AIM AND THE PROSPECTUS DIRECTIVE

Further to our article in the October Public Companies Update, plans have been drawn up for AIM to cease to be a EU Regulated Market when the Prospectus Directive is implemented.

1.1 Regulated Market
The London Stock Exchange have said that this will just alter the technical status of AIM in the context of European regulation, but that it will not impact on the way AIM is regulated by the London Stock Exchange, and it is understood that the Treasury can see no reason why AIM will not be able to continue as an Exchange-regulated market.

The existing Investment Services Directive requires each member to notify the European Commission of its regulated markets each year. An annual list is then compiled and published detailing all of the regulated markets in the EU. This list is due to be updated shortly and AIM's status will be of importance as the Prospectus Directive only applies to regulated markets. This could mean that AIM might adopt a half way house where its rules are no less onerous than present but without the additional costs which will apply to EU Regulated Markets under the Prospectus Directive.

Each Member State specifies the markets that come under the definition of a "regulated market". The UK previously notified the Commission that it considers the AIM market to fall within the definition of regulated market. However, AIM has confirmed to us that it is planning to relinquish its status as a regulated market.

A LSE spokesperson also said that the UK Treasury and Financial Services Authority have already provisionally agreed to AIM's exemption from the Directive, although they want to see the consultation results before giving final authorisation but that they would launch a consultation later in 2004.

1.2 Practical Implications
In its recent Adviser Issue, the London Stock Exchange have said that they have had discussions on these proposals with the Inland Revenue and that they have received some comfort that this technical change in status should not have an impact on the existing tax treatment of shares traded on AIM.

This change in status will mean that AIM companies are not subject to some of the provisions of the Prospectus Directive which apply to companies on Regulated Markets, such as the requirement to publish a prospectus when applying for shares to be listed on a regulated market. Applicants for admission to trading on AIM would, generally speaking, have to prepare an admission document in accordance with the AIM Rules and only if its application is accompanied by a public offer for more than €2.5m over a 12 month period or otherwise falls within the scope of the Prospectus Directive, a prospectus in accordance with the Prospectus Directive.

If you require further information on any matter covered in this note, please contact your principal contact at Charles Russell or Simon Gilbert, Katy Knight, Clive Hopewell or Alexander Keepin (London), Francis Rundall or Richard Norton (Cheltenham) or Geoff Sparks (Guildford) and on 0207 203 5000.

Please note that the summaries above are a general indicative guide only. They are not exhaustive. This information has been prepared by the firm as a service to our clients. As it is a general guide, we recommend that you seek professional advice before taking action. No liability can be accepted by the firm for any action taken or not taken as a result of this information. The firm is not authorised under the Financial Services and Markets Act 2000 but we are able in certain circumstances to offer a limited range of investment services to clients because we are members of the Law Society. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide.