Ownership Structure

London Stock Exchange
2 February 2000

                     EXCHANGE ANNOUNCES PROPOSED CHANGES                      
                            TO OWNERSHIP STRUCTURE                            
                   Vote on demutualisation set for 15 March                   

 
The London Stock Exchange is today issuing a circular and Information
Memorandum to B shareholders seeking their approval to become a public
company with transferable shares, enabling the Exchange to operate on a fully
commercial basis. 
 
An Extraordinary General Meeting has been set for 15 March 2000, when the
Exchange's B shareholders will be asked to approve the proposals. 
 
Commenting on the demutualisation proposals, Sir John Kemp-Welch, chairman of
the London Stock Exchange, said: 'This move comes at a time when stock
exchanges worldwide are operating in a rapidly changing environment that
affects many aspects of their businesses.  
 
'We believe the new structure will put us in a strong position to respond to
these changes. A simplified ownership structure will allow us to focus on
delivering enhanced services to our customers and improved returns for our
shareholders.' 
 
Subject to the necessary approvals, the Exchange's aim will be to maximise
shareholder value through the provision of high quality, competitively priced
services to its customers, including issuers, investors and intermediaries.
The strategy will be based on: 
 
* Consolidating and enhancing the Exchange's leading position in the UK and
  internationally

* Continuing to invest in the development of new products and services 
 
* Playing a leading role in the development of European and other
  international equity trading markets. 

The Exchange's trading performance from its continuing activities has
progressed from a loss before taxation of £16.1 million in 1995 to a profit
before taxation of £17.5 million in 1999. 
 
Gavin Casey, chief executive of the London Stock Exchange, said: 'We are in a
strong market and financial position with the resources to compete more
effectively in the future. These proposed changes are a vital step in
ensuring our competitive edge.' 
 
                                                                     

 
NOTE TO EDITORS
The proposals require the support of 75% of the votes cast at the
Extraordinary General Meeting. The Exchange's shares will not be listed but
trading will be available on a matched bargain basis. Subject to the
necessary approvals, dealings in the shares are expected to commence in May
2000. 
 
CONTACT DETAILS
 
London Stock Exchange 
Andy Muncer 0207 797 3465      Jeremy Hughes 0207 797 1395 

Schroders 0207 658 6000 
Philip Robert-Tissot 

Brunswick     0207 404 5959 
Derek Bainbridge, Tim Payne 

After hours: duty press officer available on 0207 797 1000 



                   PROPOSED CHANGES TO OWNERSHIP STRUCTURE                    
                             Summary information                              
 
SUMMARY OF THE PROPOSALS 
Further to the announcement in July 1999 of the proposed reorganisation, the
Exchange has posted documents to its existing A and B shareholders today in
connection with the proposals, which are summarised below: 
 
*  B shares will be redesignated as ordinary shares and will be
   transferable, subject to a maximum shareholding of not more than 4.9% for  
   any ordinary shareholder or group of connected ordinary shareholders; 
   
*  following a bonus issue, each B shareholder will hold 100,000 ordinary
   shares, equivalent to approximately 0.34% of the Exchange's issued ordinary
   share capital; 

*  Cazenove will provide an off-market trading facility to bring together
   potential buyers and sellers of ordinary shares on a matched bargain basis;

*  the Exchange intends to pay dividends on ordinary shares and proposes to
   pay the first dividend in January 2001; 

*  the Exchange will re-register as a public company with the name London
   Stock Exchange plc; 
   
*  the Exchange will introduce share incentive arrangements for directors
   and employees; and 
     
*  the A shares are to be redeemed and each A shareholder will receive
   £10,000 for each A share held when the Court approved reduction of capital
   becomes effective.

 
An Extraordinary General Meeting of B shareholders is to be held on 15 March
2000 to approve the proposals. It is expected that dealings in ordinary
shares will commence in May 2000. 
 
BUSINESS DESCRIPTION
The Exchange is the UK's leading stock exchange and the most international of
all stock exchanges world-wide. It provides the markets and means of raising
capital for UK and international companies through equity, debt and
depository receipt issues. The Exchange operates the fourth largest equities
exchange in the world by market capitalisation and the third largest by value
of trading. 
 
