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1 AIM A Brief Guide Finance & investment Maritime Energy Natural resources Transport Real estate ICT Corporate Finance Tax Dispute resolution Employment Regulatory London New York Paris Hamburg Munich Frankfurt Milan Rome Madrid Athens Singapore Bangkok Hong Kong wfw.com

2 Contents 01 Our approach 02 AIM 06 Appointing brokers and nomads 07 How does my company list on AIM? 09 What happens after admission? 10 Can foreign companiesʹ shares be traded electronically through CREST? 11 What are the tax benefits of listing on AIM? 13 Contacts 14 Notes 16 Our offices

3 OUR APPROACH 01 Our approach Watson, Farley & Williams is a leading international law firm with offices in major financial centres in Europe, Asia and the USA. We have the skills to manage a wide range of corporate and finance transactions, and disputes, and to provide our clients with the high quality advice they require. We have teams which are integrated across legal disciplines and offices so that a consistent level of service can be provided on all matters, in each jurisdiction and in combination across borders. We continually invest in developing our expertise and reputation in the sectors we know best: Finance & Investment, Maritime, Energy, Natural Resources, Transport, Real Estate and ICT. We establish candid, open relationships with our clients and take the time to understand their businesses. We generally work in small, partner led teams where our sector knowledge and experience enable us to provide effective, commercially focused advice. Watson, Farley & Williams AIM A Brief Guide

4 02 AIM AIM Thisbrochureisintendedtohighlightsomeof themainconsiderationsforcompaniesseeking toobtainalistingontheaimmarket(aim)of thelondonstockexchangeplc(thelse). WhatisAIM? AIMwaslaunchedinJune1995asameansforproviding smallercompanieswithanalternativewayofraisingnew capitalforexpansion.aimisanexchangeregulatedmarket butisdesignedtomaximiseaccessibility.theframeworkis madeupofclearruleswhichhavebeenspecificallytailored forsmallerandgrowingcompanieswishingtofloat between1%and100%ofthecompany. ThetypesofcompaniessuitedtoalistingonAIMinclude: UKandnon UKcompanieswishingtoissueshares,raise capital,widentheirinvestorbaseandhavetheirshares tradedonareputableandregulatedmarket thosecompaniesnotwishingtoplaceaminimumof25% oftheirsharecapitalinpublichands(asisrequiredonthe OfficialList(theOfficialList)oftheUnitedKingdom ListingAuthority(theUKLA) companieslookingtomakeacquisitionswithoutthe expenseandtimeinvolvedinlistingontheofficiallist.

5 AIM 03 ListingonAIMoffersmanyadvantagestocompanies.AIM enhancethecompany sstatuswithcustomersand can: suppliersasconfidenceisgainedbytheimpositionof regulatoryproceduresonthecompany provideaccesstolong terminvestmentcapitalforfurther enableacompanytomakeacquisitionsusingitssharesas growthofthebusiness capitalcanberaised,bothatthe currency timeofadmissionandlaterthroughfurthershareissues, forworkingcapitalorresearchanddevelopment beusedasasteppingstonetoafulllistingontheofficial purposesaswellasforacquisitions List. createamarketforacompany ssharesandplacean WhylistonAIM? objectivemarketvalueontheshares AIMprovidesallofthebenefitsofbeingtradedonapublic marketbutiscomparativelyflexibleasithas: provideaccesstoabroadrangeofinstitutionaland privateinvestors easierentrycriteria offerexistingshareholdersanexitstrategyandthechance alessstringentregulatoryregime AIMhasitsownsetof torealisetheirinvestment rules,theaimrules,whicharedesignedtoensurea reasonabledegreeofregulationandinvestorprotection beusedtoencourageemployeecommitmentasitwill makeshareschemesmoreattractiveandprovidean easieracquisitionrules incentiveforlong termmotivation certaintaxbenefits sharesonaimareclassifiedfortax createaheightenedprofileofthecompanyasfeedbackof purposesasunquotedwhichmeansvarioustaxreliefs informationonthecompanyismadetothepublicby maybeavailabletoinvestors(seebelowforfurther wayofanalystsreportsandhopefullyfavourablepress details). coverage thiscanfacilitateexpansionofacompany s operationsintonewoverseasmarkets Watson,Farley&Williams AIM ABriefGuide

