EFTA01393153

MAY 2007 SUPPLEMENT The February 1994 edition of the booklet entitled Characteristics and Risks of Standardized Options (the "Booklet') is amended as follows to reflect certain changes in OCC's rules as well as the rules of certain options markets. The changes in Part I reflect modifications made to the definition of "ordinary cash dividend or distribution" (i.e., cash dividends and distributions for which no adjustment is made). The changes in Part II reflect changes made to eliminate the need to round adjusted exercise prices in certain circumstances and to provide more precise compensation for fractional shares elimi- nated by rounding. Parts Ill-V of this Supplement supersede and replace the February 2003 Supplement to the Booklet. Part Ill pertains to options on interests in investment com- panies and similar entities. Part IV pertains to special exercise settlement procedures or restrictions that may be imposed upon the occurrence of certain extraordinary events. Part V discloses that a registration statement and prospectus for the options covered by the Booklet are no longer available. Part VI pertains to an expansion of OCC's authority to adjust the multiplier for yield-based Treasury options and to fix the cash settlement amount for such options in certain circumstances. Part VII reflects the adoption of rules by certain options markets that permit, in very lim- ited circumstances, the cancellation or adjustment of a transaction entered into at a premium based on an erro- neously reported value for the underlying interest. Part VIII, which supersedes paragraph 1 of the March 2000 Supplement to the Booklet, pertains to the acceleration of the expiration date of options on equity securities in certain circumstances. Part I. Definition of Ordinary Cash Dividend or Distribution. The fourth paragraph on page 19 is amended to read as follows: As a general rule. no adjustment is made for ordinary cash dividends or cash distributions. A cash dividend or distribution announced prior to February 1, 2009. will gener- ally be considered "ordinary" unless it exceeds 10% of the aggregate market value of the underlying security out- standing as of the close of trading on the declaration date. The same rule will continue to appty on and after that 105 CONFIDENTIAL - PURSUANT TOEFEESERLYA0S6590 P. 6(e) CONFIDENTIAL SDNY_GM_00244774 EFTA01393153