Germany

As of April 1999, Deutsche Börse intends to provide enterprises with low capitalization (known as small caps) with a new forum: the SMAX or Small Cap Exchange. The new division will be separate from the successful New Market which opened in March 1997 for stocks of young innovative high growth companies. It will run alongside the traditional three: the official market, regulated market and free market. Through this measure qualified small caps (in particular, German Mittelstand enterprises) should have access to a more prominent and more liquid market.

To qualify for the new market, stocks of small caps will have to be admitted either to official quotation or to the regulated market at the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse). Both markets are regulated markets under the EC Investment Services Directive and, therefore, a pre-condition for many institutional investors to invest in small caps traded on SMAX will be met.

Additionally, small caps will have to accept certain quality standards under a private law agreement with the exchange. The issuer will have to take the following measures to foster liquidity and transparency: (i) it will have to publish quarterly reports complying with requirements on their contents; (ii) it will have to involve a credit institution or a financial services institution as designated sponsor which provides quotes to the electronic order book of Xetra; (iii) at least 20% of the stocks of the small cap must be freely floating; (iv) the issuer will have to acknowledge the German Takeover Code which was published by the Panel of Exchange Experts (Börsensachverständigenkommission) appointed by the German Ministry of Finance and which provides for a voluntary commitment to a framework for a transparent, fair and investor-friendly execution of public takeovers; and (v) the stockholding of the members of the board of directors and of the supervisory board of the issuer must be published annually.

Deutsche Börse will also introduce two indices for the new division: the SMAX-All-Share-Index comprising all shares traded on SMAX and the SDAX comprising the 100 small caps traded on SMAX with the highest market capitalization and volume of trading. The index family of Deutsche Börse will be complemented by an index for such stocks following the 30 stocks contained in the DAX and the 70 mid caps contained in the MDAX.

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