Board of Trade of the City of Chicago Inc – ‘425’ on 8/28/01 re: Board of Trade of the City of Chicago Inc

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Business-Combination Transaction Communication   —   Rule 425
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Document/Exhibit                   Description                      Pages   Size 

 1: 425         Business-Combination Transaction Communication         5     18K 

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Filed by Board of Trade of the City of Chicago, Inc. (CBOT)           
Subject Company -- Board of Trade of the City of Chicago, Inc.        
Pursuant to Rule 425 under the Securities Act of 1933                 
File No. 333-54370                                                    

* * * * 

The following are the prepared remarks of the Chairman of the CBOT given at a   
meeting of the membership on August 28, 2001, which are currently available on  
the CBOT's intranet sites, MemberNet and OnBoard.                               

Nickolas J. Neubauer
CBOT Member Information Meeting 
August 28, 2001 
--------------- 

     Thank you for taking the time to attend today's information meeting, either
in person or via Membernet.                                                     

    I am happy to say that many things occurred in the last month that prepare
the CBOT's future and continue us along our path to becoming a well organized   
and efficiently run enterprise.                                                 

1.   CBOE Resolution                                                            

     The most important commitment I made to you as Chairman was to preserve the
CBOE exercise right.  I told you that the exercise right is an essential source 
of value in our seats and that we must resolve our CBOE issues by negotiation,  
not litigation.                                                                 

After months of negotiation, we reached an agreement with the CBOE    
leadership, Bill Brodsky and Mark Duffy, and this agreement has been approved by
both Boards of Directors.                                                       

 The CBOE members will vote on this September 20.  Mark Duffy is holding
numerous information meetings and my sources tell me that the agreement has been
well received.                                                                  

It is a fair and balanced agreement that allows both exchanges to move
forward.  We discussed the agreement with you in July when it was approved by   
our Board; the agreement was mailed to all our members and copies are available 
again today. Those of you that lease seats to CBOE members or otherwise have    
contact with those members should talk to them about the importance of this     
agreement for both exchanges.                                                   

   When we submit our restructuring document to you, which will have changes
in it to accommodate the CBOT/CBOE Agreement, there will be a separate box to   
allow you to vote on the agreement itself.  We could have made this all in one  
vote but in the interest of being sure that we are doing everything possible to 
consult you, the members, on important issues, we will have this separate vote. 

2.   Future CBOE Cooperation                                                    

Sometimes negotiations end with an agreement reached and both parties 
breathe a sign of relief, happy that they will never see the other side again.  

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  This is not the case here.  Working with Bill Brodsky and Mark Duffy has
brought our exchanges closer together.  Last month I invited Mark Duffy, the    
CBOE's Vice Chairman and senior elected official, to our Board meetings and he  
attended last week.                                                             

A few months ago David Vitale initiated discussions with the CBOE on  
various technology sharing and cost saving proposals.  Such plans could bring   
both exchanges substantial benefits. Our communication channels with the CBOE   
have never been better.                                                         

  I know many of you have long advocated mergers of the Chicago exchanges.
Because of such issues as governance and valuation, formal legal mergers would  
not be easy.  But the steps we are taking - the initiatives I just described,   
the joint venture on single stock futures - can bring us almost all of the      
benefits of merger.  In any event, we must keep close ties with the other       
Chicago exchanges.                                                              

3.   New Products                                                               

  The Chicago Board of Trade is going to be a product-driven organization.
David Vitale and our management team is going to align our infrastructure and   
capabilities so that we can continue to grow our existing diversified product   
base and also develop new products that reflect an economic benefit to the      
customer.                                                                       

  Our goal is to become the premier global marketplace.  We will serve and
empower both our members and our customers through the innovative use of        
technology, demand efficiency, and by providing both choice and value.  We will 
do this by providing the most liquid and transparent liquidity pools in an open 
and fair marketplace.                                                           

  We already have announced a new swaps contract and the AIG/Dow commodity
index.  Our mini sized Dow product will be launched September 30. In addition to
that, our Board approved two new products that I would like to talk about.      

   One was proposed by Pete Steidlmayer.  Pete, as you know, is one of those
members who loves the Board of Trade and whose contributions to it have been    
huge.  Market Profile is one of the CBOT's most important and profitable        
products.  Thank you, Pete.                                                     

   This new contract is essentially an exchange traded managed futures fund.
As you know, exchange traded funds have been very successful at the American    
Stock Exchange. There are certain novel features in this proposal that could be 
entitled to patent protection and so I will not discuss this new contract in    
detail today.                                                                   

    Let me say that I believe that these will be successful contracts.  We may
not have all the best design features incorporated at the start but an exchange 
traded managed futures fund has so many inherent advantages over what is        
available that I believe it will be a very successful product. These contracts  
will be traded in open outcry.                                                  

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    Another new contract is interest rate swaps and I will just talk about one
feature.  It will be traded in both open outcry and on a/c/e. Bernie Dan has    
worked with members and developed a plan that will work to enhance member       
opportunity and promote this contract's success.                                

     The plan is to trade it at a post in either the agency or ten-year pit.  In
the past we have spent considerable amounts of money to construct pits and      
engage in extensive preparatory work to get ready for an open outcry launch.    

    I have always felt that much of this was wasted.  When the CBOE launches a
contract, they essentially have a post, television screens and communications.  
Think about it: isn't this basically what's needed?                             

  You may remember I made a commitment to you not to waste money.  This is
part of it.  We can launch new products like swaps in open outcry and           
electronically and do so in an economically efficient manner.                   

         We have many members that are committed to the success of this product,
and thanks to them and the efforts of Bernie and our business development team, 
we may be able to start replacing some of the member opportunity and volume that
has been lost from our 30-year bond pit. As new products are developed, Bernie  
is committed to working with members to see that they are launched with the best
possible plan for success.                                                      

4.   Our Finances Are Sound                                                     

  Speaking of money, we continue to meet our budget, although August was a
slow volume month. For the first seven months of the year, we did about 1       
million contracts per day, with about 175,000 daily on a/c/e. So far in August  
we are doing about 830,000 per day in total volume, but this average may        
increase with the contract rollover at month's end.                             

 The bottom line is that we are continuing to do better than the 800,000
contracts per day that our budget called for.  As a result we will likely have  
more than the $20 million in cash balances at year end forecast by that budget  
(as of June 30, we had $29 million in unrestricted cash balances).  Our revenues
are up over last year and we are keeping our expenses in line with budget.      

  In most of our meetings this year, I emphasized to you that our finances
are sound. After the release of our 6 month financial results last week, a      
reporter called and expressed surprise that our net income was $6.6 million for 
the first six months of 2001, versus a net loss of $3.0 million for the first   
six months of 2000. I guess my message still has not gotten through, so let me  
go over these results in some detail.                                           

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    First, as I said, our net income for the first six months of 2001 was $6.6
million. Since we own real estate and have substantial depreciation expense,    
this figure does not tell the whole story: our net cash flow generation from    
operations for the period was about $23 million. We paid off about $10 million  
in long-term liabilities.                                                       

 You should also know that our revenues were up about $11.8 million over
those in the first six months of 2000, about $3.8 million coming from dues, but 
with exchange fees and market data showing healthy increases. Our expenses were 
down; salaries and benefits were lower, as were amounts spent on professional   
services. Our rate of spending is lower than in 1998, 1999 or 2000, and our     
revenues are higher than in those previous years.                               

 Thanks go to last year's Finance Committee chaired by Charlie Carey for
developing a sound budget. David Vitale and Glen Johnson are doing a great job  
in continuing this expense review and reduction program.                        

5.   Electrifying Open Outcry                                                   

       The Chicago Board of Trade has responded to customer demand by offering
electronic order routing to our open outcry pits.  It is a top priority of our  
technology strategy. We have made steady progress in this: the percentage of    
orders filled by EC has gone from  32% in January to 42% in July. In Ags, the   
numbers are even higher: 48% of ag orders were filled by EC in July,  up from   
40% in January.  We will continue to develop electronic access to the floor,    
which creates the opportunity for our agricultural sector to further integrate  
technology with open outcry trading while at the same time leveraging our       
liquidity.                                                                      

        Bryan Durkin has been posting a report on EC performance on our bulletin
boards on the trading floor. You will be happy to know that we have had no down 
periods since May 29. We had good volume in ags this summer and it was not      
marred by outages. We are providing you and our customers with an increasingly  
reliable technology platform that in turn brings greater integrity to our       
marketplace.  I feel that with the leadership of Bill Farrow and Bryan we will  
continue to make substantial progress in this area.                             

6.   Restructuring                                                              

Let me finish with a few comments on where we stand in restructuring. 
Assuming a favorable CBOE vote on September 20, we will send a revised S-4      
document to the SEC for their review.  Our vote will come shortly after the SEC 
declares our registration statement effective, with member information meetings 
and a time period to allow proper review of the proposal by you, the members,   
prior to the vote.                                                              

Because this timing would probably fall in the middle of our normal   
election cycle, I will propose to our Board that we now move to the nine-member 
Board set forth                                                                 

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in our restructuring document. This proposal, if approved by the Board, would   
also require member approval. If passed, we would elect a new nine member Board 
by the end of the year.                                                         

     We have come a long way in eight months.  Sound finances, resolution of the
CBOE issues, new products and an excellent management group led by our fine CEO,
David Vitale, with two great additions in Bernie Dan and Bill Farrow, as well as
Carol Burke, our fine general counsel.   So let's hear from David and then      
discuss the CBOT in response to your questions.                                 

While the Board of Trade of the City of Chicago, Inc. (CBOT) has filed a        
Registration Statement on Form S-4, including a preliminary proxy statement and 
prospectus, regarding the restructuring transactions with the SEC, it has not   
yet become effective, which means it is not yet final.  CBOT members are urged  
to read the final Registration Statement on Form S-4, including the final proxy 
statement and prospectus, regarding the restructuring transactions referred to  
above, when it is finalized and distributed to members, as well as the other    
documents which the CBOT has filed or will file with the SEC, because they      
contain or will contain important information for making an informed investment 
decision.  Members may obtain a free copy of the final prospectus, when it      
becomes available, and other documents filed by the CBOT at the SEC's web site  
at www.sec.gov.  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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