing Limited (HKEx) has announced the arrangements for the adjustment to the contract terms of all open Cathay Pacific Airways (CPA) Futures and Options contracts in existence after the market close on 18 October 2006, the business day immediately before the ex-dividend day of 19 October 2006, to account for CPA’s proposed special dividend of $0.32 per share.

Highlights of the adjustment arrangements to CPA Futures and Options contracts are attached below. Investors should consult their brokers for further details, or if they have any questions regarding the adjustment.

CPA Futures Contracts

After the market close on 18 October 2006:

1)	The adjusted contracted prices (ACP) will be obtained by the following formula and rounded to nearest two decimal places: Contracted prices of outstanding CPA Futures contracts x [(S- 0.32)/(S)] where S is the closing price of CPA shares on the business day prior to the ex-dividend date and $0.32 is the special dividend announced on 25 September 2006.
2)	An adjusted contract multiplier will be obtained by the following formula and rounded to the nearest four decimal places: Contracted prices of outstanding CPA Futures contracts x 1,000 / ACP where the contract multiplier of CPA Futures contract is 1,000 shares.

On the ex-dividend date (19 October 2006):

1)	The adjusted CPA Futures contracts (adjusted contracts) will be traded under the temporary trading symbol CPB and the contract months will be October, November and December 2006, and March and June 2007. On and after 29 June 2007, no new contract month under CPB will be listed and the adjusted contract months under CPB will be available for trading until expiration.
2)	The available contract months for standard CPA Futures contracts with the original contract multiplier of 1,000 shares (standard contracts), under the original trading symbol CPA, will be October, November and December 2006, and March and June 2007. New contract months under CPA will be introduced according to the normal procedures.

The above capital adjustment, once made, will be conclusive and binding on all CPA Futures contracts.

CPA Options Contracts

After the market close on 18 October 2006:

1)	The adjusted exercise prices (AEP) will be obtained by the following formula and rounded to nearest two decimal places: Exercise prices of outstanding CPA Option series x [(S - 0.32) / (S)] where S is the closing price of CPA shares on the business day prior to the ex-dividend date and $0.32 is the special dividend announced on 25 September 2006.
2)	An adjusted contract size will be obtained by the following formula and rounded to the nearest four decimal places: Exercise prices of outstanding CPA Option series x 1,000 / AEP where the contract size of CPA Option Series is 1,000 shares.

On the ex-dividend date (19 October 2006):

1)	The adjusted CPA Options contracts (adjusted contracts) will be traded under the temporary trading symbol CPB and the expiry months will be October, November and December 2006, and March and June 2007. On and after 29 June 2007, no new expiry month and series under CPB will be listed and the adjusted expiry months and series under CPB will be available for trading until expiration.
2)	The available expiry months for standard CPA Options Contracts with the original contract size of 1,000 shares (standard contracts), under the original trading symbol CPA, will be October, November and December 2006, and March and June 2007. New expiry month and series under CPA will be introduced according to the normal procedures.

The above capital adjustment, once made, will be conclusive and binding on all CPA Options contracts.

Updated 10 Oct 2006