6 04 AIM A brief comparison between the Official List and AIM shows AIM as the more flexible regime: Minimum market capitalisation Minimum percentage of shares required to be in public hands Trading record requirements Accounting record requirements Prior Shareholder Approval Pre vetting of admission documents Official List Standard Premium 700,000 for 700,000 for shares shares AIM None 25% 25% None None Normally 3 years, for at least 75% of the business (mineral companies an exceptional case) None, although note prospectus requirements Unqualified audited accounts for 3 years None For class 1 acquisitions and disposals, reverse take overs and related party transactions Yes, by UKLA Yes, by UKLA None Normally 3 years Only for reverse takeovers or disposals resulting in a fundamental change of business None, unless a prospectus in which case vetted by UKLA Sponsor or Nomad Restrictions on Related Party Transaction Restrictions on offering shares at a discount Applicability of the Model Code Applicability of Listing Principles Obligation to disclose dealings in shares Requirements for the issue of further shares Official List AIM Standard Premium None Sponsors Nomad are needed for certain transactions None Yes A fair and reasonable confirmation is required where class test percentage is more than 5% None Generally None cannot be more than 10% discount None Yes AIM Rules None Yes None None Yes Dealings by directors and their families Prospectus (with limited exceptions) Prospectus (with limited exceptions) Admission document if an offer to the public

7 IS MY COMPANY ELIGABLE TO LIST ON AIM? 05 Is my company eligible to list on AIM? For a company to be admitted to AIM it must satisfy a range of criteria: a company must be incorporated in accordance with its applicable law, able to offer securities to the public and application must be made for all securities of the relevant class to be admitted there can be no restrictions on free transferability of securities, no pre emption rights and, generally, shares must be eligible for electronic settlement a Nomad and a broker must be appointed the Nomad will decide if the company is appropriate for admission to AIM Despite the more flexible regime, various issues must still be considered when listing on AIM. In particular: a company and its performance will be subject to more public scrutiny following a listing quotation on a public market brings with it the uncertainty of market conditions and there factors which may affect a company s share price listed companies face constraints which would not exist for private companies and he directors will be more accountable to external shareholders for their decisions and actions if the company is an investing company (i.e. a company whose primary business is the investing of its funds in the securities of other companies or the acquisition of a particular business), it must raise a minimum of 3 million in cash via an equity fundraising on, or immediately before, admission it must comply with any special condition imposed by the LSE. Where a company s main activity is a business which has not been independent and earning revenue for at least two years, the company will be required to ensure that certain persons, including directors, substantial shareholders and certain employees, agree not to dispose of their shares for a period of twelve months from admission. a company will have to be more open in terms of disclosing its financial position and other developments such as corporate activity While AIM listing costs are significantly lower than a listing on the Official List, they could still be high if minimal funds are raised on flotation and the annual retainer fees of Nomads, brokers and other advisers should also be borne in mind. Watson, Farley & Williams AIM A Brief Guide

8 06 APPOINTING BROKERS AND NOMADS Appointing brokers and nomads For a company to be admitted to AIM it must appoint and retain a Nomad and a broker at all times. These are advisers who are approved as such by the LSE. Their functions are to assist with the admission procedure and thereafter advise on, and ensure compliance with, the ongoing requirements of AIM and provide market support for trading in the companyʹs securities. Nomad Nomads are not required to satisfy themselves that all relevant matters concerning suitability for admission have been referred to the LSE. However, it is the Nomad s role to confirm that, in its opinion, the company and its securities are suitable for admission and there has been compliance with the AIM Rules. It must also confirm that the directors of the company have received satisfactory advice and guidance as to the nature of their obligations to ensure compliance by the company with the AIM Rules. Following admission, the Nomad is responsible for advising the directors of the company as to their ongoing obligations and for regularly reviewing the company s actual trading performance and financial condition against any profit forecast, estimate or projection included in the admission document or otherwise published, in each case to ensure compliance with the AIM Rules, particularly any notification requirements. The Nomad will also usually liaise with any relevant regulatory body on behalf of the company. If an AIM company loses its Nomad for any reason (e.g. dismissal or resignation) trading on AIM of its securities will be suspended immediately. If a replacement is not appointed (and announced) within one month of the adviser ceasing to act, the companyʹs admission to AIM will be cancelled. Broker The role of the broker is to: use its best endeavours to match bargains if there is no market maker in the securities, i.e. bringing together buyers and sellers provide information about the company to the market provide research and institutional sales support for the company act as a point of contact between shareholders and investors and the company and to generate investor interest advise the company on investment conditions and assist in the pricing of securities during a fundraising exercise. It is possible for a firm to act as both Nomad and broker.

