Cboe Global Markets
Annual Report 2001

Plain-text annual report

01 Chicago Board Options Exchange Annual Report 2001 cv2 CBOE ‘01 CBOE is the largest and most successful options 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 01010101010101010 marketplace in the world. ifc1 CBOE ‘01 ONE HAS OPPORTUNITIES The NUMBER ONE Options Exchange provides customers with a wide selection of products to achieve their unique investment goals. ONE HAS RESPONSIBILITIES The NUMBER ONE Options Exchange is responsible for representing the interests of its members and customers. Whether testifying before Congress, commenting on proposed legislation or working with the Securities and Exchange Commission on finalizing regulations, the CBOE weighs in on behalf of options users everywhere. As an advocate for informed investing, CBOE offers a wide array of educational vehicles, all targeted at educating investors about the use of options as an effective risk management tool. ONE HAS RESOURCES The NUMBER ONE Options Exchange offers a wide variety of resources beginning with a large community of traders who are the most experienced, highly-skilled, well-capitalized liquidity providers in the options arena. In addition, CBOE has a unique, sophisticated hybrid trading floor that facilitates efficient trading. 01 CBOE ‘01 2 CBOE ‘01 “ TO BE THE LEADING MARKETPLACE FOR FINANCIAL DERIVATIVE PRODUCTS, WITH FAIR AND EFFICIENT MARKETS CHARACTERIZED BY DEPTH, LIQUIDITY AND BEST EXECUTION OF PARTICIPANT ORDERS.” CBOE MISSION LETTER FROM THE OFFICE OF THE CHAIRMAN SINGLE-DAY RECORD VOLUME: 2,726,267 CBOE HAS 40.5% OF TOTAL OPTIONS MARKET SHARE CONSOLIDATION Unprecedented challenges and a need for strategic agility characterized a positive but demanding year in the overall options marketplace. The Chicago Board Options Exchange® (CBOE®) enjoyed a record-breaking fiscal year, with a 2.2% growth in contracts traded when compared to Fiscal Year 2000, also a record-breaker. In addition, a record for fiscal year average daily volume was set in 2001 with an average of 1,271,240 contracts traded daily, an increase of 3.4% over FY 2000. During the week of April 16, 2001, CBOE experienced three of the four busiest trading days in our history. The single-day record for trading volume was set on Wednesday, April 18, 2001 when 2,726,267 contracts traded. April 18 marked only the second time in the history of the Exchange that total volume surpassed two and one-half million contracts. Due to the commitment of CBOE’s membership, the listing of new and attractive products, and exemplary customer service, CBOE retained its leadership position within the options industry in Fiscal Year 2001, capturing a healthy 40.5% of total options market share, 38.5% of equity options market share and 53.7% of index options market share. It is a market position that founders of many other industries would be thrilled to occupy 28 years after their first days in business, but it is not an acceptable position to us. Despite volume gains, unrelenting competitive forces eroded overall market share in FY 2001—a situation that CBOE is taking aggressive steps to remedy. As the number one options exchange in the world for almost three decades, CBOE is positioned as both the emulated leader and the primary target for all competitors. As competitive pressures mounted, market makers and member firms devised strategies to combat them. Many of CBOE’s smaller, independent market-making firms were either acquired or became affiliated with larger firms in order to best service customers as consolidation swept the options industry. Consolidation allowed for the economies of scale so essential to success in today’s global economy. 03 CBOE ‘01 EFFORTS TO ATTRACT CUSTOMERS SINGLE-STOCK FUTURES JOINT VENTURE In support, CBOE redoubled its efforts to attract customers and provide members with additional tools to service customer needs. Significant, attractive products were listed, a milestone joint venture was created and sophisticated technological advancements were introduced to facilitate trading. Marketing strategies were devised to provide traders and investors with a broader menu of products and services to suit varying portfolio goals. A Strategic Planning Task Force was formed to examine the com- petitive landscape, which had already shifted dramatically since the recommendations of CBOE’s last strategic review in 1999 were implemented. As we move forward, it is important to recognize that we have remained the number one options exchange because we have adhered to principles of unwavering commitment to excellence and service, and refused to rest complacently on past achievements. As the premier options exchange in the world, we have unparalleled opportunities, responsibilities and resources. We will continue to stay number one by living up to them all. OPPORTUNITIES In FY 2001, CBOE placed special emphasis on creating opportunities and expanding markets, both for investors and market makers. History was made when Congress, late in 2000, passed legislation allowing for the trading of futures on single stocks. Key issues for which we lobbied were included in the legislation, such as the ability to trade the products either as a security or a future. CBOE, Chicago Mercantile Exchange Inc. and Chicago Board of Trade formed a joint venture to trade single-stock futures contracts. The joint venture will be a for-profit company with its own management and board and will be separately organized as a regulated exchange. On August 29, 2001, the joint venture announced the appointment of William J. Rainer to serve as chairman and chief executive officer. Rainer, former chairman of the Commodity Futures Trading Com- mission, is a co-founder and former managing director of Greenwich Capital Markets, Inc., a primary dealer of government securities. Single-stock futures provide another opportunity for both our members and customers. We anticipate that members will be able to begin trading single-stock futures contracts through the joint venture early in 2002. 04 CBOE ‘01 Total Volume and Open Interest Fiscal Years 79,769,523 44,947,915 23,668,551 18,368,242 14,135,316 221,256,576 196,304,017 172,275,136 319,081,344 312,182,108 0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 Volume Open Interest Average Daily Volume Fiscal Years 1,271,240 1,229,063 878,002 778,984 680,929 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 2001 2000 1999 1998 1997 2001 2000 1999 1998 1997 Total Options Market Share Fiscal Year 2001 Equity Options Market Share Fiscal Year 2001 Index Options Market Share Fiscal Year 2001 ISE 3.9% PHLX 13.1% PCX 14.0% ISE 4.1% PHLX 14.3% PCX 15.8% CBOE 40.5% ISE 2.2% PCX 2.9% PHLX 5.3% CBOE 38.5% CBOE 53.7% AMEX 28.5% AMEX 27.3% AMEX 35.9% 6 CBOE ‘01 Several significant new products were listed in FY 2001 to help investors further diversify their portfolios. These include: CBOE Mini-NDX (MNX SM), launched on August 14, 2000. This index option is based on one-tenth of the value of the Nasdaq-100 Index®. iSharesSM S&P 100® Index Fund (OEF) began trading exclusively at CBOE on October 27, 2000. iShares are exchange-traded securities that trade like stocks, but with the advantages of index trading. They are designed to generally correspond to the performance of the S&P 100 Index. Options on iSharesSM S&P 100 Index Fund (OEF) began trading on February 7, 2001. Options on Nasdaq-100 Index Tracking StockSM (QQQ) began trading on February 27, 2001. The Nasdaq-100 Index Tracking Stock represents ownership in the Nasdaq-100 Trust,SM a long-term unit investment trust established to accumulate and hold a portfolio of the equity securities that comprise the Nasdaq-100 Index ®. Nasdaq-100 Index Tracking Stock (QQQ) began trading at CBOE on August 1, 2001. The QQQ shares are one of the most actively traded Exchange Traded Funds (ETF) in the world. CBOEdirect, CBOE’s new screen-based trading system, is scheduled to be launched on October 26, 2001. Not just an order matching system, CBOEdirect actually replicates CBOE’s trading floor on a screen, with liquidity providers making two-sided, continuous markets. An unprecedented technological achievement, CBOEdirect provides access to an entire options universe on a screen-based system. NEW PRODUCTS LISTED MNX SM iSHARES SM QQQ CBOEdirect™ MNX Volume by Month Fiscal Year 2001 06.01 05.01 04.01 03.01 02.01 01.01 12.00 11.00 10.00 09.00 08.00 639,202 683,177 641,548 505,667 551,140 554,804 347,914 358,399 342,940 258,126 160,497 0 .05 .10 .15 .20 .25 .30 .35 .40 .45 .50 .55 .60 .65 .70 07 CBOE ‘01 Volume Records Fiscal Year 2001 01.19.01 2,196,769 Single-Day Equity Volume 02.07.01 234,222 Individual Equity Single-Day Volume: Cisco 03.01 2,211,781 QQQ Monthly Volume 03.08.01 328,796 QQQ Single-Day Volume (options) 04.01 1,177,763 DJX Monthly Volume 04.18.01 2,726,267 Single-Day Trading Volume 6 of the 10 busiest single trading days in the history of the Exchange were set in FY 2001—including the top 4: 2,726,267 on 04.18.01, 2,640,244 on 04.20.01, 2,415,824 on 04.19.01, and 2,391,788 on 01.19.01. 05.01 06.07.01 683,177 827,500 MNX Monthly Volume iShares Single-Day Volume (shares) The system will run from 7:00 a.m.– 8:15 a.m. Screen-based trading will be conducted initially in the Dow Jones Industrial AverageSM Index options (DJX), followed by the Russell 2000® Index options (RUT) and the S&P 100® Index options (OEX®). The new system provides the opportunity to trade these popular products electronically outside of normal trading hours. RESPONSIBILITIES As an advocate for investor rights and for fair regulation, CBOE takes an active role in ensuring that competition in the derivatives marketplace flourishes on a level playing field. As a business and training model for exchanges around the world, CBOE’s efforts are unparalleled. CBOE has invested considerable resources in developing extensive educational tools that help investors and options profes- sionals hone their investing skills. CBOE was at the vanguard in ensuring that any legislation proposed that would permit trading of single-stock futures contracts would be enacted only after the concerns of the options industry and options customers were satisfactorily addressed. Due in great part to CBOE’s efforts, key issues were resolved in the Commodity Futures Modernization Act prior to passage of the final legislation. Most significantly, stock futures can be traded either as a security or a future. Other issues resolved before the bill’s passage included comparable margins between stock futures and stock options, transaction fees that apply to stock futures trading on a securities 08 CBOE ‘01 ADVOCACY RECENT LEGISLATION SECTION 31 FEES DECIMALS INTERMARKET LINKAGE exchange or a futures exchange, choice of physical or cash settle- ment, and comparable federal tax treatment for options and single-stock futures. As a vocal advocate for fairness in the marketplace, CBOE campaigned for legislation that would eliminate Section 31 fees applicable to options on broad-based stock indices. These fees were intended to fund the SEC; yet, the government currently collects several times over the SEC’s budget. In addition, these fees are not imposed on futures and futures options based on stock indices, although these products compete directly with options on broad-based stock indices. The U.S. House of Representatives has passed a bill (H.R. 1088) on Section 31 fees, and at the time this report was published, the bill was being considered in the U.S. Senate. On April 9, 2001, CBOE completed an extensive conversion process that enabled trading of all options classes in decimals. Conversion to decimals was mandated by the Securities and Exchange Commission, and all U.S. stocks and exchange-traded options now trade in decimals. Additionally, as a step toward establishing permanent intermarket linkage between the options exchanges, the Securities and Exchange Commission approved an interim intermarket linkage program to facilitate members’ electronic access between the options exchanges. The first interim linkage in the industry began at CBOE on April 25, 2001. 