Proposed Pre-Conditional Cash Offer by Deutsche Börse for the LSE

Deutsche Börse AG (Deutsche Börse) announces details of a pre-conditional cash offer of no less than 530 pence for each ordinary shares of the London Stock Exchange plc (London Stock Exchange). The Offer is subject to the sole pre-condition that the Board of the London Stock Exchange resolves to give anunqualified and unconditional recommendation to its shareholders to accept the Offer. Deutsche Börse reserves the right to waive, in whole or in part, the above pre-condition.

Deutsche Börse is committed to ensuring the continued operation of the London market in a manner consistent with past practice. The London Stock Exchange will continue to be solely regulated by the FSA. Established market modelsincluding the AIM market would be supported and maintained. Sterling would remain the trading currency for UK stocks and London would be promoted as the primary destination for the listing and trading of UK and international stocks.

Deutsche Börse intends to agree a long term arrangement with CrestCo to ensure continuity for its well accepted and efficient services for clearing and settlement. In addition, if the transaction takes place, Deutsche Börse would be prepared to offer an immediate one year extension of the existing contract with LCH.Clearnet as the provider of the guarantee function for the London market in return for a material price reduction for the benefit of the customers of the London Stock Exchange.

Deutsche Börse intends to offer customers of the London Stock Exchange immediate cost reductions as follows:

- the cost of current tariff structures for electronic order book trading in the UK would be reduced by 10% overall as of 1 January 2006. Prices would be capped at this new level for at least five years and would be expected to be further reduced in the future. Moreover, Deutsche Börse would guarantee that these fees will never exceed current levels

- with respect to clearing, Deutsche Börse would put in place an alternative offer to the London market to provide LCH's clearing guarantee at a price 50% lower than the price currently charged by LCH.Clearnet; and

- in the area of information services the new group would offer a 10% price reduction to customers who subscribe to the delivery of real time price information for the UK and German cash markets.

Regulation of the London Stock Exchange would be unchanged and new customer-oriented governance procedures would be put in place:

- Deutsche Börse is determined to ensure that customers represent a significant proportion of the Board of the London Stock Exchange as well as having the appropriate number of directors who are genuinely independent of both the exchanges and their customers. In addition, the Executive Board of Deutsche Börse intends that the Board of the London Stock Exchange will be chaired by an independent chairman

- Any operational changes to the London market that have a material impact on the economics of customers' operations in the London cash equity market would be subject to the approval of both the Board of the London Stock Exchange and the new group's Executive and Supervisory Boards

- The Supervisory Board of Deutsche Börse is currently comprised of fourteen shareholder-elected representatives. If the proposed transaction takes place, Deutsche Börse would commit that new candidates would be nominated such that seven of the fourteen would have close ties to the City of London

- The Executive Board members responsible for the Cash Equities, Derivatives and Clearing businesses would be resident in London. These activities represent approximately 45% of the new group's revenues for the financial year 2003.

The Executive Board estimates that a combination with the London Stock Exchange would lead to an additional contribution to profit before tax from revenue and cost synergies of at least EUR 100 million per annum which is expected to be achieved in the third financial year (2008) following completion of the transaction. Of this EUR 100 million approximately EUR 25 million per annum is estimated to come from revenue synergies and approximately EUR 75 million per annum from reduced costs. Total restructuring costs are expected to be less than EUR 100 million.

The Executive Board of Deutsche Börse estimates that the combination would lead to accretion in its earnings per share (before implementation costs) in the first full financial year after completion of the transaction. In addition, the pro forma return on investment in the first full financial year after completion of the transaction, including full run rate synergies, is expected to be approximately 8%, which exceeds the Group's anticipated cost of capital.

The Executive Board also believes that the strong cash flow generation of the new group would facilitate the continuation of the progressive dividend policy of Deutsche Börse, maintaining a strong AA credit rating and facilitate the implementation of a share buyback program commencing by the end of 2006.

Listing and trading activities as well as regulation in the Frankfurt market will be entirely unaffected by the proposed transaction and remain unchanged. Deutsche Börse will continue to be incorporated in Germany with its global headquarters in Frankfurt.

The announcement is being made in order to facilitate discussions with the customers, shareholders and other stakeholders of the London Stock Exchange and Deutsche Börse. Following such discussions and prior to making the formal offer, Deutsche Börse reserves the right to amend any or all elements of the Offer and proposals to customers, shareholders and other stakeholders, save that it will not reduce the price. This announcement does not constitute an offer or invitation to purchase any securities or a firm intention to make an offer pursuant to Rule 2.5 of the City Code on Takeovers and Mergers. There can be no guarantee that such an offer will be made.