9 HOW DOES MY COMPANY LIST ON AIM? 07 How does my company list on AIM? There are different admission procedures for companies seeking a standard listing on AIM and those companies which are already listed on certain major international stock markets and seeking a secondary listing on AIM. Standard Admission Procedure Under the standard procedure, a company wishing to be quoted on AIM must produce a formal admission document or prospectus to include all relevant information on the company (i.e. its activities, directors and management and its historic financial information). An admission document constituting a full prospectus under the EU Prospectus Directive will only be required if a public offer of securities over 5million (cumulative in any year) is being made to more than 150 legal persons in any member state as part of the admission process (subject to certain exemptions). Where there is no offer to the public or an offer is an exempt offer, companies seeking admission to AIM will need to produce an admission document complying with a standard of information referred to as AIM PD AIM PD is based on the content requirements for a full prospectus with certain carve outs. In many cases, because of the nature of the exemptions available, a company seeking admission to AIM will be able to avoid the need to prepare a full prospectus. Declaration of Nomad this includes confirmation of the responsibilities of the Nomad as set out in the AIM Rules Application by the company this is confirmation of the responsibilities of the company, as set out in the AIM Rules. Pre admission announcement (see below for further details). Streamlined Secondary Listing Procedure Companies already listed on the following major international stock markets (Designated Markets), and which have been so listed for at least 18 months, can benefit from a streamlined regime under which the standard procedure requirement to produce an admission document is replaced by an obligation to issue an expanded pre admission announcement: Australian Securities Exchange Deutsche Börse Group Johannesburg Stock Exchange NASDAQ NYSE Other documentation to be produced includes: Long form report this is a detailed financial due diligence report on the company prepared for the Nomad and the directors of the company to assist with the drafting of the admission document and determining the suitability of the company for joining AIM depending on the type of company involved, this report may not be required Short form report this is an accountants report summarising historical trading results of the company and may be included in the admission document, if applicable NYSE Euronext NASDAQ OMX Stockholm Swiss Exchange TMX Group UKLA Official List. Working capital report this confirms that, having made due and careful enquiry, there is sufficient working capital available to the company for its present requirements, that is for at least 12 months subsequent to the admission of the company s shares to AIM Watson, Farley & Williams AIM A Brief Guide

10 08 HOW DOES MY COMPANY LIST ON AIM? The pre admission announcement must contain certain additional information to that required to be included by the AIM Rules in the 10 day pre admission announcement required under the standard procedure. This will include the following additional information about the quoted company: the name of the Designated Market and the date of its admission to that market confirmation that it has adhered to the legal and regulatory requirements of that market details of its post admission strategy (and for investing companies, its investment strategy) a description of any significant change in its financial or trading position since the last audited annual report a statement that its directors have no reason to believe that its working capital will be insufficient for at least 12 months following admission details of any lock in arrangements under the AIM Rules a brief description of the arrangements for settling transactions in its securities a website address detailing the rights attaching to its securities any other information that has not been made public that would otherwise be required in an admission document a website address of a page containing the latest published annual report and accounts which must have a financial year end not more than 9 months prior to admission and must be prepared under International Financial Reporting Standards as adopted by the European Union, national GAAP, US GAAP, Canadian GAAP, Australian International Financial Reporting Standards or Japanese GAAP (depending on the country where the company is incorporated). Where more than 9 months have elapsed since the financial year end to which these relate, a website address of a page containing a set of fully audited interim results covering the period from the financial year end to which those latest accounts relate and ending no less than 6 months from that date will also be required. Timetable Standard procedure the pre admission announcement will need to be made to the LSE at least 10 business days before admission. Not less than three business days before admission, the company must publish its admission document and submit it to the LSE together with a fee and a 3 day announcement. Streamlined procedure the pre admission announcement will need to be made to the LSE at least 20 business days before admission (i.e. in place of the 10 day announcement required under the standard procedure). Not less than three business days before admission, the company must submit to the LSE three copies of its latest report and accounts together with a fee and a 3 day announcement. On the day of admission, dealings will commence when the LSE issues a dealing notice to that effect.

