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Filed by Board of Trade of the City of Chicago (CBOT)
Subject Company - Board of Trade of the City of Chicago
Pursuant to Rule 425 under the Securities Act of 1933
File No. 132-01854
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The following presentation was delivered to CBOT members and membership interest
holders on August 16, 2000.
2000 Finances
Brief description of the actions of the Finance Committee since I took over as
chairman this January.
The Finance Committee started this year focused on cost-cutting and cost-
containment. To accomplish this, we conducted meetings with department heads. We
discussed their respective budgets and requested them to identify any areas
within those departments where costs could be cut or deferred. There was a hold
put on projects that were deemed non-essential, and budgeted positions were left
open.
To that end our head count has been reduced to 750 from 834 last year and 932
budgeted at the beginning of 1999. We are still working closely with Glen
Johnson and CBOT staff to re-examine all departments and all projects to make
sure we get our operating costs down.
There was a question posted on Membernet regarding the marketing department.
That budget was reduced from $20 million in 1998 to $9.5 million in 2000. And
they were given the responsibility of member readiness for Eurex.
This years Finance Committee has also further revised down our volume
projections from 260 million, which last years Finance Committee, approved to
230. We will be monitoring that closely. I believe most of that decline can be
attributed to the decline in 30 year T-Bond trading.
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We are also directing Glen Johnson to prepare next year's budget and cash flow
requirements as though annualized volume will be 200 million contracts. That
would be a decline. This type of conservative approach is necessary to insure
for adequate cash reserves.
The drop in this years volume produced a corresponding drop in this years volume
produced a corresponding drop in revenue of $13 million dollars.
In response to this decline the committee determined to recommend a revenue
enhancement package that includes:
1. Imposition of dues
2. An increase in member exchange fees
3. An increase in delegate fees
4. Surcharges for licensed products and block trading fee for any new agencies
products.
We have a well publicized payment of 20.7 million dollars due on our business/
building. This payment will reduce debt to approximately 64 million dollars.
We have to insure adequate cash reserves to provide for strategic initiatives
such as order routing, ACE Alliance debt repayment.
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We need to reconcile all of the costs of the Alliance platform to our budget. I
know there are concerns regarding the DBS operating agreement and the decision
to outsource market supervision. In particular the costs of operating project A
versus the cost of the outsourcing arrangements. Jim Amaral will address these
differences, explaining the net effect on operating expenses going forward.
We have scheduled meetings on September 11 and 18. We will continue to work
with Dennis Dutterer, Glen Johnson and Jim Amaral to monitor these costs and
continue to look for areas of cost reduction within the Exchange.
The Finance Committee will be busy. We will close the gaps and we will put
this exchange on sound financial footing through 2000 and beyond. Thank you
The CBOT urges its members and membership interest holders to read the
Registration Statement(s) on Form S-4, including the proxy statement/prospectus
contained within the Registration Statement(s), regarding the CBOT restructuring
referred to herein or in connection herewith, when it becomes available, as well
as the other documents that the CBOT has filed or will file with the Securities
and Exchange Commission, because they contain or will contain important
information. CBOT members and membership interest holders may obtain a free
copy of the proxy statement/prospectus, when it becomes available, and other
documents filed by the CBOT at the Commission's web site at www.sec.gov, or from
the CBOT by directing such request in writing or by telephone to: Board of Trade
of the City of Chicago, 141 W. Jackson Blvd., Chicago, Illinois 60604-2994,
Attention: Office of the Secretary, Telephone: (312) 435-3605, Facsimile: (312)
347-3827. This communication shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of securities in
any state in which offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state. No
offering of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.
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