Of UK domiciled listed companies, 98% by number are quoted on the Exchange.
Some 500 non-UK domiciled companies from over 60 countries are traded on the
Exchange. More than 99% by value of UK trading in UK companies' shares takes
place on the Exchange. 

The Exchange's activities can be broadly categorised as set out below. 
 
 
*  COMPANY SERVICES  The Exchange provides a number of markets which
   facilitate the raising of capital and the trading of corporate securities.
   These markets are supported by a range of services to raise the profile of
   Exchange-traded companies and encourage the flow of market and corporate
   information through the Regulatory News Service ('RNS') and other value    
   added services.

*  TRADING SERVICES  The Exchange provides access to a well-developed
   trading environment with services encompassing an advanced electronic order
   book for the most liquid stocks, quote display and a mix of quote display  
   and order execution for less liquid stocks. The Exchange is a Recognised
   Investment Exchange under the Financial Services Act 1986 with             
   responsibility for the orderly operation and regulation of its markets.

*  INFORMATION SERVICES  The Exchange provides high quality real time price
   information to over 85,000 installed terminals world-wide as well as       
   historic and reference data services.

THE EXCHANGE'S BUSINESS ENVIRONMENT 
The Exchange is operating in a rapidly changing environment that affects many
aspects of its business. The board believes that the Exchange is well
positioned to meet these changes as a result of its scale of operation;
critical mass in the UK market; high quality, easily accessible and cost
competitive services and the technological advantage achieved by early
automation. 
 
The board believes that the major external factors affecting the Exchange's
operating environment are as follows: 
 
*  deregulation and liberalisation of economies globally; 
*  demographic pressure to fund long-term pension liabilities;  
*  technological developments in communications and business systems; 
*  market consolidation amongst securities market participants; and 
*  increasing competition.
 
The Exchange has invested to reinforce its position as the most liquid market
for UK stocks by providing low-cost trade execution, high levels of
performance and efficiency and improved accessibility. Plans have been and
continue to be implemented to develop trading functionality and accessibility
further and to improve services to continue to attract international
companies from developed, developing and emerging economies. The directors
believe the Exchange is well positioned to provide services to complement the
growing demands for capital from these companies. 
 
The Exchange remains committed to the creation of a pan-European stock market
and has played a leading role in developments to date. The development of
such a market may result from the initial co-operation between European stock
exchanges, from corporate activity or from unilateral action by one or more
exchanges. The Exchange intends to play a leading role in the creation of a
pan-European market in whatever way and however quickly it develops. 
 
OBJECTIVE AND STRATEGY 
Under the Exchange's current quasi-mutual constitution, it has been prevented
from operating on a fully commercial basis with a view to earning profits for
distribution and has been prohibited from paying dividends to shareholders. 
 
Following implementation of the proposals, the Exchange's primary objective,
as a fully commercial entity, will be to maximise shareholder value through
the provision to its customers (including issuers, investors and
intermediaries) of high quality, competitively priced services. In order to
achieve this objective, the Exchange will follow a strategy based on: 
 
*  building on the strengths of its existing businesses, including the
   quality and reliability of its trading and information services and its
   innovative and flexible approach to the development of market structures   
   and services, in order to enhance its strong competitive position in the UK
   and internationally; 

*  continuing to invest in the development of new products and services, in
   order to enhance its position and grow its revenues;  

*  continuing to manage costs effectively; and 
     
*  playing a leading role in the development of the European and other
   international equity trading markets, on the basis of the Exchange's strong
   financial position.

GROUP FINANCIAL HIGHLIGHTS

Summarised profit and loss account
 
The Group's trading performance for continuing activities, excluding
settlement and its role as UK Competent Authority for listing which is to be
transferred to the Financial Services Authority, for the five year period
ended 31 March 1999 and the six month period ended 30 September 1999 is
summarised in the table below.  

                                                                              
                                                                         
                           Year ended 31 March                   Six months to
                                                                  30 September
                       Notes    1995   1996    1997    1998    1999      1999
                                  £m     £m      £m      £m      £m        £m 
------------------------------------------------------------------------------
Turnover
Company Services                18.2   17.6    19.3    21.0    23.1      12.1
Trading Services                33.5   36.7    38.9    39.1    40.5      22.5
Information Services            69.0   60.8    62.5    64.7    71.8      35.3
Other                            4.7    5.6     7.0     8.9    11.3       5.4 
______________________________________________________________________________
Total turnover                 125.4  120.7   127.7   133.7   146.7      75.3 
Less: rebate             1         -      -   (10.0)  (16.6)      -         - 
      share of joint     2         -      -    (2.2)   (3.0)   (3.4)     (2.1)
      venture turnover
Net turnover                   125.4  120.7   115.5   114.1   143.3      73.2 
Operating costs                (97.3) (94.8)  (92.8)  (88.7)  (96.0)    (46.2)
Development and other          (45.5) (51.3)  (28.3)  (18.7)  (37.8)     (6.8)
costs
______________________________________________________________________________
Total costs                   (142.8)(146.1) (121.1) (107.4) (133.8)    (53.0)
------------------------------------------------------------------------------
Operating profit/(loss)        (17.4) (25.4)   (5.6)    6.7     9.5      20.2 
Net interest receivable  3       1.3    6.2     7.4     7.6     8.0       3.2 
and joint venture income
------------------------------------------------------------------------------
Profit/(loss) before           (16.1) (19.2)    1.8    14.3    17.5      23.4 
taxation
------------------------------------------------------------------------------
Illustrative earnings    4         -      -       -    37.2    37.9      55.0 
per share(p)


Notes: 
 
1  A rebate was paid to Member Firms in 1997 and 1998. 
2  Share of joint venture turnover represents the Exchange's 50% share of
   FTSE International turnover included above within Information Services. 
3  Includes share of profits of FTSE International as well as net interest
   receivable. 
4  Illustrative earnings per share is determined excluding settlement and
   Competent Authority and is based on 29,800,000 ordinary shares expected to 
   be in issue following implementation of the proposals; 1998 illustrative
   earnings per share is shown after rebate.


TURNOVER 
Total turnover has increased over the period from 31 March 1995 to 31 March
1999 from £125.4 million to £146.7 million. This reflects increases in each
of the three divisions and in other income.  
 
OPERATING COSTS 
Between the years ending 31 March 1995 and 31 March 1998, the Exchange
reduced operating costs from £97.3 million to £88.7 million, principally as a
result of savings in property and support functions. In the year to 31 March
1999 operating costs increased to £96.0 million as the Exchange progressed
the development of its markets both in the UK and internationally and
increased spending to improve further the reliability of its services. 
 
DEVELOPMENT AND OTHER COSTS 
The Exchange incurs significant development and other costs which represent
investment in systems and market support. These costs are expensed in the
year incurred. In the years ended 31 March 1995 and 31 March 1996, the
particularly high level of development expenditure marked the culmination of
the investment programme which resulted in the replacement of the Exchange's
main trading and information systems. This was followed by the implementation
of the Exchange's electronic order book in 1997. The main expenditure in the
year to 31 March 1999 was the system changes, upgrades and significant market
support for the Year 2000 programme. New information technology projects are
expected to require the Exchange to maintain this recent high level of
development expenditure. 
 
BALANCE SHEET 
As at 30 September 1999, the Exchange had net assets of £211.3 million,
including cash and investments of £201.2 million. The book value of the
Exchange's freehold properties at 30 September 1999 was £85.9 million.  
 
Following the repayment of the A shares, the only borrowing outstanding will
be the £30 million 10 1/8% Mortgage Debenture Stock, which is repayable in
2016 and is secured on the Exchange Tower. If the Mortgage Debenture Stock is
repaid early, it must be repaid with a gross redemption yield equal to that
of 12% Treasury Stock 2013/17. As at 30 September 1999, this implied a
redemption multiple of approximately 1.62 times nominal value, equivalent to
a redemption value of £48.6 million.  
 