09 CBOE ‘01 CBOE.COM 152 MILLION PAGE VIEWS THE OPTIONS INSTITUTE ACCOUNTABILITY DPM ASSOCIATION EXPANDED TECHNOLOGIES One of the most comprehensive and widely-accessed resources provided by CBOE is a completely redesigned website, www.cboe.com, which debuted in June, 2001. At the heart of the new cboe.com is a unique personalized engine called MyCBOE. Investors can use this customization tool to ensure that only relevant options and market information are delivered to them—all on one convenient page. CBOE’s website was named “Best of the Web” in the options field by Forbes.com, and was cited for its excellent educational features by TheStreet.com. CBOE’s website logged 152 million page views in FY 2001, a 17% increase over the previous fiscal year. Functioning as the educational arm of CBOE, The Options Institute is an invaluable resource industry-wide for training a broad range of investors and professionals associated with the investing field. In FY 2001, the Options Institute held 364 classes, educating 18,754 individuals including individual investors, institutional investors, brokers, trading floor and firm employees, financial advisors and regulatory personnel. RESOURCES As the first, oldest and largest options exchange in the world, CBOE drew on its extensive experience to develop sophisticated resources that facilitate speed, deep liquidity and efficiency in the trading process. To offer immediate access to a floor contact and to provide a single point of accountability for customers, CBOE members voted in 1999 to expand the “DPM system” to all equity options. CBOE first introduced the DPM (Designated Primary Market Maker) program in 1987. Since then, CBOE market makers and DPMs have enabled the Exchange to grow amidst heightened competition. The DPM Association of Chicago was formed in April of 2000. It is an inde- pendent association composed of many of CBOE’s DPMs. The DPM Association streamlines communication by providing a single point of contact for the investing community with the majority of Chicago’s DPMs. Offering a vast depth of options trading expertise, the DPM Association is committed to market liquidity, best execution and market quality. CBOE has one of the most technologically-advanced trading floors in the world. During FY 2001, CBOE increased flexibility and further expanded access to many of the existing automated systems. CBOE continued its technology leadership with a number of innovations. Advances like automated book priority, options quotes with size and 10 CBOE ‘01 11 CBOE ‘01 HYBRID TRADING FLOOR BEST EXECUTION VXN SM improvements to RAES (Retail Automatic Execution System) provided CBOE’s customers with the full service they expect from a trading floor combined with the speed and efficiency of an electronic marketplace. CBOE provides efficient mechanisms to facilitate seamless trading. Eighty-eight percent of all executions are routed and conducted electronically. CBOE combines the advantages of cutting-edge technology with the benefits of open outcry to produce an efficient, reliable and rapid trading process resulting in maximized customer service. As part of its ongoing commitment to enhancing execution quality, on August 1, 2000, CBOE introduced the Best Execution Assurance Program.SM The program utilizes technological applications to provide member firms and other customers with best execution documen- tation. By providing direct price protection and the means with which to evaluate the quality of order executions at CBOE, the program provides member firms with the tools necessary to satisfy their best execution obligations when deciding to route order flow to CBOE. CBOE developed the first Nasdaq Volatility Index, VXN,SM as it became apparent that there was a dramatic divergence between volatility in the Nasdaq market and the broader market early in 1999. This significant resource, introduced on January 23, 2001, was constructed in response to customer demand for a quantified CBOE Nasdaq Volatility Index (VXN) and CBOE Volatility IndexSM (VIXSM) January 1995 to January 2001 100 80 60 40 20 0 01.03.95 01.03.96 01.02.97 01.02.98 01.05.99 01.05.00 01.05.01 VXN VIX VXN is based on the implied volatilities of Nasdaq-100 Index® options (NDX), while VIX is based on the implied volatilities of S&P 100® Index options (OEX®). 12 CBOE ‘01 A COMMITMENT TO STAYING NUMBER ONE measure of volatility in today’s tech-heavy marketplace. VXN tracks the volatility of Nasdaq-100 Index® options (NDX), which trade exclusively at CBOE. In the years ahead, CBOE will continue to face many challenges, many anticipated and some surprises. At CBOE we view being the industry leader as a business decision. As the marketplace evolves, we remain committed to preserving our position as the number one options exchange in the world through our ongoing dedication to service a rapidly-changing marketplace. We pledge to continue to develop the resources and products to help both our members and their customers prosper. From the number one options marketplace in existence, you can expect no less. William J. Brodsky Chairman and CEO Mark F. Duffy Vice Chairman Edward J. Joyce President and COO 13 CBOE ‘01 THE 2001 CBOE ANNUAL REPORT IS DEDICATED TO THE VICTIMS OF THE SEPTEMBER 11, 2001 TRAGEDY “ Today we honor the victims of last week's tragic terrorist events, including former CBOE Vice Chairman Robert Cruikshank, with two minutes of silence prior to the ringing of the opening bell. The whole world is watching to see how the exchanges and financial industry respond to the events of last week. CBOE stands ready to do its part in restoring the U.S. financial market.” Statement from CBOE Chairman and CEO William J. Brodsky 8:28 a.m., September 17, 2001 16 CBOE ‘01 CBOE FY 2001: THE NUMBER ONE OPTIONS EXCHANGE FOR 28 YEARS FINANCIAL SUMMARY For the fiscal year ended June 30, 2001, the Chicago Board Options Exchange earned net income of $7.1 million compared to $10.9 million in fiscal year 2000. A new record was set for the total amount of contract volume during the year. Approximately 1,271,000 contracts per day were traded, a 3.4% increase over the previous record established in fiscal year 2000. However, total Exchange revenues declined by $17.5 million or 9.9% due to the elimination of equity options customer fees. Excluding a $16.0 million consolidated class action settlement expense recorded in fiscal year 2000, operating expenses increased by 3.8% in fiscal year 2001. This increase was attributed to higher data processing expenses mainly related to capacity expansion ($3.1 million), non-cash depreciation and amortization expense related to investments in systems hardware and software ($2.6 million), and royalty fees due to the highly successful launch of options on the Nasdaq-100 Index Trust ($1.0 million). The Exchange invested $37.7 million in capital spending during fiscal year 2001. Most of these expenditures were for systems hardware and software related to capacity increases, new trading technology, website redesign, complex orders on ORS, and a new trading floor printer system. During the year, $10.7 million was paid into an escrow account, representing the first two installment payments of a consolidated class action settlement. The third payment of $5.3 million is due on July 1, 2002. Note 7 to the consolidated financial statements summarizes the status of the settlement. Retained earnings increased to $109.3 million and total members’ equity at June 30, 2001 was $130.2 million. At year’s end, the Exchange was debt-free with working capital of $17.6 million. 17 CBOE ‘01 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Chicago Board Options Exchange, Incorporated and Subsidiary For the Years Ended June 30, 2001 and 2000 2001 2000 Revenues: Transaction fees Other member fees Communications fees Regulatory fees Interest Equity in income of CSE Other Total Revenues Expenses: Employee costs Outside services Facilities costs Communications Data processing Travel and promotional expenses Depreciation and amortization Settlement expense Royalty fees Other Total Expenses Income Before Income Taxes Provision (Benefit) for Income Taxes: Current Deferred Total Provision (Benefit) for Income Taxes Net Income Retained Earnings at Beginning of Year Retained Earnings at End of Year $ 96,091,800 24,612,500 21,538,600 10,835,500 1,347,800 716,700 2,670,800 157,813,700 67,411,600 17,451,300 3,993,000 879,600 15,263,700 6,452,100 24,634,200 0 7,396,600 2,421,000 145,903,100 11,910,600 (2,943,000) 7,717,700 4,774,700 7,135,900 102,154,500 $ 109,290,400 $ 114,460,300 23,263,000 22,580,700 8,095,400 1,890,900 415,900 4,635,100 175,341,300 69,003,700 17,351,600 3,914,300 781,000 12,118,600 6,279,900 21,985,200 16,000,000 6,430,400 2,665,500 156,530,200 18,811,100 8,401,600 (446,900) 7,954,700 10,856,400 91,298,100 $ 102,154,500 CONSOLIDATED BALANCE SHEETS Chicago Board Options Exchange, Incorporated and Subsidiary June 30, 2001 and 2000 2001 2000 Assets Current Assets: Cash and cash equivalents Investments available-for-sale Accounts receivable Income taxes receivable Prepaid medical benefits Other prepaid expenses Other current assets Total Current Assets Investments in Affiliates Land Property and Equipment: Building Furniture and equipment Software development work in progress Less accumulated depreciation and amortization Total Property and Equipment—Net Other Assets: Goodwill (less accumulated amortization— 2001, $3,130,200; 2000, $2,373,000) Data processing software and other assets (less accumulated amortization— 2001, $21,762,600; 2000, $15,881,200) Total Other Assets—Net Total See notes to consolidated financial statements. 18 CBOE ‘01 $ 9,740,200 0 22,212,200 3,313,400 926,700 4,185,500 554,400 40,932,400 10,848,700 4,914,300 57,608,500 159,011,700 26,219,600 (139,434,000) 103,405,800 $ 2,200,800 20,132,800 17,451,200 3,328,600 16,400 4,913,600 515,500 48,558,900 10,165,400 4,914,300 57,608,500 138,297,000 17,447,700 (121,472,500) 91,880,700 2,145,300 2,902,500 14,783,000 16,928,300 12,489,100 15,391,600 $ 177,029,500 $ 170,910,900 CONSOLIDATED BALANCE SHEETS (CONTINUED) June 30, 2001 and 2000 Liabilities and Members’ Equity Current Liabilities: Accounts payable and accrued expenses Settlement payable Marketing fee payable Membership transfer deposits Other deposits Total Current Liabilities Long-term Liabilities: Long-term settlement obligations Deferred income taxes Total Long-term Liabilities Total Liabilities Members’ Equity Memberships Retained earnings Total Members’ Equity Total CONSOLIDATED STATEMENTS OF CASH FLOWS Chicago Board Options Exchange, Incorporated and Subsidiary For the Years Ended June 30, 2001 and 2000 Cash Flows from Operating Activities: Net income Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization Long-term settlement obligations Deferred income taxes Equity in income of CSE Changes in current assets and liabilities: Accounts receivable Income taxes Prepaid medical benefits Other prepaid expenses Other current assets Accounts payable and accrued expenses Settlement payable Marketing fee payable Membership transfer deposits Other deposits Net Cash Flows from Operating Activities Cash Flows from Investing Activities: Capital and other assets expenditures Investments available-for-sale: Proceeds from maturities Purchases Net Cash Flows from Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year 2001 2000 $ 13,746,800 0 9,173,400 0 416,000 23,336,200 5,333,300 18,136,000 23,469,300 46,805,500 20,933,600 109,290,400 130,224,000 $ 19,560,200 5,333,300 0 1,465,500 378,800 26,737,800 10,666,700 10,418,300 21,085,000 47,822,800 20,933,600 102,154,500 123,088,100 $ 177,029,500 $ 170,910,900 2001 2000 $ 7,135,900 $ 10,856,400 24,634,200 (5,333,400) 7,717,700 (716,700) (4,761,000) 15,200 (910,300) 728,100 (38,900) (5,813,400) (5,333,300) 9,173,400 (1,465,500) 37,200 25,069,200 (37,662,600) 115,751,800 (95,619,000) (17,529,800) 7,539,400 2,200,800 21,985,200 10,666,700 (446,900) (415,900) 515,300 (3,468,900) 747,400 (994,900) (88,300) (2,545,500) 5,333,300 0 (1,195,500) (34,900) 40,913,500 (39,803,700) 187,285,300 (196,807,700) (49,326,100) (8,412,600) 10,613,400 $ 9,740,200 $ 2,200,800 Supplemental Disclosure of Cash Flow Information Cash paid for income taxes $ 3,400 $ 11,870,500 See notes to consolidated financial statements. 19 CBOE ‘01 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Chicago Board Options Exchange, Incorporated and Subsidiary For the Years Ended June 30, 2001 and 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business – The Chicago Board Options Exchange, Incorporated (“the Exchange”) is a registered securities exchange, subject to oversight by the Securities and Exchange Commission. The Exchange’s principal business is providing a marketplace for trading equity and index options. Basis of Presentation – The consolidated financial statements include the accounts and results of operations of the Exchange, and its wholly owned subsidiary, Chicago Options Exchange Building Corporation. Inter-company balances and transactions are eliminated. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents – Cash and cash equivalents include highly liquid investments with maturities of three months or less from the date of purchase. Investments – All investments are classified as available-for-sale and are reported at cost which approximates their fair value in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Accounts Receivable – Accounts receivable consist primarily of transaction, marketing and other fees receivable from The Options Clearing Corporation (“OCC”), and the Exchange’s share of distributable revenue receivable from The Options Price Reporting Authority (“OPRA”). Investments in Affiliates – Investments in affiliates represent investments in OCC and The Cincinnati Stock Exchange (“CSE”). The investment in OCC (20% of its outstanding stock) is carried at cost because of the limited percentage owned. The Exchange accounts for the investment in CSE (68% of its total certificates of proprietary membership) under the equity method due to the lack of effec- tive control over the operating and financing activities of CSE. Property and Equipment – Property and equipment are carried at cost. Depreciation on building, furniture and equipment is provided on the straight-line method. Estimated useful lives are 40 years for the building and five to ten years for furniture and equipment. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining term of the applicable leases. Data Processing Software – Data processing software is carried at cost and amortized over five to seven years using the straight-line method commencing with the date the software is put in service. Goodwill – Goodwill is amortized over seven years to 40 years for financial statement presentation and over fifteen years for income tax purposes. Impairment of Long-Lived Assets – Management reviews long-lived assets and the related intangible assets for impairment of value whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. If the Exchange determines it is unable to recover the carrying value of the assets, the assets will be written down using an appropriate method. Management does not believe current events or circumstances provide evidence that suggest asset values have been impaired. Income Taxes – Income taxes are determined using the liability method, under which deferred tax assets and liabilities are recorded based on differences between the financial accounting and tax bases of assets and liabilities. Other Deposits – Other deposits include amounts received from members for telephones in the Exchange facility and amounts for Exchange sponsored conferences. Fair Value of Financial Instruments – SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” requires disclosure of the fair value of certain financial instruments. The carrying values of financial instruments included in assets and liabilities are reasonable estimates of their fair value. Adoption of New Accounting Policies – Effective for the fiscal year ended June 30, 2000, the Exchange adopted the American Institute of Certified Public Accountants’ Statement of Position (SOP) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” The statement requires capitalization of certain costs incurred in the development of internal-use software, including external direct material and service costs, employee payroll and payroll-related costs. Prior to adoption of SOP 98-1, the Exchange expensed these costs as incurred. The effect of this change in accounting principle was an increase to earnings, net of tax, of $7,531,700 and $9,483,000 for the fiscal years ended June 30, 2001 and 2000, respectively. In June 1998, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which requires recognition of all derivative instruments in the balance sheet as either assets or liabilities and the measurement of those instruments at fair value. SFAS No. 133 also requires changes in the fair value of the derivative instruments to be recorded each period in current year earnings or comprehensive income depending on the intended use of the derivatives. In June 2000, the FASB issued SFAS No. 138, which amends the accounting and reporting standards of SFAS No. 133 for certain deriva- tive instruments and certain hedging activities. SFAS No. 133 and SFAS No. 138 are required to be adopted by the Exchange effective July 1, 2001. In July 2001, the Exchange adopted the provisions of SFAS No. 133. No transition adjustment was required. Recent Accounting Pronouncement – In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets” which is effective for the Exchange July 1, 2002. Under SFAS No. 142, goodwill and separately identified intangible assets with indefinite lives will no longer be amortized but reviewed annually (or more frequently if impairment indicators arise) for impairment. Separately identified intangible assets not deemed to have indefinite lives will continue to be amortized over their useful lives. The Exchange has deemed the impact of adopting SFAS No. 142 to be immaterial. 20 CBOE ‘01 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENTS All of the Exchange’s invested excess cash balances at June 30, 2001 had a maturity date of three months or less from the purchase date, and as a result, are classified as cash and cash equivalents. A summary of investments by security type for those investments with a maturity greater than three months from the purchase date is presented below: U.S. Government obligations Corporate debt securities Total investments available-for-sale $ $ 2001 0 0 0 2000 13,160,100 6,972,700 20,132,800 $ $ 3. INVESTMENT IN THE CINCINNATI STOCK EXCHANGE The investment in CSE is accounted for using the equity method. Condensed financial statements of the CSE as of and for the years ended June 30, 2001 and 2000 are as follows: Balance Sheets Cash and cash equivalents Securities available-for-sale Other current assets Long-term securities available-for-sale Other long-term assets Total assets Current liabilities Deferred income taxes Members’ equity Total liabilities and members’ equity The Exchange’s share of members’ equity Statement of Operations Transaction revenue Other revenue Total revenues Employee costs Other expenses Total expenses Net income $ 2001 434,400 2,569,600 2,623,700 10,222,800 3,166,900 19,017,400 4,276,500 557,900 14,183,000 19,017,400 $ 2000 4,433,200 2,463,600 2,518,600 6,360,000 1,819,700 17,595,100 4,365,300 171,300 13,058,500 17,595,100 $ 10,200,400 $ 9,517,100 $ 2001 4,077,800 4,925,400 9,003,200 2,954,600 4,991,400 7,946,000 1,057,200 2000 3,687,700 3,210,700 6,898,400 2,094,500 4,190,200 6,284,700 613,700 415,900 $ $ The Exchange’s equity in net income $ 716,700 4. RELATED PARTIES The Exchange’s equity in the net assets of OCC exceeded its cost by approximately $10,039,400 and $8,856,700 at June 30, 2001 and 2000, respectively. The Exchange collected transaction and other fees of $202,419,300 and $141,903,600 for the years ended June 30, 2001 and 2000, respectively, by drawing on accounts of the Exchange’s members held at OCC. For the year ended June 30, 2001, the amount collected includes $80,069,600 of marketing fees. (See Note 9.) The Exchange had a receivable due from OCC of $15,845,800 and $8,084,800 at June 30, 2001 and 2000, respectively. The Exchange incurred rebillable expenses on behalf of CSE, for expenses such as employee costs, computer equipment and office space of $2,267,100 and $2,122,800 for the years ended June 30, 2001 and 2000, respectively. The Exchange had a receivable from CSE of $461,500 and $329,000 at June 30, 2001 and 2000, respectively. OPRA is a committee administered jointly by the five options exchanges and is authorized by the Securities and Exchange Commission to provide consolidated options information. This information is provided by the exchanges and is sold to outside news services and customers. OPRA’s operating income is distributed among the exchanges based on their relative volume of total trans- actions. Operating income distributed to the Exchange was $21,538,600 and $22,580,700 for the years ended June 30, 2001 and 2000, respectively. The Exchange had a receivable from OPRA of $5,614,700 and $5,789,500 at June 30, 2001 and 2000, respectively. 5. LEASES The Exchange leases certain computer hardware and office space with lease terms of two years and five years, respectively. Future minimum lease payments under these noncancelable operating leases are as follows at June 30, 2001: 2002 2003 2004 2005 2006 Total 21 CBOE ‘01 $ 1,791,500 829,200 845,100 861,400 675,100 $ 5,002,300 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. EMPLOYEE BENEFITS Eligible employees participate in the Chicago Board Options Exchange SMART Plan (the “SMART Plan”). The SMART Plan is a defined contribution plan, which is qualified under Internal Revenue Code Section 401(k). The Exchange contributed $3,228,500 and $3,720,900 to the SMART Plan for the years ended June 30, 2001 and 2000, respectively. Eligible employees participate in the Supplemental Employee Retirement Plan (the “SERP Plan”). The SERP Plan is a defined contribution plan that is nonqualified by Internal Revenue Code regulations. The Exchange contributed $1,128,400 and $1,256,200 to the SERP Plan for the years ended June 30, 2001 and 2000, respectively. The Exchange also has a Voluntary Employees’ Beneficiary Association (“VEBA”). The VEBA is a trust, qualifying under Internal Revenue Code Section 501(c)(9), created to provide certain medical, dental, severance, and short-term disability benefits to employees of the Exchange. Contributions to the trust are based on reserve levels established by Section 419(a) of the Internal Revenue Code. During fiscal years 2001 and 2000, the Exchange contributed $1,704,700 and $967,700, respectively, to the trust. 7. COMMITMENTS The Exchange reached a settlement in September 2000 with the Securities and Exchange Commission and the Antitrust Division of the Department of Justice concerning their investigations into the listing of certain options and other SEC regulatory issues. As part of these settlements, the Exchange was not fined, but did agree to expend an amount that equals or exceeds $17.0 million in each of calendar years 2000 and 2001 on options-related surveillance, regulation and enforcement. In September 2000, the Exchange reached an agreement in principle to settle a consolidated civil class action lawsuit filed against the Exchange and the other U.S. options exchanges and certain market maker firms. The Exchange agreed to pay $16.0 million in three equal installments on or before October 16, 2000, July 1, 2001, and July 1, 2002. Two payments totaling $10.7 million were made in fiscal year 2001, and are being held in escrow pending approval of the settlement agreement by the U.S. District Court for the Southern District of New York. Approval of the settlement agreement is currently pending appellate review of the district court’s February 2001 order granting summary judgment in favor of the defendants. In May 2001, the Exchange and the Chicago Mercantile Exchange, Inc. announced plans to create a joint venture to trade single- stock futures. The Exchange has a 41.6% stake in the joint venture. The new entity will be a for-profit company, will have its own management and board, and will be separately organized as a regulated exchange. As of September 2001, the Exchange has committed $1.3 million in funding for the joint venture. 8. INCOME TAXES The timing of tax deductions related to the prior year’s class action settlement ($10.7 million paid and deducted in fiscal year 2001) and internally developed software costs ($13.0 million in fiscal year 2001) are the main reasons for the income tax returns’ net operating loss in fiscal year 2001. A reconciliation of the statutory federal income tax rate to the effective income tax rate, for the years ended June 30, 2001 and 2000, is as follows: Statutory federal income tax rate State income tax rate, net of federal income tax effect Rate increase (reduction) attributed to: Equity in income of CSE Permanent and timing differences Effective income tax rate 2001 35.0% 4.7 (2.2) 2.5 40.0% At June 30, 2001 and 2000, the net deferred income tax liability approximated: 2001 Deferred tax assets Deferred tax liabilities Net deferred income tax liability $ $ 8,887,400 27,023,400 18,136,000 2000 35.0% 4.6 (0.8) 3.5 42.3% 2000 11,114,500 21,532,800 10,418,300 $ $ Deferred income taxes arise principally from temporary differences relating to the use of accelerated depreciation methods for income tax purposes, funding of a VEBA trust, capitalization of software under SOP 98-1, and class action lawsuit payments and liability. 9. MARKETING FEE On July 1, 2000 the Exchange imposed a $.40 per contract marketing fee on market makers and DPMs when executing transactions with non-Exchange market makers. The money collected was made available to DPMs for order flow marketing, including the facili- tation of payment for order flow. The Exchange distributed funds, as directed by the DPMs, each month. At June 30, 2001 marketing fee balances were cash of $3,536,200 and accounts receivable of $5,637,200. 