11 WHAT HAPPENS AFTER ADMISSION? 09 What happens after admission? Once admitted to AIM, companies must provide certain information to the market on a regular basis and specifically upon the occurrence of certain events. To ensure that the market is kept fully informed, AIM companies are obliged, in principle, to make similar ongoing disclosures to those required by companies on the Official List. There is an overriding obligation to ensure communication between the company and the market (including shareholders) and to ensure that the market is aware of the financial position of the company and its prospects. In particular, a company admitted to AIM is required to advise the LSE without delay of: any factors which could affect the company s share price any changes in the performance of the company s business or expectations thereof any changes in the directors of the company. provide information about any substantial transactions or related party transactions this applies to transactions where any percentage ratio of the class tests set out in the AIM Rules exceeds 10% (i.e. mainly acquisitions and disposals of shareholdings in other companies) or transactions with related parties (e.g. involving a director, substantial shareholder or person or company associated with any of them) where any percentage ratio of the class tests exceeds 5% obtain shareholder approval for any reverse take over or a disposal resulting in a fundamental change of business and disclose certain information in relation thereto publication of an admission document is required in connection with a reverse take over and a circular in connection with a fundamental change of business. A reverse take over is principally an acquisition where any percentage ratio of the class tests set out in the AIM Rules exceeds 100% or which results in a fundamental change in a company s business, board or voting control or, in the case of an investing company, departs substantially from its investing strategy Each AIM company is also required to: publish accounts prepared in accordance with International Financial Reporting Standards as adopted by the European Union, national GAAP, US GAAP, Canadian GAAP, Australian International Financial Reporting Standards or Japanese GAAP (depending on the country where the company is incorporated). Annual audited financial statements must be published within 6 months of the year end, and audited or unaudited interim accounts must be published within 3 months of the relevant six month period end undertake regular reviews of any published forecasts or estimates and notify any significant differences between forecast performance and actual performance ensure that its directors and employees do not deal in its AIM securities, both while in possession of unpublished price sensitive information and during the period prior to the announcement of results retain a Nomad and broker at all times and notify any changes of Nomad or broker. maintain a website on which key company information (including details of the companyʹs business, advisors, directors and significant shareholders) must be disclosed and kept up to date. The company will also be able to communicate with their shareholders by posting their accounts, circulars, AGM and EGM notices on this website if their articles allow them to do so or where there is a specific shareholder resolution permitting this. notify the market of any changes in shareholdings, and the grant, acquisition, disposal or exercise of any options in the company s shares by the directors and their connected persons For investing companies that are admitted to AIM, such companies should, as a minimum, seek shareholder consent for their investing strategies on an annual basis. For companies that divest their business once admitted to AIM and become investing companies, there will be a requirement for shareholders to approve an investing strategy at the next annual general meeting and for the company to make an acquisition constituting a reverse takeover within 12 months of that meeting. Watson, Farley & Williams AIM A Brief Guide

12 10 CAN FOREIGN COMPANIESʹ SHARES BE TRADED ELECTRONICALLY THROUGH CREST? Can foreign companiesʹ shares be traded electronically through CREST? Certain foreign resident companies, including those from Australia and South Africa, are unable to settle their securities electronically in the UK through the CREST paperless settlement system. Trades in the securities of these companies are made in the traditional residual system, whereby stock transfer forms and share certificates are delivered on payment of the settlement monies. Securities settled through CREST are more liquid and more attractive to investors, particularly institutional investors. Foreign companies whose securities are not compatible with the CREST system may be able to take advantage of the CREST settlement facilities and list on AIM through three methods: (1) placing a UK public limited company (UK PLC) on top of the foreign company; (2) using CREST Depository Interests (CDIs); and (3) depository interests (DIs). Both CDIs and DIs are interests representing the underlying shares and enable foreign companies to obtain a secondary listing on AIM and take advantage of the CREST settlement system whilst maintaining their corporate structure and primary listing. UK PLC A new UK PLC is established which makes a recommended share for share exchange offer for all of the shares of the existing foreign company in exchange for shares in UK PLC (usually on a one for one basis). The intention is to create a mirror image (or as near as possible) to the original foreign company s shareholding. The acceptance process can be accelerated if the directors and connected/friendly shareholders sign irrevocable undertakings to accept the offer before it is made to any outside shareholders. The UK PLC is then admitted to AIM, its UK securities being automatically eligible for settlement through CREST. CREST Depository Interests Companies resident in jurisdictions whose Central Securities Depositories have a link with CRESTCo Limited may be able to use CDIs to settle securities electronically. A subsidiary of CRESTCo Limited holds the shares and issues corresponding CDIs to investors which can be settled electronically. Depository Interests Companies resident in jurisdictions where there is no link with CRESTCo Limited can use DIs to settle securities electronically. A depository (usually the UK registrar) holds the actual shares in the foreign company on trust for the DI investor. The depository s name will appear in the share register and the investor s name will be recorded in a separate depository interest register. Investors wishing to receive share certificates can do so, but these may not be settled through CREST. Whichever method is adopted, some other matters also require consideration. For instance, if the company is treated as resident outside the UK, the City Code on Takeovers and Mergers ( City Code ) will not apply. If no local equivalent takeover provisions apply, the company should consider amending its constitution to incorporate certain key provisions of the City Code to ensure that shareholders acquiring over 30% of the company must extend a mandatory offer to all shareholders as if the City Code applied, and to allow the directors the powers to disenfranchise any shareholders failing to make such an offer.