CAPITAL STRUCTURE
The board believes that it is important for the Exchange to maintain a strong
balance sheet with significant cash balances in order to: 
 
 
*  provide financial stability during the transition from quasi-mutual
   status;

*  ensure confidence in the Exchange's ability to take a leading role in
   market developments;

*  finance investment in development expenditure;

*  maintain strategic flexibility at a time of unprecedented change in the
   Exchange's operating environment; and

*  ensure the Exchange is able to meet the capital adequacy requirements
   imposed by the Financial Services Authority.
 
CURRENT TRADING AND PROSPECTS 
As outlined in the interim report in November 1999, development costs will be
incurred in the second half of the year to 31 March 2000 to enhance the
electronic order book as part of the Exchange's plans to enhance further the
quality of services to its customers. Since September 1999, financial
performance has continued broadly in line with the directors' expectations.
This level of performance, together with development costs and the costs of
implementing the proposals, which will largely fall into the second half,
indicates significantly lower profitability for the six month period to 31
March 2000 than for the six month period to 30 September 1999. 
 
The directors believe that the Exchange is well positioned to meet the
challenges of the competitive business environment in which it operates and
view the prospects for the Exchange with confidence. 
 
DIVIDEND POLICY 
The directors intend to adopt a progressive dividend policy, with dividends
initially covered approximately 3 to 5 times by earnings. 
 
The directors intend that the Exchange will pay both an interim and a final
dividend each year, payable in January (interim) and August (final). The
interim and final dividends will be paid in the approximate proportions of
one third and two thirds respectively of the expected total annual dividend.
The first dividend payable on ordinary shares will be the interim dividend
for the year ending 31 March 2001. 
 
REASONS FOR AND BENEFITS OF THE PROPOSALS 
The board has concluded that the Exchange needs to revise its current
constitution to become a public company with transferable shares and to
operate on a fully commercial basis. 
 
The board believes that in an increasingly competitive environment, ending
the link between ownership and access to the Exchange's markets is critical
to the Exchange's future success. By separating ownership from membership,
the Exchange will be able to focus on providing the right services to
customers and creating value for shareholders. Specifically, the board
believes the proposals will enable the Exchange more readily to achieve: 
 
*  a clearer focus on customer needs;  

*  effective decision-making;  

*  the flexibility to respond to changes in the business environment; and 

*  a fully commercial basis of operation.
 
The board believes that the proposals are in the best interests of the
Exchange and that their implementation will provide the most appropriate
basis for the next phase of the Exchange's development. Following the
implementation of the proposals, the Exchange will be operating on a fully
commercial basis. The board has concluded that the Exchange should not
proceed to a full listing at this stage. This decision will, however, be kept
under review in the light of progress made on the development of the
business.  
 
TIMETABLE TO IMPLEMENTATION 
An Extraordinary General Meeting has been convened for 15 March 2000, at
which meeting the B shareholders will be asked to vote on the proposals.
Assuming the proposals are approved at the EGM, there will be a Court hearing
of the Petition for the reduction of capital. The Exchange will only be
re-registered as a public company following confirmation of the reduction of
capital by the Court and completion of the share capital reorganisation. 
 
If the proposals and the Court hearing for the reduction of capital are
approved, off-market, matched bargain dealings in ordinary shares are
expected to commence in May 2000. The dates following the EGM are indicative
dates and the board will make an appropriate announcement when the precise
dates are known. 
 
TRANSFERABILITY OF SHARES 
Ordinary shares will be transferable subject to a maximum shareholding of not
more than 4.9% for any ordinary shareholder or group of connected ordinary
shareholders. Cazenove will provide a trading facility to bring together
potential buyers and sellers to allow trading of ordinary shares on a matched
bargain basis.  
 
This announcement does not constitute an offer or an invitation to acquire
any securities. 
 
Schroders, which is regulated by The Securities and Futures Authority
Limited, is acting for London Stock Exchange Limited and no one else in
connection with the proposals to B shareholders and will not be responsible
to anyone other than London Stock Exchange Limited for providing the
protections afforded to the customers of Schroders or for providing advice in
relation to the proposals. 
 
Schroders has approved the contents of this announcement solely for the
purposes of section 57 of the Financial Services Act 1986.