22 CBOE ‘01 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. LITIGATION The Exchange has been sued by six individuals, one corporation and one limited liability company who describe themselves as retail customers and who claim that the Exchange made false representations about the operation of various Exchange systems and engaged in fraudulent practices in connection with plaintiffs' options transactions. The complaint also alleges that they were harmed by a regulatory inquiry that the Exchange initiated. Plaintiffs allege that the Exchange thereby violated certain sections of the Securities Exchange Act of 1934, the Securities Act of 1933, the antitrust laws and various Illinois statutes concerning fraudulent practices and that the Exchange defrauded them, breached contractual obligations, defamed plaintiffs and interfered with their contractual relations. The complaint seeks damages in the amount of $100 million, plus treble damages for the alleged antitrust violations, attorneys' fees, costs, and interest. The Exchange also has been sued by three individuals who describe themselves as retail customers and who claim that the manner in which the Exchange operated its “electronic transfer system” violated certain provisions of the Securities Exchange Act of 1934 and the antitrust laws and breached contracts that the Exchange supposedly had with plaintiffs. Plaintiffs also allege that the Exchange’s regulatory inquiry interfered with plaintiffs’ contractual relations with their clearing firms. The complaint seeks damages in excess of $75,000, plus treble damages in connection with the antitrust claims, pre- and post-judgment interest, costs, and attorneys’ fees. The Exchange believes that it has meritorious defenses and intends to vigorously defend itself against these actions. However, the Exchange cannot presently estimate the amount of loss, if any, that may result. The ultimate outcome of these cases cannot presently be determined and no allowance for loss that may result has been made in these financial statements. INDEPENDENT AUDITORS’ REPORT To the Board of Directors and Members of the Chicago Board Options Exchange, Incorporated: We have audited the accompanying consolidated balance sheets of the Chicago Board Options Exchange, Incorporated (the “Exchange”) and subsidiary as of June 30, 2001 and 2000, and the related consolidated statements of income and retained earnings and of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Exchange’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of The Cincinnati Stock Exchange (“CSE”) for the year ended June 30, 2001, the Exchange’s investment in which is accounted for by use of the equity method. The Exchange’s equity of $10,200,400 in the CSE’s net assets at June 30, 2001 and of $716,700 in that Exchange’s net income for the respective year then ended are included in the accompanying financial statements. The financial statements of CSE were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for CSE, is based solely on the report of such other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the Exchange and its subsidiary at June 30, 2001 and 2000, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP August 17, 2001 (September 27, 2001 as to the second paragraph in Note 10) 23 CBOE ‘01 William J. Brodsky Mark F. Duffy Edward J. Joyce Robert J. Birnbaum Thomas A. Bond John Favia David Johnson Silas Keehn Leon T. Kendall Daniel P. Koutris Duane R. Kullberg David J. Lund James P. MacGilvray Alan D. Marks R. Eden Martin Robert P. Mazzarella Anthony D. McCormick Roderick Palmore Susan M. Phillips Michael J. Post John M. Streibich Alvin G. Wilkinson Mark Zurack BOARD OF DIRECTORS WILLIAM J. BRODSKY Chairman of the Board and Chief Executive Officer MARK F. DUFFY Vice Chairman and Chairman of the Executive Committee EDWARD J. JOYCE President and Chief Operating Officer ROBERT J. BIRNBAUM Former President New York Stock Exchange American Stock Exchange Public Director THOMAS A. BOND Chief Operating Officer LETCO JOHN FAVIA Market Maker Blue Capital Group DAVID JOHNSON Managing Director Morgan Stanley SILAS KEEHN President (Retired) Federal Reserve Bank of Chicago Public Director LEON T. KENDALL Professor of Finance and Real Estate J. L. Kellogg Graduate School of Management Northwestern University Public Director DANIEL P. KOUTRIS Managing Member KFT, DPM, LLC DUANE R. KULLBERG Former Chief Executive Officer Andersen Worldwide Public Director DAVID J. LUND Managing Director and Co-Head Global Equity Linked Products Merrill Lynch & Co., Inc. JAMES P. MACGILVRAY Executive Vice President UBS PaineWebber ALAN D. MARKS Former Managing Director Salomon Smith Barney R. EDEN MARTIN Partner Sidley & Austin Public Director ROBERT P. MAZZARELLA President Fidelity Brokerage Services, LLC ANTHONY D. MCCORMICK Vice President Derivative Markets Charles Schwab & Co., Inc. RODERICK PALMORE Senior Vice President Sara Lee Corporation Public Director SUSAN M. PHILLIPS Former Governor Federal Reserve Board Dean School of Business and Public Management The George Washington University Public Director MICHAEL J. POST President Seats Exchange, Inc. JOHN M. STREIBICH Designated Primary Market Maker Susquehanna Investment Group ALVIN G. WILKINSON Market Maker Wilkinson Management, LLC MARK ZURACK Managing Director Goldman Sachs & Co. 24 CBOE ‘01 STANDING COMMITTEES OF THE BOARD AUDIT COMMITTEE Duane R. Kullberg, Chairman Robert J. Birnbaum Alvin G. Wilkinson COMPENSATION COMMITTEE Alan D. Marks, Chairman William J. Brodsky Mark F. Duffy Duane R. Kullberg R. Eden Martin Alvin G. Wilkinson EXECUTIVE COMMITTEE Mark F. Duffy, Chairman Robert J. Birnbaum Thomas A. Bond William J. Brodsky Daniel P. Koutris Robert P. Mazzarella Alvin G. Wilkinson COMMITTEES OF THE MEMBERSHIP ALLOCATION COMMITTEE Licia J. Leslie, Chairman Randy N. Chandra John J. Colletti James D. Coughlan Joseph A. Frehr Stuart J. Kipness Grant W. Lawson John B. Niemann Benjamin E. Parker Mark Severin Christopher M. Wheaton APPEALS COMMITTEE B. Michael Kelly, Chairman Patrick J. McDermott, Vice Chairman Orlando Alfonso Matthew Arndt Brett T. Benson Timothy Benton Frank Brodlo Andrew H. Carolan Michael T. Considine Greg DeFalco Bruce D. DiDominicis David A. Filippini James P. Fitzgibbons Jonathan G. Flatow Michael D. Friedman James Gazis Timothy P. Gill Thomas A. Hamilton, Jr. Mark A. Harmon Michael P. Held Andrew Hodgman Paul J. Jiganti Richard Kevin John A. Lalowski Kelly Luthringshausen Daniel R. McCarthy Patrick J. Naughton John T. Nemeth John B. Niemann Renee P. O’Bryan Daniel M. O’Donnell Terrence M. O’Donnell Daniel O’Grady Daniel J. O’Shea Peter Osborne Douglas W. Prskalo Gregg A. Prskalo Sondra C. Rabin W. Scott Schwanke Neal Shamis James David Short Antanas Siurna Svebor Smolic James D. Sullivan William Ulivieri Wayne A. Weiss Dennis M. Wetzel Francis Wondrasek ELECTION COMMITTEE Joanne Moffic-Silver, Chairman Nancy Nielsen RaeDell Tapia-Pancake EQUITY FLOOR PROCEDURE COMMITTEE Edward T. Tilly, Chairman Michael E. Barry Terrance G. Boyle Patrick J. Caffrey Anthony J. Carone Daniel P. Carver James D. Coughlan David Creagan Mark F. Duffy Mark A. Esposito Joseph J. Fahrenbach Francis P. Gleason Van V. Hemphill Kevin J. Hincks Paul J. Jiganti Stuart J. Kipnes Benjamin M. Klein Grant W. Lawson David F. Miller, Jr. Kenneth D. Mueller John E. Smollen, Jr. J. Todd Weingart EXEMPTION COMMITTEE Pete Najarian, Chairman Patrick J. Caffrey Jeffrey A. Cesarone Corey L. Fisher Charles R. Heppner Charles F. Imburgia Matthew M. Van Aken FACILITIES COMMITTEE William J. Ellington, Chairman Christopher Wheaton, Vice Chairman Lawrence Baier, Jr. Edward Barry William E. Billings Thomas C. Bruno Steven F. Callahan Eric A. Conlon David Dobeff Mark R. Fluger Richard W. Fuller Dann C. Hansen Steven Hessing Patty Kevin-Schuler Joe M. O’Donnell James Wieties David R. Zalesky Daniel C. Zandi FINANCIAL PLANNING COMMITTEE Alvin G. Wilkinson, Chairman Robert J. Kirkland, Vice Chairman ARBITRATION COMMITTEE Daniel A. Baldwin, Co-Chairman Gregg M. Rzepczynski, Lawrence J. Parkhill Joseph F. Sacchetti Timothy M. Sommerfield BUSINESS DEVELOPMENT COMMITTEE Gary P. Lahey, Chairman Richard A. Angell Christine Bookmyer Stephen Dillinger Sam L. Eadie, Jr. J. David Fikejs Norman Friedman Richard Haave Monte Henige Ross Kaminsky Jack Kennedy John Patrick Mulroy Jon Najarian Tim O’Donnell John Robinson Michael Rodnick Kirk Roggensack Christopher Sandel Edmund J. Zarek CBOE/CBOT JOINT ADVISORY COMMITTEE John E. Callahan, Chairman David Johnson Gary P. Lahey Ex-Officio Daniel N. Ambrosino Dennis M. Davitt Norman Friedman Brian A. Novak James V. Proesel Paul L. Richards Robert C. Sheehan William J. Terman CLEARING PROCEDURE COMMITTEE Patrick Blackburn, Chairman Daniel Amar Mark A. Baumgardner John R. Beres Mitchell R. Bialek Louis G. Buttny Anne Byerwalter William F. Carik David T. DeArmey Patricia Firman Art Goldberg John Hiatt, Sr. John J. Kaminsky Matthew Liszka Anthony Monaco Ralph Mueller John E. O’Donnell Maureen Pacocha Ronald L. Petzke Frank Pirih Michael Ryan Susan Shimmin Thomas C. Smith Michael Trees Co-Chairman Jennifer Abrams Fisher Thomas R. Beehler Robert I. Chukerman Richard M. Coplan Charles B. Cox, III Michael D. Coyle Christopher P. Cribari David Dobreff Stephen P. Donahue Douglas H. Edelman Brian H. Egert David A. Eglit James P. Fitzgibbons Jonathan G. Flatow Theodoric Flemister Mark R. Fluger Ann Grady Peter C. Guth Thomas A. Hamilton Michael P. Held William G. Hohenadel Paul J. Jiganti Mark E. Kalas Joseph G. Kinahan John A. Koltes John A. Lalowski Michael Lyons Patrick J. McDermott Brock R. McNerney Nina V. Milovac Joseph D. Mueller Scott O’Connell Charles W. Palm Donald F. Pratl Steven M. Quirk Sondra C. Rabin Peter V. Rogus Scott E. Schram William Shimanek Richard R. Taylor Fred Teichert John H. Waterfield Patrick W. Wehr Dennis M. Wetzel James U. Wieties Corey D. Zimmerman BUSINESS CONDUCT COMMITTEE John F. Burnside, Chairman David T. DeArmey, Vice Chairman Orlando J. Alfonso J. Peter Brown Raymond P. Dempsey Robert C. Errico Richard I. Fremgen Maureen C. Guilfoile Allen B. Holeman Judith M. Kula Gary P. Lahey Steven A. O’Malley 25 CBOE ‘01 COMMITTEES OF THE MEMBERSHIP (CONTINUED) Bruce I. Andrews Stephen P. Donahue Boris Furman Fred O. Goldman William J. Gorman Eric Henschel Michael B. Hoban Jeffrey T. Kaufmann Kevin J. Keller Michael R. Quaid Howard N. Ring Frank A. Roszkiewicz Joseph Sellitto Robert Silverstein FINANCIAL REGULATORY COMMITTEE David T. DeArmey, Chairman Richard E. Schell, Vice Chairman Margaret E. Wiermanski, Vice Chairman Matthew Abraham Mark A. Babbich Patrick Blackburn William F. Carik Frank Catris Mark Gannon Fred O. Goldman William Gould John Hiatt, Sr. Kristen Hughes Kelly Judith M. Kula Bruce Marcinek Steven O’Malley Janice Rohr Ex-Officio Linda Haven Andrew Naughton Jacqueline Sloan FLOOR DIRECTORS COMMITTEE Mark F. Duffy, Chairman Thomas A. Bond John Favia David Johnson Daniel P. Koutris Michael Post John M. Streibich Alvin G. Wilkinson FLOOR OFFICIALS COMMITTEE Raymond P. Dempsey, Chairman Robert A. Fodor, Vice Chairman Daniel C. Zandi, Vice Chairman Janice R. Armstrong Daniel A. Baldwin Thomas A. Brady James G. Brophy Patrick J. Caffrey James K. Corsey Brian M. Dowd Damon M. Fawcett Craig R. Johnson Donald H. Klein, Jr. Daniel P. McCollar Thomas W. McEntegart Kurt R. Passehl John E. Smollen, Jr. Charles D. Woodward INDEX FLOOR PROCEDURE COMMITTEE Jeffrey S. Latham, Chairman Jonathan G. Flatow, Vice Chairman Peter Brown Terrence J. Brown Richard Cichy Michael F. Gallagher Edward M. Giangiorgi Sean Haggerty John Justic Emanual Liontakes Michael McGuire Alec Milam Robert C. O’Mullan Steven J. Pettinato Douglas W. Prskalo Keith Siemiawski Paul Stefanos Scott Tinervia Richard E. Tobin Charles D. Woodward INDEX MARKET PERFORMANCE COMMITTEE Jonathan G. Flatow, Chairman Andrew W. Hall, Vice Chairman Donald C. Cullen Jerry E. Diegel Charles E. Feuillan Mark A. Harmon Peter J. Heinz, Jr. Thomas H. Jarck Jeffrey L. Klein Todd A. Koster Walter J. Krop Michael F. Lohman James W. Lynch John P. Mariner Daniel F. McHugh Brian M. Morgan Christopher Nevins Brian A. Novak Daniel J. O’Shea John A. Possidoni Steven M. Quirk Peter H. Schulte Thomas J. Siurek Elan A. Strominger J. Todd Weingart LESSOR ADVISORY COMMITTEE Michael J. Post, Chairman Anthony P. Arciero Arnold S. Arfa Lawrence J. Blum Allan H. Carney Mario D’Agostino Stephen Dillinger Patrick J. English Norman S. Friedland Michael P. Held John R. Hosty Paul J. Jiganti Ruth I. Kahn Jerold Kopf Victor R. Meskin Michael M. Mondrus Robert M. Murphy T. Paul Natenberg Loren H. Newman Martin P. O’Connell 26 CBOE ‘01 William R. Power Berton Rubin Robert Silverstein Leslie R. Zuckerman MARKET PERFORMANCE COMMITTEE John M. Streibich, Chairman Mark Severin, Vice Chairman Terrence J. Andrews Susan C. Bannon Michael R. Benson Richard H. Bode Terrence E. Burke Terrence E. Cullen Richard W. Fuller, Jr. James E. Keaty Donald H. Klein, Jr. Brian R. Korbel Licia J. Leslie James J. Mead, Jr. John B. Niemann John