13 WHAT ARE THE TAX BENEFITS OF LISTING ON AIM? 11 What are the tax benefits of listing on AIM? The shares of companies listed on AIM are treated as unquoted for the purposes of certain UK tax reliefs. Individual and corporate investors who are resident or ordinarily resident in the UK for tax purposes may be able to benefit from these, as well as other more general reliefs. Tax reliefs available to individual investors CGT Reliefs Hold over (or ʺgiftʺ) relief may be available where shares in an AIM listed trading company are transferred otherwise than at armʹs length (such as by way of gift). The relief postpones any deemed capital gain until a subsequent ʺarmʹs lengthʺ transaction takes place. The relief is particularly useful for the transfer or gift of shares within families. The relief does not apply to a transfer of shares to a company. Venture Capital Trusts (VCTs) Introduced in order to encourage investment in small companies, VCT s are investment vehicles whose investment may be focused in AIM companies and other unlisted small companies. Individuals investing in VCT s may benefit from access to a managed portfolio of investments and a number of tax advantages, including capital gains tax relief on the disposal of shares, income tax relief from dividends and income tax relief in respect of the initial amount invested. Relief for Losses Relief is available in certain circumstances if shares are disposed of at a loss, by using the loss arising to reduce or eliminate other capital gains tax charges arising in the same year or in subsequent years. In certain circumstances, a loss arising on AIM listed shares may be set off against income arising in the same or the immediately preceding year. Inheritance tax (IHT) Full relief from IHT is available for investments in AIM companies that are trading companies. The investments must be held for at least 2 years for this relief to apply. IHT is chargeable on chargeable transfers which can arise on the death of the owner of the shares, and the gift of the shares within 7 years of the death of the donor. Tax implications for Corporate Investors Corporate Venturing Scheme (CVS) Applying only to those shares issued between 1 April 2000 and 1 April 2010, the CVS is a tax incentive scheme which was introduced to encourage companies to invest in small, higher risk trading companies to form wider corporate venturing relationships. Various reliefs are available where a qualifying company invests in a qualifying unquoted (including an AIM listed) trading company. Enterprise Investment Scheme (EIS) The EIS can benefit individual investors who subscribe for Substantial Shareholdings Exemption (SSE) new ordinary shares in AIM companies which are The SSE applies to disposals by qualifying trading qualifying trading companies. There are a number of companies (or holding companies of trading groups) of qualifying criteria but, where available, the EIS can provide substantial shareholdings in other qualifying trading relief for investors from both income and capital gains companies. A substantial shareholding is typically a taxes. holding of 10% or more. Where the requisite criteria are satisfied, any capital gain on the disposal will be exempt from corporation tax. Stamp Duty and SDRT The company and its investors will also need to consider the implications of UK stamp duty and/or stamp duty reserve tax ( SDRT ). Stamp duty is a tax on instruments of transfer. It is imposed at a fixed rate of 0.5%, usually by reference to the actual consideration for the transfer (although market value rules may apply in some situations and there is an exemption for transfers with a consideration of up to 1,000). Generally, stamp duty will be payable if the instrument is executed in the UK. If the transfer is in respect of shares in a UK incorporated company and is completed in certificated/paper form, then a stock transfer form will have to be executed and stamped. Watson, Farley & Williams AIM A Brief Guide

14 12 WHAT ARE THE TAX BENEFITS OF LISTING ON AIM? No charge to stamp duty is payable if the transfer occurs through CREST but SDRT may be payable. SDRT is payable in relation to agreements to transfer chargeable securities (which include share in UK incorporated companies and rights and interest in such shares) and is generally charged at 0.5% of the consideration for the transfer (a 1.5% change can arise in certain circumstances). Stamp duty and SDRT may overlap, but generally a charge to stamp duty cancels an SDRT liability. UK ʺdepositary interestsʺ in foreign securities are exempt from such a charge if they meet the required criteria. It is necessary to evaluate tax implications on a case by case basis and therefore advisable to seek further guidance in this area. Watson, Farley & Williams have acted for Nomads, brokers, UK and foreign companies in all aspects of AIMrelated work, including admissions, placings, disposals, acquisitions and reverse take overs. A full list of our recent AIM transactions is available on request.

15 CONTACTS 13 Contacts Christina Howard Partner London Jan Mellmann Partner London Chris Kilburn Singapore Watson, Farley & Williams AIM A Brief Guide

16 14 NOTES Notes

17 NOTES 15 Notes Watson, Farley & Williams AIM A Brief Guide

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