Public Companies Update January 2006

3 AIM RULES - INTERNATIONAL ACCOUNTING STANDARDS NOTICE

3.1 Introduction

The London Stock Exchange has confirmed its intention, which it originally published in October 2004, to amend the AIM Rules to mandate international accounting standards (IAS) for AIM companies, in a Notice issued on 21 December 2005. The Notice explains how this change will be implemented and it states that the change will apply to AIM companies for financial years commencing on or after 1 January 2007. It also invites comments from market participants in relation to the proposed change.

The effect that the proposed change will have on AIM companies depends on whether the AIM companies are incorporated in an EEA member state or a non EEA country.

3.2 AIM Companies incorporated in an EEA member state

It is proposed that a company incorporated in an EEA member state which is a parent company and which prepares consolidated financial information must prepare the consolidated financial information in accordance with IAS for accounting periods commencing on or after 1 January 2007.

For accounting periods commencing on or after 1 January 2007, a company that is incorporated in an EEA member state which is not a parent company may prepare any financial information either in accordance with IAS or in accordance with the accounting and company legislation and regulation applicable in the company's country of incorporation.

3.3 AIM Companies incorporated in non EEA countries

3.3.1 The Current Position

Non EEA incorporated AIM companies must prepare historical financial information in an AIM Admission Document in accordance with IAS or a country's national accounting standards that is IAS equivalent under paragraph 20.1 of Annex 1 of the Prospectus Rules.
Also, following Admission, half yearly reports and annual reports and accounts of non EEA AIM companies must be prepared in accordance with UK or US GAAP or IAS (as per Rules 18 and 19 of the AIM Rules).

3.3.2 The Proposed Change

It is proposed that the range of acceptable accounting standards is extended so that both the historical financial information presented in an AIM Admission Document, together with the half yearly reports and annual reports and accounts may be prepared in accordance with any of the following accounting standards:-

If adopted this will represent a significant change for non EEA incorporated companies as, for example, Canadian corporations who are listed on AIM and prepare their accounts in Canadian GAAP and then reconcile them to IAS or US GAAP will no longer have to do this for their ongoing half yearly and annual accounts. This will also impact on the presentation of historical financial information in an AIM Admission Document or Prospectus where companies are required to present historical financial information in a form consistent with those adopted in the Company's next published annual accounts as the acceptable formats for those accounts would also include Canadian GAAP.

3.4 Conclusion

The deadline for responses was 27 January 2006 and it is expected that the London Stock Exchange will issue revised AIM Rules and Guidance soon after this date.

One key point which companies will need to keep under review is when they should adopt IAS, or in the case of non EEA companies one of the other acceptable standards, as when a company prepares historical financial information whether for an AIM Admission Document or for a Prospectus, Paragraph 20.1 of Annex I of the Prospectus Rules requires that this is presented in a form consistent with those adopted in the company's next published annual accounts. This may mean that earlier periods will need to be presented or restated in IAS or another format and AIM companies should discuss the optimum timing for adoption of IAS with their NOMADs and auditors.

A copy of the AIM Notice is available at http://www.londonstockexchange.com/en-gb/products/companyservices/ourmarkets/aim/aimnotices.htm

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

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