P. O’Grady Burt J. Robinson Frank P. Tenerelli John H. Waterfield, III Thomas Weston MEMBER FIRM OPERATIONS COMMITTEE Gerald T. McNulty, Chairman Thomas Berk, III Michael K. Brennan James G. Brophy Jeffrey J. Bughman Daniel Keith Busse Daniel P. Carver Steven M. Chilow Raymond P. Dempsey Robert B. Duddy William Ellington Joseph A. Frehr Francis P. Gleason Lawrence J. Hanson David Johnson Jeffrey S. Kantor Jeffrey T. Kaufmann Stuart Kipnes Donald H. Klein Jeffrey S. Latham James C. Lavery Gerald T. McNulty David F. Miller Mark T. Morse Mark Oakley Jonathan O’Donnell Michael Stowick Michael Trees J. Todd Weingart MEMBERSHIP COMMITTEE Robert B. Gianone, Chairman Richard W. Fuller, Vice Chairman Anthony P. Arciero Craig R. Barone Kenneth J. Bellavia Gary L. Bowers Thomas E. Callahan Keir S. Collins David A. Eglit Robert R. Fabijanowicz Matthew J. Filpovich Sean W. Haggerty David C. Ho James J. Humes Robert B. Hutchison Michael T. Kalchbrenner William M. Kennedy Madeline Kiedysz Lloyd William Montgomery Dora Morano-Koop Andrew B. Newmark Philip Gregory Oakley Donald F. Pratl Michael L. Rodnick Mary Rita Ryder Gregg Rzepczynski Stuart Saltzberg Robert J. Wasserman Patrick W. Wehr Leslie Zuckerman MODIFIED TRADING SYSTEM (MTS) APPOINTMENTS COMMITTEE William J. O’Keefe, Chairman Cabot B. Caldwell Daniel P. Carver, Sr. Randy N. Chandra Mark F. Duffy Joseph A. Frehr Brandon S. Koress Gerald T. McNulty John E. Smollen, Jr. John M. Streibich Christopher M. Wheaton NOMINATING COMMITTEE Ilene M. Resnick Garber, Chairman Steven M. Chilow Lawrence J. Hanson William C. McGowan Victor R. Meskin Donald F. Phillips Howard N. Ring William J. Terman Richard L. Thomas Arnold R. Weber PRODUCT DEVELOPMENT COMMITTEE Thomas A. Bartlett, Chairman Alan Burstein Angelo Calvello Boris Furman Gary P. Lahey Brian A. Novak Martin P. O’Connell Dominic Salvino Robert C. Sheehan SCREEN-BASED TRADING COMMITTEE John Favia, Chairman Barton Bergman James J. Boyle Terrance G. Boyle Jim Harkness Paul J. Jiganti Ross G. Kaminsky John A. Koltes Jeffrey Latham Steve Malitz Gerald T. McNulty Brian A. Novak Thomas M. O’Donnell Joseph Sellitto Phillip Teuscher COMMITTEES OF THE MEMBERSHIP (CONTINUED) SPECIAL PRODUCT ASSIGNMENT COMMITTEE Licia J. Leslie, Chairman Thomas A. Bartlett James D. Coughlan Mark F. Duffy Jonathan Flatow John Streibich Christopher M. Wheaton Replacement Members John Colletti Boris Furman Burt Robinson Thomas Siurek SPX FLOOR PROCEDURE COMMITTEE Richard T. Marneris, Chairman Jeffrey Kupets, Vice Chairman Salvatore J. Aiello Mark Caffray TASK FORCES GOVERNANCE TASK FORCE Duane R. Kullberg, Chairman Robert J. Birnbaum Thomas A. Bond Alan D. Marks Michael J. Post Alvin G. Wilkinson MARKET LINKAGE TASK FORCE James J. Boyle Mark F. Duffy Ross G. Kaminsky ADVISORY COMMITTEES COMPLIANCE ADVISORY PANEL Kevin Ahearn David DeMuro Robert C. Errico George Janos James Kehoe Mark Manning Michelle Morgan Robert Palleschi Brian Underwood Paul Wigdor DISCOUNT ADVISORY COMMITTEE Angelo Benedetto Connie Dotson Bruce MacAlpine Gary Martino Barry Mione Christopher Nagy Frank O'Connor Carrie Rattle Maurisa Sommerfeld John Caffrey Eoin Callery Joseph Carsello S. Mark Cavanagh Michael Cozzie Timothy Feeney Kevin Flaherty Ron K. Grutzmacher Michael Hayes Thomas H. Jarck John Massarelli Michael Mayor Daniel Quinn David A. Scatena Michael Schueneman, Jr. John Tracy Timothy Weinand Allan Welby Alvin G. Wilkinson STOCK SELECTION COMMITTEE Benjamin Parker, Chairman David Adent, Vice Chairman Robert E. Ariss L. Wade Brewer Daniel J. Callahan John Colletti Mark G. Eddy Michael Frazin John S. Henkel B. Michael Kelly Brock R. McNerney Thomas E. Palka R. James Relihan Todd J. Schwartz Svebor Smolic John Superson Timothy J. Werner Thomas G. Weston J. Slade Winchester SYSTEMS COMMITTEE Daniel P. Koutris, Chairman Marc Brown Anthony J. Carone Daniel Condon Thomas Corbett Stephen Dillinger Michael Friedman John Haffner James Harkness John J. Kaminsky Mark J. Karrasch Robert Kirkland Bruce Meegan David Miller John E. O’Donnell Patrick Quinn Jeffrey K. Wagner Craig Karsen Scott Kilrea Gary P. Lahey Jeff Melgard David F. Miller Edward T. Tilly STOCK FUTURES TASK FORCE William J. Brodsky, Chairman Mark F. Duffy, Vice Chairman Thomas A. Bartlett Robert J. Birnbaum John Favia David Johnson Edward J. Joyce Peter Lee Kevin Luthringshausen Anthony D. McCormick Susan M. Phillips Michael J. Post John Stafford Alvin G. Wilkinson Mark Zurack STRATEGIC PLANNING TASK FORCE William J. Brodsky, Chairman Thomas A. Bond Mark F. Duffy John Favia Edward J. Joyce R. Eden Martin Anthony D. McCormick Michael J. Post Stephen Mitchell Denny Moorman Ann Mueller Henry Nothnagel Nancy Penwell Wendy Rea John Sagness William Sanford James Schmitz Terri Strickland-Smith Carol Zenk RETAIL ADVISORY COMMITTEE Matthew Gelber John Harris Laura Holder Edward Lynn Anthony Miliote Gregory Miller Kevin Murphy Michael Perry Philip Polera William Ryan Christopher Sandel Michael Schwartz Thomas Stotts Stewart Winner MANAGING DIRECTORS COMMITTEE John Andersen Joseph Bile Joseph Dattolo Lawrence Hanson David Johnson Ronald Kessler Peter Lee James MacGilvray, Jr. Douglas Matthews Anthony McCormick Kurt Muller Leslie Quick, III Thomas Sheridan Simon Terner Joseph Valenza NEW YORK FIRM ADVISORY COMMITTEE Maureen Demane Joseph Fenton Robert Fogliano Scott Fullman Lenny Greenbaum Michael Rouse Lawrence Starr INSTITUTIONAL TRADERS GROUP Alan Augarten John Brett Arnaud Desombre Jerry Donini Ralph Edwards Joseph Gahtan Kenneth MacKenzie Arthur Mbanefo Larry Motola Mark Neuberger Van Nguyen Brett Overacker Ralph Reynolds Daniel Waldron REGIONAL FIRM ADVISORY COMMITTEE Vince Bonato Louis DePaul Dino Galeazzi Dalton Givens Mary Hanan Sharon Jensen James Knight Jon Matthai 27 CBOE ‘01 EXECUTIVE OFFICERS AND STAFF OFFICIALS EXECUTIVE WILLIAM J. BRODSKY Chairman and Chief Executive Officer CIVIC AND GOVERNMENTAL AFFAIRS AMY ZISOOK Vice President MARK F. DUFFY Vice Chairman and Chairman of the Executive Committee EDWARD J. JOYCE President and Chief Operating Officer BUSINESS DEVELOPMENT EDWARD L. PROVOST Executive Vice President THOMAS A. BRADY Vice President Member Trading Services TULLY R. DAVIA Vice President Institutional Marketing PATRICK J. FAY Vice President Business Development DANIEL R. HUSTAD Vice President Market Quality and Assurance WILLIAM G. KSANDER Vice President Statistical Analysis MATTHEW T. MORAN Vice President Institutional Marketing DEBRA L. PETERS Vice President The Options Institute WILLIAM J. WHITE, JR. Vice President Member Trading Services CORPORATE COMMUNICATIONS CAROL E. KENNEDY Vice President CORPORATE PLANNING AND RESEARCH RICHARD G. DUFOUR Executive Vice President JOSEPH LEVIN Vice President Research and Product Development FINANCE AND ADMINISTRATION ALAN J. DEAN Senior Vice President and Chief Financial Officer DONALD R. PATTON Controller and Vice President Accounting JAMES P. ROCHE Vice President Market Data Services DEBORAH WOODS Vice President Human Resources LEGAL JOANNE MOFFIC-SILVER General Counsel and Corporate Secretary ARTHUR B. REINSTEIN Deputy General Counsel J. PATRICK SEXTON Assistant General Counsel REGULATORY SERVICES MARY L. BENDER Senior Vice President DOUGLAS BECK Vice President Market Monitoring LAWRENCE J. BRESNAHAN Vice President Financial and Sales Practice Compliance RICHARD LEWANDOWSKI Vice President Regulatory Services MARGARET WILLIAMS Vice President Market Regulation SYSTEMS GERALD T. O’CONNELL Executive Vice President and Chief Information Officer GORDON D. EVORA Vice President Systems Development JAMES J. NECEDA Vice President Systems Development MARK S. NOVAK Vice President Systems Development LARRY L. PFAFFENBACH Vice President Systems Planning ROBERTA J. PIWNICKI Vice President Systems Development GAUTAM ROY Vice President Software CURT SCHUMACHER Vice President Systems Operations TRADING OPERATIONS PHILIP M. SLOCUM Senior Vice President GAIL FLAGLER Vice President Reporting Services JOHN T. JOHNSTON Vice President Execution and Reporting Services THOMAS P. KNORRING Vice President Trade Processing ANTHONY MONTESANO Vice President Trading Operations MICHAEL TODOROFSKY Vice President Market Operations TIMOTHY T. WATKINS Vice President Trading Systems Development CLEARING MEMBER FIRMS A A Sage Corporation A.G. Edwards & Sons, Inc. ABN AMRO, Inc. ABN AMRO Sage Corporation Advest, Inc. Banc One Brokerage International Co. Bank of America Securities, LLC Bear Stearns Securities Corp. BNP Securities (U.S.A.), Inc. BNY Clearing Services, LLC Carr Futures, Inc. Carr Futures Inc./Direct Wire Charles Schwab & Co., Inc. Charles Schwab Canada Co. CIBC Oppenheimer Corp. Credit Suisse First Boston Corporation Dain Rauscher, Inc. Dean Witter Reynolds, Inc. Deutsche Bank Alex Brown, Inc. Donaldson Lufkin & Jenrette Securities Corporation/ Pershing Division E-Trade Securities, Inc. E.D. & F. Man International, Inc. E.D. & F. Man International, Inc./Retail Customer Ernst & Co. (Corporation) ESI Securities Company Fahnestock & Co., Inc. FIMAT, USA, Inc. First Options of Chicago, Inc. Goldman, Sachs & Co. Herzog, Heine, Geduld, Inc. Hull Trading Company, LLC INC Trading Corp. ING Securities Derivatives/ Customer Division ING TT&S (U.S.) Securities, Inc. ING (U.S.) Securities, Futures & Options, Inc. Interactive Brokers, LLC J.J.B. Hilliard, W.L. Lyons, Inc. J.P. Morgan Securities, Inc. K.A., Division of First Options of Chicago, Inc. Knight Execution Partners, LLC K.V. Execution Services, LLC Ladenburg, Thalman & Co., Inc. Lakeshore Securities, L.P. Lehman Brothers, Inc. LIT America, Inc./CRI Division LIT, Division of First Options of Chicago, Inc. Maple Partners U.S.A, Inc. Merrill Lynch, Pierce, Fenner & Smith, Inc. Merrill Lynch Professional Clearing Mesirow Financial, Inc. Morgan Keegan & Company, Inc. Morgan Stanley & Company, Inc. National Financial Services, LLC National Bank Financial, Inc. N.K. & Co., Inc./Ernst & Co. Nomura Securities International, Inc. O’Connor & Company, LLC PaineWebber, Inc. PAX Clearing Corporation PAX Clearing Corp.–AB Preferred Capital Markets, Inc. Prudential Securities, Inc. Raymond James & Associates, Inc. RBC Dominion Securities Corporation Refco Securities, LLC Robb, Peck, McCooey Clearing Corporation Robert W. Baird & Co., Inc. Salomon Brothers, Inc. Salomon Smith Barney, Inc. Schroder & Co., Inc. SG Cowen Securities Corporation Spear, Leeds & Kellogg Stephens, Inc. Stifel, Nicolaus & Company, Inc. Timber Hill, LLC TradeLink, LLC Tucker Anthony, Inc. UBS Warburg, LLC U.S. Clearing Corp. Warburg Dillon Read, LLC Weiss, Peck & Greer, LLC Ziv Investment Company 28 CBOE ‘01 SECURITIES UNDERLYING OPTIONS 360networks inc. 3Com Corporation 4Kids Entertainment, Inc. 724 Solutions Inc. Abbott Laboratories Abercrombie & Fitch Company Abgenix, Inc. ABIOMED, Inc. Abitibi-Consolidated Inc. Accredo Health, Incorporated ACT Manufacturing, Inc. Acterna Corporation Action Performance Companies, Inc. Active Power, Inc. Activision, Inc. Acxiom Corporation Adaptec, Inc. ADC Telecommunications, Inc. Adelphia Business Solutions, Inc. Adelphia Communications Corporation Class A Adept Technology, Inc. Administaff, Inc. Adobe Systems Incorporated Advanced Digital Information Corp. Advanced Energy Industries, Inc. Advanced Fibre Communications, Inc. Advanced Micro Devices, Inc. Aeroflex Incorporated AES Corporation Aether Systems, Inc. Aetna Inc. Affiliated Computer Services, Inc. Class A Affymetrix, Inc. AFLAC Incorporated A.G. Edwards & Sons, Inc. Agere Systems Inc. Agile Software Corporation Agilent Technologies, Inc. Agnico-Eagle Mines Ltd. Agrium, Inc. Airborne, Inc. AirTran Holdings, Inc. AK Steel Holding Corporation Akamai Technologies, Inc. Albany Molecular Research, Inc. Albertson’s, Inc. Alcan Inc. Alcatel Alcoa Inc. Alexion Pharmaceuticals, Inc. Align Technology, Inc. Alkermes, Inc. Allegheny Energy, Inc. Allegiance Telecom, Inc. Allergan, Inc. Alliance Capital Management, L.P. Alliance Semiconductor Corporation Alliant Techsystems, Inc. Allied Waste Industries, Inc. Alloy Online, Inc. Allstate Corporation (The) ALLTEL Corporation Alpha Industries, Inc. Altera Corporation Alvarion Ltd. Amazon.com, Inc. Amdocs Ltd. Amerada Hess Corporation America Movil S.A. de C.V. American Capital Strategies, Ltd. American Eagle Outfitters, Inc. American Electric Power Company, Inc. American Express Company American General Corporation American Home Products Corporation American International Group, Inc. American Management Systems, Inc. American Power Conversion Corporation American Standard Companies Inc. American Tower Corporation Class A AmeriCredit Corporation AmeriSource Health Corporation Ameritrade Holding Corporation Class A Ames Department Stores, Inc. Amgen, Inc. Amkor Technology, Inc. Amphenol Corporation Class A AMR Corporation AmSouth Bancorporation Amylin Pharmaceuticals, Inc. Anadarko Petroleum Corporation Anadigics, Inc. Analog Devices, Inc. Anaren Microwave, Inc. Anchor Gaming Andrew Corporation Andrx Corporation AngloGold Limited Anheuser-Busch Companies, Inc. Ann Taylor Stores Corporation Answerthink, Inc. ANTEC Corporation AOL Time Warner, Inc. Aon Corporation Apache Corporation Apogent Technologies Inc. Apollo Group, Inc. Apple Computer, Inc. Applebee’s International, Inc. Applera Corporation-Applied Biosystems Group Applera Corporation-Celera Genomics Group Applied Materials, Inc. Applied Micro Circuits Corporation Applied Power, Inc. Apria Healthcare Group Incorporated Aquila, Inc. Arbitron Inc. Arch Coal, Inc. Archer Daniels Midland Company AremisSoft Corporation Arena Pharmaceuticals, Inc. Argosy Gaming Company ARIAD Pharmaceuticals, Inc. Ariba Inc. Arrow Electronics, Inc. Art Technology Group, Inc. Artesyn Technologies, Inc. 29 CBOE ‘01 Arthur J. Gallagher & Co. ArvinMeritor, Inc. ASA Limited Ascential Software Corporation ASE Test Limited AsiaInfo Holdings, Inc. ASM International N.V. ASM Lithography Holding N.V. Aspect Communications Corporation Associated Banc-Corp Astoria Financial Corporation AstraZeneca PLC ADS Asyst Technologies, Inc. At Home Corporation Class A Atlas Air, Inc. Atmel Corporation AT&T Canada, Inc. Class B AT&T Corporation AT&T Wireless AudioCodes Ltd. Aurora Biosciences Corporation Auspex Systems, Inc. Automatic Data Processing, Inc. AutoNation, Inc. Autozone, Inc. Avanex Corporation Avaya Inc. Aventis S.A. Avici Systems, Inc. Avigen, Inc. Aviron Avista Corporation Avnet, Inc. Avocent Corporation Avon Products, Inc. AVX Corporation Aware, Inc. AXA Financial, Inc. Axcelis Technologies, Inc. Aztar Corporation Baker Hughes Incorporated Ballard Power Systems, Inc. Bank of America Corporation Bank of New York Company, Inc. (The) Bank One Corporation Banknorth Group, Inc. Barnes & Noble, Inc. Barr Laboratories, Inc. Barrett Resources Corporation Barrick Gold Corporation Bausch & Lomb Incorporated Baxter International, Inc. BB&T Corporation BCE, Inc. BEA Systems, Inc. Bear Stearns Companies, Inc. (The) Becton, Dickinson & Company Bed Bath & Beyond, Inc. BellSouth Corporation Belo Corporation Bergen Brunswig Corporation Class A Best Buy Co., Inc. Beverly Enterprises, Inc. BindView Development Corporation Biogen, Inc. Biomet, Inc. Biomira Inc. Biopure Corporation Biosite, Inc. Bio-Technology General Corporation Biotime Inc. Biovail Corporation BJ Services Company BJ’s Wholesale Club, Inc. Black Box Corporation Black & Decker Corporation (The) Blue Martini Software, Inc. BMC Software, Inc. Boeing Company (The) Boise Cascade Corporation Bookham Technology PLC-SPON ADR Borders Group, Inc. Borland Software Corporation Boston Communications Group, Inc. Boston Scientific Corporation BP PLC Brightpoint, Inc. Brio Technology, Inc. Bristol-Myers Squibb Company BriteSmile, Inc. British Telecommunications PLC Broadcom Corporation BroadVision, Inc. Broadwing Inc. Brocade Communications Systems, Inc. Brunswick Corporation BSQUARE Corporation Buca, Inc. Burlington Northern Santa Fe Corporation Burlington Resources Inc. Business Objects S.A. ADR Cable & Wireless PLC ADR Cablevision Systems Corporation Cabot Microelectronics Corporation CacheFlow Inc. Cadence Design Systems, Inc. Caliper Technologies Corp. Callaway Golf Company Calpine Corporation Caminus Corporation Campbell Soup Company Canadian National Railway Company Capital One Financial Corporation Capstone Turbine Corporation Cardinal Health, Inc. Caremark Rx, Inc. CarMax Group Carnival Corporation Carreker Corporation Carrier Access Corporation Carter-Wallace, Inc. Caterpillar, Inc. C&D Technologies, Inc. CDW Computer Centers, Inc. Celestica Inc. Celgene Corporation Cell Genesys, Inc. Cell Pathways, Inc. Cell Therapeutics, Inc. Cendant Corporation Centex Corporation Centillium Communications, Inc. Centra Software, Inc. Central Garden & Pet Company CenturyTel, Inc. Cephalon, Inc. Ceridian Corporation SECURITIES UNDERLYING OPTIONS (CONTINUED) Cerner Corporation Charles Schwab Corporation (The) Charter Communications, Inc. Chartered Semiconductor Manufacturing Ltd. Cheap Tickets, Inc. Check Point Software Technologies Ltd. Checkfree Corporation Chesapeake Energy Corporation Chevron Corporation Chico’s FAS, Inc. China Mobile (Hong Kong) Limited China Unicom Limited ChipPAC, Inc. Chiron Corporation Christopher & Banks Corporation Chubb Corporation (The) Ciena Corporation CIGNA Corporation Cinergy Corporation Cintas Corporation Circuit City Stores, Inc. Cirrus Logic, Inc. Cisco Systems, Inc. Citigroup, Inc. Citizens Communications Company Citrix Systems, Inc. City National Corporation Claire’s Stores, Inc. Clarent Corporation Clarus Corporation Clear Channel Communications, Inc. Clorox Company (The) CMGI, Inc. CMS Energy Corporation CNET Networks, Inc. CNF Inc. Coach, Inc. Coca-Cola Company (The) Coca-Cola Enterprises Inc. Cognos Incorporated Coinstar, Inc. Colgate-Palmolive Company COLT Telecom Group PLC ADR Columbia Laboratories, Inc. Columbia Sportwear Company Com21, Inc. Comcast Corporation (Special Class A) Comdisco, Inc. Comerica Incorporated Commerce One, Inc. Community Health Systems, Inc. Companhia de Bebidas das Americas (AmBev)–PR ADR Compania Anonima Nacional Telefonos de Venezuela Compania de Telecomunicaciones de Chile S.A. ADR Compaq Computer Corporation CompuCredit Corporation Computer Associates International, Inc. Computer Horizons Corporation Computer Sciences Corporation Computer Network Technology Corporation Compuware Corporation Comstock Resources, Inc. Comverse Technology, Inc. ConAgra Foods, Inc. Concord Camera Corp. Concord Communications, Inc. Concord EFS, Inc. Concurrent Computer Corporation Conexant Systems, Inc. Conoco Inc. Class A Conoco Inc. Class B Conseco, Inc. Consul Energy, Inc. Consolidated Edison, Inc. Continental Airlines, Inc. Convera Corporation Convergys Corporation Cooper Cameron Corporation Cooper Industries, Inc. Copper Mountain Networks, Inc. COR Therapeutics, Inc. Corinthian Colleges, Inc. Corixa Corporation Corning Incorporated Corvis Corporation Costco Wholesale Corporation Countrywide Credit Industries, Inc. Covance Inc. Covansys Corporation Covanta Energy Corporation Corvas International, Inc. Cox Communications, Inc. Class A Creative Technology Limited Credence Systems Corporation Cree, Inc. Crompton Corporation Crown Castle International Corporation CryptoLogic Inc. CSFBdirect, Inc. CSG Systems International, Inc. Cubist Pharmaceuticals, Inc. Cummins Inc. CuraGen Corporation Curis, Inc. CV Therapeutics, Inc. CVS Corporation Cyber-Care, Inc. Cyberonics, Inc. Cygnus, Inc. Cymer Inc. Cypress Semiconductor Corporation CYTOGEN Corporation Cytyc Corporation DaimlerChrysler AG Dana Corporation Danaher Corporation Darden Restaurants, Inc. DDi Corporation Deere & Company Dell Computer Corporation Delphi Automotive Systems Delta Air Lines, Inc. Delta & Pine Land Company Dentsply International, Inc. Descartes Systems Group Inc. Deutsche Telekom AG ADR Devon Energy Corporation Diamond Offshore Drilling, Inc. DiamondCluster International, Inc. Digex, Incorporated Digital Island, Inc. 30 CBOE ‘01 Digital Lightwave, Inc. Digital River, Inc. Dime Bancorp, Inc. Direct Focus, Inc. Ditech Communications Corporation Diversa Corporation DMC Stratex Networks, Inc. Dollar General Corporation Dollar Tree Stores, Inc. Doral Financial Corporation DoubleClick, Inc. Dow Chemical Company (The) DQE, Inc. DSP Group, Inc. Duke Energy Corporation Duramed Pharmaceuticals, Inc. Dycom Industries, Inc. Dynegy Inc. E*Trade Group Inc. E.piphany, Inc. EarthLink, Inc. Eastman Chemical Company Eastman Kodak Company Eaton Corporation eBay, Inc. Echelon Corporation EchoStar Communications Corporation ECI Telecom Ltd. Eclipsys Corp. EDEN Bioscience Corporation Edison International Edison Schools, Inc. Edwards Lifesciences Corporation E.I. du Pont de Nemours & Company El Paso Corporation Elan Corporation PLC ADR Electric Fuel Corporation Electro Scientific Industries, Inc. Electroglas, Inc. Electronic Arts, Inc. Electronic Data Systems Corporation Electronics for Imaging, Inc. Eli Lilly and Company eLoyalty Corporation Embarcadero Technologies, Inc. Embratel Participacoes S.A. EMC Corporation EMCORE Corporation Emerson Electric Company Emisphere Technologies, Inc. Emulex Corporation Energizer Holdings, Inc. Energy East Corporation Engelhard Corporation Enron Corp. ENSCO International Incorporated Entegris, Inc. Enterasys Networks, Inc. Entercom Communications Corp. Entergy Corporation Entravision Communications Corporation EntreMed, Inc. Entrust, Inc. Enzo Biochem, Inc. Enzon, Inc. EOG Resources, Inc. Epicore Software Corporation EPIQ Systems, Inc. Equant N.V. Ericsson (L.M.) Telephone Co. ADR ESC Medical Systems, Limited ESS Technology, Inc. Estee Lauder Companies, Inc. (The) Class A Exar Corporation Excel Technology, Inc. Exelixis, Inc. Exelon Corporation EXFO Electro-Optical Engineering, Inc. Exodus Communications, Inc. Expedia, Inc. Expeditors International of Washington, Inc. Express Scripts, Inc. Class A Extended Stay America, Inc. Extreme Networks, Inc. Exult, Inc. Exxon Mobil Corporation F5 Networks, Inc. Factory 2-U Stores, Inc. Fairchild Semiconductor International Fannie Mae Fastenal Company Federated Department Stores, Inc. FedEx Corporation Fidelity National Financial, Inc. Fifth Third Bancorp FileNet Corporation Finisar Corporation First Data Corporation First Health Group Corporation First Union Corporation FirstEnergy Corp. Fiserv, Inc. FLAG Telecom Holdings Limited FleetBoston Financial Corporation Fleming Companies, Inc. Flextronics International Ltd. Flowers Foods, Inc. Fluor Corporation FMC Corporation FMC Technologies, Inc. Focal Communications Corporation Ford Motor Company Forest Laboratories, Inc. Forest Oil Corporation Forward Air Corporation Foster Wheeler Ltd. Foundry Networks, Inc. Fox Entertainment Group, Inc. Freddie Mac FreeMarkets, Inc. Freeport-McMoRan Copper & Gold, Inc. Class B Frontier Airlines, Inc. FSI International, Inc. FuelCell Energy, Inc. Fundtech Ltd. Furniture Brands International, Inc. Gadzooks, Inc. Gadzoox Networks, Inc. Galileo International, Inc. Gap, Inc. (The) Garmin Ltd. Gateway, Inc. Gemstar-TV Guide International, Inc. SECURITIES UNDERLYING OPTIONS (CONTINUED) Genaissance Pharmaceuticals, Inc. Gene Logic Inc. Genentech, Inc. General Cable Corporation General Dynamics Corporation General Electric Company General Mills, Inc. General Motors Corporation General Motors Corporation Herman Miller, Inc. Hershey Foods Corporation Hewlett-Packard Company Hi/fn, inc. Hibernia Corporation Class A Hilton Hotels Corporation Hispanic Broadcasting Corp. Hitachi Ltd. ADR Hollinger International, Inc. Hollis-Eden (Hughes Electronics) Class H Pharmaceuticals, Inc. Genesis Microchip, Inc. Genome Therapeutics Corp. Genta Incorporated Genuity, Inc. Genzyme Corporation Genzyme Corporation– Genzyme Biosurgery Division Georgia-Pacific Group Geron Corporation Getty Images, Inc. Gilat Satellite Networks, Ltd. Gilead Sciences, Inc. Gillette Company (The) Glenayre Technologies, Inc. Global Crossing Ltd. Global Industries Ltd. Global Marine, Inc. Globalstar Telecommunications Ltd. GlobeSpan, Inc. Globix Corporation Globo Cabo S.A. SP ADR GoAmerica, Inc. Golden State Bancorp, Inc. Goldman Sachs Group, Inc. (The) Goodrich Corporation Goodyear Tire & Rubber Company (The) GoTo.com, Inc. Grant Prideco, Inc. Great Lakes Chemical Corporation Greater Bay Bancorp GreenPoint Financial Corp. Grupo Financiero Galicia S.A. Grupo Televisa S.A. ADR GTECH Holdings Corporation Gucci Group, N.V. Guidant Corporation Guilford Pharmaceuticals, Inc. Gymboree Corporation (The) H Power Corp. Hain Celestial Group, Inc. Halliburton Company Handspring, Inc. Hanover Compressor Holding Corp. Harley-Davidson, Inc. Harmonic, Inc. Harrah’s Entertainment, Inc. Harris Corporation Hartford Financial Services Group, Inc. (The) HCA, Inc. Headwaters, Incorporated Health Management Associates, Inc. Class A Health Net, Inc. HEALTHSOUTH Corporation Heidrick & Struggles International, Inc. Heinz (H.J.) Company Helmerich & Payne, Inc. Hercules Incorporated Home Depot, Inc. (The) Homestake Mining Co. Homestore.com, Inc. Honeywell International Inc. Horizon Offshore, Inc. Hospitality Properties Trust Hot Topic, Inc. Hotel Reservations Network, Inc. Class A HotJobs.com, Ltd. Household International, Inc. H&R Block, Inc. HSBC Holdings PLC Hudson United Bancorp Human Genome Sciences, Inc. Humana, Inc. Huntington Bancshares, Inc. Hutchinson Technology, Inc. Hyperion Solutions Corporation Hyseq, Inc. i2 Technologies, Inc. Ibis Technology Corp. IBP, Inc. ICN Pharmaceuticals, Inc. ICOS Corporation IDEC Pharmaceuticals Corporation Identix Incorporated IDT Corporation Ikon Office Solutions, Inc. ILEX Oncology, Inc. Illinois Tool Works, Inc. I-many, Inc. IMC Global, Inc. ImClone Systems Incorporated Immune Response Corporation (The) Immunex Corporation ImmunoGen, Inc. Immunomedics, Inc. IMPATH, Inc. IMPCO Technologies, Inc. Imperial Chemical Industries PLC ADR IMRglobal Corporation IMS Health Incorporated INAMED Corporation Incyte Genomics, Inc. Inet Technologies, Inc. InFocus Corporation InfoSpace.com, Inc. ING Groep N.V. ADR Ingersoll-Rand Company Ingram Micro, Inc. Inhale Therapeutic Systems Inktomi Corporation Input/Output, Inc. Inrange Technologies Corporation Class B Insight Communications Company, Inc. Instinet Group, Incorporated Integra LifeSciences Holdings Corporation Integrated Circuit Systems, Inc. 31 CBOE ‘01 Integrated Device Technology, Inc. Integrated Silicon Solutions, Inc. Intel Corporation InteliData Technologies Corporation Interactive Data Corporation InterDigital Communications Corporation Interliant Inc. International Business Machines Corporation International FiberCom, Inc. International Flavors & Fragrances, Inc. International Game Technology International Paper Company International Rectifier Corporation Internet Architecture HOLDRs Trust (IAH) Internet Capital Group, Inc. Internet Security Systems, Inc. Interpublic Group of Companies, Inc. (The) Intersil Holding Corporation Interstate Bakeries Corporation InterVoice-Brite, Inc. Interwoven, Inc. Intimate Brands, Inc. Class A IntraNet Solutions, Inc. Intuit Corporation Intuitive Surgical, Inc. Investment Technology Group, Inc. Investors Financial Services Corp. Invitrogen Corporation IONA Technologies Isis Pharmaceuticals, Inc. i-STAT Corporation ITT Educational Services, Inc. ITT Industries, Inc. Ivax Corporation Ixia IXYS Corporation J Net Enterprises, Inc. Jabil Circuit, Inc. Jack Henry & Associates Inc. Jazztel PLC ADR J.C. Penney Company, Inc. J.D. Edwards & Company JDS Uniphase Corporation JLG Industries, Inc. JNI Corp. John Hancock Financial Services, Inc. Johnson & Johnson Jones Apparel Group, Inc. J.P. Morgan Chase & Co. Juniper Networks, Inc. Jupiter Media Metrix, Inc. Kansas City Southern Industries, Inc. KB HOME Keithley Instruments, Inc. Kellogg Company KEMET Corporation Kerr-McGee Corporation Key Energy Services, Inc. KeyCorp Keynote Systems, Inc. Keyspan Corp. Kimberly-Clark Corporation Kinder Morgan, Inc. King Pharmaceuticals, Inc. KLA-Tencor Corporation Kmart Corporation Knight/Trimark Group, Inc. Kohl’s Corporation Koninklijke Philips Electronics N.V. Kopin Corporation KPMG Consulting Inc. KPNQuest N.V. Kraft Foods Inc. Krispy Kreme Doughnuts, Inc. Kroger Company (The) K-Swiss, Inc. Kulicke and Soffa Industries, Inc. L3 Communications Holdings, Inc. Laboratory Corporation of America Holdings LaBranche & Co Inc. Lam Research Corporation Lamar Advertising Company Landry’s Seafood Restaurants, Inc. Lands’ End Inc. Large Scale Biology Corp. Lattice Semiconductor Leap Wireless International, Inc. Legato Systems, Inc. Legg Mason, Inc. Lehman Brothers Holdings, Inc. Lennar Corporation, Inc. Lernout & Hauspie Speech Products Level 3 Communications Lexicon Genetics Incorporated Lexmark International Group, Inc. Class A Liberate Technologies, Inc. Liberty Media Corporation Series A LifePoint Hospitals, Inc. LightPath Technologies, Inc. Class A Limited, Inc. (The) Lincare Holdings, Inc. Lincoln National Corporation Linear Technology Corporation Liz Claiborne, Inc. Lockheed Martin Corporation Loews Corporation Longs Drug Stores Corporation Loral Space & Communications Ltd. Louis Dreyfus Natural Gas Corp. Lowe’s Companies, Inc. LSI Logic Corporation LTX Corporation Lucent Technologies, Inc. Luminent, Inc. Lyondell Chemical Company MacroChem Corporation MacroMedia, Inc. Macrovision Corporation Madge Networks N.V. Magna International, Inc. Class A Mandalay Resort Group Manor Care, Inc. Manpower, Inc. Manufacturers Services Limited Manugistics Group, Inc. MapInfo Corporation Marconi PLC ADR Marine Drilling Companies, Inc. Marriott International, Inc. SECURITIES UNDERLYING OPTIONS (CONTINUED) Marsh & McLennan Companies, Inc. Marvell Technology Group Ltd. Massey Energy Company MatrixOne, Inc. Mattel, Inc. Maxim Integrated Products, Inc. Maxim Pharmaceuticals, Inc. Maxtor Corporation May Department Stores Company (The) Maytag Corporation MBNA Corporation McAfee.com Corporation McDATA Corporation Class A McDATA Corporation Class B McDermott International, Inc. McDonald’s Corporation McKesson Corporation McLeodUSA, Inc. MDU Resources Group, Inc. Mead Corporation (The) Medarex, Inc. Mediacom Communications Corporation Medicines Company (The) Medicis Pharmaceutical Corporation MedImmune, Inc. Medtronic, Inc. Mellon Financial Corporation Mentor Graphics Corporation Merck & Co., Inc. Mercury Interactive Corporation Merix Corporation Merrill Lynch & Co., Inc. Metalink Ltd. MetaSolv, Inc. Methode Electronics, Inc. Class A MetLife, Inc. Metricom, Inc. Metris Companies, Inc. Metromedia Fiber Network, Inc. MGI Pharma Inc. MGM Mirage Micrel, Inc. Microchip Technology, Inc. Micromuse, Inc. Micron Technology, Inc. Microsemi Corp. Microsoft Corporation MicroStrategy Incorporated Microtune, Inc. Midway Games, Inc. Millennium Pharmaceuticals, Inc. Millipore Corporation MiniMed Inc. Minnesota Mining & Manufacturing Company MIPS Technologies, Inc. Class B Mirant Corporation Mitchell Energy & Development Motorola, Inc. MP3.com, Inc. Mpower Holding Corp. MRV Communications Inc. MSC Industrial Direct Co., Inc. M-Systems Flash Disk Pioneer Ltd. MTR Gaming Group, Inc. Murphy Oil Corporation Mykrolis Corporation Mylan Laboratories, Inc. Myriad Genetics Inc. Nabors Industries, Inc. Nasdaq–100 Index Tracking StockSM National City Corporation National Commerce Financial Corp. National Oilwell, Inc. National Semiconductor Corporation Nautica Enterprises, Inc. Navistar International Corporation NBTY, Inc. NCR Corp. NeoRx Corporation Net.B@nk, Inc. Net2Phone, Inc. Netegrity, Inc. NetIQ Corporation Netopia, Inc. Netro Corporation Network Appliance, Inc. Network Associates, Inc. Network Peripherals, Inc. Network Plus Corp. New Focus, Inc. New York Community Bancorp, Inc. Newell Rubbermaid Corporation Newmont Mining Corporation Newport Corporation Newport News Shipbuilding Inc. News Corporation Ltd. (The) ADR Nu Horizons Electronics Corp. Nuance Communications Inc. Nucor Corporation Numerical Technologies, Inc. NVIDIA Corporation Oak Technology, Inc. Oakley, Inc. Occidental Petroleum Corporation Ocean Energy Inc. Office Depot, Inc. Oil Service HOLDRs Trust Omnicom Group, Inc. OmniSky Corporation ONI Systems Corporation Onyx Pharmaceuticals, Inc. ONYX Software Corporation Open Text Corporation Open TV Corp. Openwave Systems, Inc. Oplink Communications, Inc. Optical Communication Products, Inc. Optimal Robotics Corp. Oracle Corporation OraSure Technologies, Inc. Orbital Sciences Corporation Orchid BioSciences Organogenesis, Inc. Orthodontic Centers of America, Inc. OSI Pharmaceuticals, Inc. Outback Steakhouse, Inc. Owens-Illinois, Inc. Oxford Health Plans, Inc. PACCAR, Inc. Pacific Sunwear of California, Inc. PacifiCare Health Systems, Inc. Class B Packaging Corp of America Pall Corporation Palm, Inc. PanAmSat Corporation Papa John’s International, Inc. Parametric Technology Corporation Next Level Communications, Park Place Entertainment Inc. NextCard, Inc. Nextel Communications, Inc. Class A Nice Systems Ltd. ADR NIKE, Inc. Class B NiSource Inc. Noble Affiliates, Inc. Noble Drilling Corporation Nokia Corporation ADR Norfolk Southern Corporation Nortel Networks Corporation Northeast Utilities Northern Trust Corporation Northfield Laboratories, Inc. Northrop Grumman Corporation Parker Drilling Company Patterson Dental Company Patterson-UTI Energy, Inc. Paxson Communications Corporation Paychex, Inc. Payless ShoeSource, Inc. PC Connection, Inc. Peabody Energy Corporation PEC Solutions, Inc. Pediatrix Medical Group, Inc. Pegasus Communications Corporation Pegasus Solutions, Inc. Pemstar, Inc. Pennzoil-Quaker State Company PeopleSoft Inc. Pep Boys-Manny, Moe, & Jack (The) Pepsi Bottling Group, Inc. PepsiAmericas, Inc. PepsiCo, Inc. Peregrine Systems, Inc. Pericom Semiconductor Corporation PerkinElmer, Inc. Perot Systems Corporation Perrigo Company PetroChina Company Limited ADR Petroleo Brasileiro S.A. PETROBRAS-ADR Petroleum Geo-Services ASA ADR Pfizer Inc. PG&E Corporation Pharmaceutical HOLDRs Trust Pharmaceutical Resources, Inc. Pharmacia Corporation Phelps Dodge Corporation Philip Morris Companies Inc. Philippine Long Distance Telephone Company ADR Phillips Petroleum Company Pier 1 Imports, Inc. Pinnacle Systems, Inc. Pivotal Corporation Pixelworks, Inc. Placer Dome Inc. Plexus Corporation Plug Power Inc. Plum Creek Timber Co. Inc. PLX Technology, Inc. PMC-Sierra, Inc. PNC Financial Services Group Inc. Pogo Producing Company Pohang Iron & Steel Company, Ltd. ADR Polaroid Corporation Polo Ralph Lauren Corp. Polycom, Inc. PolyMedica Corporation Portal Software, Inc. Potash Corporation of Saskatchewan Inc. Potlatch Corporation Power-One, Inc. Powerwave Technologies, Inc. PPG Industries, Inc. PRAECIS Pharmaceuticals, Inc. Pre-Paid Legal Services, Inc. Presstek, Inc. PRI Automation Inc. Price Communications Corporation Priceline.com Incorporated Pride International, Inc. Primedia Inc. Procter & Gamble Company (The) Prodigy Communications Corporation Professional Detailing, Inc. Progenics Pharmaceuticals, Inc. Progressive Corporation (The) Protective Life Corporation Protein Design Labs, Inc. Proton Energy Systems, Inc. Provident Financial Group, Inc. Providian Financial Corporation Proxim, Inc. PTEK Holdings, Inc. Public Service Company of New Mexico Pulte Homes, Inc. Pumatech, Inc. PurchasePro.com, Inc. QLogic Corporation QLT Inc. Quaker Oats Company Corp. Class A Corporation Mitsubishi Tokyo Financial Northwest Airlines Corp. Group, Inc. ADR MKS Instruments, Inc. Modis Professional Services Inc. Mohawk Industries, Inc. Molecular Devices Corporation Molex Incorporated Monsanto Company Montana Power Company Morgan Stanley Dean Witter & Co. Class A NOVA Corporation (Georgia) Novartis AG-ADR Novatel Wireless, Inc. Novell, Inc. Novellus Systems, Inc. Novoste Corporation NPS Pharmaceuticals, Inc. NRG Energy, Inc. NTL Incorporated 32 CBOE ‘01 SECURITIES UNDERLYING OPTIONS (CONTINUED) QUALCOMM, Inc. Quanta Services, Inc. Quantum Corporation–DLT & Storage Systems Group Quest Diagnostics Incorporated Quest Software, Inc. Questar Corporation Quintiles Transnational Corporation QWest Communications International Radian Group RadioShack Corporation RADVision Ltd. Rainbow Media Group Ralston Purina Group Rambus, Inc. Rational Software Corporation Reader’s Digest Association, Inc. Class A Read-Rite Corporation RealNetworks Inc. Red Hat, Inc. Redback Networks Inc. Reebok International Ltd. Regeneration Technologies, Inc. Regional Bank HOLDRs Trust Register.com, Inc. Reliant Energy, Inc. Reliant Resources, Inc. Remedy Corporation Remington Oil & Gas Corporation Republic Services Inc. Class A Research in Motion Limited Resources Connection, Inc. Respironics, Inc. Retail HOLDRs Trust Retek Inc. Revlon, Inc. Class A RF Micro Devices, Inc. Rite Aid Corporation Riverstone Networks, Inc. R.J. Reynolds Tobacco Holdings, Inc. Rockwell Collins, Inc. Rockwell International Corporation Rostelecom ADR Rowan Companies, Inc. Roxio, Inc. Royal Bank of Canada Royal Caribbean Cruises Ltd. Royal Dutch Petroleum Company RPM, Inc. RSA Security Inc. Ruby Tuesday, Inc. Rudolph Technologies, Inc. Ryder Systems, Inc. S1 Corporation Saba Software, Inc. Sabre Holdings Corp. SAFECO Corporation Safeguard Scientifics, Inc. Safeway, Inc. Salix Pharmaceuticals, Ltd. Sanchez Computer Associates SanDisk Corporation Sanmina Corporation Santa Fe International, Corporation SAP AG Sapient Corporation Sara Lee Corporation SatCon Technology Corporation Satyam Infoway Limited ADR Sawtek Inc. SBA Communications Corporation SBC Communications, Inc. SBS Technologies, Inc. SCG Holding Corporation Schein (Henry), Inc. Schering-Plough Corporation Schlumberger Limited SCI Systems, Inc. SciClone Pharmaceuticals, Inc. Scientific-Atlanta, Inc. Scios, Inc. SeaChange International, Inc. Sealed Air Corporation Sears, Roebuck and Company SeeBeyond Technology Corporation SEI Investments Company Seitel, Inc. Select Medical Corporation Semiconductor HOLDRs Trust Semtech Corporation Sepracor, Inc. Sequenom Inc. SERENA Software, Inc. Serono SA-ADR Shaw Group, Inc. (The) Shell Transport & Trading Company, PLC ADR Sherwin-Williams Company (The) Shire Pharmaceuticals Group PLC ADR SICOR, Inc. Siebel Systems, Inc. Sierra Pacific Resources Sigma-Aldrich Corporation Silicon Image, Inc. Silicon Laboratories Inc. Silicon Storage Technology, Inc. Silicon Valley Bancshares SilverStream Software, Inc. Sirius Satellite Radio, Inc. SK Telecom Co., Ltd. ADS SmartForce PLC Smith International, Inc. Smurfit Stone Container Corporation Software HOLDRs Trust Solectron Corporation Solutia Inc. Sonic Automotive, Inc. SONICblue Incorporated SonicWALL, Inc. Sonus Networks, Inc. Sorrento Networks Corporation Southern Company (The) SouthTrust Corporation Southwest Airlines Co. Southwest Securities Group, Inc. Sovereign Bancorp, Inc. Spectrasite Holdings, Inc. Spectrian Corporation SpeechWorks International, Inc. SpeedFam-IPEC, Inc. Spiegel, Incorporated Class A Sprint Corporation–Sprint FON Group Sprint Corporation–Sprint PCS Group SPX Corporation St. Jude Medical, Inc. St. Mary Land & Exploration Company 33 CBOE ‘01 St. Paul Companies, Inc. (The) Stanford Microdevices, Inc. Staples, Inc. Starbucks Corporation STARR Surgical Company Starwood Hotels & Resorts Trust State Street Corporation Station Casinos, Inc. Stericycle, Inc. STERIS Corporation Stewart & Stevensen Services, Inc. Stillwater Mining Company Stilwell Financial, Inc. STMicroelectronics N.V. Storage Technology Corporation StorageNetworks, Inc. Stratos Lightwave, Inc. Stryker Corporation Suiza Foods Corp. Sun Life Financial Services of Canada, Inc. Sun Microsystems, Inc. SunGard Data Systems Inc. Sunoco, Inc. Sunrise Assisted Living, Inc. SunTrust Banks, Inc. Superconductor Technologies, Inc. SuperGen, Inc. Superior Energy Services, Inc. Swift Energy Company Swift Transportation Co., Inc. Sybase, Inc. Sycamore Networks, Inc. Symantec Corporation Symbol Technologies, Inc. Syncor International Corporation Syngenta AG-ADR Synopsys, Inc. Synovos Financial Corp. Sysco Corporation T. Rowe Price Associates Taiwan Semiconductor Manufacturing Company Ltd. Take-Two Interactive Software, Inc. Tanox, Inc. Target Corporation Targeted Genetics Corporation Taro Pharmaceutical Industries Ltd. TCF Financial Corporation TD Waterhouse Group, Inc. Technitrol, Inc. Teekay Shipping Corporation Tekelec Tektronix Inc. Telebras HOLDRs Telecom Argentina Stet-France Telecom S.A. ADR Telecom HOLDRs Trust TeleCorp PCS, Inc. Teledyne Technologies Incorporated Telefonica de Argentina, S.A. ADR Telefonica S.A. ADR Telefonos de Mexico, S.A. de C.V. ADR TeleNorte Leste Participacoes S.A. ADS TeleTech Holdings, Inc. Tellabs, Inc. Tellium, Inc. Tenet Healthcare Corporation Teradyne, Inc. Terayon Communication Systems, Inc. Terra Networks, S.A. Teva Pharmaceutical Industries Ltd. ADR Texaco, Inc. Texas Instruments Incorporated Theragenics Corporation Therma-Wave, Inc. Thermo Electron Corporation THQ Inc. Three-Five Systems, Inc. TIBCO Software Inc. Ticketmaster Tidel Technologies, Inc. Tidewater, Inc. Tiffany & Co. Time Warner Telecom Inc. Timken Company (The) Titan Corporation (The) TiVo Inc. TJX Companies, Inc. (The) TMP Worldwide, Inc. Toll Brothers, Inc. Tollgrade Communications, Inc. Tommy Hilfiger Corporation Tootsie Roll Industries, Inc. Topps Company, Inc. (The) Tosco Corporation Total Fina S.A. ADR Toyota Motor Corporation ADR Toys “R” Us, Inc. Transkaryotic Therapies, Inc. Transmeta Corporation Transocean Sedco Forex Inc. TranSwitch Corporation Travelocity.com, Inc. Tribune Company Trico Marine Services, Inc. Tricon Global Restaurants Trigon Healthcare, Inc. Trimble Navigation Limited Trimeris, Inc. Tripath Technology, Inc. Triquint Semiconductor, Inc. Triton Energy Ltd. Trizec Hahn Corporation TriZetto Group, Inc. TRW Inc. Tubos de Acero de Mexico S.A. ADR Turnstone Systems, Inc. TV Azteca S.A. de C.V. Tweeter Home Entertainment Group, Inc. Tyco International Ltd. TyCom, Ltd. Tyson Foods, Inc. Class A UAL Corporation UAXS Global Holdings, Inc. UBS AG UICI Ulticom, Inc. Ultramar Diamond Shamrock Corp. Ultratech Stepper, Inc. Union Pacific Corporation Unisys Corporation United Microelectronics Corporation ADR United Natural Foods, Inc. SECURITIES UNDERLYING OPTIONS (CONTINUED) United Parcel Service, Inc. Class B United Stationers, Inc. United Technologies Corporation United Therapeutics Corporation UnitedGlobalCom, Inc. UnitedHealth Group Universal Access Universal Health Services, Inc. Class B University of Phoenix Online Univision Communications, Inc. Class A Unocal Corporation UnumProvident Corporation USA Education, Inc. US Airways Group, Inc. U.S. Bancorp USEC, Inc. USFreightways Corporation USG Corporation Usinternetworking, Inc. US Oncology, Inc. UST Inc. USX-Marathon Group USX-U.S. Steel Group Utilities HOLDRs Trust UTStarcom, Inc. VA Linux Systems, Inc. Valence Technology, Inc. Valero Energy Corporation ValueVision International, Inc. Varian, Inc. Varian Semiconductor Equipment Associates, Inc. Vastera, Inc. Veeco Instruments, Inc. Ventana Medical Systems, Inc. Ventiv Health, Inc. VeriSign, Inc. Veritas DGC, Inc. VERITAS Software Corporation Verity, Inc. Verizon Communications, Inc. Versata, Inc. Vertex Pharmaceuticals Incorporated VerticalNet, Inc. V.F. Corporation Viacom, Inc. Class A Viacom, Inc. Class B ViaSat Inc. Viasystems Group, Inc. Vicor Corporation Vignette Corporation Vimpel-Communications ADR Vintage Petroleum, Inc. Virata Corporation ViroPharma Incorporated Vishay Intertechnology, Inc. Visteon Corporation VISX, Incorporated Vitesse Semiconductor Corporation Vitria Technology, Inc. Vivendi Universal Vodafone Group Plc ADR Wabash National Corporation Wachovia Corporation Walgreen Co. Wal-Mart Stores, Inc. Walt Disney Company (The) Washington Mutual, Inc. Waste Connections, Inc. Waste Management, Inc. WatchGuard Technologies, Inc. Waters Corporation Watson Pharmaceuticals, Inc. Wave Systems Corporation Weatherford International, Inc. WebMD Corporation webMethods, Inc. Websense Inc. WellPoint Health Networks, Inc. Wells Fargo & Company Wendy's International, Inc. Western Digital Corporation Western Multiplex Corporation Weyerhaeuser Company Whirlpool Corporation Whole Foods Market, Inc. Wild Oats Markets, Inc. Willamette Industries, Inc. Williams Communications Group, Inc. Williams Companies, Inc. (The) Williams-Sonoma, Inc. Wind River Systems, Inc. Winn-Dixie Stores, Inc. Winnebago Industries, Inc. Winstar Communications, Inc. Wisconsin Central Transportation Corporation WJ Communications, Inc. WorldCom, Inc.–MCI Group WorldCom, Inc.–WorldCom Group W.R. Berkley Corporation Xcelera, Inc. Xerox Corporation Xilinx, Inc. XM Satellite Radio Holdings, Inc. XO Communications, Inc. XOMA Ltd. XTO Energy Inc. Xybernaut Corporation Yahoo! Inc. York International Corporation Zale Corporation Zebra Technologies Corporation Zimmer Holdings, Inc. Zions Bancorporation ZixIt Corporation Zoltek Companies, Inc. Zoran Corporation STOCK INDICES DOMESTIC BROAD-BASED CBOE Mini-NDX (MNXSM) Dow Jones Industrial AverageSM (DJX) Goldman Sachs Technology Index (GSTITM) Composite (GTC) iSharesSM S&P 100® Index Fund (OEF) Morgan Stanley Multinational Company IndexSM (NFT) Nasdaq-100® (NDX) Nasdaq-100® Index Tracking StockSM (QQQ) NYSE Composite® (NYA) S&P 100® Index (OEX®) (American-style exercise) 34 CBOE ‘01 S&P 100® Index (XEOSM) (European-style exercise) S&P 500® (SPX) S&P 500/BARRA Growth (SGX) S&P 500/BARRA Value (SVX) S&P SmallCap 600® (SML) Russell 2000® (RUT) Salomon Smith Barney Holdings Inc. Dow Jones Industrial AverageSM Index Equity Linked Notes expiring September 6, 2005 Salomon Smith Barney Holdings Inc. Nikkei 225 Index Securities expiring August 20, 2002 Salomon Smith Barney Holdings Inc. S&P 500® Index Equity Linked Notes expiring March 11, 2002 Salomon Smith Barney Holdings Inc. S&P 500® Index Equity Linked Notes expiring October 3, 2003 Salomon Smith Barney Holdings Inc. 2000 TEN+SM Index Call Warrants expiring September 26, 2005 Salomon Smith Barney Holdings Inc. Targets Trust III Targeted Growth Enhanced Terms Securities ("TARGETS®") with respect to the common stock of MCI WorldCom, Inc. expiring August 15, 2002 Salomon Smith Barney Holdings Inc. Callable S&P 500® Index Equity Linked Notes expiring June 30, 2006 Salomon Smith Barney Holdings Inc. S&P 500® Index Equity Linked Notes expiring December 30, 2005 Salomon Smith Barney Holdings Inc. Targets Trust IV Targeted Growth Enhanced Terms Securities ("TARGETS®") with respect to the common stock of Amgen, Inc. expiring November 15, 2002 Salomon Smith Barney Holdings Inc. Targets Trust V Targeted Growth Enhanced Terms Securities ("TARGETS®") with respect to the common stock of Sun Microsystems, Inc. expiring May 15, 2003 OTHER EQUITY PRODUCTS TRADED iSharesSM S&P 100® (OEF) Nasdaq-100® Index Tracking StockSM (QQQ) DOMESTIC SECTORS CBOE Gold (GOX) CBOE Internet (INX) CBOE Oil (OIX) CBOE Technology (TXX) Dow 10SM Index (MUT) Dow Jones Equity REIT IndexSM (DJR) Dow Jones Internet Commerce IndexSM (ECM) Dow Jones Transportation AverageSM (DTX) Dow Jones Utility AverageSM (DUX) GSTITM Hardware (GHA) GSTITM Internet (GIN) GSTITM Multimedia Networking (GIP) GSTITM Semiconductor (GSM) GSTITM Services (GSV) GSTITM Software (GSO) S&P Banks (BIX) S&P Chemicals (CEX) S&P Health Care (HCX) S&P Insurance (IUX) S&P Retail (RLX) S&P Transportation (TRX) INTERNATIONAL CBOE Mexico (MEX) INTEREST RATES Each contract is based on the “spot yield” (the annualized discount rate for T-bills and the yield-to-maturity for T-notes and T-bonds) of the most recently auctioned corresponding U.S. Treasuries: 5-year T-note (FVX) 10-year T-note (TNX) 13-week T-bill (IRX) 30-year T-bond (TYX) STRUCTURED PRODUCTS American Express Credit Corporation 1 1/8% Cash Exchangeable Notes expiring February 19, 2003 The Bear Stearns Companies Inc. S&P 500® Index Equity Linked Notes expiring May 20, 2003 The Goldman Sachs Group, Inc. Callable Index Linked Notes due November 23, 2003 (linked to the GSTITM Internet Index) The Goldman Sachs Group, Inc. Callable Index Linked Notes due December 2, 2003 (linked to the GSTITM Internet Index) “Dow Jones,SM” “Dow Jones Industrial Average,SM” “Dow Jones Transportation Average,SM” “Dow Jones Utility Average,SM” “DJA,SM” “Options on The Dow,SM” “Dow 10,SM” Dow Jones Equity REIT Index,SM” and “Dow Jones Internet Commerce Index SM” are service marks of Dow Jones & Company, Inc. and have been licensed for certain purposes by the Chicago Board Options Exchange, Inc. Options based on the Dow Jones Indexes are not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such products. CBOE,® Chicago Board Options Exchange,® FLEX,® FLexible EXchange,® LEAPS® and OEX® are registered trademarks of the Chicago Board Options Exchange, Inc. Best Execution Assurance Program,SM CBOEdirect,TM CBOEflex.net,TM CBOE Volatility Index,SM Long- term Equity AnticiPation Securities,TM MNX,SM SPX,TM VIX,SM VXNSM and XEOSM are trademarks of the Chicago Board Options Exchange, Inc. “MITTS®” is a registered service mark and “Market Index Target-Term Securities SM” is a service mark owned by Merrill Lynch & Co., Inc. Goldman Sachs & Co. has trade name and trademark rights to the designations “GSTITM” and “Goldman Sachs” and such designations have been licensed to the Chicago Board Options Exchange, Inc. for use in connection with the trading of options based upon the Goldman Sachs Technology Indexes. iSharesSM are distributed by SEI Investments Distribution Co. Barclays Global Fund Advisors serves as an advisor to iShares and is not affiliated with SEI. iShares are not sponsored, endorsed, sold or promoted by Standard & Poor’s. iShares is a service mark of Barclays Global Investors, N.A. Incorporated and has been licensed for use by the Chicago Board Options Exchange, Inc. Nasdaq-100,® Nasdaq-100 Index,® Nasdaq,® The Nasdaq Stock Market,® Nasdaq-100 Shares,SM and Nasdaq-100 TrustSM are trademarks of The Nasdaq Stock Market, Inc. The Nasdaq-100 Index® is determined, composed, and calculated by Nasdaq without regard to CBOE, The Nasdaq- 100 Trust,SM or the beneficial owners of Nasdaq-100 Shares.SM The corporations make no warranty, express or implied, and bear no liability with respect to The Nasdaq- 100 Index,® its use, or any data included therein. The NYSE Composite Index® is a registered trademark of the New York Stock Exchange, Inc. NYSE does not issue, offer, sell, sponsor, or recommend or provide a facility for the offer or sale of options based on the NYSE Composite Index. Standard & Poor’s,® S&P,® S&P 100® and S&P 500® are registered trademarks of The McGraw-Hill Companies, Inc. and are licensed for use by the Chicago Board Options Exchange, Inc. The S&P SmallCap 600TM Stock Index is a trademark of McGraw-Hill, Inc. and is licensed for use by the Chicago Board Options Exchange, Inc. “TARGETS®” is a registered service mark of Salomon Smith Barney Holdings Inc. 1999 TEN+SM and 2000 TEN+SM are service marks of Salomon Smith Barney Holdings Inc. ©2001 Chicago Board Options Exchange, Inc. All rights reserved. Printed in the USA. Design: Liska + Associates, Inc. Photography: Tim Bieber, Mark Battrell Printing: Active Graphics, Inc. “Morgan Stanley Multinational Index SM” is a service mark of Morgan Stanley & Co. The Russell 2000® Index is a registered trademark of The Frank Russell Company. LaSalle at Van Buren Chicago, Illinois 60605 312.786.5600 300 Park Avenue, Suite 1700 New York, New York 10022 212.572.4815 www.cboe.com 

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